Disagreements remain in ILA-USMX labor negotiations

Where there once appeared to be hope regarding avoiding a labor strike at East and Gulf cost ports, there are now, again, apprehensions over a potentially damaging labor-related squabble that could have a significant impact in shippers’ Peak Season operations planning.

Earlier this month, the International Longshoremen’s Association (ILA), the largest union of maritime workers in North America, and the United States Maritime Alliance (USMX), an alliance of container carriers, direct employers, and port associations serving United States-based East and Gulf Coasts, said they would resume negotiations for a new labor contract this week. This week’s meeting followed what was perceived as positive momentum stemming from mid-July negotiations for a new contract.

But based on comments made by USMX officials yesterday, it looks like it may be back to the drawing board to get a new deal in place, as time continues to run out, with a September 30 deadline for a new deal looming.

“USMX and its member companies are disappointed with the uncompromising stand the ILA leadership is taking in the negotiations,” said USMX Chairman and CEO James A. Capo, in a statement. “The ILA’s posture is contrary to the history of cooperation that has characterized these negotiations in the past and, since 1977, has led to agreements without any disruption to the supply chain and port operations on the East and Gulf coasts.”

Capo added that USMX’ objective in negotiations is to maintain the competitive position and market share of the ports by improving productivity and removing the inefficiencies that threaten the economic vitality of the ports.

What’s more, he noted that ILA leadership has been “unwilling” to have a meaningful discussion about antiquated work ruled it employs—including “low-show” jobs that pay some ILA members for 24 hours of work even if they are on the job for a few hours in a day.

ILA workers, explained Capo, on average earn $124,138 a year in wages and benefits, along with an average hourly wage of $50, which is more than double the $23.19 average for all U.S. union workers in addition to paying no premiums and minimal co-pays and deductibles for a healthcare plan that is better than most U.S. employers provide their workers.

ILA officials were not available for comment at press time.

In July, it appeared that ILA and USMX were making progress, when they announced agreements in principle on issues having to do with the introduction of new technology and automation and maintenance and repair of chassis within marine terminals and at off-pier facilities at the East and Gulf Coast ports.

As recently reported by LM, in recent months, the talks have ranged from amicable to contentious, which has led to shippers thinking about making contingency plans to move freight that typically arrives through East and Gulf Coast ports.

Both the National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) have expressed their concerns to the ILA and USMX over what a potential labor strike could do.

RILA officials said that the ongoing labor negotiations affect 14 East and Gulf Coast ports, which together account for 95 percent of all containerized shipments to the Eastern seaboard.

NRF said retailers are in the process of making final decisions on whether to divert cargo from the East and Gulf Coast ports in order to avoid potential disruptions, which would not only add costly delays to its members supply chains and other industries relying on these East and Gulf Coast based maritime facilities but also potentially further threaten the fragile economic recovery with Peak Season approaching.

A major sticking point in the negotiations between the ILA and USMX has to do with how the ILA has to negotiate all Master Contract issues with the ILA Wage Scale Committee, which ILA President Harold Daggett said in a letter to USMX’ Capo is a democratically-elected committee that Capo has declined to address despite Daggett’s overtures to do so.

Another issue has to do with technology. USMX’ Capo maintains that the ILA is demanding that management guarantee a job for any worker even if new technologies eliminate a need for that position. Capo also noted that the current Collective Bargaining Agreement mandates that both sides negotiate over the impact new technology might have on the work force.

And Capo also explained that the possibility of chassis pool operators joining USMX and be bound to the Master Contract, as per the ILA’s request, would be “impossible” to achieve as the USMX cannot legally force pool operations to do so.

The ILA is also requesting that all import containers be weighed at the pier before being released to assure that ILA funds are not shortchanged monies and help to save lives as the ILA has lost 14 members in the last year due to workplace fatalities. While the ILA admitted this would reduce port productivity it stressed that productivity can never trump safety. USMX contends that weighing containers would create more unneeded work, add unnecessary expense and increase congestion at the ports.

A noted ocean cargo expert said how significant an impact a potential disruption will be depends on its duration but may not be as dire as it could be.

“There are also limits to contingency plans and mitigation,” said Paul Bingham, economics practice leader at CDM Smith. “At some point the cost of obtaining alternative transportation (i.e. West Coast or air freight) or stocking inventories outweighs the profits lost from just waiting out a disruption. Profits lost come from lost sales and depreciated product value (e.g. perishables.) Yet one needs to be careful to not over-value disruption impacts. The ships that are delayed in the case of a disruption aren’t sunk, they are diverted or delayed at sea, with most of those cargoes eventually getting to their intended recipients. There is also the working off of pent up demand after a port disruption where some of the intially-disrupted sales are made up, just with a lag.”

Bingham said that the costs of assuring import capacity on alternative routes, such as across the West Coast ports, or advance stocking of inventory can be thought of as disruption insurance premiums.

And Ted Prince, principal consultant at T. Prince and Associates LLC and a partner at Surface Intermodal Solutions, said that there is nothing preventing the ILA and USMX from reaching a deal.

“The question is if the ILA is really trying to make a statement here,” he said. “There has been so much talk about the death of organized labor politically and generically. This is a labor union with a very proud history.”