The US Gov­ern­ment’s pro­pos­al to im­pose huge fees on Chi­nese-built or Chi­nese-flagged ves­sels dock­ing at US ports could in­crease the cost of freight to the Caribbean by be­tween 50 and 60 per cent, which could re­sult in high­er prices on im­port­ed goods of 15 to 20 per cent.

That is the analy­sis of the CEO and tech­ni­cal di­rec­tor of the Cari­com Pri­vate Sec­tor Or­gan­i­sa­tion (CP­SO), Dr Patrick An­toine, who al­so ar­gues that T&T’s en­er­gy ex­ports could be “hit hard,” if the US fees are ful­ly im­ple­ment­ed. (See Page 7)

The Of­fice of the US Trade Rep­re­sen­ta­tive (US­TR) is con­sid­er­ing the im­po­si­tion of: a fee of up to US$1 mil­lion on Chi­nese ves­sel op­er­a­tors for each en­try to a US port; a fee of up to US$1.5 mil­lion on ship­ping com­pa­nies with fleets com­pris­ing Chi­nese-built ves­sels; and a fee of up to US$1 mil­lion on com­pa­nies that have or­ders for Chi­nese ships.

An­toine said one of the im­pli­ca­tions of the US­TR go­ing ahead with its sched­ule of new fees on ship­ping is the ris­ing cost of im­ports as a con­se­quence of the sever­i­ty of the fines.

Not­ing that mar­itime trans­port ac­counts for more than 90 per cent of Cari­com’s trade in goods, he said coun­tries in the re­gion are on a sev­en-day (one week) ship­ping cy­cle for im­ports.

“So if you wait for 52 times the ves­sels are in and out of Cari­com and ports in the US. That means that if you were to take the min­i­mum find­ing to ac­count for a com­pa­ny that has even one Chi­nese ves­sel in its fleet, you’re talk­ing about US$1 mil­lion dol­lars per vis­it in­to a US port.

“So you’re talk­ing about po­ten­tial­ly US$26 mil­lion min­i­mum in ad­di­tion­al fees.”

An­toine said be­cause Cari­com coun­tries are small, they en­gage in a prac­tice called called short-sea ship­ping, in which ves­sels typ­i­cal­ly that have 200 con­tain­ers. If the pro­posed US­TR fees are spread over 200 con­tain­ers, the cost per con­tain­er is like­ly to be be­tween US$2,000 and US$4,000 in ad­di­tion­al fees.

“And un­like COVID, it’s not go­ing to go away. It’s go­ing to stay. And that’s go­ing to have a mas­sive im­pact on the cost of liv­ing and in­fla­tion in the coun­try,” said An­toine, who has a PhD in in­ter­na­tion­al fi­nance, eco­nom­ic pol­i­cy and in­ter­na­tion­al trade.

He said the sec­ond ef­fect is for goods that the re­gion im­ports, adds val­ue to and then ex­ports back to the US. The re­gion­al tech­no­crat cit­ed the ex­am­ple of im­ports of wheat or corn that are used to man­u­fac­ture a range of goods that are ex­port­ed. He said the US­TR fees would ap­ply on the im­ports of the com­modi­ties and ex­ports of the man­u­fac­tured goods.

“What­ev­er goes back in­to the US, the ves­sel will pay again. It pays when it leaves, if it’s a com­pa­ny which has one Chi­na built ves­sel in the fleet, and it pays when it goes back in with the fin­ished prod­uct.

“We call that in­tra-in­dus­try trade, where the trade takes place in the same broad cat­e­go­ry, but the spe­cif­ic na­ture of the prod­uct may be dif­fer­ent. So that means that for in­tra-in­dus­try trade, we get hit very heav­i­ly,” An­toine said.

He said the third im­pact would be on he de­scribed as “pure ex­ports.”

He said T&T’s petro­chem­i­cal sec­tor has a unique prob­lem, which is “not go­ing to be spared for com­pa­nies that have Chi­nese-built ves­sels.” These com­pa­nies that ex­port prod­ucts like Urea Am­mo­ni­um Ni­trate (UAN), am­mo­nia, methanol or crude are go­ing to be hit hard.

“And the wicked thing is that while we ex­port these prod­ucts, we al­so im­port pe­tro­le­um prod­ucts. The pe­tro­le­um prod­ucts, if ex­port­ed on a ves­sel that that is not US flagged would al­so get hit by these fees. So we are go­ing to get hit by a dou­ble wham­my, with good go­ing in­to the US fac­ing the ad­di­tion­al fees and prod­ucts from the US back to us, al­so fac­ing the fees,” said the econ­o­mist.

Ques­tioned on whether the com­pet­i­tive­ness of Point Lisas petro­chem­i­cal com­pa­nies would be im­pact­ed if the US­TR mea­sures are ful­ly im­ple­ment­ed, An­toine point­ed to two pos­si­ble im­pacts.

