West Coast Port Negotiations Continue Ahead of June 30 Labor Pact Expiration

This story appears in the June 23 print edition of Transport Topics.

Contract negotiators for ports on the West Coast are continuing to bargain with no public sign of how much progress may have been made as the June 30 contract expiration date approaches.

The Pacific Maritime Association, bargaining on behalf of ocean carriers and terminal operators, has been in talks for six weeks — breaking silence earlier this month only to dispel inaccurate rumors that talks were suspended.

Neither the PMA nor the International Longshore and Warehouse Union commented on the talks last week when contacted by Transport Topics.

In another maritime industry development, a plan to combine the operations of the three largest ocean carriers collapsed last week after Chinese regulators rejected it.

The so-called P3 would have pooled operations by Maersk Line, CMA-CGM and Mediterranean Shipping Co. on major trade routes to cut costs.

The expiring six-year labor contract, covering five of the nation’s 10 largest ports, was reached after four weeks of talks beyond the 2008 expiration date and included management complaints that productivity fell about 30% as talks dragged on. Also, a 10-day shutdown in 2002 cost the U.S. economy an estimated $1 billion a day in lost business.

Trade group officials whose members rely on imports through West Coast freight terminals expressed a mixture of concern and hope as the June 30 deadline nears.

“Any disturbance or interference in retail supply chains is not a promising option and remains a distinct possibility until a final agreement is reached,” said Kelly Kolb, a vice president at the Retail Industry Leaders Association. “With that in mind, it is imperative that the two parties come to an agreement quickly to avoid disrupting the flow of cargo through the West Coast ports.”

“We fully expect the contract to expire on June 30 without a new deal in place,” said Jonathan Gold, a vice president at the National Retail Federation, another trade group. “We hope the parties will remain at the table and get a deal done quickly in July without engaging in supply chain disruptions.”

Added Robin Lanier, executive director of the trade group Waterfront Coalition: “I maintain that the news blackout is a very positive sign that they are having a mature conversation and that there’s no grandstanding.”

She said that she wouldn’t be surprised if they did a short-term agreement because of the “Cadillac tax,” referring to provisions in the Affordable Care Act that could tax health care plans starting in 2018 that offer higher benefits than typical agreements.

As negotiations continued, the latest round of cargo data last week indicated a continued uptick in freight volumes in advance of the deadline.

In May, Los Angeles and Long Beach, the twin California ports that are the nation’s two largest, reported a combined year-over-year increase of 5% in import loads, a 1% increase in exports and more than 10% more empty containers moved.

The pace of the increase was lower than March and April, both of which were more than 10% higher than the corresponding 2013 month.

A white paper written for the PMA by maritime economist John Martin illustrated management’s issues. It showed a decline in market share for West Coast ports, which last year had less than half of all containerized imports, and the rise of port cargo on the East and Gulf coasts.

Statistics from the American Association of Port Authorities show a shift of 3 percentage points in market share toward East Coast ports and away from West Coast terminals.

Martin also said in his report that the cargo handled through West Coast ports is linked to more than 9 million jobs and more than $383 billion in wages paid, including activity in port areas as well as inland locations.

His economic impact paper didn’t name a specific amount of economic damage if there is a 2014 strike.

The ILWU also is discussing chassis issues and jurisdiction over maintenance and repairs, which traditionally have been done on the docks, Lanier said.

However, the gradual withdrawal of ocean carriers from chassis ownership has created the possibility that the work could be reassigned.

As for the failed P3 plan, China’s Ministry of Commerce said the plan that would have included 255 vessels carrying at least 40% of world trade would “restrict competition.”

The United States and European regulators previously cleared the P3 plan. Maersk officials last week said they were exploring new alliance options.