By  on May 29, 2007

San Francisco — Going "green" is a priority at California ports, and retailers are being asked to help pay for it.

The ramifications for the industry may be significant because the twin ports of Los Angeles and Long Beach are the key gateway for fashion imports from all points in Asia.

Although maintaining it's all for reducing greenhouse gas emissions, a group of retailers that includes J.C. Penney, Macy's, Neiman Marcus, Limited Brands, Wal-Mart and Target is fighting two proposals it argues would unevenly burden importers of consumer goods and other cargo arriving in containers, instead of spreading costs along the supply chain. The proposals are:

-- State legislation will levy a cargo fee at the ports of Los Angeles, Long Beach and Oakland of $30 a 20-foot equivalent unit. Half the money could be dedicated to green programs at each port. Gov. Arnold Schwarzenegger, who has made fighting global warming central to his agenda, vetoed a similar bill last year, partly because he wanted more specifics on how the money would be spent.

-- A proposed Clean Trucks Program at the ports of Los Angeles-Long Beach that calls for replacing all delivery trucks that have emissions below 2007 standards. Retailers fear truck shortages and higher transportation prices of $150 a container or more.

The Clean Trucks Program is slated to be voted on by the Los Angeles-Long Beach port commissions in July. The cargo fee bill was reintroduced in late February and is expected to pass both houses of the state legislature this year.

Reducing port emissions and expanding facilities to keep pace with rapidly expanding international trade must go hand in hand, argues the author of the cargo surcharge legislation, Sen. Alan Lowenthal, a Democrat representing the 27th District in Southern California, which includes Long Beach. The ports of Los Angeles, Long Beach and Oakland are the first-, second- and fourth-busiest container ports in the country, respectively, together handling half of all imported cargo.

"It is high time that major retailers and business interests in this country realize that the public will not tolerate growth without reductions in air pollution," Lowenthal said in a statement.He also cited how voters statewide in November approved a $1 billion bond to reduce "goods movement" pollution in the state, while approving $2 billion to build new highways and other infrastructure to speed cargo from ports.

As the result of diesel pollution from California's ports, there are an estimated 2,400 deaths a year, according to the California Air Resources Board. The key polluters at ports are trucks, dock equipment and container ships. The ocean carriers are separately facing pressure internationally to curb emissions, and some have voluntarily switched to low-sulfur fuel when approaching ports.

Citing similar environmental and health concerns, the U.S. Environmental Protection Agency is set to hear a petition filed by Schwarzenegger in 2005 to enforce auto emission standards that are tougher than federal standards and would reduce exhaust by 30 percent over several years.

Bill Dombrowski, president and chief executive officer of the California Retailers' Association, said the cargo surcharge bill has momentum, given its passage last year and the intense focus on ports going green.

"The environment is a hot topic for the legislature this year," Dombrowski said. "So all the elements are there" for passage.

Dombrowski is part of a coalition of retail and manufacturing interests that hopes to steer lawmakers away from the cargo surcharge bill and is looking to negotiate alternatives with Lowenthal. One funding option being proposed by the coalition is using some of the $3.5 billion in existing public bond money targeted for roads, rail, bridges and other improvements to speed cargo away from the ports. One of Schwarzenegger's concerns in vetoing the cargo bill last year centered on his desire for a long-term plan addressing port financing, including alternatives such as public-private partnerships.

In a May 9 letter to Lowenthal, the cargo importer coalition, which also includes Liz Claiborne, Nike and Gap, wrote that a container surcharge "is inappropriate for financing the infrastructure improvements and environmental mitigation projects created by California's growing population and economy." The coalition also said meaningful amounts of cargo would be diverted from California to avoid paying the surcharge. A container fee also likely would be challenged in court, further delaying greenhouse gas remediation, the coalition wrote.

A spokeswoman for Schwarzenegger said she couldn't speculate on whether the governor would sign the bill. In recasting last year's vetoed measure, Lowenthal has addressed some of his earlier concerns. The measure now calls for ports to keep half the money they collect instead of going into a general state port project fund. Ports can use their half of the money on green port projects, as well as infrastructure.The evolving supply chain science of being energy efficient and reducing emissions while adding port capacity, highways, bridges or other development, "is a growing global issue," said Jack Kyser, senior vice president and chief economist with the Los Angeles County Economic Development Corp.

How to pay and who pays are also mounting concerns, Kyser noted.

"We're going to have to have a more orderly discussion about who deals with improvements and who bears the cost," he said.

Also lacking is acknowledgement by the Congress and executive branch that the entire nation benefits from California's ports and should share in port costs, Kyser added. The Los Angeles-Long Beach ports alone handle 44 percent of all cargo imported into the U.S. in containers.

The LAEDC estimated in 2005 it will cost $10.5 billion to expand the Los Angeles-Long Beach ports with road, rail yard and railroad improvements needed to keep pace with international trade. The commissions overseeing the ports also are poised to vote this summer on a proposed Clean Air Action Plan intended to reduce pollution by 45 percent in five years from ocean carriers, trains, trucks and terminal operators.

Retailers and other importers are fighting the Clean Trucks Program part of the action plan. Starting next year, only trucks with 2007-level emissions would be able to enter the Los Angeles-Long Beach ports without paying a "truck impact fee" of around $34. By 2013, the older polluting trucks would be barred.

The truck emission restriction is expected to reduce 23 percent of port-related diesel particulate matter and 34 percent of its nitrogen oxides. Grants would be given to help offset the cost of retrofitting or buying some 16,000 new trucks. However, cargo importers argue the plan still would be too costly for many independent truckers who ferry goods to warehouses, rail yards or transportation hubs from ports.

Ezra Finkin, legislative director of the Waterfront Coalition, said a conservative estimate of the cost that eventually would be passed on to cargo customers would amount to $150 a container.

"In certain instances, this is going to be a lot more expensive on a per-container basis than the Lowenthal bill," Finkin said.

One of retailers' fears about any container fee is having to rework supply channels to send goods to other ports in order to avoid surcharges. It's an open question whether that would occur, as other West Coast ports are tackling the same environmental and growth issues.For example, at the ports of Seattle and Tacoma, Wash., and Vancouver, a Pacific Northwest Ports Clean Initiative is in the works. The voluntary compact sets a 2010 goal to lower air emissions at the ports by 70 percent for carriers at berth and 30 percent from cargo-handling equipment. A similar truck and tugboat emission reduction initiative also is being planned.

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