Proposed Ship Rule Damages Market Accessibility for U.S. Corn

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In January, the National Corn Growers Association published the 2025 Corn Competitiveness Report identifying solutions to improve market access and profitability for U.S. corn. Now, a new proposed rule could negatively impact market access and would add new transportation costs for corn and other bulk commodities that would undoubtedly be passed onto American farmers.

Background

The Biden administration began an investigation of China's shipbuilding and maritime dominance in 2024, which culminated in a report released on report released on January 16, 2025. The report concluded that China has given its shipbuilding and maritime industry an unfair advantage through financial support, barriers for foreign firms, intellectual property theft, procurement policies, and forced technology transfers.

Under the Trump administration, the Office of the U.S. Trade Representative issued a proposal would impose steep restrictions on Chinese operators and U.S. carriers using Chinese-made ships, including fees up to $1 million per U.S. port call for Chinese operators and fees up to $1.5 million per entry for all Chinese-built vessels, scaled based on the percentage of an operator's fleet built in China. The proposal indicates a combination of ship, shipment, and operator violations could incur multiple fees.

Majority of Shipments Affected

A fine would be applied to ships built in China, or owned by a Chinese company, or any ship that is part of a fleet owned by a company that has in it a Chinese built ship, expected to include nearly all operating bulk shipment vessels. An American Farm Bureau Federation analysis shows Chinese firms control 95% of global maritime container inventory production, 85% of global intermodal chassis production, and 53% of the global commercial ship order book. Any company that owns Chinese vessels anywhere in their fleet will be subject to a fine as soon as they enter any U.S. ports.

For container ships that arrive to the U.S. full, the fine would be applicable to the exporter of the products coming to the U.S. But bulk carriers often arrive empty and leave full of U.S. agricultural products, meaning U.S. exports - and the farmers who produce them - are exposed to the added fees.

Any detriment to U.S. bulk grain exports is disadvantageous to the American economy. A bulk grain exemption could save farmers the burden of increased transportation costs.

Added Costs for U.S. Corn

Of the 2.46 billion bushels of corn exported in 2024, 1.65 billion bushels were inspected for export at the Gulf and Pacific Northwest ports (USDA Table 18). This means 2/3 of U.S. corn exports are vulnerable to these fines. In the past an even higher share of total corn exports was inspected at these ocean ports, reaching over 80% in nearly half of the past twenty years as shown below.

While 40% of the 2024 U.S. corn exports went to Mexico and a majority travels by rail or truck, about 25% of that grain reached Mexico on ocean vessels leaving from the Gulf ports that would also be vulnerable to the fines.

Bulk shipment vessels carrying corn range in size from approximately 2.4 to 3.0 million bushels. If these measures are implemented, U.S. corn could face higher costs of $0.34 to $0.42 per bushel with a $1 million fine, and $0.51 to $0.64 per bushel with a $1.5 million fine. That translates to 14% higher costs from current price levels. If these fines are stacked, the penalties are even higher.

The added cost has the potential to reduce U.S. corn exports and impede market access. If exports continue, farmers ultimately bear the economic burden of the increased transportation costs.

Long-Term Ramifications

Added costs are a clear short-term burden on farmers. But disruption to established trade flows also brings long-term consequences. Finding ships to export corn and other commodities will be problematic, with impacts already emerging for forward bookings.

As shown in a study co-published with American Soybean Association last year, renewed trade conflict benefits South American producers and accelerates conversion of cropland in South America, which has permanent ramifications on soybean and corn exports worldwide. While not a tariff specifically, the proposed fines on ships is another form of trade barrier that similarly harms the reliability of U.S. as a dependent supplier and results in our exports markets looking for other sources.

Summary

This comes at a time when corn farmers are already facing significant economic challenges; 2025 is projected to be the third consecutive year of negative returns for corn driven by an expected 36% drop in average corn price since 2022. Inflated shipping costs will place an additional financial burden on our growers and the disruption of trade leads to long-term loss of market access to competitors.

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