[Congressional Record Volume 144, Number 69 (Tuesday, June 2, 1998)]
[Senate]
[Pages S5577-S5579]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         HARBOR MAINTENANCE TAX

 Mr. BREAUX. Mr. President, since colonial times, waterborne 
commerce has been key to the economic growth and vitality of our 
Nation. It has been especially important for my home state of 
Louisiana. The entire U.S. economy, and that of Louisiana, depends on 
an efficient and reliable transportation system to remain competitive 
in domestic and international markets. Navigable channels, railways, 
highways, and ports are links in the transportation chain that allow 
manufacturers, buyers, and sellers to send and receive goods quickly, 
safely, and efficiently. Congress has recognized the importance and 
need for promoting a system of seamless intermodal connections, from 
ship to shore, and then to rail or truck, and ultimately to the 
consumer's local retail store. The original ISTEA legislation, was 
named for intermodalism, in recognition of the importance of fostering 
and promoting intermodalism, and I am confident that ISTEA II will 
continue our efforts to expand and modernize the infrastructure needed 
to facilitate intermodalism.

[[Page S5578]]

  Continued adequate investment in our Nation's transportation 
infrastructure, including federal navigation channels, is critical. In 
fact, in Louisiana we have literally hundreds of miles of navigable 
waterways crisscrossing our state. The resulting benefits of this 
waterway system are efficient access to a wide variety of products and 
services, internationally competitive exports, and lower costs for 
consumers. Maintaining deep draft navigation channels is one of the 
most important, and least understood, factors in maintaining an 
efficient national transportation system. The need for both maintenance 
and deepening of navigational channels will drastically increase as 
vessel operators continue to switch to newer and larger vessels.
  The most modern and largest container ships available today are 
capable of carrying over 6,000 TEUs. By way of comparison, this cargo 
load would translate into a train length of over 27 miles. However, 
these vessels require navigable channels in excess of 45 feet of depth 
in order to get into port in a fully laden mode. We can have the 
greatest system of intermodal infrastructure available, but if the 
gigantic vessels that will be plying the seven seas cannot enter our 
ports, our importers and exporters will not benefit, and we will lose 
the competitive advantages of having cheap and safe transportation.
  U.S. port development and maintenance is currently a shared 
responsibility of federal, state, and local governments, with extensive 
private sector participation. Under this relationship, rooted in the 
U.S. Constitution, the Federal government has maintained harbor access 
channels and contributed a share towards channel improvements, while 
individual ports construct and maintain the land-side terminal 
facilities, including developing rail and highway access, dredging 
their own shipping berths, and contributing to channel improvement 
cost-sharing programs.
  Since 1789, the Federal Government has authorized navigation channel 
improvement projects, and the General Survey Act of 1824 established 
the U.S. Army Corps of Engineers as the agency responsible for the 
Nation's navigation system. Relying in good faith on this long-standing 
partnership, local port authorities spend approximately $1.3 billion 
annually to construct and maintain the land-side facilities. These 
local investments have been paid for through state taxes and bonds and 
have resulted in a port system that can be relied on to meet our 
country's national defense needs and accommodate our ever growing 
international trade.
  Traditionally, the Federal Government funded maintenance dredging of 
federal navigation channels from General Treasury revenues. However in 
1986, Congress enacted the Harbor Maintenance Trust Fund to pay for a 
portion of channel maintenance dredging. Revenue for this trust fund is 
generated by assessing a fee, the ``Harbor Maintenance Tax'' or HMT, on 
the value of export, import, and domestic cargo moving through the 
nation's deep draft ports. At the same time, local cost-sharing was 
instituted for funding new construction projects. These projects allow 
a Port to either widen or deepen navigable channels. By way of 
contrast, on the inland waterways, operations and maintenance costs are 
paid out of the General Treasury, and new construction costs are 
funded, in part, by an inland waterways fuel tax.


          The Funding for Maintenance Dredging is in Jeopardy

  Recently, the Supreme Court has ruled that the Ad Valorem nature of 
the HMT and the surplus of revenues in the HMT makes it a tax rather 
than a user fee, and that the collection of the HMT violates Article I, 
section 9, clause 5 of the U.S. Constitution which restricts Congress 
from enacting taxes or duties on U.S. exports. As a result of this 
determination, the U.S. Customs Service has been forced to cease 
collection of the HMT on exports. In addition, previous to the 
determination of the Supreme Court, the European Union challenged the 
HMT as a tariff barrier and an unfair trade practice under GATT. It 
will be unlikely that we will now be able to prevail in a GATT panel in 
a challenge to the HMT given that we only would collect the HMT for 
imported items.


