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California SB 974: Proposed Port Container Fee

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  • Pacific Merchant Marine Council, NLUS
    Please contact me if you care to discuss SB 974 or other legislation affecting the maritime industry. The PMMC will approach state legislation from the point
    Message 1 of 1 , Dec 17, 2007
      Please contact me if you care to discuss SB 974 or other legislation affecting the maritime industry.
      The PMMC will approach state legislation from the point of view of support for US flag Merchant Marine and allied maritime industries.
      California SB 974 will be on the 2008 legislative agenda; we intend to be ready when it again surfaces in committee.
      Proposed Port Container Fee Nears Approval

      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.

      California Chamber of Commerce


      CalChamber-Opposed ‘Job Killer’ Stalled Until Next Year

      (September 11, 2007) Following strong opposition from the California Chamber of Commerce, the business community and business-friendly legislators, the author of a “job killer” bill that would have assessed an illegal tax on containerized cargo coming through the state’s three largest ports postponed action on the proposal until next year.

      SB 974 (Lowenthal; D-Long Beach) increases the cost of shipping goods and makes California less competitive by imposing an illegal per-container tax in the ports of Long Beach, Los Angeles and Oakland.

      Faced with a veto threat, Senator Alan Lowenthal joined the office of Governor Arnold Schwarzenegger in issuing a joint statement announcing their intent to work together to craft a bill that would address the infrastructure and environmental needs created by California’s ports.

      “The CalChamber supports the joint decision by Governor Schwarzenegger and Senator Lowenthal to turn SB 974 into a two-year bill and take a collaborative approach toward solving the infrastructure and environmental challenges in and around California’s major ports,” said Jason Schmelzer, CalChamber policy advocate. “Interested parties agree that infrastructure in and around the ports needs improvement in order for California to maintain its status as the gateway to the global economy. While the CalChamber remains opposed to the container tax as crafted in SB 974, we firmly believe that it is possible to develop an alternative that achieves our common goals and continues to grow California’s economy.”

      The CalChamber believes SB 974 is imposing an illegal tax because it would pay for infrastructure that also is used by citizens in the course of their normal lives, as well as other trucks and trains in the course of intrastate commerce. A fee is defined as benefiting those who pay the fee, which is not the case in SB 974.

      Problems with SB 974

      Among its many problems, SB 974 threatens to:

      • Put port economic benefits at risk; 
      • Divert cargo; 
      • Hurt the state’s agricultural industry; 
      • Make California’s manufacturing industry less competitive; 
      • Compromise recycling; 
      • Enact an illegal tax; 
      • Violate the commerce clause; 
      • Violate numerous trade agreements; 
      • Prompt litigation; and 
      • Freeze private investment in port infrastructure.

      Other Solutions Exist

      The claimed purpose of this bill is to finance infrastructure improvements and environmental mitigation projects. Despite suggestions to the contrary, acceptable alternatives to this illegal solution do exist:

      • Ports are financed with billions of dollars in private sector investments, paid for mostly through revenue bonds financed by port terminal operators and others through true user fees. California ports are carrying close to $3.5 billion in revenue bonds for maritime infrastructure improvements, and these funds continue to be spent on updating and building new roads, rail capacity and a variety of other projects. 
      • In addition, public-private partnerships offer a viable way to fund goods movement-related projects outside of the ports. In principle, a public-private partnership must provide real and tangible benefits to all who contribute funds. This concept is most applicable to individual projects because funding sources may derive varying levels of benefit from each specific project and, therefore should have varying levels of financial involvement in those projects. The one-size-fits-all approach offered by SB 974 does not constitute a true public-private partnership.

      “The CalChamber is committed to working with Governor Schwarzenegger and Senator Lowenthal on crafting a solution to address the much needed infrastructure improvements and environmental mitigation projects created by California’s growing population and economy,” Schmelzer said. “Above all, the CalChamber believes that any solution must avoid causing any unintended consequences that would have a negative impact on the sale and delivery of goods grown and manufactured in California.”

      Staff Contact: Jason Schmelzer

      See http://info.sen.ca.gov/pub/07-08/bill/sen/sb_0951-1000/sb_974_bill_20070524_amended_sen_v96.html for a copy of the bill and current status.


