AAPA urges USTR to reverse tariff on Chinese STS cranes

The American Association of Port Authorities (AAPA) recently submitted comments to United States Trade Representative (USTR) Ambassador Katherine Tai, urging her office to reverse the decision to impose a 25% tariff on Chinese-built STS cranes. The effective date for the tariff is 1 August 2024.

While AAPA supports efforts to spur the manufacture of critical port equipment in the US, no companies can build large cranes domestically. These cranes are almost exclusively manufactured overseas, with China holding a significant market share.

“Simply put, AAPA is confident that the tariff if imposed, will not meet its stated objectives,” said Cary Davis, AAPA’s President and CEO. “Instead, it will only result in negative outcomes, including grave harm to port efficiency and capacity, strained supply chains, increased consumer prices, and a weaker US economy.”

In the comments, AAPA focused on the impacts of the proposed tariff on the economy. According to AAPA, the tariff will increase infrastructure development costs by millions of dollars per terminal since there are no domestic alternatives, and it could also force port authorities and private marine terminal operators (MTOs) to scale back plans for new infrastructure development to make up additional costs.

AAPA was joined by a chorus of ports and other industry partners echoing similar arguments. It’s worth noting that waterborne commerce constitutes 26% of the US GDP and supports 28.5 million direct and indirect jobs.

AAPA has also taken steps to incentivise domestic manufacture of STS cranes through a cooperative agreement with the Maritime Administration (MARAD).

Additional US$131.25 million

AAPA is surveying port authorities and MTOs to anticipate the order book of ports’ cargo handling equipment needs over the next five and ten years. This can be used by the Federal Government and private manufacturers to link the public and private funding needed to bring crane manufacturing back to the US.

Thus far, AAPA has collected responses from 33 port authorities and MTOs. The results of the study are incomplete and represent only a snapshot, but the preliminary results show that within the next five years, these 33 respondents expect to purchase 61 STS cranes.

Separate from the above survey, AAPA also asked its members how this proposed tariff would impact their infrastructure development. The Port of New Orleans, which is planning its new Louisiana International Terminal to expand container capacity in the Gulf Coast region, plans to procure ten new STS cranes and estimates that a 25% tariff would cost US$52 million for this terminal alone.

The Port of Virginia has already signed contracts to procure twelve STS cranes from Chinese companies at US$161.52 million. The Port signed these contracts prior to the announcement of the new Section 301 tariffs. Should the tariffs come into effect, the Port would be responsible for an additional US$40.38 million cost.

In addition to the Port of Virginia, AAPA has communicated with at least six other port authorities and MTOs that have also signed contracts to procure STS cranes.

In total, at least 35 STS cranes are already on order nationally, and assuming an average of US$15 million per crane (AAPA’s understanding from its membership), the new tariff would mean an additional US$131.25 million in unexpected costs, before factoring in planned purchases over the next five or ten years.

According to AAPA, even in a best-case scenario, it will take years for a company to stand up manufacturing capacity and produce enough STS cranes to compete in the world market.

Actions to take

AAPA further claims if USTR does not remove STS cranes from the new list of Section 301 tariffs, it should take one of two actions to provide relief for those ports that have signed contracts for STS cranes: “First, USTR should delay the effective date for the STS crane tariffs by at least two years, or ideally until there is a US manufacturer capable of providing the product domestically. This would serve the dual purpose of providing relief to ports that have already signed contracts and incentivising domestic production. Second, USTR should exclude STS crane purchases from the tariff for those ports that signed contracts to procure cranes before the publication of the new tariffs in the Federal Register on May 28, 2024. This would put all ports purchasing STS cranes on a level playing field and not arbitrarily advantage certain ports and the regions they support over others.”

Additionally, AAPA says the issue of cybersecurity of foreign-manufactured STS cranes is being addressed by multiple federal agencies, including USCG, which has the primary responsibility of ensuring port infrastructure is secure. “It is therefore unnecessary to impose a tariff on Chinese STS cranes to secure US ports,” AAPA concludes.