Over the past decade or so, the Harbor Maintenance Tax (HMT) has been the source of a good deal of discord within shipping, port, and legislative circles, as well as a potential concern about U.S.-Canadian international trade relations. Imposed on ocean cargo inbound into the U.S., HMT was instituted as part of the Water Resources Development Act of 1986 as a means of collecting revenue to maintain and improve American seaports from those who use them, i.e., foreign shippers of freight destined for the U.S. (see May 2012 Legal Lookout article). Concern arose that the tax prompts foreign shippers to use Canadian and Mexican ports to land their U.S.-bound freight (thereby avoiding HMT), and our neighbors up north to exploit the situation by building an impressive rail infrastructure to transport freight from Canadian seaports into interior states. The Canadians vehemently deny any such effect or result, and that their railroad plans would be improper in any event.
Apparently, HMT revenues aren’t all that well administered, at least in the views of those ports which collect substantial portions of them, and those which could really use financial help with dredging, development and maintenance. Collected taxes go into a Harbor Maintenance Trust Fund which, under Congressional budget rules, count as federal receipts, and payouts as current-year expenditures. Consequently, only about half of HMT funds are disbursed to ports. The other half just makes the national debt look a little better. At last count, over $7 billion was just sitting there in the Trust Fund.
Congress commissioned the U.S. Federal Maritime Commission (FMC) to study and report on the circumstances. In the summer of 2012, that report concluded that HMT wasn’t diverting to foreign ports significant volumes of inbound freight (HMT is only one consideration of shippers when electing where their freight lands), and anything Canada might be doing to invite traffic was fine under NAFTA and our trade agreements.
While FMC’s report still is the subject of much debate, Congress won’t do anything under the current circumstances. Ports of the state of Washington are among the most vocal on the issue, as they compete most heavily with Canada’s busiest seaport, the Port of Vancouver. This prompted Washington Senators Patty Murray and Maria Cantwell to introduce to the Senate the Maritime Goods Movement Act for the 21st Century Act (the Act) in September 2013. Washington Congressman Jim McDermott put the bill in front of the House in February 2014.
The Act would revamp our entire process for collecting revenue from outside shippers for maintenance and development of U.S. ports. It would repeal HMT and replace it with a Maritime Goods Movement Use Fee for port operations and maintenance. First and foremost, this should about double funds actually made available to our ports.
It also would disincentivize foreign shippers from going through Canadian and Mexican ports just to avoid U.S. taxes by making fees chargeable for ocean freight at entry into the U.S., even if by surface transportation. That sounds like it might create logistical and enforcement issues, and potentially hold up a lot of cargo, but steeper obstacles to fluid cross-border movement have long been in place and dealt with.
The Act would create a fund for low-use, remote and subsistence harbors that don’t get much funding. This is one of the chief complaints about the current system, which not surprisingly comes from those smaller ports themselves. The program is designed to include a competitive grant program to improve intermodal transportation system as well. Lastly, and perhaps curiously, the Act would close loopholes that allow big oil to receive billions in federal subsidies.
As we all know, bills like this, even when they address seemingly urgent circumstances, can take forever to come to votes in Congress. The Act likely will be the subject of a good deal of debate, but would be a useful addition to the U.S.’s revamping of transportation policy. In addition to more appropriate allocation of revenue, the Act would help existing ports revitalize or develop toward better efficiency and competitiveness.
Ref: Maritime Goods Movement Act for the 21st Century, available at http://beta.congress.gov/bill/113th-congress/senate-bill/1509.