..THE PORTOF LOS ANGELES 425 S.Poles verdes Street Post Office Box 151 San Pedro, CA 90733-0151 TEL/TDD310 SEA-PORT www.portoflosangeles.org

Eric Garcettl

Board of HarborCommissioners

Mayor, City of LosAngeles

AmbassadorVilmaS.Martinez DavidArion PatriciaCastellanos AnthonyPirozzi,Jr.President Vice President

Edward R. Renwick

Gary lee Moore, P.E. Interim Executive Director

June 6, 2014

Honorable Members of theCity Council of theCity of Los Angeles

Attention: Mr. Michael Espinosa, City Clerk's Office

CD No. 15

SUBJECT: RESOLUTION NO. 14-7655 - FIRST AMENDMENT TO FOREIGN-TRADE ZONEGENERAL PURPOSE OPERATING AGREEMENT NO. 09-2749 BETWEEN THECITY OF LOS ANGELES HARBOR DEPARTMENT AND ASK MARINE, INC., FTZ202, SITE 15

Pursuant to Section 373 of the City Charter and Section 10.5 of the Los Angeles AdministrativeCode, enclosed for your approval is the proposed First Amendment to Foreign-Trade ZoneGeneral Purpose Operating Agreement No. 09-2749 between the City of Los Angeles HarborDepartment and ASK Marine, Inc. The First Amendment to FTZ General Purpose Agreementwas approved at the May 15, 2014 meeting of the Board of Harbor Commissioners. There is noimpact to the General Fund.

RECOMMENDATION:

1. The City Council approve the proposed First Amendment to Foreign-Trade Zone GeneralPurpose Operating Agreement between the City of Los Angeles Harbor Department andASK Marine, Inc.;

2. Adopt the determination by the Los Angeles Harbor Department that the proposed actionis 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,

AMBER M. KLES SCommission Secretary

cc: Trade, Commerce, & Tourism CommitteeCouncilman BuscainoCouncilman La80ngeCouncilman Bonin

Mandy Morales, Mayor's OfficeErick Martell, Harbor Legislative Analyst

AN EQUAL EMPLOYMENT OPPORTUNITY· AFFIRMATIVE ACTION EMPLOYER

Alvin Newman, CAOLisa Schechter, CD4Aaron Gross, Mayor's OfficeChristine Vee Hollis, CLA

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RECOMMENDATION APPROVED;RESOLUTION NO. 14-7655 ADOPTED; ANDAGREEMENT NO. 14-2749-A APPROVED

BY THE BOARD OF HARBOR COMMISSIONERS

~\9~BOARD SECRETARY

DATE: MAY 6,2014

I~(W,THE PORTOF LOS ANGELES

Executive Director'sReport to the

Board of Harbor Commissioners

FROM: BUSINESS AND TRADE DEVELOPMENT

SUBJECT: RESOLUTION No.\l±lLOC:32 APPROVAL OF FIRSTAMENDMENT TO FOREIGN-TRADE ZONE GENERAL PURPOSEOPERATING AGREEMENT NO. 09-2749 BETWEEN THE CITY OF LOSANGELES HARBOR DEPARTMENT AND ASK MARINE, INC., FTZ 202,SITE 15

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 requestfrom ASK Marine, Inc. (ASK), Site 15, located in Wilmington, California, to exercise itsfirst renewal option to extend the term of its FTZ Operating Agreement No. 09-2749(Agreement No. 09-2749) at FTZ 202, Site 15. ASK provides international logistic andwarehouse services. The original term of the agreement is five years with three, five-year renewal options. The original agreement commenced October 1, 2009 and is set toexpire on September 30, 2014.

Any change made to an original Operating Agreement, including existing renewaloptions, requires an amendment to the agreement. Upon approval, the proposed FirstAmendment will extend Agreement No. 09-2749 for five years through September 30,2019. Also, as part of the changes, all updated City of Los Angeles contractualprovisions will be incorporated into Agreement No. 09-2749. All remaining terms andconditions of Agreement No. 09-2749 shall remain in full force and effect.

