White House, industry associations press ILWU and PMA to get a new labor contract done

While the labor contract between the International Longshore Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) expired at the end of June, that development did not come as a surprise. In fact, as previously reported by LM, the organizations said in a mid-June joint statement that it was unlikely they would reach a deal before the July 1 expiration of the current agreement.

The ILWU represents port workers in California, Oregon, and Washington, with more than 40 percent of U.S. incoming container traffic moving through West Coast ports at the Ports of Los Angeles and Long Beach, according to industry estimates. The PMA represents shipping lines and terminal operators at 29 West Coast ports. And the contract represents more than 22,000 dockworkers at all 30 U.S. West Coast ports.

Even though the current contract has expired, the ILWU and PMA said on July 1 that negotiations on a new deal will continue to move forward.

“While there will be no contract extension, cargo will keep moving, and normal operations will continue at the ports until an agreement can be reached between the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU),” they said.

“Both sides understand the strategic importance of the ports to the local, regional and US economies, and are mindful of the need to finalize a new coast-wide contract as soon as possible to ensure continuing confidence in the West Coast. The coast-wide labor contract is between employers who operate port terminals and shipping lines represented by the PMA and dockworkers represented by the ILWU. The parties have negotiated a West Coast collective bargaining agreement since the 1930s.”

Various industry associations—including the National Retail Federation, American Chemistry Council, California Trucking Association, and the National Industrial Transportation League, and many others—recently penned a letter to President Biden, calling on the White House to reach a new agreement without any disruption to port operations.

“We believe an immediate extension of the current contract…will provide assurances to the millions of businesses, workers and consumers who rely on West Coast ports,” the letter stated. “We know that there are significant issues for both parties that need to be worked out during this contract negotiation. The only way to resolve these issues is for the parties to remain at the bargaining table and negotiate in good faith. Extending the current contract would provide additional certainty to all of the supply chain stakeholders that rely on the U.S. West Coast ports. This is even more important as we continue to experience supply chain disruptions and congestion for a variety of reasons.”

One of those reasons, the letter observed, is the timing related to the upcoming peak shipping season, with current cargo flows expected to remain at all-time high levels and subsequently result in further supply chain stress and ongoing inflation, with these issues expected to remain intact through the end of 2022.

“Supply chain stakeholders remain concerned about the potential for disruption, especially without a contract or an extension in place,” the letter said. “Unfortunately, this concern stems from a long history of disruptions during previous negotiations. We know the administration understands the economic significance of these negotiations. As such, we encourage the administration to provide any and all support to the parties to reach a final conclusion of their negotiations.

And the letter also said that the White House should work with the ILWU and PMA in the following ways:

• Extend the current contract until a final contract is reached;
• Commit to remain at the negotiating table and negotiate in good faith; and
• Agree to not engage in any kind of activity that leads to further disruption at the ports. The only way the parties can reach an agreement that will ensure the continued competitiveness of the ports and those who rely upon them is to remain at the table until a new agreement is finalized.

In commentary provided toLM, Spencer Shute, Senior Consultant at Proxima, a Chicago-based strategic team of procurement specialists with more than 25 years of consultation and supply chain experience, said that should negotiations stall and lead to a lockout between thew ILWU and PMA, the impact would be devastating to the U.S. supply chain and felt by all retailers and consumers, with limited supply to continue to impact inflationary concerns.

“While a full shut down is the worst-case scenario and both sides are working to avoid that situation, it is likely that the flow of goods through the West Coast ports will slow down,” said Shute. “This will cause transit delays as freight that is being processed at a slower rate won’t be available for truckers. If the slow down happens immediately trucking equipment will be out of position which impacts overall freight rates. The additional delays will create a sense of limited supply impacting consumer buying patterns. Retailers will begin to encourage holiday shoppers to purchase goods sooner than ‘normal’ (similar to last year). An additional factor in all of this is freight from Shanghai will begin reaching US ports after they have started to reopen from the lockdowns. This will create a sense of volume surge which impacts how the ports process freight. If negotiations are not completed, there will be limited incentive for the laborers to expedite processing ships coming to port.”

As for alternatives shippers can take to mitigate this situation, Shute said that they are limited, considering the volume processed through West Coast ports.

And he explained that the expiration of the current agreement has been known since it was signed and not a completely unforeseen event, with the caveat that this negotiation is viewed as more challenging, due to the myriad supply chain disruptions over the last two years, coupled with what he called the resulting impacts on supply, demand, costs, and labor.