For several years now, the risk of labor unrest has had a seemingly intractable place in decisions by carriers and shippers over the direction of import flows: The West Coast, with a tough-talking union that was behind a shutdown of the country’s largest port complex in 2002, is an area to be watched carefully for potential disruption while labor peace reigns on the East Coast.
That view may get a new calculation after a labor dispute in Philadelphia spread last month to the ports of New York and New Jersey.
What started as a clash over Del Monte’s decision to switch its banana import operations to a terminal not represented by the International Longshoremen’s Association shut down facilities in the New York region for two days. Picketers noted the country’s largest retailers ship through the terminals, and they got the shippers’ attention.
“The strike occurred at the worst possible time because we still had Christmas stuff coming in through New York,” said the logistics director at one large national retail importer, who spoke on condition of anonymity. “It forced us to start thinking about bringing more discretionary cargo in through LA, which we didn’t want to do because costs are going up there.”
The retailer talked to carriers who he said were talking “about cutting and running” from New York to Norfolk. He said he could shift his discretionary cargo from the Midwest to Norfolk, but would still need to ship cargo to New York for its huge hinterland.
“We are definitely monitoring it more closely now so that we will have options in case of a shutdown,” said Matthew Montour, supply chain and logistics manager at Goya Foods, which imports 40 percent of the food it sells through East and Gulf Coast ports, with most of that through New York-New Jersey. “Over the past years it hasn’t even been an issue, so we haven’t had to consider an option.”
On the surface, the ILA picketing that closed the closed container terminals in the Port of New York and New Jersey on Sept. 28-29 was an isolated incident involving a local dispute. Union members were protesting the loss of 200 ILA jobs from Del Monte’s shift of fruit imports to a non-ILA terminal in the Philadelphia area.
Shippers, carriers and port operators note the ILA is becoming more aggressive just as West Coast ports are starting to live down a reputation for labor unrest highlighted by a 2002 lockout that closed Pacific ports for 11 days.
The lockout disrupted supply chains and jolted shippers into diversifying their import gateways. Wal-Mart, which until 2002 moved most of its Asian imports through Los Angeles and Long Beach, now divides its cargo among five major gateways after adding Norfolk, Savannah and Houston to the mix.
The recession’s impact on cargo volume has led the International Longshore and Warehouse Union, which represents West Coast dockworkers, to rein back its formerly combative posture. Slowdowns and work stoppages, once frequent, have all but disappeared. ILWU officials now join port officials in presentations touting the West Coast as a reliable and efficient gateway.
Now it’s the ILA that is flexing its muscle after a long period of relative calm on the waterfront.
Maritime officials hope the dockworker protest isn’t a harbinger of trouble next year when the ILA and its employers open bargaining on a new East and Gulf Coast waterfront contract to replace the one that expires Sept. 30, 2012.
“This port has been blessed with a 30-year history of aggressive but non-combative negotiations,” said Jim Devine, president of New York Container Terminal. “I’m concerned that with the importance of the 2012 contract, this may more foretell a thought process on the part of some of the people in the union that the only way to get their point across is to be belligerent and act illegally.”
The ILA’s growing militancy runs against current trends in labor relations. With organized labor’s growth now concentrated in public-sector unions, strike activity has declined sharply. Last year’s total of five strikes involving more than 1,000 workers was the lowest since the Bureau of Labor Statistics began collecting data in 1947. There have been nine such strikes this year, mostly by government or health care workers. The peak year was 470 in 1952.
Most current ILA members weren’t on the docks when the union staged its last coastwide strike in 1977. The ILA struck at the expiration of every contract between World War II and 1971, often for weeks at a time.
Dave Akers, managing director of the Toy Shippers Association, said the East Coast “has become more and more important” to his group. “Five or six years ago, we brought in about 6 or 7 percent of our cargo through the East Coast. Now it’s 25 percent of what we do. Most of it still comes in through LA, but the East Coast is a big and growing area for us,” Akers said.
He said labor unrest on the East Coast could cause shippers to reconsider their bicoastal strategies, but he’s “not sure that the infrastructure will be there to support switching back to the West Coast. We’re not going to have enough intermodal support for that kind of volume switch.”
East Coast port officials don’t envision losing cargo they’ve gained since 2002.
“I’m looking at this action in Philadelphia as being an anomaly, and I certainly hope it doesn’t signal that we’re going to have issues going forward with the next ILA contract, because I don’t want to give a pound of Asian freight back to the West Coast,” said Jim White, executive director of the Maryland Port Administration.
The ILA’s approach may become clearer next year when the expected start to contract negotiations will coincide with the union’s quadrennial convention in July and the possible election of a new president, Harold Daggett.
Incumbent Richard Hughes has not announced whether he plans to seek a second term. If he does, the ILA would have its first contested presidential election since 1963. Daggett, the longtime head of the ILA’s big maintenance and repair local in New York-New Jersey, is an announced candidate.
Management officials describe Daggett as more confrontational than Hughes or John Bowers, who retired in 2007 after 20 years as president. “Harold has a different way of dealing with problems than John Bowers and Richie Hughes,” one management official said.
Daggett insists he’s merely representing ILA members’ interests. “I don’t like the word ‘militant’ used about me,” he said. “I believe in enforcing the master contract. Management signed it, we signed it, and we both should follow it.”
Since becoming executive vice president in 2007, Daggett has become increasingly visible on hot-button issues such as ILA work jurisdiction, technology and automation, chassis maintenance and weighing of import containers — all of which could be on the table next year.
Last year, Daggett publicly opposed Hughes’ decision to open early negotiations on an extension of the coastwide master contract. Daggett argued that waiting until economic conditions improved would strengthen the union’s negotiating position. He eventually agreed to support the negotiations and the resulting contract extension.
“If I were militant, I wouldn’t have gone along with a two-year extension when the economy was upside-down,” Daggett said. “The ILA has helped the companies through a tough time.”
Daggett’s original stance against the early negotiations and contract extension was backed by the Longshore Workers Coalition, an intra-union group that criticized ILA leadership as undemocratic. The LWC was soundly beaten in its “vote no” campaign against last year’s contract extension, but the coalition has not gone away. Its members participated alongside mainstream ILA members in the Del Monte protests and are campaigning for delegate seats at next July’s convention.
As head of the union’s largest maintenance-and-repair local, Daggett has taken an interest in container lines’ moves to extricate themselves from owning and operating intermodal chassis. He said he would resist any effort to circumvent ILA work jurisdiction.
Daggett also has pushed for more restrictions on technology and automation. Last year, he tried unsuccessfully to persuade management to negotiate changes to contract provisions that free operators to introduce new technology but permit the ILA to negotiate the impact on jobs.
He has criticized the introduction of automated terminals such as the one APM Terminals opened in 2006 at Portsmouth, Va., and said he opposes the contract the ILA recently accepted for a similar facility Hanjin Shipping plans to operate at Jacksonville, Fla., starting in 2013.
“These automated terminals cost us jobs,” he said.
Those views put Daggett at odds with waterfront management, which wants productivity improvements companies say are necessary for East Coast ports to attract and efficiently handle larger ships that will transit the Panama Canal after its expansion in 2014.
With the brief walkout, however, some believe the union already has sent a message to shippers. “If you think the East Coast is immune from labor problems, I will wait until the ILA signs their new agreement, because they may turn out to be the more radical union,” Ted Prince, an intermodal industry consultant, told The Journal of Commerce’s East Coast Maritime Conference last month.