US Harbour Maintenance Tax Under Investigation

by Leroy Baker, Tax-News.com, New York

10 October 2011

The United States Federal Maritime Commission (FMC) is to undertake an inquiry into the tax and other disparities that may be causing US-bound cargo to be driven to Canadian and Mexican ports.

In response to written requests, the FMC, at its meeting on October 5, voted unanimously to give notice of an inquiry, which will seek public comment and information to inform the FMC’s study of the effect, particularly, of the federal Harbour Maintenance Tax (HMT) that may be diverting US-bound cargo away from US ports.

Washington state's two Senators, Patty Murray and Maria Cantwell (both Democrats), recently wrote to the FMC requesting that it should analyze the impact of the HMT. They pointed out that shippers can avoid paying the HMT by routing cargo through non-US seaports.

They wrote that: “Although the HMT has existed since 1986, it has become a more significant competitiveness issue with the development of new Canadian and Mexican seaports along the west coast (of the US), and it appears that the HMT may be a key factor causing US ports to lose a growing share of imported container cargo from Asia.”

It is said that a growing number of containerized US imports from Asia move through the west coast Canadian container ports of Vancouver and Prince Rupert en route to the US Midwest (such as Chicago and Memphis) through cross-border rail. Additional volumes also enter US markets via Mexican ports.

As a result, the Senators wrote, non-US ports are able to claim a substantial per-container cost advantage over US seaports based on the HMT alone. "The results of this unfair disparity are increased cargo diversion and lost US jobs," they warned.

“It is imperative that we level the playing field between international ports and domestic ports so that the US can continue to compete for cargo,” the Senators added. “Therefore, we respectfully request the FMC to conduct an analysis of the impacts and the extent to which the HMT and other factors impact container cargo diversion from US west coast ports to west coast Canadian and Mexican ports, as well as offer legislative and regulatory recommendations to address this concern.”

FMC’s Chairman, Richard A. Lidinsky, replied that Canadian and Mexican ports are free to compete with US ports for US cargo. "But they should do so on a playing field that is not artificially tilted by governments’ policies. So the primary question is whether we are handicapping our own ports in international competition," he added.

The Commission will be seeking input on the issue from government, industry, and the public - both in the US and Canada.

The Harbor Maintenance Tax is a federal tax imposed on shippers based on the value of the goods being shipped through ports. Revenues are transferred to the Harbor Maintenance Trust Fund to pay for a portion of channel maintenance dredging. However, according to the American Association of Ports Authorities, a surplus of USD1.2bn is now sitting idle in the trust fund.

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