After facing strong opposition, including from PPAI, during a recent public hearing, the office of the United States Trade Representative is changing its approach to proposed remedies under its Section 301 investigation on China shipbuilding.
- Those proposed remedies include implementing fees of up to $1.5 million on Chinese-made ships entering U.S. ports, penalties on operators ordering from China and U.S.-flagged shipping mandates.
- The proposed remedies would reduce U.S. GDP by up to $6.2 billion, according to a new study by Trade Partnership Worldwide, which was supported by PPAI and nearly 30 other associations.
The U.S. no longer plans to charge Chinese ships the full slate of proposed port fees for using American ports, said U.S. Trade Representative Jamieson Greer during a hearing of the Senate Finance Committee on Tuesday, FreightWaves reported.
“They’re not all going to be implemented. They’re not all going to be stacked,” Greer said.
The USTR’s new plan is to base the fees largely on vessel capacity, resulting in lower charges for smaller ships coming into U.S. ports, The Wall Street Journal reported.
Executive Order
On Wednesday, President Donald Trump signed an executive order supporting whichever actions the USTR ultimately takes to “restore America’s maritime dominance.”
Additionally, the order calls for the USTR to propose tariffs on ship-to-shore cranes manufactured or assembled using components of Chinese origin; or manufactured anywhere in the world by a company owned, controlled or substantially influenced by China.
- The tariffs would also apply to other cargo handling equipment.
Section 6 of the executive order requires the U.S. Department of Homeland Security to take all necessary action, including proposing legislation, to “prevent cargo carriers from circumventing the Harbor Maintenance Fee on imported goods through the practice of making port in Canada or Mexico and sending their cargo into the United States through land borders.”
- It will require the HMF be applied to U.S. bound cargo that enters through Canadian or Mexican ports at the U.S. border, plus a “10% service fee for additional costs to U.S. Customs and Border Protection.”
PPAI’s Stance
Concerns raised during the hearing were increased costs, supply chain disruption, impact on agriculture and a lack of direct benefit to U.S. shipbuilding. Many pointed out that the U.S. shipbuilding sector lacks capacity to replace Chinese-built vessels anytime soon, making the policy more punitive than productive.
The promotional products industry wouldn’t be immune to the negative impact.
- Suppliers would face higher production and logistics costs, reducing profit margins.
- Distributors would have to pass on the increased costs to end buyers, making branded merchandise less attractive for corporate campaigns.
PPAI urges policymakers to pursue alternative solutions that strengthen U.S. manufacturing and supply chains without creating additional burdens for businesses that rely on international trade.
In addition to supporting the new study, PPAI joined more than 260 trade associations in signing a coalition letter to USTR, opposing the proposed Section 301 China shipbuilding remedies. The letter is below.
“PPAI strongly urges USTR to consider the unintended economic consequences of the proposed Section 301 remedies, particularly their strain on U.S. supply chains, cost structures and business operations,” Drew Holmgreen, president and CEO of PPAI, said in comments submitted to USTR ahead of the hearing.
Drew Holmgreen
President & CEO, PPAI
“While these measures are intended to support domestic shipbuilding, they risk creating higher costs for importers, disrupting logistics networks and weakening the competitiveness of industries that rely on global trade, including promotional products.”
View PPAI’s comments to the USTR below.
Economic Devastation
A major sticking point is that USTR’s proposed remedies would increase shipping costs by 8% to 14%, leading to higher prices for imported goods, according to Trade Partnership Worldwide’s study.
Alok Bhat
Market Economist, Research & Public Affairs Lead, PPAI
The new study also suggests that port traffic could decline by up to 11%, as shipping companies reroute through Canada or Mexico to avoid fees. As a result, U.S. warehousing and trucking jobs would be lost due to reduced port activity and the price of everyday goods would rise due to supply chain disruptions.
- Distributors using on-demand print and fulfillment services could see delays in processing and shipping customer orders, according to Alok Bhat, market economist, research and public affairs lead at PPAI.
- Meanwhile, suppliers storing bulk inventory in West Coast fulfillment centers may face higher handling fees as warehouses adjust to fewer shipments.
“Most of PPAI’s nearly 15,000 members are small and mid-sized businesses, meaning they lack the purchasing power to absorb rising costs like large corporate brands can,” Bhat says. “Larger distributors and suppliers may secure better freight rates, leaving smaller competitors at a disadvantage. Independent distributors may lose contracts if corporate buyers see the costs of promotional product rise significantly.”
See the full study below.