RECOMMENDATION:

It is recommended that the Board of Harbor Commissioners (Board):

1. Approve the proposed First Amendment to Foreign-Trade Zone OperatingAgreement No. 09-2749 between the City of Los Angeles Harbor Department andASK Marine, Inc.;

2. Direct the Board Secretary to transmit the proposed First Amendment to Foreign-Trade Zone Operating Agreement No. 09-2749 to the Los Angeles City Council forapproval pursuant to Section 373 of the Charter of the City of Los Angeles andSection 10.5 of the Los Angeles Administrative Code;

DATE: MAY 6, 2014 PAGE20F4

SUBJECT: GENERAL PURPOSE OPERATING AGREEMENT WITH ASK MARINE,INC., FTZ 202, SITE 15

3. Upon approval by the City Council, authorize the Executive Director to execute andthe Board Secretary to attest to the proposed First Amendment to Foreign-TradeZone Operating Agreement No. 09-2749; and

4. Adopt Resolution NO.\~

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 reducingimport duties or excise taxes by deferring payment of duties thereby making it attractivefor 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 andBorder Protection Agency territories, The importer may defer payment of duties andother 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 FTZBoard to have an Operating Agreement with FTZ site operators (Transmittal 1). ASK, aU.S. company, located in Wilmington, Califomia employs approximately eight full-timeemployees; ASK has continually operated a FTZ warehouse at FTZ 202, Site 15 since2009. Site 15 facilities consist of approximately 159,865 square feet of warehouse andoffice space on 4 acres (Transmittal 2). ASK is leasing this property from WilmingtonStorage Partners, L.P., Pacific Palisades, CA 90272 .

ASK will continue to operate its warehouses under FTZ procedures. ASK agrees tokeep its warehouses open to support the PierPass Program and shall notify truckdrivers, truck brokers, and trucking companies that the trucks serving the containerterminals must confine their routes to the designated Wilmington Truck.Route.

Need for Approval - ASK is requesting approval from the Harbor Department to executethe proposed First Amendment to extend Agreement No. 09-2749 for a term of fiveyears in order to continue operating this site as a FTZ warehouse. ASK receives, stores,manages inventory, and distributes machineries, consumer products, and othermerchandise for sale nationally. Occasionally, the products are re-exported from thewarehouse. The First Amendment also incorporates updated City of Los Angelescontractual provisions standard in Harbor Department contracts.

DATE: MAY 6, 2014 PAGE30F4

SUBJECT: GENERAL PURPOSE OPERATING AGREEMENT WITH ASK MARINE,INC., FTZ 202, SITE 15

If ASK does not obtain approval as an operator with FTZ status. from the HarborDepartment, they potentially have the choice of going to another FTZ in California suchas Long Beach, San Diego,. Palmdale, etc., or even going out of state. Since FTZfacilities exist in every state, ASK can potentially shift its employees to work elsewhereas a result of seeking FTZ status in another location.

Harbor Department Fiscal Requirements - This proposed First Amendment will notrequire funding by the Harbor Department. ASK will pay an annual fee of $7,750 to theHarbor Department for each year of the five-year term of the proposed FirstAmendment.

ENVIRONMENTAL ASSESSMENT:

The proposed action is approval of the proposed First Amendment to Agreement No.09-2749 between the Harbor Department and ASK. The proposed First Amendmentwould extend the existing Operating Agreement with no changes to operations. As anactivity involving the amendment of an agreement to use an existing facility involvingnegligible or no expansion of use. the Director of Environmental Management hasdetermined that the proposed action is exempt from the requirements of the CaliforniaEnvironmental Quality Act (CEQA) under Article III, Section 1 (14) of the Los AngelesCity CEQA Guidelines ..

ECONOMIC BENEFITS:

This Board action will have no employment impact.

FINANCIAL IMPACT:

The Harbor Department to date has received $25,000 (per FTZ Tariff No.1) in annualfees from ASK for the original five-year term. If the proposed First Amendment isapproved, the Harbor Department will receive from ASK $7,750 annually (per FTZ TariffNo.2) for five years.

Although there is no direct cost to the Harbor Department arising from this proposedBoard action, the Harbor Department does incur FTZ related expenses. During calendaryear 2013 approximately $60,000 was spent on outside FTZ related consulting serviceswhile $264,000 in revenues was collected from all of the Harbor Department's FTZoperators.

