Over the past few weeks, the port crisis has been on the news, on the radio, and in the newspaper. Those of us that have been aware of this since last May are pretty versed on what’s going on. Or if you happen to be a friend of mine, then you I’m sure have been briefed on the subject. 🙂 Sorry not sorry. There was a recent article in the Oregonian on the background of the Port of Portland – a fantastic article showcasing the history of what has brought us to this point at the port. Very sad, very true. I had a local farmer in my office asking me, “Is it really that bad?” Yes, it’s really that bad.
That article really showcased the Port of Portland, but if you want to learn more about the crisis ensuing at all West Coast ports, let me take a shot at it… (With help from the AgTC)
- Port Authority – a public government entity which owns the land. It is the landlord. In California, Ports are a division of the local City government – so the Ports of LA, Long Beach and Oakland are controlled by the Mayors. Port of Portland is an entity of the State of Oregon. Seattle and Tacoma are independent governments (and their marine departments are merging).
- Marine Terminal Operator – is the tenant. It is a private company which leases a piece of the Port Authority’s land, typically for 5 to 50 year terms. (Note the Port of Portland’s terminal operated signed a 25 year lease. I believe they are on year 3 of the lease.) Millions of dollars are invested in cranes and other equipment, some funded by the landlord Port, some by the tenant Marine Terminal Operator. The Terminal Operator hires longshoremen (who are represented by the ILWU) to operate the equipment and load and unload the ships that dock at the terminal, but also working in the container yard to load and unload containers on and off the trucks. If a terminal has an on-dock rail yard, containers are loaded on and off the rail cars by longshoremen labor. There are three basic kinds of terminals:
- “Bulk” handle grain, soybean, oil — in huge tanks or elevators, and pour the product into massive compartments of ships. These bulk terminals are operating under a separate contract with the ILWU, and there is currently no dispute and no disruption to operations.
- The other primary terminal, is a “container terminal” where ships are loaded/unloaded with those steel boxes, generally 40 foot x 8 x 8 (called a Forty Foot Equivalent Unit or FEU) or 20 foot x 8 x 8 (TEU). There are dozens of container terminals on the West Coast, ranging from one container terminal at Port of Portland, to eight at Port of LA and six at Port of Long Beach. The terminal operator, hires the labor (longshoremen) to operate the terminals. The current labor dispute centers on these container terminals. The operators of these container terminals are members of the Pacific Maritime Association (PMA), which is representing them in negotiations with the International Longshore and Warehouse Union (ILWU, see below) on the marine terminal labor contract.
- Also, there are “break-bulk terminals.” Some cargo does not move in containers, but are stowed loosely in the hold of a ship. For example, rolls of newsprint, or coils of steel, or palletized fruit. The current ILWU –PMA dispute has largely (but not completely) spared these terminals.
- Steamship Lines (actually, none operate with steam power – it is petroleum fuel), are also known as “ocean carriers”, or just “carriers”. There are about 20 major ocean carriers carrying US international trade, import and export, to and from West Coast terminals. All are private companies, all are foreign companies, headquartered in Asia, Europe and the Mid-East. None are US owned companies. The steamship lines enter into long term contracts with container terminal operators, often agreeing to share costs of container cranes and other infrastructure. They typically pay the terminal operator a fee per container loaded on the ship, or unloaded, under various arrangements.
- Labor. The International Longshore and Warehouseman’s Union (ILWU) represents 100% of the labor force at the US west coast marine container terminals. These include all levels of labor, including skilled crane operators, operators of equipment who stack containers, lift containers on and off of the trucks, clerks who check others’ work, those who run the gates at which trucks enter and exit the terminals checking documentation, plug and unplug refrigeration units on containers, etc.
- Pacific Maritime Association (PMA). This is the organization comprised of the West Coast terminal operators and steamship lines that negotiates the labor contract with the ILWU. All compensation, wages, benefits, work rules, vacation, and dispute resolution procedures, are covered by the PMA-ILWU contract.
- The Hiring Hall. This is an historical labor hiring mechanism, today unique to longshore labor, passionately defended by the ILWU. Under the hiring hall mechanism, no regular team of longshoremen (crane operator, checkers, mobile equipment operators, etc.) show up at the same terminal each day, familiar with the requirements of the job, and with each other. Instead, the terminal operator, each morning, calls the ILWU Hiring Hall, and puts in an order for a crew, or number or workers. The ILWU dispatcher then sends out whatever group he assembles. That is the crew that works that terminal that day – rarely the same combination of individuals, with varying degrees of experience, work ethic and familiarity with the equipment. It obviously impacts the productivity of terminal operations. In some ports, such as Charleston and Savannah, the terminal workers are organized as regular crews, working together – as in virtually every warehouse or manufacturing enterprise, or as is the case in Ports around the world. The lift rate on and off the ships at Charleston and Savannah is approximately 42 or 44 containers an hour per crane (similar to Europe). On the US West Coast, it is typically 27 to 28 containers/hour. In my opinion and from running crews and business myself, this is a very strange and seemingly extremely inefficient and unproductive way to do things. I would like the chance to understand the reasoning behind this mechanism the ILWU still uses. I wonder if there is any reasoning behind it or if it’s simply “how it’s always been done.”
