Canadian Transport Minister Lisa Raitt on Tuesday warned that successful passage of legislation that would target user fees at cargo entering the United States via Canadian ports would be challenged by Canada and would harm trade between the world's largest bilateral trading partners.
Speaking before the American Association of Port Authorities spring conference in Washington, Raitt said Canada "will vigorously defend our trade interests and rights attained through international trade agreements," adding that the proposed legislation is "of grave concern" to the industry and the government.
Sens. Patty Murray and Maria Cantwell of Washington last September introduced the Maritime Goods Movement Act for the 21st Century as a way to protect Pacific Northwest ports from losing cargo to the ports of Vancouver and Prince Rupert allegedly because of the U.S. Harbor Maintenance Tax, an ad valorem fee on waterborne imports that is used to pay for maintenance dredging and other upkeep of navigation channels in U.S. ports. They said the HMT creates a competitive disadvantage for U.S. ports. The lawmakers also cited a need to protect U.S. ports from cargo diversion to Mexico.
The bill would eliminate the HMT since only half of the amount collected is even appropriated for its intended purpose and replace it with a similar 0.125 percent tax on the value of containers originating internationally. The fee would apply even if cargo is unloaded in a foreign country and arrives in the United States by another form of transit, such as truck or rail.
Raitt said taxing U.S.-bound cargo through Canada is misguided because Canadian ports "compete on a fair playing field" as independent, self-governing and self-financing entities. She noted that the amount of Canadian cargo moving through U.S. ports is three times higher than U.S. cargo moving through Canadian ports and that the number of containerized U.S. cargo imports via Canadian ports has actually declined over the past decade.
Raitt noted that since 2009, U.S. goods exports to Canada have increased by 25 percent, which has helped the U.S. recover from the recession.
She suggested that if the Maritime Goods Movement Act became law, the U.S. would be hurting itself because the two North American economies are so intertwined, with manufacturers on both sides of the border constantly shipping components and raw materials back and forth to produce finished goods, which are then shipped across the border to consumers.
"So, we would be undermining a shared competitiveness when we impose new barriers and impediments into a supply chain that is very much integrated," she said.
In 2013, Canada's total merchandise trade with the U.S. was about $605 billion.
Passing such a law runs counter to the Beyond-the-Border Initiative of President Barack Obama and Prime Minister Stephen Harper, which aims to harmonize border management and facilitate cross-border trade to help spur economic growth in both countries.
"The imposition of a new tax would have a negative effect on our trade, growth and jobs. And that impact would be felt on both sides of our border," Raitt said.
The Federal Maritime Commission last summer released a report that said the HMT was one of several factors resulting in cargo diversion to ports in Canada and Mexico
. It said shippers on average pay $109 per container in HMT fees and that some of the cargo would revert back to U.S. ports if the tax was repealed. However, Republican commissioners did not approve of the report, saying it didn't use independent economic models to isolate the impact of the HMT on supply chain decisions.
During her visit to Washington, Raitt also met with Homeland Secretary Jeh Johnson on continuing efforts to ensure safe and efficient cross-border transportation and with the Canadian American Business Council.