DATE: MAY 6, 2014 PAGE 4 OF 4

SUBJECT: GENERAL PURPOSE OPERATING AGREEMENT WITH ASK MARINE,INC., FTZ 202, SITE 15

Approvinq the proposed First Amendment with ASK creates an entity that confersamong other advantages, tax and operating benefits to the operator, and provides a toolfor economic development. As the Harbor Department is a designated grantee of FTZsunder the State of California enabling legislation, granting FTZ status to ASK allowsmore efficient operations and allows ASK to remain competitive.

CITY ATTORNEY:

The Office of the City Attorney has prepared and approved the proposedFirst Amendment as to form and legality.

TRANSMITTALS:

1. Proposed First Amendment to FTZ Operating Agreement No. 09-2749 with ASKMarine, Inc., FTZ 202, Site 15

2. ASK Marine, Inc., FTZ 202, Site 15 map

1Y1~ D~WMICHAEL DiBERNARDODirector of Business Development

FISAPproval:~nitiaIS).CAAPproval:j,initiaIS)

nI foV

VI L. A HEWSONInt ~m De~uty Executive Director

APPROVED:

~~:O~.Interim Executive Director

Author: M. Morimoto

GLM:DM:MD:MM:maFile:G;\Board Beports'Forelqn-Trade Zone\2014\FTZ Ask Marine Site 15 FINAL SA 05.06.14.doc

Harbor Department. ..... Agreement V-\-OlL\,\

City of LosAngeles

FIRST AMENDMENT TOFOREIGN-TRADE ZONE OPERATING AGREEMENT NO. 09-2749

BETWEEN THE CITY OF LOS ANGELESAND

ASK MARINE, INC.

THIS FIRST AMENDMENT to Foreign-Trade Zone ("FTZ") Operating AgreementNo. 09-2749 ("Agreement")· is made and entered into by and between the CITY OFLOS ANGELES, a municipal corporation ("City"), acting by and through its Board ofHarbor Commissioners ("Board"), and ASK MARINE, INC. ("Operator") as follows:

WHEREAS, City and Operator entered into Agreement No. 09-2749 onOctober 1, 2009; and

WHEREAS, City and Operator wish to extend the term of Agreement No. 09-2749 an additional five (5) years; and

WHEREAS, City and Operator also agree to further modify language toAgreement No. 09-2749,

NOW, THEREFORE, BE IT RESOLVED, that Agreement No. 09-2749 betweenthe City of Los. Angeles and Customs Air Warehouse, Inc. be hereby amended asfollows:

1.. ARTICLE II. AUTHORITY· GRANTED/ACCEPTED, TERM ANDAGREEMENT, Section 2.03 Term of Agreement, subsection A. Term of Renewal, theinitial term of this Agreement shall be extended an additional five (5) years beginning onSeptember 25, 2014 and ending on September 24, 2019.

2. ARTICLE XIV. INDEMINIFICATION,· INSURANCE, BONDING ANDPAYMENT OF OBLIGATIONS, is deleted in its entirety and shall be replaced with thefollowing:

"ARTICLE XIV. - INDEMNIFICATION AND INSURANCE

14.01 Indemnification

Except for the sole negligence or willful misconduct of the City, or any ofits Boards, Officers, Agents, Employees, Assigns and Successors in Interest,Operator undertakes and agrees to defend, indemnify and hold harmless the Cityand any of its Boards, Officers, Agents, Employees, Assigns, and Successors inInterest from and against all suits and causes of action, claims, losses, demandsand expenses, including, but not limited to, attorney's fees (both in house andoutside counsel) and cost of litigation (including all actual litigation costs incurredby the City, including but not limited to, costs of experts and consultants),

damages or liability of any nature whatsoever, for death or injury to any person,including Operator's employees and agents, or damage or destruction of anyproperty of either party hereto or of third parties, arising in any manner by reasonof the negligent acts, errors, omissions or willful misconduct incident to theperformance of this Agreement by Operator or its subcontractors of any tier.Rights and remedies available to the City under this provision are cumulative ofthose provided for elsewhere in this Agreement and those allowed under thelaws of the United States, the State of California, and the City.

