OF LOS ANGELES 425 S.Palos Verdes Street Post Office Box 151 San Pedro, CA TEl/TDD 310 SEA-PORT

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1 la THE PORT OF LOS ANGELES 425 S.Palos Verdes Street Post Office Box 151 San Pedro, CA TEl/TDD 310 SEA-PORT Eric Garceffi Mayor, City of LosAngeles Boord of Harbor Commissioners AmbassadorVUmaS.Martinez DavidArian PatriciaCastellanos AnthonyPirozzi,Jr. President Vice President Edward R. Renwick Gary lee Moore, P.E. Interim Executive Director June 6,2014 REVISED Honorable Members of the City Council of the City of Los Angeles CD No. 15 Attention: Mr. Michael Espinosa, City Clerk's Office SUBJECT: RESOLUTION NO FIRST AMENDMENT TO FOREIGN-TRADE ZONE GENERAL PURPOSE OPERATING AGREEMENT NO BETWEEN THE CITY OF LOS ANGELES HARBOR DEPARTMENT AND CALIFORNIA CARTAGE COMPANY, LLC, FTZ 202, SITE i-a Pursuant to Section 373 of the City Charter and Section 10.5 of the Los Angeles Administrative Code, enclosed for your approval is the proposed First Amendment to Foreign-Trade Zone General Purpose Operating Agreement No between the City of Los Angeles Harbor Department and California Cartage Company. The First Amendment to FTZ General Purpose Agreement was approved at the March 20, 2014 meeting of the Board of Harbor Commissioners. There is no impact to the General Fund. RECOMMENDATION: 1. The City Council approve the proposed First Amendment to Foreign-Trade Zone General Purpose Operating Agreement between the City of Los Angeles Harbor Department and California Cartage Company; 2. Adopt the determination by the Los Angeles Harbor Department that the proposed action is exempt from the requirements of the California Environmental Quality Act (CEQA) under Article III, Section 1(14) of the Los Angeles City CEQA Guidelines; and 3. Return to the Board of Harbor Commissioners for further processing. Respectfully Submitted, ~~,~ MBER M. KLESGES ommission Secretary co; Trade, Commerce, & Tourism Committee Councilman Buscaino Councilman LaBonge Councilman Bonin Mandy Morales, Mayor's Office Erick Martell, Harbor Legislative Analyst Alvin Newman, CAD Lisa Schechter, CD4 Aaron Gross, Mayor's Office Christine Vee Hollis, CLA AN EQUAL EMPLOYMENT OPPORTUNITY AFFIRMATIVE ACTION EMPLOYER Printed on recvceo POpel@

2 RECOMMENDATION APPROVED; RESOLUTION NO ADOPTED; AND AGREEMENT NO A APPROVED BY THE BOARD OF HARBOR COMMISSIONERS March 20, 2014 ~:S~ 11\ THE PORT OF LOS ANGELES Executive Director's Report to the Boord of Harbor Commissioners DATE: MARCH 13,2014 FROM: BUSINESS AND TRADE DEVELOPMENT SUBJECT: RESOLUTION NO.\':\-1- lt65 APPROVAL OF FIRST AMENDMENT TO FOREIGN-TRADE ZONE GENERAL PURPOSE OPERATING AGREEMENT NO BETWEEN THE CITY OF LOS ANGELES HARBOR DEPARTMENT AND CALIFORNIA CARTAGE COMPANY, LLC, FTZ 202, SITE 1-A SUMMARY: The City of Los Angeles Harbor Department (Harbor Department), as the Foreign-Trade. Zone (FTZ) grantee, establishes General Purpose Operating Agreements with FTZ operators to oversee their FTZ operations. The Harbor Department received a request from California Cartage Company, LLC (California Cartage), Site 1-A, located in Wilmington, California, to exercise their first renewal option to extend the term of their FTZ Operating Agreement No (Agreement No ) at FTZ 202, Site 1-A (Site). Burlington Northern Santa Fe Railroad (BNSF) and City entered into a Site Preparation and Access Agreement and Permit (SPAA) granting BNSF rights to the Site. BNSF Railway licensed the Site to California Cartage on the terms and conditions set forth in the license, dated August 2, 2013 (License). California Cartage acknowledges that its only right to posse!?sthe Site arises by, through and under the License, and is governed. by its terms. BNSF consents to the extension described in this resolution, as an accommodation to California Cartage in consideration of the provisions of the First Amendment (Amendment), including, without limitation, those reproduced in this Resolution. On this basis and as described in this Resolution, the staff of the Harbor Department recommends as set forth below. The original term of Agreement No was one year with two, optional one-year renewals. The original agreement commenced on June 1, 2013, and is set to expire on May 31,2014. Any change made to an original Operating Agreement, including any existing renewal options, requires an amendment to the agreement. Upon approval, the proposed Amendment will extend Agreement No for one year to May 31,2015 or upon the termination of the License, whichever occurs earlier. All remaining terms and conditions of Agreement No shall remain in full force and effect.

