US Ports, Terminals Call on USTR Tai to Reconsider 25% Tariffs on China-Made Cranes

U.S. ports and terminal operators are now pushing back on the 25-percent tariff the Biden administration proposed on ship-to-shore cranes manufactured in China, citing the added cost pressures the gateways would incur that could exceed $130 million.

Ports across Houston, South Carolina, Georgia, Tampa, Virginia and New York, as well as terminals in Long Beach, Los Angeles and New Jersey, are among the parties urging U.S. Trade Representative (USTR) Katherine Tai to reconsider the tariffs.

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The ship-to-shore (STS) cranes have come under scrutiny over the past year as ongoing geopolitical tensions between the U.S. and China have persisted, with various government entities sharing concern that the gantries pose a national security risk.

Earlier this year, a Homeland Security official even warned that U.S. ports are overreliant on the China-built technology and foreign-owned equipment in general. Concerns were amplified when an eight-month probe found communications equipment on the cranes, including cellular modems, that could be remotely accessed.

One of the trade groups that wrote to Ambassador Tai, the American Association of Port Authorities (AAPA), had previously pushed back against some of the political rhetoric, saying there was no evidence of any security issues stemming from China-made cranes in the U.S. The AAPA requested in its Friday letter that USTR Tai remove STS cranes from the newly announced list of Section 301 tariffs.

In its letter, the AAPA said 33 ports and terminal operators expect to purchase 61 ship-to-shore cranes over the next five years. At least 35 cranes are already on order nationally, and assuming an average of $15 million per crane, the new tariff would mean an additional $131.25 million in unexpected costs.

Cary Davis, president and CEO of the American Association of Port Authorities, wrote in the letter that the USTR should delay the effective date for the crane tariffs—currently Aug. 1, 2024—by at least two years, or “ideally until there is a U.S. manufacturer capable of providing the product domestically.”

Multiple port representatives who wrote to Tai expressed the same concern, noting that while a small fraction of cranes are produced in Germany and Finland, the final product relies on components largely amassed from China and would also be subject to the proposed tariff.

Currently, Chinese state-owned Shanghai Zhenhua Heavy Industries (ZPMC) is estimated to have manufactured 80 percent of the ship-to-shore cranes in the U.S.

“It is unlikely that any manufacturers could produce American-made STS cranes with the necessary reliability, durability and specifications to support our seaports within the next several years, even though there is an eventual pathway,” said Davis.

In February, the White House signed off on a $20 billion renovation to improve security at the U.S. ports, with a major part of the investment focusing on domestic crane production. Paceco, a U.S.-based subsidiary of Japanese crane and shipping equipment manufacturer Mitsui, has been tasked with building new cranes for the ports—representing the first time in 30 years the technology will be manufactured in the U.S.

Davis called STS cranes “among the most critical assets of a modern intermodal port,” noting that cargo throughput at ports is primarily a function of vessel unloading and number of crane “lifts” per hour, making it one of most important measures of port fluidity.

“The imposition of tariffs on STS cranes represents a step backwards,” said Davis. “Disincentivizing ports from purchasing STS cranes in the form of a tariff disincentivizes them from increasing efficiency and expanding capacity. No one knows what form the next supply chain crisis will take, but the U.S. needs to expand its port efficiency and capacity to ensure that our infrastructure is resilient.”

If the tariff stands and is enforced, Port Houston would incur $40 million just on STS cranes ordered or to be delivered this calendar year, while nearby Port Freeport would an additional $6 million on two ordered cranes.

“Where ports are able to pass on the additional costs, the burden, rather than being focused on limited industries, will be borne across all industries threatening inflationary effects across all sectors,” a letter from Port Houston said. “This differs from the economic analysis on the tariffs that have been imposed to date and risks impacts on economy-wide prices and employment as all sectors will feel the effect of increased shipping and transportation costs.”

The Georgia Ports Authority has eight new STS cranes on order and would incur about $20 million in tariffs on the four delivered after the Aug. 1 implementation date. The Port of Charleston would incur approximately $6 million per year from the proposed tariffs.

“As we continue to seek to advance our own competitiveness against our international partners, including Mexico and Canada along the East Coast, this cost will translate to longer wait times and increased dwell times for visiting container ships,” wrote Barbara Melvin, president and CEO of the South Carolina Ports. “Ultimately, American consumers, manufacturers and exporters will bear the burden.”