If a proposed 25% tariff were to go into effect, the cost of 12 STS cranes already ordered from Chinese companies by the Port of Virginia (pictured) would balloon from $161.52 million to nearly $202 million, says the AAPA.
Photo courtesy of Port of Virginia
A tariff almost went into effect today that would penalize U.S. ports at the same time it penalizes Chinese makers of ship-to-shore cranes. That’s because no domestic manufacturer yet exists.
The American Association of Port Authorities (AAPA) submitted comments a month ago to United States Trade Representative (USTR) Ambassador Katherine Tai, urging her office to reverse or at least delay the decision to impose a 25% tariff on Chinese-built ship-to-shore (STS) cranes — a tariff due to go into effect today until a notice of delayed determination was issued by the USTR on Tuesday.
“While AAPA supports efforts to spur the manufacture of critical port equipment in America, unfortunately, there are presently no firms capable of building large cranes domestically,” wrote AAPA President and CEO Cary Davis. “Since there are no domestic manufacturers of STS cranes, there is no timeline for when they might be available domestically, and the Federal Government has provided no incentives for their manufacture, a 25% tariff on Chinese STS cranes will do nothing to protect American manufacturers from unfair practices” while also foisting onto ports millions of dollars in extra costs. “The Port of Virginia has already signed contracts to procure 12 STS cranes from Chinese companies at $161.52 million,” the letter read. “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 $40.38 million cost.”
Preliminary results from an ongoing survey by the AAPA and the Maritime Administration (MARAD) have found that even a limited sample of 33 respondents expect to purchase 61 STS cranes within the next five 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 America,” Davis wrote in the AAPA’s six pages of comments. “However, 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.”
“Simply put, AAPA is confident that the tariff, if imposed, will not meet its stated objectives,” Davis wrote. “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 U.S. economy.”
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‘Yay’ for Delay?
A July 30 release from the USTR confirms that at least part of the AAPA’s request has been met in the form of a delay, proving that public comments can indeed influence policy decisions.
“On May 28, 2024, USTR proposed certain modifications of the actions in the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” the USTR says. “In response to the May 28 Notice, USTR received more than 1,100 comments from the public. In consultation with the Section 301 committee, USTR continues to review all comments and expects its final determination will now be issued in August 2024. USTR expects that the modifications slated for 2024 will take effect approximately two weeks after it makes the final determination public.”
Port of New Orleans officials told the AAPA that the 25% tariff would add $52 million in costs for its planned $2 billion Louisiana International Terminal, for which it plans to procure 10 new STS cranes.
Rendering courtesy of APM Terminals
A report released by the USTR in May stated, “The Trade Representative is proposing modifying the actions by adding or increasing section 301 tariffs for certain products in strategic sectors. Many of the sectors are targeted by China for dominance or are sectors where the U.S. has recently made significant investments. These include:
Battery parts (non-lithium-ion batteries)
Electric vehicles
Facemasks
Lithium-ion electrical vehicle batteries
Lithium-ion non-electrical vehicle batteries
Medical gloves
Natural graphite
Other critical minerals
Permanent magnets
Semiconductors
Ship to shore cranes
Solar cells (whether or not assembled into modules)
Steel and aluminum products
Syringes and needles
In its comments, the AAPA focused on the impacts of the proposed tariff on the economy. “Since there are no domestic alternatives, the tariff will increase infrastructure development costs by millions of dollars per terminal,” the document stated. “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.”
In addition to the Port of Virginia, the AAPA said it 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 $15 million per crane (AAPA’s understanding from our membership), the new tariff would mean an additional $131.25 million in unexpected costs, before factoring in planned purchases over the next five or 10 years.”
Port of New Orleans officials told the AAPA that the 25% tariff would add $52 million in costs for its planned $2 billion Louisiana International Terminal, for which it plans to procure 10 new STS cranes. For more on the importance of that terminal, see Site Selection’s just-published story featuring Ron Starner’s conversation with Greater New Orleans Inc. President and CEO Michael Hecht, who says the project “will enable Louisiana to go back to the future in ports. This is why we purchased Louisiana from Napoleon over 200 years ago.”
While Hecht put things into historical perspective, the AAPA analyzed what trade policies such as the now-delayed tariff can mean for the future:
“The port and freight transportation sectors are the backbone of the nation’s economy,” the AAPA stated. “Without efficiently operating port infrastructure, American manufacturers cannot get the inputs they need to run factories, retailers cannot stock their shelves for consumers, and farmers cannot get their products exported to markets abroad. Indeed, during the height of the coronavirus pandemic in 2020 and 2021, we saw the consequences of decades of failure to invest sufficient resources in port infrastructure. Amid a surge in cargo imports, ports around the world, including in the U.S., were overwhelmed by volumes.
“Building the necessary port terminals and multimodal transportation capacity to deal with these cargo surges,” it said, “is a process that takes years and billions of dollars.”
Some of those billions will be coming directly from the same federal government proposing the tariff. Site Selection’s analysis of Bipartisan Infrastructure Law funding finds that federal funds directed toward ports and waterways are going to more than 620 projects nationwide. For more infrastructure analysis, watch for the 2024 Global Groundwork Index rankings in the September 2024 issue of Site Selection. — Adam Bruns