     The Federal Government Must Resume Responsibility for Channel 
                              Maintenance

  The debate over the creation of a user fee in 1986 to fund 
maintenance dredging was a long and acrimonious one and one that 
divided the port, shipper, and carrier communities. Congress recognized 
and considered that the assessment of a tonnage fee on cargo or vessels 
would have severely affected bulk commodities, such as grain or coal, 
which compete in international markets where even the slightest price 
fluctuation can make or break a sale. The final product, assessing an 
Ad Valorem fee on cargo, ending up adding hundreds of dollars to the 
cost of shipping a single container of high value cargo, such as 
electronic equipment or computers, has caused traffic to be diverted to 
non-U.S. ports to avoid payment. For instance, the imposition of the 
HMT caused a railcar-carrier service on the Great Lakes to go out of 
business.
  When the HMT was enacted in 1986, Congress tried to be sensitive to 
the impact of a user fee on trade, and set the HMT at a level to 
collect 40 percent of the costs thought to be required to cover 
maintenance dredging. However, in 1990 in the budget agreement, 
Congress tripled the fee with very little debate, and since then the 
trust fund has accumulated a $1.2 billion surplus and that surplus has 
been projected to grow to $1.9 billion by the end of fiscal year 1999.
  The cost of maintenance dredging is expensive, and many U.S. ports 
could not perform routine maintenance dredging programs given the scope 
of the need of certain ports and the hydrographical particulars of 
certain channel waterways. Without routine maintenance dredging, many 
of these channels would be rendered unnavigable. It should be 
remembered that the prime beneficiaries of adequately maintained 
navigation channels are not the ports themselves, although local port 
communities do benefit from the economic activity generated through the 
port, but U.S. producers and consumers. In fact, the beneficiaries 
include the entire national economy, as well as the Federal Government, 
as well as the vessels of the U.S. Navy, Coast Guard, and other public 
agencies which travel our navigable channel waterways--all benefit from 
the public sector payments into the HMT to defray maintenance dredging 
costs.
  Without today's access to ports, there would be fewer and more 
expensive transportation options. U.S. exports would suffer as 
producers' transportation costs increased, thus decreasing our 
international competitiveness and the availability or accessibility of 
certain imports. Since 95% of U.S. international trade moves through 
our ports, the channels and harbors must be kept safe and navigable 
through essential routine maintenance by removing sediment that can 
clog shipping lanes.


  User Fees for Dredging Hurt Our International Trade Competitiveness

  Imposing new taxes on trade to fund maintenance dredging would run 
counter to our government's trade promotion efforts. Our nation cannot 
hope to reap the economic benefits of the global marketplace without 
providing the infrastructure necessary to transport those goods as 
cheaply and efficiently as possible. A 1993 General Accounting Office 
study found that 12 Federal agencies already levy 117 assessments on 
waterborne trade. Making our exports more expensive through additional 
fees makes the U.S. less competitive in international markets.
  U.S. ports annually handle more than one billion metric tons of 
international trade cargo valued in excess of $600 billion. Customs 
revenues in FY 1996 totaled $22.3 billion, of which roughly 70 percent 
(or $15.6 billion) is attributable to seaport activity. International 
trade's impact on the U.S. Gross Domestic Product (GDP) is growing by 
astronomical bounds. In 1970, trade represented only 13 percent of U.S. 
GDP. By 1996, trade had grown to account for 30 percent of GDP, or 
about $2.3 trillion. More than 11 million U.S. jobs now depend on 
exports, and this figure represents an increase of 1.5 million jobs in 
just four years. Significantly, the wages earned by workers 
manufacturing goods for export are, on average, 13-17 percent higher 
than non trade-related jobs.

[[Page S5579]]

                              Why Dredge?

  Over 90 percent of the nation's top 50 ports in foreign waterborne 
commerce, including ports in Louisiana, require regular maintenance 
dredging. Together these ports move nearly 93 percent of the volume of 
all U.S. waterborne commerce. Routine maintenance dredging is necessary 
in many parts of the country to remove sediment from rivers and harbors 
that builds up due to tidal and other hydrographical forces. Without 
dredging, many port facilities and navigation channels would be 
rendered unsafe and non-navigable to users in less than a year. For 
example, the Columbia River accumulates sediment at a rate of five to 
six feet a year in some areas. Without routine dredging, areas of the 
navigation channel that serves the water highway for many ports in 
Oregon and Washington State could change from a 40-foot to a 35-foot 
deep channel in one year. Since 90% of the ship traffic use the maximum 
depth of the channel, such a dramatic change would prohibit many ships 
from entering the channel or force ships to carry only a fraction of 
their intended load, making their voyages expensive and inefficient.
  Failure to adequately maintain navigation channels affects not only 
the local economy around the port, but has far-reaching impacts 
throughout the country. For example, agricultural and natural resource 
products such as grain or timber will be unable to reach export 
markets. In addition, imports such as clothing, consumer electronics, 
and automobiles will become more scarce and expensive. Since ships and 
ports provide the means to facilitate the flow of interstate and 
international commerce, the Federal Government should bear a large 
portion of the responsibility to ensure that these trade conduits 
remain viable.


