NRF chief calls for a labor agreement to be reached between PMA and ILWU

With negotiations over a new labor contract between the Pacific Maritime Association and the International Longshore Warehouse Union (ILWU) now in their fourth month and no clear end in sight, National Retail Federation (NRF) President Matt Shay wrote a letter to leadership at PMA and the ILWU, asking the parties to come to terms on a new agreement soon.

In the letter, which was addressed to ILWU President Robert McEllrath and PMA Chairman and CEO James McKenna, Shay stressed that “the failure to reach an agreement is now having a significant impact on port operations and contributing to port congestion in significant and damaging ways.”

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.

As previously reported, the ILWU’s president Bob McEllrath has told members to “hold the line,” and encouraged them to propose strategies to address the challenges ahead, including:
-jurisdiction – efforts by the employers and other unions to “poach” Longshore jobs;
-health Care & Pensions – increased employer & government pressure to cut benefits; and
-automation employer efforts to replace workers with new technology

As for the PMA’s stance, a report in the International Business Times cited the PMA as pointing to lost market share and the need to increase efficiency to maintain a competitive advantage against ports in Canada, Mexico, and the U.S.-based East and Gulf Coast ports.

And the report added that the PMA claims that annual earnings for full-time longshoremen average $132,046 along with generous no-deductible health benefits, while the ILWU says that the current labor contract calls for $35 per hour for the most experienced workers, or an annual salary of $72,800 per year. And according to the PMA 2013 annual report, 34 percent of longshore workers get less than 1,600 hours of work per year or roughly 30 hours a week.

Shay wrote in the letter to McEllrath and McKenna that at a minimum the NRF is asking the parties to extend the expired contract through November in order to reinstate arbitration agreements, which, he said, are preventing many issues at the ports from being addressed. 

“Retailers are now in the midst of their heaviest shipping season of the year preparing for the upcoming holidays, which are a ‘make it or break it’ time for retailers and merchants,” Shay wrote. “While we recognize that there are many reasons for the current port congestion, there is no doubt that the lack of a new labor contract between PMA and the ILWU is having a big impact on port productivity, particularly in Southern California. As you know retailers began instituting costly contingency plans in early 2014 to ensure that merchandise would reach stores in time for the critical holiday shopping season.  The current congestion at West Coast ports has eviscerated those preparations in many cases, which may cause critical merchandise to miss target on-sale dates.”

What’s more, Shay expressed frustration and dismay on behalf of retail shippers, saying that NRF is deeply troubled by the lack of apparent progress in negotiations since August, when PMA and ILWU said they had reached a tentative deal on health benefits, adding that there has been no signs of progress since then, which he described as troubling and disconcerting.

He added that a new labor contract needs to be viewed as a must, given the backlog of shipping containers piling up at West Coast ports, explaining that shippers need certainty when making strategic long-term supply chain investments or for placing transportation orders for discretionary cargo.

This letter is not surprising in that Peak Season activity is nearly complete with no new resolution of a contract, said Paul Bingham, economics practice leader at CDM Smith.

Bingham noted that there has been diversion away from U.S. West Coast ports this year, some to British Columbia ports and some via all water services to the East Coast.  There were also some timing impacts where some shipments were moved earlier, especially into the first half of the year from the summer given the contract expiration date at the end of June.

“The letter is specific in several details of the situation that seem reasonable to draw attention to, such as a call for a public update from the negotiating parties on where they are now, after silence of more than a month,” said Bingham. “The letter acknowledges that there are many reasons for the port throughput problems being experienced recently in Peak Season, although they only name the incomplete negotiations and its consequences as a reason.  The action called for in the letter to have the old contract extended through November, in order to reinstate the arbitration process, is understandable.  Lack of the contract-specified arbitration process leaves the port terminals at risk of disruption that is then potentially more difficult to resolve.  Examples from earlier in the summer were when in July, ILWU workers briefly acknowledged picket lines set up by independent dray truck operators at some terminals protesting for the right to organize.  Had the old contract been in place still that might not have happened.”

Other related things cited by Bingham but not raised in Shay’s letter because they are out of the control of the PMA and ILWU are
-the lingering impacts of the confusion in the market over the transition away from steamship-line owned container chassis;
- the aftermath of the port terminal closures during the wharf fire at Port of Los Angeles last month; and
- the impacts of the surges of containers that are discharged/loaded by the larger-size vessels now in use on some services calling the Ports of Los Angeles and Long Beach

“There is probably also an element of concern on the part of the retailer managers that their 2014 plans to work around a potential U.S. West Coast disruption had built-in expectations of a finite period for contract settlement, after which they had not done the same level of alternatives planning,” said Bingham. “The uncertainty about when the alternative shipping operations can end is likely a contributor to the timing of the letter, especially when there is no public update from the negotiation parties about how close they are to reaching a settlement.”