China sanctions Hanwha Ocean to retaliate against US port fees

President Lee Jae Myung speaks during the naming ceremony of the TS State of Maine vessel at Hanwha Philly Shipyard in Philadelphia, Pa., Aug. 27. Yonhap

Hanwha Ocean’s five U.S. affiliates have come under Chinese government sanctions, following the Korean company’s alleged support for the U.S. government’s investigation into Chinese competitors and the resulting imposition of new port fees.

With the new fees taking effect Tuesday, China’s Ministry of Commerce said the same day that organizations and individuals within the country are banned from engaging in transactions, cooperation or any activities with Hanwha Shipping, Hanwha Philly Shipyard, Hanwha Ocean USA International, Hanwha Shipping Holdings or HS USA Holdings Corp.

Of the companies, Hanwha Philly Shipyard is a symbolic site of the shipbuilding cooperation between Korea and the U.S. President Lee Jae Myung visited the shipyard during his trip to the U.S. in August.

“Hanwha Ocean’s U.S. subsidiaries have helped and supported the U.S. government’s investigations, which endanger our country’s sovereignty, security and interests,” the Chinese ministry said in a release.

The ministry also claimed that the U.S. Section 301 investigation and follow-up actions against Chinese firms “seriously violate international laws and basic norms governing international relations.”

Under Section 301, the U.S. government last year began probing the Chinese government’s subsidizing of the country’s shipbuilders and shipping companies. The Office of the U.S. Trade Representative (USTR) decided in April to levy port fees on Chinese-built, -owned or -operated vessels.

During the investigation, Hanwha publicly supported the U.S. initiative, given its ownership of an American shipyard and operations in the shipping sector.

“Hanwha Shipping stands with the Trump administration’s 'all-of-government' effort to reindustrialize the maritime industrial base of the United States and looks forward to support that may allow us to become the center for maritime operation and building excellence once again,” Hanwha Shipping Vice President Ryan Lynch said in March during a public hearing on the USTR’s proposed port fees.

Following China’s announcement, Hanwha Ocean’s stock price temporarily fell by as much as 8 percent on the benchmark KOSPI, although it remains unclear how the sanctions will impact the company’s business in the medium to long term.

"Hanwha Ocean is aware of the announcement made by the Chinese government and is closely reviewing its potential business impact on the company," a Hanwha Ocean official said.

The Ministry of Trade and Industry and the Ministry of Foreign Affairs also said they are reviewing China's announcement by communicating with diplomatic missions there.

A worker wears a hat embroidered with the slogan "Make America Shipbuilding Great Again" and the national flags of Korea and the United States during the naming ceremony of the TS State of Maine vessel at Hanwha Philly Shipyard in Philadelphia, Pa., Aug. 27. Yonhap

Amid U.S. efforts to revitalize its shipbuilding industry with Korean investments, concerns are mounting that the sanctions against Hanwha Ocean could hurt the project.

Since Seoul and Washington agreed to work together during negotiations over U.S. tariffs, Beijing has repeatedly raised objections to the initiative.

“By focusing on revitalizing the shipbuilding industry, the U.S. seems increasingly inclined to integrate South Korea and Japan into its defense industry, which is primarily aimed at advancing U.S. strategic and military interests,” China’s state-owned Global Times wrote in a column in August.

In addition to Hanwha Ocean, other Korean companies have felt the strain from the renewed trade conflict between the U.S. and China, which flared ahead of a possible summit between the leaders of the world’s two largest economies later this month during the Asia-Pacific Economic Cooperation (APEC) meetings in Korea.

After China’s commerce ministry announced tighter export controls on rare earth metals last week in apparent retaliation against the U.S., concerns have grown over potential production setbacks in the semiconductor and electric vehicle industries.

Hyundai Glovis, a shipping firm that mainly transports vehicles made by its affiliates Hyundai Motor and Kia, was impacted when the U.S. imposed separate maritime-related fees on foreign-built vehicle carriers in addition to the fees targeting Chinese vessels.