The U.S. enforcement of sanctions against three shipping lines Thursday comes amid growing signs of renewed economic friction between the two nations. If prolonged, it would be a serious blow to the firms, but damage to the overall Japanese economy is expected to be minimal.
Citing that Japanese port practices are inefficient and opaque, the Federal Maritime Commission is charging a $100,000 retaliative surcharge on each port call by container ships of three major shipping lines — Kawasaki Kisen Kaisha Ltd., Mitsui O.S.K. Lines Ltd. and Nippon Yusen K.K. The sanctions are expected to total 5 billion yen a year.
The move comes as the two governments face potentially thorny issues, such as civil aviation talks to be concluded by the end of this month and the possible extension of a 1994 bilateral agreement on procurement by Nippon Telegraph and Telephone Corp. that expires Sept. 30.
The Transport Ministry is considering proposing that a bilateral meeting on the shipping issue be held based on Treaty of Friendship, Commerce and Navigation between Japan and the United States.
The bilateral treaty signed in 1953 promises freedom of trade and sea voyage and allows foreign vessels to engage in coastal trade, navigate and fish in internal waters on a mutual basis.
“Unilateral sanctions are against the treaty and possibly violate rules under the World Trade Organization. We will continue to demand that the FMC withdraw them, as we have done up to now,” Transport Minister Makoto Koga said at a regular press conference Friday.
The shipping lines jointly filed an application at the District of Columbia Court of Appeals to seek an order to temporarily halt regulations covering the sanction.
Although none of vessels owned by the shipping lines made port calls in the United States on the first day of the sanctions, two ships arrived at ports in Seattle and Tacoma on Friday.
In September, 17 NYK ships, 13 Kawasaki ships and 11 Mitsui O.S.K. vessels are to enter U.S. ports. The surcharges will be totaled by month, and the first payment is due on Oct. 15.
“We can’t raise our charges to customers to cover the sanctions. The route between Asia and U.S. is very competitive. Many shipping lines offer services on the route. The only way is to pay the surcharges ourselves,” said a spokesman for NYK.
The other two firms take the same position.
If the sanctions continue for a long time, the shipping lines will suffer considerable damage. However, they appear to doubt that the sanctions will remain on a long-term basis.
“Although we can’t be optimistic, negotiations are still going on. We don’t think that the sanctions will continue for as long as six months or a year. Such a thing shouldn’t happen,” the NYK spokesman said.
Concerning the impact on Japanese exporters, both government officials and the export industry expect little, if any, damage at least for the time being.
“It is unlikely that the U.S. sanctions will cause any significant damage to Japanese exporters,” said an official at the Ministry of International Trade and Industry.
Even if the three shipping firms retract their words and decide to raise freight charges to cover the sanction-caused cost increase, he said, “There are other ships operating the same routes which are not subject to the sanctions and Japanese exporters can turn to them.”
Japanese automakers, expected to be the first to suffer among exporters, are monitoring the situation with interest but do not foresee any significant damage to their business.
“Sanctions are targeted at container ships. That means there will be no impact on the exports of completed cars, which are shipped on pure car carriers, not container ships,” said Keiichi Tsuboi, a spokesman for Nissan Motor Co.
Tsuboi would not totally rule out the possibility of increased shipping costs for auto parts as a result of sanctions. But even if that happens, he said, “We can simply turn to other shipping companies. We have contracts with the three shipping companies subjected to the sanctions but also with many others.”
Naoto Fuse, a spokesman for Toyota Motor Corp., said his company’s reaction will depend on how the three shipping companies react to the situation.
“When we see the actual impact on us in the form of increased shipping costs, then we will naturally try to avoid the situation, just as any other manufacturers would do,” he said.
“We’ve been pursuing what we call a global optimum purchasing policy, that is, we will make our choice based on economic efficiency.”
Electronics companies are also taking a wait-and-see position.
“We’ve been so far hearing that ship owners are not going to reflect their increased costs in freight charges,” a spokesman for a major electronics company said. “But if the situation changes and they decide to increase charges, we will naturally reconsider our logistics in accordance with the new situation.”