During the March 24 U.S Trade Representative (USTR) public hearing on proposed fees on Chinese ship operators and Chinese-built ships, Mike Koehne, a soybean farmer from Greensburg, Indiana, and member of the boards of the American Soybean Association, the U.S. Soybean Export Council, the Indiana Soybean Alliance, and the Soy Transportation Coalition (currently serving as chairman), offered comments on behalf of his fellow soybean farmers and the entire industry.

During his testimony, Koehne stated, "Imposing port fees on most of the maritime fleet that exports from and imports to the U.S. will increase costs for U.S. farmers -- both in terms of inputs like fertilizer, seed, etc., and getting crops to market. At the same time, our competitors in Brazil and Argentina will not be subject to the same regulations. While well-intended, this proposal would ensure U.S. soybeans will bear higher costs and be less competitive in the global marketplace."

Mike Steenhoek, executive director of the Soy Transportation Coalition, sent DTN an email containing Koehne's testimony and offered some of his thoughts about the situation.

"U.S. soybean and grain exports do not enjoy a lucrative profit margin. Historically, soybean and grain exports will have a small profit margin that will be multiplied over millions and billions of bushels. That is how agriculture is usually economically viable. Additional transportation costs, such as those proposed by USTR, can easily close the door to the global marketplace," said Steenhoek.

"Transportation can facilitate farmer profitability or be an obstacle to it. It all depends upon how cost-effective and reliable that transportation system is. The proposed actions by USTR would add significant costs to the soybeans and soy products U.S. farmers export to the global marketplace," said Steenhoek. "One more obstacle to farmer profitability will have been erected. Extending U.S. influence throughout the world is more than having a fleet of naval vessels. It is more than having embassies located in capital cities of other countries. Extending U.S. influence is also a function of a group of individuals -- U.S. farmers -- growing food that will, in turn, be exported to supply the protein and nutritional needs of the global population. Not only do agricultural exports allow U.S. farmers to be profitable, but it also promotes U.S. influence and global stability in ways others can only hope to achieve. We therefore encourage the leadership of USTR to pursue remedies that will allow U.S. farmers to continue to fulfill this important mission."

The American Soybean Association estimated the costs of a $1 million fee on soybean exports. Both vessels in the below examples are loaded with 70,000 metric tons (mt) of U.S. soybeans.

-- Pacific Northwest to China: Total transportation cost would increase from $11.90 per bushel to $12.29 per bushel.

-- Mississippi Gulf to Japan: Total transportation cost would increase from $12.22 per bushel to $12.61 per bushel.

The National Grain and Feed Association (NGFA) also opposed the USTR proposal to levy steep fines and restrictions on exporters that use Chinese-made ships.

"Though well-intentioned, this proposal threatens to impose significant costs on U.S. grain and oilseed exporters and erode America's competitiveness in the international market," explained NGFA President and CEO Mike Seyfert in an NGFA March 24 press release. "If enacted, this proposal would effectively eliminate half of the global bulk fleet that we need to export almost one-third of grains and oilseeds that are produced in America," Seyfert explained. "That puts U.S. agriculture at a considerable competitive disadvantage in global markets. We are already seeing disruptions in the marketplace since the proposal was put forward, including lost sales and difficulty contracting ships."

There are approximately 21,000 vessels in the world's bulk shipping fleet, nearly 50% of which were made in China. Only five ships currently operating in the global fleet were built in America, or 0.2%, according to the NGFA press release (https://www.ngfa.org/…).

"With the big threat of a possible April implementation of USTR 301 Policy against ships built in China, ship owners do not know how to write an appropriate charterparty (legal maritime contract) nor provide sensible rate quotes for grain shipments to U.S. ports beyond the next 20 days," Jay O'Neil, HJ O'Neil Commodity Consulting told DTN. "This threat has obviously become very disruptive for U.S. exports. And the threat has already pushed increased buyer interest for loadings out of East Coast South America."

O'Neil added, "As for the proposed USTR 301 two-tiered proposed $1.0 to $1.5 million USD tax on Chinese vessels visiting U.S. ports, that is very misguided and troubling for U.S. consumers and U.S. grain farmers. In 2022, over one third of all commercial vessels were built in China, and that percentage is quickly rising to over 55%. If it becomes more expensive for these ships to serve U.S. ports, the added expense will definitely be passed on to U.S. consumers and or to U.S. grain farmers. U.S. grain exports would become less competitive and farm prices would suffer. Just as it was with past grain embargoes, the U.S. government would be encouraging crop production expansions in lands of our foreign competitors."

U.S. farmers are the ultimate "Made in America" constituency added Steenhoek. "Our nation has a proud history of U.S. farmers growing U.S. food on U.S. soil. That is worth protecting and preserving. We therefore believe that the effort to promote U.S. shipbuilding is a laudable goal. While we concur with the overall goal, what is beyond dispute is that this goal is a massive undertaking that will require an extraordinarily long 'runway' in order to achieve it. The essential question, therefore, is what is the appropriate length of runway that will be necessary to achieve the goal without penalizing other 'Made in America' industries, like agriculture? The proposed actions by USTR will clearly diminish the ability of U.S. farmers to compete in the international marketplace."

Executive Director of the Agriculture Transportation Coalition (AgTC), Peter Friedmann, summarized in a detailed outline of their testimony for March 26, "The nation's agriculture exporters, are united in concern and opposition to the proposal, in concept and format. We are not opposed to the objective, but we are not willing to sacrifice America's agriculture and the communities throughout the country that would be economically distressed or worse, by a plan such as the present, that would eliminate our ability to sell agriculture outside our own borders." Here is a copy of that testimony outline: https://agtrans.org/…

There were so many organizations, comprised of 14 panels, that the USTR added March 26 for another day of hearings. Now that all sides have been heard, it will be a waiting game as to what the current administration will decide: leave the original proposal, pull back on the current proposed fees or take more time to decide what to do next.

Read "USTR Hearing on Chinese Ship Fees" by DTN Ag Policy Editor Chris Clayton: https://www.dtnpf.com/…

North American Export Grain Association (NAEGA) press release on their March 26 testimony: https://static1.squarespace.com/…

Joint Ag Letter on Sec. 301 Fees, signed by more than 100 organizations, sent to USTR on March 24: https://ethanolrfa.org/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

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