A container ship in Prince Rupert, British Columbia. The port there is viewed as a growing competitor to U.S. Pacific Northwest ports. Credit: Stephen Rees/Flickr
Online editors are always trying to get their writers to engage readers. So, for this month’s trade policy column, let’s play a game. Here’s a fun one: “Try to come up with a trade policy that really disadvantages the Puget Sound region.”
What characteristics would this policy have? Well, first off, let’s make it so that this policy would disincentivize companies from doing business in the Puget Sound region (a pretty basic starting point, I’d say).
Second, how about we create something that invests in other states that are trying to compete against us?
And just for good measure, let’s pretend that this same policy is actually important to other regions around our state, so that the Puget Sound region can’t get rid of it entirely without negatively impacting fellow Washingtonians.
Guess what? That policy already exists. It’s called the Harbor Maintenance Tax. But the good news is that there might finally be an opportunity at the federal level to improve it.
The Harbor Maintenance Tax (HMT) is a federal tax imposed on shippers based on the value of the goods being shipped through ports. The tax revenue is designed to be placed in a trust fund for maintenance dredging of federal navigational channels. Many ports in our state — like those along the Columbia River — rely on HMT funds to make the infrastructure investments necessary for freight to move along our state’s waterways.
Unlike those other Washington ports, however, Puget Sound ports have naturally deep harbors that don’t need much dredging, and so they see little benefit from HMT investment. In fact, a majority of HMT revenue goes to dredge East Coast and Gulf Coast ports that are increasingly our competitors. On the Seattle Metropolitan Chamber of Commerce's recent visit to Georgia, we saw firsthand how, in anticipation of the Panama Canal widening, the Port of Savannah is making major investments to prepare for cargo that is currently being offloaded on the West Coast.
But what really causes concern for Puget Sound ports is the “land border loophole” created by the HMT. While the tax is assessed on ocean-going international imports that land at U.S. ports, it is not assessed on importers who route cargo through non-U.S. ports (such as Canada and Mexico). Those ports then move their cargo into U.S. markets by land. This disparity makes it cheaper for international importers to divert cargo to non-U.S. ports such as Prince Rupert in British Columbia to avoid the HMT in Washington.
Washington’s congressional delegation has been focused on the impacts of the loophole, and — at the delegation's urging — the Federal Maritime Commission issued a notice of inquiry last fall “to study the impacts and the extent to which the U.S. Harbor Maintenance Tax, other U.S. policies, and other factors may incentivize container cargo to shift from U.S. West Coast ports to those located in Canada and Mexico.”
The findings of that inquiry are due any day now. If the maritime commission confirms that cargo is shifting away from the United States because of the tax and the land border loophole, it may finally create the momentum in Congress necessary to address the problem. While the Puget Sound ports have long raised this issue, a federal confirmation of the problem can be used as a powerful tool to spur action.
The United States could find a way — without violating our trade agreements with Canada — to ensure that pass-through goods entering our country from Canada pay an equivalent fee. Or Congress could make HMT investments more beneficial to the Puget Sound ports; allowing HMT investments in non-dredging freight mobility projects – such as roads and rail – might be one such solution.
The proposed new basketball arena and the relocation of the grand alliance of shippers from Seattle to Tacoma have both brought renewed energy to the ongoing conversations about how Puget Sound ports can compete in the changing global economy. While there are many opinions on how to best do this — from increased coordination to more (and more strategic) investments — addressing the HMT’s diversionary impacts would significantly improve competitiveness for the Puget Sound’s ports.
The release of the Federal Maritime Commission's findings and recommendations will present a unique opportunity to make progress on this issue. Working together with our congressional delegation and other key stakeholders, we must not miss the chance.