Bill Mongelluzzo, March 4, 2015, JOC.com
An East Coast dockworker Wednesday shocked importers and exporters that use West Coast ports by saying something completely opposite of what they have experienced from West Coast longshoremen the past four months.
“We want your business,” Thomas Stokes III, president of International Longshoremen’s Association Local 1414 in Savannah, told the 15th Journal of Commerce Trans-Pacific Maritime conference.
This pronouncement by the ILA leader came one day after the ILA international headquarters in New York confirmed it is exploring the possibility of starting contract negotiations soon — three years before the existing contract expires — with waterfront employers represented by USMX. The intent is to head off any possible diversion of cargo when the contract deadline approaches in 2018.
West Coast ports were brought to their knees in early November when the International Longshore and Warehouse Union began to allegedly hard-time employers with work slowdowns in Seattle, Tacoma and Oakland, and the ILWU also refused to dispatch sufficient qualified labor in Los Angeles-Long Beach.
The Pacific Maritime Association over the ensuing four months documented a 30 to 40 percent reduction in crane productivity at the northern ports, and a reduction in the daily dispatching of skilled yard crane operators in Los Angeles-Long Beach from 110 to 35. The ILWU job actions compounded pre-existing port congestion to the point where marine terminals were brought to the brink of gridlock, saved only by a Feb.20 tentative contract agreement reached between the PMA and the ILWU.
Stokes, speaking spontaneously from the audience, said Savannah’s longshoremen are proud of their productivity. He said they remain current on industry developments by attending forums such as TPM, 3,000 miles from their homes, and they educate their youngest dockworkers on the important role they play in the international supply chain.
The ILWU, by contrast, continues to say its members didn’t engage in work slowdowns in order to gain leverage in the contract negotiations that began on May 12, 2014. The ILWU blamed the port congestion on cargo surges brought on by big ships, and ocean carrier decisions to exit the chassis business, which led to equipment shortages and dislocations.
In a job action unrelated to the 2014-15 contract negotiations, ILWU Local 8 in Portland in June 2012 slashed crane productivity from about 26 per hour to the low teens because of a labor dispute with operator ICTSI. Despite repeated warnings from Hanjin Shipping Co., which accounts for more than 70 percent of Portland’s container volume, that its ships would cease calling in the Pacific Northwest port if productivity did not improve, ILWU productivity did not pick up. The Port of Portland reported that except for one day over the past two and one-half years — Super Bowl Sunday 2014 — crane productivity remained far below historical performance. Hanjin’s last call in Portland will be next week.
Poor productivity and port congestion at West Coast ports have convinced a number of importers that they must look for alternative ports in Canada and on the U.S. East and Gulf coasts. January container volumes announced by the ports generally show double-digit declines in container volume at West Coast ports and double-digit increases at Canadian and East Coast ports.
Adam Hall, senior director of international logistics at Dollar General, said that due to the situation on the West Coast, cargo diversion certainly occurred in the short-term, and now that retailers have readjusted their supply chains and established closer working relationships with trucking companies and other service providers in the East, a “significant portion of the cargo will not come back.”
Stuart Turner, enterprise commodity manager, global logistics, at Nexteer Automotive, said some cargo interests that diverted cargo over the past year came to the realization that they “no longer needed the West Coast.”
Dow Corning Corporation has a number of plants in the Midwest and for years has routed much of its Asian cargo through the West Coast. However, Dan Cronkright, global logistics procurement manager, said the past four months demonstrated that port reliability is a crucial requirement for a supply chain. The West Coast supply chain in recent months proved to be “completely unreliable,” he said.
Echoing that view, Chas Deller, partner at 10xOceanSolutions, said reliability and certainty, even more so than speed to market, are the most important qualities in a supply chain. The disruptions at West Coast ports have cost importers and exporters “a staggering amount of dollars,” he said.
The announcement Wednesday that the ILA and East Coast employers could commence contract negotiations in the next few weeks sends a message to importers who have recently altered their supply chains away from West Coast ports not to fear that there will be a breakdown in negotiations when the ILA contract comes up in 2018. It is common for cargo interests in a longshore contract year on either coast to begin diverting shipments to the opposite coast months before the contract expiration.
The ILWU historically has shunned the idea of agreeing to a contract before the previous agreement has expired. The 2014-15 negotiations demonstrate how the union uses a contract expiration to squeeze concessions from employers. The previous ILWU contract expired on July 1, and the ILWU refused to extend it, which means the no-strike clause and grievance machinery in the contract were null and void. That made employers helpless in stopping the work slowdowns that crippled their ports for four months.
The ILWU and PMA in late August jointly announced a tentative agreement on a key issue in the negotiations, maintenance of the union’s health care benefits in which employers pay 100 percent of the premiums. However, each time the PMA made a concession on a major issue such as health care or chassis jurisdiction, the ILWU kept returning to the table with a list of 10 to 12 new demands. This bargaining strategy is tried and proven, and has resulted in contract gains unlike those experienced by any other union in the country. It is unlikely that this bargaining strategy, or, in fact, the militant culture of the ILWU, will change anytime soon, especially if the PMA and the ILWU fail to follow the lead of the ILA and East Coast employers in starting contract talks years before the existing agreement is set to expire.
The top executives of the ports of Los Angeles and Long Beach told the TPM conference they have already begun to implement operational changes that should lead to long-term productivity gains. The Port of Oakland made a similar announcement on Wednesday. However, the ports concede that it could take two to three months to clear out the terminal and vessel backlogs that continue to act as a drag on productivity.
Meanwhile, Jorge Quijano, CEO of the Panama Canal Authority, told TPM on Tuesday that the canal expansion project will be completed early next year, and full commercial traffic with mega-ships almost as large as those now calling at West Coast ports will be able to transit the canal beginning in the second quarter of 2016.
Retailers shipping goods to the eastern half of the U.S., where two-thirds of the population resides, know they will then be able to bypass ILWU labor at West Coast ports and ship directly to East and Gulf Coast ports.