Is a Labor Disruption on the Horizon?

Negotiations are underway between the Intl Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) on a new contract which covers the employment of about 13, 600 west coast longshoremen. With a July 1, 2014 expiration date looming, representatives from both sides are optimistic an agreement can be reached.

West coast ports are critical to the well-being of our nation’s economy having a financial impact of over 2 trillion dollars annually. Any impasse in negotiations could cause ripple effects felt throughout the nation. A 2002 ten day union labor lockout resulted in a backlog of vessels waiting to be unloaded and a fiscal loss of millions of dollars per day for the U.S. economy.

Jim Kenna, PMA President, noting the talks are timely given the increase in competition and the loss of market share among west coast ports – 48.6 % in 2008 to 43.5% in 2013, sees the contract renewal discussions as an opportunity “to enhance the competitiveness of West Coast ports, ensuring effective, productive terminals that support workers in local port communities and beyond.”

ILWU President Bob McEllrath stated, “Longshore members have made it clear that they want a contract with stronger safety provisions, more secure benefits, greater respect for ILWU jurisdiction, and a reasonable approach to new technology.”

One major issue expected to garner much attention by both parties is healthcare benefits for ILWU workers and the Affordable Health Care Act tax imposed on firms offering top notch health care plans. In particular, the PMA reports that its employers “spend more than $1.6 million per day for health care coverage for ILWU registrants, retirees and their dependents, but the PMA says the cost of the new tax could be more than $100 million per year.” It’s easy to see the challenges ahead given this is only one of a large number of complex issues facing both parties, not to mention job retention and automation which will continue to come into play as vessels grow in size.

~ Ocean Carrier Reactions ~

Having filed port congestion surcharges years ago with the FMC as the result of previous work stoppages or labor disruptions, should a current labor action occur the carriers are advertising their anticipated surcharges at the following tentative levels:

– $800 usd per 20’ Cntr
– $1,000 usd per 40’ Cntr
– $1,125 usd per 40’ HC Cntr
– $1,270 usd per 45’ Cntr

While the above rates are not representative of the surcharges for all carriers, the surcharges appear to be quite high in value.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

A work stoppage in 2014 could have a significant impact than in previous years on the trade community as many vessels calling west coast ports are larger in size and unable to transit the Panama Canal. Intermodal trains would quickly recognize a backlog and equipment per diem charges would ensue.

Shippers and importers are advised to reach out to all parties within their supply chain to identify alternatives and develop a contingency plan in the event of a labor disruption. While it may be impossible to avoid additional expenses as a result of a work stoppage, proactive steps can ensure continuity in your supply chain.

From the desk of…

Jerry Becnel
President