Next round in California drayage wars: LA City Council wades into the controversy

  Photo: Shutterstock

Photo: Shutterstock

The denial of a normally routine application for the extension of Free Trade Zone status has turned into the latest battleground over the status of California drayage drivers.

Earlier this month, the Los Angeles City Council unanimously overrode the city's Board of Harbor Commissioners, which had recommended that California Cartage--a subsidiary of New Jersey-based NFI--be allowed an extension of its FTZ. California Cartage has had the FTZ for many years. This was not a first-time application.

The FTZ for California Cartage, according to the Long Beach Press-Telegram, is a warehouse that sits on city-owned property. FTZs are able to avoid tariffs and other import/export restrictions depending upon their activities.

To get a sense of the hostility that has moved into this debate, here's a quote from the Long Beach Press-Telegram story on the vote, from City Councilman Joe Buscaino. “How can we incentivize a company that is treating its employees like crap? It’s not going to fly with me and it shouldn’t fly with you.”

The battle over drayage providers like California Cartage appears to have been initially fueled by a story in USA Today last summer, highly criticized by the industry itself, charging that pay structures for many drivers led them at times to bring home paychecks that were practically zero. This recently has followed by a series of both private lawsuits and a lawsuit by Los Angeles City Attorney Mike Feuer against three drayage companies, including Cal Cartage. Labor activists last year compiled a list of what they said was then-ongoing litigation or regulatory complaints filed against Cal Cartage.

Ironically, according to the agreement between the Harbor Commission and California Cartage, the FTZ extension for Cal Cartage did get a signoff from the city attorney's office. But the "approval" appears to be only in the sense that the attorney's office "has prepared and approved the proposed agreement as to form and legality."

"This has always been a procedural matter in the past," Weston LaBar, the executive director of the Harbor Trucking Association, told Freightwaves. "We find that the L.A. City Council has tried to politicize issues that are not political instead of looking at its role as a governing body."

It appears though that the Harbor Commission might have been anticipating some problems. In the document spelling out the agreement, it says that "the existence of pending litigation and claims against Cal Cartage" had no impact on the commission's recommendation. It also said that the commission was facing regulations "that require this board (to) uniformly and consistently apply the process to all FTZ applicants."

The City Council vote to overturn the Harbor Commissioners' recommendation was 11-0.

Reading the commissioners' recommendation that the FTZ be extended, what is striking is how small the deal is between the port and Cal Cartage. If the contract were to be approved, the Harbor Commission was to receive $7,750 from Cal Cartage.

It isn't clear what happens next. According to press reports, the L.A. City Council action kicked the issue back to the Harbor Commission. But given that the justification by the Council for its action is that Cal Cartage is the subject of legal actions regarding its employees, which presumably are not going to be resolved quickly, it's uncertain what the Harbor Commission can do next.

Philip Sanfield, director of media relations for the Port of Los Angeles, laid out his agency's role. He said the port is a "grantee" under the free trade zone program, which is federal, but that it is a "limited role...it can be described as ministerial." "If an FTZ applicant meets the requirements of the FTZ program, POLA’s administrative approval is suppositive," he wrote in an email. His group administers 36 active operators in FTZs serving a four-county area that includes the ports of Los Angeles and Long Beach.

Maybe it's the small size of the contract in question that led Robert Sanders, an attorney with Cal Cartage, to say in a statement released to Freightwaves that the Council action "does not inhibit Cal Cartage’s ability to continue performing non-FTZ operations at its Wilmington facility.  Those other operations will continue." He added that the Council's action was "based on misinformation and unsubstantiated claims."

Given the contract's size and the fact that Cal Cartage has been operating an FTZ since 1995, according to Sanfield, it's clear that this vote is more symbolic than anything. It's also a sign that one side of the political divide has clearly latched on to drayage driver pay and legal status as an issue.