The indirect impact on FOB trades is also felt through freight rates. If fee-compliant vessels become scarcer, charter rates for U.S. port calls will likely rise. Buyers adjusting for higher shipping costs will in turn reduce their FOB bids (which sellers will have to accept as the domestic market cannot absorb supply planned for export). This translates into lower prices at the U.S. export point and tighter margins for sellers. Some exporters may respond by shifting more volume to Cost, Insurance, and Freight (CIF) contracts to gain greater control over shipping.


CIF trades expose the seller to the new fees more directly. In this structure, the seller is responsible for chartering the vessel and delivering the grain to the destination port. If the selected vessel falls under Annex I or fails to qualify for exemptions under Annex II, the seller will face either an inflated freight quote or a direct surcharge. These additional costs may be passed on to the buyer, but only if market conditions allow. In competitive tenders any cost advantage lost to fees could mean losing the sale.


Sellers operating on CIF terms will need to vet vessels more carefully than before. This includes verifying the build location, ultimate ownership, and operational control of each vessel offered. Charter parties may need new language to address potential fees or dispute resolution in the event of misclassification. Some shipowners may refuse to call U.S. ports entirely if they believe the compliance burden or fee cost is too high. Others will include the fee in their rate, whether or not the ship ends up liable. CIF sellers must be ready to absorb this volatility or switch to safer tonnage, even if it means fewer options or higher base costs.


The choice between FOB and CIF now involves a fresh set of trade-offs. FOB offers lower exposure to fees but less control over the vessel. CIF allows greater control but brings the risk of being caught out by compliance errors or sudden rate spikes. Sellers with in-house freight capacity may continue offering CIF where they can secure compliant tonnage, possibly gaining market share if competitors avoid the complexity. Those with less shipping expertise may shift more to FOB, pushing the freight challenge onto buyers and focusing on margin stability.


SOME SHIPOWNERS MAY REFUSE TO CALL U.S. PORTS ENTIRELY IF THEY BELIEVE THE COMPLIANCE BURDEN OR FEE COST IS TOO HIGH...


Examples from key trade routes illustrate the real-world implications. In the U.S. Gulf to North Africa corridor, Supramax vessels are the norm. Many of these are Chinese-built, though often owned or chartered by Western firms. A ship arriving in ballast may escape Annex II fees, but if it is Chinese-operated, it will still face charges under Annex I. This dynamic may lead to fewer willing vessels and higher freight rates, eroding U.S. competitiveness versus European or Black Sea origins.


On the Pacific Northwest (PNW) to Asia route for soybeans and corn, Panamax vessels are more common. These may fall under the weight exemption or arrive in ballast, limiting the applicability of fees, yet many of them are above 80,000 deadweight tonnes. Chinese- operated ships remain exposed. If Chinese buyers insist on using their own carriers, as they often do, they may face higher freight costs or logistical barriers, prompting them to consider alternative origins such as Brazil, or shift more procurement to non-U.S. sources.


In this shifting environment, data-driven decision-making will become essential. At Copenhagen Merchants we built the CM Navigator are already helping traders adjust to this new landscape. By recalculating over 500,000 dry bulk freight rates every 15 minutes, the platform combines these with global FOB prices, for buyers and sellers to constantly access most competitive CFR price. Our thesis is that in a market where vessel origin can tip the balance of trade, technology that translates complexity into clear, actionable insight is now central to staying competitive.


Mads Frank Markussen Head of Freight Research and FFA E: research@navimerchants.com T: +(0045) 31 14 94 57


11 | ADMISI - The Ghost In The Machine | Q2 Edition 2025


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