Harbor Services Fund Under Attack

Wednesday, July 28, 1999
The Administration's proposed tax to pay for harbor dredging is not a viable or equitable solution to funding navigation channel maintenance at the nation's ports, says the American Association of Port Authorities (AAPA). AAPA and others testified at a House Water Resources and Environment Subcommittee Hearing on the Administration's Harbor Services Fund (HSF) proposal, H. R. 1947. The plan creates a new tax on vessels to replace the Harbor Maintenance Tax, the export-tax portion of which was declared unconstitutional by the Supreme Court in 1998. The administration proposal, submitted to Congress, but not yet introduced as a bill, would raise the funds for maintaining deep-draft channels and the federal share of the cost of widening and deepening channels by imposing differing amounts of fees on four classes of vessels: bulkers, tankers, general and cruise. The fees would be assessed on "vessel capacity units" (VCUs) based on net tonnage, except for containerships and cruise vessels, which would be based on gross tonnage. The fees would be $0.12 per VCU for bulkers and cruise vessels; $0.28 per VCU for tankers; and $2.74 for general cargo vessels. Vessels under 3,000 gross registered tons would not be subject to the fee, nor would most cargo to and from Alaska, Hawaii and U.S. territories. "Ports are vital to our national defense by providing critical bases of operations for the U.S. military and USCG," said AAPA President Kurt J. Nagle during a hearing held on the proposal. "Ports are vital to our national economy by handling 95 percent of our international trade. And, ports are vital to our industrial heartland by helping bulk exports like grain and coal successfully compete in the world marketplace. For these, and other reasons, the federal government should continue to pay its fair share for harbor maintenance and dredging." Also testifying were Peter Finnerty, vice-president, Sea-Land Services, Inc., Thomas Allegretti, president, American Waterways Operators; and Edward M. Emmett, president and CEO, National Industrial Transportation League. Assistant Secretary of the Army for Civil Works, Dr. Joseph Westphal, testified on behalf of the Administration. "Ports already pay the lion's share of infrastructure costs needed for waterborne commerce and are willing to continue paying their fair share. However, because ports offer widespread economic and national security benefits to the entire nation, the federal government should not be permitted to abdicate its limited yet necessary role in funding the maintenance of America's ports," Nagle added. AAPA strongly supports H.R. 1260, legislation which would repeal the harbor maintenance tax and fund navigation channel maintenance out of the general treasury. The bill currently has more than 30 cosponsors. Ports and other maritime industry representatives are opposed to H.R. 1947 because: · The HSF plan constitutes a new tax on trade. · The proposal will harm bulk commodity exports. When passed on to shippers, the tax will price those commodities out of international markets. · International and domestic cargo diversion to other countries and other modes of transportation is a serious threat under the proposal. · The HSF plan does not provide equity or ensure that there is a reasonable return to ports in relation to the amount collected. Other statements regarding the Harbor Services Fund and H.R.1260, follow: "The Administration's Harbor Services Fund proposal represents a billion dollars in new taxes on the maritime industry and will certainly drive jobs overseas. Maritime commerce provides significant national benefits for American business, farmers, workers and consumers. We call on the Administration to recognize these benefits and find the money in the general treasury to maintain our nation's navigation channels."-Brian McWilliams, president, International Longshore & Warehouse Union (ILWU) "The American Waterways Operators views the harbor services fund proposal recently put forth by the Administration as an abdication of the Federal government's historic responsibility to upgrade and maintain our nation's ports for the benefit of our entire citizenry. We support H.R. 1260, legislation sponsored by Congressmen Robert Borski and Jim Oberstar to repeal the existing Harbor Maintenance Tax and authorize general revenues to pay for the federal cost of operating and maintaining the nation's harbors."-Thomas A. Allegretti, president, The American Waterways Operators (AWO) "Vessel owners or carriers operate in a highly competitive environment with low profit margins. The cost of the HSF for container operators and general cargo operators calling at the Ports of Los Angeles and Long Beach over a 12-month period would be a minimum of $300 million per year. In April 1999 alone, the taxes would have been $25.5 million. This is an incredible incentive for more rapid port development for nearby foreign ports to the south."-Jay Winter, executive secretary, Steamship Association of Southern California "The Administration's proposal to shift the entire cost of constructing and maintaining deep-draft harbor channels to the private sector is tantamount to a denial that coastal and Great Lakes ports contribute to national economic well-being, generate Federal tax revenues, or, in fact, have public value. Exactly the opposite is true, which is why it makes good sense for the U.S. Treasury to invest in navigation infrastructure."-Harry N. Cook, president, National Waterways Conference "The Baltic and International Maritime Council (BIMCO) is the largest association of ship owners and operators in the world. We are greatly troubled by the attempt of the U.S. Administration to impose a fee on commercial carriers for a service provided to the public at large."-Dennis Bryant, Attorney for BIMCO "The Transportation Institute is disappointed with the Administration's proposal to add an additional tax burden on vessel operators to fund harbor projects and other navigation channel improvements, which benefit all users of the Nation's waterways government vessels, recreational vessels, fishing vessels as well as commercial vessels. Clearly, the cynical approach taken in drafting this scheme shines through as stakeholders' concerns expressed over the last several months cargo diversion, export competitiveness, impact on trade relations, constitutionality, federal abdication of financial responsibility have not been addressed. We urge the Congress to consider this proposal with all due deliberation as the U.S. waterway system provides enormous economic and national security benefits."-James L. Henry, chairman and president, Transportation Institute "The Chamber of Shipping of America has worked on this issue for over a year and we are very disappointed that the administration's proposed harbor services user fee does not address any of the industry's concerns. We cannot afford to make mistakes in addressing the issue of ports and waterways development. Our trade status, and more importantly, our national defense, is at stake."-Joseph J. Cox, president, Chamber of Shipping of America "INTERTANKO has advocated that improvement in the physical condition of U.S. ports, waterways and approaches to them from the open sea is an important and neglected element of marine safety and environmental protection. Finding ways to address effectively these issues is a national concern that will benefit all the citizens of the U.S. and all waterway users, not just commercial, freight-carrying vessels. Significant public investment will reap significant public rewards. The Administration's first impulse is to place the heaviest financial load on the narrowest user sector. This trivializes the problems and will delay or deny America a much- needed upgrading of its Marine Transportation System."-Svein Ringbakken, senior vice-president and general counsel, INTERTANKO

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