Congestion at west coast ports are causing real pain

westcoastportThe alleged west ports slow down is causing congestion, pain and lots of finger pointing.  The issue is that contract negotiations between the Maritime port employers and the longshoremen workers are dragging on with no apparent resolution in sight.

The International Longshore and Warehouse Union have been working without a new contract since July 2014.   The Pacific Maritime Association which is negotiating on behalf of the west coast employers has accused the union of using slow down tactics to gain bargaining leverage.  The ILWU denies any slow down and states that the congestion is caused by shortages of containers and flat bed trucks.

Many businesses are complaining and claiming lost revenue because of the “slowdown”. Some specialty retailers are claiming the slowdown has been brutal.  While major retail stores have seen some outages on popular products, there appears to be plenty of other options for the consumer.   Christmas season retail sales are not expected to overly impress anyone, but no one is blaming product shortages for the “less than spectacular” sales.   Overall it has been hard to determine the economic impact of the west port congestion so far.

One of the more visible issues caused by the west port “congestion” was  the shortage of Mc Donald’s French Fries in Japan which was due to Idaho potatoes being held up in port.    Eventually Mc Donald’s air shipped the potatoes and the crisis is apparently over.

So what are the issues in this labour dispute?   Neither side has been extremely candid but industry experts claim the following are the major contentions:

  • Automation: US ports are lagging far behind the rest of the world in productivity and the employers want to bring in more automation to stream line operations.    Automation could results in loss of jobs and the ILWU is fighting to protect its workers.
  • Jurisdiction: There have already been a lot of changes in technologies and systems that have shifted work around.  Unions are fighting to expand its jurisdiction to avoid further erosion to their membership.   ILWU feels that some of the work being contracted out should be done by ILWU workers.  This isn’t only a union vs. non-union issue; the ILWU is fighting other unions in this turf battle.
  • Health Care: The ILWU workers have one of the best health insurance packages in the US.   Their plan is classified as “Cadillac” under the latest Obama Care regulations which mean that it will be subject to a “tax”.   Who pays for the tax is at issue; the west coast employers who are feeling pinched by competition and cost reduction pressures, feel that they can’t afford to pay that added cost.   The ILWU, like most unions view “give backs” as unacceptable.

Looming in the background is the Panama Canal expansion that is scheduled to be completed in early 2016.   The widened canal allows larger ships to pass through and is expected to double its current capacity.   The Panama Canal will provided more options for shippers and could results in lost business for the west coast ports.

It appears that both the ILWU and the west coast employers have a lot to lose if they don’t resolve the contract issues soon, which gives us some hope that this impasse will be resolved in early 2015.   In the meantime, shippers need to carefully review their options and timelines to avoid costly shortages and lost revenue.