	Introduction

In 1986, the Harbor Maintenance Tax (HMT) was enacted to fund U.S. Army Corps of Engineers' (USACE or the Corps) activities related to the routine operation and maintenance (O&M) of harbors, namely the dredging of harbor channels to their authorized depths and widths. U.S. waterborne exporters no longer pay the tax because a 1998 U.S. Supreme Court ruling found it unconstitutional. The tax revenues are deposited into the Harbor Maintenance Trust Fund (HMTF) from which Congress annually appropriates funds for harbor maintenance. Consequently, a large "surplus" in the HMTF has developed. Under-maintained channels in busy U.S. ports could increase the risks of ship groundings or collisions, resulting in spilled cargo or fuel oil. They also could raise the cost of shipping, requiring ships to carry less cargo to reduce their draft or wait for high tide before transiting a harbor. To rectify this situation, some industry stakeholders seek to enact a "spending guarantee" to spend down the surplus in the HMTF. Some of these harbors or waterways are among the most expensive to maintain in the country and collectively they represent a significant portion of total HMTF expenditures. Given the amount of HMT collections not spent on harbors and the amount spent on harbors with little or no cargo, a rough estimate is that less than half and perhaps as little as a third of every HMT dollar collected is being spent to maintain harbors that shippers frequently use. The HMT was originally assessed at 0.04% of the cargo value. Generally, coastal and Great Lakes ports are subject to the tax. However, domestic shipping on the Great Lakes and along the coasts is only one-fifth the tonnage of U.S. foreign waterborne trade and domestic vessels account for less than one in every ten ship calls at U.S. ports. Based on the HMTF expenditures these ports have received and the HMT revenues generated on imported cargo alone (not counting domestic cargo or cruise ship traffic), Los Angeles and Long Beach likely receive less than a penny on the dollar, and Seattle and Tacoma just over a penny for every dollar that import shippers who use their port pay in HMT. New York, Boston, and Houston likely receive less than a quarter of tax revenues collected. Although little cargo moves through Grays Harbor, it is much more significant to commercial fishermen and recreational boaters. As mentioned above, according to the Corps analysis, full channel dimensions are available less than an average of 35% of the time at the 59 highest use U.S. harbors. Most, if not all, of the busiest ports in the country generate more than sufficient HMT revenue to cover Corps O&M expenditures at their port, even at exceptionally dredging-intensive ports like those on the Mississippi River in Louisiana. As indicated above, a good portion of the HMT revenues that shippers generate are used to dredge channels used mostly by either recreational boaters or commercial fishermen, which do not pay the HMT. Some might argue that to target one group of harbor users for assessing a fee and then to distribute revenues mostly, or entirely, in the case of some harbors, for the benefit of other users, undermines the "trust fund" and "user fee" concept. Legislative Activity in the 111th Congress

In the 111 th Congress, several bills were introduced to either change the tax rate or how revenues from the tax are spent. H.R. 3486 , H.R. 638 , S. 551 , and S. 1509 would repeal the tax on domestic waterborne non-bulk cargo and cargo imported from Canada through the Great Lakes for the purported purpose of mitigating highway congestion by diverting shipments from truck to water modes. H.R. H.R. 4844 / S. 3213 would provide a "spending guarantee" modeled after the Airport and Airway Trust Fund. H.R. 2355 would increase the tax rate to 0.4375% ($4.38 per $1,000 in cargo value) and expand use of the fund for landside port improvements in addition to the waterside maintenance performed by the Corps. The Obama Administration, in its FY2010 budget submission, requested that a pilot project be created to examine the feasibility of having local users finance the maintenance dredging of channels with little or no commercial traffic. Congress reduced the amount of funding for this program from $1.5 million to $1.4 million.
In 1986, Congress enacted the Harbor Maintenance Tax (HMT) to recover operation and maintenance (O&M) costs at U.S. coastal and Great Lakes harbors from maritime shippers. O&M is mostly the dredging of harbor channels to their authorized depths and widths. The tax is levied on importers and domestic shippers using coastal or Great Lakes ports. Due to a Supreme Court decision in 1998, exporters no longer pay the tax because it was found unconstitutional. The tax is assessed at a rate of 0.125% of cargo value ($1.25 per $1,000 in cargo value). The tax revenues are deposited into the Harbor Maintenance Trust Fund (HMTF) from which Congress appropriates funds for harbor dredging.
Despite a large surplus in the trust fund, the busiest U.S. harbors are presently under-maintained. The U.S. Army Corps of Engineers (Corps) estimates that full channel dimensions at the nation's busiest 59 ports are available less than 35% of the time. This situation can increase the cost of shipping as vessels carry less cargo in order to reduce their draft or wait for high tide before transiting a harbor. It could also increase the risk of a ship grounding or collision, possibly resulting in an oil spill. To rectify this situation, some are calling for increasing disbursements from the trust fund. However, Corps data indicate that a significant portion of annual HMTF disbursements are directed towards harbors which handle little or no cargo. The Oregon Inlet in North Carolina, Grays Harbor in Washington, Humboldt Harbor in California, and the Lake Washington Ship Canal in Seattle are some of the harbors or waterways that fit this description. Commercial fishermen and recreational boat (or yacht) owners account for most, if not all, of the vessel traffic in these harbors. Fishermen and recreational boaters do not pay the HMT. Some might argue that to target one group of harbor users for assessing a fee and then to distribute revenues mostly, or entirely, in some cases, for the benefit of other users, undermines the "trust fund" and "user fee" concept. The Administration requested and Congress provided funding for a pilot program that began in FY2010 to investigate the feasibility of having non-cargo harbor users finance the dredging requirements of harbors with little or no commerce.
In addition to the distribution of HMT revenues for the benefit of non-cargo harbor users, there are also equity issues associated with HMT revenue distribution among the nation's top commercial ports. Due to geological differences, ports vary greatly in the amount of dredging they require. About one-fifth of HMTF expenditures are spent in Louisiana. The ports of Mobile, AL, and Portland, OR also are relatively expensive to maintain. The amount of HMT revenue ports generate also varies significantly due to differences in the amount and characteristics of the cargoes they handle. Consequently, HMT revenues are redistributed from ports that are large import gateways with naturally deep channels to lower volume ports that require frequent dredging to maintain adequate channel depths and widths. The ports of Los Angeles, Long Beach, Seattle, and Tacoma, and to a lesser degree, Boston, New York, and Houston are large net generators of HMT revenue. International cargo predominates at most ports. Ports compete for this cargo, and the growth of containerized cargo and the prospective expansion of the Panama Canal have intensified competition among U.S. ports.
Legislation was introduced in the 111th Congress that had varying objectives regarding the HMT. H.R. 3447 and H.R. 4844/S. 3213 would spend down the surplus in the HMTF. H.R. 2355 would increase the tax rate and expand use of the HMTF for landside port infrastructure improvements. H.R. 3486, H.R. 638, S. 551, and S. 1509 would repeal the tax on non-bulk cargo shipped on the Great Lakes and along the coasts in an effort to divert truck cargo from congested highways to waterways. None of these bills were enacted.