As proposed shipping fees raise questions about vessel access, fee structures and supply chain disruptions, North American Export Grain Association’s President & CEO Alejandra Castillo details the uncertainty U.S. grain exporters face.
Castillo stresses the need for clarity and coordination on the policy, highlighting that exemptions may shield bulk ag exports for now, but competitors such as Brazil may gain ground if confusion persists.
Interview with Alejandra Castillo, president & CEO, North American Export Grain Association (NAEGA):
Elise Schafer, editor, Feed & Grain: Hi everyone, and welcome to Feed & Grain Chat. I'm your host. Elise Schafer, editor of Feed & Grain. This edition of Feed & Grain Chat is brought to you by WATT Global Media and FeedandGrain.com. FeedandGrain.com is your source for the latest news, product and equipment information for the grain handling and feed manufacturing industries.
Today, I'm joined by Alejandra Castillo, president & CEO of the North American Export Grain Association. She's here to give us an update on the USTR's proposed fees aimed at bolstering U.S. shipbuilding and how it'll impact U.S. grain exporters. Hi, Alejandra. Thanks for joining me today.
Alejandra Castillo, president & CEO, NAEGA: Hi, Elise, how are you?
Schafer: Doing well. Thank you. Now, you've voiced support for strengthening the U.S. maritime industry, but what do you suggest is the best strategy going forward at this point in time?
Castillo: First of all, thank you for the invitation to talk on this really important topic. It's been almost a month and a half since the USTR recommendation came out, and so we're happy to see the conversation continues to gather interest from our members and from industry abroad and across all the sectors and so us in in the export industry, this is a very, very important topic and something that we're still trying to figure out how it will play out once the recommendations are implemented.
But to get to your question, what the best way to achieve the interest that the administration is putting forward is definitely from the export side — it would be fantastic to see renewed shipbuilding coming out of the United States.
For us in the export industry, we want to make sure that that happens alongside the ability to continue to be competitive in the market, a strategy that certainly incentivizes the usage of current fleet, um the usage and passage of the what we call Kamsarmax [vessels], which are a slightly bigger Panamax, which are under the Annex II from the USTR recommendation and going to be allowed to come into U.S. ports for U.S. commodities, for bulk U.S. commodities.
We just want to make sure that we are fully cognizant or aware of how this will work before we can actually say, well, shipbuilding should be redirected in ah in a different way for the US exporters. Our focus is to ensure that we can put our commodities on a vessel that it comes to port, that it loads well, and that we can export out of the U.S. Certainly, if that is a way to also incentivize shipbuilding, we are definitely supportive of that, but our main focus is to ensure that under the current and implementation recommendations that it works smoothly first.
Schafer: What kind of short-term impacts are U.S. grain exporters already facing and what can be done right now to reduce the damage?
Castillo: Yeah, that's an excellent question, Elise. I think from the moment that the recommendation or that the investigation began in March, if I'm not wrong, we felt an immediate impact on trade, where we were not getting freight bids, where we were getting a lot of questions. I think today the market has leveled out somewhat, however, the questions on how will this final recommendation really look like and how will it be? How will the fees be assessed? At what point? Who? Where? How much?
Those are still questions that we are trying to figure out. You know, it's been a relief to see freight bids come back into the market. So, our exporters are getting bids for vessels coming, calling US ports. But we're still hearing from ship owners, “What are the nuances of the recommendations?” So for example, will larger Panamaxes that have a dead weight tonnage of greater than 80,000 metric tons to be loaded — the majority of the new Panamaxes can go up to 85, if not 90,000 metric tons, right — will those be allowed to come into U.S. ports without incurring in any fees? What is the definition of a ballast vessel coming into port?
And so to answer the question is, on the one hand, we’re relieved to see that a big portion of our commodities and the vessels that load that load those commodities are under the exempted category under Annex 2, but we are still having a lot of questions around how will it actually work when the day comes, and that date is coming up quickly. We're already in June. We are expecting to see this coming to full force by October of this year.