       The Economic Benefits of Waterborne Shipping are Plentiful

  The economic benefit of our waterborne system is nationwide: goods 
from 27 states leave the country through the ports in Louisiana alone. 
Midwestern grain supplies the Pacific rim market through ports in the 
Pacific Northwest. Crude oil that is brought to and refined in New 
Jersey and Pennsylvania reaches consumers on the entire East Coast--
from Maine to Florida. Steel that travels to major Midwestern 
industrial centers is delivered cheaply and efficiently through ports 
on the Great Lakes. Ports on the West Coast handle high value goods 
destined for consumers throughout the country.
  Costs associated with waterborne shipping are three to four times 
less per ton-mile than any other freight transportation, and waterborne 
shipping is the most cost effective method of freight movement. Our 
waterborne transportation efficiency contributes mightily to our 
ability to compete in the price sensitive bulk commodity markets. Grain 
and coal are just two examples of price-sensitive bulk commodities. 
Because shipping contracts can hinge on a few tenths of a cent per 
bushel of grain or ton of coal, transportation costs can be the 
deciding factor for foreign buyers choosing between American or foreign 
bulk products.
  Maintaining the right channel depth allows U.S. commodities to stay 
competitive. For each foot of draft vessel depth not dredged, vessels 
carry less product--making each voyage less efficient and more costly. 
For instance, maintaining a channel at 43 feet instead of 44 feet may 
mean the difference of 750 tons of additional coal capable of being 
loaded on a ship. Properly maintained channels can make or break a 
contract in the international marketplace.


             Safety and Environmental Benefits of Dredging

  Making waterways safe for navigation is one of the most important 
benefits of routine maintenance dredging. Deepened channels that 
accumulate sediment become dangerous because they increase the chance 
of ships running aground. Groundings are expensive not only in cargo 
and time lost, but groundings may also pollute the environment if 
ships' hulls are breached and cargo is spilled. The cost of responding 
to and cleaning up oil pollution impacts everyone. Well-maintained 
channels eliminate any surprise shoalings or buildups that may cause 
mishaps harmful to the environment.
  When waterways are not regularly dredged, ships have to be lightered; 
that is, they have enough cargo removed to smaller, shallower vessels 
so that the primary ship is light enough to enter the harbor safely. 
Aside from the additional handling costs associated with the practice 
and the loss of time and potential productivity, lightering of bulk 
liquids increases the chance of spillage and pollution.
  Waterborne freight transportation is also the most efficient mode of 
surface transportation in terms of fuel use per ton-mile. Waterborne 
commerce contributes the least amount of pollution in terms of 
hydrocarbons, carbon monoxide, and nitrous oxide emitted per ton-mile, 
and is also the safest in terms of death or injury per ton-mile. 
Waterborne shipping emits five times fewer hydrocarbons than trains and 
seven times fewer than trucks. A shift of less than 1 million tons of 
cargo from ship to truck would increase fuel use by a factor of ten, 
and probable accidents by a factor of six annually.


                      Future Role of U.S. at Stake

  Since the first wooden vessels arrived on our shores, this nation has 
relied on and prospered due to its access to water and thereon to the 
rest of the world. Both economically and strategically, thereby are no 
greater national assets than our ports and federal navigation 
channels--our water connections to the global marketplace and our means 
of projecting our national defense.
  Until 1986, the Federal Government fully funded the maintenance of 
our Nation's navigation channels, maintaining a partnership with state 
and local port authorities. Contributing to, and relying on this 
partnership, these local port agencies have invested billions of 
dollars in land-side terminals to develop the array of ports along our 
three sea coasts, Great Lakes, and inland waterways. The HMT, 
instituted in 1986 to recover first 40%, then 100%, and more, of 
dredging maintenance costs, has been ruled unconstitutional as applied 
to exports by the U.S. Supreme Court. Based both on this decision and 
the rancorous debate during the 1980s, any alternative trade tax/user 
fee funding mechanism will have significant legal and political 
challenges to overcome.
  With the United States' future role in the global economy at stake, 
it is critical that we approach this issue delicately, and I would urge 
the Administration to carefully review this issue and not rush to any 
judgment. This issue has too many different constituencies with an 
important stakeholder interest.
  Accordingly, I have written to Secretary Slater to request his 
assistance in establishing a private sector task force to review the 
issues confronting any reformulated approach to maintenance dredging. 
At a minimum, this task force should include various carrier and 
shipper interests and port and port-related labor interests and should 
allow the affected interests to air their concerns and make 
recommendations. The problem that we face with the potential 
elimination of the HMT is severe, and any action to replace it, or 
reformulate it, should be done only after an informed airing of the 
issues from affected parties. Mr. President, this issue is critical not 
only to Louisiana but to the entire country. I look forward to working 
with all interested parties to develop a workable solution.

                          ____________________