14.02 Acceptable Evidence and Approval of Insurance

Electronic submission is the required method of submitting Operator'sinsurance documents. Operator's insurance broker or agent shall register withthe City's online insurance compliance systemTrack4LA ™ athttp://track4Ia.lacity.org/ and submit the appropriate proof of insurance onOperator's behalf.

14.03 General Liability Insurance

Operator shall procure and maintain in effect throughout the term of thisAgreement, without requiring additional compensation from the City, commercialgeneral liability insurance covering personal and advertising injury, bodily injury,and property damage providing contractual liability, independent contractors,products and completed operations, and premises/operations coverage writtenby an insurance company authorized to do business in the State of Californiarated VII, A- or better in Best's Insurance Guide (or an alternate guide acceptableto City if Best's is not available) within Operator's normal limits of liability but notless than One Million Dollars ($1,000,000.00) combined single limit for injury orclaim. Said limits shall provide first dollar coverage except that Executive Directormay permit a self-insured retention or self-insurance in those cases where, in hisor her judqrnent, such retention or self-insurance is justified by the net worth ofOperator. The retention or self-insurance provided shall provide that any otherinsurance maintained by the Harbor Department shall be excess of Operator'sinsurance and shall not contribute to it. In all cases, regardless of any deductibleor retention, said insurance shall contain a defense of suits provision and a

. severability of interest clause. Additionally, each policy shall include an additionalinsured endorsement (CG 2010 or equivalent) naming the City of Los AngelesHarbor Department, its officers, agents and employees as Primary additionalinsureds, a 10 days notice of cancellation for nonpayment of premium, and a 30days notice of cancellation for any other reasons.

14.04 Automobile Liability Insurance

Operator shall procure and maintain at its expense and keep in force at alltimes during the term of this Agreement, automobile liability insurance written by"an insurance company authorized to do business in the State of California rated

2

VII, A- or better in Best's Insurance Guide (or an alternate guide acceptable toCity if Best's is not available) within Operator's normal limits of liability but notless than One Million Dollars ($1,000,000.00) covering damages, injuries or.death resulting from each accident or claim arising out of anyone claim oraccident. Said insurance shall protect against claims arising from actions or

.. operations of the insured, or by its employees. Coverage shall contain a defenseof suits provision and a severability of interest clause. Additionally, each policyshall include an additional insured endorsement (CG 2010 or equivalent) namingthe City of Los Angeles Harbor Department, its officers, agents and employeesas Primary additional insureds, a 10-days notice of cancellation for nonpaymentof premium, and a 30-days notice of cancellation for any' other reasons.

14.05 Workers' Compensation and Employer's Liability

Operator shall certify that it is aware of the provisions of Section 3700 ofthe California Labor code which requires every employer to be insured againstliability for Workers' Compensation or to undertake self-insurance in accordancewith the provisions of that Code, and that Operator shall comply with suchprovisions before commencing the performance of the tasks under thisAgreement. Coverage for claims under U.S. Longshore and Harbor Workers'Compensation Act, if required under applicable law, shall be included. Operatorshall submit Workers' Compensation policies whether underwritten by the stateinsurance fund or private carrier, which provide that the public or private carrierwaives its right of subrogation against the City in any circumstance in which it isalleged that actions or omissions of the City contributed to the accident. SuchWorker's Compensation and occupational disease requirements shall include·coverage for all employees of Operator, and for all employees of anysubcontractor or other vendor retained by Operator.

14.06 Back-to-Back Bond

Operator shall, if requested to do so by the Grantee, furnish and pay thepremium for a bond in a sum equal to the amount of the Customs Form 301Foreign-Trade Zone Operator's bond required by Customs pursuant to theRegulations, conditioned upon the full, faithful and prompt performance of andcompliance with, on the part of the Operator, all the covenants, terms andconditions of this Agreement on its part to be fulfilled, kept, performed andobserved. The bond so furnished shall be in a form acceptable to the Grantee, andshall be effective throughout the term of this Agreement and shall be niade eitherby a surety company or companies qualified to carry on a surety business in theState of California and satisfactory to the Grantee.

14.07 Carder Requirements

All insurance which Operator is required to provide pursuant to thisAgreement shall be placed with insurance carriers authorized to do business in

3

the State of California and which are rated A-, VII or better in Best's InsuranceGuide. Carriers without a Best's rating shall meet comparable standards inanother rating service acceptable to City.

