Save the dates!

Marine Log

February 20, 2007

Harbor Maintenance Tax under fire at Short Sea Shipping hearing

The Harbor Maintenance Tax was targeted as a significant obstacle to development of U.S. short sea sea shipping services at a House hearing held by the Subcommittee on Coast Guard and Maritime Transportation on February 15.

You can access details of the hearing, including witnesses' prepared statements HERE.

Meantime, the U.S. Maritime Administration is pushing forward with its efforts to boost short sea shipping. It has unveiled America's Marine Highway Initiative.

In background information for February 15, hearing, the subcommittee says short sea shipping (SSS) is generally defined as "waterborne transportation of commercial freight between domestic ports (from one port in the U.S. to another port in the U. S.) through the use of inland and coastal waterways." It includes the movement of freight and of passengers (for instance ferries); however, when the term "short sea shipping" is discussed as a mode of transportation, it is typically meant to refer to the movement of freight.

An opportunity may exist to develop a new SSS policy that will promote the continued development of this method of transportation. However, short sea shipping is still in a nascent stage and any new policy initiative will need to wrestle with a host of issues, ranging from the role the federal government should play in developing a mode of transportation devoted largely to freight, to how best to overcome the constraints that limit this mode (legal, logistical, operational, and financial) and win acceptance of the mode among shippers. Nonetheless, the development of a short sea shipping initiative could offer an opportunity to develop a new policy initiative in the field of transportation.

The Harbor Maintenance Tax (HMT) is a levy on the value of cargo timported to a port within the United States or that is transported between two U. S. Ports. It is assessed at a rate of 0.125% of the value of the cargo. The tax is assessed only once on cargo that is transported between one U.S. port to another (either at the point of departure or arrival, but not both); however, cargo that is carried from a foreign port may be taxed twice--once upon arrival at the initial U. S. port and again if transported to another U.S. port aboard a different vessel.

Cargo transported along the inland waterways is subject to the Inland Waterways Fuel Tax instead of the HMT. The Great Lakes are not considered part of the inland waterways system. Many proponents off SSS make three basic arguments for an exemption of SSS cargo from the HMT:

Cargo transported through SSS should be exempted from the HMT because it creates a competitive disadvantage vis a vis other modes (e.g., freight transported by trucks does not pay a specific comparable tax), including the possibility of double assessment of the HMT.

There can be multiple HMT charges for a single through-movement. For example, if a container is transported from Europe to New York, is taken off the ship, and reloaded on a SSS ship for transport to Baltimore, it would pay the HMT twice--once for each leg of the movement.

Since the HMT is assessed and collected from the shipper, not the carrier, the HMT discourages SSS shipment of consolidated loads. For example, if a FEDEX truck were to move 500 packages from New York to Jacksonville, FL, on a SSS vessel, each of the 500 package owners would be responsible for paying the HMT--which would be very difficult to do and the owners of these 500 packages wouldn't have to pay any additional fees if FEDEX moved their packages over the highway to Jacksonville.