California container tax vetoed
California Gov. Arnold Schwarzenegger vetoed a bill that would have imposed a $30-per-TEU fee on cargo containers arriving and departing from the ports of Los Angeles and Long Beach to fund clean air projects, port security and infrastructure improvement projects.
In returning the bill to the legislature without a signature,
Schwarzenegger said, “although the policy objectives of Senate Bill 927 — to develop more secure ports, congestion relief and environmental mitigation — are laudable, this measure is flawed in its construction, application, lack of accountability.”
Groups such as the National Industrial Transportation League had argued against the bill, saying it would hurt U.S. agricultural exporters.
“While the new tax at L.A.-L.B. might be viewed by some as ‘marginal,’ it can and will make the difference on whether these goods can now be competitive with overseas suppliers,” Peter J. Gatti, the NIT League’s executive vice president, had argued in a letter to the governor. “Many California exporters as a result will be forced to seek alternative out-of-state ports to move their goods or simply lose out on these vital markets.”
“Alternatively importers faced with this new tax will be forced to change their supply chain strategies so as to avoid the higher costs of doing business in the state,” he added. “Already plans are being readied for new alternative ports in both Mexico and Canada as well as underutilized East Coast ports, which see this measure as an opportunity to handle Asian cargoes once only reserved for California’s ports.”
But a study commissioned by the National Resources Defense Council and the Los Angeles-based Coalition for Clean Air disputed that the bill, authored by California legislator Alan Lowenthal, would adversely affect business.
The study said projected cargo growth would far exceed potential ship diversions and, as a result, future ship diversions would be “virtually unobservable.”
Tracy Mulling, president and chief executive officer of the National Retail Federation, said the fee “would have amounted to a tax that would have driven up the price of consumer goods for working Americans shopping in retail stores in virtually every state, not just California.”
“This would have been a tax on consumers, not foreign entities. Gov. Schwarzenegger did the right thing in vetoing it,” Mullin added, claiming it “would have violated the Commerce Clause of the U.S. Constitution, international law and U.S. treaty obligations, and would have exposed the state of California to court challenges had it become law.”
Sandy Kennedy of the Retail Industry Leaders Association contended the bill could have “resulted in cargo being directed to other West Coast ports or even outside of the U.S. altogether, damaging local communities surrounding the ports who depend on the jobs and tax revenue that the ports generates.”