14.08 Notice of Cancellation

Each insurance policy described above shall provide that it will not becanceled or reduced in coverage until after the Board of Harbor Commissioners,Attention: Risk Manager and the City Attorney of City have each been given thirty(30) days' prior written notice by registered mail addressed to 425 S. PalosVerdes Street, San Pedro, California 90731.

14.09 Modification of Coverage

Executive Director, at his or her discretion, based upon recommendationof independent insurance consultants to City, may increase or decrease amountsand types of insurance coverage required hereunder at any time during the termhereof by giving ninety (90) days' prior written notice to Operator.

14.10 Renewal of Policies

At least thirty (30) days prior to the expiration of each policy, Operatorshall direct their insurance broker or agent to submit to the City's onlineinsurance compliance systemTrack4LA ™ at http://track4Ia.lacitv.org/ a renewalendorsement or renewal certificate showing that the policy has been renewed orextended or, if new insurance has been obtained, evidence of insurance asspecified above. If Operator neglects or fails to secure or maintain the insurancerequired above, Executive Director may, at his or her own option but without anyobligation, obtain such insurance to protect City's interests. The cost of suchinsurance will be charged to the Operator.

14.11 Right to Self-Insure

Upon written approval by the Executive Director, Operator may self-insureif the following conditions are met:

1. Operator has a formal self-insurance program in place prior toexecution of this Agreement. If a corporation, Operator must havea formal resolution of its board of directors authorizing self-insurance.

2. Operator agrees to protect the City, its boards, officers, agents andemployees at the same level as would be provided by full insurancewith respect to types of coverage arid minimum limits of liabilityrequired by this Agreement.

4

3. Operator agrees to defend the City, its boards, officers, agents andemployees in any lawsuit that would otherwise be defended by aninsurance carrier.

4. Operator agrees that any insurance carried by Department isexcess of Operator's self-insurance and will not contribute to it.

5. Operator provides the name and address of its claimsadministrator.

6. Operator submits its most recently filed 10-0 and its 10-K oraudited annual financial statements for the three most recent fiscalyears prior to Executive Director's consideration of approval of self-insurance and annually thereafter.

7. Operator agrees to inform Departmentin writing immediately of anychange in its status or policy which would materially affect theprotection afforded Department by this self-insurance.

8. Operator has complied with all laws pertaining to self-insurance.

14.12 Accident Reports

Operator shall report in writing to Executive Director within fifteen (15)calendar days after it, its officers or managing agents have knowledge of anyaccident or occurrence involving death of or injury to any person or persons, ordamage in excess of Five Hundred Dollars ($500.00) to property, occurring uponthe premises, or elsewhere within the Port of Los Angeles if Operator's officers,agents or employees are involved in such an accident or occurrence. Suchreport shall contain to the extent available (1) the name and address of thepersons involved, (2) a general statement as to the nature and extent of injury ordamage, (3) the date and hour of occurrence, (4) the names and addresses ofknown witnesses, and (5) such other information as may be known to Operator,its officers or managing agents."

Except as amended herein, all remaining terms and conditions of AgreementNo. 09-2749 shall remain in full force and effect.

1/1/

1///

////

1111

5

IN WITNESS THEREOF, the parties hereto have executed this First Amendmentto Agreement No. 09-2749 onthe date to the left of their signatures.

Dated: , 2014

Dated: ~ .)/ ,2014

APPROVED AS TO FORM AND LEGALITY

". lY\ai1 \b ,2014MICHAEL NEUER, City AttorneyJANNA B. SIDLEY, General Counsel

By 1 ~HELEN J. soiZePUtYCitY Attorney

HJS:jpr03/25/14

THE CITY OF LOS ANGELES, by itsBoard of Harbor Commissioners

By ___Interim Executive Director

Attest -:--:-:c---------------~Board Secretary

(Print/type name and title)

6

FTZ 202 = Site 15ASK Marine Inc.

Exhibit A Transmittal 2THE PORTOf !.OS AIIi>lLU

o 125 250 500

Harbor DepartmentPlannilg & Econemlc Development

Map Produced 412014

\

COUNCIL FILE NO.

