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Supply chain pain may lurk in container crane bill

Cost increases for US terminal operators to be offset by grant program

Legislation proposing strict new prohibitions on the purchase and operation of the world’s most popular container cranes could cause severe disruptions at U.S. ports, according to a maritime cybersecurity expert.

The Port Crane Security and Inspection Act of 2022, introduced last week by Carlos Gimenez, R-Fla., bans port cranes sold under contracts with countries considered a U.S. foreign adversary — which includes China, the world’s largest manufacturer of ship-to-shore gantry cranes — from operating at U.S. ports. In addition, within five years after the law is enacted, operators of such cranes already in the U.S. would be required to remove any software manufactured by countries covered under the ban that connects the cranes to the ports’ cyber infrastructure.

The legislation also states that cranes purchased from China that had been scheduled for delivery at U.S. ports and determined by the U.S. Department of Homeland Security “to be of high risk to port security or maritime transportation security” must be inspected by the Cybersecurity and Infrastructure Security Agency (CISA) for “potential security vulnerabilities” before they can begin operating, according to the bill.

Bull’s-eye on ZPMC

There are just a handful of container crane manufacturers of large ship-to-shore cranes built to load and unload post-Panamax-size ships and larger, but one company dominates: China’s ZPMC, which is estimated to control at least 70% of the market.

As a state-controlled company unburdened by the same profit-turning pressures of its international competitors, ZPMC can offer significant below-market prices for cranes that typically cost $10 million to $12 million or more, a marketing director for an international crane manufacturer told FreightWaves. ZPMC-built cranes are operating at the largest U.S. container ports, including Los Angeles, New York, Virginia, Baltimore, Seattle, Miami, Houston, Charleston, South Carolina, and Tampa, Florida.

While ZPMC is the apparent target of the legislation and would potentially see a market hit as U.S. ports continue to expand, its competition, conversely, could benefit. Among the largest are Konecranes and Kalmar Global, both based in Finland, Liebherr of Ireland and Japan’s Paceco Group/Mitsui E&S.

Another supply chain hit?

The legislation as currently written could present logistical problems for public and private container terminal operators, Scott Dickerson, executive director of the nonprofit Maritime Transportation System Information Sharing and Analysis Center Institute told FreightWaves.

“These are major investments for industry and to place a prohibition for certain cranes to no longer operate [with current software] within five years would severely impact shoreside operations and ultimately the general public,” he said. “It’s not as simple as swapping out the software — it isn’t equivalent to saying you’ll switch to using an Edge versus a Chrome browser. The supply chain issues we are seeing today would likely be significantly worse under this proposed legislation.”

Regarding the inspection requirements in the bill, “can CISA complete these inspections in an eight-hour window dictated by the operator? That is how this will need to work as the cranes will be placed into operation based on industry’s needs, not CISA’s availability,” Dickerson emphasized. “Otherwise, the economy and supply chain of an entire region of the country could be significantly impacted while industry waits for the government to complete its work.”

A better alternative, he suggested, would be to allow independent third parties to complete the inspections.

Grant help

Alongside the Port Crane Inspection Act, Gimenez introduced another bill, the Port Cranes for America Act, which would create a grant program available to U.S. terminal operators to pay for up to 80% of the cost of gantry cranes with a lifting capacity of more than 50 tons.

For ports looking to expand their operations, the companion legislation would offset higher costs that could result from a potential bump in the price of a gantry crane due to ZPMC effectively being shut out of the U.S. market, as well as pay for software replacement costs.

“This provides for a significant offset of the costs that would be incurred under [the security bill], which is terrific and well thought through,” Dickerson said.

He questioned, however, why the legislation gives the U.S. Maritime Administration (MARAD) the authority to issue the grants when the Federal Emergency Management Administration (FEMA) currently administers the Port Security Grant Program.

“As federal agencies historically do not have a strong track record of coordinating, this may increase the chances of inconsistent grant awards,” Dickerson said. As an example, he noted, a terminal operator may apply for a grant under FEMA’s for new crane equipment but MARAD may not actually grant the new equipment, or vice versa.

Click for more FreightWaves articles by John Gallagher.

John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.