Trump offers US protection in the Strait of Hormuz for a 20% fee. How would that work?

By Elisabeth Buchwald, CNN

(CNN) — Since the US-Israeli war with Iran broke out, shipping companies have been calling for greater protection for vessels to safely cross through the Strait of Hormuz, a critical trade route that is controlled by Iran. President Donald Trump now says the United States can provide that — but in exchange for a 20% fee on cargo moving 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 of legality and feasibility.

Who would foot the bill?

First and foremost, people need to know what it would cost to evaluate whether they want to use the service, John McCown, a senior fellow at the Center for Maritime Strategy, told CNN. From Trump’s post, it’s unclear how the fee would be calculated.

“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.

The White House did not respond to CNN’s request for further details.

In any event, the fee will likely be high enough that no party is willing to pay it, McCown said.

As a general rule of thumb, shippers pay carriers 2%-3% of the value of their goods in fees, according to McCown, former CEO of shipping logistics company Trailer Bridge. A fee around 10 times the size would likely be entirely unaffordable to shippers, he said.

Insurers may get the final say, though, since they may refuse to cover boats transiting the Strait of Hormuz if they deem the security risks are too high, regardless of whether owners are willing to pay for US protection.

Is the fee even legal?

The Strait of Hormuz is an international waterway where vessels have the right of free passage under international law. Iran has previously imposed what it described as service fees on vessels, though those charges are not currently in place.

Those fees were effectively tolls, according to James Kraska, a professor of international maritime law at the US Naval War College. He says the practice is not permitted under international law.

His read of Trump’s post is that the United States is saying: “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’s being imposed voluntarily, where shippers could decide whether they want to pay for protection or not, as opposed to a fee that determines if 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, executive industry adviser at Xeneta‏, a freight analytics platform. “Ironically, that practice was stopped by American intervention.”

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