ILA, USMX sign off on tentative labor agreement

A little more than one month after coming to terms on a tentative agreement on a new labor contract, which was preceded by months of difficult negotiations, the United States Maritime Alliance (USMX), an alliance of container carriers, direct employers, and port associations serving United States-based East and Gulf Coasts, and the International Longshoremen’s Association (ILA), the largest union of maritime workers in North America, have officially approved the agreement for a successor Master Agreement, according to the Federal Mediation and Conciliation Service (FMCS).

“I am extremely pleased to announce that today the parties have approved their tentative agreement for a successor Master Agreement,” said FMCS Director George H. Cohen in a statement. “In doing so, the parties have successfully concluded lengthy, complex and understandably sometimes contentious negotiations concerning a multitude of economic and job related issues. Mutual respect, good old fashioned ‘roll up your sleeves’ hard work and applying innovative problem solving skills ultimately prevailed.”

Cohen said that terms of the agreement, which are not yet available, will be submitted to ILA and USMX memberships for ratification and he added that it paves the way for six years of stable labor-management relations covering all the Atlantic and Gulf Coast ports.

And he signaled his appreciation to ILA President Harold Daggett and USMX Chairman and CEO James Capo for the confidence they exhibited in FMCS first by jointly requesting our assistance and thereafter by fully cooperating with Cohen and his colleagues throughout the mediation process. 

February’s tentative agreement came in slightly ahead of the February 6 deadline, with the original deadline of September 30 pushed to December.

These negotiations are very significant in that they affect 14 East and Gulf Coast ports that cumulatively represent 95 percent of all containerized shipments—and 110 million tons of import and export cargo—to the Eastern seaboard.

This development follows news of longshoremen at the Port Authority of New York and New Jersey reaching a tentative six-year labor agreement with the New York Shippers Association late last week, with the agreement coming one day before a Friday, March 8 deadline, according to a Reuters report.

According to the Reuters report roughly 4,500 longshoremen and women work at the Port of New York and New Jersey—or roughly a third of all longshoremen on the East Coast. And it added that the port handles about 3 million containers annually, mostly through three main terminals in New Jersey. The ILA represents about 14,500 dock workers at East and Gulf Coast ports.

ILA officials noted in March that since 1977 ILA and USMX have successfully negotiated nine new Master Contracts without any disruption in operations, with the current contract in effect since 2004 and then subsequently extended for two years in 2010.

But concerns have remained heightened, due to the ten-day 2002 longshore contract dispute on the West Coast, which some estimates indicate cost the U.S. economy several billion dollars per day and negatively impacted various key sectors within the economy.

And shippers have been cautious and careful about planning for the unknown when assessing how these negotiations could impact their supply chain operations.

A Northeast-based shipper told LM last year that in anticipation of a possible strike her company had done an inventory review and arranged to bring in inbound inventory ahead of time, coupled with discussing alternate routes with the company’s freight forwarders.

On February 13, the ILA released details of the tentative master contract, that it said are subject to the drafting of final contract language and acceptance by its membership. Some of the details include:

• The expiration date of the new Master Contract will be September 30, 2018.
• The new contract will not take effect until all local bargaining is concluded.
• There will be respective $1 per hour wage increases on October 1, 2014, October 1, 2016, and October 1, 2017.
• The wage progression formula, which was in the Master Contract, extension has been shortened from 9 years to 6 years.
• A minimum coastwise guarantee of $211 million in container royalty for each year of the contract.

A noted trade expert said that this agreement is good news but cautioned that it comes with some caveats, too.

“As expected the FMCS acknowledged the good news in having an agreement reached and the thanks to both sides are common at the ends of these sorts of negotiations,” said Paul Bingham, economics practice leader at CDM Smith. “The only catch seems to be the ratification votes, but with the agreement already announced for New York and New Jersey already, it seems this new Master Agreement will be ratified by the rank and file. With labor peace at the East and Gulf Coast ports for now, the attention will shift back towards the ILWU on the West Coast with their contract expiring next year.”
 
Bingham added that shippers can certainly turn their focus away from labor disruption mitigation for the rest of 2013 for the East and Gulf Coast ports, after the challenges since the end of peak season last year. 

And he said that the timing for the ILA and USMX in the end will have been a slow season story, where the disruption threat wasn’t during the peak shipping season so the potential threat had been minimized in terms of timing during the annual cycle.