Parties reach tentative agreement in Port of Los Angeles and Port of Long Beach work stoppage

Soon after federal mediators were brought in to help reach an agreement between teams representing employers at the ports of Los Angeles (POLA) and Long Beach POLB) and the International Longshore and Warehouse Union Local 63 Office Clerical Unit (“OCU”), the eight-day strike, which saw activity at POLA and POLB essentially come to a halt, has ended in the form of a tentative agreement.

The Los Angeles Times reported that the strike commenced on November 27, when the 80-member OCU expressed frustration regarding shipping line employers outsourcing jobs. The OCU, said the report, had the support of 10,000 regional ILWU members, whom in turn honored the picket line and did not work. The report added that it centered on the claim by the union that employers have steadily outsourced jobs through attrition, while the union said the employers have transferred work from higher-paid union members to lower-paid employees in other states and countries.

While details of the agreement were limited, Steve Berry, lead negotiator for the Los Angeles and Long Beach Harbor Employers Association, the union’s negotiating arm, said in the report there will be “no outsourcing under this contract” and that the package included unspecified wage and pension increases and a “no layoff” clause that would go into effect once ratified. The contract will last for six years, and is retroactive to June 30, 2010 and be set to expire on June 30, 2016, according to the report.

The impact of the labor stoppage was significant, with roughly 20 container vessels idled as a result, which were unable to unload or load cargo, and more than 20 vessels either anchored at POLA and POLB or diverted since the beginning of the strike to Oakland, Panama, and Ensenada, Mexico. Along with the idled or diverted vessels, each port had several container operations that were not in operation during the duration of the labor stoppage. What’s more, the OCU had picket lines at 10 of the 14 terminals at POLA and POLB.

And it was clear that supply chain operations were being negatively affected, due to things like port terminal operators lacking the room and resources to store empty containers and intermodal equipment.

“I am pleased to announce that an agreement has been reached between labor and management that will bring to an end the eight-day strike that has cost our local economy billions of dollars,” said Los Angeles Mayor Antonio Villaraigosa in a statement. “I would like to thank both the employers and the union for returning to the bargaining table in earnest beginning last night and working feverishly to reach a new deal. The result is a contract amenable to both sides and the return to work during this holiday season for thousands of men and women who are vital to keeping our port running around the clock.”

In the days leading up to this tentative agreement, the pressure had been mounting for the parties to come to an agreement.

The National Industrial Transportation League (NITL) and dozens of other shipper groups and transportation and logistics concerns, including the Airforwarders Association, the National Retail Federation, and the Transportation Intermediaries Association, among others, penned a letter to President Obama yesterday, calling for the White House to quickly engage in the dispute to end the work stoppage at the ports and aid in negotiations.

The groups explained in the letter that if there was no imminent resolution there could be significant consequences, including: manufacturers requiring parts for their production lines to have to suspend operations; exporters failing to meet delivery times for Far East customers; retailers being unable to get goods to store shelves in a timely fashion, and importers, wholesalers, and U.S. consumer brands having to face order cancellations if delivery dates could not be met.

Had the strike continued, many industry experts said it was reasonable to assume that it could have cost the U.S. economy roughly $1 billion per day, as was the case with the ten-day West Coast port strike in 2002. According to industry estimates, POLA and POLB cumulatively handle more than 40 percent of U.S. import cargo per day, which represents about $1 billion on a daily basis.

As the strike went on, the consequences and impacts of it subsequently increased, said Paul Bingham, Economics Practice Leader, Transportation Division, CDM Smith.
A draw down of small inventory buffer stocks or slack built into shipment delivery time estimates [were] being used up with less and less flexibility remaining in the supply chains that were affected,” said Bingham.

The increasing impacts, he said, would have been likely to continue to mount for some time, if the disruption continued although there would be limits to increasing impacts and the marginal increase in impacts eventually started to diminish as shippers, carriers and consumers adjusted to temporary accommodation to the strike impacts in the form of diversion to other ports of vessels and cargo, individual shipment diversions—to other vessel services or even air cargo—and source supply shifts added to the initial inventory draw downs as coping mechanisms by businesses trying to minimize the impacts they suffer.

But with a tentative agreement in hand Bingham said he expects “there will be some rebound in economic activity, where delayed cargo is finally delivered and overtime is earned by workers catching up with the resulting temporary surge in cargo handling.”