No proof US harbour maintenance tax diverts cargo to Canada

The US Federal Maritime Commission is wrapping up the hearing portion of its investigation into issues surrounding shipping traffic at Canadian and Mexican seaports.

Formerly known as Docket No. 11-19, the proceeding is an inquiry into the topic of US inland containerized cargo moving through the Canadian and Mexican ports.

Among the most contentious issues for Canadians is the speculation that by using Canadian harbours, shippers avoid paying the US harbour maintenance tax (HMT). Both Canadian and international organizations have objected to that assumption.

Organizations looking for standing at the inquiry submitted position papers in December. In one of those papers, the World Shipping Council, the National Industrial Transportation League and the National Retail Federation, jointly stated that “the non-application for the US harbour maintenance tax (HMT) to cargo that transits through Canadian ports is not a ‘loophole’ in US law, nor can one safely assume that US destination cargo that arrives through a Canadian port has been ‘diverted’ to that route by the potential application of the HMT to it if it arrived in a US port.”

Representatives from Canadian ports also argued against the assumption. The ports of Halifax, Montreal, Prince Rupert and Vancouver jointly submitted a paper, indicating that not only are Canadian ports important to US economic competitiveness, they aren’t taking any business away from American ports.

“Irrespective of efficiency gains at Canadian ports, the overall North American shipping container market is growing significantly. Between 2000 and 2010, East and West Coast US ports grew at an annual rate of 3 percent annually, while Canadian East and West Coast ports experienced 5 percent annual growth. From 2000 to 2010, the US captured 74 percent of the increased North American cargo traffic. Contrary to claims of cargo diversion by some Members of Congress, the Canadian share of US containerized imports via Canadian ports as a share of total US port traffic averaged less than 2.5 percent in 2010, which is a decrease from 3.2 percent in 2000. At the same time, US market share of Canadian containerized cargo imports and exports is three times Canada’s market share of US containerized cargo. Specifically, US ports handled more than 8 percent of Canadian containerized imports and exports.”

Canadian Pacific is also convinced that the HMT is not causing US ports to lose business to Canada.

“CP is aware that the annual revenues collected through the Harbor Maintenance Tax (HMT) exceeds the annual funding amount allocated to port dredging which has resulted in a substantial surplus in the Harbor Maintenance Trust Fund. Further, CP acknowledges the concerns that west coast US ports have with the application of the HMT and the allocation of the dredging funds, namely to east coast ports.

“CP does not agree with any assertion that the application of HMT, in itself, places US ports at competitive disadvantage to Canadian ports, there is simply no evidence to make that claim.”

The Canada government also submitted a statement disagreeing with the diversion assumption.