ILA, USMX agree to 90-day extension in labor negotiations

The prospect of a strike at United States East and Gulf Coast-based ports, which was widely expected in freight transportation logistics circles in recent weeks at the end of September, is on hold—for now, at least.

United States Federal Mediation and Conciliation Service Director George H. Cohen said today that negotiations this week between the International Longshoremen’s Association (ILA), the largest union of maritime workers in North America, and the United States Maritime Alliance (USMX), an alliance of container carriers, direct employers, and port associations serving United States-based East and Gulf Coasts, made progress “on several important subjects” and the ILA and USMX have agreed to extend the collective bargaining agreement, which was due to expire on September 30 for a ninety-day period through December 29.

Cohen said that in taking this step the parties emphasized that they are doing so “for the good of the country” to avoid any interruption in interstate commerce.

And he added that the extension will provide the parties an opportunity to focus on the “outstanding core issues in a deliberate manner apart from the pressure of an immediate deadline.” The negotiations on the Master Agreement will be conducted during the same time frame as negotiations for local agreements, and the negotiations will continue under the auspices of the FMCS, he said.

When negotiations between the ILA and USMX broke off in recent weeks, the FMCS stepped in on September 6 upon its request ILA and USMX resume negotiations under FMCS auspices during the week of September 17, 2012.

This 90-day extension comes at a time when shippers were coming up with contingency plans for supply chain operations as Peak Season activity begins to accelerate. The need for urgency in these talks was made clear by the National Retail Federation and the Retail Industry Leaders Association.

It is certain to be welcome news for shippers, especially retailers, whom require long lead times and precision inventory management to get store shelves stocked in a timely manner for holiday shopping season.

“From our perspective, having a strike or shutdown would not do anybody any good from a port, shipper, importer or exporter perspective,” said NRF Vice President of Supply Chain and Custom Policy Jonathan Gold in a recent interview. “Shippers are making their final decisions in the next week to ten days regarding their Peak Season shipping plans and unfortunately all of these decisions come with an increase in costs. The West Coast shutdown costs the U.S. economy about $1 billion per day for ten days, and it took six months to recover from it.”

A Northeast-based shipper told LM that in anticipation of a possible strike her company had done an inventory review and arranged to bring in inbound inventory ahead of time, coupled with discussing alternate routes with the company’s freight forwarders.
That approach could be quite tenuous, though, she said, as many other shippers were taking similar steps.

“It is a tough situation,” said the shipper. “When you have lead times of 45 days in some cases, it can make it hard to plan inventory that far ahead in advance, especially when it became clear that this situation was not going to be quickly resolved. And there is not alternate sourcing in the U.S. [for our products].”

Dealing with long lead times, coupled with the pending September 30 deadline, created unchartered waters for shippers in this case. This was likely to lead to shippers considering some modal shifts—to air for partial quantities, for example—to better navigate the labor standstill and still could if further progress is not made by the new December 29 deadline

As previously reported, a major sticking point in the negotiations between the ILA and USMX has to do with how the ILA has to negotiate all Master Contract issues with the ILA Wage Scale Committee, which ILA President Harold Daggett said in an August letter to USMX Chairman and CEO James Capo is a democratically-elected committee that Capo has declined to address despite Daggett’s overtures to do so.

Another issue has to do with technology. USMX’ Capo maintains that the ILA is demanding that management guarantee a job for any worker even if new technologies eliminate a need for that position. Capo also noted that the current Collective Bargaining Agreement mandates that both sides negotiate over the impact new technology might have on the work force.

On August 22, negotiations between ILA and USMX dissolved, following July meetings, which ostensibly pointed to positive progress being made, when they announced agreements in principle on issues having to do with the introduction of new technology and automation and maintenance and repair of chassis within marine terminals and at off-pier facilities at the East and Gulf Coast ports.

Earlier this month, the National Industrial Transportation League (NITL) called on United States Department of Transportation Secretary Ray LaHood to get the ILA and USMX back to the bargaining table to hammer out a deal.

NITL President and CEO Bruce Carlton explained to LaHood in a letter that NITL members—many of whom are responsible for making freight transportation decisions using all modes in both the U.S. and globally and are importers and exporters that rely on these ports—would be adversely impacted by any shutdown of the nation’s ports.

Carlton wrote that with “the current contract set to expire on October 1, 2012…the League is extremely concerned about the dire consequences that would impact the nation’s freight system and our economy as a result of a bi-coastal port shutdown. We need to look no further than the devastating consequences of the west coast port lockout in 2002.”

Today’s news was welcomed by RILA.

“The 90 day extension is welcomed news for retailers because it ensures that a work stoppage at the ports will not interfere with the flow of goods during the critical holiday season,” said Kelly Kolb, RILA vice president for government affairs, in a statement. “Ports play a critical role in the supply chain and a potential disruption would be harmful to the retail industry as it would lead to lost sales and aggravated customers. RILA will continue to closely monitor the progress of negotiations and strongly urge the parties to reach a long-term agreement as soon as possible in order to remove the threat of a devastating work stoppage at the East and Gulf Coast ports.”