UPDATE: ILA-USMX: Talks Break Off as Expiration Date Nears

UPDATE, 12/26/12, 11:38 AM EST

Both the ILA and the USMX have agreed to attend a meeting called by George Cohen, Director of Federal Mediation and Conciliation Service (FMCS) in advance of the December 29th expiration of the contract extension.

The goal is to continue the negotiations in the hopes of avoiding a strike by East Coast labor on December 30th.

Attached please find the official Statement by FMCS Director George H. Cohen on East Coast Ports Labor Negotiations.

Odyssey will continue to keep you informed.


ORIGINAL POST, 12/19/12 

Negotiations at a Standstill

“In a recent “Trade Fact of the Week” post, Progressive Economy laid out the following outline of worldwide container-shipping fleet capacity:

World Container-shipping fleet capacity, ILA, USMX, OL

1990: 1.5 million TEUs

2000: 4.3 million TEUs

2008: 10.6 million TEUs

2012: 15.4 million TEUs

* “Twenty-foot Equivalent Units” –essentially the number of standard 20 x 8 x 8.5 foot shipping containers the world’s container-ship fleet can carry at any given moment. (Source: Progressive Economy, 2012)

The enormous growth in container shipping that these figures represent has been a long time coming. The beginning and end of every container ship’s journey is their port of call. Without a functioning port, a ship cannot load or drop off product, and its essential function is rendered useless. With the huge increase in shipping capacity over the last two decades, the ports of the United States have become hotbeds of activity and plentiful sources for economic productivity that ripples throughout our country– our clothing and shoe industries alone, which import 99 percent of footwear and 98 percent of apparel through these U.S. ports, directly supports over 4 million American jobs. And it is not just workers in the apparel and footwear industry that benefit from well-functioning ports – it is everyday American families as well, with higher quality and lower priced clothing and shoes resulting from efficient trade.

As a strike looms less than two weeks from now at all East and Gulf Coast ports, it is imperative that the American people and our President understand the importance of functioning and reliable ports to our country.”

So begins the plea for action posted on the American Apparel and Footwear Association’s (AAFA) website. Odyssey continues to keep you up to date with what you need to know. Yesterday at 3:04PM EST, the Journal of Commerce reported that contract negotiations between the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) have once again broken off, raising the likelihood of a Maine-to-Texas dock strike at year-end.

In the meeting held in Newark, N.J., members of the ILA and the United States Maritime Alliance Ltd. (USMX), the group representing port employers at East and Gulf Coast ports – failed to resolve their differences on a key sticking point – fees known as container royalties, which the union said it considers untouchable. ILA President, Harold Dagget, says the ILA offered to extend the contract to Feb. 1, “provided that management takes the Container Royalty issue off the table”, and USMX counter-offered with an extension to Jan. 7, to which the ILA rejected.

A Brief Background of the Issues at Hand

The ILA and USMX have been negotiating on and off since March for a six-year contract covering about 15,000 ILA members handling containerized and roll-on, roll-off cargo in East and Gulf Coast ports. Negotiators agreed last summer on ILA demands for payment of workers displaced by automation, and for guarantees of ILA jurisdiction over chassis repairs.

  • The major issues that remain are container royalties and local work rules.
  • The container royalty program was established in the 1960s to compensate ILA workers for the loss of jobs to automation.
  • According to USMX, carriers paid $211 million – equivalent to $10 per man-hour, in royalties last year.
  • USMX wants to freeze royalty payouts at current levels, and eliminate them for new hires; however, USMX is proposing to use future growth in royalties for other ILA benefits, and have offered to guarantee that current workers continue receiving royalties at current levels for the next 25 years.

Dagget says the ILA views the container royalties as “wage supplements” – not bonuses. Averaging $15,500, the royalty per employee ranged from a few thousand dollars in ports such as Jacksonville and New Orleans to $36,000 in Savannah and more than $20,000 in New York-New Jersey. “Container royalties are the bloodline for the ILA members, for the international and for the districts,” he said. Ten percent of carriers’ royalty payments go to the ILA treasury.

new york port september, ILA, USMX, OL&T

The Nation is Reacting

The National Retail Federation released a statement calling for the two sides to stay at the table until a deal is reached. “The last thing the economy needs right now is another strike, which would impact all international trade and commerce at the nation’s East and Gulf Coast container ports,” wrote Jonathan Gold, vice president. “This is truly a ‘container cliff’ in the making.”  An additional 68 trade (including the aforementioned AAFA) have echoed their sentiment  – encouraging President Obama to invoke the Taft-Hartley Act if necessary to keep the ports open.

Shippers should keep in mind that:

  • A strike would affect container and roll-on, roll-off cargo – but not breakbulk, cruise, and military ships covered by local agreements, which the ILA said it would continue to work.
  • The ILA said it would also work perishables – but refrigerated and military containers moving on container ships delayed by the strike would be nonetheless affected.
  • The threat is causing shippers to initiate contingency plans. Some are choosing to divert cargo to Canada, Mexico, or the West Coast; while others are waiting it out in hopes that their overseas supplies will be sufficient to last through any possible idle period.

The JOC points out that also looming is a December 31st expiration of a contract between the ILA and the Metropolitan Marine Maintenance Contractors’ Association, which represents New York-New Jersey equipment maintenance and repair companies. The Metro association’s contract is not part of the coastwide master agreement, and a strike against the repair companies would idle the port.

OL&T’s Thoughts

Let’s be mindful that a lot can happen in the next 11 days, even if no negotiations take place for a few of those days. The negotiations themselves are mature, and there only seem to be a few key points holding up an extension or possible new contract. Odyssey has expected the negotiations to go down to the deadline date and we will continue to keep you informed.

Source: Journal of Commerce, AAFA: We Wear News