Congressional group voices concern over stalled labor talks to PMA and ILWU leadership

While the ongoing labor negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) ostensibly going from bad to worse, following the ILWU’s announcement late last week that it was halting negotiations from November 20 through November 30, a Congressional group last week penned a letter to PMA and ILWU leadership expressing concern over the state of the negotiations. The PMA and ILWU contract expired on July 1, and talks between the PMA and ILWU have been ongoing since May 12.

The Congressional group, entitled the Congressional PORTS Caucus, which is comprised of 90 members of Congress, explained to ILWU President Robert McEllrath and PMA Chairman and CEO James McKenna that heading into this holiday season, U.S. ports are already dealing with issues such as bigger incoming ships, chassis shortages, and deficient roads in U.S. freight gateways.

“These underlying factors have already caused congestion at many of our West Coast ports and any factors that have potential to exacerbate this congestion will further impact the entire supply chain across the United States,” wrote the Congressional PORTS Caucus. “A fair and equitable conclusion on the ongoing West Coast Labor negotiations would allow the stakeholders to work together to formulate solutions to our West Coast labor negotiation.”

The letter added that West Coast ports serve as a vital gateway for shipping American-made products around the world and also urged the PMA and ILWU to continue negotiations in good faith and work to address outstanding issues to reach a mutually agreeable solution.  

This letter is the most recent one calling for a solution to what has become a lengthy conflict.

Last week, U.S. senators representing California, Washington and Oregon also appealed to both the ILWU and PMA leadership to “continue negotiating in good faith to resolve the remaining issues and to swiftly move toward a final contract agreeable to both parties.”

The ILWU represents nearly 14,000 port workers in California, Oregon, and Washington, with more than 40 percent of U.S. incoming container traffic moving through West Coast ports at the Ports of Los Angeles and Long Beach, according to industry estimates. The PMA represents shipping lines and terminal operators at 29 West Coast ports.

And in early November 105 organizations, including shipper groups like the National Retail Federation and the Retail Industry Leaders Association and carrier organizations like the American Trucking Associations, and manufacturers, farmers, wholesalers, importers, exporters, and transportation and logistics providers, penned a letter to President Obama, expressing their concern about the ongoing interruptions at West Coast port terminal operations and asking for help to ensure the situation does not escalate to a complete shutdown of West Coast ports.

That letter noted that the threat of a port shutdown is creating high levels of uncertainty in a fragile economic climate that has resulted in many businesses to move forward on contingency plans that are costly and impact economic competitiveness. It also cited the 2002 West Coast port shutdown that lasted ten days and cost the U.S. economy $1 billion per day, and took six months for the affected ports to clear the backlog. Should something like that occur now, the letter cited a June study from the National Association of Manufacturers that noted the costs of a strike to the economy would be about $2 billion per day for a five-day interruption.

Another possible option to get the parties closer to agreement, the letter noted, was having the White House encourage them to begin working with a federal mediator through the Federal Mediation and Conciliation Service (FMCS), an approach that resulted in a positive outcome when negotiations hit a rough patch for East and Gulf Coast ports in 2013.

While these respective parties endeavor to see the PMA and ILWU come to terms on a new deal, given the current circumstances, especially with talks tabled until early next week, chances of a deal happening appear remote.

Prior to that, ILWU said the PMA “dishonestly” accuses the union of breaking a spoken agreement that port operations would continue under the auspices of a temporary contract extension.

According to ILWU spokesman Craig Merrilees, the union has bargained in good faith despite “pressure tactics” imposed by the PMA over the past six months. These tactics include the shifting of ocean container chassis away from union crews, and refusing to bargain a training program for longshore workers as terminals become more mechanized.

And the PMA countered at the time, saying that the ILWU has targeted the ports of Los Angeles and Long Beach by unilaterally refusing to dispatch hundreds of qualified, skilled workers for critically important positions transporting containers in terminal yards at the nation’s largest port complex.

PMA officials said that terminal congestion has been increasing at Southern California port terminals for various reasons, including increased cargo volume, a shortage of chassis and rail cars, and a lack of available truck drivers, among others. And with the ILWU’s actions, the PMA said these job actions, which “have already crippled operations at the ports of Seattle and Tacoma, now threaten to do the same in Los Angeles and Long Beach.” Those four ports cumulatively handle more than 80 percent of containerized cargo at West Coast ports.

Along with the aforementioned labor issues, West Coast ports are also being impacted by high seasonal demand, lack of available chassis, and the ongoing driver shortage, among other factors.

In the event of a major work stoppage and related issues, shippers have been making sure they have a contingency plan at the ready if needed.

Paul Bingham, economics practice leader at CDM Smith, said that if it weren’t for the contingency planning for potential 2014 ILWU longshore labor disruptions, the impact on supply chains would be worse.  There are shippers inland complaining of the higher costs and the delays in handling their shipments.

“I haven’t read of any manufacturers shutting down operations yet, nor of retailer stock-outs, though we’re just getting into the big holiday selling season now so it may be too early to tell on that side,” Bingham said in a recent interview. “The traditional peak season through the ports is just about over however, so the additional volume pressure going forwards should be reduced.  That doesn’t work off the existing backlog quickly however.  It is clear is that in the near-term, the extra costs are being passed through to shippers, which dampens export competitiveness selling into foreign markets, and increases delivered costs of imports. The East Coast and Gulf Coast ports are likely eagerly enjoying some incremental market share gains, especially from all-water routes from Asia diverted from U.S. West Coast services to either Panama Canal or Suez Canal routing, though the actual change is likely marginal.  Inventory carrying costs are increasing with the time-to-market increases from the delays, though interest rates remain low so for most companies with a reasonable cost of capital, those are not yet extreme.”

A retail shipper recently told LM that in terms of the delays due to the West Coast for his company, it been relatively nimble changing POE’s as the disruptions have occurred in the form of things like weather, labor, and space availability, among others, and managing its carrier base between the steamship lines, draymen, and operations.

“We recognize that the environment has been very challenging for many of the BCO’s we benchmark with,” the shipper said. “However, while we have had some delays, our contingency planning and risk mitigation plan that we developed late last year has helped to significantly minimize our challenges.”