COSCO/kanter/mike1st/mark2nd

By LARRY KANTER

Staff Reporter

With plans by the Port of Long Beach to build a new container terminal for the China Ocean Shipping Co. in jeopardy, officials from the rival Port of Los Angeles are making a bid for the fast-growing, Chinese government-owned shipping line.

Los Angeles Harbor Commission President Leland Wong and port director Larry Keller are scheduled to be in China this week, on a visit they say has been planned for months.

But in light of Long Beach's recent troubles, the pair at the last minute revised their itinerary to include a meeting with executives of the shipping line, known as Cosco, according to Wong.

"We're going to approach them just like we would any other customer," Wong said in an interview prior to his departure for China late last week. "We have facilities to offer that are superior (to those being offered by Long Beach). We feel we can negotiate a very good contract."

The stakes for Long Beach and Los Angeles are enormous. China is the region's second-largest trading partner, with more than $18 billion worth of cargo moving between L.A. and China each year. Cosco handles about 25 percent of U.S.-China trade.

Those stakes could become sigificantly higher if Cosco were to take over OOCL Inc., a large Hong Kong-based shipping company, as some shipping industry experts speculate may happen when Hong Kong reverts to Chinese control in July.

Under its agreement with Cosco, Long Beach promised the company a working terminal by July 1, 1998. After that, stiff monthly penalties kick in, which could cost Long Beach hundreds of thousands of dollars, according to Don Wylie, director of trade and maritime services for the Port of Long Beach.

The project, he said, already is one to two months behind schedule.

The question reverberating through local shipping circles is which side will win the latest battle.

L.A. is prepared to offer Cosco a new, built-to-suit container terminal complete with on-dock rail capabilities at its new Pier 400 development a 470-acre, $300 million facility under construction in San Pedro Bay.

Not only would the facility be custom-built, it is free from the historic structures that dot the Long Beach Naval Station as well as the symbolism associated with transferring a former military base to a facility owned by the People's Republic of China.

Pier 400 is scheduled to be completed by 2000.

The Port of Long Beach had agreed to build a new shipping terminal for Cosco on the site of the former Long Beach Naval Station.

But those plans suffered a setback on April 11, when Los Angeles Superior Court Judge Robert H. O'Brien ordered the port to cancel its lease with Cosco and consider all options for the site "free and clear" of any pre-commitments. The ruling was in response to a lawsuit filed by preservationists seeking to save a number of historic structures at the 55-year-old base.

The Long Beach Harbor Commission last week voted to instruct the Port of Long Beach staff to develop documents canceling its lease with Cosco, which was signed last October. City lawyers reportedly fear that breaking the lease could expose the port to a breach of contract lawsuit.

Citing the ongoing litigation with preservationists, Wylie refused to comment on either the panel's vote or on the prospect of losing Cosco to Los Angeles.

But Randal Hernandez, chief of staff for Long Beach Mayor Beverly O'Neill, downplayed any potential threat posed by L.A.

"Long Beach has a long relationship with Cosco," Hernandez said. "They've been here for 16 years. We think we have a very good, longstanding partnership with Cosco."

Nonetheless, Port of L.A. officials are jumping on what they see as a golden opportunity. "We're an option," said Wong, "especially in light of the lease being canceled."

Ironically, Wong and Keller are in China at the same time as O'Neill and a number of Long Beach port officials who also are there this week on a previously scheduled visit.

High on their itinerary is a meeting scheduled for April 21 with Cosco President Zhen Zhong and other top company executives. At that meeting, the delegation intends to reaffirm Long Beach's support for the $200 million terminal it had planned on building for Cosco.

The current battle is shaping up as a virtual replay of a similar bidding war that played out last year, when the two competitive ports aggressively jockeyed for the shipper's business.

That battle ended last April, when Cosco signed a letter of intent with the Port of Long Beach for a 145-acre shipping terminal and on-dock railyard to be built on the site of the former Long Beach Naval Station.

Those plans, however, immediately became the subject of controversy, sparking a flurry of lawsuits from environmentalists, historic preservationists and neighboring cities wary of increased traffic as a result of the facility.

More recently, Rep. Duncan Hunter, R-San Diego, proposed legislation that would block the Cosco lease based on national security concerns.

Cosco officials, who rarely respond to U.S. press inquiries, declined to comment last week.

However, in a written statement issued March 28, Ma Zehua, president of the company's Cosco Americas Inc. unit, protested characterizations of Cosco as a threat to U.S. national security.

"We strongly protest against such doings and reserve the right to take all measures necessary to protect Cosco's interests against any harm inflicted," he said.

Last year, when Los Angeles attempted to entice Cosco away from Long Beach it proposed that the company move to the terminal currently occupied by American Presidents Lines Ltd. APL is slated to leave that facility this summer, when the shipper moves over to a 235-acre container terminal at the L.A. port's new Pier 300 development.

Cosco reportedly opted for Long Beach because it wanted the new terminal designed to its own specifications.

Some industry insiders say that, with Pier 400 on the table, Los Angeles could be a much more formidable competitor this time around.

"Pier 400 would be more suitable for Cosco," said one shipping line executive who asked not to be identified. "Cosco needs a facility that can handle 1 million-plus container units (a year). For that, you need 250 acres. And that's only half of what's available at Pier 400. There's more room to grow."

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