On October 14, as China’s “Special Port Fee” was announced to take effect, the “stubborn” Matson Navigation Company did not make temporary adjustments but chose to directly call at the ports of Shanghai and Ningbo. Although the maritime departments of the two locations did not specify the details of billing, according to the Ministry of Transport’s port fee collection measures, the “toll fee” must be paid to proceed.
The “Twinstar” alliance appeared more flexible, promptly issuing change notices concerning voyages of two US-flagged container ships. A Hapag-Lloyd container ship named Potomac Express will no longer call at Ningbo. Cargo exported from Ningbo to the United States will first be loaded onto the Maersk Luz and, as scheduled, transfer to the Potomac Express at Gwangyang Port on October 24. Similarly, Maersk announced that another of its container ships, named Maersk Kinloss, also canceled its Ningbo call. Import cargo related to Ningbo will be unloaded at Busan Port in South Korea and then transported to Ningbo and final destinations by other vessels; while cargo exported from Ningbo to the US will first be transferred by a yet-to-be-determined “feeder vessel” to South Korea, then transshipped onto a mainline vessel to continue to the US.
Although Maersk previously faced industry skepticism when launching its feeder-mainline network within the alliance, this connection between feeder and mainline ports, while passively verifying the network’s reliability, has also made South Korea’s Busan Port the first beneficiary of the Sino-US dispute.
It is foreseeable that in Asia, South Korea’s Busan Port, Singapore Port, and Port Klang may become transshipment hubs in the future. Cargo originally shipped directly between China and the US or on vessels involved in China-US trade might first be shipped to these ports for transshipment, then carried to their destinations by third-party shipping companies or compliant vessels not subject to the fee, to avoid the Special Port Fee.
In the Americas, some cargo destined for the US West Coast might be cleared through Canadian ports first, then enter the US hinterland via land transportation. Therefore, Canada’s Port of Vancouver and Port of Montreal may benefit. Benefiting from the “nearshoring” trend in manufacturing supply chains, ports like Mexico’s Port of Manzanillo might serve as gateway ports into the North American market.
As China’s Special Port Fee implementation measures include exemption clauses, allowing specific vessels to be exempt, this will indirectly strengthen the position of the following types of ports: ports in China where domestic shipyards are located. This is because the Ministry of Transport’s detailed fee rules stipulate that vessels entering shipyards “in ballast for repairs” are exempt from the fee, which may encourage specific vessels to choose Chinese shipyards and related ports for repairs more frequently.
Currently, China’s major ship repair yards and bases are mainly distributed around the following ports:
First, the Zhoushan region, located at the intersection of China’s north-south shipping routes and close to international main shipping lanes, is China’s largest ship repair base, with an output value exceeding 40 billion yuan, accounting for over 40% of the national total. Second, other regions in the Yangtze River Delta, represented by Shanghai, Nantong, and Taicang. The Yangtze River Delta region is the largest ship repair region in China overall, with its annual average ship repair output value accounting for over 60% of the national total (including the Zhoushan region). This region has the capability to undertake high-value-added repair and conversion projects, such as FPSO conversions (i.e., converting existing vessels into Floating Production Storage and Offloading units), dual-fuel conversions, and LNG vessel repairs. Third, the Bohai Rim region’s Dalian and Qingdao, which host historically significant, large-scale shipbuilding and repair enterprises and are important shipbuilding industrial bases in Northern China. Fourth, the Pearl River Delta region, represented by Longxue Island in Guangzhou, is a major shipbuilding and repair base in Southern China. Due to its proximity to Hong Kong and Macau, it primarily serves the ship repair and construction needs within the region and for the South China Sea routes.
For cruise operators, the cruise giant Royal Caribbean’s “Spectrum of the Seas” was recently exempted from the Special Port Fee and is operating subsequent voyages normally. The main reason for the exemption is that the “Spectrum of the Seas” uses Shanghai Wusongkou as its home port, serving local tourists from that home port. Only US-flagged vessels making temporary visits would be subject to the levy.
Of course, the Sino-US trade tensions have also unexpectedly implicated the three Japanese shipping companies: Nippon Yusen Kaisha (NYK Line), Mitsui O.S.K. Lines (MOL), and Kawasaki Kisen Kaisha (“K” Line).
On October 14, Eastern Time, the US measure to charge a $46 per ton port entry fee for foreign-built car carriers took effect, with actual collection deferred until December 10. In its April proposal, the Office of the United States Trade Representative (USTR) suggested levying $150 per standard passenger vehicle starting in October. This proposal raised concerns about excessive burden, leading to a revision in June to a “$14 per net ton” scheme, reducing the amount to about one-third. The USTR revealed that the $14 scheme was also criticized as “too low,” hence this increase to $46 per net ton. Although the calculation method differs, the port entry fee for large car carriers is now close to the April figure and is still expected to exceed $1 million. Failure to pay may result in US ports refusing to unload the cargo.
This was originally targeted at car carriers, which have seen extremely high demand recently due to China’s booming auto exports. However, companies currently holding 65% of the global car carrier market share are Norway’s Wallenius Wilhelmsen (15%), Japan’s NYK Line, MOL, and “K” Line (combined 40%), and South Korea’s Hyundai Glovis (10%), meaning multiple car carrier companies were inadvertently affected.
The direct beneficiaries of the reciprocal port fees imposed by China and the US are the treasuries of the imposing parties, both of which will gain additional revenue. However, from the perspective of the port and shipping market, the biggest impact is the shift and fragmentation of trade flows and vessel port calls, granting new development opportunities to third-party ports that are unrestricted or offer lower-cost transshipment services. In the initial stage of the new rules taking effect, companies like Matson and COSCO Shipping chose to “tough it out,” while others like Maersk and Pacific Basin reasonably avoided the fees by reconfiguring routes, resignations of directors, etc. However, the relocation of the global largest independent shipowner, Seaspan, from Hong Kong to Singapore to counter the US Section 301 investigation also highlights a reality: geopolitics is reshaping the development of the global port and shipping industry once again in an extremely rapid and brutal manner, while mending the fractures will require a much longer time.
