BCOs warn ILA and USMX to resume talks or risk cargo loss

BCOs warn ILA and USMX to resume talks or risk cargo loss

US East Coast ports have gained 10 points of Asia import market share since 2005. Photo credit: Georgia Ports Authority.

A coalition of more than 100 retailers, consumers, trade, and transportation organizations on Friday warned East and Gulf coast waterfront employers and the International Longshoremen’s Association (ILA) that a failure to resume master contract negotiations will likely soon result in a diversion of cargo to West Coast ports.

The coalition of beneficial cargo owners (BCOs), agribusinesses, logistics providers, and other supply chain stakeholders led by the National Retail Federation expressed “deep concern” over the recent breakdown in negotiations between the United States Maritime Alliance (USMX) and the ILA for early contract extension negotiations. USMX and the ILA broke off contract talks on Dec. 6 over the definition of automated terminals, which ILA president Harold Daggett opposes. The current master contract covering East and Gulf coast ports will expire on Sept. 30, 2018.

Timing is everything, the BCOs and transportation providers indicated. Last year the Pacific Maritime Association (PMA) and International Longshore and Warehouse Union (ILWU) agreed to extend the West Coast waterfront contract to July 1, 2022. BCOs this spring could establish new relationships with West Coast terminal operators, truckers, warehouse operators, and railroads and begin to divert shipments through Pacific Coast gateways in the Untied States and Canada if the ILA and USMX do not make progress on a new contract. Diversion will accelerate as the September deadline approaches.

BCOs emphasize this is not an idle threat, and the occurrence of cargo diversion in years when a waterfront contract is up for renewal is “well documented.” The West Coast share of US imports from Asia dropped 12 percent from 79 percent in 2005 to 67 percent in 2016, based at least in part on labor dissention at West Coast ports. The PMA and ILWU had contentious contract negotiations in 2002 and again in 2014 to 2015 that involved crippling ILWU work slowdowns and employer retaliation.

The coalition said the cargo gains at East and Gulf coast ports “could just as easily shift back to West Coast gateways, where a long-term contract is in place.” They note this would be ironic at a time when East and Gulf coast ports are increasing their advantage now that mega-ships on all-water services from Asia can transit the enlarged Panama Canal.

BCOs emphasize the importance of certainty in cargo routing. If they enter a year in which no longshore contract negotiations are scheduled, they plan their entire supply chain for the year based upon assurances of port performance, the all-in cost of transportation, carrier capacity, and other basic logistics factors. However, even if there are no early warnings of labor-management dissension, BCOs will hedge their bets early on in order to avoid being shut out later in the year if contract negotiations break down.

“We strongly encourage both sides to return to the table as soon as possible to resume negotiations,” the coalition stated.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.