Potential impact on high-end chilled beef and lower-value variety meat exports if USTR imposes service and entrance fees.

U.S. Meat Export Federation
The Office of the U.S. Trade Representative (USTR) held public hearings March 24 and 26 on proposals in response to China’s acts, policies and practices aimed at dominating the maritime, logistics and shipbuilding sector. A major component of USTR’s proposal is to impose a service fee of $1 million for each U.S. port call of a Chinese-operated ship. Port entrance fees would also be imposed on Chinese-built vessels, based on the ratio of a carrier’s fleet that is built in China, and fees would be assessed based on a carrier’s pending orders of Chinese-made vessels.
With these fees being applied so broadly, exporters and other cargo owners would certainly see higher ocean freight rates to cover the additional costs. The additional fees are also likely to lead to service reductions and fewer calls to key U.S. ports. These are major concerns for the U.S. beef industry, which ships nearly 75% of its exports by ocean freight. In fact, last year about $8.2 billion in U.S. beef exports traveled by ocean carrier, or $158 million per week. These products enter an extremely competitive global marketplace in which efficient, timely and cost-effective transportation is absolutely critical.
The U.S. Meat Export Federation (USMEF) submitted comments to USTR detailing red meat exporters’ concerns about the remedies proposed in this proceeding. One of the issues highlighted by USMEF is the potential impact on variety meat exports – items such as beef livers, hearts, kidneys, tripe, intestines, feet and sweetbreads. Because these are lower-value products, any increase in transportation costs jeopardizes exporters’ ability to ship them internationally. In fact, when transportation and other operating costs increased during COVID, variety meat exports were the hardest-hit product category. For cattle producers, variety meat exports equate to about $40 per fed steer or heifer slaughtered. And because there is almost no domestic demand for beef variety meat, an increase in international shipping costs places this entire revenue stream at risk.
The proposed service fees are also a concern for higher-end beef products because these fees could cause carriers to reduce or eliminate port calls. The best example is the Port of Oakland, Calif., which is by far the largest outlet for U.S. beef exports, handling 42% of waterborne shipments. Oakland plays an especially critical role in enabling the U.S. industry to ship high-value chilled (meaning never frozen) beef to Asia. Oakland is served by many vessels that have already delivered import cargo to a Southern California port. These vessels then call Oakland before returning to Asia, making it an ideal choice for exporters shipping chilled beef to key markets such as Japan, South Korea or Taiwan.
Utilizing the Port of Oakland allows U.S. exporters to maximize the available shelf life for chilled beef products, bolstering Asian customers’ confidence that shipments will arrive in plenty of time for the product to make its way into commercial channels. These advantages will be eliminated if calls to the Port of Oakland are reduced, and exporters must ship more product through the Ports of Los Angeles and Long Beach. This is especially concerning when port congestion is high in Southern California, such as during the peak season for imports.
While utilizing the Port of Oakland does not completely eliminate potential delays or obstacles, the port has proven to be an invaluable asset for the U.S. beef industry. Service fees that incentivize the elimination of Oakland from a vessel’s itinerary will have an immediate and detrimental impact on beef exports.
Another concern highlighted by USMEF is that the proposed service fees make little accommodation or adjustment for smaller vessels. One of the most rapidly developing regions for U.S. red meat exports is Latin America, which is a collection of small and medium-sized markets that do not necessarily attract the larger classes of ocean vessels. If a small vessel hauling U.S. exports to Central or South America or a Caribbean island is subject to service fees similar to the world’s largest vessels, the cost burden is spread over far fewer containers.
Also concerning are proposals to require certain ratios (which increase over time) of U.S. exports to be carried on U.S.-flagged vessels and on vessels built in U.S. shipyards. While USMEF is supportive of the goals behind these proposals, it is not clear how exporters of a wide range of U.S. products would meet these obligations or whether compliance is even possible.
At a time when rising trade deficits are in the spotlight, the fees and requirements proposed by USTR will dampen many U.S. industries’ ability – and their incentive – to export products, due to higher costs and reduced services at the ports utilized by exporters. A better approach would be to examine alternative methods of incentivizing investments in domestic ship building and operation of U.S.-flagged vessels – methods that will not penalize U.S. exporters.