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Tariff battle heats up

The AAPA has a tough task as it heads to Washington this week to try and convince the US administration Chinese made cranes should be exempt from a 25% tariff.

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American Association of Port Authorities President Kurt Nagle is testifying this week before a committee of the United States Trade Representative on “Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.” Nagle is asking the committee to exclude port equipment from a list of items manufactured in China that will be subject to a 25% tariff when entering the US.


On the front page of the July edition WorldCargo News reported that ZPMC said most of its clients are applying HTS Code 84261900 “Transporter cranes, gantry cranes and bridge cranes” to STS and yard cranes. This code was not on the initial list of products that would be subject to a 25% tariff, but was on the second list of products that were announced for a 10% tariff. In early August the USTR, at President Trumps request, increased that rate to 25%.


In his written testimony released this week, AAPA President Kurt Nagle noted that US ports are under pressure to be more “efficient, enhance environmental performance and reduce the impact of port operations on local communities. In response, U.S. ports and their private sector partners plan to invest significantly in improving port infrastructure by spending $155 billion between 2016 and 2020”.


Ports are concerned that tariffs on Chinese imports will not only reduce their business, but increase their costs. “As business leaders however, they are concerned about making these sizeable investments in an unstable trade environment. In addition, the proposed new tariffs would dramatically increase the costs of key aspects of port infrastructure investments. Container ports especially would be negatively impacted by the new tariffs placed on cranes under 8426.19.00 HTSUS. Several U.S. ports have Chinese cranes on order, with a cost of up to $14 million per crane. The 25 percent in additional tariff would cost each of these ports millions of dollars and reduce U.S. ports’ competitiveness with Canadian and Mexican ports vying for U.S. cargo. Currently, there is no U.S. manufacturer for these cranes and in the case of low-profile cranes that are required for ports near airports, the only experienced manufacturer is from China. Therefore, AAPA respectfully requests that cranes used in port operations be exempt from the tariffs. We also request that USTR in any future decision exempt port yard equipment that may fall under other codes under 8426 HTSUS, including 8426.30.00 and 8426.91 which are specifically referenced in this 301 expansion.”


The AAPA, however, faces the challenge that container shipping and container ports are very much the facilitator of the trade imbalance the Trump administration is targeting, in effect reducing imports from China what the administration is trying to achieve. If tariffs on Chinese container cranes mean putting up the cost of bringing Chinese imports into the US, the USTR may not view that as a negative outcome.


As well as its problem with ‘optics’, the AAPA also has a weaker case than transport companies like JB Hunt and Schneider that succeeded in getting the USTR to remove its proposed 25% tariff on intermodal containers - one of only five product lines to be removed in the first round of hearings. While ZPMC is the dominant supplier and several European suppliers fabricate their cranes in China, not all container cranes are made in China. US ports have also recently ordered cranes from Liebherr, and Hans Kunz that have been built in Europe, and from MES (Japan and Indonesia).


While there is not enough capacity elsewhere to meet US demand for container cranes without China, questioning from the USTR committee in its earlier hearings on Chinese tariffs highlighted how members focused on whether those arguing for an exemption had any options besides Chinese suppliers.


It also has to be considered that the US Administration has taken other trade actions to protect and grow the US steel industry, and it follows that it would also want to consider more closely why it is no large container cranes are currently made in the US, and to what extent this situation is the result of the unfair trade practices it has identified.


The recent precedent in Georgia could be relevant here. As noted by WorldCargo News in February, the steel structures for the eight new Konecranes widespan RMGs ordered by the Georgia Ports Authority (GPA) for its Mason Mega Rail project will be fabricated in the USA.


This project received a US$44M grant from the US government’s FASTLANE programme. This funding is subject to a Buy America requirement that stipulates a “domestic manufacturing process” for the steel and iron products. Many of the crane components were exempt and will be made elsewhere, but Konecranes found a way to have the girders, which are over 50m long, fabricated in the US. It did this because it had to, despite no similar large container crane having been made in the US for many years and another port before it obtaining a full exemption for similar cranes.


It is not known which company will manufacture the girders, but there are companies in the US that can do this work. ACE World Companies in Texas went to TOC Europe in 2017 to promote its “made in America” yard cranes.

New MES low profile cranes in Tokyo
New MES low profile cranes in Tokyo

Finally, Nagles’s assertion that for low profile cranes “the only experienced manufacturer is from China” overlooks low profile cranes built by MES. Pictured are three new low-profile cranes Mitsui Engineering & Shipbuilding Co., Ltd. (MES) delivered last year to the Tokyo Port Terminal (TPT), which is currently operated by the Tokyo Port Authority.

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