California Apparel News

If you want to see people get really angry, talk about charging a fee for anything they do.

That’s what’s happening with a state bill that would charge $60 on every 40-foot container and $20 on every 20-foot container that comes in to or goes out of the twin ports of Los Angeles and Long Beach, the largest port complex in the United States. Lawsuits are already being threatened.

The bill, SB927, was approved by the Legislature at the end of August and is sitting on Gov. Arnold Schwarzenegger’s desk. He has until Sept. 30 to give it a thumbs up or a thumbs down.

Lobbying efforts are in full swing, with business and trade groups stacked up against the bill.

“We are hoping against hope that it gets passed, but [Schwarzenegger] is getting so much pressure from both sides,” said Meegan Murray, a legislative aide in Sen. Alan Lowenthal’s office in Sacramento, Calif. The Long Beach Democrat is the bill’s chief backer.

The fees are expected to generate $500 million a year to be used to improve the roads and rail lines around the ports, clean up air pollution, and beef up security. The fees wouldn’t be collected until Jan. 1, 2008, while the state takes one year to figure out exactly how the money will be spent.

But no matter what their ultimate use, the fees aren’t sitting well with a host of organizations that include the California Chamber of Commerce, the Los Angeles Area Chamber of Commerce, the Long Beach Chamber of Commerce, the National Retail Federation, the Retail Industry Leaders Association, the American Apparel & Footwear Association, the California Business Properties Association, and the California Manufacturers & Technology Association.

One of the most vociferous opponents has been the Waterfront Coalition, a Washington, D.C., group that represents shippers and transportation providers such as Wal-Mart Stores Inc., Gap Inc., Mattel Inc. and The Home Depot Inc.

“We believe it is not a fee but a tax,” said Robin Lanier, executive director of the Waterfront Coalition. “The state of California cannot legally tax foreign commerce. They just can’t do it.”

Lanier is promising to spearhead an effort to file a lawsuit if the bill is passed. She noted that the AAFA, the NRF and other apparelrelated organizations would be joining the legal action. “This proposal has many legal problems with it. It runs afoul of the commerce clause of the U.S. Constitution,” Lanier noted.

She explained that the Constitution reserves the right to tax national and international commerce to the federal government, not to state governments. “This proposal also has an international legal issue,” Lanier said. “The General Agreement on Tariffs and Trade [the precursor to the World Trade Organization] prohibits imposition of taxes for the purpose of raising money. This could trigger a challenge by our trading partners.”

Los Angeles and Long Beach would be the only two ports in the state that would impose these container fees. That worries many who believe shippers might transfer their business to other West Coast ports such as Oakland, Calif., Seattle or Tacoma, Wash. Already, the Long Beach/Los Angeles port complex charges a $100 fee for every 40-foot container (and a $50 fee for 20-foot containers) picked up during weekdays. This is part of the PierPass program implemented last year to open up the ports at night and on Saturdays to clear goods at a speedier rate.

“I believe some people will take their business elsewhere. They may analyze costs down to a penny, and if it is over a certain amount, they will do X and if it is under a certain amount, they will do Y,” said Robert Krieger, president of Norman Krieger Inc., a Los Angeles customs broker and freight forwarder with many apparel clients.

John Salvo, president of Carmichael International Service, another Los Angeles customs broker and freight forwarder with a hefty number of apparel clients, said his company signed a group letter opposing the bill.

But ironically, he hasn’t had too many complaints about the fee from his importing clients. It’s his exporting clients that are up in arms. “There is a much bigger reaction from export clients because export products are generally of lower value. It’s things like recycled paper and agriculture,” Salvo said.

Indeed, the fee isn’t being seen as a huge expense by many apparel importers, which calculate that a 20-foot container holds between 10,000 and 20,000 pieces of apparel. The fee adds less than half a cent to each item.

“I think that if they use the fee for a good purpose, I am for it,” said Michael Weisberg, chief executive of Second Generation Inc., a Los Angeles young women’s apparel maker whose labels include BeBop and Fishbowl. “It’s important that the air is clean and they clean up the port.”

Neither would Trixxi, an apparel manufacturer in Vernon, Calif., be terribly affected, even though 50 percent of the company’s womenswear comes from Asia. “If it averages out to less than half a cent, it’s not even going to show up on our cost sheets,” said Bill Schlabach, the company’s chief operating officer. “I hope they use it to do something about homeland security. They should be X-raying more containers.”