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Legislator claims mandated charge would have ''miminal or no impact'' on cargo movement

SACRAMENTO – 09/07/07 – The California State Assembly’s Appropriations Committee has recommended passage of a controversial piece of legislation levying fees on all full containers moving through the ports of Los Angeles, Long Beach, and Oakland to pay for programs to relieve traffic congestion and air pollution.

The law would mandate a $60 fee on every 40-foot container (FEU) and a $30 tariff on every 20-foot container (TEU) moving through the three ports' container terminals. 

The Assembly committee amended the bill – SB 974 – which now goes to the full Assembly, to allow a local panel of officials to decide how to spend the 50% of the revenues that would go to traffic congestion relief. The remaining monies would be split between pollution mitigation and improvements to rail infrastructure.

The bill was originally introduced by State Senator Alan Lowenthal (D-Long Beach) in June and passed by the Senate. Two months earlier, the bill was passed by both the California Senate Transportation and Senate Environment Committees.

According to a statement issued by Lowenthal’s office, the fee would have “minimal or no impact” on the ports, “especially when growth projections are considered.”

The potential cost to consumers, it said, “is also minimal with an estimated price increase on goods is one to two cents.”

Several major trade groups including the California Chamber of Commerce (CCOC) and the Waterfront Coalition have come out strongly against the bill, which, the Chamber says, is illegal and “the equivalent of at least a $500 million per year tax” on California business.

According to the Chamber, the bill is illegal because the tax revenues generated would be used to pay for infrastructure used by people other than those financing it.

That, the group says, “makes the cargo “fee” in fact a tax, which must be approved by a two-thirds vote of the Legislature.”

In addition, the Sacramento-based trade group says, the bill violates the Commerce Clause of the US Constitution which states that a statute cannot facially discriminate against foreign and interstate commerce.

“Each container that moves through the ports of Long Beach, Los Angeles and Oakland is always in the stream of interstate or foreign commerce – never of intrastate commerce,” it said.

The Chamber’s position was underscored by the Waterfront Coalition, a Washington, DC-headquartered industry group comprised of importers, exporters, and logistics service providers which issued a position paper on the bill in March asserting that “fees of this kind are unconstitutional on several grounds.”

California, the group said, “would have a very difficult time defending the fee if a case were filed in federal court, alluding to a resolution passed by Hawaii's state legislature directing the state’s attorney general to consider filing suit against California in federal court if SB 974 becomes law.

The move "was driven by Hawaii’s almost total dependence on containerized commerce moving through California terminals," it said.

If the bill is eventually signed by the governor, the CCOC added, it “would create additional costs for imports and exports through these ports…and likely lead shippers moving their goods through competing ports instead.”

California’s ports, it added, “are already are more expensive than the competitors. SB 974 would cost the average ship an additional $480,000 to transport a full load in and out of these ports.”

SB 974 “would violate a number of international trade agreements, which could result in an international dispute at the World Trade Organization,” the group said.

“Containers are simply instruments of trade under the International Convention on Containers, and ‘taxes, fees and other charges’ are prohibited.”

While the bill states that revenue collected will meet goods movement transportation and environmental needs in the state, “no state agency has detailed specific projects or their cost,” the Coalition said.

Revenues generated by the fee “could very well grossly exceed the true costs of completing these projects. Shippers should be concerned that these fees could last in perpetuity and pay for other unfunded state initiatives well beyond the scope of moving freight.”

The bill, it said, “would not release any collected funds in southern California until emissions reductions targets established by the ports of Los Angeles and Long Beach are achieved - by 2010.”

In 2006, Governor Arnold Schwarzenegger vetoed similar legislation, SB 927, which was also introduced by Sen. Lowenthal.

Giving his reasons for vetoing that bill, the governor said, “It is very important that any measure that increases fees that impact exporters not have the unintended consequences of negatively impacting the sale and delivery of goods grown and manufactured in California.”

At the same time it approved the bill, the Appropriations Committee rejected an amendment sought by Los Angeles Mayor Antonio Villaraigosa that would have allowed some of the money to be spent on the replacement of two large bridges at the Port of Los Angeles.

The ports of Los Angeles, Long Beach, and Oakland rank, respectively, as the first, second, and fifth busiest container ports in the country.

Last year alone, the ports of Los Angeles and Long Beach handled 41% of the country's total containerized imports.

Telephone calls to both Sen. Lowenthal’s office and the office of the Senate Appropriations Committee for comment on the positions of the CCOC and the Waterfront Coalition, as well as amplification of components of the bill, went unanswered or were not responded to.

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