      1. ... issued a press release revealing the fate of SB 974, the Clean Port Bill. ... offer to work together and make SB 974 a reality," stated Lowenthal. ...
        www.ecovote.org/blog/?p=187 - 24k - Cached
      2. LEGISLATIVE COUNSEL'S DIGEST SB 974, as amended, Lowenthal. ... of the fee to the Southern California Port Congestion Relief Trust Fund, which ...
        info.sen.ca.gov/pub/.../sb_974_bill_ 20070524_amended_sen_v96.html - 51k - Cached
      3. SB 974 will place a nominal $30 fee on each shipping container entering the ... Bill status and text from the California Legislature ...
        www.ecovote.org/ports - 12k - Cached
      4. SB 974 provides a funding mechanism to. allow the ports of Los Angeles, Long Beach, ... Allocate half of the fee to the California. Transportation Commission for ...
        dist27.casen.govoffice.com/vertical/ Sites/... - 25k - View as html
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        SB 974 Support. Alameda Corridor-East. American Academy of Pediatrics, California Division ... SB 974 Support. Parents for a Safer Environment. Parents for ...
        apps.mtc.ca.gov/meeting_packet_ documents/agenda_897/SB974AttA.doc - 40k - View as html
      6. ... with their strong support of SB 974 (Lowenthal) which will charge freight ... already know, the policy proposed by SB 974 is supported by a strong majority of ...
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      7. I want to search again. Documents associated with SB 974 in the Session. Status ... Home Senators Legislation Committees Schedules Offices/Caucuses Audio ...
        info.sen.ca.gov/cgi-bin/postquery?bill_ number=sb_974&...&site=sen - 12k - Cached
      8. ... work with Senator Lowenthal, author of SB 974, which would have imposed $30 fee ... I accept the Governor's offer to work together and make SB 974 a reality. ...
        www.californiaprogressreport.com/2007/ 09/cleaning_up_air.html - 37k - Cached
      9. SB 974: California Port Pollution Reduction bill ... SB 974 levies a small fee on these cargo containers to clean up some of the ...
        www.ucsusa.org/clean_california/ California_Legislative_Update.html - 47k - Cached
      10. Click here to take action on SB 974 " ... The tax imposed by SB 974 would further inhibit the ability of manufacturers to ...
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        1. SB 974 (Lowenthal) proposes a tax on container cargo moving through ... when in fact, under the California Constitution, it is a tax that is subject to a ...
          www.caltax.org/ContainerTax-SB974.pdf - 97k - View as html
        2. The members of the California Assembly welcome your input on their bills. ... All you need to do is enter your comments - support, opposition, ideas for ...
          www.assembly.ca.gov/acs/ acsframeset2text.htm - 11k - Cached
        3. ... exports, California Chamber of Commerce, Waterfront Coalition, SB 974, Senator ... consider filing suit against California in federal court if SB 974 becomes law. ...
          www.caltradereport.com/eWebPages/front- page-1189139807.html - 38k - Cached
        4. ... strong opposition from the California Chamber of Commerce, the business ... Schwarzenegger and Senator Lowenthal to turn SB 974 into a two-year bill and ...
          www.calchamber.com/CC/Headlines/ InfrastructureEducation/09112007TS.htm - 29k - Cached
        5. The controversial bill (SB 974) that would have imposed a $30 per twenty foot ... SB 974, which was approved by California Senate's Appropriation Committee in ...
          www.djacobsonlaw.com/2007/09/california- container-fee-proposal.html - 37k - Cached
        6. A California Chamber of Commerce-opposed "job killer" bill that assesses an ... The CalChamber believes SB 974 is imposing an illegal tax because it would pay ...
          www.calchamber.com/alert/alert_71307- 3.htm - 9k - Cached
        7. In the case of SB 974 we'll expect to see that happen in the coming ... SB 974 was deemed a "job killer" by the California Chamber of Commerce, a ...
          www.californiaprogressreport.com/2007/ 09/air_pollution_f.html - 37k - Cached
        8. intent of SB 974 is clearly not to hurt California's farmers, the results are ... Now, on top of these cost pressures, SB 974 would ...
          www.apparelandfootwear.org/letters/ californiaportfeeltr070510.pdf - 116k - View as html
        9. ... Investment Bill - SB 974! Invest in a Strong Future for California ... California Nurses Association. SB 974 (Lowenthal) The Clean Ports Investment Bill ...
          www.coalitionforcleanair.org/pdf/ factsheets/SB-974-Fact-Sheet-New.pdf - 460k - View as html
        10. Informational hearing on SB 974. Sacramento, California. May 22, 2007. 1 ... SB 974 would impose a $60 tax on the cargo that moves through the ports of Los ...
          www.lachamber.org/Lanier Testimony.pdf - 42k - View as html
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