USTR’s port fees have more bark than bite as exemptions minimise impact on oil/products fleet
USTR port fees target oil and LPG fleets, but key exemptions blunt the impact on most tanker classes and protect US’ oil and products export
The US Trade Representative’s latest port fee initiative, announced on April 17, while initially conceived as being draconian enough to reshape global shipping, instead is likely to have minimal impacts on the global oil and products tanker market. Set to take effect in October, the proposal — while imposing fees on China-owned and China-built vessels with charges potentially exceeding ~$5 million per US voyage for Very Large Crude Carriers (VLCCs) — ultimately impacts 10% of the overall tanker fleet. This policy is expected to realign shipping economics, and prompt a reassessment of fleet compositions and likely to trigger fleet reshuffling for specific vessel classes.
No. of Chinese built/owned/operated oil tankers involved in US trade across vessel classes (no. of vessels, LHS) vs percentage of global fleet (%, RHS)
Exemptions could soften the blow
On the other hand this USTR port fee initiative has spared tankers from port fees due to key exemptions. These apply to China-built ships if they arrive into US ports ballast, are US-owned, have travelled less than 2,000 nautical miles, or have an individual bulk capacity of less than 80,000 DWT (a 55,000 DWT limit is also mentioned, leading to some ambiguity in interpretation). Currently there are no exemptions for China-owned vessels (even Hong Kong and Macau based companies will be subject to fees). There is also a degree of uncertainty on which entity is stated as a beneficial owner, especially in instances where Chinese leasing companies have financed the vessel.
As a result, most US CPP trade is unaffected, as it is mainly on MRs, and lightering and short-haul crude voyages on larger vessel classes are covered by the distance exemption. Most affected are VLCCs and Suezmaxes (each 11% of global fleet) and Aframaxes (7% of global fleet). In addition to these the fleet of Panamaxes could be the most impacted (16% of global fleet) but that still hinges on whether the exemption of 80,000 DWT or 55,000 DWT with Panamaxes falling between the latter.
Routes which could be the most impacted across tanker vessel classes can be seen in the table below. They include voyages (for the period from Jan 1, 2024 – April 15, 2025) for Chinese Built/Owned/Operated vessels and take into account exemptions where applicable. Ship-to-ship (STS) transfers could be possibly a method to evade port fees, as there has been no mention of this in the USTR’s announcement.
Operators can also receive a fee remission for up to three years if they order and take delivery of a US-built vessel of equivalent or greater capacity within that time frame. This measure indicates the government’s intention to support the domestic shipbuilding industry. At the same time, the proposed fees and measures – especially against China-built vessels – have been considerably scaled down, largely to protect the US’ oil and products export market share as well as US buyers from higher import prices.
Global ethane trade worst hit
That said, these measures have an outsized effect on the global ethane trade (impacting nearly 29% of US ethane exports), with a smaller effect on the LPG trade (9% of VLGC fleet affected). Ten ships – all VLECs operated by Satellite Chemical – could incur fees of ~$3 million per voyage. The company, which operates a fully ethane-based 2.5 Mtpa steam cracker in China, imported 123 kbd of ethane from the US last year, or 28.5% of total US ethane exports. The LPG trade is less impacted with only 15 ships (7% of the fleet) likely to incur port fees of between $1.6-$5 million per voyage. Exemptions and lead time (potentially allowing for operator changes) can help to cope with the challenges and avoid extra costs.