- Federal Mediator. Ideally, the PMA and ILWU can and do negotiate each contract (every 3 or 6 years) on their own. However, when the two parties cannot reach agreement, they can request assignment of a mediator by the Federal Mediation and Conciliation Service. Both parties have to agree to use the mediator, who is engaged only for as long as both parties want him/her to assist in the negotiations. The mediator has played a central role in helping the ILWU and PMA, as well as the East Coast longshore union and employers, resolve contract disputes on several occasions in recent years. According to a Journal of Commerce article, for contracts covering more than 1,000 workers, the success rate was 76.6 percent in Fiscal 2013.
- ILWU- PMA Contract. The contract contains all aspects of the working relationship between longshore labor and their employers, the PMA. Pay, benefits, work rules, arbitration mechanism to resolve disputes as they arise. The contract expired June 30, 2014. With exception of a brief extension, the ILWU and PMA have been operating without a contract and thus any dispute resolution mechanism. Negotiations have continued on and off, on the following issues (note these are “believed” issues as negotiations are tight-lipped except for the very slanted press releases coming from one of the parties):
- Automation: Automation means fewer longshore jobs. To protect their jobs, ILWU has successfully limited ability of US west coast terminal operators to install automated cranes, readers and other equipment that are commonly used throughout the world. ILWU seeks to limit the introduction of automation, and protect jurisdiction.
- Jurisdiction: To the extent automated machinery is introduced, ILWU wants to assure that ILWU members (as opposed to Machinists Union or International Brotherhood of Electrical Workers) have the work.
- Affordable Care Act (ObamaCare) imposes an excise tax on the “Cadillac” health care plans, to raise money to pay for health coverage for those who can’t afford it. As the ILWU health benefits are among the most generous in the world, they are subject to this excise tax. The ILWU members do not wish to pay the excise tax, as this would make their benefits no longer 100% free. PMA says the terminal operators cannot afford to pay the $150 million annual cumulative excise tax. While no public statement has been released by the PMA and ILWU, it appears that they have agreed to deal with this by “kicking the can down the road”: since the excise tax doesn’t kick in till 2018, they may agree to a 3 year contract, and leave this excise tax issue for the next contract negotiations.
- The ILWU wants the right to unilaterally fire a local arbitrator. Local arbitrators are appointed jointly by the ILWU and PMA, with a local arbitrator serving in each of the major port ranges on the West Coast. When the coast wide contract is in force, and a dispute arises between the employer and the ILWU local, an arbitrator is called in to gather testimony and render a decision. In most instances, the local arbitrator can prevent what is often a minor disagreement from shutting down a marine terminal for an entire day, or longer. In the worst case scenario, as is occurring right now, the absence of the arbitration process can allow work slowdowns to continue endlessly. Does it make any sense to any of you that either party should be allowed to fire an arbitrator? Wouldn’t that give any party simply too much power? The right to fire the exact individual that is supposed to either rule in favor or against you? I would suggest that we would all be in agreement that this is simply too much power for any one side.
- Chassis: When the chassis were under control of the ocean carriers, the ILWU did some of the chassis repair work. Now that the carriers are divesting themselves of the chassis, turning ownership and management to independent leasing and trucking companies, who will have jurisdiction over chassis repair work? The independent leasing companies and truckers are not a part of the PMA and are therefore not a part of the current negotiation between the ILWU and PMA. INSERTING MY OPINION HERE: According to the ILWU, and quoted from a source that I need to remain private (therefore not verifiable), there was a letter sent to Members of Congress urging them not to sign onto a previous Congressional letter. In that letter, it is quoted regarding the Chassis M&R (maintenance and repair): “It’s an important issue in terms of preserving and protecting the jobs of hundreds of ILWU mechanics but more importantly we want chassis on the road that are maintained and do not endanger the lives of the driving public.” May I break this statement down? The ports no longer own the chassis (explained below). This got phased out over the course of the last year or so. Private leasing companies, or like in the case of our company, individual companies own their own chassis. These companies are responsible for the maintenance and repair of the chassis that they OWN. The Federal Motor Carrier agency and Dept of Transportation set incredibly strict guidelines that we follow to ensure safety on the road. Between our 2 truck shops, we have certified mechanics performing Annual Inspections on these and every other piece of equipment being used on the road. We also have pre-trip inspections performed by truck drivers every single day these are being used. For the ILWU to want jurisdiction over and responsibility of this task is ludicrous. The lives of the driving public have absolutely nothing to do with the ILWU. To put it bluntly, it is not the ILWU’s job or responsibility to maintain safety on the roads. If a chassis that they inspected were in an accident, would the ILWU take responsibility? I think not.
