Port fees, shipbuilder sanctions highlight shipping as red line in Beijing
There's no question that shipping has emerged as a new front line in Sino-US geostrategic competition.
On Tuesday, steep new port fees took effect in both countries:
- The US fees on Chinese-owned, -flagged, and -built ships were announced back in April following a Section 301 investigation.
- China's reciprocal fees on US-owned, -flagged, and -built ships were announced Friday, with the Ministry of Transport releasing implementation rules only on Tuesday – leaving companies almost no time to prepare.
The problem: It's unclear whether some global shipping companies meet Beijing's US-ownership threshold.
- Publicly listed global shipping firms are scrambling to determine whether US institutional shareholders push them above the 25% ownership threshold.
- Some China-bound cargoes have been diverted to India and Indonesia to sidestep the uncertainty – and fees – in the meantime (Lloyds List).
Then, late Tuesday, the commerce ministry (MofCom) sanctioned five US-linked subsidiaries of South Korean shipbuilder Hanwha Ocean – banning Chinese firms from doing business with them.
- MofCom said Hanwha, which just committed USD 5 billion to its US shipyard in August, had violated China's Anti-Foreign Sanctions Law (AFSL) by "assisting and supporting the US government's investigation" and damaging China's "sovereignty, security, and development interests."
Get smart: The US-China trade war is once again rippling through global supply chains, with the new fees and mounting risks driving up the cost of trade.
- COSCO Shipping said in September it would absorb the soaring fees rather than pass them on to customers – but few competitors can afford to do the same.
Get smarter: Targeting Hanwha's US subsidiaries rather than its HQ was a calculated warning shot – meant to discourage cooperation with US government probes without severing commercial ties altogether.
Big picture: Beijing has spent years building out tools like the AFSL to hit back against foreign sanctions – and it is increasingly willing to use them.