The public has one more week to comment on a Trump administration proposal to impose service fees on all vessels made in China that call on United States ports, which, if implemented, could have a devastating impact on Virgin Islanders’ wallets.
The proposed fee hikes include up to $1 million for any vessel operated by China entering a U.S. port and up to $1.5 million per Chinese-built vessel entering a U.S. port — even if the ship is registered elsewhere. Shipping companies who have Chinese-built vessels in their fleet would also be charged up to $1 million per port entry regardless of where the entering ship is flagged.
The proposal was first announced last month by the U.S. Trade Representative — the federal agency responsible for developing the nation’s foreign trade policies. The agency’s investigation into China’s activities targeting the maritime and shipbuilding industries began almost a year ago under the Biden administration after a petition from five labor unions: the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; the International Brotherhood of Electrical Workers; the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers; the International Association of Machinists and Aerospace Workers, and the Maritime Trades Department of the AFL-CIO.
Their petition claimed that the waning U.S. shipping industry could not recover — or operate sustainably — amid China’s “rapidly growing network of Chinese-built vessels, owned and operated by Chinese shipping companies and others, financed by Chinese state-owned banks, and favored by a spreading web of global ports and terminals owned by Chinese firms.” According to the petition, Chinese shipyards produce more than a thousand oceangoing vessels per year. The U.S. produces fewer than 10.
In a report issued two months ago, the USTR found China’s activities “unreasonable” under Section 301 of the U.S. Trade Act of 1974, a finding which authorizes the agency to impose tariffs or other trade restrictions on imports from the offending country.
The proposal is in line with President Donald Trump’s stated goal of reviving the U.S. shipbuilding industry, and in a joint address to Congress two weeks ago he vowed to create an Office of Shipbuilding within the executive branch that would offer special tax incentives.
“We used to make so many ships. We don’t make them anymore very much, but we’re going to make them very fast, very soon,” he said. “It will have a huge impact.”
Delegate to Congress Stacey Plaskett said in a statement last week that the impact will be felt across most industries and that Virgin Islanders will be particularly affected, and badly.
“American businesses and consumers will be hit with price increases at the grocery store, the gas station, and the hardware store,” she stated. “The Virgin Islands will be disproportionately impacted, given our reliance on the maritime industry to import essential products. The price increases will be directly passed on to consumers in the Virgin Islands and across our nation. If imposed, USTR’s proposal will have drastic consequences on Americans.”
According to the V.I. Economic Research Bureau, the territory spent more than $150.9 million on imported food products in 2022. A 2021 Comprehensive Economic Development Strategy, commissioned by the bureau from the University of the Virgin Islands Center for Excellence in Leadership and Learning, described the U.S. Virgin Islands’ agricultural industries as “moribund” and “by far the most underdeveloped and neglected sector in the Territory.” The territory’s location, layout and small population mean limited domestic production, making it heavily dependent on imported food and goods.
“When openness exists, it means that the economy can take advantage of gains from trade, but at the same time, becomes very sensitive to price volatility, macroeconomic developments, and trade policy changes in its major trading partners and the principal source markets for tourists,” according to the report.
Economics Professor Mark Wenner, former chief economist at the Economic Research Bureau, told the Source Monday that the full scope of the proposed fees’ impact on the U.S. Virgin Islands depends on the size and number of Chinese-built vessels in the fleets of companies like Tropical Shipping and Crowley.
“We only have two major shipping companies, and this would really put us at a serious cost disadvantage,” he said. “We would be facing much higher shipping fees, much higher … landed costs for imported goods — and we import probably 95-97 percent of everything.”
Tropical Shipping Senior Director of Government Affairs Jennifer Nugent-Hill told the 36th Legislature during a Committee of the Whole meeting two weeks ago that the USTR proposal under consideration will “kill a lot of companies and potentially impact — tremendously — the level of service that we provide to the territory.”
“Well, the last time I remember anyone building ships of any significance in America was a very long time ago,” she said after outlining the fee policy. “The shipyards in the United States lost to China the ability to build ships at a reasonably cost price — ‘reasonable’ being defined by what you think it may be.”
Nugent-Hill said only four of Tropical Shipping’s 18 vessels were built in the U.S., and the company would have to pay $1 million per port call under the USTR’s proposal.
“I’m sorry to tell you that the shippers — meaning the owners of the goods, the people who are selling the food, who are providing them to your grocery store, the building materials and all those other charges — are going to have to pass this on to consumers,” she said.
Nugent-Hill encouraged lawmakers to back the V.I. Economic Development Authority, saying that keeping outgoing ships full of exports will reduce the burden of the proposed port fees “because regardless of whether the container comes full or goes out empty, there is still a charge associated with the work of the port.”
“You have to pay it,” she said. “And I don’t believe any carriers can survive without having a profit.”
The public has until March 24 to comment on the fees, the same day the USTR will hold a public hearing on the proposed action.
The USTR had received 93 comments by Monday night. Though some applauded the effort to resurrect U.S. shipbuilding, multiple shipping companies voiced strong opposition to the move. One respondent, a representative of the International Longshore and Warehouse Union’s Washington Area District, noted that without equivalent fees on cargo entering through Mexico or Canada, “it is possible that cargo diversion to these countries will increase significantly in order to bypass the proposed fees.”
“It is recommended to address the land border loophole and harmonize the U.S. port fees across all ports of call,” he wrote. “This would ensure that steamship lines do not favor larger load centers over smaller regional ports.”
Editor’s Note: A previous version of this article incorrectly described proposed fees for shipping companies with Chinese-built ships in their fleet. Those fees would be implemented upon entry of any Chinese-built vessel in a U.S. port regardless of its flag, not any vessel regardless of its origin.
