Harbor maintenance fee

What Is Harbor Maintenance Fee?

The Harbor maintenance fee (HMF) is a federal charge levied on the value of commercial cargo moving through U.S. ports, primarily intended to fund the maintenance and development of these critical waterways. Administered by U.S. Customs and Border Protection (CBP), this fee is a component of Taxation & Trade policies designed to ensure the nation's port infrastructure remains operational and efficient. The HMF applies to imported goods, domestic shipments, and goods admitted into Foreign-Trade Zones (FTZs). Its purpose is to require those who benefit from the nation's harbors to share in the cost of their upkeep.⁹⁸, ⁹⁹, ¹⁰⁰, ¹⁰¹, ¹⁰², ¹⁰³, ¹⁰⁴

History and Origin

The Harbor maintenance fee was established under the Water Resources Development Act of 1986, becoming effective on April 1, 1987.⁹³, ⁹⁴, ⁹⁵, ⁹⁶, ⁹⁷ The primary intent behind its creation was to provide a dedicated and reliable funding source for the operation and maintenance activities conducted by the U.S. Army Corps of Engineers (USACE) in federal ports and navigation channels, particularly for dredging to maintain necessary depths.⁸⁷, ⁸⁸, ⁸⁹, ⁹⁰, ⁹¹, ⁹²

Initially, the fee was assessed on imports, exports, and domestic shipments. However, a significant legal challenge arose concerning the application of the HMF to exports. On March 31, 1998, the U.S. Supreme Court, in United States v. United States Shoe Corp., ruled that the Harbor maintenance fee, as applied to exports, was unconstitutional. The Court determined that the fee functioned as a tax rather than a user fee, violating the Export Clause of the U.S. Constitution, which prohibits taxes or duties on articles exported from any state.⁸¹, ⁸², ⁸³, ⁸⁴, ⁸⁵, ⁸⁶ As a result of this landmark decision, the HMF is no longer collected on exports, focusing solely on imports, domestic shipments, and Foreign-Trade Zone admissions.⁷⁹, ⁸⁰

Key Takeaways

• The Harbor maintenance fee is a federal charge on the value of commercial cargo primarily imported into U.S. ports.
• It is assessed at a rate of 0.125% of the cargo's declared value.⁷⁶, ⁷⁷, ⁷⁸
• Funds collected from the HMF are deposited into the Harbor Maintenance Trust Fund (HMTF) to finance port and harbor maintenance projects.⁷², ⁷³, ⁷⁴, ⁷⁵
• The fee does not apply to exports due to a 1998 Supreme Court ruling, nor does it apply to cargo transported by air.⁶⁹, ⁷⁰, ⁷¹
• The HMF contributes to the operational efficiency and safety of U.S. maritime logistics.

Formula and Calculation

The calculation of the Harbor maintenance fee is straightforward, based on the ad valorem principle (meaning "according to value"). The fee is a fixed percentage of the commercial cargo's declared value.⁶⁶, ⁶⁷, ⁶⁸

The formula is:

Where:

• Cargo Value represents the total value of the commercial goods being imported, as declared on the commercial invoice.⁶⁴, ⁶⁵
• 0.00125 (or 0.125%) is the current assessment rate.⁶², ⁶³

There is no minimum or maximum limit to the HMF amount, meaning it scales directly with the value of the shipment.⁵⁹, ⁶⁰, ⁶¹

Interpreting the Harbor Maintenance Fee

The Harbor maintenance fee is a direct cost incurred by importers and domestic shippers utilizing U.S. ports. Its primary interpretation is as a user fee designed to support the infrastructure that facilitates global trade. For businesses involved in importing, understanding this fee is crucial for accurate cost accounting and pricing strategies. It directly impacts landed costs, which include all expenses associated with getting a product from its point of origin to its destination. The HMF ensures that funds are available for continuous dredging and repair of port facilities, which are essential for maintaining navigable waterways and supporting the smooth flow of goods.⁵⁶, ⁵⁷, ⁵⁸ The fee's existence underscores the economic importance of robust port infrastructure to overall national economic activity.

Hypothetical Example

Consider "Global Gadgets Inc.," a U.S. company importing a shipment of consumer electronics from Asia. The commercial cargo has a declared value of $$500,000. The shipment arrives via ocean freight at the Port of Los Angeles.

To calculate the Harbor maintenance fee:

Global Gadgets Inc. would pay a Harbor maintenance fee of $$625 to U.S. Customs and Border Protection for this shipment, in addition to any applicable customs duties or other import charges. This fee directly contributes to the maintenance of the port facilities that handled their valuable cargo.

Practical Applications

The Harbor maintenance fee has several practical applications within the realm of global trade agreements and supply chain management.

