U.S. senators take aim at Canada's West Coast ports with new cargo tax legislation

WASHINGTON – Two U.S. senators plan to introduce legislation soon aimed at shippers who favour Canadian ports over American ones due to supposed lower costs north of the border, measures that could have a significant impact on Canada’s lucrative West Coast ports.

At a time when trade between the U.S. and Canada is supposed to be easing under the much ballyhooed Beyond The Border initiatives, Washington state lawmakers Maria Cantwell and Patty Murray, longtime foes of the U.S. Harbor Maintenance Tax, are once again targeting the levy with a proposal that would penalize Canadian ports.

The senators want to replace the Harbor Maintenance Tax on shippers with a levy that would apply to all cargo containers coming into the United States via Canadian and Mexican ports. That means when a shipping company unloads its containers in Prince Rupert, B.C, for example, and they’re loaded onto a U.S.-bound train or transport truck, the cargo will be taxed at the border.

“We know that if the playing field is level, Washington’s state ports and products will win out,” Cantwell said when announcing the proposed legislation last month in Seattle.

For Canadian port executives, who have long argued that foreign shippers choose Canadian ports for myriad reasons beyond the American tax, such a levy would amount to a punishing tariff.

The port of Seattle, in particular, has faced intense competition from B.C. ports, especially Prince Rupert, which opened six years ago and is planning a massive expansion in the years to come.

In their joint statement, both senators pointed to last summer’s U.S. Federal Maritime Commission report, a document delivered to Congress that was damning to Canada and caused serious dissension among the bipartisan members of the five-person panel. Two of them refused to vote in favour of its release.

The commission report said that 27 per cent of containers moving through American ports was “at risk” of being lured to Prince Rupert instead. It also stated that a recent boost of U.S.-bound cargo coming through Canadian ports coincided with the opening of Prince Rupert, and raised veiled suggestions about security measures in place at the B.C. port.

“We’re very much opposed to this legislation,” Wendy Zatylny, executive director of the Association of Canadian Port Authorities, said Thursday. “It’s not a fair piece of legislation.”

Canadian port executives say shippers choose Canadian West Coast ports over American for reasons that have nothing to do with the American harbour tax.

Both Prince Rupert and Vancouver have several advantages over American West Coast ports — in particular, cargo ships travelling from China arrive several days earlier at the Canadian ports because of what’s known as the Great Circle Route across the Pacific Ocean.

Prince Rupert also has the lowest rail grade to U.S. centres such as Chicago and Memphis, and its terminals are not burdened by urban congestion.

“Shippers have made their decisions to ship through Canadian ports not because of any kind harbour maintenance tax but simply because of increased efficiencies,” said Zatylny. “The Canadian ports have worked very hard to bring in innovations that speed up the process, so what we’re seeing are the benefits of that.”

The American tax is levied, in part, to cover the cost of dredging port channels on the American West Coast.

Dredging isn’t necessary in Prince Rupert’s deep channels, while Vancouver requires only minimal dredging. Instead of a tax, Canada charges importers a user fee that goes toward port maintenance.

Zatylny pointed out that another piece of legislation already working its way through Congress — the Water Resources Development Act — addresses the biggest concerns raised by Cantwell and Murray. That bill has bipartisan support and essentially authorizes the Army Corps of Engineers to study and construct water infrastructure projects, including at critical U.S. ports.

“It’s actually meant to address some of the issues they’re trying to get at regarding funding to ports,” she said. “It enables the full spending of the Harbor Maintenance fund, tops it up, and broadens the terms so that money can be used for infrastructure at ports, and for improving efficiencies that go beyond just dredging. And it does so without imposing any fees on Canada or Mexico.”

Officials at the Canadian embassy said they’re working hard to educate American legislators and Obama administration officials about the folly of the proposed legislation as legislators prepare to get back to work on Monday following their summer recess.

“We’re continuing advocacy efforts with key U.S. interests, including the administration and Congress, and most importantly, the U.S. business community, which relies on Canadian supply chains to support the world’s largest trade relationship,” an embassy official said.

Canadian port officials are doing the same, said Zatylny.

“We’re organizing ourselves here in Canada to get ready for whatever kind of outreach and lobbying campaign that we need to do once Congress is back in session,” she said.

“But the reality is, the business models at all the container ports in Canada will hold. I can’t speak for what shippers will do or how they’ll make their decisions, but I do know that the efficiencies that Canadian ports have developed are not at risk.”

Earlier this week, two Vancouver-area ports announced they’d be part of a multimillion-dollar expansion to include new facilities for inspecting offshore cargo. International Trade Minister Ed Fast said the facilities will help improve security and increase exports to new markets by reducing processing times.

The joint Canada-U.S. project, he added, will help ease movement of shipments between Canada and its neighbour to the south.