Ag Industry Says Shipbuilding Proposals Would Upend U.S. Exports, Asks for Carveouts

Every bushel of corn Mike Koehne sends to Asia from his 900-acre farm in southeast Indiana begins its journey on the Ohio River. The product is loaded onto a barge to make the roughly 800-mile trip to New Orleans, where it will be moved onto a waiting bulk carrier. This carrier may stop at multiple U.S. ports to fill its hold before sailing for Japan or another U.S. export market.

The Office of the U.S. Trade Representative is considering a slate of proposals, including steep new port fees, to revive domestic shipbuilding and counter China’s dominance. These could introduce new costs for shipping operators at each stage of the export process.

Under some proposals, Chinese-made vessels, which make up more than half of new ships and U.S. dry bulk carrier port stops, could face surcharges of up to $1.5 million every time one docks at a U.S. port.

If a carrier stops at five U.S. ports to load cargo, “that makes things really expensive,” Koehne told Agri-Pulse.

On top of a surcharge for Chinese-made vessels, officials are considering new fees for operators that have large orders booked with Chinese ship makers and a requirement that up to 15% of U.S. exports must be shipped on U.S.-flagged vessels – and 5% on U.S.-made vessels – within seven years.

The proposals are causing anxiety in the farming community, Koehne told officials on Monday during the first of two public hearings on the plans. U.S. agricultural exporters face intense competition in international markets, and many warned in written comments Monday that higher transportation costs will lead to higher prices for U.S. commodities and ultimately lost markets.

“This plan to kickstart the industry while asking farmers to foot the bill is not the solution,” Koehne told officials.

U.S. shipbuilding capacity has plummeted in recent decades as China’s capabilities have surged. In 1970 the U.S. made around 5% of the world’s merchant vessels by tonnage. This share had fallen to just 0.1% in 2023, according to UN Trade and Development data.

Even if carriers wanted to pivot to U.S.-made vessels to meet the sourcing requirements under consideration, there simply aren’t enough ships under production, a coalition of more than 100 national and regional ag groups argued in a letter to USTR Monday.

Other major shipbuilding nations may also be unable to step up production to help carriers pivot fleets away from China. A Japanese executive told Reuters the industry is running near full capacity, while Korean producers are facing financial constraints that limit new investment.

The timeline for phasing in sourcing requirements of just seven years is “simply unrealistic,” American Farm Bureau Federation President Zippy Duvall wrote in a submission to USTR.

“The current U.S.-flagged fleet lacks the capacity to accommodate even a fraction of these shipments,” he added. Without alternatives, operators will be forced to eat the added costs – which they will likely pass along to ag customers, according to the AFBF submission.

“[F]orcing exporters into an artificially constrained system will not bolster American agriculture—it will suffocate it,” Duvall wrote.

Higher Prices, Fewer Options

It isn’t only U.S. ag export prices set to grow as a result of the new proposals. The agricultural groups warned in their letter this week that the plans would also see fertilizer prices climb, given their transportation on bulk and carrier vessels. The proposals, if implemented, could also severely limit transportation options for U.S. importers and exporters.

Maritime companies have already indicated that if a new flat fee is imposed on U.S. port calls, they would reduce visits to smaller ports. The Meat Institute warned in written comments to USTR that U.S. pork and beef industries rely on the smaller Port of Oakland to ship to customers in Asia and Oceania and would struggle to shift supply chains to larger ports.

“[P]erishable products cannot be easily diverted or repositioned due to travel time or infrastructure constraints, including the lack of available reefer containers and refrigeration plugs,” the submission reads.

During the hearing, ship operators described how the fees could make shorter trade routes across the Great Lakes or to Latin American and Caribbean nations unviable. World Direct Shipping moves around half of all containerized trade between East Coast and Mexico ports. Two of its three vessels are Chinese-made, Daniel Blazer, whose family owns the company, told officials during Monday’s hearing.

A $1 million fee on port calls, Blazer said, would make the service “economically unviable,” driving trade onto other modes of transport.