• Funding Port Infrastructure: The most direct application is the funding it provides for the U.S. Army Corps of Engineers' critical work in maintaining port depths and facilities through dredging and repairs. This ensures that large vessels can safely access U.S. ports, which is vital for international logistics and commerce.⁵¹, ⁵², ⁵³, ⁵⁴, ⁵⁵
• Importer Cost Management: For importers, the HMF is a regular, albeit often small, component of their total shipping costs. Businesses must factor this fee into their financial planning and pricing models for imported goods.
• Domestic Shipping: The fee also applies to domestic shipments moving between U.S. ports, ensuring that all users of federally maintained waterways contribute to their upkeep.⁴⁸, ⁴⁹, ⁵⁰
• Trade Facilitation: By contributing to well-maintained harbors, the Harbor maintenance fee indirectly supports trade facilitation, reducing potential delays and ensuring that commercial cargo can move efficiently through U.S. gateways.

The funds collected are deposited into the Harbor Maintenance Trust Fund (HMTF), from which Congress appropriates amounts for harbor maintenance and development projects.⁴⁶, ⁴⁷ According to the U.S. Army Corps of Engineers, these funds are used to recover 100 percent of their eligible operations and maintenance expenditures for commercial navigation.⁴⁵

Limitations and Criticisms

Despite its intended purpose, the Harbor maintenance fee has faced several criticisms and limitations:

• Unspent Funds: Historically, a significant issue has been the substantial surplus of collected HMF revenues in the Harbor Maintenance Trust Fund (HMTF) that often went unspent. Critics argue that these funds, intended for dredging and port maintenance, were not fully utilized for their designated purpose, leading to under-maintained ports despite adequate collections.⁴⁰, ⁴¹, ⁴², ⁴³, ⁴⁴ Legislative efforts, such as provisions in the Water Resources Reform and Development Act (WRRDA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, have aimed to ensure better utilization of these funds.³⁷, ³⁸, ³⁹
• Equity and Distribution Concerns: There have been debates regarding the equitable distribution of HMTF funds, with some ports contributing more revenue than they receive in maintenance funding. This creates a "donor port" scenario, where high-volume ports subsidize maintenance at lower-volume ports.³⁴, ³⁵, ³⁶
• International Trade Compliance: The exemption of exports from the Harbor maintenance fee (following the United States v. United States Shoe Corp. Supreme Court ruling³², ³³) has raised concerns about compliance with international trade agreements, specifically the General Agreement on Tariffs and Trade (GATT). Some argue that levying the fee only on imports while exempting exports creates an imbalance and may violate GATT principles that fees should be limited to the cost of services rendered and not serve as indirect protection for domestic products.³¹

These limitations highlight ongoing challenges in aligning the fee's collection with its expenditure and ensuring fairness across the maritime industry.

Harbor maintenance fee vs. Merchandise Processing Fee

The Harbor maintenance fee (HMF) and the Merchandise Processing Fee (MPF) are both federal fees collected by U.S. Customs and Border Protection (CBP) on shipments entering the U.S., but they differ significantly in their application and purpose.

While both are charges incurred during the import process, the Harbor maintenance fee is directly tied to the physical infrastructure of ports, whereas the Merchandise Processing Fee covers the administrative costs of processing international trade entries.¹⁴, ¹⁵, ¹⁶

FAQs

1. Is the Harbor maintenance fee a tax or a user fee?

Legally, for imports and domestic shipments, it functions as a user fee intended to fund the maintenance of ports and harbors. However, as applied to exports, the U.S. Supreme Court ruled it was an unconstitutional tax due to its ad valorem nature, leading to its discontinuance for exports.¹¹, ¹², ¹³

2. Are there any minimum or maximum limits for the Harbor maintenance fee?

No, the Harbor maintenance fee is calculated purely as 0.125% of the commercial cargo's declared value, with no minimum or maximum amount imposed by U.S. Customs and Border Protection.⁹, ¹⁰

3. How often is the Harbor maintenance fee paid?

For most imported goods and domestic shipments, the fee is paid at the time of entry, similar to customs duties. For goods admitted into Foreign-Trade Zones, the fee is typically remitted quarterly.⁸

4. Does the Harbor maintenance fee apply to air cargo?

No, the Harbor maintenance fee applies only to commercial cargo shipped via ocean freight and handled at a U.S. port. Shipments arriving by air, rail, or truck are not subject to the HMF.⁵, ⁶, ⁷

5. What happens to the money collected from the Harbor maintenance fee?

The funds collected are deposited into the Harbor Maintenance Trust Fund (HMTF). This fund is then used by Congress to appropriate money for projects related to harbor maintenance and development, primarily conducted by the U.S. Army Corps of Engineers, such as dredging operations and infrastructure upgrades.¹, ², ³, ⁴