Lack of progress between PMA and ILWU creating a tough situation for industry stakeholders

An unwelcome combination of a lack of meaningful progress and intensified conflict are resulting in ongoing and extended negotiations between over a new labor contract between the Pacific Maritime Association and the International Longshore Warehouse Union (ILWU).

Talks between the PMA and ILWU have been ongoing since May 12, with their contract having expired on July 1.

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.

Earlier this week, 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 said this week that the ILWU has now 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 action this week, 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.”

What’s more it noted that those four ports cumulatively handle more than 80 percent of containerized cargo at West Coast ports.

Faced with the reality that a labor deal is far from a reality, 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 yesterday, 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.

“While the parties to the negotiation stated earlier this year that they would continue operations throughout the negotiations, we have seen crisis levels of congestion at the ports since September,” the letter stated. “The sudden change in tone is alarming and suggests that a full shutdown of every West Coast port may be imminent. The impact this would have on jobs, down-stream consumers, and the business operations of exporters, importers, retailers, transportation providers, manufacturers and other stakeholders would be catastrophic.”

The letter added 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.

Charles W. “Chuck” Clowdis, Jr,, managing director, IHS Economics, Global Trade & Transportation, told LM that while Los Angeles and Long Beach ports have seen worse congestion in previous years this’ season’s malaise and slowness of processing container ships is alarming since it comes on the most promising Holiday Season since 2005-2006. 

“Some receivers are diverting to other ports but most are too late and subject to steamship line schedules,” he said. “We spoke with one major retailer who has dusted-off his Holiday ‘air cargo critical’ list and is lining-up space now. While on select goods only at this stage, port congestion can put more and more Holiday Gift items in the air before they are on-the-shelves.”

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. “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.”