Legislature asks Congress for harbor maintenance tax reform

Container ship entering port
Under HJM 4012, Washington lawmakers are requesting that Congress reform the harbor maintenance tax so it no longer competitively disadvantages West Coast ports. Photo: Andi_Graf

Stakeholders from the retail sector, port leadership and labor leaders are voicing strong support for a measure which would request Congress to reform the Harbor Maintenance Tax (HMT) so that it no longer places a handicap on West Coast ports vying for business from U.S.-bound shippers.

HJM 4012 asks Congress to reform the HMT so that it does not competitively disadvantage U.S. ports. The measure also requests that Congress expand its uses of the tax’s revenue to give back to ports that impose the HMT on incoming shippers.

State Rep. Tom Dent (R-13) is prime sponsor, and cosponsors include State Reps. Mary Dye (R-9), Jeff Morris (D-40) and Eric Pettigrew (D-37).

HMT is placed on U.S.-bound cargo and is used to fund the maintenance and dredging of harbors. The tax accounts for, on average, an extra $109 in shipper fees per container.

“Unfortunately, Congress routinely diverts up to half of the HMT revenue for other purposes,” Ryan Calkins, Commissioner for the Port of Seattle, told members of the House Technology and Economic Development Committee on January 17. “The remaining funds are spent to maintain the harbors of our competitors: ports like Savannah, Houston and New York.”

According to a Northwest Seaport Alliance summary paper on HMT, one-fifth of the money collected by the tax goes into dredging – a service that a naturally deep port like Seattle’s has no need for. The paper also found that the ports of Seattle and Tacoma receive just over a penny on every dollar charged to U.S.-bound shippers moving through those ports.

“More importantly, the HMT is not assessed on importers who route cargos through non-U.S. ports and afterwards move the cargo into U.S. markets by land,” said Calkins.

The Port of Seattle is considered a “donor port,” that is, one of nine ports paying the HMT and not receiving much benefit in return. According to Calkins, the port is probably “the most vulnerable” to the disadvantages of HMT and competitiveness from the port of Vancouver.

Calkins added that he can personally attest to the effect the HMT has on rerouting cargo because he ran an import and distribution business prior to joining the commission.

“For each shipment from overseas we analyzed the cost of each itinerary and invariably chose the least expensive option. Had we not, our competitors would have gained a cost advantage on us.”

According to a 2012 Federal Maritime Commission study, the tax is responsible for diverting 50 percent of shippers, as they are choosing to route through Canada instead of the West Coast.

“In a trade-dependent state like Washington, our economy depends on keeping our region’s gateways competitive.”

Gordon Baxter, lobbyist for the International Longshore and Warehouse Union (ILWU), agreed.

“The HMT harms Washington state competitiveness, particularly when compared to Canada.”

One of Washington’s main competitors is British Columbia’s Port of Prince Rupert. In August, the port completed a terminal expansion which allows it to accommodate the largest container ships. The construction allows the port to now handle 1.35 million 20-foot equivalent units (TEUs) each year.

He added that the use of HMT is especially harmful to Washington, as trade accounts for 1.4 billion jobs and $1.5 trillion in global domestic product (GDP) for the state.

Mark Johnson, Vice President of Government Affairs at the Washington Retail Association (WRA), said the association imports hundreds of millions of dollars through ports each year.

“We do not appreciate Congress diverting a large portion of the Harbor Maintenance Tax away from what they should be doing with it. We commend this measure to you and we hope you send a loud message back to Congress that this practice needs to stop and change.”

HJM 4012 is scheduled for possible executive session during the House Technology and Economic Development Committee on January 23, 24 and 25.

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