“Without WDS, approximately 1,000 additional trucks would cross the border each week,” he said, worsening road and border crossing congestion and raising costs for both imports and exports.

Similarly, Hannah Bowlby, chair of the Ontario Marine Council, argued that the proposals as written could eliminate waterway trade in the Great Lakes region. She called on officials to exempt short-haul shipping from any future actions – or avoid flat and weight-based fees and have port fees reflect cargo values instead.

Short sea shipping, comprising routes shorter than 2,000 nautical miles, typically handles lower-value commodities or raw inputs, she said, unlike long-distance voyages that often carry higher-value finished goods. The smaller ships also typically make more port calls.

“One size does not fit all,” Bowlby argued. “Low-value goods and small vessels can't be treated the same as long hauls.”

Several agricultural groups also used their public comments to ask for specific ag exemptions.

The National Corn Growers Association appealed for a carve-out for bulk grain shipments, arguing that around a quarter of all U.S. corn grown cannot be sold domestically. Meanwhile, the Northwest Grain Growers called for a broader exemption, applying to all agricultural commodities until domestically made ships can meet market demand.

Dole, the multinational fruit and vegetable producer and distributor, asked for an exclusion for ships transporting fresh produce.

Convincing Congress

But industry representatives may find officials incalcitrant. The proposals enjoy broad bipartisan support and have received a warm reception from many on Capitol Hill.

Monday’s hearing saw a stream of lawmakers from both parties appear via video link to lament the decline of domestic shipbuilding and tout the need for bold measures to wake it from a coma.

Connecticut Rep. Rosa DeLauro, from the progressive wing of the Democratic party, offered her “strong support” for USTR’s proposals. On the other side of the aisle, Rep. John Moolenaar, R-Mich., argued that the U.S. should proceed with port fees on Chinese-made vessels.

“The United States cannot afford to cede another critical industrial base to the Chinese Communist Party,” Moolenaar argued.

Koehne, who sits on the board of directors of the American Soybean Association, told Agri-Pulse after the hearing that he was concerned by what he saw from the lawmakers' responses.

“I understand what they're saying that we’ve got to increase the shipbuilding – which I agree with that – but I don't know if all of them understand the consequences,” Koehne said.

Lobbying on Capitol Hill last week, ASA and other groups raised the issue with members’ offices, according to Virginia Houston, ASA director of government affairs.

In comments to Agri-Pulse on Monday, California Democrat Jimmy Panetta said agriculture’s concerns are understandable, but he also highlighted the risks of global reliance on China for vessels.

“We have to make serious decisions about where we're going and how serious we are with our domestic shipbuilding before we address other concerns,” Panetta said.

USTR’s proposals were drawn up under the Biden administration as the result of a probe into China’s unfair trade practices. But the Trump administration has signaled it is taking up the mantle and is already working on an executive order to spur domestic shipbuilding that includes port fees and subsidies, according to reporting from Reuters earlier this month.

Feeling the Effects

Even the prospect of fees is prompting disruption in shipping contract markets. Chris Peha, CEO of Northwest Grain Growers, said in written comments to USTR that the industry is struggling to secure contracts for bulk vessels beyond May 2025. Those that can be secured, he said, are coming with significant price premiums to offset risks.

“Consequently, foreign buyers are increasingly sourcing grain from countries like Canada and Australia, potentially leading to long-term losses for U.S. producers,” Peha wrote.

A joint submission from the National American Export Grain Association, the National Oilseed Processors Association and the National Grain and Feed Association sees similar challenges. They estimate that ocean freight costs for shipments past May are up by 40% or more.

“This is an example of a laudable goal that cannot be quickly executed,” Mike Steenhoek, executive director of the Soy Transportation Coalition, said in an email.

“As a result, soybean farmers and other impacted industries are urging USTR to address this important issue in a way that does not harm U.S. exporters and importers.”

This article was originally published by Agri-Pulse. Agri-Pulse is a trusted source in Washington, D.C., with the largest editorial team focused on food and farm policy coverage.