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It’s been just over a year since the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) kicked off negotiations for a new labor contract.
The current contract between the two parties expired on July 1, 2022, according to FreightWaves, and the two sides have been in negotiations ever since.
The ILWU represents about 22,000 dockworkers at 29 ports along the West Coast while the PMA represents about 70 shipping companies that use those ports. The two organizations have so far been unable to reach an agreement on a number of issues, including wages, benefits and automation’s impact on jobs.
This week, at least one terminal at the Port of Long Beach was shut down when Total Terminals International canceled operations there Monday morning, reports Bloomberg, which says the issue then continued on Tuesday.
The PMA said that a West Coast dockworkers guild “effectively shut down some terminals across every major container gateway on the US West Coast,” the publication adds. One ILWU chapter said members in Southern California had taken it upon themselves to voice their displeasure with the ocean carriers’ and terminal operators’ position.
Despite the recent events, some positive signs have emerged regarding the negotiations over the last couple of months. According to National Review, the two organizations are currently “inching towards a new labor contract.” Without a contract since last July, however, the dockworkers can strike whenever they want, it adds, and ordinary arbitration processes for resolving disputes aren’t in effect.
“Reports from the negotiations, which take place behind closed doors, seem to indicate that the issue of automation, a major sticking point, has been tentatively resolved,” National Review reports. “That tentative breakthrough, which is said to have happened late last month, was the first major advance in negotiations since last summer.”
In May, for example, a tentative deal was reached for manning requirements at non-automated terminals. The publication says the two remaining issues are wages and pensions, and that the ILWU wants a 10% wage increase in the first year of the new contract.
Is the End in Sight?
The WSJ is also bullish on the contract talks and says that they appear to be “headed into their final stretch” following agreements on several major issues.
“Some shipping officials familiar with the talks hope a tentative agreement could be reached by June, ending a contentious period in port labor relations that prompted some of the country’s biggest retailers and manufacturers to shift goods away from the region to avoid possible disruptions,” the publication reports.
“Shipping industry officials say local issues have been resolved and a tentative agreement was reached last month on terms for the use of automation on the docks, one of the most contentious issues at the ports,” WSJ reports. “That leaves the issue of wages and pensions.”
Broader Supply Chain Impacts
Spencer Shute, CSCP, principal consultant at procurement and supply chain consultancy Proxima, expects a “return to normal” for West Coast port operations once the labor negotiations are settled and fully implemented. He also expects to see shipment volume that had been previously diverted to ports on the East Coast or other areas to resume once a contract is in place.
“Short-term effects include shippers adjusting destinations and order lead times to account for adjusted transit times,” Shute adds. “Long-term effects are that other ports across the US, particularly East Coast (NY/NJ) and Gulf Coast ports have proven to be viable options for shipping containers. These ports have increased capacity, efficiency and will remain an attractive option for shippers to consider.”
Asked how the lengthy negotiations have impacted the broader supply chain, Shute says there’s been “limited impact” given the softening in the overall domestic freight market. However, he says cargo ships will likely see some “shift in travel patterns” as shippers adjust some volume back to the West Coast. “Given the global state of freight, this should not cause disruptions.”