3 DATE: MARCH 13, 2014 PAGE 2 OF 4 SUBJECT: GENERAL PURPOSE OPERATING AGREEMENT WITH CALIFORNIA CARTAGE COMPANY, LLC, FTZ 202, SITE 1-A RECOMMENDATION: It is recommended that the Board of Harbor Commissioners (Board): 1. Approve the proposed First Amendment to Foreign-Trade Zone Operating Agreement No between the City of Los Angeles Harbor Department and California Cartage Company, LLC; 2. Direct the Board Secretary to transmit the proposed First Amendment to Foreign- Trade Zone Operating Agreement No to the Los Angeles City Council for approval pursuant to Section 373 of the' Charter of the City of Los Angeles and Section 10.5 of the Los Angeles Administrative Code; " 3. Upon approval by the City Council, authorize the Executive Director to execute and the Board Secretary to attest to the proposed First Amendment to Foreign-Trade Zone Operating Agreement No ; and 4. Adopt Resolution No. \'-\-1-lp~. DISCUSSION: Background/Context - The Foreign-Trade Zone Act of 1934, as amended (19 U.S.C. 81a-81u) was established to support U.S. commerce and create jobs by reducing import duties or excise taxes by deferring payment of duties thereby making it attractive for companies to perform some work on their products in the U.S. rather than offshore. The definition of a FTZ is a restricted access site located in the U.S. Customs and Border Protection Agency territories. The importer may defer payment of duties and other fees until the merchandise is brought into U.S. commerce for consumption. Need for Agreement - The Harbor Department, as the grantee, is required by the FTZ Board to have an Operating Agreement with FTZ site operators (Transmittal 1). Site 1-A facilities consist of approximately 600,000 square feet of warehouse and office space on 84 acres (Transmittal 2). This Site is owned by the Harbor Department and leased to BNSF. BNSF and California Cartage entered into a non-exclusive license agreement granting California Cartaqe use and occupancy of property described in the License. The License is attached to the Amendment. California Cartage will continue to operate their warehouses under FTZ procedures. California Cartage agrees to keep its warehouses open to support the PierPass

4 DATE: MARCH 13,2014 PAGE 3 OF4 SUBJECT: GENERAL PURPOSE OPERATING AGREEMENT WITH CALIFORNIA CARTAGE COMPANY, LLC, FTZ 202, SITE 1-A Program and shall notify truck drivers, truck brokers, and trucking companies that the trucks serving the container terminals must confine their routes to the designated Wilmington Truck Route. Need for Approval - California Cartage is requesting approval from the Harbor Department to execute the proposed Amendment to extend Agreement No for a term of one year or upon the termination of the License, whichever occurs earlier, to continue operating this Site as a FTZ warehouse. California Cartage receives, stores, manages inventory, and distributes consumer products, apparel, accessories, and other merchandise for sale nationally. Occasionally, the products are re-exported from the warehouse. If a company does not obtain approval as an operator with FTZ status from the Harbor Department, they potentially have the choice of going to another FTZ in California, such as, Long Beach, San Diego, Palmdale, etc., or even going out of state. Since FTZ facilities exist in every state, companies can potentially shift its employees to work elsewhere as a result of seeking FTZ status in another location. Harbor Department Fiscal Requirements - This proposed Amendment will not require funding by the Harbor Department. California Cartage will pay an annual fee of $7,750 to the Harbor Department for the term of the proposed Amendment. ENVIRONMENTAL ASSESSMENT: The proposed action is approval of the proposed Amendment to Agreement No The proposed Amendment would extend the existing Operating Agreement with no changes to operations. As an activity involving the amendment of an agreement to use an existing facility involving negligible or no expansion of use, the Director of Environmental Management has determined that the proposed action is exempt from the requirements of the California Environmental Quality Act (CEQA) under Article III, Section 1 (14) of the Los Angeles City CEQA Guidelines. ECONOMIC BENEFITS: This Board action will have no employment impact. FINANCIAL IMPACT: The Harbor Department to date has received $5,000 in operator fees from California Cartage for the original one-year term. If the proposed Amendment is approved for the

