WASHINGTON — Proposed penalties from the US Trade Representative (USTR) office would have a negative impact on the US dairy industry, the International Dairy Foods Association (IDFA) made clear March 24 in formal comments submitted to USTR.

IDFA pointed out that proposed actions laid out in by USTR following its investigation (under Section 301 of the Trade Act) into China’s dominance in global shipbuilding include steep port entry fees – as much as $1 million per port entry – on maritime transport operators linked to Chinese-built or Chinese-ordered vessels, including carriers who have pending orders for Chinese-built vessels. Such measures, IDFA said, would severely disrupt US dairy supply chains and “damage the global competitiveness of American agriculture.”

Becky Rasdall Vargas, senior vice president of trade and workforce policy at IDFA, said strengthening America’s shipbuilding sector is a goal the dairy industry shares, as the organization’s members have witnessed the value of US vessels.

“USTR’s proposed actions, however, risk inflicting serious unintended consequences on American exporters, producers and workers by raising shipping costs, rerouting global trade and weakening supply chains — especially for time-sensitive, perishable products like dairy,” Vargas said.

Within IDFA’s submitted comments, the trade association highlighted concerns such as:

• Penalties vs. support — USTR proposes penalties to “create leverage,” yet provides no support to a US shipbuilding industry facing a shortage of workers, the diversion of resources from commercial shipbuilding to naval shipbuilding, and a shortage of additional resources needed to overcome these challenges.

• Loss of US port business — IDFA members have already received warnings from shippers and forwarders indicating that USTR’s proposed actions will shift US port business to other parts of the world.

• Skyrocketing costs — Container vessels servicing the US typically call at three to four US ports on each trip. Per port call fees of $1-3.5 million would add millions in costs to each voyage, which would dramatically increase freight rates, especially on routes where US-built ships are unavailable.

• COVID-like supply shocks — Members fear the proposal could recreate COVID-era disruptions — shelved inventory, sudden price swings and supply shocks — without a clear plan to support the US shipbuilding industry’s capacity needs.

• Implementation confusion — The proposal lacks critical clarity around who would be responsible for tracking and paying the fees, creating an unpredictable and burdensome environment for small- and medium-sized businesses.

More than 30 organizations, including IDFA, sponsored a study that examined various outcomes tied to USTR’s proposed actions. IDFA shared the report found that proposed trade actions would result in US dairy exports decreasing by more than 8% and US dairy imports falling off by close to 14%. 

“The layers of uncertainty facing IDFA exporters and importers alike are only increasing through this proposal,” Vargas said. “IDFA stands ready to work with USTR and other federal partners to ensure any future actions reflect the needs of the US dairy supply chain, while still achieving the administration’s strategic objective of boosting our domestic shipbuilding capacity.”

Section 301(b) of the Trade Act was designed to address unfair foreign practices affecting US commerce. Earlier this month, five national labor unions filed a petition to USTR that requested an investigation into the acts, policies and practices of China targeting the maritime, logistics and shipbuilding sectors for dominance.

USTR stated it found “China’s targeting for dominance unreasonable because it displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition and creates dependencies on the PRC, increasing risk and reducing supply chain resilience.”