From SCDigest's On-Target e-Magazine
- May 7, 2014 -
Global Supply Chain News: Is a Strike Likely at West Coast Ports this Summer?
Handling Health Care Costs Looms Large; A $150 Million Cadillac Plan Tax?
SCDigest Editorial Staff
It's contract time again for West Coast port and terminal operators, as negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), whose 72 members include shipping lines and terminal operators, begin on May 12 in San Francisco.
The current six-year contract expires on July 1, but if history is any guide, a deal will not be wrapped up by that time. In the past, it has taken several weeks after contract expiration to come up with an agreement, making things dicey for importer and exporters using these ports.
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Future container volumes are also at risk due to the planned opening of the expanded Panama Canal in late 2015, which likely will take a solid share of shipments from Asia to the US.
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The best scenario of course is that an agreement is reached during that time for the 13,600-member ILWU to keep working under the existing contract until a new agreement is reached. That would likely be the case if the two sides appear even reasonably close on the high-level terms of a deal. But there are no guarantees that strikes won't be seen, perhaps isolated actions instead of port-wide.
To start, for example, the ILWU could hold occasional "emergency union meetings" that would turn one-hour lunches into three-hour shutdowns, according to Bruce Carlton, president and CEO of the National Industrial Transportation League (NIT League).
Such a tactic would simply be a way to remind ports and terminals that the ILWU has power, Carlton said, and will become more likely as negotiations drag on.
Though both sides are playing nice, with a minimal war of words at this point before the actual talks, in the memory of many is the rather nasty and prolonged negotiations between East and Gulf Coast ports and the longshoreman's union there before a deal was finally reached in early 2013, months after the contract initially expired. Though in the end there was no strike, one was perilously close many times, risking what was termed a "container cliff" for the economic damage that would have ensued from such an action.
"All our members have been preparing their contingency plans for a while because they all knew this is coming," said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. "You probably won't see the contingency plans hit until the negotiations start."
Retailers and brand companies in categories from toys to apparel are said to be plsnning on bringing some highly predictable merchandise from Asia in early, before the contract expiration is reached. Others may look at routing some shipments into ports in Mexico or Gulf Coast ports such as Houston.
This is especially true for brands and retailers connected to the "back to school" season that starts in late July and who would be especially at financial risk from a work stoppage in mid-summer.
Air freighting is always an option too, though that is many times more expensive than ocean freight.
(Global Supply Chain Article Continued Below)
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In the East Coast negotiations, the big issues were automation at the ports and an obscure but costly royalty that the ports had the pay the union for every container moved, a relic dating back to the 1960s.
