Home | Business News | Browse by Publication | T | Transportation Journal

Financing port dredging costs: taxes versus user fees.

Article Excerpt
Ships, particularly containerships, continue to grow in size. Containerships exceeding 9,000 twenty-foot-equivalent units (TEUs) in size are now entering some trades, and containerships up to 18,000 TEUs are in the planning stages. One consequence of larger containerships is the burden that they place on ports, e.g., port channels often have to be dredged deeper. How should port dredging be financed? Should a tax be used? If a user fee is used, should shipping lines whose ships use the channel pay this fee? Should the user fee be a national user fee (the same at all ports of a nation) or a port-specific user fee? How should the user fee be assessed, e.g., based upon ship size, type and amount of cargo loaded and unloaded while in port, or time in port per call?

This article discusses tax and user fee programs for financing port dredging costs. By doing so, it provides background information for addressing the above questions. The next section discusses the U.S. tax and proposed Clinton Administration national user fee programs for financing port dredging costs. Then, a port-specific user dredging fee model is presented, followed by a discussion of implementing port-specific user dredging fees. The next sections discuss external benefits and vessel cargo in financing port dredging costs. Finally, a summary of the discussion is presented.

THE U.S. EXPERIENCE

Prior to 1986 the costs of the U.S. government's sponsored programs for the deepening and maintenance of port channels were financed from the federal general tax fund in the amount of 65 percent, with state or local governments being responsible for the remaining 35 percent. In 1986 the U.S. Congress passed the Water Resources Development Act, replacing the federal general tax fund with the Harbor Maintenance Trust Fund (HMTF) as the federal revenue source for financing channel deepening and maintenance costs. The revenue source for the trust fund is the Harbor Maintenance Tax (HMT), an ad valorem tax placed on the value of exported, imported, and some domestic (coast and lake, but generally excluding inland waterway) cargo moving to and from U.S. ports. The tax rate was originally set at 0.04 percent of the value of the cargo. With the passage of the Omnibus Budget Reconciliation Act of 1990, the rate was increased to 0.125 percent (effective January 1, 1991).

In 1998 the U.S. Supreme Court declared the HMT to be in violation of the export clause of the U.S. Constitution that "No Tax or Duty shall be laid on Articles exported from any State" (Article 1, Section 9, Clause 5). As a result, the HMT collections from exporters were discontinued as of April 25, 1998--but remained on imports and certain domestic and foreign trade zone cargoes. However, in the same opinion, the Supreme Court also ruled that exporters are not exempt from user fees to defray dredging costs. The Court ruled that a user fee determined by "the extent and manner of port use depending on factors such as the size and tonnage of a vessel, the length of time it spends in port and the services it requires--for instance, harbor dredging" would meet the constitutionality test (U. S. Army Corps of Engineers 2001, 9). The European Union has also been critical of the HMT, equating the tax to an illegal barrier to their exports by being in violation of several GATT...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!