Rising Port Costs for Chinese Vessels Could Drive Genco Away from the U.S. Market

Smart shipowners are gearing up to shift any additional U.S. fees for Chinese vessels onto their charterers,effectively shielding themselves from the financial burden of hefty regulatory costs at each port visit. Genco CEO john Wobensmith highlights that new charter party clauses will ensure that U.S. exporters and importers shoulder these immediate expenses instead of the shipowners.

As the largest bulker operator based in the U.S., Genco has a meaningful fleet featuring ships built in China, making it vulnerable to proposed port fees outlined by the Office of the U.S.Trade Representative (USTR). If implemented as planned, these fees could cost millions per port call for Chinese-built vessels and any global operators utilizing them elsewhere. Additionally, exporters would face mandates to transport an increasing share of their goods on American-flagged ships, eventually leading to a reliance on limited U.S.-built tonnage—this could hike export costs while creating job opportunities for American mariners.

The potential impact of these fees has prompted various shipowners to rethink their operations drastically. For instance, ACL—a ro/ro liner based in the U.S.—has indicated it might cease operations domestically due to these changes. other ocean carriers are considering reducing their port calls to just a few major hubs as a strategy to mitigate costs.Wobensmith expressed his alignment with USTR’s aim of bolstering American shipping but noted that Genco faces two choices: either withdraw from the domestic market and concentrate on it’s international business—which constitutes 90% of its activities—or pass those extra charges onto consumers.

Currently, Genco is opting for this latter approach by incorporating clauses into its charter agreements that mandate charterers cover any new port charges imposed by the U.S., regardless of what they may be.

The connection between these two strategies—exiting or transferring costs—is quite evident. The added expense from port fees could render certain agricultural commodities “uncompetitive” against foreign alternatives, as previously cautioned by American farming advocates. Wobensmith pointed out that soy exports might nearly come to a standstill due to this situation; thus, passing along extra charges could ultimately drive some shipowners with Chinese tonnage out of business altogether.

Image credit: Bernard Spragg / public domain