Every big metal container of imported cargo delivered by ship from the growing port of Prince Rupert, B.C., to the American Midwest now enjoys an instant $109 shipping cost advantage over containers imported through U.S. ports such as Tacoma and Seattle, courtesy of the U.S. government.
That cost advantage is an unintended consequence of a federal tax on imports that applies only at U.S. ports, not where the imported goods enter the U.S. by land.
Now Washington’s U.S. Sens. Patty Murray and Maria Cantwell plan to introduce what they say is a comprehensive solution to the inequities of the federal tax. Called the Maritime Goods Movement Act for the 21st Century, the bill, if enacted by Congress and signed by the president, would impose an import tax not only at U.S. seaports but also at land points-of-entry.
That inequity has been a thorn in the side of U.S. ports for years, particularly Northwest ports that compete directly with Canadian maritime facilities.
“Currently, the Harbor Maintenance Tax is diverting U.S.-bound sea cargo, which should enter our country through the Port of Seattle, the Port of Tacoma or other ports along our shores,” said Murray.
“Instead, shippers have decided it’s more cost-efficient to send those U.S.-bound goods to Canada and Mexico first only to ship them to the United States by truck and rail,” she said.
That cargo diversion now amounts to some 400,000 containers a year, said Port of Seattle CEO Tay Yoshitani.
The proposed act would also broaden the uses for the funds the tax raises, addressing another issue that has hectored Puget Sound ports.
Much of the money the present Harbor Maintenance Tax raises goes to maintenance dredging at major U.S. ports. Because Puget Sound is naturally deep , the ports of Seattle and Tacoma estimate that for every dollar they raise for the Harbor Maintenance fund, they receive only a penny in return.
Ports along big, silt-laden rivers such as the Mississippi receive a disproportional share of the tax money for dredging. The new law would allow expenditures from the fund for port and transportation infrastructure improvement beyond dredging.
Northwest ports have made unsuccessful attempts to reform the tax before. Those efforts failed because powerful interests prefer the system as it is.
Major Canadian railroads that transport U.S.-bound containers to their inland destinations don’t like changing the tax. Those Canadian railroads own rail networks within the U.S., which gives them political clout. One U.S. railroad, Kansas City Southern, owns an extensive Mexican rail network, which could transport containers from developing Mexican ports such as Lazaro Cardenas.
Shipping lines that will see their costs go up don’t like a bill that would add taxes to the shipments, and customers of imported goods likewise don’t favor a broader tax because it would be passed on to them.
Some ports that depend on federal monies for dredging have been reluctant to support an amended tax because it would cause the federal tax receipts pot to be shared with more ports.
Murray and Cantwell’s bill this time seeks to enlarge the amount of money available, thus keeping dredging-dependent ports well-funded.
In addition to collecting additional taxes at land entry points, the bill also seeks to have Congress use the entire import tax revenue fund used for port transportation improvements. Under the present law, only the Harbor Maintenance Tax money goes to maintain ports. The rest is available for general appropriation.
John Gillie: 253-597-8663