The five-member Federal Maritime Commission voted 3-2 on Tuesday in favour of the critical report, which carries findings that also purportedly raise concerns about Canadian security measures at ports.
The report will soon be delivered to U.S. legislators. Congress asked the non-partisan agency last year to probe allegations about Canada's port practices after complaints by two Washington state senators.
Canadian stakeholders are crying foul over the report. Those familiar with the inquiry say the findings don't jibe with the submissions sent to the non-partisan agency from experts and port authorities on both sides of the border.
Commissioners received more than 75 responses after asking interested parties if Canada was diverting cargo away from U.S. ports.
The bulk of those responses came from American experts, and the overwhelming majority of them indicated Canada wasn't doing anything underhanded, Robin Silvester, president and CEO of the Vancouver port authority, said in an interview Tuesday.
The report has caused uncharacteristic dissent among the commissioners. Their vote on Tuesday went down party lines, an unusual phenomenon at the agency.
Three of the commissioners, including chairman Richard Lidinsky, voted in favour of the report, sources say, while two others cast their ballots against it. Those in favour are Democrats; those opposed are Republicans.
Lidinsky is an Obama appointee.
Rebecca Dye, meantime, a Republican commissioner, said publicly last month that the Canadian government and other officials told the agency that in a 10-year period, only 2.5 per cent of U.S.-bound cargo was imported via Canadian ports.
Even though the commission has no authority over Congress, it could shape the opinions of the lawmakers who do have clout and may seize upon the issue with just four months before the presidential election.
The commission's findings are also expected to cause tension in the Canada-U.S. relationship. It's a curious development in the wake of bilateral co-operation on trade and border issues between the Obama administration and Canada under the Beyond the Border initiative.
Silvester says he's read a large number of the submissions, adding he's befuddled by the turn of events.
"It's disappointing and perplexing, and it doesn't seem to be backed up by the submissions provided to the commission," he said.
What's more, Silvester said, he's heard the report raises concerns about security measures at Canadian ports, a bizarre allegation considering Canada and the U.S. are currently working together under Beyond the Border to tighten and harmonize security measures at ports.
"You could make a very fair case that containers entering the U.S. from Canada are the most secure, rather than the least," he said.
"Every container that comes into Canada undergoes radiation screening, and then when they cross into the United States, they're screened again as a further security measure. That doesn't happen with containers entering the U.S. from other countries."
The matter has been a simmering trade irritant between the U.S. and Canada ever since Sens. Patty Murray and Maria Cantwell complained that Canadians were unfairly subsidizing the diversion of cargo ships away from American competitors, particularly in Prince Rupert, B.C.
The senators urged the commission to launch the inquiry last fall. They soon had the support of several lawmakers in the House of Representatives.
In their letter to the agency, the senators pointed out that the U.S. Harbor Maintenance Tax is not collected at border crossings when cargo enters the country on trains from Canada after arriving in North America via Canadian ports. They suggested it should be.
The American tax is levied, in part, to cover the cost of dredging port channels on the American West Coast.
Dredging isn't necessary in Prince Rupert's deep channels, while Vancouver requires only minimal dredging. Instead of a tax, Canada charges importers a user fee that goes toward port maintenance.
The senators' complaints prompted some American lawmakers to mull over a US$140-per-container levy on cargo entering the United States after coming through B.C. ports.
Canadian opponents say such a levy amounts to a punishing tariff on every container entering the United States from B.C. ports.
Lidinsky suggested last year that he was sympathetic to the concerns of American port authorities.
While Canadian and Mexican ports are free to compete with their U.S. counterparts for cargo, he said, "they should do so on a playing field that is not artificially tilted by governments' policies."
The growing popularity of Prince Rupert is at the heart of the debate. The $170-million port opened five years ago with $60 million in subsidies from both the B.C. and federal governments.
Both Prince Rupert and Vancouver have several advantages over American West Coast ports — in particular, cargo ships travelling from China arrive several days earlier at the Canadian ports because of what's known as the Great Circle Route across the Pacific Ocean.
Prince Rupert also has the lowest rail grade to U.S. centres such as Chicago and Memphis, and its terminals are not burdened by urban congestion.
The commission is expected to make the report public on Friday.
David Jacobson, U.S. ambassador to Canada, and Ron Kirk, the U.S. Trade Representative, will then once again have to soothe Canadians alarmed by yet another apparent rise of American protectionism.
"They're going to have to assure Canadians that this agency doesn't have any actual authority, that the report is not an expression of U.S. policy, but Canadians are going to be angry nonetheless," a diplomatic source said.
"It sends the wrong message."
"Against the backdrop of Beyond the Border ... it flies completely in the face of the history of the Canada-U.S. trade relationship, the current status of the relationship and the future direction of the relationship as envisioned the president of the United States and the prime minister of Canada."
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