Since the outbreak of the US-Israeli conflict with Iran, shipping companies have been advocating for enhanced security measures to ensure the safe passage of vessels through the Strait of Hormuz, a vital trade corridor under Iranian control. President Donald Trump now asserts that the United States can offer that — but in return for a 20% fee on cargo transiting through the waterway. “The U.S.A. will be, from this point forward, known as ‘THE GUARDIAN OF THE HORMUZ STRAIT,’ but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20% on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World,” Trump said in a Truth Social post on Monday.
His proposal, however, raises several questions regarding its legality and feasibility. First and foremost, individuals must understand the associated costs to determine their interest in utilising the service, John McCown told. Trump’s post leaves ambiguity regarding the method of fee calculation. “Is it 20% of what our cost on the blockade is, somehow divided by the number of ships?” McCown questioned. Other possibilities include 20% of the costs the US Navy incurs to escort cargo or a 20% charge on the value of the goods being transported. In any event, the fee is expected to be sufficiently elevated that no party is inclined to cover it, McCown stated. As a general principle, shippers typically compensate carriers with fees amounting to 2%-3% of the value of their goods, as noted by McCown, the former CEO of shipping logistics firm Trailer Bridge. A fee approximately tenfold the current amount would probably be completely unmanageable for shippers, he stated.
Insurers may ultimately have the decisive authority, as they could decline to provide coverage for vessels navigating the Strait of Hormuz if they assess the security risks as excessively high, irrespective of the owners’ readiness to finance US protection. The Strait of Hormuz serves as a crucial international waterway, where vessels are entitled to free passage in accordance with international law. Iran has previously implemented what it termed service fees on vessels; however, those charges are not currently enforced. According to James Kraska, those fees functioned as tolls. He asserts that the practice is not allowed under international law. His interpretation of Trump’s post suggests that the United States is signalling: “We’re going to convoy vessels through here, and if you want to join, here’s the cost.”
That option would comply with international law, according to Kraska, because it is being imposed voluntarily, allowing shippers to decide whether they wish to pay for protection or not, rather than being subject to a fee that dictates whether cargo can transit. But he added that just because something is lawful, it doesn’t mean he’d necessarily advise it. “The last time the world faced a situation like this was when Denmark charged foreign vessels for passing through Øresund, from the early 1400s through the mid-1800s. Dues were also assessed on declared cargo value,” said Bjorn Vang Jensen. “Ironically, that practice was stopped by American intervention.”