"Container cliff" confronts U.S. economy as contract talks between ILA, management collapse

There is more than one "cliff" confronting the U.S. economy as the year draws to a close.

Yesterday, the International Longshoreman's Association (ILA) and the U.S. Maritime Alliance (USMX), which represents ship management at 14 ports from Maine to Texas, broke off talks aimed at reaching a new contract before the current pact expires on Dec. 29.

In dueling statements, each side accused the other of rejecting a mediator's proposal to extend the contract to Feb. 1. Such an extension would allow the sides more time to reach a deal and avert a threatened Dec. 30 dockworker strike that would paralyze shipping along the East and Gulf Coasts. The Federal Mediation & Conciliation Service, the federal agency overseeing the talks, declined comment.

An ILA strike would be the first since 1977.

CONTAINER CLIFF
In a statement issued late yesterday, the National Retail Federation (NRF), the largest retailer trade group, urged the White House to intervene to keep the ports open. The NRF warned that U.S. and global trade are heading towards a "container cliff," a reference to the much-discussed "fiscal cliff" of spending cuts and tax increases that would hit the U.S. economy in January if Congress and the White House can't reach a deficit-reduction agreement.

"It is imperative that both sides verbally announce their intentions to return to the negotiations," said Jonathan Gold, NRF's vice president for supply chain and customs policy. "A coast-wide port shutdown would have a significant impact across all businesses and industries that rely on the ports, particularly retail."

In an e-mail to DC VELOCITY sent before the talks collapsed, Gold said his members are "becoming more and more concerned" that a Dec. 30 strike will occur, barring last ditch efforts to either agree to a new contract or to an extension of the current pact.

After coping with an eight-day clerical workers strike that shut down the Port of Los Angeles and curtailed operations at the Port of Long Beach, retailers want some clarity on the East and Gulf Coasts, and have no stomach for a "can-kicking exercise" into 2013, Gold said. "[Another extension] only prolongs the situation and continues the probability of some kind of disruption at a later date," Gold said in the e-mail.

In the meantime, many retailers are re-activating contingency plans to divert deliveries to other U.S. ports in the event of a work stoppage, Gold said. Those plans were crafted over the summer as the supply chain became increasingly concerned the ILA would call an Oct. 1 strike if no agreement was reached by the original Sept. 30 expiration date. Those fears were temporarily allayed when both sides agreed in late September to a three-month contract extension that now expires at month's end.

CONTAINER ROYALTIES ARE STICKING POINT
The sticking point is over the issue of so-called "container royalties," established in 1960 to protect union workers in New York from job losses caused by the advent of containerization and cargo automation practices.

The ILA has called that issue "untouchable" and would agree to an extension only if management took it off the table. USMX has proposed to keep royalties at 2011 levels—estimated at $211 million, 10 percent of which goes into members' pockets—for current recipients for 25 years or until they leave the industry, whichever occurs first. However, new employees would not be eligible to receive royalties.

USMX has said repeatedly that all issues, including container royalties, need to be addressed. Royalty payments averaged $15,500 in 2011 for each ILA member working at the 14 East and Gulf Coast ports, according to management.

USMX, which has proposed a six-year contract, said both sides have tentatively agreed to language protecting workers whose jobs are displaced by the use of new technology and to continue ILA jurisdiction over the maintenance and repair of chassis done within terminals and port areas covered by the master contract.