5 DATE: MARCH 13, 2014 PAGE40F4 SUBJECT: GENERAL PURPOSE OPERATING AGREEMENT WITH CALIFORNIA CARTAGE COMPANY, LLC, FTZ 202, SITE 1-A first extension, the Harbor Department will receive $7,750 annually from California Cartage (per FTZ Tariff No.2). Although there is no direct cost to the Harbor Department arising from this proposed Board action, the Harbor Department does incur FTZ related expenses. During calendar year 2013, approximately $60,000 was spenton outside FTZ related consulting services while $264,000 in revenues was collected from all of the Harbor Department's FTZ operators. CITY ATTORNEY: The Office of the City Attorney has prepared and approved the proposed Amendment as to form and legality. TRANSMITTALS: 1. Proposed First Amendment to FTZ Operating Agreement No with California Cartage Company, LLC, FTZ 202, Site 1-A 2. California Cartage Company, LLC, FTZ 202, Site 1-A map MICHAEL DiBERNARDO Director of Business Development FIS APproval:~(.initiaIS) CA APprovalye-(initiaIS) 2i~ Interim Deputy Executive Director GARY LEE MOORE, P.E. Interi Executive Director Author: M. Morimoto GLM:DLM:MD:MM:ma File:G:\8oard Reports\Forelgn Trade Zone\Site 1A Cal Cartage\2014\FTZ Cal Cartage FINAL BR Site 1A doc

6 California Cartage Co. llc Site i-a 2401 E PCH ,000 Wilmington, Ca _-==::J!IIIIIIIIIIC::::III _ Feet Harbor Department Ptmninu & Economic D8\lelolll1l1!11t Map ProtlocBtl7J2DI1

7 TRANSMITTAL TO DATE Gary Lee Moore, Interim Executive Director Harbor Department. MAY FROM The Mayor COUNCIL FILE NO. COUNCIL DISTRICT 15 PROPOSED FIRST AMENDMENT TO FOREIGN TRADE ZONE OPERATOR AGREEMENT NO CALIFORNIA CARTAGE COMPANY, LLC, FTZ 202, SITE 1-A Transmitted for further pr cessing and Council consideration. See the City Admi I rative Officer report attached. 0na Guerrero) MAS:ABN: CAO 649-d

