Dan Sandoval

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Ports pileup

Transportation

Contract negotiations at U.S. West Coast ports are creating problems for exporters.

March 5, 2015

Throughout the past decade, exports have become a growing part of the recycling industry. This growth, however, has been put to the test in recent months as negotiations between the International Longshoremen and Warehouse Union (ILWU) and the Pacific Maritime Administration (PMA) have dragged on. As the negotiations continue, exporters’ businesses and the wider economy are feeling the effects.
 

Slow going

The ILWU, which represents approximately 20,000 dockworkers at 29 U.S. West Coast ports, and the PMA, which is charged with negotiating and administering maritime labor agreements with the ILWU, have been locked in negotiations for roughly nine months that have grown increasingly contentious.

The PMA released a report prior to the most recent contract’s expiration date of June 30, 2014, that highlights the role that West Coast ports play in the U.S. economy. The report, authored by maritime economist John Martin, notes that West Coast ports provide more than 9 million jobs in the United States. Daily operations at the ports contribute about 12.5 percent of U.S. gross domestic product (GDP), and activity generated by cargo at West Coast ports provides close to 4.3 million jobs in the three states where the ports are located (California, Oregon and Washington) and contribute more than $989 billion to the economies of these states, according to the PMA report.

This information helps to illustrate how activity at the West Coast ports could extend beyond the ports’ home states.

The PMA says ILWU members began a work slowdown at the West Coast ports in November 2014. However, the ILWU denies this, saying instead that the slowdown is the result of missing and damaged equipment at the ports.

This slowdown has grown steadily and is generating concern among shippers, as it has resulted in massive port congestion and significant delays.

However, these challenges have not been limited to businesses on the West Coast. As negotiations drag on, recyclers and other businesses throughout the country have been affected.

While negotiations on some issues have progressed, in early February it appeared that both sides were digging in and that the possibilities of a strike by the ILWU or a lockout by the PMA were becoming more likely. In fact, the PMA temporarily suspended its loading and unloading operations Feb. 7-8 because of what it deemed “premium pay for diminished productivity.” This lockout was expanded to include Feb. 12, 14, 15 and 16.
 

Collateral damage

The slowdown has made a difficult situation even worse for recycling companies and other businesses that ship off of the West Coast.

The president of one large recycling company that ships material overseas using the Southern California ports of Los Angeles and Long Beach calls the situation a disaster. “I have never seen the ports like this,” he says. He adds that even when a resolution is reached by the PMA and ILWU, he expects the backlog at the ports to linger for at least two months.

In the meantime, he says, his business has declined by 20 to 30 percent as a result of the slowdown, which is forcing his company to rent additional warehouse space to store material. “It is costing people like us a lot of money,” he says.

The recycler says that even though he has been cutting costs and laying off employees, his losses still are significant.

Another broker who uses Southern California ports to ship recovered paper and plastics overseas agrees that the ports of Long Beach and Los Angeles are experiencing the most delays, though she says all the big ports, including Oakland, Tacoma and Seattle, are off significantly in terms of the typical volume of material handled.

In response to this situation on the West Coast, the broker says, some companies have started to ship material off of the East Coast when possible.

A representative from a large metal recycling company based in the Midwest says he has been directing more of the company’s cargo to ports on the East Coast, though in the past he has used both East and West coast ports.
 

Key issues

While both the PMA and ILWU took aggressive postures in negotiations throughout the fall, it appeared that as 2014 was nearing an end an agreement was within reach. A number of statements were released at that time claiming the parties had reached tentative agreements on a number of key points, including wages and health care coverage.

Despite these agreements, several problem spots remained, including one that has perhaps created the biggest challenge for both parties: Who would be responsible for providing the maintenance and repair of the chassis equipment that is used by trucks to move containers into and out of the ports?

The PMA says this issue appears to be the catalyst for the recent move by union workers to conduct a deliberate slowdown of business activities at the ports.

Historically, the chassis were owned by PMA member companies, including the shipping lines. As part of earlier contracts, union workers were responsible for providing the maintenance and repair (M&R) of the chassis equipment. This created union jobs to inspect and repair the equipment.

However, over the past several years, the owners of the chassis equipment have sold the business to third-party firms that are not PMA members. The new chassis owners say they and not the union employees should inspect and maintain the equipment. This move could reduce the number of ILWU employees.

The sale of this equipment to third parties, according to the ILWU, has resulted in misplaced and damaged equipment. This, the union has claimed, is the reason for massive congestion that is hampering ports throughout the West Coast.

However, critics of the union’s M&R policy say that under the previous contract, union workers could flag random chassis equipment for inspection and repair as a way to generate additional income.

In early January, the PMA released a report noting that beginning in November 2014 the ILWU reduced the number of operators it had working at West Coast ports by as much as two-thirds.

The slowdown is most acute at the Southern California ports of Los Angeles and Long Beach, where the PMA claims that the average number of shifts for qualified crane operators dropped from more than 110 per day to less than 35 per day since November, “resulting in tens of thousands of containers available for discharge sitting on the docks at the twin ports.”