He said com­pa­nies that have take-or-pay con­tracts, which means that all of the ship­ping costs are al­ready built in and can­not be passed on, are go­ing to face “tremen­dous pain” as a re­sult of the ad­di­tion­al ship­ping fees.

“The price is ei­ther go­ing to be borne by the con­sumer, in which case we be­come less price com­pet­i­tive rel­a­tive to the com­pe­ti­tion. So I can see mas­sive im­pli­ca­tions for ex­ports from the Point Lisas In­dus­tri­al Es­tate, just for hav­ing Chi­nese-built as­sets, or hav­ing as­sets on or­der with Chi­nese ship build­ing com­pa­nies, or for prod­ucts com­ing out of the US that are not car­ry­ing on a US flag car­ri­er,” he said.

The CEO of CP­SO al­so point­ed to a pos­si­ble sce­nario in which com­pa­nies could face ag­gre­gat­ed fees of up to US$3.5 mil­lion per port vis­it. This could oc­cur if a prod­uct is be­ing ex­port­ed on a non-US flagged ves­sel, has at least one ves­sel in their fleet that is Chi­nese, and has a ves­sel on or­der from a Chi­nese com­pa­ny.

The pro­posed, ad­di­ton­al ship­ping fees could al­so re­sult in cost es­ca­la­tions on con­struc­tion projects.

“This is like­ly to be sig­nif­i­cant, par­tic­u­lar­ly for big projects where you were try­ing to hold tight mar­gins for projects that are go­ing to be planned,” he said.

Pro­posed reme­dies

An­toine tes­ti­fied at a hear­ing or­gan­ised by the US­TR on Mon­day. The hear­ing was part of the process by which the US­TR ar­rives at a de­ter­mi­na­tion of the pro­posed ac­tions it will take. The hear­ing fol­lowed the in­ves­ti­ga­tion by the US­TR of Chi­na tar­get­ting the glob­al mar­itime, lo­gis­tics and ship build­ing sec­tors for dom­i­nance. The in­ves­ti­ga­tion fol­lowed a com­plaint by five trade unions to the US­TR in March 2024.

In his tes­ti­mo­ny, An­toine sug­gest­ed two pos­si­ble op­tions for con­sid­er­a­tion by the US­TR.

• Op­tion one - In the in­ter­est of sus­tain­ing the ship­ping and lo­gis­tics re­quire­ments of US-Cari­com trade, the Cari­com pri­vate sec­tor, re­quests the US­TR to seek al­ter­na­tives to the mea­sures pro­posed in re­sponse to the Sec­tion 301 in­ves­ti­ga­tion, un­til such time as the ship­build­ing and as­so­ci­at­ed in­dus­tries in the US are de­vel­oped to fill the gap that will emerge from the pro­pose­dreme­dies.

• Op­tion two - Should the US­TR de­cide to pro­ceed with the ap­pli­ca­tion of the pro­posed reme­dies, the CP­SO, on be­half of the re­gion­al pri­vate sec­tor re­quests, that con­sid­er­a­tions be giv­en to ex­plor­ing an ex­emp­tion for Cari­com/Caribbean States (as a ‘sec­ond-best’ op­tion). Such an ex­emp­tion (prefer­ably leg­is­lat­ed) could be based on:

• Main­tain­ing and ex­pand­ing Cari­com-US trade and com­merce – the US has main­tained a trade sur­plus with CARI­COM/Caribbean for more than three decades;

• Grand­fa­ther­ing’ of ex­ist­ing ves­sels – en­sur­ing that small­er ves­sels cur­rent­ly op­er­at­ing be­tween the US and the small states of the Caribbean (many of which are Chi­na-built), crit­i­cal to sup­port­ing the ‘short-sea’ ship­ping re­quire­ments of US-Cari­com trade, are not sub­ject to new penal­ties;

• Ex­emp­tion for our rel­a­tive­ly small Caribbean trans­ship­ment hubs- rec­og­niz­ing the strate­gic role of our small Caribbean ports in glob­al sup­ply chains and en­sur­ing that US-Caribbean trade re­mains un­in­ter­rupt­ed;

• Flex­i­ble pol­i­cy im­ple­men­ta­tion – al­low­ing re­gion­al (Caribbean) op­er­a­tors time to ad­just and ex­plore al­ter­na­tive ves­sel sourc­ing op­tions rather than en­forc­ing sud­den fi­nan­cial penal­ties;

• Stronger US-Caribbean mar­itime part­ner­ships – en­cour­ag­ing col­lab­o­ra­tive so­lu­tions rather than re­stric­tive poli­cies that could weak­en re­gion­al trade sta­bil­i­ty.

• Mu­tu­al ben­e­fits of ex­emp­tion to US and Cari­com busi­ness­es as con­tem­plat­ed un­der the Caribbean Basin Eco­nom­ic Re­cov­ery Act (CBERA) and Caribbean Basin Trade Pref­er­ences Act (CBP­TA).