We commend the Administration for taking steps to close the land border loophole which poses a threat to the U.S. economy and maritime interests. Section 6 of the President’s April 2025 Executive Order on Restoring America’s Maritime Dominance seeks to protect U.S. jobs and revitalize the U.S. maritime industry by closing tax loopholes that Canada and Mexico have been using to redirect supply chains away from U.S. ports. Implementing Section 6 would go a long way to promote U.S. interests while ensuring a level playing field for U.S. ports.
The situation today is urgent as new Canadian and Mexican port development projects are planned, and these projects could result in the closure of port terminals in the U.S. Implementation of Section 6 would eliminate the artificial cost advantage that is undermining our economy and helping to justify these projects.
Ports in Canada have been capturing market share at our nation’s expense for almost two decades. They have leveraged substantial government-provided investment to build infrastructure to handle U.S. cargo and have built twice the port capacity necessary to serve the Canadian domestic market. Importantly, Canada has also benefited from loopholes in U.S. tax law to offer a lower cost alternative to U.S. shippers: Cargo shipped through ports in Canada and Mexico and then into the U.S. over land borders can avoid taxes assessed at U.S. ports, including the Harbor Maintenance Tax (HMT).
In addition to the loss of revenues into the trust funds that support the maritime industry, this land border loophole also has been financially significant enough to drive shippers to avoid U.S. ports. In 2012 the Federal Maritime Commission (FMC) undertook a study on the role of the HMT in the diversion of U.S. cargo to non-U.S. ports. The FMC found that if Canada’s HMT advantage were eliminated, up to half of the U.S.-bound containers coming into Canada’s West Coast ports might revert to using U.S. ports. The same dynamic applies to Mexican ports, which also have been increasingly attracting cargo that otherwise would go through U.S. ports.
We applaud the Administration for recognizing this threat and taking steps to counteract it through the Restoring America’s Maritime Dominance Executive Order as well as for its robust maritime agenda. We look forward to implementation of Section 6 to fully close the land border loophole; doing so will staunch the bleeding of maritime jobs to Canada and Mexico and create new employment opportunities for U.S. longshore workers, truck drivers and others and provide the U.S. maritime industry a much-needed boost.
Max Vekich and Laura DiBella are Commissioners with the U.S. Federal Maritime Commission. The thoughts and comments expressed herein are their own and do not necessarily represent the position of the Commission.