Many exporters say the ports of Los Angeles and Long Beach already are congested in light of growing traffic and the lack of updates at the ports.

Several exporters say trucks often line up for several miles waiting to deliver containers to the ports.

Steamship vessels also are seeing a huge backlog as they wait to dock at these ports to unload and load containers, sources say.
 

Flickering hope

Early February seemed to bring good news regarding the ongoing contract negotions, with several sources, including the American Association of Port Authorities (AAPA), Alexandria, Virginia, saying the PMA and ILWU had reached a tentative agreement on the chassis M&R policy. Although details of the agreement were not released, the announcement was met with relief by many of the companies and entities directly affected by the slowdown.

Conveying optimism that the drawn-out negotiations were reaching an end, Kurt Nagle, president and CEO of the AAPA, said: “We’re pleased and encouraged with the reported progress toward a successful conclusion of these protracted labor negotiations. Ports are a critical part of the American supply chain and economy, with 12.5 percent of the U.S. GDP tied to the efficient movement of goods through our West Coast ports alone in 2013.

“Ensuring that cargo moves efficiently through all of our ports must be a national priority and isn’t just a West Coast issue,” Nagle continued. “The faster the two sides in the West Coast port labor contract negotiations can reach a just, long-term agreement, the sooner our system of ports can get back to ensuring the efficient delivery of goods, jobs, international competitiveness and overall prosperity that our nation has come to depend upon.”

Other organizations, however, were skeptical about the tentative agreement.

The Agricultural Transportation Coalition (AgTC), Washington, said the tentative agreement was a rumor and expressed doubt that it would come to fruition.

In comments the AgTC sent to its members, it states that under the agreement, “The ILWU would have jurisdiction over maintenance and repair work of chassis when conducted on the terminal.”

However, the coalition said this would create a significant problem: “It would give the ILWU the decision-making authority as to which chassis could leave the terminal and which chassis would be sent to the ILWU-run chassis repair facility.”

Other groups affected by the slowdown also expressed skepticism about a near-term settlement. Fred Johring, chairman of the Harbor Trucking Association (HTA), a coalition of Los Angeles and Long Beach intermodal carriers, says legal issues could arise if the contract allows the ILWU to perform M&R on chassis equipment that is not owned by PMA members.

Johring says this is problematic for members of his group that may own their chassis and would then be required to have a third party inspect the equipment. He says the U.S. Department of Transportation already requires drivers to inspect chassis to ensure they are in good condition.

Seeking to break the deadlock in the negotiations, the PMA said it made an “all-in” five-year contract offer that would significantly increase compensation to ILWU members, provide fully paid health care and increase the maximum pension.

PMA President Jim McKenna said, “Our members have shown tremendous restraint in the face of ILWU slowdowns that have cut productivity by as much as 30, 40, even 50 percent. This offer puts us all-in as we seek to wrap up these contract talks and return our ports to normal operations.”

The PMA also said it requested a contract extension, which would prohibit work slowdowns, but the union refused.

“Despite four weeks of participation by a federal mediator, the parties have not yet been able to bridge the considerable gaps between them,” the PMA writes in a news release dated Feb. 4, 2015. “The union has recently made significant new demands and is also insisting on changes to the decades-long process for selecting arbitrators—trying to change the rules on the waterfront in their favor, giving them the ability to unilaterally remove arbitrators who rule against them.”
 

Stepping backward

As of Feb. 11, the PMA announced that it would temporarily suspend premium-pay weekend and holiday vessel operations on four upcoming dates, while yard, gate and rail operations would continue at terminal operators’ discretion. In Southern California, the PMA said, terminal operators would expand daytime vessel operations on nonholiday weekdays.

“Last week, PMA made a comprehensive contract offer designed to bring these talks to conclusion,” PMA spokesman Wade Gates said. “The ILWU responded with demands they knew we could not meet and continued slowdowns that will soon bring West Coast ports to gridlock. What they’re doing amounts to a strike with pay, and we will reduce the extent to which we pay premium rates for such a strike.”

In response to the PMA announcement and the cancellation of negotiations scheduled for Feb. 11, ILWU President Robert McEllrath said, “This is an effort by the employers to put economic pressure on our members and to gain leverage in contract talks. The union is standing by ready to negotiate, as we have been for the past several days.”

McEllrath added, “It seems to us that the employers are trying to sabotage negotiations. They are not just hurting workers, families and communities, what our employers are doing is bad for the industry and the U.S. economy.”

In light of these recent developments, it seems less encouraging that a deal will be struck between the two parties sometime in February, though the possibility remains. However, a federal mediator has been working with the PMA and ILWU, and, according to both parties, many of the key sticking points in the negotiations have been resolved.

Unfortunately for recyclers and other businesses that rely on the contents of the containers that pass through the West Coast ports, whether the PMA and ILWU reach a deal by the middle of February or negotiations continue to drag on, many shippers say the backlog at Southern California’s ports will continue to reverberate long after a new labor contract has been signed.


 

The author is senior editor of Recycling Today and can be contacted via email at dsandoval@gie.net.

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