The Harbor Maintenance Tax (HMT) was instituted by the Water Resources Development Act of 1986 (WRDA 1986, P.L. 99-662 ) to pay for routine maintenance and operations costs of harbors. Numerous legal challenges to the HMT raise questions about its future and possible legislative changes. Harbor maintenance dredging requirements are expected to increase in the near-term due to current channel deepening projects at many ports. This report reviews recent developments in harbor maintenance legislation and the current status of harbor maintenance funding. The first is the distinction between harbor maintenance and harbor-deepening projects. Funds for the federal share of harbor-deepening projects are provided from U.S. Treasury general funds. In March 1998, the U.S. Supreme Court struck down the application of the HMT with respect to exports, finding that it violated Article I, Section 9, Clause 5 of the Constitution which states that, "No tax or duty shall be laid on articles exported from any state." Cases regarding the constitutionality of the HMT on imports remain in litigation. The European Union sees the application of the HMT to imports as a discriminatory import tariff that violates U.S. obligations under the World Trade Organization (WTO). The current HMTF balance, in conjunction with the revenue stream from the remaining HMT collections and interest payments, are considered sufficient to recover expenditures for the foreseeable future. However, the results of the aforementioned legal and trade challenges could reduce or halt incoming revenue. Today, however, ever-larger containerships are the primary driving force behind current dredging activity. Issues for Congress

There are a number of policy questions that are intertwined with the question of how to finance harbor maintenance in a manner that is both constitutional and not in violation of trade agreements. The Water Resources Development Act of 2003 ( H.R. 2003), which passed the House, would authorize this change in cost share arrangements.
The Harbor Maintenance Tax (HMT) was instituted by the Water Resources Development Act (WRDA) of 1986 (P.L. 99-662) to pay for the routine maintenance and operations costs of harbors. Numerous legal challenges to the HMT raise questions about its future and the issue of possible legislative changes. In March 1998, the Supreme Court struck down the application of the HMT with respect to exports, finding that it violated the Constitution's ban on export taxes. Cases regarding the constitutionality of the HMT on imports remain in litigation. The European Union sees the application of the HMT to imports as a discriminatory import tariff that violates the General Agreement on Tariffs and Trade (GATT).
The current Harbor Maintenance Trust Fund balance, in conjunction with the revenue stream from the remaining HMT collections and interest payments, are considered sufficient to cover expenditures for the foreseeable future. However, the results of the legal and trade challenges could reduce or halt incoming revenue. Harbor maintenance dredging requirements are expected to increase in the near-term over recent levels due to current deepening projects at many ports. Larger containerships appear to be the primary driving force behind current dredging activity.
Issues for the 108th Congress include how to finance harbor maintenance in a manner that is both constitutional and not in violation of trade agreements, and how to finance the federal portion of harbor-deepening projects. Key policy questions include: Should the federal government return to using the general fund to finance harbor maintenance? Should a new user fee be established to pay for harbor maintenance? The larger issue that may need to be resolved before a funding solution can be found is: what should the role of the federal government be in port maintenance and dredging? The Water Resources Development Act of 2003 (H.R. 2557), which passed the House, would increase the role of the federal government by increasing its share of the cost in harbor deepening and maintenance projects. This report will be updated as warranted.