0150-08913-0001TRANSMITTAL

TO

Gary Lee Moore, Interim Executive DirectorHarbor Department

DATE

UN 16 2014

COUNCIL DISTRICT

15FROM

The Mayor

PROPOSED FIRST AMENDMENT TO FOREIGN TRADE ZONE (FTZ) OPERATORAGREEMENT NO. 09-2749 WITH ASK MARINE, INC., FTZ NO. 202, SITE NO.i5

Transmitted for further processing, including Council consideration.See the City Administrative Officer report attache .

MAYOR

MAS:ABN:101401741

CAO 649·d

REPORT FROM

OFFICE OF THE CITY ADMINISTRATIVE OFFICER

Date: June 10 I 2014 CAO File No. 0150-08913-0001Council File No.Council District: 15

To: The Mayor

From: Miguel A. Santana, City Administrative Offi~(.JJ_

Reference: Correspondence from the Harbor Department dated May 16, 2014; referred by theMayor for report dated May 21,2014

Subject: PROPOSED FIRST AMENDMENT TO FOREIGN TRADE ZONE (HZ) OPERATORAGREEMENT NO. 09-2749 WITH ASK MARINE, INC., HZ NO. 202, SITE NO. 15

SUMMARY

The Harbor Department (Port) Board of Harbor Commissioners (Board) requests approval ofResolution No. 14-7655 authorizing the proposed First Amendment of Foreign Trade Zone (FTZ)Operator Agreement (Agreement) No. 09-2749 with ASK Marine, Inc. (ASK), FTZ No. 202, Site No.15, located in Wilmington, California. ASK provides international logistic and warehouse services.The original FTZ Agreement with ASK was for an initial term offive years, with three subsequent five-year renewal options, for a contractterm up to 20 years. The original term began in October 2009and expired in September 2014. The proposed Amendment wili execute the first contract renewaloption for an additional five years, from October 1, 2014 to September 30, 2019. Board approval isrequired to.exercise any renewal options and changes to the Agreement. Except for updated contractprovisions, all remaining terms and conditions of the Agreement will remain in full force and effect.

ASK will continue to operate FTZ Site under federal FTZ Operating rules and regulations. The UnitedStates (U.S.) Government's Federal FTZ Board designated the Port as the Grantee/Administrator ofFTZ 202 region for the City of Los.Angeles and the surrounding region. A definition of an FTZ is asecure 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 lawsand Customs entry procedures. All activities are performed in accordance with Federal FTZprocedures. The goal of the FTZ program and Portis to stimulate economic growth and developmentin the United States, facilitate efficient cargo transit and support the local, State and nationaleconomy. The FTZ does not generate a direct profit for the Port, but is provided by the Port as aservice to its customers to promote international trade and commerce in the region and U.S. See theAttachment for an overview of FTZ policies and guidelines for this Agreement.

The Port states that ASK plans to continue to operate and manage FTZ operations, including generalwarehousing, distribution and office facilities at FTZ Site No. 15 to receive, store, and manageinventory and distribute consumer products, apparel, accessories, and other merchandise for sale inthe domestic and, occasionally, the international market. The Port states that ASK is leasing this

CAOFile No. PAGE0150-08913-0001 2

property from Wilmington Storage Partners, L.P., in Pacific Palisades. The area used by ASKconsists of approximately 159,865 square feet of warehouse and office space on approximately 4acres of land. ASK employs approximately eight full-time employees.

ASK has already paid a one-time application or activation fee of $5,000 and an administrative fee of$25,000, respectively, for the original five-year term, for a total of $30,000 in FTZ Operator fees. ThePort subsequently increased the annual administrative fees, and the proposed Amendment with ASKwould be required to pay an annual fee of $7,750 per year or $38,750 for one five-year contract term,with renewal options, subject to ratification by the Board, for the remaining 15-year contract term anda total fee of $146,250. 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 oroutside expenses for FTZ-related administrative services. During the 2013 calendar year, the Portstates 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 ASK has committed to use the Pier Pass program, which reduces daytime trucktraffic operations and allows open operations in the evenings. ASK will notify truck drivers, brokersand companies that trucks serving the FTZ site and Port's container terminals must confine theirroutes to the designated Wilmington truck route. If the proposed Agreement is not approved, ASKhas the option to move its facilities to another FTZ region in California, such as Long Beach or SanDiego, Palmdale or another state. The. Port states that approval of the Agreement is in the bestinterest of ASK and the City and Port economically;

