ILWU and PMA come to terms on a tentative agreement for health benefits

The ongoing labor negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) pointed to some signs of progress, with the concerns announcing late yesterday that they have come to terms on a tentative agreement on terms for health benefits.

The ILWU represents 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. And the contract, which expired on July 1, represents more than 22,000 dockworkers at all 30 U.S. West Coast ports. Negotiations began on May 10.

ILWU and PMA said that the tentative agreement is subject to agreement on the other issues in the negotiations.

“The parties have agreed not to discuss the terms of this tentative agreement as negotiations continue,” said ILWU and PMA officials in a statement. “Maintenance of health benefits (MOB) is an important part of the contract being negotiated between employers represented by the PMA and workers represented by the ILWU.” 

As previously noted in LM, this is not the first time a contract between the organizations gone on following the end of an existing contract. And one does not have to go too far back to see how acrimonious negotiations were, as in 2015, in the months prior to the June 30 deadline, it required the U.S. Federal Mediation and Conciliation Service to step in to help the sides find a way to come to an agreement over stalled labor negotiations. What’s more, the ongoing tension between the parties subsequently resulted in hindered productivity and also was a contributing factor in port congestion on the West Coast, especially as it led up to the 2016 holiday season. The PMA said, at the time, that the state of terminal productivity at the five largest West Coast ports was approaching gridlock, due in large part to what it labeled ILWU-staged shutdowns.

Various industry associations—including the National Retail Federation, American Chemistry Council, California Trucking Association, and the National Industrial Transportation League, and many others—recently penned a letter to President Biden, calling on the White House to reach a new agreement without any disruption to port operations.

“We believe an immediate extension of the current contract…will provide assurances to the millions of businesses, workers and consumers who rely on West Coast ports,” the letter stated. “We know that there are significant issues for both parties that need to be worked out during this contract negotiation. The only way to resolve these issues is for the parties to remain at the bargaining table and negotiate in good faith. Extending the current contract would provide additional certainty to all of the supply chain stakeholders that rely on the U.S. West Coast ports. This is even more important as we continue to experience supply chain disruptions and congestion for a variety of reasons.”

One of those reasons, the letter observed, is the timing related to the upcoming peak shipping season, with current cargo flows expected to remain at all-time high levels and subsequently result in further supply chain stress and ongoing inflation, with these issues expected to remain intact through the end of 2022.

In commentary provided to LM, Spencer Shute, Senior Consultant at Proxima, a Chicago-based strategic team of procurement specialists with more than 25 years of consultation and supply chain experience, said that should negotiations stall and lead to a lockout between thew ILWU and PMA, the impact would be devastating to the U.S. supply chain and felt by all retailers and consumers, with limited supply to continue to impact inflationary concerns.

“While a full shut down is the worst-case scenario and both sides are working to avoid that situation, it is likely that the flow of goods through the West Coast ports will slow down,” said Shute. “This will cause transit delays as freight that is being processed at a slower rate won’t be available for truckers. If the slow down happens immediately trucking equipment will be out of position which impacts overall freight rates. The additional delays will create a sense of limited supply impacting consumer buying patterns. Retailers will begin to encourage holiday shoppers to purchase goods sooner than ‘normal’ (similar to last year). An additional factor in all of this is freight from Shanghai will begin reaching US ports after they have started to reopen from the lockdowns. This will create a sense of volume surge which impacts how the ports process freight. If negotiations are not completed, there will be limited incentive for the laborers to expedite processing ships coming to port.”