Pegasus Market Update Q2 2025: No.19
All,
Reciprocal Tariffs are the beginning of what we believe to be continuing changes to the entire scope of global trade throughout the year and possibly beyond. Ocean carrier services, sourcing origins, and rates in multiple markets will likely change dramatically. While this is not something that should happen haphazardly, it seems that this will be the landscape that we can expect and will need to work through. Whatever happens next, you can count on us to work with you and for you through these changes, and we will come out the other side together.
Reciprocal Tariffs
Most of the tariff information is everywhere, and most of it is discussed individually, so I'm not going to spend too much time on it other than to simply summarize that the reciprocal tariff amounts are on top of everything else that is already applicable, such as the regular duty, any additions for metal, etc. We have been and will continue to consult on your particular options and needs individually.
We also recommend contacting the Commerce Department and your U.S. representatives with your particular situation and arguments, if any. While it may be ignored, the communication itself is not a difficult step to take, and you will have at least made your case and done everything that can be done.
De Minimus Applications
Pursuant to the Executive Order (EO) 14256, “Further Amendment to Duties Addressing the Synthetic Opioid Supply Chain in the People’s Republic of China as Applied to Low-Value Imports,” signed on April 2, 2025 (90 FR 14899, April 7, 2025), as subsequently amended by the Trump administration, Customs and Border Protection (CBP) said in this CSMS on Friday, April 18, that effective 12:01 a.m. ET on May 2, goods from China and Hong Kong are not eligible for the de minimis exemption, must be entered under an appropriate entry type, such as a type 11 or 01 entry, and will be subject to all applicable duties, taxes, and fees.
“Requests for de minimis entry and clearance for ineligible shipments will be rejected,” CBP said.
Other than for shipments to the U.S. through the international postal network, CBP said the EO requires entry under an appropriate entry type to be made in ACE for covered shipments that would otherwise have been eligible for the de minimis exemption. Merchandise subject to EO 14256, as amended, may not be entered by submitting any paper entry forms or documents, and, other than for mail, entries must be made in ACE.
Vessel Tariffs - USTR Application
Following Trump’s Executive Order on US shipping, USTR has made a revised proposal for fees on Chinese shipping. The new proposal has major changes compared to the first proposal, with downward revisions of some fees. The new proposal includes the following:
Chinese vessel operators to pay 50 USD per net ton of the vessel from Oct. 2025. This increases gradually to 140 USD by April 2028. This applies to all vessels operated, irrespective of where they are built. The original proposal was for 1000 USD per net ton up to 1 million USD.
For Chinese-built vessels calling a US port, a fee of 18 USD per net ton of vessel or 120 USD per container discharged will be paid from Oct. 2025. It is the highest amount of the two that applies. This increases gradually to either 33 USD per net ton of vessel or 250 USD per container by April 2028. This was originally set as a flat fee of 1.5 million USD.
Importantly, this does not apply to vessels smaller than 4000 TEU. It also does not apply to voyages shorter than 2000nm.
The fee on a Chinese-built vessel can be waived if the operator orders and takes delivery of a US-built vessel of the same or larger tonnage within 3 years. Note that to be “US-built”, the vessel must also be made with steel and components manufactured in the US. Given the exemption for vessels below 4000 TEU, it is hard to see this rule being used in practice.
Note that fees are no longer cumulative and now only apply per call to the US and not per individual port call. For example, an Atlantic service calling 4 ports in the US will now only be subject to the fee once and not 4 times.
There is no longer a fee on non-Chinese built ships, nor does the carrier own such, nor do they have any on order in Chinese yards. This was originally set as a fee of 1 million USD.
There is no longer a requirement for US exporters to use US-flag tonnage except for LNG shipments.
In addition, USTR proposes a 20-100% tariff on ship-to-shore gantry cranes, containers, and chassis from China.
For container shipping, several key takeaways:
COSCO/OOCL will be hit harder than other carriers. This is likely to cause a network adjustment in Ocean Alliance such that CMA CGM and Evergreen will be operating US-bound services as much as possible.
Other carriers will shuffle vessels where possible to have Chinese ships in other trades.
The exemption for vessels below 4000 TEU and voyages below 2000nm will incentivize transhipment for cargo to USEC in the Caribbean hub ports. It will also incentivize the use of smaller vessels, especially on trades with South America and on the Atlantic. Presently, the average vessel size from East Coast South America to USEC is 6200 TEU, and Med-USEC is 6000 TEU.
USTR is open for comments until May 18, and a hearing is held May 19.
For example, COSCO vessels around 13,000 TEU seem to be around 60,000 net tons. In the new USTR proposal, there is no upper limit for fees - in the old proposal, the upper limit was 1 million USD.
This means under the new proposal, vessels operated by either COSCO/OOCL might now face fees of not 1 million USD but fees in the range of for example 8.4 million USD for a 60,000 net ton vessel. Broadly speaking, for some of the largest container vessels in the world we might be looking at more than 10 million USD per call to the US.
For other carriers arriving in the US with Chinese-built vessels, we would be looking at fees of up to 4 million USD per call to the US.
Author
Matthew Crocker
Chief Commercial Officer
CNBC Trump Administration accounces fees on Chinese Goods
U.S. Moves Ahead With Plan to Charge Fees on Chinese Ships