2 March 2023 (Lloyd's List) - THE unresolved west coast labour contract is the main concern for US retailers as they negotiate new service contracts with ocean carriers and seek to minimise risk in their supply chains.
“It is important that folks get the deal done,” said National Retail Federation vice-president of supply chain and customs policy Jonathan Gold. “I think that is the most important thing for my members.”
Negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association have dragged on since May. The dockworkers have been working without a contract since July.
With little progress to show and amid fears of industrial action, the uncertainty has led shippers to divert of cargo from the west coast to east and US Gulf coast ports.
“My members are looking to diversify their risk as much as possible. When the contract expired [last July], that is when you saw the shift. Because folks did not want to take a chance on getting caught not knowing what was going to happen [and] how long negotiations are going to take,” Mr Gold told the Journal of Commerce’s TPM Conference.
“The fact that there is no contract in place is the biggest concern for members. There was no extension like we’ve seen in the past, where if something happened by either side, there is a mechanism to get folks back to work without a contract.”
A joint statement by the ILWU and the PMA said they continue to negotiate and are hopeful of reaching an agreement soon, but Lloyd’s List understands that there has been no substantial progress in the talks.
Port of Los Angeles executive director Gene Seroka told the panel that it is not only labour issues, but also regulation and high costs that are undermining the competitiveness of the San Pedro Bay ports and leading to a shift of cargo eastwards.
“It is not just one labour contract negotiation,” he said. “It is a series of issues put into those three major categories that have to be addressed. And at the same time, our contemporaries have hired switched-on leaders. They have aligned with policymakers, created very business-friendly environments, and put together coalitions to pursue both public and private investment. This is super nuanced and super complex.”
The competitiveness of California’s ports is also hampered by a lack of warehousing space and a challenging regulatory environment, said Mr Gold, adding that shifts in sourcing could also reduce California’s market share of cargo.
“There are a lot of other issues happening out here in the west coast, especially in California, that are making it not so friendly for businesses to do work here,” he said.
“And it is putting extra strain on the port and the supply chain’s ability to move product through, whether it is things like AB5, clean truck rules, [and] bans on new warehousing, which is critically needed right now.
“The fact that warehouses are full, and you have nowhere to put cargo, that is a problem. But certainly, the labour [issue] is one of the big things that is out there. We have got to see some progress [on the labour contract]. And I think until my members, or the shippers get more confidence that there is going to be a contract in place, you're not going to see that cargo start to shift back [to the west coast].
“The other challenge too is that a lot of this stuff that has moved — it is going to take time for that to move back, if it moves back at all. I think part of that too is the growth we have seen on east coast and US Gulf coast ports, the new warehousing that has been developed, the population growth we are seeing in those areas.”
While the ILWU and the PMA began negotiations just two months before their contract expired in July, the International Longshoremen’s Association, which represents dockworkers on the east and US Gulf coasts, has begun local discussion with employers well ahead of the expiration of their master contract in September 2024.
Mr Gold said the early movement on the east and US Gulf coasts provides certainty to shippers.
“To know that there is going to be that peace for the additional six years and the fact that they are already starting now on some of the local negotiations, I think is incredibly important. I think that shows the kind of willingness to work together to try to get these issues resolved quicker and not wait until, you know, two months before a contract expires to start having these tough negotiations.”
