ILA chief presents terms of new labor contract to membership

Earlier this month, the United States Maritime Alliance (USMX), an alliance of container carriers, direct employers, and port associations serving United States-based East and Gulf Coasts, and the International Longshoremen’s Association (ILA), the largest union of maritime workers in North America, officially approved the agreement for a successor Master Agreement, which came roughly one month after the parties came to terms on a new tentative labor contract agreement.

Terms of the agreement will be submitted to ILA and USMX memberships for ratification and pave the way for six years of stable labor-management relations covering all the Atlantic and Gulf Coast ports, said the Federal Mediation and Conciliation Service (FMCS) in mid-March.

The terms were previously not available, but on March 19 ILA President Harold J. Daggett penned a letter to all ILA members covered by the Master Contract, with details on the new six-year contract from October 1, 2012-September 30, 2018.

The terms of the contract include:
-guaranteed payments of $211 million in container royalties each year for the life of the contract;
-increased wages effective October 1, 2014, with the highest wage to go to $33 per hour and effective October 1, 2016, with the highest wage to go to $34 per hour; and
-a continuation of the national healthcare program for ILA members with no change in deductibles, coverage, or co-pays

The container royalties were a major bone of contention in the drawn out negotiations it needed to control container royalty payments that have risen dramatically since they were first established in 1960, totaling $211 million in 2011 or an average of $10 per man hour.  Employers are not seeking to eliminate these bonuses, USMX President James Capo previously said, as they are looking only to cap them and use the extra money to help pay for benefits for ILA workers.

The ILA’s Daggett said preventing a cap on container royalty was one of the key battles the ILA faces.

And in this week’s letter to ILA membership Daggett explained that even if there is another recession which causes total tonnage to decline, ILA members are assured of $211 million in container royalties coastwide.

“We have never had a container royalty guarantee,” he wrote. “Thus the amount of benefits each year has depended upon worldwide economic conditions. Now, if the contract is approved, you face no risk of any fall-off on coastwide container royalty receipts for the life of the Master Contract. Not only do we have a guarantee that protects us in bad time, but we also share in any additional royalties that may be generated if economic conditions improve.”

Daggett said that on Tuesday, April 9 a vote will be held among ILA members in good standing in all ILA ports covered by the Master Contract.

These negotiations are very significant in that they affect 14 East and Gulf Coast ports that cumulatively represent 95 percent of all containerized shipments—and 110 million tons of import and export cargo—to the Eastern seaboard.

ILA officials noted that since 1977 ILA and USMX have successfully negotiated nine new Master Contracts without any disruption in operations, with the current contract in effect since 2004 and then subsequently extended for two years in 2010.

But concerns have remained heightened, due to the ten-day 2002 longshore contract dispute on the West Coast, which some estimates indicate cost the U.S. economy several billion dollars per day and negatively impacted various key sectors within the economy.

And shippers have been cautious and careful about planning for the unknown when assessing how these negotiations could impact their supply chain operations.

A Northeast-based shipper told LM last year that in anticipation of a possible strike her company had done an inventory review and arranged to bring in inbound inventory ahead of time, coupled with discussing alternate routes with the company’s freight forwarders.

With a deal ostensibly in place, Paul Bingham, economics practice leader at CDM Smith, said that shippers can certainly turn their focus away from labor disruption mitigation for the rest of 2013 for the East and Gulf Coast ports, after the challenges since the end of peak season last year. 

And he said that the timing for the ILA and USMX in the end will have been a slow season story, where the disruption threat wasn’t during the peak shipping season so the potential threat had been minimized in terms of timing during the annual cycle.