The eyes of concerned logisticians remain focused on the ongoing West Coast port contract negotiations between the longshoremen’s union and the region’s shipping ports. The longshoremen have been without a contract since July 2022 and the expectation was that an agreement would be reached by the time the contract expired.
It did not. Nor was it reached by the end of 2022 or by the end of Q1 2023.
In this article, we sit down with Weber Logistics VP of Transportation, Gary Kendle, to examine the status of negotiations and discuss what shippers can do in the face of the current uncertainty.
There had not been a lot of publicized activity until the recent Good Friday work stoppage. Where do things stand?
Right now, the union appears to be ramping up pressure a bit, while technically staying within the letter of the existing contract. For instance, the work stoppage on the Thursday PM before Good Friday happened at a time when labor regularly stops for a membership meeting. The issue here was that there was not much – if any – advance notice given to the terminals about the meeting and the related stoppage. This same tactic carried over into Good Friday, where labor demand far exceeded labor supply and the first shift was cancelled as a result.
The union technically did nothing wrong. However, they deviated from well-established practices in terms of advance notice.
Is that the extent of any disruptions?
Similarly, the union has recently begun enforcing certain terms of the existing/expired contract related to chassis inspection. In many terminals, workers are contracted to inspect pooled chassis equipment as it's coming in and or leaving the terminals – and then make any repairs that are necessary. These inspections, of course, will slow down traffic in and out of the terminals.
Again, nothing technically wrong with doing this. The perception, though, is that this is a conveniently timed decision to inspect chassis after not doing so for years. The union rebuttal to that, however, is that COVID made inspection difficult if not impossible for several years, and they are now just catching up.
Are the two sides getting any closer to an agreement?
There is word that they’re starting to agree on some of the minor points. But minor points were never in doubt. It’s the big stuff like automation, wages and pensions that’s holding this up.
Why are they at such an impasse?
Terminal automation remains a central issue. The union (The International Longshore & Warehouse Union; ILWU) is afraid that furthering port automation will reduce jobs.
The Pacific Maritime Association (PMA), on the other hand, says that automation is necessary to improve productivity, remain competitive, and handle heavy container volumes from Asia. They also say that automation will create new jobs, so that jobs won’t go away completely – some roles may just change.
It seems like everyone knew that automation would be a sticking point, but here we are almost a year since the contract expired without a new contract. Is there a growing sense of frustration?
There is but it’s not an easy issue to solve. The union firmly believes that they will lose jobs. The PMA says that they won’t – at least not completely. And round and round they go.
There are also additional factors that complicate matters. First there is already automation at the Ports of L.A. and Long Beach. Long Beach Container Terminal (LBCT) and Trans-Pacific Container Service Corporation (TraPac) are both automated. Total Terminals at Pier T are planning to automate, and making investments accordingly.
Such investments, once made, likely won’t be walked back.
There is also the fact that, two contracts ago, the union agreed to some forms of automation. So, there’s a question of ‘if you knew you were going to have a problem with it, why did you agree to it to begin with?’ But, perhaps they just didn’t want to be the bad guy at the time and saved that battle for another day.
What have been the effects of this standoff thus far?
Much of the discretionary cargo that was coming to the West Coast has moved elsewhere, at least until this contract is settled.
In this case, discretionary cargo is where an importer has the discretion to move goods to an alternative port and that port is not the final delivery point. In the past, importers have used L.A. and Long Beach for much of their discretionary cargo since it has a high density of warehouses, transportation, and intermodal hubs.
It’s hard to say if this cargo will come back once the contract is ratified.
Does recent news that import volumes are up into the US, and the West Coast specifically, mean that fears of a labor standoff are subsiding?
I wouldn’t say that. Shipping is cyclical. Every year, imports slow down from February through April for the Chinese New Year, which essentially shuts down Asian ports for two weeks during the national celebration. Mid-April is traditionally when you start to see a rebound each year. So, I’d caution anyone who wants to point to this recent data to say that the labor negotiations are becoming less of an issue. I don’t think they are.
Which side is more incentivized to come to an agreement?
I'm honestly torn. I think it’s 50 50. There's really no overwhelming incentive for either one to make the deal. After all this time, each side wants to walk away with something to show for the pain, they want to show ‘wins.’
For management, they have some leverage because we’re in a freight recession, particularly in L.A./Long Beach, because of all the discretionary cargo that went away. They can say, ‘business is bad right now, we really can’t make many concessions.’
It would seem that both sides should feel incentivized to come to an agreement, right?
That’s right. The ports have lost significant market share to other ports who are perceived as easier to do business with. However, let’s not forget that this is also a time where companies are moving manufacturing away from China, and/or utilizing plants in other locations in addition to China, which can also hurt West Coast imports.
That second item is just a fact of life, post-pandemic. However, concerning discretionary shipments, the thought is some or all of it will come back to L.A. and Long Beach when an agreement is reached. Until that point, however, both sides are losing money and leverage. In my opinion, that should make them both highly incentivized to play nice and get a deal done.
If this impasse continues – or especially if there is threat of a strike – do you feel that the federal government will step in and force a resolution?
My guess is yes, the federal government will intervene and force a resolution. It’s hard to imagine they wouldn’t as we are quickly approaching a significant election season. I can imagine the political plates would be spinning if the incumbents allowed this to get out of hand. Additionally, the economy is on shaky ground and if there was a lockout or strike it could have significant ramifications for the local and national economy.
What is your takeaway message for shippers? Should they keep the faith in the Ports of L.A. and Long Beach?
I understand the shippers’ concerns as this thing continues to drag out. Despite all of the perceived blemishes, however, the ports of L.A. and Long Beach – and West Coast ports overall – have extensive infrastructures which surpass every other U.S. metropolitan area.
We know that this contract standoff will get resolved – whether it’s by the two sides playing nice and getting it done without intervention or through a mandated agreement from the federal government.
But it will get resolved. So, it’s important not to lose sight of the many advantages of importing into the West Coast.
We have an economy that is predicated on speed. And if you’re importing from Asia, shipping into L.A. and Long Beach is the fastest way to get your goods to North American consumers, bar none.
To learn more about working with a logistics provider to optimize your West Coast import operations, contact Weber Logistics today.