8 REPORT FROM OFFICE OF THE CITY ADMINISTRATIVE OFFICER Date: May 01, 2014 CAO File No Council File No.: Council District: 15 To: The Mayor From: Miguel A Santana, City Administrative Office~ U. J"'{ - Reference: Subject: Correspondence from the Harbor Department dated April 9, 2014; referred by the Mayor for report on April 11, 2014 PROPOSED FIRST AMENDMENT TO FOREIGN TRADE ZONE OPERATOR AGREEMENT NO CALIFORNIA CARTAGE COMPANY, LLC, FTZ 2Q2, SITE 1-A SUMMARY The Harbor Department (Port) Board of. Harbor Commissioners (Board) requests approval of Resolution No authorizing a proposed First Amendment to Foreign Trade Zone (FTZ) Operating Agreement (Agreement) No with California Cartage Company, LLC (California Cartage), to continue operating in FTZ No. 202, Site No. 1"A, located in the City of Wilmington. The' original Agreement with California Cartage began on June 1,2013 and is set to expire on May 31, The original term of the Agreement consisted of a one-year contract with two, one-year renewal options. The proposed FirstAmendment will extend the FTZ contract by one additional year, leaving a one-year renewal option, subject to ratification by the Board. All remaining terms and condition of the Agreement will remain in effect.. California Cartage will continue to operate the FTZ Site under federal FTZ Operating rules and regulations. The United States (U.S.) Government's Federal FTZ Board designated the Port as the Grantee/Administrator of FTZ 202 region for the City of Los Angeles and the surrounding region. A definition of an FTZ is a secure area located in or near the port of entry for U.S. Customs and Border Protection Agency (Customs), but legally considered to be outside the Customs territory for the purpose of tariff laws and Customs entry procedures. All activities are performed in accordance with Federal FTZ procedures. The goal of the FTZ program and Port is to stimulate economic growth and development in the United States, facilitate efficient cargo transit and support the local, State and national economy. The FTZ does not generate a direct profitforthe Port,but is provided by the Port as a service to its customers to promote international trade and commerce in the region and U.S. See the Attachment for an overview of FTZ policies and guidelines for this Agreement.. The California Cartage site includes approximately 600,000 square feet of warehouse and office square on land area of 84 acres. The Port states that California Cartage employs approximately 21 0 full-time employees and part-time and seasonal employees. The Port states that extending the proposed Agreement will authorize California Cartage to continue to operate and manage offices, warehouse and distribution facilities at the site for consumer and office products, machineries and other merchandise for domestic and, occasionally, international markets.

9 CAO File No. PAGE California Cartage has already paid an administrative fee of $5,000 for the original one-year term. If the proposed Amendment is approved, California Cartage's administrative fee would be $7,750 per year due to the subsequent increase by the Port of its annual fee. The total anticipated administrative fee for three years is $20,500, The FTZ Operator agreements will require no direct use of Port funds. Although there will be no additional. direct cost, the Port states that it spends funds on indirect or outside expenses for FTZ~related administrative services. During the 2013 calendar year, the Port states that it spent approximately $60,000 for FTZ-related expenses and collected approximately $264,000 in revenue and fees from all the FTZ operators. The Port states that California Cartage has committed to use the Pier Pass program, which reduces daytime truck traffic operations and allows open operations in the evenings. California Cartage will notify truck drivers, brokers and companies that trucks serving the FTZ site and Port's container terminals must confine their routes to the designated Wilmington truck route. The Port states that if the proposed Agreement is not approved, California Cartage has the option to move its facilities to another Fl'Z region in California, such as Long Beach or San Diego, Palmdale or another state. The Port states that approval of the Agreement is in the best interest of the City and Port economically. In August 2013, the Port states that BUrlington Northern Santa Fe Railroad (BNSF) and the City of LosAngeles (City) entered into along-term contract granting BNSF to use and occupy more than 103 acres of Port of Los Angeles (POLA) property to develop, prepare, coordinate and construct a near-dock intermodal railway container transfer facility on the land. The BNSF-contracted land included the FTZ Site currently occupied by California Cartage. BN$F subsequently licensed that portion of tlie property back to California Cartage under the stipulated term and conditions of its contract with the City and the existing FTZ Agreement. According to the Port, BNSF consents to the. extension of the FTZ Site Agreement, and California Cartage acknowledges that its only right to possess the property is under the BNSF license. The proposed Amendment with California Cartage is for one year or upon the termination of the license with BNSF. The proposed Agreement is in compliance with City requirements and has been approved asto form by the City Attorney. Pursuant to Charter Section 373 and the Los Angeles Administrative Code Section 10.5, Council approval is required because the cumulative contract term exceeds three years. The Port Director of Environmental Managementhas determined that this is an administrative action and is therefore exempt from the requirements of the California Environmental Quality Act (CEQA) in accordance with Article III,Section 1 (14) of the Los Angeles City CEQA guidelines.. RECOMMENDATION That the Mayor approve Harbor Department (Port) Resolution No authorizing the proposed First Amendment to Foreign Trade Zone (FTZ) Operating Agreement No with California Cartage Company, LLC, to continue operating in FTZ No. 202, Site No.1-A, located in the City of Wilmington, for an additional term of one year, through May 31, 2015, and return the document to the Port for further processing, including Council consideration..

