Labor peace arrives for East and Gulf Coast ports

After more than a year of contentious negotiations, 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, have finally arrived to a state of labor peace.

The ILA announced last night that its membership has officially signed off on a six-year Master Contract, which covers roughly 14,500 members, in a ratification vote held at East and Gulf Coast member ports.

This agreement follows a March announcement that the USMX and the ILA approved an agreement for a successor Master Contract and came one month after the parties came to terms on a new tentative labor contract agreement. The original deadline for the contract was September 30, 2012, but it was extended through a series of continuing extensions to keep ILA and USMX negotiations intact and to keep cargo moving into and out of East and Coast ports. Both parties were aided in negotiations by the Federal Mediation and Conciliation Services.

Terms of the new contract, according to the ILA, include: wage increases totaling $3 per hour spread out over the life of the agreement that will bring the hourly pay rate to $35.00 by the final year of the contract; contract language that protects ILA workers that have been displaced due to new technology and automation, coupled with a joint management-ILA committee that will continually examine the impact of automation on ILA’s workforce; and terms that will restrict the outsourcing or subcontracting of ILA jobs to non-ILA employers, with the ILA preserving its chassis maintenance and repair jurisdiction and expand major damage criteria to protect jobs.

Other terms of the contract, which were disclosed by ILA President Harold J. Daggett in a March 19 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, include:
-guaranteed payments of $211 million in container royalties each year for the life of the contract; and
-a continuation of the national healthcare program for ILA members with no change in deductibles, coverage, or co-pays

“On behalf of ILA members and officers at all ports, we’re thrilled this Master Contract was ratified by an overwhelming margin,” said Daggett in a statement. “We all worked very hard, achieved landmark improvements and protected our members and our union for many years.”

ILA officials said that USMX members will vote to ratify the Master Contract by April 17. And they added that the completion of the contract brings stability and growth for six years, with it coming prior to the completion of the Panama Canal expansion, which is expected to bring an increase in trade activity at East and Gulf Coast ports.

These negotiations were 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 have 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 over the deal coming to fruition 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.

National Retail Federation (NRF) Vice President for Supply Chain and Customs Policy Jon Gold told LM that this news is positive for both supply chains and the U.S. economy in that the agreement provides stability on the waterfront for East and Gulf Coast ports.

“This provides the stability that retailers and other importers and exporters and transportation and logistics providers, among others, really rely on through the ports,” he said.

Prior to the completion of this deal, many shippers were vetting contingency plans in the even that a deal would not happen, as they needed to have a course of action to get their goods to market, especially last fall at the height of Peak Season.

Some of the contingency plans cited by Gold included diverting cargo to the West Coast, looking at options through Canada and Mexico, and shipping well ahead of time to ensure there was sufficient inventory in place.

“That uncertainty really weighed heavily with a lot of shippers in terms of what they needed to do,” explained Gold.

Now that a deal is 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.