CONGRESS HAS CHANCE TO CLEAR A PATH TO SOUNDER FINANCIAL FOOTING FOR DREDGING

CONGRESS HAS CHANCE TO CLEAR A PATH TO SOUNDER FINANCIAL FOOTING FOR DREDGING

The Supreme Court's recent decision striking down the Harbor Maintenance Tax as applied to exports provides Congress with an opportunity to put dredging in the United States on a sound financial footing and, at the same time, avoid future litigation.

Navigational capability commensurate with commercial needs is vital to the continued economic growth of our nation.Commercial vessels carry 95 percent of this nation's imports and exports and a sizable percentage of our domestic trade. Over the years, various ports have developed into international maritime transportation centers, providing connecting links to rail, trucking or inland waterways modes.

The naturally occurring water depth in some of those ports is no longer commensurate with the drafts and other needs of many modern vessels.

Those ports must either be dredged or vessels will divert elsewhere, in some cases to foreign ports. If vessels divert, much of the money spent over previous years on the intermodal infrastructure in those ports will be wasted.

Jobs in those ports also will be lost. In light of the Supreme Court decision on taxation of exports, and the recent European Union challenge regarding such taxation of imports, it should be assumed that the Harbor Maintenance Tax as currently structured will soon cease to provide a viable funding mechanism for dredging and related harbor improvements.

Thus, an alternative funding method must be developed.

TAX SHIFTING MAY ONLY

CAUSE NEW PROBLEMS

At first blush, shifting the incidence of the tax (or user fee) to the carrier may appear to be the answer. Doing so, though, will only create a new set of problems.

As the court stated in the case of United States vs. United States Shoe Corp., a ''user fee'' is a charge designed as compensation for government-supplied services, facilities or benefits.

There must be a close approximation between the government charge and the government service rendered. If the user fee is to be assessed against the vessel, the charge must fairly match the vessel's use of the governmental service - in this case, dredging.

Not all ports require dredging. Thus, a proper user fee against vessels for dredging cannot be assessed against a vessel calling at a non-dredged port.

Not all ports requiring dredging are scheduled for dredging in the near future. Thus, a proper user fee against vessels for dredging can not be assessed against a vessel for calling at an undredged port.

Not all vessels calling at a dredged port have a sufficiently deep draft to make use of the dredging. Thus, a proper user fee against vessels for dredging cannot be assessed against a vessel that could have safely called at the port, even if it had not been dredged.

Additionally, it is an open question whether a vessel that might only require that the port be dredged to, say, 40 feet should be assessed a full user fee if the government decides to dredge to 50 feet.

DIGGING DEEPER TO PAY

FOR EXPENSIVE DREDGING

There is no doubt that dredging is expensive. If this expense is to be spread over the small number of deep-draft vessels actually calling at dredged ports, the user fee per vessel will inevitably be so high that owners and shippers will seriously consider diverting to a lower-cost port, undermining the national dredging program.

Any alternative user fee for dredging assessed against vessels will inevitably run afoul of the Supreme Court's admonition regarding proper fees. Thus, Congress is faced with a Hobson's choice with respect to user fees. If it attempts to impose a proper dredging user fee against vessels that actually make use of the service, the fee per vessel will be so high as to result in cargo diversion. If it attempts to spread the user fee across a broad group of vessels so as to avoid cargo diversion, it risks having the scheme struck down by the courts.

The alternative is to recognize that a sound national dredging program benefits the entire nation and all of its citizens. As noted above, the free flow of merchandise in and out of the United States is vital to our economy. Since the vast majority of those goods travel by ship, maintaining a proper navigational capability in our waters is absolutely necessary. Dredging is an integral part of the maintenance of that navigational capability.

TO DREDGE OR NOT TO

DREDGE IS THE QUESTION

This is not to say that every port in the United States needs to be, or should be, dredged to accommodate the deepest draft tankers or container vessels.

Rather, the federal, state and local governments (as the representatives of the people) should jointly decide which ports should be dredged and how deeply. Then, since such dredging benefits all the people and the national economy, the national dredging program should be funded from the general revenues so that all those who benefit thereby fairly share in the cost.