A divided Federal Maritime Commission issued a report saying the Harbor Maintenance Tax is among factors encouraging U.S.-bound imports through Canadian ports, and suggesting that Congress consider changes.
The FMC voted 3-2 this week to issue the report, which came in response to a request from West Coast senators and House members who asked whether U.S. port policies encourage shipments through Canadian ports.
Republican Commissioners Rebecca Dye and Michael Khouri opposed releasing the report. They said its methodology and conclusions were flawed.
“The ‘study’ we have submitted to Congress is a political policy paper developed to justify a predetermined conclusion that the Harbor Maintenance Tax affects ‘cargo diversion’ from U.S. to Canadian ports,” Dye said.
She also objected to the report’s statement that Canada’s Port of Prince Rupert, British Columbia, is not part of the Container Security Initiative, which prescreens U.S.-bound cargo. Dye noted that CSI ports were selected based on U.S.-bound cargo volume, and that Prince Rupert did not open until 2007.
Chairman Richard Lidinsky was among Democrats voting to issue the report. “This study provides facts U.S. policymakers can rely upon as they make the important choices affecting this country’s ability to compete in a global transportation marketplace,” he said in a statement.
The report estimated that the harbor maintenance tax adds an average of $109 per 40-foot-equivalent unit to U.S. port costs.
“If U.S. importers were relieved from paying this tax or, equivalently, if a fee of this magnitude was imposed at the border on U.S.-bound containers having used Canada’s west coast ports, a portion of the U.S. cargo that comes through the ports of Vancouver and Prince Rupert likely would revert to using U.S. West Coast ports,” the report said.
The report acknowledged there is nothing illegal about shipping U.S.-bound cargo through Canadian ports and noted that cargo interests’ routing decisions are based on time and cost savings, risk mitigation and rail rates in addition to the harbor maintenance tax.
However, the report said the perception that Prince Rupert offers shorter door-to-door transit times from Asia to the U.S. interior “is not necessarily true” and that “it is difficult to conclude that transportation costs are significantly lower when importers opt to use Prince Rupert as their seaport of choice.”
The FMC’s request for comments on the issue elicited comments from 76 companies, associations, ports and governments.
Dye complained that the report “confuses certain positions, inappropriately characterizes several comments, and fails to acknowledge many of the important commenters.”
She said the only data submitted by commenters claiming a relationship between the harbor tax and cargo diversion is a 2007 study using a cost-based model that “does not account for the dynamic reality in the marketplace.”
Khouri raised similar objections to the report. He said it “fails to assist or advance meaningful study or debate concerning either the federal HMT or the broader subject of a national transportation policy.”
He questioned the weight the report gave to the Harbor Maintenance Tax’s impact on cargo routings. He noted that Canada-bound cargo is more likely to move through U.S. ports than U.S.-bound shipments via Canadian ports.
“The unaddressed question is — if HMT is such a relevant factor in route selection, why would any Canadian-bound cargo enter through a U.S. port and pay the HMT?” Khouri said. “The original question was how to ‘level the playing field.’ An alternative question could be — is there enough tilt to the playing field to allow for rain water to run off?”
Canadian National Railway, which serves Prince Rupert, commented on the report, saying the harbor maintenance tax’s impact on the competitiveness of U.S. ports “is purely a U.S. domestic issue dealing with the competitiveness of those ports and not one involving Canada, its ports, or its railroads….”
“With all due respect to the FMC, CN believes businesses know the reasons for their business decisions best and thus have clear economic reasons for citing the advantages of Prince Rupert’s geographic location and cargo velocity for their port choice,” the CN statement said.