Francesco Di Costanzo
Back to shorts

(17) The Price of Passage Would Be a Percentage of Your Cargo

/5 min read

The Base of the Charge Changes the Trade

The decisive feature of the Hormuz fee proposal is its base, a percentage of declared cargo value. Reuters reported on 6 August that Iran was seeking 5%–7% of cargo price, Oman was discussing around 3%, and Washington wanted no fee. The proposal remains at the negotiation stage; the reported terms do not establish an enacted tariff. It describes an ad valorem charge. Its cash bill rises with the value printed on the cargo invoice rather than with the ship’s size, its route or a published service.

The distinction matters more than the difference between 3% and 7%. A charge based on cargo value makes the waterway participate in the value of the trade passing through it. The same vessel, using the same channel and consuming the same navigation services, would produce a much larger payment when it carries a more valuable cargo. Eight shipping groups objected in an open letter, calling compulsory transit or service charges “a toll in all but name.”

Canal Tolls Price the Transit, Not the Invoice

Suez and Panama levy substantial charges. Their published structures start from the vessel and the transit. The Panama Canal Authority combines a fixed charge by vessel and lock category with a capacity component. Its listed tanker rates are per PC/UMS ton, with a separate fixed transit charge. The official tariff does not use declared cargo value as a billing unit.

The Suez Canal Authority likewise publishes a vessel-specific toll table and a calculator that uses particulars such as vessel type, laden status, Suez Canal tonnage, deadweight, draft and beam. Cargo category can matter, but neither the table nor the calculator displays a field for declared cargo value, and the Authority does not publish one flat VLCC toll. A laden crude tanker can therefore incur a large Suez bill whose basis remains operational rather than a claim on the oil’s sale value.

The Arithmetic Is a Different Order of Magnitude

Use a two-million-barrel VLCC cargo and Brent at roughly $83 a barrel as an illustration; Reuters reported a $83.55 Brent settlement on 7 August. The cargo would be worth $166 million. A 3% charge on that value would equal $4.98 million, or $2.49 a barrel. A 7% charge would equal $11.62 million, or $5.81 a barrel. These are illustrative calculations, not a forecast of any invoice or a statement that vessels are currently paying such a fee.

For scale, a shipping-services estimate places a laden VLCC Suez transit at roughly $600,000–$900,000. The Suez Canal Authority says its calculator is an estimate and the actual bill depends on the ship and applicable rebates, so the comparison should not be treated as a standard quote. Even at the top of that indicative range, the proposed 3% charge in the illustration is more than five times larger. At 7%, it is roughly thirteen times larger.

A Percentage Is Not a Neutral Burden

An ad valorem charge does not mechanically make high-value cargo less profitable. If every cargo faces the same percentage, the fee takes the same share of gross cargo value. Commercial decisions depend on margins, contracts, price volatility and who absorbs the charge. The narrower point is that the rule sorts the cash cost by declared value, while a capacity-based toll broadly sorts it by the ship and the transit.

That sorting can change what is viable to move, particularly where the absolute payment collides with tight margins or working-capital limits. It also creates a valuation problem that a tonnage tariff avoids. Any system needs a declared-value definition, a valuation date, a currency rule and a method for disputes. Reuters’ 6 August report did not publish those terms. The Lloyd’s Market Association’s LMA5708 model wording adds a separate constraint. If it is incorporated into a policy, it can terminate hull cover for the relevant vessel after a transit-fee payment, while carving back legally permissible charges for specific maritime or navigational services.

Transit Passage Places Limits on Revenue

UNCLOS gives ships a right of continuous and expeditious transit through qualifying straits. Article 42 permits rules on navigation, pollution, fishing and certain customs-related conduct, but says they cannot discriminate or practically deny, hamper or impair transit passage. Article 44 says transit passage must not be hampered or suspended. Those provisions explain the industry objection, although they do not settle every argument about payment for a specific service.

Oxford Public International Law notes a live controversy over whether Article 43 leaves room for charges for specific services rendered to a ship in transit. That caveat leaves space for a genuine navigational service, not a clear answer for a general share of the cargo invoice. Before any Hormuz arrangement can become operational, negotiators will have to define whether they are pricing a service to a vessel, capacity in a channel or the commercial value of trade itself.

Sources

Negotiation and industry response

  1. Reuters, "Proposed Hormuz passage deal not feasible for shipping industry, sources say" https://www.reuters.com/world/middle-east/proposed-hormuz-passage-deal-not-feasible-shipping-industry-sources-say-2026-08-06/

  2. Reuters, "Brent climbs $1 on uncertainty over end to Iran war" https://www.reuters.com/business/energy/oil-rises-concerns-over-strait-hormuz-reopening-plans-2026-08-07/

  3. Fortune, "Iran says it has a deal to reopen the Strait of Hormuz—and shipping groups are aghast" https://fortune.com/2026/08/06/iran-oman-deal-strait-of-hormuz-shipowners-fees/

  4. Lloyd’s Market Association, "Strait of Hormuz Transit Fee Condition" https://lmalloyds.com/strait-of-hormuz-transit-fee-condition/

Canal tariff structures

  1. Suez Canal Authority, "Tolls Table" https://www.suezcanal.gov.eg/English/Navigation/Tolls/Pages/TollsTable.aspx

  2. Suez Canal Authority, "Vessels Tolls Calculator" https://www.suezcanal.gov.eg/English/Navigation/Tolls/Pages/TollsCalculator.aspx

  3. Panama Canal Authority, "Maritime Tariff List" https://pancanal.com/en/maritime-services/maritime-tariff/

  4. Port Service Finder, "Suez Canal Transit: The Complete Guide for Shipowners and Operators (2026)" https://portservicefinder.com/blog/suez-canal-transit-complete-guide-2026

Law of the sea

  1. United Nations, "United Nations Convention on the Law of the Sea, Part III: Straits Used for International Navigation" https://www.un.org/depts/los/convention_agreements/texts/unclos/part3.htm

  2. Alexandros XM Ntovas, "Straits Used for International Navigation" https://academic.oup.com/oxford-law-pro/book/56260/chapter/473387361?guestAccessKey=