ILA, USMX remain in discussions over labor pact

With a September 30 deadline looming, The International Longshoremen’s Association, the largest union of maritime workers in North America, and the United States Maritime Alliance, an alliance of container carriers, direct employers, and port associations serving United States-based East and Gulf Coasts, remain in negotiations on a new contract this week in Delray Beach, Florida.

In recent months, the talks have ranged from amicable to contentious, and with no clear end in sight it has 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.

In a July 16 letter to Harold Daggett, ILA president, and James Capo, USMX chairman and CEO, NRF President and CEO Matthew Shay made pleaded his case for the organizations to come to terms on a new agreement.

“We ask that you continue the negotiations without delay, and without impacting commerce moving through the ports,” wrote Shay. “We would further ask that you issue a statement committing to continue negotiating and working without interruption, even if negotiations extend beyond the September 30 contract expiration.”

The NRF’s top executive added that this week’s negotiations come at a critical time as 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.

RILA pointed out that the ongoing labor negotiations 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.

RILA President Sandy Kennedy wrote in a letter to Daggett and Capo that without the absence of certainty over the outcome of these negotiations, retailers have no choice but to continue planning for a shutdown.

“[S]ome of our members advise that they are beginning to redirect their supply chains in order to allow adequate lead time to ensure that customer needs can continue to be met, regardless of whether the negotiations are successfully concluded by September 30,” wrote Kennedy. “Supply chain changes of this magnitude are not desirable to retailers because they take time both to implement and to reverse.”

While the final outcome of these negotiations is incomplete, ILA officials noted in March 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 remain 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.

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 the ILA’s 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 experts 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.