Nix New Car Carrier Port Fees in Trade Negotiations

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The Trump administration has announced plans to impose port entry fees on car carrier ships not built in the United States.

In response, Japanese shipping companies have begun considering passing on the new port entry fees in their freight rates. If they are forced to bear the costs themselves, they say, they will not be able to stay in business.

If these fees are indeed passed on, it would essentially amount to imposition of new tariffs on Japanese automakers exporting to the US. In turn, that will increase costs.

The profits of Japanese automakers are already being impacted by the additional tariffs on motor vehicle imports. This is reflected in Toyota Motor Corporation's operating profits forecast that its operating profit . Those are projected to be reduced by ¥180 billion JPY ($1.25 billion USD) in the two months from April to May.

Responding with Common Sense and Information

Government negotiators must strongly urge the US administration to rescind the new charges. Port entry fees for car carriers are to be set at $150 per vehicle. The total is based on the maximum number of cars that can be loaded on a carrier.

Since large carrier vessels have a carrying capacity of 6,000 to 7,000 cars, port entry fees in such a case would exceed ¥100 million ($700,000 ). The plan is due to be implemented from October 14.

*Shipping containers are stacked up at the Port of Los Angeles, USA. (©Reuters)*

Strengthening domestic shipbuilding capabilities is a key national security priority for the Trump administration. The new port entry fees were originally intended to apply only to Chinese-built ships. However, their application is being expanded to include other foreign ships in an effort to encourage shipbuilding in the United States.

The port entry fee plan includes a waiver on port entry fees for up to three years if an order is placed with a US shipyard. This is intended as an incentive to encourage ship construction within the US.

Nonetheless, as things now stand, the top three shipbuilding countries, namely China, South Korea and Japan, account for the bulk of the world's shipbuilding volume, and over 90% of the total output. The US share does not even reach 1%. That being so, it is difficult to imagine that the collection of port fees alone will lead to an increase in orders for ship construction.

Protecting Core Industries

The Trump administration imposed an additional 25% tariff on auto imports on April 3. Further tariffs were also imposed from May 3 on auto parts, such as engines and transmissions. The Japanese government has been calling for the elimination of these additional tariffs. But the US is adamant that they are not subject to negotiation.

To break the impasse, the Japanese government wants to use technical cooperation in the shipbuilding sector as a bargaining chip. But it should also use it as leverage to demand the withdrawal of the port entry fees.

As competition among automakers around the world intensifies, the elimination of tariffs alone will not be enough to protect Japan's core industries. But at least this obstacle needs to be banished.