US Harbor Maintenance Tax Loophole Closure Targets Canadian Port Advantage

The Trump administration’s move to close the decades-old Harbor Maintenance Tax loophole threatens to reshape the competitive dynamics between US and Canadian container gateways, though the impact on Prince Rupert’s recent volume surge remains uncertain. Under Executive Order 14629, signed in April 2025 as part of the “Restoring America’s Maritime Dominance” initiative, the Department of Homeland Security must enforce collection of the Harbor Maintenance Fee on all foreign-origin cargo entering the US — including goods offloaded at Canadian and Mexican ports and transported overland. The order adds a 10% service fee for inland customs clearance, eliminating the cost advantage that has drawn some shippers to Canadian gateways. The timing puts the enforcement squarely at odds with Prince Rupert’s strongest performance in years. Container volumes at DP World’s Fairview Container Terminal rose 20% in 2025 to 885,797 teu, according to the Prince Rupert Port Authority, contributing to the port’s overall throughput of 26.3 million tonnes — a 14% year-on-year increase. The growth came despite CN’s warnings throughout 2025 of economic uncertainty stemming from the broader tariff environment, which prompted the railway to cut capital spending by US$600m for 2026 and shed management positions. The loophole has been a point of contention since the 1980s, when the Harbor Maintenance Tax was established to fund US port dredging. At 0.125% of cargo value, the tax adds between US$84 and US$137 per forty-foot container on typical shipments, with higher-value goods facing steeper charges. Canadian ports, which fund their own harbour maintenance without equivalent federal levies, have offered shippers a way around the fee by discharging cargo for onward rail or truck transit to US markets. Prince Rupert’s competitive position rests on more than tax avoidance. The port’s location on the Pacific Great Circle route puts it two to three days closer to North Asian origins than US West Coast alternatives, with CN’s single-line rail service to Chicago offering transit time advantages that the HMT alone never fully offset. Industry observers have consistently argued that routing decisions hinge on speed and reliability rather than the modest fee savings. Yet the enforcement comes amid broader pressure on Canadian rail-served ports. The threatened 25% tariffs on Canadian goods, though subject to ongoing negotiation, have added friction to supply chains already contending with the HMT closure. CN chief executive Tracy Robinson acknowledged “heightened risk of recession” during 2025 earnings calls, with the railway developing contingency plans for various trade scenarios while cautioning that 2026 volumes would likely remain flat. For US ports, the loophole closure could redirect some container traffic that would otherwise have moved through Canadian or Mexican gateways. Los Angeles-Long Beach and East Coast ports stand to benefit if the enforcement proves effective, though infrastructure constraints at Canadian facilities and the relatively modest share of US-bound cargo routing through Prince Rupert — roughly 7% of all North American port traffic moves through Canadian and Mexican gateways combined — suggest any volume shift will be incremental. The longer-term implications depend on how thoroughly CBP enforces the new requirements and whether shippers absorb the added costs or adjust routing strategies. Prince Rupert’s infrastructure investments, including the C$1.46bn Ridley Island Energy Export Facility and CN’s Zanardi Rapids Bridge expansion due for completion in 2027, signal the port is positioning for sustained growth regardless of the regulatory shift.

Sources: White House Fact Sheet (April 9, 2025) Prince Rupert Port Authority Container News The Globe and Mail FreightWaves