Adding fuel to the fire

Adding fuel to the fire

Shippers could face a long, hot and tense summer if recent protests by container truckers at the ports of Oakland, Los Angeles-Long Beach and Norfolk are any indication.

Violence erupted in Oakland during the first week of May as independent drivers picketed marine terminals and intermodal railyards in a protest sparked by high prices for diesel fuel. The drivers said ocean carriers either were refusing to pay fuel surcharges or the surcharges they agreed to pay were inadequate. Angry drivers threw stones at drivers who crossed their picket lines; broken windshields were reported.

The Oakland protest came less than a week after some 85 percent of the harbor drivers in Los Angeles-Long Beach went on a one-day strike. Drivers in Norfolk, Va., picketed marine terminals on May 6 and May 7, although port operations were not interrupted. Harbor drivers continue to meet weekly in Southern California to discuss working conditions in the nation's largest container complex, the ports of Los Angeles and Long Beach.

Trucking companies say they're worried. "Tensions are high now. It will get worse in the peak (season). We could have some real capacity constraints," said Patty Senecal, vice president of sales at Transport Express in Rancho Dominguez, Calif.

Truck drivers nationwide are feeling the bite of high diesel fuel prices, and truckers who shuttle containers to and from container ports have been hit the hardest of all. Independent truck drivers operate on a margin of 2 percent, according to the Owner-Operator Independent Drivers Association in Grain Valley, Mo. If truckers cannot collect a fuel surcharge to cover the higher costs, their margin is wiped out.

The relationship between owner-operators, the trucking companies they contract with, and the shipping lines and shippers who pay the freight charges has been tense for at least five years. Spontaneous driver demonstrations have erupted in recent years at virtually every major U.S. container port as well as inland trucking hubs.

While the spike in diesel fuel costs spawned the most recent job actions, drivers have also demonstrated over poor working conditions at container ports, long waits at terminal gates and, most of all, low base freight rates in the hyper-competitive harbor trucking industry. In recent weeks, some drivers have reacted with the only tool at their disposal - withholding their services.

The prospects for further job actions this summer are a concern to trucking company executives as well as ocean carriers and shippers. A one-week walkout during the peak-shipping season at a major gateway such as Los Angeles-Long Beach could cripple the nation's international trade.

When the West Coast ports were shut down for 10 days during longshore labor negotiations in September and October 2002, hundreds of vessels were thrown off schedule and ports spent three months clearing their backlog of containers.

Trucking executives say they're concerned not only about further job actions, but about what they see as a lack of a sense of urgency among shipping executives and shippers. "Ocean carriers, especially those domiciled away from the port, have difficulty understanding and recognizing the magnitude of the situation," said Richard Coyle, vice president of Devine Intermodal, based in Sacramento, Calif.

This month's Oakland protests ended May 10 after shipping lines, sometimes at the urging of shippers, increased the fuel surcharges they pay to drivers in Northern California. Although that defused tensions, trucking officials said the truce in Oakland has done nothing to address the systemic problems facing harbor trucking.

"I am a contractor of drivers and owner-operators, and although I am a target of this unrest, I am also sensitive to the issues and sympathetic of the drivers' dilemma," Coyle said. "We would like to pay more than we are, for sure, but the likelihood of extracting offsetting rate hikes from ocean carriers for store-door moves is nil."

Some harbor trucking companies sign contracts with ocean carriers for "store-door moves," which entail shuttling containers from the harbor to the distribution centers operated by retailers and importers. The trucking rate is rolled into the through rate that ocean carriers and importers negotiate without involvement by the trucking company.

Importers sometimes "nominate" trucking companies, telling the ocean carrier what trucking companies they prefer to move their freight from the harbor to the distribution centers. A few harbor trucking companies are owned by shipping lines. Their drivers may be owner-operators or direct employees, and the direct employees are in a few cases organized by the Teamsters union.

The vast majority of the nation's harbor drivers, though, are independents. They own their own rigs and contract with the trucking companies. Most trucking companies maintain an arm's-length relationship with the drivers in an attempt to demonstrate to the government for tax purposes that the drivers are independent contractors rather than direct employees. In those cases, shipping lines pay trucking companies a rate based primarily on mileage. The trucking companies pass on to the drivers 70 percent to 75 percent of the base rate, keeping the remainder for overhead, insurance and their profit.

The complex equation is muddled even further by a steady stream of owner-operator drivers, often immigrants. Initially, these drivers are willing to work for less than established drivers. That allows some trucking companies to underbid the established trucking companies for business, with the result being relentless pressure on freight rates.

When drivers are mostly of the same ethnic background, local leaders sometimes emerge, such as Latino leaders in Southern California. In Oakland, where the driver work force is diverse, there are leaders for the white, black, Latino and East Indian drivers. Add to that condition the inability of trucking companies to collectively set rates and working conditions due to U.S. antitrust laws, and the result is a recipe for chaos where there is no recognized bargaining unit on either side.

The Teamsters recognized this void three years ago and has been methodically - though so far unsuccessfully - attempting to bring order, and unionization, to container ports. "Drivers have to have a voice to collectively express the concerns and the needs they have. They need a forum," said Chuck Mack, director of the Teamsters port division. "Of course, we believe that voice should be the Teamsters."

Mack said a stable, well-paid driver work force represented by a union would provide drivers with a means of protest other than unpredictable work stoppages. He said this would benefit the entire intermodal industry. "We don't look at this as a one-way street. Everyone has to look at the bigger picture," he said.

Unlike ocean carriers, truckers lack antitrust immunity. While shipping lines can form a discussion agreement and discuss the freight rates they charge to shippers, trucking companies cannot form a similar unit and negotiate trucking rates for container hauling.

The fuel surcharges that ship lines pay to truckers vary considerably. An industry consultant who tracks surcharges said that in May, APL Ltd. paid the highest surcharges, 9 percent. Most other carriers paid less than 7 percent and some paid as little as 3 percent, while trucking companies were seeking surcharges of 14 percent to cover diesel prices of $2.40 a gallon. "We consider truckers to be our customers," said Scott Dailey, an APL spokesman.

In some cases, trucking industry associations take up the cause of the drivers. Trucking-company members of the Association of Bi-State Motor Carriers in New York-New Jersey, for example, pay their drivers a fuel surcharge even if ocean carriers or shippers refuse to reimburse the trucking companies, said Jeff Bader, president of the association and of Golden Carriers Inc. in Hillside, N.J. "You have to do the right thing," he said. It's in the best economic interests of shipping lines and terminal operators to pay fair trucking rates and to provide drivers with good working conditions, Bader said. "That's what prudent businessmen do."