The New York Stock Exchange-listed Hafnia, the world’s largest pool of products and chemical tankers by number of ships, has decided not to send any China-registered, or -owned ship managed by it to call the US ports from mid-October onwards to avoid any additional port fees, sources with direct knowledge of the matter said Aug. 24.

Unless companies with ships that have ownership links with China agree to pay the additional port fees emanating from the upcoming USTR rules, “the question of sending them to the US does not arise,” one of the sources told Platts, part of S&P Global Commodity Insights.

“An exercise to identify such tankers has already begun,” another source said.

Hafnia operates close to 200 tankers in around eight pools. Around 30 companies have put in their tankers in the Hafnia pools, and they own more than 40% of this fleet by number.

A Hafnia spokesperson is yet to respond to a request for comment.

The move is highly significant because it marks the beginning of a two-tier market of ships that will and will not call on US ports, which will be totally cemented over the next few weeks, unless the US withdraws its proposals, something which the shipping industry currently thinks is highly unlikely.

The company has asked all entities with ships in Hafnia pools to give a written undertaking that these tankers do not have any ownership link with China, both sources said. This includes a requirement that companies that own these tankers are not registered in mainland China, Macau or Hong Kong, they said.
Tankers have traditionally had a complicated web of ownership, but each mandatorily has an Ultimate Beneficial Owner, or UBO, and a shareholding structure. Keeping this in mind, Hafnia is insisting that if any of these persons, or entities have a stake of 25%, or more in a ship that is in its pools and holds a Chinese, Macau, or Hong Kong passport, and registration, then the details must be furnished to them, so that a situation does not arise where inadvertently an additional fee is levied on them at US ports.

“No risk can be taken in this regard and any financial link with China is tantamount to [Chinese] ownership,” said a Copenhagen-based source. For the sake of good order, this includes and is not limited to sale and lease-back arrangements, and loans and mortgages, the source said.

The onus is on the pool partners to either provide us with this information, or give us a legal undertaking that there is no financial ownership link whatsoever with “any territory that is Chinese on the map of the world”, he said.

The US proposes to levy fees on China-linked ships calling at its ports from Oct. 14, and progressively hike them over the next three years, to encourage local maritime manufacturing. However, it distinguishes between those owned and operated by Chinese companies and those built in China for companies elsewhere. There are many exemptions for the latter, but none for those owned and operated by Chinese companies and individuals.

For example, ships built in China but not owned by the Chinese and arriving empty to load American export cargoes have been granted total exemption from these fees, which are otherwise so exorbitant that carrying cargoes to and from American ports on them is totally unviable. For a Chinese-owned and operated VLCC, a US port call can cost more than $5 million from Oct. 14 and almost $8.5 million from mid-April next year, according to brokers’ estimates, based on the USTR proposals.

Against this backdrop, companies such as Hafnia would not send Chinese-owned or operated tonnage to US ports, and charterers would not agree to foot the bill under their commercial contracts with owners.

Singapore-based shipping conglomerate BW Group has a stake in Hafnia, which operates the world’s largest fleet of LR1 tankers. Last year, Hafnia was listed on the New York Stock Exchange and continues to trade on the Oslo Stock Exchange.
Source: Platts