The proposed Agreement is in compliance with City requirements and has been approved as to formby the City Attorney. Pursuant to Charter Section 373 and the Los Angeles Administrative CodeSection 10.5, Council approval is required because the cumulative contract term exceeds threeyears. The Port Director of Environmental Management has.determined that this is an administrativeaction 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. 14-7655 authorizing the proposedFirst Amendment of Foreign Trade Zone (FTZ) Operator Agreement (Agreement) No. 09-2749 withASK Marine, Inc., FTZ No. 202, Site No. 15, located in Wilmington, California, and extend theAgreement by an additional five years, through September 30,2019, and return the documentto thePort for further processing, including Council consideration.

FISCAL IMPACT STATEMENT

The proposed Amendment to the FTZ Operator Agreement with ASK Marine, Inc. (ASK) will have noimpact on the City General Fund. ASK has already paid a one-time application or activation fee of$5,000 and an administrative fee of $25,000, for the original five-year term, for a total of $30,000.The Port subsequently increased the annual administrative fee, and ASK will be required to pay anannual fee of $7,750 per year or $38,750 for one five-year contract term, with renewal options,subject to ratification by the Board, for the remaining 15-year contractterm and total fee of$146,250,if the contract is renewed. All Funds will be deposited in the Harbor Revenue Fund;

CAOFileNo. PAGE0150-08913-0001 3

TIME LIMIT FOR COUNCil ACTION

Pursuant to Charter Section 373, "Long Term Contract Approved by Council," and the Los AngelesAdministrative Code Section 10.5, "Limitation and Power to Make Contracts,". unless the Counciltakes action disapproving a contract that is longer than three years within 60 days after submission toCouncil, the contract will be deemed approved.

MAS:ABN:10140174

Attachment

CAOFileNo. PAGE0150-08913-0001 4

ATTACHMENT

OVERVIEW OF FOREIGN TRADE ZONES, OPERATING AGREEMENT","., ... "--- .. ,~.. "~.. - .-."

The Federal FTZ Board designated the Harbor Department (Port) asthe Grantee/Administrator ofFTZ No. 202 for the City of Los Angeles and the surrounding region. The following is an overview ofFTZ policies and guidelines.

The FTZ Operating Agreements are entered into with various companies who have applied for FTZstatus with the Federal FTZ Board and have been approved by the United States (U.S.) Departmentof Homeland Security Customs and Border Protection (Customs) to activate a site. Authority isgranted by the Federal FTZ Board under the amended FTZ Act of 1934, which is administeredthrough Federal FTZ and Customs Regulations. The FTZAct was established to support U.S.commerce and create jobs by reducing import duties or excise taxes by deferring payment of dutythereby making it appealing for companies to perform work on their products in the U.S. instead ofoffshore. The goal ofthe 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 beoutside the Customs territory for the purpose of tariff laws and Customs entry procedures. It is theU.S. version of what are known internationally as free-trade zones. An FTZ is sponsored by qualifiedpublic or private companies, which may operate the facilities themselves or contract for the operationwith public or private firms. The operations are conducted on a public use basis, which opens itsservices to the public, with published tariff rates. In this case, the published rates applicable are thePort Tariff (No.1) rates, terms and conditions. These spaces and operations will be under thesupervision 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 FTZgeneral 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 F'TZdoesnot generate a profit for the Port, but is provided as a service to its customers to promoteinternational trade in the U.S. These operations will be monitored by the Port, but under thesupervision 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 annualadministrative operating fee of $7,750 per year for an initial term of five years, with three subsequentfive-year renewal options, in the same amount, for a contract term up to a total of 20 years. Theproposed Agreement renewal options will be subject to approval by the Board and based upon termsand conditions negotiated prior to the end of each one-year term. The proposed Agreement with theFTZ Operator will become effective the first of the month following Council approval and will remainin effect for an initial term of five years. Either the Port or FTZ Operator can terminate the proposedAgreement at the end of the each term or by submitting a 180-day prior written notice.