Thursday, September 13, 2012
CBN Labor Update
Pressure from industry for ILA-USMX resolution mounts
Interests representing a spectrum of shipping industry sectors that range from agriculture to retail have publically, and urgently, called for a resolution of the soon-to-expire master contract between the International Longshoremen's Union and their employers represented by the United States Maritime Alliance at ports that run from Maine to Texas, or cargo customers will be faced with some difficult decisions.
The stalled talks between the two sides are scheduled to resume next week with a U.S. federal mediator presiding after several months of off-and-on negotiations and at times, contentious public bickering over issues such as benefits and wages.
"We urge you to enact a resolution of these negotiations immediately, as companies need to make shipping decisions now and cannot risk the possibility of shipments being held up at the ports in the event an agreement is not reached by September 30," was the plea in a letter sent last week to the ILA and USMX that was signed by the American Apparel & Footwear Association, Travel Goods Association, Fashion Accessories Shippers Association, and the Gemini Shippers Association.
The National Retail Federation's president and chief executive officer, Matthew Shay, said in his group's own letter to the same two groups that without the "certainty" of a "secure, long-term" longshore labor contract, retailers and other shippers "will surely reevaluate their supply chains and the short-term and long-term reliance on these ports."
The short-term re-evaluation of supply chains in the event of a potential waterfront labor stoppage or slowdown appears to be shifting more Asia-U.S. cargo through the North American West Coast intermodal gateways in what would be a reversal of what transpired a decade ago when a labor-management meltdown at ports from California to Washington State reportedly caused permanent shifts of shipping business to alternative routes such as shipping direct to the eastern part of the country with smaller containerships through the Panama Canal.
However, the specter of possible congestion through West Coast ports is a cause of concern for shippers who may be forced to re-route more global freight.
"The increased congestion at West Coast ports will result in a chaotic bottleneck affecting the flow of goods in and out of the United States at the height of the shipping peak season," said Nelson R. Cabrera, business development manager of Miami-based logistics firm Lilly & Associates. "This places an enormous hurdle in the increasingly lean supply chains of our nation's importers and exporters," he said.
Exporters stand to face the increased transportation costs of West Coast congestion, according to the Agriculture Transportation Coalition and its membership.
"If the transportation costs increase, if ports are not operational and the cargo just sits, the foreign customers will look elsewhere for their almonds, cotton, rice, hay, pork, beef, poultry, fruit, dairy, soybeans, grain, citrus, lumber, plywood, paper, potatoes, French fries, wine, and the myriad other food, farm and fiber we grow and process here in the U.S.," said the AgTC in a statement.
"While we produce the best of many of these products, the fact is, there is nothing that we export in agriculture and forest products, that cannot be sourced somewhere else in the world", said Peter Friedmann, executive director of AgTC.
Hearkening back to the U.S. West Coast waterfront disaster when then-President George W. Bush invoked the Taft-Hartley Act to force a resolution between the International Longshore and Warehouse Union and the Pacific Maritime Association, the AgTC said "the injury from that West Coast port shutdown has been felt for years since."
"For instance, when confectioners in Japan could not get the superior California nuts and raisins, they were forced to substitute from Turkey and elsewhere. And once the customer finds another source, it can be very reluctant to return to the source, which could not deliver. The fact that the U.S. ag producer was not at fault, that it was a port labor dispute, doesn't always convince the foreign customer to return to us. So, once a port shuts down, the economic injury to the U.S. producer lingers long after the ports get back to work," the AgTC said.
Anonymous exporter members of the AgTC weighed in on the dispute, forecasting some of the transportation and supply chain problems they say could manifest from ILA work stoppage or slowdown; especially due to a suddenly congested West Coast port pipeline this fall.
"The impact from the Port labor strike would have irreparable consequences on our business. The $1000/container fee added to our West Coast shipments is something we simply cannot absorb when shipping 800 containers per month...or, $800,000 in added fees," said one U.S. exporter.
"We export our frozen foodstuffs and agricultural products exclusively from the USWC ports; therefore, the potential impact of an ILA strike and subsequent implementation of the [U.S. West Coast] Congestion Surcharge by the ocean carriers would cause us serious financial implications. In reviewing our October export shipping forecast, and taking into account the Congestion Surcharge of $1000/40' container and $800/20' container, our ocean shipping costs would increase $145,000/week. This represents a 55% increase in freight costs," said another exporter.
The AgTC also referenced what it says could be a "devastating impact" on the U.S. pulp and paper mill industry, with a possible $1,000 per-FEU congestion surcharge looming that the industry group said could imperil "thousands of U.S. manufacturing jobs and damaging an important U.S. industry sector."
The Federal Mediation and Conciliation Service's director, George H. Cohen, said last week that the ILA and USMX "have agreed to resume negotiations under our auspices during the week of September 17, 2012."
The FMCS is an independent U.S. government agency created in 1947 to operate as a conflict resolution buffer between contentious labor and management issues.
"Due to the sensitivity of this high profile dispute and consistent with the Agency's longstanding practice, we will not disclose either the location of the meeting or the content of the substantive negotiations that will take place," Cohen said.
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