We're in the trade. We're all interested in figuring out what are what are the details, what the minutia of the loading will be once the implementation is fully enforced.
Schafer: And with the export system supporting everything from inland rail to feed mills, what kind of ripple effects should the grain supply chain prepare for if these policies go forward?
Castillo: Yeah, that's an excellent question. I think, again, we're all still trying to figure out what that will actually be. What I can tell you right now is that we are expecting to see fees on container shipments. We are expecting to see fees on larger vessels. We are hearing there are greater conversations around non-Chinese shipbuilders, whether that is Japan or Korea, trying to increase the size of their fleet. And obviously, how will this impact inland transportation when you have a limited amount or a more limited capacity to load vessels and containers out of U.S. ports? Again, it's a bit soon to tell exactly what that impact will be. All I can tell you is that the entire supply chain is certainly becoming a bit more alert that there are going to be significant nuances across the supply chains that we won't really know and understand fully until we are living the fee calculation and seeing what the fee calculation will be like.
I think one main question for us is what is going to be the protocol to notify when there is a break in the supply chain, like who are we going to be able to call? And how are we going to be able to manage that from an administration perspective, right? Will it be, which agency will be in charge? And so, I think from rail and barge, as well as container and vessels, we're all kind of expecting and expectant of those changes that we just don't know what they will look like yet.
Schafer: Of course. Now, if agricultural exports aren't exempted from these proposed fees, how do you see global grain trade shifting? And who's most likely to benefit from the U.S. losing ground in this market?
Castillo: Even since the beginning of when the USTR investigation was announced, we immediately saw, like I said, a retraction on the availability of vessels calling US port because of the lack of clarity on the terms and language. And, you know, what we talked about when we submitted our formal comments to USTR was we were already seeing ships preferring other destinations, other origins.
Undoubtedly, the United States remains one of the largest or the largest producers of corn, soybeans on a global scale. But a second origin that is just as that is as big or as impressive as the U.S. is Brazil and so we are expecting to see other origins, whether they be Brazil or or Argentina, taking up some of the capacity that may be impacted because of this of this ruling.
Our hope is with the exemptions that are already in place under Annex 2 and the fact that most of the agricultural bulk exports are part of that exemption clause, including the Panamaxes, our hope is that we will not see a significant shift.
I think the question will be, you know, and we are working in tandem with other trade associations to continue to provide feedback to USTR and other agencies about the concerns of trade, about the concerns of industry regarding the size, the nuances, the details that we're starting to get ah greater insight into.
But it's undoubted that, you know, other origins like South American origins are definitely going to be benefiting from a lack of capacity or or us i'm sorry or vessels coming to US s ports.
Schafer: Well, Alejandra, thank you so much for updating us on this situation and giving us your thoughts on the developments.
Castillo: Absolutely. Thank you, Elise, for the opportunity. It continues to be a flowing conversation. I guess a couple of last our last comments is, one, it was really gratifying to see the the unity in the sector. Across the sectors, we saw significant support and rallying of coming together to say this was going to cause significant damages to to industries, not just the bulk grains.
And it's been It's been really, really impressive to see also the administration's willingness to hear our comments, to hear our concerns and the industry's concerns and see some of those being addressed through the recommendation. Our hope is that between now and October, we can continue to have this open dialogue with the administration around what are we expecting to see and the impact that this could have if we don't have some of those questions answered prior to the October deadline, before the implementation comes into full force.
And so it is a fluid situation. We are hopeful that the administration is obviously placing significant attention to the industry's concerns, but we're still kind of in the early stages to fully document what the impact will be like. And I hope that we don't get to that point too late.
Schafer: Well, it sounds like there is certainly an open door and we wish you the best with that ah opportunity to work with the administration.
Castillo: Thank you very much, Elise.
Schafer: Well, that's all for today's Feed & Grain Chat, if you'd like to see more videos like this, subscribe to our YouTube channel, sign up for the Industry Watch daily eNewsletter, or go to FeedandGrain.com and search for videos. Thank you again for watching, and we hope to see you next time.