BY MICHAEL HANSEN – A major dock strike could shutdown work on the U.S. East and Gulf Coasts when the current longshore contract covering container cargoes on those coasts expires at midnight Saturday, December 29, 2012. If a lengthy strike occurs It is likely to have a significant impact on the U.S. West Coast as cargo and ships are redirected to the major container terminals could result in port congestion and affect domestic seaborne traffic to Alaska, Guam and Hawaii.
The parties to the U.S. East and Gulf coasts longshore contract are: the International Longshoremen’s Association (ILA), which represents labor; and, the United States Maritime Alliance (USMSX), which represents the employers including container carriers, stevedoring companies, terminal operators, and port user associations in contract negotiations. They have been negotiating a new contract for nearly the entire year without success including the last session that ended December 18th.
The point of contention is the level of container royalties. The royalty is a surcharge of $4.85 per weight ton on container cargo and paid by the carriers to the ILA, which is over and above the usual wages and benefits. The royalty funds are distributed to the membership as wage supplement which averaged $15,500 per worker in 2011 and 10% goes to support the ILA health care fund.
Container royalties were instituted on the East and Gulf coasts in 1960 to compensate the ILA longshoremen for the loss of work that occurred with the advent of containerization. Prior to that break bulk cargo required a large number of men to handle it, and containerization significantly reduced manpower requirements over time. Since then, the volume of container cargo transacted on the two coasts has more than doubled and the number of longshoremen has shrunk, resulting in high wage supplement payments of up to $30,000 per longshoreman in some ports.
With the completion of the Panama Canal Expansion Project nearing in the 2014/2015 time frame, the carriers and ports anticipate growing volume of Asian container cargo will be transacted at East and Gulf Coast ports, which would exacerbate the problem of container royalties for the USMX members.
The USMX wants to cap the container royalties paid each year to 14,500 ILA longshoremen at 15 ports which cost the employers $211 million in 2011. The ILA refuses to agree to a limit. This negotiating brinkmanship has led to the situation being called the ‘container cliff.’
Many national trade associations have appealed to President Barak Obama to use the Taft-Hartley injunction to hold off the strike for 80 days, to give the parties more time to work out their differences. This includes the country’s oldest and largest shipper’s organizations, the National Industrial Transportation League (NITL) in a letter to the President dated December 13, 2012 .
As the ILA and USMX have been at loggerheads for several months, many of the container lines and shippers of Asian cargo have been making contingency plans to reroute their ships and cargo from U.S. East and Gulf Coast ports, to the major U.S. West Coast ports of Los Angeles / Long Beach, Oakland, and Seattle / Tacoma and move their cargo across country by rail. If this occurs, the additional ships and cargo would likely result in port congestion and delays affecting the noncontiguous jurisdictions.
Michael N Hansen is the President of the Hawaii Shippers Council, a business league organization incorporated in 1997 to represent cargo interests – known as “shippers” – who tender goods for shipment with the ocean carriers operating the Hawaii trade.