- Port Operations Disruption. Since May 2013, all West Coast terminals have suffered job actions by the various ILWU Locals that have resulted in closure of terminals, ranging from several hours to several days. The pace of these labor actions accelerated in sporadic and unpredictable manner during September and October, 2014, and became a daily unpredictable occurrence at various terminals up and down the coast, since November 2014. Job actions include walking off the job, or not reporting for work, or the Hiring Hall sending less experienced labor. Sometimes the work is so slow, the terminal operator shuts down the terminal. ILWU claims PMA (terminal operators) are making the situation worse, by refusing to hire 2nd and 3rd shifts (at hefty overtime pay scale); PMA says that the longshoremen are working so slow as to force hiring 2nd and 3rd shifts, and they aren’t going to be “played”. The ILWU deny they are working slow.
- Other Factors Contributing to Port Congestion. As in any industry, there is ongoing change in ocean carrier and port operations. With effort by Ports, terminal operators, and labor working together constructively to meet challenges, it is possible to work through these. But when labor doesn’t show up to work, or takes steps to exacerbate the challenges, congestion is the predictable result.
- Mega Ships, now double the size of the traditional container ships, depositing hundreds of containers at a time on the terminal. This taxes the available terminal space, increases the need for velocity in moving containers off the ships, onto the trucks or rail, and out the gates.
- Alliances. The steamship lines, taking advantage of the new mega ships, are now combining their cargo, so as to have larger volume deliveries of containers, but fewer ship calls. More containers, delivered at once, stresses capacity of the terminal operator to move the containers through the gates.
- Chassis—(the trailer on which the ocean container is placed and then hauled out the gates). Ocean carriers have traditionally, in the US, owned and maintained the chassis. The carriers are discontinuing this. Chassis are now the responsibility of truckers, shippers and others. During this transition there has been confusion and a shortage of chassis. To solve the problem, some shippers are buying and maintaining their own chassis. The Port of Long Beach is acquiring 3,000 chassis to have available for shippers through that Port. Other solutions will be implemented over the coming months/years. In the meantime, like the mega-ships, all parties need to work constructively to try to make the best of the situation.
WHERE ARE WE NOW?
The finger-pointing between the PMA and the ILWU is intense; and exporters and importers are not being spared the increasing damages, losses, missed delivery deadlines, unhappy overseas customers, waiting trucks, rejected cargo, and layoffs.
The long term impacts are becoming evident: for exporters – permanent loss of foreign customers who are looking for food, farm and fiber sources in other countries. For importers – hearing accelerating plans to permanently revise supply chain, reducing dependence on US West Coast ports, increasing shipments via Canadian and all-water (Panama and Suez) to the East/Gulf Coast ports.
The future impact to all West Coast states is in flux. How will the rest of the world react to the unreliability of our ports? Are our international customers looking for another source for their feed, food and fiber? Will other industries (airplane and car parts, shoes, retailers, etc…) move their warehouses and distribution sites towards the East Coast and Gulf Coast to be closer to more a more reliable port system? They already are. There’s chatter out there of the East Coast terminals and ILA (International Longshore Association) asking for that business. If this happens, then where will we get empty containers? How much more will it cost to ship off the West Coast and will we be competitive in the global market? How much will the landscape of Oregon and America change? All of these questions remain to be answered. One thing is for certain: the longer these disruptions continue, the more at risk we are.
Things are moving fast these days. On Thursday (February 12) morning, 359 Oregon companies, farms and associations wrote a letter to the Oregon Congressional Delegation asking for intervention in the West Coast Port Crisis. Also on Thursday, many Congresspeople hosted a Press Conference on this subject. (See Congressman Kurt Schrader’s comments here). By Friday morning, all 5 US House Members from Oregon sent a letter to the President urging his active and immediate engagement, including using statutory authorities accorded to the Chief Executive as necessary. Friday afternoon, US Senators Jeff Merkley and Ron Wyden wrote a letter to the ILWU/PMA strongly urging both parties to immediately resume port operations at full capacity while the final issues are negotiated. Finally, Friday afternoon, President Obama announces he will send his Secretary of Labor to the negotiation table. This doesn’t necessarily mean a signed contract is immediately imminent, but the last week showed more media and political involvement then we’ve seen in the past 9 months combined. I’m hoping it’s a sign that we are moving in the right direction.