Policy & Compliance
operated vessels). This rate will increase incrementally up to April 2028. Initially it was thought that large sections of the shipping sector had avoided the worst impacts of the US protectionism. The recently re-introduced SHIPS for America Act included charging port fees to non- Chinese operators ordering vessels at Chinese yards, something that the final USTR decision effectively rejected. The Bill, originally introduced in the last Congress in December 2024, aims to revive US shipbuilding, and increases port fees on vessels built in Chinese shipyards. However, it also imposes preference requirements on US business to use American-built vessels. Additional taxes The SHIPS Act proposes that a Maritime Security Trust Fund be financed via the special tonnage taxes, lighthouse duties and the USTR taxes. The SHIPS Act would impose additional taxes on Chinese-built vessels. Within the Bill reference is made to a “foreign shipyard of concern”, which is defined as any shipyard owned or controlled by a foreign country of concern. Currently it is thought that this refers only to those yards owned by the China State Shipbuilding Corporation. The Bill stipulates that from October 2027, other (and the implication is that the focus will be on Chinese) yards could be added to the list of “a shipyard of concern”. The SHIPS Act, with bi-partisan political support, is likely to become law and will impose a “penalty tax” on Chinese ships and operators as well as including non-Chinese operators that order at “foreign shipyards(s) of concern”. The Bill sets out levels of penalty taxes that can be
widely applied on Chinese shipowners and non-Chinese owners or operators if more than 50% of their vessels on order at the application date were constructed at a “foreign shipyard of concern”. Cargo preference The other policy strand relates to the cargo preference requirements contained within the Bill. An escalating percentage of US imports from China carried in container vessels would have to be carried in US-built vessels. Commencing five years after the date of enactment, 1% of goods from China must be carried in US-built ships. This rises by 1% per annum to 10% in the 14th year. The above principle will apply to other vessel types such as those carrying crude oil and liquid natural gas. Traders, from the smallest to the largest, who do not comply with this requirement will be fined an amount greater than the difference of the cost of shipping on a US-built vessel compared with one built and operated elsewhere. These proposals have largely slipped under the radar and with trade talks ongoing between China and the US, there is always scope for change. Although US-centric, this legislation has the capability to disrupt international trade. Shipping lines can re-allocate vessels to different routes, etc, to mitigate this law and the USTR announcements. However, the biggest question relates to capacity of US shipyards to build the necessary numbers of vessels at a competitive cost? The real danger is that US-built ships will be more expensive to purchase, which will drive up freight costs, which could lead to higher inflation and a negative impact on the US consumer.
“ The real danger is that US-built ships will be more expensive to freight costs, which could lead to higher inflation and a negative impact on the US consumer purchase, which will drive up
July 2025 | 13
www.bifa.org
Made with FlippingBook Annual report maker