Avoiding Another Ports Slowdown

Avoiding Another Ports Slowdown
West Coast shippers and longshoremen are taking initial steps to begin contract extension talks well in advance of the scheduled 2019 expiration. Leaders of many industry associations hope to avoid the stalled talks and economic losses that occurred from mid-2014 into early 2015. Photo: Jeff Wilcox.

After a costly setback from fall 2014 through early 2015, major West Coast port labor unions and employers are set to begin negotiations well in advance of a 2019 contract expiration date. Delegates of the International Longshore and Warehouse Union (ILWU) voted this month to begin talks soon with the Pacific Maritime Association (PMA). Last time talks did not start until mid-May 2014, just six weeks prior to contract expiration. It took the two nine months to reach an agreement. The slow pace of progress led to a West Coast shipping slowdown by the ILWU which caused severe delays at ports and cost the retail and agriculture sectors hundreds of millions of dollars.

That experience led PMA to request that ILWU this year take early steps to authorize the opening of talks on an extension of the current contract.

Economic Stakeholders Urged Early Start

Other key sectors of the Northwest economy were vocal in their concerns, as well. Three days before the recent ILWU vote, 128 organizations representing manufacturers, farmers, distributors and other supply chain stakeholders sent a letter to ILWU and PMA encouraging “early and continuous dialogue” between the two organizations to “help avoid a repeat” of the 2014-15 slowdown.

The news of intentions to get a jump on contract talks was welcomed by Washington Council on International Trade (WCIT) President, Eric Schinfeld.

“With the livelihood of so many local businesses, employees, and residents dependent upon efficient and reliable gateways, it is essential that port management and union representatives meet early and regularly to finalize a contract extension beyond 2019,” said Schinfeld in a statement.

Herb Krohn, Washington Director of the International Association of the Sheet Metal, Aviation, Rail and Transportation (SMART) Workers Union – Transportation Division, told Lens the ILWU vote indicates the longshoremen are happy with their current contract and looking forward to striking a new deal.

“I think it always helps when there are discussions between labor organizations and management. The fact that they are already thinking about it is a sign of openness to communicate,” Krohn told Lens.

The American Soybean Association wrote in a statement that the two parties agreeing to begin talks two years in advance would send a clear message to the stakeholder community that they intend to avoid any disruptions at West Coast ports in the future.” 

“This is a directive to go and have discussions with the PMA and report back to the membership, and we’ll do just that, with the wellbeing of the rank and file, our communities, and the nation in mind,” said ILWU International President Robert McEllrath in a statement.

More Than $700 Million In Losses, Previously

During the drawn-out 2014 contract talks, container productivity slowed significantly, resulting in $769.5 million in net shipping losses to Washington businesses from October 2014 to March 2015. This is according to a 2016 report prepared by Community Attributes, Inc. for the WCIT.

The estimate was based on exported shipments and imports not received, plus the costs of trucks idling in line and “fees associated with idle containers at the ports, borne by shippers.”

ILWU represents longshore, clerk and foreman workers at ports on the U.S. West Coast, plus Hawaii, Alaska and British Columbia, Canada. PMA membership includes port terminal operators and maritime companies who do business on the U.S. West Coast.

In 2014, contract talks began on May 12 and were not settled until a tentative five-year pact was reached in February 2015 with the help of federal mediators. Both sides ratified the agreement in May 2015.

Major sticking points included an enhanced arbitration system, an annual ILWU wage base increase, continued healthcare benefits and labor jurisdiction over chassis, or vehicle base frames, used to move containers.

During the negotiations, ILWU tried to gain bargaining leverage by slowing work operations. However, the labor union said the biggest cause of the slowdown was not enough truck beds to move containers from ports to distribution sites.

Tara Mattina, communications director for the Northwest Seaport Alliance, told Lens that ports, cargo owners and shipping lines were “caught in the middle” of the contract discussions.

Those parties “don’t have a seat at the table and are not part of the negotiations, but were definitely affected,” Mattina told Lens.

Loss Of Business To Canadian Ports

The Federal Maritime Commission (FMC)  reported a drop in containerized imports to the West Coast by as much as 29 percent in the beginning of 2015.

In contrast, during the first half of 2015 Canadian ports of Prince Rupert and Metro Vancouver, as well as U.S. East and Gulf Coasts, had a “dramatic increase” in container volume due to cargo diversions.

Rerouting and missed sales opportunities from West Coast ports were anticipated to cost U.S. retailers up to $36.9 billion from 2015 to 2016. That is according to an analysis from Kurt Salmon, a global management consulting firm.

The effects were felt at the ports of Seattle and Tacoma, where containers handled per hour fell to half from November 2014 through March 15. The delays caused exporters to miss crucial demand periods.

Missed Sales For Washington Apples, Potatoes

Washington Tree Fruit Association officials estimated between 200,000 to 300,000 boxes of apples per week were not sold because of the slowdown. The Washington State Potato Commission reported millions of dollars in losses per month due to missed sales opportunities.

Partnering To Keep Region Competitive

Mattina told Lens that Los Angeles and Long Beach have large local and regional markets for imported goods, which intensifies demand among shippers. In contrast, she said, Washington is a “discretionary gateway” where roughly 70 percent of cargo travels to other destinations including the Midwest and the Ohio Valley.

Therefore, Mattina said, it is especially important for Washington to do everything it can to keep its ports competitive.

“The good news is (Washington) ports have really good relationships with shipping lines, PMA and local longshore unions” and will “rely on these relationships to stay as competitive as possible,” said Mattina.

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