Financing Port Dredging Costs: Taxes Versus User Fees (Notes and Comments‪)‬

Ships, particularly containerships, continue to grow in size. Containerships exceeding 9,000 twenty-foot-equivalent units (TEUs) in size are now entering some trades, and containerships up to 18,000 TEUs are in the planning stages. One consequence of larger containerships is the burden that they place on ports, e.g., port channels often have to be dredged deeper. How should port dredging be financed? Should a tax be used? If a user fee is used, should shipping lines whose ships use the channel pay this fee? Should the user fee be a national user fee (the same at all ports of a nation) or a port-specific user fee? How should the user fee be assessed, e.g., based upon ship size, type and amount of cargo loaded and unloaded while in port, or time in port per call? This article discusses tax and user fee programs for financing port dredging costs. By doing so, it provides background information for addressing the above questions. The next section discusses the U.S. tax and proposed Clinton Administration national user fee programs for financing port dredging costs. Then, a port-specific user dredging fee model is presented, followed by a discussion of implementing port-specific user dredging fees. The next sections discuss external benefits and vessel cargo in financing port dredging costs. Finally, a summary of the discussion is presented.