It's not easy being a small U.S. exporter these days. Not only are American goods getting snubbed abroad as the value of the dollar soars, but a $1-billion-a-year tax affecting exports that was ruled unconstitutional after more than three years of wrangling is threatening to creep in again through the back door.

The brouhaha concerns the 1987 Harbor Maintenance Tax on exports, which funded harbor dredging. The Supreme Court struck it down in March, and it promised refunds of back levies. But getting the money hasn't been easy. The court said exporters have to sue the government to get their refunds.

But at least the export tax was dead and buried, right? Not quite. According to the Office of Management & Budget, the Clinton Administration plans to ask Congress for a new fee to raise dredging and harbor development funds that exporters say will also be passed on to them. The old rule, which taxed goods on the basis of their value, was abrogated because U.S. law forbids taxing exports. The Administration's planned tax would fall instead on ship owners, based on the size of their vessels. Most likely, those costs would be passed on to their export customers in the form of higher freight rates. That's fair, says the government. The Administration says shippers who reap the benefits of American ports ought to shoulder the costs of keeping them safe and reliable.

"The U.S. government has invented a new way of collecting that money, only with a new name," says Werner Knoop, executive vice-president for UTC Overseas in New York, a freight-forwarding company.

Critics of the old law and the new incarnation say funds for harbor maintenance should come out of general revenue, not any sort of user fee, since exports benefit the entire economy. Moreover, not all U.S. harbors need dredging, they argue, so why should shippers in all ports be affected? In fact, an Administration memo confirms that the government has been spending only about half of what it collects on dredging each year.

What about a refund for taxes collected under the old law? Good luck. The statute of limitations means exporters can claim refunds only for the last 2 of the 10 years the tax has been collected. Moreover, though a refund is virtually guaranteed if a company files suit, the legal costs may outweigh the value of the refund, especially for small companies, many of which may not even know they have the right to the money.

"The guy who paid $1 million in the last two years is in a position to hire a lawyer. The guy who has paid $2,000 in the last two years, really isn't," says Michael E. Roll, a customs and international trade lawyer for Katten, Muchin & Zavis in Chicago. "The little guys are the ones being hurt by this." So far, only 7,000 suits have been filed out of 100,000 U.S. exporters, though not all of them ship by ocean. Still, that could mean plenty of small- to medium-size businesses have refunds coming. Given the bleak future for U.S exports, it may be the biggest source of revenue exporters will see for some time.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

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