Q&A: ILA-USMX Standoff

Who’ll blink? That’s the biggest question in the ILA-USMX negotiations, but there are others. Let’s take them one by one.

Why couldn’t the International Longshoremen’s Association and United States Maritime Alliance agree on a contract extension?

Federal mediator George Cohen reportedly was ready Tuesday with a press release announcing an extension of the ILA-USMX contract to mid-January, with no preconditions on bargaining. USMX agreed to the mediator’s request to extend the contract and bring the parties back on Jan. 7 for two weeks of intensive negotiations in Washington. The ILA proposed extending the contract to Feb. 1 — but only if USMX took royalties off the table. Royalties are a crucial issue, and USMX wouldn’t accept the ILA’s demand to continue the status quo. At that point, negotiations broke off.

What happens now?

No new meetings are scheduled, but both sides are being pressed — from Washington and industry groups — to extend the contract past its Dec. 29 expiration. Whether the pressure will break the deadlock is unclear. ILA President Harold Daggett says that if there’s no extension, the union is prepared to carry through with its threat to strike.  Until there’s movement on the royalty issue, bargaining is suspended. At this point, neither side seems willing to budge.

If there is a strike, when would it start?

Daggett has authorization from union delegates to call a strike when the contract expires. If there’s no extension, picket lines could go up as early as Dec. 30, although there’s speculation that the ILA might delay a strike until after its paid New Year’s Day holiday. If there are slowdowns before the contract expires, employers could lock out the union, as they did on the West Coast with the International Longshore and Warehouse Union in 2002.

Could the government intervene to halt a strike?

The Taft-Hartley Act empowers the president to seek an injunction triggering a back-to-work order halting "a threatened or actual strike or lockout affecting an entire industry” and that imperils “national health or safety.” Several industry groups have urged President Obama to intervene to keep the ports open. That intervention could take the form of behind-the-scenes persuasion, which likely already has begun, or the “nuclear option” of a Taft-Hartley injunction. The National Retail Federation has urged Obama to use Taft-Hartley if necessary to head off the threat of a strike. If the ILA strikes and the walkout drags on, the administration will face increasing pressure to act.

Which cargoes would be affected by an ILA strike?

A strike would affect containerized and roll-on, roll-off cargo carried or handled by carriers or terminal operators that have signed the ILA-USMX coastwide master contract.

What about non-containerized cargo?

That’s more complicated. The ILA will continue working breakbulk ships and cruise vessels, which unlike container lines are not under the master contract and could switch to non-union stevedores if the ILA struck. The ILA says it will continue to handle military cargoes and perishables, including containerized bananas imported by fruit companies that aren’t under the master contract. However, a growing volume of reefer containers move on container ships operated by major carriers that are master-contract signatories and would be hit by a strike. Many military shipments also move alongside commercial cargoes in container ships that would be idled.

Complete coverage of ILA-USMX negotiations

What will shippers do?

Some have already begun diverting a limited amount of cargo to Canada, Mexico or the West Coast now that the ILWU’s Office Clerical Unit is back to work in Los Angeles-Long Beach. Air freight also is an option, but that’s expensive. Canadian ports provide a relief valve, but can’t handle all cargo that normally moves via the East Coast. Montreal has draft limitations. Halifax has deep water and efficient on-dock rail, but its two container terminals total only about 145 acres and have berths for only five sizable container ships at a time.

What will carriers do?

Major container lines’ ships won’t be worked in East and Gulf Coast ports. Most carriers say they’ll probably sit tight for a few days, hoping any walkout proves short-lived. Then they’ll implement contingency plans, declaring force majeure and dropping cargo at Canadian and Mexican ports. Any interruption at East Coast ports will cause vessel schedule disruptions that will take weeks to straighten out.

Would an ILA strike be coastwide?

A strike would affect all major container ports along the East and Gulf coasts, and all major container lines serving those ports. There are a few small non-ILA terminals, such as Chester, Pa., used by Independent Container Line, but all major container lines and terminal operators are contract signatories. There’s been speculation that the ILA’s southern locals might disregard a strike call, but that appears to be wishful thinking by cargo interests. Many ILA local leaders aren’t eager to strike, especially if it’s to preserve overstaffing and work rules in New York-New Jersey. However, Benny Holland, the union’s Texas-based executive vice president, notes that container royalties and other master contract issues affect all ports. He says that if the ILA strikes, the union’s southern locals will support it.

What’s the status of negotiations on work rules?

Most ILA work rules are in local contracts that supplement the coastwide master contract. Employers are hoping to use the master contract to provide local negotiators with flexibility to change port-specific work rules such as starting times and staffing requirements. Common practice in labor negotiations is to swap money for work rules, but most of the money is in the master contract. Both sides have agreed that the new master contract won’t be ratified until all local contracts are agreed upon. That leaves local negotiations in limbo until the master contract talks get back on track.

What are container royalties? Why are they an issue?

Since the 1960s, carriers have paid per-ton royalties that are used mainly to compensate ILA members for the loss of jobs to containerization. In 2009, the ILA and USMX eliminated caps on carriers’ payments and dockworkers’ year-end royalty checks. The change has added $180 million to carrier costs over the last three years. Workers’ royalty checks, previously capped at $16,500 for experienced workers and $7,500 for newer hires, averaged $15,500 last year and were as high as $36,000 in Savannah. Employers note that few ILA members from the 1960s are still working. USMX wants to freeze workers’ royalty checks at current levels while guaranteeing them for 25 years, use the excess for other benefits, and eliminate payouts to future hires. The ILA sees royalties as a perpetual payment it negotiated to offset the permanent loss of jobs, and is dead-set against capping them. With hundreds of millions of dollars on the line, neither side is willing to back down.

Why are this year’s negotiations so difficult?

The ILA and USMX entered this year’s bargaining with starkly different objectives. Since his election as ILA president last year, Daggett has vowed to negotiate a lucrative contract. Employers, meanwhile, are determined to control costs and work rules that they were reluctant to tackle in previous contracts. There’s also been a clash of negotiating styles. Accustomed to the collaborative approach of previous ILA presidents John Bowers and Richard Hughes, USMX officials have been exasperated by Daggett’s give-no-quarter style. When USMX Chairman/CEO James Capo complained recently that ILA leaders “view bargaining as a one-way street leading only in their direction,” he meant it.

Which standoff will be settled first – the U.S. government’s fiscal cliff or the ILA-USMX “container cliff”?

You tell me.

Contact Joseph Bonney at jbonney@joc.com, and follow him at twitter.com/JosephBonney.

 

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