$1.5M Port Fees Could Disrupt Global Shipping

Ah, the shipping industry—a world of towering cranes, bustling ports, and the occasional container ship stuck in the Suez Canal. It’s a sector that thrives on precision, efficiency, and, let’s be honest, a healthy dose of chaos. But now, it seems policymakers have decided to crank up the chaos dial to 11 with a new proposal that could send shockwaves through global supply chains. Buckle up, folks, because we’re about to dive into the bureaucratic brilliance of a $1.5 million port fee proposal targeting Chinese-built vessels. Spoiler alert: it’s not going to end well.

Understanding the Economic Reality of Container Shipping (That Someone Clearly Missed)

Before we get into the nitty-gritty of this proposal, let’s take a step back and look at the current state of container shipping. Because, apparently, someone forgot to do that before drafting this policy.

A typical 15,000 TEU (twenty-foot equivalent unit) vessel already faces significant costs when calling at US ports. Basic port fees can range between $150,000 and $350,000—substantially higher than global averages. And that’s before we factor in cargo handling fees, pilotage charges, and the occasional bribe to the seagulls to stop dive-bombing the crew. 🐦

Now, imagine slapping an additional $1.5 million fee on top of that, specifically targeting Chinese-built vessels. For context, Soren Toft, CEO of Mediterranean Shipping Co. (MSC), has calculated this would translate to approximately $800 per 40-foot container on Asia-US East Coast routes. Assuming an average freight rate of $4,000 to $5,000, that’s a 16-20% surcharge. Because, you know, what supply chains need right now is another layer of complexity and cost.

The Shipping Company’s Dilemma (A Choose-Your-Own-Adventure Where All Endings Are Bad)

So, what’s a shipping company to do? Let’s break down their limited options—each more delightful than the last:

Option 1: Pass the Cost Along (AKA “Sorry, Not Sorry”)

The simplest—but hardly painless—solution would be to maintain current service patterns and pass the costs directly to shippers, who would pass them to retailers, who would pass them to consumers. For a typical Asia-US East Coast service calling at four ports, we’re talking about spreading $4 million in additional fees across customers.

As Toft aptly pointed out, without passing the cost onto the shippers, this fee could effectively “eliminate the freight rate” on some routes, where margins are already razor-thin. But hey, who needs trans-Atlantic trade anyway? 🌍

Option 2: Fewer Port Calls (AKA “Sorry, Oakland”)

The more likely response would be “network rationalisation”—a fancy term that essentially means “tough luck, smaller ports.” As Toft explained with refreshing candour: “In California today we typically call at Long Beach then proceed to Oakland. But we can’t proceed to Oakland if that costs us another $1 million.”

This isn’t just a matter of inconvenience. It’s a fundamental restructuring of how goods flow into the United States. But hey, who doesn’t love a good supply chain shakeup every now and then? 🤷‍♂️

Option 3: Find Workarounds (AKA “Hello, Mexico?“)

Carriers could explore developing robust transshipment operations through neighbouring countries not subject to the fees. Think Canadian ports like Vancouver for West Coast cargo, Mexican ports like Lázaro Cárdenas, or Caribbean hubs in Panama or the Bahamas.

Nothing says “America First” quite like incentivising shipping companies to route cargo through other countries. 🇺

The Cascading Consequences (Or: How I Learned to Stop Worrying and Love Chaos)

If shipping lines adopt the most likely strategy—consolidating port calls—the effects would cascade throughout the entire supply chain in ways that many policymakers may not have fully considered.

Port Pandemonium (2021: The Sequel Nobody Asked For)

Concentrating cargo volume in fewer ports would push already strained infrastructure to its breaking point. Major gateways like Los Angeles/Long Beach, New York/New Jersey, and Savannah would face intensified congestion at terminals, roads, and rail connections.

Remember the port congestion of 2021, with dozens of vessels anchored outside ports waiting for berth space? We could see similar scenarios playing out again, but this time by design rather than circumstance. Because if there’s one thing we learned from 2021, it’s that supply chain crises are super fun and we should definitely try to recreate them!

Economic Impact on Overlooked Communities (Don’t Worry, They’re Used to It)

Ports that lose services would experience significant economic contraction. The impact goes far beyond just the docks:

• Direct job losses among longshoremen, pilots, and terminal operators
• Reduced activity for trucking companies, freight forwarders, and customs brokers
• Diminished business for port-adjacent services including bunkering, provisioning, and maintenance
• Decreased tax revenue for local governments

To put this in perspective, a port like Oakland supports tens of thousands of jobs—approximately 84,000 in the region. These aren’t just statistics; they represent livelihoods that would be upended.

Transportation Network Disruption (Traffic Jams Are Good For Thinking Time)

As cargo becomes concentrated at fewer entry points, inland transportation networks would face unprecedented pressure:

• Rail congestion would intensify as more cargo requires longer-distance inland movement
• Truck capacity would be strained, potentially creating driver shortages in major gateway regions
• Intermodal facilities would face capacity constraints and congestion

Ironically, a policy aimed at Chinese vessels would most significantly impact American transportation workers, creating bottlenecks and inefficiencies throughout domestic supply chains.

Environmental Consequences (Climate Change Needed A Boost Anyway)

The environmental impact would be multifaceted and largely negative:

• Increased drayage distances would generate greater carbon emissions
• More truck transportation (versus direct port delivery) would increase road congestion and emissions
• Vessel queuing at congested ports would result in additional anchorage emissions
• Potential modal shift from more efficient water transportation to less efficient land transportation

In an era where companies are striving to reduce their carbon footprint, this policy could inadvertently push supply chains in the opposite direction.

The Real-World Impact (For Those Who Live In The Real World)

Let’s make this concrete with a practical example. Currently, a shipment from Shanghai to Dallas might arrive at the Port of Houston, then move by rail directly to its destination—a relatively efficient journey.

Under the new fee structure, that same container might instead route through New York (as shipping lines eliminate the Houston call to avoid additional fees), then face congested rail terminals and potentially shift to truck transportation for part of its journey. The result? Higher costs, much longer transit times, more emissions, and a more fragile supply chain. Progress!

For consumers, this translates to higher prices, more frequent stockouts, and less reliable service. For businesses, it means increased inventory costs, more complex logistics planning, and potential competitive disadvantages in global markets.

Looking Beyond the Horizon (If We Can See Through The Smog)

The strategic response from shipping lines would reshape container networks throughout North America with far-reaching consequences. While neighbouring countries might see economic opportunities in developing alternative hub operations, the fundamental architecture of US supply chains would be altered in ways that could take years to optimise.

The irony in all this is that a policy ostensibly designed to address concerns about Chinese shipbuilding practices would primarily impact American businesses, workers, and consumers. The shipbuilding has already happened; the vessels are already built. This policy would simply change how (and at what cost) those vessels deliver the goods that American businesses and consumers rely on every day. It’s like closing the barn door after the horse has left, and then setting the barn on fire just to be sure.

Final Thoughts: A Storm on the Horizon

As the comment period on the proposed fee structure closes at the end of March, Mediterranean Shipping Co. and other major carriers face difficult decisions that will ripple through supply chains for years to come. For those of us working in or adjacent to the shipping industry, it’s a stark reminder that seemingly straightforward policy decisions can trigger complex and far-reaching consequences across the intricate global networks that move our goods. Who knew international trade could be so complicated? Apparently not everyone!

What are your thoughts on the proposed fees and their potential impact? Have you observed similar policy decisions with unintended consequences for supply chains? I’d welcome your perspectives in the comments. Let’s navigate these turbulent waters together—preferably without capsizing.

Written by Tom Bebbington