Health-Care Cost Agreement Boosts West Coast Port Talks

This story appears in the Sept. 1 print edition of Transport Topics.

Labor talks at West Coast ports moved closer to a contract resolution as the parties last week announced a tentative agreement on health-care costs.

As cargo continues to move without disruption and discussions now turn to other issues, the joint announcement from the International Longshore and Warehouse Union and the Pacific Maritime Association called the health deal “an important part” of an overall contract. Neither side disclosed any details.

PMA, on behalf of terminal operators and ocean carriers, has been negotiating since May 12 with ILWU, whose nearly 20,000 workers handle more than half of U.S. ocean container cargo. The current coverage for members could trigger additional taxes in coming years for so-called “Cadillac” health plans under the Affordable Care Act.

“Maintenance of health benefits is an important part of the contract being negotiated,” the Aug. 26 statement said, noting that the health-care deal was subject to an agreement on other unspecified contract issues.

A six-year labor agreement expired June 30. Talks have continued since early May, with the exception of two breaks for the union to deal with a separate grain handling contract in the Pacific Northwest.

The agreement was reached in 2008 without a disruption, though the prior contract triggered a 10-day work stoppage that has made shippers nervous in the absence of a new deal this year.

The so-called “Cadillac” plans, whose benefits are more extensive than other health insurance coverage, face an excise tax of as much as 40% starting in 2018.

ILWU members who use network health providers pay no annual deductible, and they pay only $1 for prescriptions, according to union officials.

The day before the tentative agreement was announced, Sandy Kennedy, president of the Retail Industry Leaders Association, sent a letter to both sides expressing concern.

“Each day without a finalized agreement jeopardizes the movement of goods destined for shelves during the all-important holiday season,” Kennedy said.

RILA members, including the largest retailers, hope negotiators are “moving with haste toward a long-term solution that will stabilize the labor picture,” Kennedy’s letter said. “Retailers continue to exercise contingency plans throughout their massive supply chain operations despite the fact the West Coast negotiations have not reached an impasse.”

The contingency plans include container shipments that increased 49% in July at Prince Rupert, British Columbia, where sailing times are at least two days less from China than other North American ports. In addition, record cargo levels were set at Vancouver, which is Canada’s largest port.

“If people are using the Canadian ports now out of concern for a slowdown, and they like what they see and they like the processing times and the experience, they’ll continue to funnel some of their traffic that way,” Emma Griffith, a director at Fitch Ratings, who covers air and sea ports, told Bloomberg News.

“Shippers will likely look at the routes through Canada as good solid opportunities,” Richard Stewart, a professor of transportation logistics at the University of Wisconsin-Superior, told Bloomberg.

Container traffic rose at West Coast ports before the contract expiration date and continued to increase in July at alternative ports such as Savannah, Georgia.