10 CAO File No. PAGE FISCAL IMPACT STATEMENT The proposed First Amendment to the FTZ Operator Agreement (Agreement) with California Cartage LLC will have no impact on the City General Fund. The original term of the Agreement with California Cartage consisted of a one-yearcontract with two, one-year renewal options. California Cartage has already paid an administrative fee of $5,000 for the original one-year term and would pay an administrative fee of $7,750 per year, due to the subsequent increase by the Port of its annual fee, for the subsequent two, one-year renewals, subject to approval by the Board. The total anticipated administrative fee for three years is $20,500, if the Agreement is renewed for each of the two oneyear options. All Funds will be depositedin the Harbor Revenue Fund. ' TIME LIMIT FOR COUNCil ACTION. Pursuant to Charter Section 373, "Long Term Contract Approved by Council," and the Los Angeles Administrative Code Section 10.5, "Limitation and Power to Make Contracts," unless the Council takes action disapproving a contract that is longer than three years within 60 days after submissiori to Council, the contract will. be deemed approved. MAS:ABN: Attachment

11 CAOFile No. PAGE ATTACHMENT OVERVIEW OF FOREIGN TRADE ZONES, OPERATING ~GREEMENT The Federal FTZ Board designated the Harbor Department (Port) as the Grantee/Administrator of FTZ No. 202 for the City of Los Angeles and the surrounding region. The following is an overview of FTZ policies and guidelines. The FTZ Operating Agreements are entered into with various companies who have applied for FTZ statuswith the Federal FTZ Board and have been approved by the United States (U.S.) Department of Homeland Security Customs and Border Protection (Customs) to activate a site. Authority is granted by the Federal FTZ Board under the amended FTZ Act of 1934, which is administered through Federal FTZ and Customs Regulations. The FTZ Act was established to support U.S. commerce and create jobs by reducing import duties or excise taxes by deferring payment of duty thereby making it appealing for companies to perform work on their products in the U.S. instead of offshore. The goal of the Port and FTZ program is to stimulate economic growth and development in the U.S., facilitate efficient cargo transit and support the local, State and national economy. An FTZ is a secure area located in or near the port of entry for Customs, but legally considered to be outside the Customs territory for the purpose of tariff laws and Customs entry procedures. It is the U.S. version of what are known internationally as free-trade zones. An FTZ is sponsored by qualified public or private companies, which may operate the facilities themselves or contract for the Clperation with public or private firms. The operations are conducted on a public use basis, which opens its services to the public, with published tariff rates. In this case, the published rates applicable are the Port Tariff (No.1) rates, terms and conditions. These spaces and operations will be under the supervision of the Federal FTZ Board and Customs and will be required to operate within U.S. law. The Port FTZ No. 202 is a multi-zone FTZ currently operating 23 sites with 15 contracted FTZ general purpose. operators and five Subzone operators. The sites include facilities in the Port area,. Los Angeles International Airport, nearby industrial parks and other outlying locations. The FTZ does not generate a profit for the Port, but is provided as a service to its customers to promote international trade in the U.S. These operations will be monitored by the Port, but under the supervision of the Federal FTZ Board and Customs and required to operate within U.S. law. The FTZ Operator is normally required to pay a one-time application fee of $5,000 and an annual administrative operating fee of $7,750 per year for an initial term of five years, with three subsequent five-year renewal options, in the same amount, for a contract term up to a total of 20 years. In this instance, the contract term is for one-year, with two one-year options. The proposed Agreement renewal options will be subject to approval by the Board and based upon terms and conditions negotiated prior to the end of each one-year term. The proposed Agreement with the FTZ Operator will become effective the first of the month following Council approval and will remain in effect for an initial term of five years. Eitherthe Port or FTZ Operator can terminate the proposed Agreement at the end of the each term or by submitting a 180-day prior written notice.