From SCDigest's On-Target e-Magazine
- Jan. 2, 2012 -
Global Supply Chain News: Strike at East and Gulf Coast Ports Averted Again, After Container Royalty Fee Issue Resolved
Details Unclear, but Royalty Payments to Stay, ILA Says; Contract Extended Another 30 Days to Work Out Other Details
SCDigest Editorial Staff
For the second time, the global logistics nightmare of a dock workers strike at 14 East and Gulf Coast ports that many called the "container cliff" was averted in a last minute extension of the existing contract, as the International Longshoremen's Association appears to have won out on the controversial issue of container handling royalty payments.
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The ILA said the deal will not eliminate the royalty payments, as the USMX had earlier demanded, according to Benny Holland, an executive vice president for the ILA.
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What Do You Say?
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The contract was first extended for three months near its original expiration date at the end of September, until Dec. 29. In in the weeks leading up to that new expiration date, the sides appeared to be far apart, especially over the royalty payment issue, leading to a real chance for a crippling shut down of the ports, which handle about 44% of total US container volumes.
The royalty payments date back to a deal done with the union in the early 1960s, as containerized freight started to take hold, and port workers were concerned the resulting improved handling of freight would lead to massive job losses. So, they were able to negotiate a fee that would be paid by ports and terminal operators on each container that moved through the port - the idea being that this would provide compensation for the loss of jobs that each container in effect represented.
The first such royalty payments were made in 1968 at the ports of New York and New Jersey. They later spread to other East and Gulf Coast ports.
These royalty payments reached $211 million in 2011 alone, averaging some $15,500 per worker at the 14 affected ports. With the increased tonnage and a general decline in the number of ILA members in the past 20 years or so, payments per ILA member have continued to rise. At Savannah, for example, they increased from $6,028 in 1996 to nearly $36,000 per worker in 2011.
Naturally enough, the union takes a slice, bringing the ILA itself more than $20 million last year.
The United States Maritime Alliance (USMX), which represents the ports and terminals in the negotiations, wanted to rein in these payments, especially as ILA workers receiving those hefty checks today have no real connection to the perceived threat from containerized traffic to manually loaded freight and handling work that started the whole program in the 1960s.
James Capo, head of the USMX, has said that the royalty payments increased dock worker pay by about $10 per hour on top of what he said were already high wages.
"This issue seems to have dwarfed anything else," Capo said recently.
The union demanded that the royalty issue be off the table in terms of the contract negotiations, and USMX's opposing stance led to the near ILA walk out.
Now, however, it appears an agreement on the royalties has been reached, though it is not clear in whose favor.
Late last week, George Cohen, director of the Federal Mediation and Conciliation Service, which has been assisting in the negotiations, said the two sides had reached an agreement in principle on the subject.
(Global Supply Chain Article Continued Below)
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However, the ILA said the deal will not eliminate the royalty payments, as the USMX had earlier demanded, according to Benny Holland, an executive vice president for the ILA.
