Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Proposed Goods Movement Tax Increase

H.R. 2355 has been introduced with the goal of raising funding to support infrastructure projects. By its terms, the bill provides that states will be given yearly grants from the funds raised in proportion to their contribution to the fund. The funding will be administered by the state-level Department of Transportation. The federal program will be administered by the U.S. Secretary of Transportation. Once funding is granted to a state, the formula for distribution is 90% for goods-movement projects, 7% for environmental projects, and 3% for homeland security projects. To be eligible, the project may be as much as 40 miles from the port of entry.

In addition to the geographic distance, the eligibility criteria include that the project must promote definable goals related to improving highway, rail and port goods movement, mitigate environmental damage to air, water and soil caused by goods movement, and promote the use of clean trucks or diesel replacement, plus improve cargo inspection, screening and security training for workers. Regional and state transportation organizations are to be included in the project-selection process. There is also a waiver provision allowing a project to be as much as 150 miles from a port of entry provided the site is located within the goods-movement chain.

The proposal also mandates the federal share of the cost of a project "shall be" 90%. However, rather than mandate a priority for the selection of projects or the expenditure of federal funds, these factors are left to the states to decide. At the same time, the grant authority to the Secretary of Transportation ends on October 1, 2019. 71.43% of the Harbor Maintenance Tax (HMT) collected will go into the newly authorized National Goods Movement Improvement Fund. The provisions for the HMT are then amended to provide that the tax applies to all cargo coming through any land or sea port of entry. The current rate is 0.125% and is substantially raised by this proposal. For ocean-going cargo, the HMT is increased to 0.4375% and is imposed at time of unloading. For land shipment, those transiting through Canada and Mexico, where there is currently no such fee, the HMT is set at 0.3215% and is imposed at time of entry. Goods originating in Canada or Mexico are exempt in order to comply with Mexico. At the same time, the Secretary may reduce the amount of the tax if the state or local government collects fees for goods-movement improvement.

Leaving aside the concern that, if enacted, the formulas and other limitations could be changed by a later act of Congress, there is no methodology for ensuring all interested parties are brought together to seek common agreement as to priorities and funding goals. There is also some discussion about transferring the funding mechanism from yearly appropriations by Congress to direct funding by the Army Corp of Engineers. If that were to happen, it is not at all clear how civilian oversight would work. Another concern is the added cost of doing business these charges represent. Assuming this increase in assessment and expansion to land ports of entry is a good idea, should there be a limit on a per-entry basis to the amount of HMT collected, in much the same way there is a cap on the merchandise processing fee?

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