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Last year, global supply chain leader NFI purchased SoCal-based Cal Cartage, which NFI had called “the premier U.S. port logistics provider.”  Cal Cartage is by far the largest drayage provider at the Ports of L.A. and Long Beach, and NFI would have reasonably expected this purchase to rocket the company to the top of the drayage industry, in part because Cal Cartage’s unique facility provides a competitive advantage: it sits on nearly 100 acres of prime real estate on the heavy load corridor just four miles from the port terminals. Through the transition, long-time customers like Amazon, Sears/Kmart, and TJ Maxx stayed on.  Owned by the Port of L.A., the facility for years charged Cal Cartage below-market rent.

It appears, however, that NFI’s plan to break into the Southern California drayage industry might be on shaky footing after the Los Angeles City Council put the brakes on a new lease.

NFI was pursuing a new lease with the Port to allow it to operate under a revocable permit for up to five years. Meanwhile, it has been facing increased government scrutiny, which in May led the City to revoke NFI/Cal Cartage’s Foreign Trade Zone status due to multiple labor and safety violations found by Cal-OSHA and the NLRB. Earlier in the year, the Los Angeles City Attorney sued several NFI/California Cartage companies for unfair competition, alleging they illegally misclassify their drivers as independent contractors.

On top of the legal issues, these violations have led drivers and warehouse workers to strike NFI/Cal Cartage seven times in recent years, most recently in October 2018.  Workers struck at the NFI warehouse at the Port, K&R Transportation, and California Cartage Express.  The picket lines extended far beyond the ports, all the way to the Rio Tinto mines in Mojave, CA.  In support of striking workers, 66 community, clergy, and labor leaders engaged in civil disobedience and were arrested outside the Port of Los Angeles.

Following this disruption, the City took action.  The day after the Port approved a five-year lease with NFI/Cal Cartage, LA City Council had filed a rare motion to assert jurisdiction over the lease.  After an October 2 committee hearing, on Friday, October 12 the full City Council unanimously voted to veto the lease, citing the multiple labor disruptions at the port and the city’s proprietary interest in avoiding work stoppages and ensuring the efficient movement of cargo.  Council requested the Port include safeguards to protect against work stoppages in any permit or lease with the company.

If NFI/Cal Cartage balks at the new standards, the city appears ready to find a new tenant.  As part of its action, the Council requested the Port initiate a procurement process concurrent with the negotiations, and require compliance with the Los Angeles’ Service Worker Retention Act to protect the current workers’ jobs in the event a successor company moved in.

At the time of this writing, NFI/California Cartage is occupying Port property without a valid lease. They face a choice: either ensure there are no labor disruptions, or lose the crown jewel of their brand new investment.