The Port of Seattle is stepping up pressure on the Federal Maritime Commission over U.S.-bound imports passing through Canada, calling on the agency to close "a loophole" in the Harbor Maintenance Tax the port says gives shippers an incentive to send cargo through Canadian ports.
In a letter Monday to FMC Secretary Karen Gregory, Port of Seattle Executive Director Tay Yoshitani said the cost of ocean and intermodal transportation is a significant factor considered by importers in choosing a gateway for their cargo.
“If the FMC finds that U.S. law provides incentives to move cargo through foreign gateways, we believe the commission should recommend that U.S. law be modified to ensure all U.S. containers are treated equally,” Yoshitani said.
The FMC has launched an investigation into whether the federal harbor maintenance tax on imports makes it less costly for U.S. importers to route their cargo through ports in Canada or Mexico and then into the U.S. via intermodal rail. The investigation was spurred by complaints from West Coast ports and their congressional representatives.
Seattle points to what it calls a loophole in the tax law in which imports routed through a Canadian port and then shipped into the U.S. over a land border are not charged the tax. By contrast, an import through a U.S. port that moves to the same destination within the U.S. must pay the tax.
Congress established the harbor maintenance tax in 1986 as a way to generate revenue for dredging the nation’s ports. The ad valorem tax is only .0125 percent, but since inbound containers often carry high-value merchandise, the amount of money paid by the importer can be high.
Seattle estimates that the tax on containers moving through the Pacific Northwest port averages $89, but a 40-foot container of electronics can incur a tax of $125 and the harbor maintenance tax on a container carrying auto parts can be $312.
“Cost is one of the most important elements in cargo-routing decisions,” the port stated in a white paper that accompanied the letter to the FMC. The study added that other cost factors, such as Canada’s alleged cheaper intermodal rail rates from Prince Rupert to Chicago, offer yet another powerful incentive for U.S. importers to ship through Canadian ports.
Seattle stated that it is impossible to calculate an exact cost savings due to Canadian rail rates because Class I railroads do not publish their rates. “Shipping lines tell us that Canadian rail costs are $200 to $500 lower than for U.S. railroads. We believe the fuel surcharge constitutes most of the difference in overall cost,” the study stated.
Seattle said that the higher U.S. intermodal rail rates plus the harbor maintenance tax, when combined with the Canadian government’s well-thought-out national freight policy, have resulted in a diversion of hundreds of thousands of U.S.-bound containers a year through Canadian ports.