US announces tariff on STS cranes

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A 25% tariff will apply to all STS cranes “from China”, including cranes produced by Konecranes, impacting US ports and terminal operators.

The Office of the United States Trade Representative has completed its investigation into “China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property and Innovation (section 301 investigation).”

In a White House memorandum President Biden noted that, while imposing tariffs under section 310 of the Trade Act “has been effective in encouraging China to take positive steps in addressing the issues identified in the section 301 investigation, such as certain revisions in its foreign investment and administrative licensing laws, China’s actions do not represent a systematic and sustained response to the issues raised in the section 301 investigation.”

The Biden Administration has therefore determined that “additional section 301 tariffs would provide incentives for China to eliminate the acts, policies, and practices at issue.”

Included in a raft of new tariffs is a new 25% tariff on Ship to Shore (STS) cranes from China in 2024. Previously there were no tariffs on STS cranes manufactured in China.

This will have a significant impact on US ports and terminal operators. It is not just ZPMC that will be affected. Konecranes is also building STS cranes in China for the Georgia Ports Authority, and these appear to be included under the new tariff. Tariffs are normally payable at the point when goods enter the US, regardless of when they were ordered or manufactured.

It has been noted many times that the US does not manufacture STS cranes. Through its PACECO subsidiary, Mitsui E&S has announced it has partnered with Brookfield to “re-establish final assembly of port cranes in California, the United States”, but it is not clear whether this includes STS cranes at this point.

The new tariff on STS cranes, however, is not about protecting domestic industry. The USTR report into China and section 301 of the Trade Act published this month notes: “With respect to STS cranes, increasing section 301 duties may be appropriate to support the security interests of the United States from the threat of Chinese state-sponsored cyber intrusions of critical infrastructure.”

A 25% tariff on Chinese cranes is likely high enough to make cranes from European, Korean, Japanese and other Asian manufacturers built outside of China cost-competitive with ZPMC. In 2023 the Virginia Port Authority paid $12.3M per crane on a five STS crane order from ZPMC. Adding a 25% tariff would bring that price to US$15.375M. Earlier this year the Jacksonville Port Authority ordered two STS cranes from Liebherr for US$15M per crane. This is not an exact ‘apples-to-apples’ comparison as the Virginia cranes are bigger and the Jaxport cranes require a backup diesel genset, but it is a reasonable ‘ballpark’ comparison.

The tariff comes at a time when US ports are able to access infrastructure development and other funding sources for equipment, including STS cranes. It is notable that the two Liebherr cranes for Jaxport were paid for with a $30M grant from the state of Florida.

The increased cost, however, is not the only issue. There is no other manufacturer in the world that can produce cranes on the scale of ZPMC. The company is the largest manufacturer of STS cranes by a significant margin. ZPMC regularly delivers orders of four or more cranes to US terminals within 18 months and in some cases less than 12 months.

Industry sources say US ports and terminals are as concerned about how they will get cranes in a timely manner as they are about the cost if ZPMC is shut out of the market. It is observed that other OEMs often do not even bid on STS crane tenders when they are ‘fully booked’ or when the specifications are too far from their standard design.

At the same time there is a whisper in the industry that these new tariffs are no real surprise, and that the Biden administration is moving in a direction it has been signalling for some time. In 2023 US ports took delivery of 43 new STS cranes. At the end of 2023, US ports had another 28 STS cranes on order for delivery in 2024 and beyond, some of which have already arrived.

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