West Coast Port Update: Deciphering the Contract Talks

Late last week, talks between clerical workers and management at the Ports of Los Angeles and Long Beach once again stalled as voting members of the International Longshore and Warehouse Union’s (ILWU) Local 63 Office Clerical Unit (OCU) rejected a proposed new contract. According to the Harbor Employers Association (HEA), which represents management, all 16 bargaining units failed to ratify the December 4th tentative agreements that had ended an eight-day strike that had shut down most terminals at the nation’s two busiest seaports.

Despite the turbulence, business has remained open as usual at both ports. As of today, it is not clear what step the union or management will take next. The National Retail Federation (NRF), the world’s largest retail trade association, urged the two sides to continue to keep the ports open despite the rejection of the contract. “We can’t afford to see another shutdown,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold in a statement issued today. “As labor and management work to resolve this situation, uninterrupted operation of the ports should be their top priority. Too many jobs across the country depend on these ports to let any interference with operations be considered an acceptable way of doing business.”

describe the imageIn November, when the strike first began, it was backed by many other union members who were not willing to cross the picket line, which resulted in the temporary closure of 10 of the 14 terminals in the L.A. and Long Beach ports.

Now that the tentative agreements have failed to be ratified, the workers could go back on strike or the employees could continue to work under the terms of their expired contracts while negotiations continue.

OL&T’s Thoughts, by John Nikolich, Director, Global Marine

“Regarding the labor negotiations on both coasts, I maintain a position of cautious optimism that agreements will be reached and/or ratified in the days to come. Unfortunately, it does seem that once we reach a milestone or cross another line in the sand on one coast, talks along the other flare up again; taking attention away from the most important goal for all stakeholders which is keeping the cargo flowing through our nation’s ports.

Now that we are through the national election, the holidays are behind us and we are past the ‘fiscal cliff’ what concerns me most is the financial instability of some of the ocean carriers who after documenting losses in 2011 and 2012 are not painting 2013 to be much prettier. We may see individual lines and consortiums reduce services into/out of the US West Coast if the cost of operating these terminals continues to rise, which is almost certain. Then given the challenges in the Asia to Europe market right now, many of the 10,000 to 15,000 TEU new builds deployed exclusively to this service may find themselves sailing extremely light, yet unable to be transitioned into other more lucrative trades.

Back to the matter at hand, fortunately West Coast Ports and terminals will continue to operate during the negotiation and ratification process. It is still recommended that OL&T Clients keep overseas trading partners, suppliers, customers and colleagues up to date on the situations on both coasts.

Here on the East Coast, the master agreement referred to in the ILA-USMX joint statement on February 1st has been agreed upon in principle and is subject to ratification by both sides but while the formalities are finalized there will not be any interruptions in port operations. We believe that labor and management at all of our nation’s ports are anxious to move past the negotiating phase and get going under new mutually beneficial master contracts.”

We will continue to keep our clients informed so make sure to subscribe to the OL&T blog for the latest updates.

Source: DC Velocity, The Journal of Commerce