The push for a tax on cargo from Canada and Mexico was excluded from the new Water Resources Reform and Development Act, signed into law Tuesday by U.S. President Barack Obama.
"(This) would have been a massive tax grab and a massive congestion problem," Canadian ambassador Gary Doer said in an interview before the bill was signed.
"This would have been a real blow to Canadian ports, and real congestion points at our borders."
The final legislation doesn't include the proposed 0.125 per cent tax, which would have been collected by U.S. Customs on all cargo carried into the U.S. via Canadian ports.
The bill negotiated between the two houses of Congress does address some of the complaints from Washington state lawmakers, who say their ports are currently disadvantaged by the American tax system.
They say it's unfair that certain ports have been forced to put disproportionately high sums into a national harbour maintenance fund, making them less competitive against Canadian ones.
The new law offers $25 million to certain ports, like those in Seattle and Tacoma, that are net contributors to the fund. Other provisions include authorizing 34 new Army Corps of Engineers projects.
The Canadian government had feared that the sweeping, 10-year funding plan would incorporate the tax idea. Washington state Democrats in the Senate and House of Representatives had proposed such a levy in similar bills.
But the Canadians argued that their ports are gobbling up business from Asia because of faster maritime routes and fast-expanding infrastructure.
In a recent U.S. speech, Transport Minister Lisa Raitt even hinted at the possibility of trade retaliation.
The idea of a tax isn't completely dead, but without the help of a larger piece of legislation, it's likely to falter, as it has in the past, Doer said.
"We've defeated it three times now — three attempts," he said. "But this was a really important one — because it had both (Washington state) senators proposing it. And it did not pass."