US fossil fuel, farm groups rail against Trump port fee plan at hearing

By Valerie Volcovici and Lisa Baertlein

WASHINGTON (Reuters) -Fossil fuel and agriculture industry executives criticized the Trump administration's plan for big fees on China-linked ships entering U.S. ports during a hearing in Washington on Wednesday, arguing the move would hobble their ability to export everything from coal to soybeans.

The proposed fees on China-built vessels could top $3 million per U.S. port call. Few vessels would be exempt, making U.S. export prices unattractive and foist up to $30 billion of annual import costs on American consumers.

The Trump administration says the fees by the United States Trade Representative would curb China's commercial and military dominance on the high seas and promote a U.S. shipbuilding renaissance. Opponents say the plan could backfire on farmers, miners and other groups that would drive orders at domestic shipyards.

"The suggested policies do not punish China as intended, but rather punish American industry and will put American laborers out of work," said Gregory Kravitz, vice president at Oxbow Energy, a South Texas-based oil and gas company, at the congressional hearing.

The energy industry is the top U.S. exporter by value and Trump has pushed an energy dominance agenda. It is at risk from the fees because, like most others, it relies on fleets that own or have ordered ships from China.

"There is insufficient supply of suitable vessels for U.S. producers to charter which would enable them to avoid paying these fees," Peter Bradley, CEO of coal and oil exporter Javelin Global Commodities, said in comments prior to this week's hearings.

The issue, along with the administration's escalating trade wars with China, Europe, Canada and Mexico, has revealed an unlikely fault line between U.S. President Donald Trump and executives from industries he promised to support during his campaigns for office.

If implemented, the USTR fees could cause U.S. exports to fall 12%, hitting farmed products, petroleum and coal, said Cary Davis, CEO of the American Association of Port Authorities, on Wednesday.

Coal and agriculture officials told Reuters last week the proposed levies already were making it difficult to charter ships for exports and causing some product to pile up stateside.

BYE-BYE BANANAS?

Foes of the port fees likened them to a tax that will cascade costs throughout global supply chains.

The fees already have sent the bulk shipping costs for critical exports like wheat, corn and soybeans up 40%, United Grain Corp said in a letter last week. MSC, the world's largest container shipping company, warned it would likely reduce U.S. port calls to contain costs - a disruptive move that could spark the return of early pandemic-era product delays and shortages.

Bananas, the No. 1 consumed U.S. fruit, could get more expensive or scarce, Jared Gale, chief legal officer of banana supplier Dole Plc, testified. Dole makes 300 U.S. port calls annually and higher port fees would either make bananas too expensive for consumers or financially unaffordable for the company to import, Gale said.

The fees would be a double whammy for Perdue AgriBusiness, hitting both the animal feed it imports and the chickens it exports, the Maryland-based company said in a letter to USTR this week.

"We can't tax our way into a competitive ocean shipbuilding program," said Peter Friedmann, executive director of the Agriculture Transportation Coalition. He recently alerted maritime executives that exports of high-value, U.S. perishables like almonds and fresh beef would be devastated if vessel owners bypass the small ports they rely on for speedy exports.

The hearing on Wednesday will be the last before the administration makes a decision on the proposal. During a hearing on Monday, U.S. ship operators notified USTR that the fees would hurt their businesses, while representatives of the domestic steel industry expressed support.

(Reporting by Valerie Volcovici, Lisa Baertlein and Timothy Gardner; Writing by Richard Valdmanis; Editing by Richard Chang)