We Were Right About Harbor Maintenance Tax Diversion!

Is there any better feeling in the world than being right about something? My wife will no longer tell me “you were right” because I immediately start gloating: shouting “whoo-hoo” and doing some sort of weird victory dance that’s a mix of the Twist and someone falling down the stairs.

So I have a feeling that there might have been some similarly funky victory dancing going on in Washington Congressional offices and at Puget Sound port facilities when, on July 27, the Federal Maritime Commission released its “Study of U.S. Inland Containerized Cargo Moving Through Canadian and Mexican Seaports.”

Why? Because, if you translate the federal-government-speak of the report into layman’s terms, it says the thing that my wife won’t: “Puget Sound ports, you were right about the diversion of cargo caused by the Harbor Maintenance Tax!”

We here at the State of Trade blog have been highlighting various issues with the Harbor Maintenance Tax for a long time, ranging from the fact that all HMT revenues aren’t spent on harbor maintenance to the use of HMT money to disproportionately help East and Southeast US ports compete for West Coast port business. But the biggest concern of our state’s Puget Sound ports – specifically Seattle, Tacoma and Everett – has been the idea that the HMT incentivizes shippers to use Canadian ports instead of theirs…because cargo coming through Canadian ports and into the US via the land border doesn’t have to pay an equivalent fee, making it cheaper than entering through US ports.

Puget Sound ports have been concerned about this cargo diversion for years, and increasingly since Canada began investing so heavily in the development of the Port of Prince Rupert. But we never had a way to objectively show that this was the case…until now. The study confirmed

“…a situation in the Pacific Northwest, even reaching southward into California, whereby cargo movements through certain other parts of our border are putting these ports at a strong competitive disadvantage…It is clear that HMT is one of many factors affecting the increased use of foreign ports for cargo bound for U.S. inland destinations…[and] amendment to the current HMT structure should be given consideration.(emphasis added)

Or, to rework the old Daily News headline, “FMC to Puget Sound: You’re Right!”

The Federal Maritime Commission study was a direct result of leadership by the Washington Congressional delegation, and so a lot of credit for this confirmation of our long-held belief goes to them.  Significantly, the findings also serve as momentum for our delegation to find a legislative solution that addresses this diversion; they can say to their peers in Congress that “the federal government has confirmed there’s a problem, so we need to address it.”

But it won’t be easy, because we’ll need to find legislative support from other parts of the country in order to get a majority vote in Congress. And so there may need to be a more comprehensive solution that not only addresses the competitiveness of Puget Sound ports, but US ports more broadly: more focus on infrastructure, on funding and on the further development of a National Freight Strategy.

The hard work is still to come. But in the meantime, feel free to shout “whoo-hoo” and revel in that feeling of rightness.

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