Exporters Pan Section 301 Proposal to Require Use of US-Flagged, US-Built Ships

Most exporters spoke on March 26. In addition to the requirements for exporters under the Section 301 action to counteract Chinese subsidies in shipbuilding, these groups said the fees for inbound vessels that are Chinese, or from companies with Chinese ships in their fleets, will mean ports like Oakland, Seattle and New Orleans will see less traffic, and that will affect exporters' ability to export from those locales.

Following are summaries of their testimonies. The West Virginia Coal Association wrote that the motivations for the proposal may be well-meaning, but if it comes to pass, "it will have an immediate and adverse impact on coal production and employment in the State of West Virginia and other coal-producing regions and states. In fact, the mere proposing of this rule has already caused confusion and delays in negotiations over coal shipments." The group said that about half of its coal production is exported, and 63% of those exports is coal used in making steel. "Imposition of the port fees will simply price West Virginia coal out of the seaborne energy market," the group said.

The North American Export Grain Association said that each $1 million increase in ocean freight adds 40 cents to 50 cents per bushel for long-haul ships, and $1.20 per bushel for exports across the Great Lakes. Moreover, 48% of vessels that can take bulk agricultural exports are Chinese-built, and therefore subject to the highest fees.

The American Soybean Association noted that more than half of soybeans grown in the U.S. are exported. "The U.S. does not have the domestic flag capacity to handle our export market at the rate proposed by USTR," they said. "We are extremely concerned that if this proposal goes into effect, U.S. soybeans will be effectively shut out from our global export markets."

The American Petroleum Institute argued that the fees might not only reduce LNG exports, but could potentially increase the amount of Chinese vessels in the fleet visiting the U.S.

The Agriculture Transportation Coalition wrote, "Our foreign customers do not need to buy from us," and said they were already shifting to other countries as sources for commodities.Making export transportation more expensive, and its availability more limited "will accelerate the current trend. U.S. agriculture and forest products are low margin, extremely price-sensitive and face intense international competition."

The group, which represents the entire spectrum of agricultural products, said if U.S.-flagged ships or U.S.-built ships were affordable to use, they would support the proposal.

"But this is not the case, not now, and under every analysis, will not be in the future. Not even close."

The group said the cost of operating U.S.-flagged ships, even those not built in the U.S., is so high, "the freight rates U.S. exporters will be charged would be multiple times the cost of transport on ships built in China, Korea [or] Japan." The group said building ships cannot be done in the timeline USTR proposes, as has been shown as U.S. shipyards build ships to serve routes between the continental U.S., Hawaii, Alaska and Puerto Rico. Those routes are required to use U.S. ships under the Jones Act.

"Ocean carriers will obviously reduce the number of US port calls, limiting to as few calls at as few US ports as possible, in order to reduce the penalties being imposed on each port call. Those calls will be the largest ships, with the most containers, by which the carrier can maximize ‘spreading’ the penalty as much as possible. But agriculture exports need more port calls, smaller ships, multiple and often 'secondary' ports," the group wrote.

Only the closest seaports work economically for the overland transportation, the coalition said.

The Recycled Materials Association noted that 30% of scrap is exported annually, and these fees would make those exports less competitive.