The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian businesses are “not panicking yet” over fears this nation and the wider Caribbean will be “devastated” by potential container shipping cost increases worth thousands of dollars due to US policy changes.

Grocery stores and construction materials suppliers told Tribune Business that the potential impact from proposals to levy fees of up to $1m per US port call on shipping companies with Chinese-manufactured vessels is akin to “man-made COVID” and the supply chain disruption and inflationary pressures that resulted from the pandemic.

They spoke out after Tropical Shipping, one of the major carriers serving The Bahamas, warned customers in this nation and elsewhere that the plan put forward by the US Trade Representative’s office would have “a far-reaching financial impact” on import-dependent Caribbean nations with ocean freight rates likely to increase by “thousands of dollars per TEU” or twenty-foot equivalent unit container.

The proposal, which is currently undergoing public consultation in the US, is already experiencing strong opposition and headwinds from American exporters, shipping companies and port operators due to the perceived harmful impact it will have on their costs, staffing levels and business they do with The Bahamas and other regions.

The feedback period, along with a public hearing, ends on March 24, 2025 in just one week’s time. The US National Law Review, while acknowledging that the wide-ranging push back means the US Trade Representative Office’s will have challenges developing something workable, and could drop the scheme altogether, warned against writing-off the Trump administration given how fast it moves.

The process requires that any proposed rule involving the imposition of port call fees on Chinese-made ships be finalised by April 17, 2025, with implementation potentially following as swiftly as 30 days later in mid-May. Tropical Shipping is sounding the alarm because most of the vessels serving the Caribbean region are Chinese-made and would thus be subject to the new fees.

Debra Symonette, Super Value’s president, told Tribune Business that the 13-store supermarket chain “isn’t panicking yet” and she urged Bahamian consumers to adopt the same approach. Pointing out that the proposed fee increase may never happen, she added that Super Value and other Bahamian businesses have the ability to switch carriers, and source product from other nations, to mitigate the potential cost impact.

Still, acknowledging that further pricing and inflationary pressures are the last thing Bahamians want following the post-COVID cost of living crisis, Ms Symonette said: “We know that once freight goes up that must affect the pricing eventually. We’re going to absorb the freight for as long as we can, and eventually may have to pass some of it on.

“Then there’s the option of using alternative carriers. It’s not strictly Tropical. We do have the option of weighing the cost and benefits of various carriers. We don’t want our customers to panic yet; we don’t know what’s going to happen. 

“There’s always the concern there’ll be an issue in something along the supply chain that trickles down to us and trickles down to the customer. For as long as we can we will avoid passing it on to our customers. We’re always fighting these challenges. Everybody is trying to do their best to cope with rising prices. We really wouldn’t want to have another one thrown on top of them [consumers].”

The US National Law Review, in its analysis of the measures being suggested by the US Trade Representative, suggested that existing Chinese-made vessels already in use with US carriers such as Tropical Shipping may not attract the proposed fee. Instead, it said the proposed fee structure is a sliding scale based on how many “proposed” new-build vessels or orders a carrier has with China.

But, while existing Chinese-made vessels serving The Bahamas and wider Caribbean may not attract the US Trade Representative fee, the US National Law Review also warned that a draft ‘executive order’ - needing only Donald Trump’s signature to take effect - is separately proposing to levy tonnage-based fees on Chinese-made vessels entering US ports although no details or mechanism for how this will work are known. 

“We’re hoping for the best,” Ms Symonette said. “It’s something we’re trying to watch. We really have to wait and see how they go about doing this and if it will affect us. We’re not panicking yet. It all depends on the decision that they make, and how much it will affect us.

“If it’s fees that are going to be directly implemented on the carriers we use, then obviously it will have a big impact and we will have to do something to kind of mitigate the affect of it. Everything is up in the air. It’s just a waiting game and we have to just see what conclusions they come to and hope they won’t take measures that adversely affect us.’

Chris Lleida, chief executive of Premier Importers, a building materials supplier, told Tribune Business it was inevitable that shipping companies such as Tropical will pass cost increases of that magnitude on to their -end-user customers - Bahamian importers and the latter’s clients.

“That would actually devastate this region,” he said, if Tropical’s fears came true. “Besides shipping to us they ship throughout the whole Caribbean. There are other carriers that come here besides MSC. Betty K has launched a new service, partnering up with King Ocean so they have larger vessels than they used to have. Crowley might be back.

“But, whatever it costs the shipping company, that cost will be directly passed to their customers and that will be passed along to our customers. It it becomes exorbitant or excessive, then obviously business will be retarded, it will slow down the economy, slow down taxes and, if it continues long enough and gets excessive enough, you can’t keep everybody employed and companies in business will be devastated.”

Mr Lleida likened many of the Trump administration’s economic and trade policies since it took office in mid-January to “using a sledgehammer to smash a mosquito. You’ll get the mosquito eventually but damage everything in the room”. Meaning that The Bahamas and other nations are collateral damage, caught up in the administration’s aggressive ‘America First’ and ‘Make America Great Again’ policy agenda.

“It’s a little frightening but that seems to be the order of the day,” the Premier Importers chief said. “I take the mindset there’s very little of this which I can control in any way. I’m focused on my work. I know this will have cost implications somewhere along the line. If anyone recalls the supply chain disruption during COVID, and after COVID, well this is a man-made COVID.

“You disrupt and impede the flow of goods around the world, it doesn’t sound like anything good is going to come out of it from a cost point of view.” Mr Lleida said that, with a 40-foot container costing $5,000, increases of the sort Tropical Shipping fears will “just explode the cost of containers”.

The US National Law Review, though, said the US Trade Representative’s planned Chinese-made vessel fee structure only applies to “prospective” ships that non-Chinese carriers have ordered - or planned to order - from that nation. That raises the prospect that existing Chinese-made vessels which already serve The Bahamas and Caribbean, and are owned by non-Chinese carriers, will be spared the fee hike.

The $1m per US port call fee will only be applied to carriers where 50 percent or more of their “prospective” Chinese ships will be delivered within the following 24 months. This fee drops to either $750,000 or $500,000 per call if the percentage is less. There is, though, a requirement that US-made goods be exported on US-made vessels.

Tropical Shipping, in its message to Bahamian customers, said: “We want to bring to your attention a proposed trade action from the US Trade Representative’s (USTR) Section 301 set for adoption by the US government under executive order in the next month.

“If adopted, this tariff would impose a significant port fee of $1m per port call on any Chinese-built vessel calling at US ports. This tariff would have a far-reaching financial impact on exporters to the Caribbean. As you may be aware, most vessels serving the region were built in China. As a result of this tariff fee, ocean freight rates from Florida will increase by thousands of dollars per TEU.”

“At Tropical, we have been aggressive in our advocacy with the US Trade Representative’s proposal and continue to raise our voice on behalf of our customers and businesses like ours.” Citing its feedback to the public consultation, Tropical Shipping said: “Based on Tropical Shipping’s years of experience and deep understanding of relevant market dynamics, the proposed action will:

“Adversely impact American shipping companies and American exporters; reduce competition for American-owned ocean cargo transportation and shift US port business to other parts of the world; adversely impact American workers in US port operations, warehousing, trucking and all other aspects of logistics; raise the cost of good exported from the US to the Caribbean.”

The latter, Tropical Shipping added, would cause a shift in the $92.3bn export business away from the US to other countries” and “increase shipping costs for US exporters, and decrease the competitiveness of American shipping companies and producers of products in the US”.