contract

PMA and ILWU Announce a Tentative Contract Agreement!!!

February 20, 2015

The ILWU and PMA have finally come to a tentative contract agreement. The ILWU has been working without a contract since July 2014. In that time, we have seen the West Coast ports come to a virtual standstill.

Details about the contract are still unknown. Both the PMA and ILWU have to ratify the contract. It does look like having the Secretary of Labor, Tom Perez, join in the contract negotiation process earlier this week has helped push the two sides come to a contract agreement.

Assuming the contract is ratified by both sides, it still is going to take months for the congestion to unwind. Importers and exporters should not expect ports to suddenly start operating efficiently. There is still a backlog of containers that need to be picked up from the ports as well as export and empty containers that need to be returned to the port. Furthermore, vessels are all over the place. Carriers will need months to get their schedules back on track. Most importantly, the basic infrastructural issues that have contributed to port congestion remain unresolved.

I will look on the bright side and say that we hopefully have the worst behind us (at least until this five year contract expires). I am happy to finally have some good news to announce after months of negative news.

Have a great weekend everyone.

-Jimmy Ting
Great World
jimmyting@gwlcorp.com
t: 650-873-9050 x1019

ILWU Contract Negotiation Update, July 2, 2014

The ILWU contract expired on June 30th and thus far we have not seen any major labor action. The ILWU and PMA issued a joint statement yesterday indicating their intention to continue keeping cargo moving until a new agreement can be reached.

If you have any questions, feel free to contact me.

Jimmy Ting
jimmyting@gwlcorp.com

Possible Shipping Disruption Due to West Coast Longshoremen Contract Negotiations

The Problem

The ILWU (International Longshoremen Worker’s Union) six year contract with the West Coast terminal operators (represented by the PMA – Pacific Maritime Association) is set to expire on July 1, 2014. The 2008 contract negotiations were contentious, but ultimately settled without a long work stoppage. Many in the shipping community still remember the 2002 contract negotiation which resulted in a two week work stoppage that shut down West Coast ports for two weeks. During that time, vessels piled up at various ports, with many ultimately discharging their containers in Mexico, Panama, and some even returning back to their originating foreign ports. The carriers declared Force Majeure, thereby transferring the financial burden of relocating the containers onto the shipping community.

What can we expect for this year’s negotiations?

I thought this article posted by Bill Mongelluzo of the JOC published on the ILWU13 website was very telling.

Bill describes what he believes will be the headline issues of this year’s negotiations:

  • Health Care: The Affordable Care Act places a tax on “Cadillac” health care plans. It is no surprise that one of the most well compensated unions would have health care plans (no premiums, co-pay for medicine of $1) that fall within the ACA’s definition of a Cadillac plan.  The terminal operators are not going to want to pay this additional tax (estimated by Jim McKenna, president of the PMA, to be roughly  $150 million a year).
  • Jurisdictional Authority: With terminals consolidating the ILWU will continue to be concerned about work possibly moving to non-union labor. We saw this with the dispute last summer when a labor dispute broke out over whose job it was to maintain chassis at the Oakland terminal.
  • Pension reform: As we’ve seen across other industries the last six years, employers are pushing for unions to take on a greater share of pension contributions.
  • Productivity: As with 2008, the terminals will continue to push for more automation and use of technology to streamline productivity. However there has been talk that this may be less of an issue than in 2008.

Some have asked why the ILWU and PMA don’t begin their negotiations earlier to help those in the shipping community avoid the stress of planning for possible shipping disruptions. Jim McKenna’s addressed this particular issue recently indicating that from previous experience, early negotiations are not fruitful as neither side feels urgency to get a contract completed. Both sides have agreed to begin negotiations in mid-May. However there is a distinct possibility that negotiations may move past the July 1st contract expiration.

We can also expect that during the negotiations, especially during the month of June, the ILWU will try to show their strength by slowing down work at the terminals. We should expect terminal efficiency to drop during the month of June, whether it is via slowdown for a few hours or a complete work stoppage for a day or two.

The Agriculture Transportation Coalition published their “Crystal Ball for the 2014 ILWU-PMA Negotiations”. Peter Friedman, Executive Director, provides interesting insight as well as his take on the different variables involved in the negotiations.

What are carriers planning to do?

The carriers are readily aware of the situation and in fact are already planning for possible congestion in the coming months leading up to the July 1st contract expiration. We have already seen one carrier (APL) announce a Congestion Surcharge (CSU) for containers from Asia to ALL destinations in the USA effective May 1, 2104. The congestion surcharge will be in the amount of $800/20’, $1000/40’, $1125/40’HQ, and $1265/45’HQ container. This charge will be applied if labor unrest occurs. It is important to note that this surcharge applies regardless of the destination. This means even containers bypassing the West Coast would face these surcharges. We saw similar announcements from the carriers in the past when they encountered possible labor disruptions. We expect other carriers to follow suit in the coming weeks with similar announcements.

In the event of actual long term labor disruption, I am not quite clear whether the Congestion Surcharge would take the place of the carriers declaring Force Majeure. However I would not be surprised if the Carriers reserved the right to declare Force Majeure even with the Congestion Surcharge.

 

What should the shipping community begin doing in response?

Importers should immediately begin the following:

  • Bring forward their supply chain and try to get product in before the July 1st contract expiration.
  • Look for alternative routings. For those receiving cargo at inland locations, there are alternatives (bringing product in through the East Coast ports or through Vancouver / Prince Rupert).
  • Look for alternative sourcing for products.
  • Notify customers of potential delays during July.

Exporters should also begin to look for alternative shipping options via other ports. They should also notify their customers an encourage them to move forward their supply chain planning.

I will continue to provide updates on the negotiations in the coming months.

Jimmy Ting

Great World Logistics (GWL)

Great World Customs Service

Great World Express

218 Littlefield Ave. South San Francisco, CA 94080

Direct: 650-308-8838

Tel: 650-873-9050 x 1019

Fax: 650-873-7029 / 7024
Skype: jimmy_ting
email: jimmyting@gwlcorp.com

www.gwlcorp.com