By Derrik Penner, August 21, 2013, Vancouver Sun
The Port of Prince Rupert’s Fairview container terminal, which is operating beyond capacity, sends about 60 per cent of its import containers to U.S. destinations and senators from Washington state have launched a bid to slap a per-container fee on all that cargo.
American interests, including senators Patty Murray and Maria Cantwell, have long contended a that shippers are diverting a lot of that U.S.-bound container traffic to Canada to dodge an American per-container tax on imports through American ports.
So Murray and Cantwell are proposing federal legislation to close off that option by repealing the $109-per-container tax and replacing it with an equivalent fee that would apply to all containers arriving in the U.S., regardless of whether they landed in a U.S. port or passed through Canada or Mexico first.
The proposed law is an extension of a campaign that has been going on since 2011 to address what Americans see as an unfair advantage for Canadian ports, which the senators characterize as an issue that threatens an estimated 10,000 jobs in their state.
Murray and Cantwell have proposed putting legislation forward in September, and for now, Canadian interests are watching warily.
“We’re certainly not happy about this,” said Wendy Zatylny, president of the Association of Canadian Port Authorities. “And is it fair? Not at all.”
Zatylny argued that shippers are choosing Canadian ports for reasons of efficiency in getting their goods to market, not to avoid the tax.
Stephen Brown, president of the B.C. Chamber of Shipping, said the senators’ announcement is of concern, but his members, which include shipping lines that use the ports, aren’t overreacting to the proposal.
“We shouldn’t overreact, but we should take any threat like this, which is essentially protectionism … seriously,” Brown said.
“We do know that the Canadian embassy in Washington is taking this latest attempt to bring in legislation and is watching it very seriously.”
The Port of Prince Rupert’s Fairview container terminal, which has the capacity to handle 500,000 twenty-foot-equivalent-units (TEUs) of containers per year, has grown from zero traffic before 2007 to 564,000 TEUs of container cargo in 2012, with the majority, 318,065 TEUs, representing imports.
Port Metro Vancouver’s terminals moved 2.7 million TEUs in 2012, 1.4 million TEUs being cargo imports, up from 2.5 million TEUs in 2010, 1.2 million TEUs being imports.
Murray and Cantwell view a considerable amount of the growth at the Canadian ports as having come at the expense of Washington ports, where they contend 10,000 jobs are at risk due to the loss of trade.
“Currently, the Harbor Maintenance Tax is diverting U.S.-bound sea cargo, which should enter our country through the Port of Seattle, the Port of Tacoma, or other ports along our shores,” Murray said in unveiling the proposal.
Seattle Post Intelligencer columnist Joel Connelly quoted Cantwell’s concerns over Washington state’s share of the West Coast container market, which declined to 15 per cent in 2012 from 18 per cent 12 years ago, while the share handled by Vancouver and Prince Rupert has risen to almost 14 per cent from eight per cent over the same period.
The other part of Murray’s proposed legislation would see proceeds from the new fee be devoted to improvements in intermodal transportation for container traffic moving in and out of ports.
“Canada’s success is laudable,” said Peter McGraw, a spokesman for the Port of Seattle, referring to the federal government’s Asia Pacific Gateway strategy, which has resulted in big investments in Canadian ports.
“We’re years behind Canada in developing a national freight strategy and this remains a huge concern for us.”
McGraw said the Port of Seattle is a net donor to the existing Harbor Maintenance Tax because it mostly pays for dredging of harbours, which Seattle’s harbour doesn’t need very often.
“We are just looking for a level playing field so our ports can compete based on our ability to effectively serve shippers,” McGraw added.
However, other trade observers don’t see the U.S. tax as a significant issue in the movement of cargo to Canadian ports, particularly Prince Rupert.
“(The tax) is a factor, but probably not the most important factor,” said Don Alper, director of the Border Policy Research Institute at Western Washington University in Bellingham. “I think the most important is distance. Getting cargo into Prince Rupert is a lot closer (from Asia) than Seattle.”
Alper added that for the senators, there is a considerable political element involved as the state’s ports have lost business to Canada and California.
“For (Murray and Cantwell), there’s not a lot of cost associated with it, and you can gain a certain amount of political advantage,” Alper said. “Overall, I’m not so sure it’s all that good for Canada/U.S. trade relations because we are so interdependent.”