SENATE BILL REPORT

SJM 8017

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Background: The Harbor Maintenance Tax (HMT) was created by Congress in the Water Resource Act of 1986 to support the cost of harbor maintenance activities at maritime ports. The HMT is imposed at a rate of 0.125 percent of the value of cargo shipped or cruise tickets sold. Revenues from the HMT are deposited into the Harbor Maintenance Trust Fund, which provides funding primarily to the U.S. Army Corps of Engineers for dredging channels, maintaining jetties, operating locks, and other harbor maintenance activities.

U.S. bound goods shipped through a Canadian or Mexican port that arrive in the U.S. via truck or rail are not subject to the HMT. A 2012 report by the Federal Maritime Commission (FMC) studied the movement of containerized cargo through Canadian and Mexican seaports to investigate the possible diversion of cargo away from U.S. west coast ports due to the HMT. The report estimated that up to 26.7 percent of container volume for U.S. west coast ports was at risk of being diverted to Canadian ports. The FMC report further found that up to half of the U.S. bound containers coming into Canada's west coast ports could revert to using U.S. west coast ports if U.S. importers were relieved from paying the HMT.

Summary of Bill: The joint memorial contains a series of findings, including:

the HMT is not collected on trans-pacific cargo shipped to the U.S. via rail or roads, which provides an incentive to divert cargo away from U.S. ports;
the ability to move cargo through Canada and avoid paying the HMT is an incentive to divert cargo away from U.S. ports;
up to half of U.S. bound containers traveling to Canada's west coast ports could revert to using U.S. west coast ports if U.S. importers were relieved from paying the HMT;
the Northwest Seaport Alliance has received just over a penny on every dollar of harbor maintenance tax paid by shippers who use their ports;
west coast ports face increasing competition for maritime goods with the recent widening of the Panama Canal and potential addition of a canal in Nicaragua; and
Washington ports are ready to compete on a level playing field.

The Legislature requests that Congress pass and the President sign legislation reforming the HMT. The reforms should ensure U.S. tax policy does not disadvantage U.S. ports and maritime cargo, and provide greater equity for HMT donor ports through expanded use of HMT revenues.