Cybersecurity Initiative at U.S. Ports A Good Start

The MOC

By
John D. McCown
April 6, 2024

On February 21 the White House announced an initiative to bolster cybersecurity at U.S.ports. What was announced was a good start but there is more to be done in this area. Akey aspect is to support more initiatives related to manufacturing some of the critical 2/4 infrastructure and equipment used in container shipping in the U.S. for both commercial and security reasons.

Today U.S. ports have returned more to normal operating status following a tumultuous few years when the pandemic set in motion factors resulting in congestion and gridlock. The epicenter of supply chain issues impacting everyone in America was container shipping and container terminals were ground zero. The direct impact of higher shipping costs for inbound containers absorbed into U.S. peaked near a $100 billion annualized rate. The knock-on effects from gummed up supply chains vibrated through the economy and added to that cost. While that period is in the rear-view mirror, it is not clear sailing ahead for U.S. ports. In the absence of taking steps to ensure that ports have sufficient capacity to handle the growth that is sure to come, problems will emerge. Container terminals with free-flowing boxes and available reserve capacity are vital for both economic and national security reasons.

The focus of the announced initiative is on the giant container cranes necessary to load and unload ships. Some 80% of the worldwide production of these cranes now come from ZPMC(Shanghai Zhenhua Heavy Industries Company Limited), a state-owned enterprise in China. Other state supported entities in China provide scanners and software that is integrated within these highly automated cranes. The key software is LOGINK, which was developed by the PRC Ministry of Transport and began to be marketed outside of China in 2010. LOGINK is a logistics management platform that aggregates data from various sources, including ports, shipping companies, shippers and other logistics networks and public databases. Major container ports in the U.S. are linked with that software platform through the use of cranes built by ZPMC.

Given that cranes handle every box moving from ship to shore, critics have referred to the ZPMC cranes with LOGINK as “Trojan horses” collecting massive amounts of data on container shipments that could be adverse to U.S. interests. A December 21, 2021 article in the Wall Street Journal quoted Michael Wessel, a commissioner on Congress’s U.S.-China Economic and Security Review Commission, as saying that LOGINK’s window into global trade “could give the data holder a treasure trove of intelligence of national security and economic interest.”

As part of what was announced on February 21, the Coast Guard issued
a Maritime Security Directive for all U.S. ports to take action to minimize any cybersecurity threat from the container cranes used at their facilities. This risk assessment and the related series of actions to safeguard critical digital infrastructure are certainly an appropriate first step in this area. Care should be taken, however, to not move backwards in the use of digital tools that enhance the fluidity of containers moving through U.S. ports. In addition to taking steps to protect the U.S. from physical and digital products made by others, it is imperative that we need to take direct and tangible action for such critical infrastructure products to be made here.

Bravo that the announcement also included a plan to have PACECO build container cranes in the U.S. Now a U.S. subsidiary of Japan’s Mitsui Ltd., PACECO built the world’s first container cranes here in the U.S. That of course was hardly unique, as everything related to container shipping – the cranes, the containers, the ships – started here and was built here. When that began almost seven decades ago, it was commercial activity. But we now know that this critical physical infrastructure system also has important national security aspects. For that basic and fundamental reason, we can ill afford to not have at least some involvement in making the critical components of that system here.

The $20 billion referenced in the announcement is the previously announced port infrastructure program and it is not clear how much will be allocated to the PACECO plan. A noteworthy set aside should be announced. Such support would not only be focused on assisting the startup of manufacturing cranes in the U.S., but also of manufacturing containers in the U.S. Containers are critical infrastructure, facilitating the flow of products worth trillions of dollars through the global distribution system. China’s share of building these boxes is even higher and comes in at 97% of worldwide production. Such a set aside would result in private initiatives in the container manufacturing area. Along with container cranes, containers should be given as much support as possible by the government in terms of both starting up production and utilizing the resulting product.

When thinking of containers, it is important to remember that information related to the container (such as data constantly showing its location) is an equally vital aspect of the physical product. Smart containers have been utilized in domestic U.S. transportation for over a decade and have contributed to enhancing the efficiency of those freight systems. The broad range of smart container applications should join any U.S. manufacturing of containers. While we presently have labor and steel cost disadvantages related to building the containers, some of that can be mitigated by technology. Clearly a technology element where we should not have disadvantages and where it actually fits with our relative strengths are the components and software that turn a steel box into a smart container. With the will to do so and the right incentive, there is no reason why the U.S. cannot actually be a leader in producing the components and software that make smart containers so.

One incentive that the government should offer is the preference or even requirement that shipments of its own cargo move in containers made in the U.S. It was, after all, some six decades ago that shipments of government cargo were the first to use containers in international movements. That not only proved to be a catalyst for container shipping but also a good decision for the government. The same could prove to be the case through the use of U.S. built smart containers for government shipments internationally.

John D. McCown is a Non-Resident Senior Fellow at the Center for Maritime Strategy. Mr. McCown has four decades of experience related to the shipping industry and his analysis focuses on the intersection of merchant shipping and maritime commerce with national security.

The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed
.
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