ILA-USMX: An Update on the Negotiations

Three days of negotiations between the International Longshoremen’s Association (ILA) and their employers, represented by the U.S. Maritime Alliance (USMX) ended on Wednesday without a labor agreement to replace the one that expires on Dec. 29. Talks aimed at working out a new master contract will resume next week on Dec. 18 in Newark, N.J..

ILA President Harold Daggett has won authorization from ILA delegates to call a strike if negotiations aren’t made before Dec. 29th. The unanimous vote by the ILA’s 200-member wage scale committee moves East and Gulf coast ports closer to their first coast-wide strike in 35 years.

An ILA strike would affect container and roll-on, roll-off cargo covered by the ILA-USMX coast-wide master contract. The ILA would continue to work break-bulk cargo and cruise lines that employ ILA labor but are not covered by the master contract. Additionally, perishables and military cargo would be exempt.

Reasons Behind the Possible Strike

The primary theme behind the recent labor actions on U.S. ports is a realization that technology and automation is changing the workplace union members have known throughout their careers – and they fear that some of the high-paying waterfront jobs that have traditionally been passed down from father to sons, daughters and grandchildren may no longer be available to pass on.

Container royalties and local work rules have also emerged as top issues in this year’s ILA-USMX negotiations. Daggett has insisted the ILA would not accept an end to caps on royalties, which were established in the 1960s to cushion union members from job losses resulting from containerization.

Detail Points of Negotiation

  • Ocean carriers pay per-ton fees into programs used mainly to provide ILA members with cash payouts each December. Eligible workers’ checks averaged $15,500 last year, when carriers paid $211 million in royalties. Ten percent of royalty payments go to the ILA treasury.
  • USMX has proposed capping payouts to workers from container royalties at current levels, and using the excess to fund other ILA benefits. USMX also has proposed eliminating royalties for future hires.
  • USMX has proposed revising the master contract to provide more flexibility in revising port-specific work rules in local contracts that supplement the coast-wide master contract.
  • Employers want to revise local contracts to synchronize work shifts and curb payment for hours in which no work is done.
  • The ILA is resisting those changes, aimed primarily at the high-cost Port of New York and New Jersey.
  • The ILA’s coast-wide master contract covers container and roll-on, roll-off cargo. Break-bulk shipments are covered by local contracts. Because the ILA faces non-union competition for break-bulk shipments, it would continue working that cargo even if a strike were to take place.

What the Carriers are Doing

Some container lines have gone ahead and adjusted vessel schedules given the possibility of a work stoppage (either lock-out or strike). Hamburg Sud recommends shippers to avoid scheduling highly transit-time sensitive cargoes or refrigerated products close to the negotiation deadline of December 29th. Already, Maersk and OOCL have released statements on potential surcharges in order to address the potential risk of significantly increased port congestion as result of any labor related issues on or after December 29th, and other carriers are expected to follow suit. It’s important to note that the surcharges will only be effective if labor delays actually occur.

OL&T’s Thoughts

Despite the uncertainty, we are minded that just earlier this month in Los Angeles and Long Beach, striking port clerical workers had barely raised their picket signs when shippers began calling for President Obama to use the Taft-Hartley Act to end the walkout. The Taft-Hartley Act is a Federal law that would keep the ports at full operational capacity while a deal is reached. Similarly, in its letter sent today, the AAFA – a national trade association representing apparel and their suppliers, which compete in the global market – implored President Obama to intercede in the East coast port labor negotiations in order to prevent losses like those that occurred on the West coast. Citing national and economic security concerns, AAFA also encouraged the President to invoke the Taft-Hartley Act. We expect many trade organizations are writing their own letters to the President.

At this point, OL&T believes a determination still cannot be made on whether or not a work stoppage will happen.  Negotiations that took place earlier this week concluded without a consensus – but on a positive note, both parties stayed at the table for the full three days. Our feeling is that if there is a work stoppage event, it will be extremely short lived and possibly isolated to a few ports. If a strike occurs, we believe that the government will intervene quickly and invoke the Taft-Hartley Act to get labor back to work ASAP.

Source: Journal of Commerce