Market Matters Blog

Even Still, All is Not Quiet at the Western Ports

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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Truck container chassis at the Port of New York. Chassis inspections negotiated in the West Coast labor dispute are a sticking point. (Picture courtesy American Trucking Associations)

After nearly 10 months of labor slowdowns resulting in monetary losses to container shippers, the members of the Pacific Maritime Association (PMA) and the International Longshore & Warehouse Union (ILWU) ratified a new five-year contract on the West Coast which is retroactive to July 1, 2014, and runs through June 30, 2019.

According to the PMA website the contract, which covers 29 ports on the West Coast including major container ports in Los Angeles, Long Beach, Oakland, Portland, Seattle and Tacoma, features an "enhanced arbitration system" designed to support waterfront stability, capacity growth and productivity. "This is especially important given the increasingly competitive environment West Coast ports face now and into the future from a variety of factors, including the long-anticipated opening of the expanded Panama Canal," PMA stated.

"Health care changes maintained in the contract will foster greater efficiency, cost containment and fraud prevention for the long-term. To date, these efficiencies have already delivered significant savings to the health care plan. At the same time, ILWU members will continue to enjoy a very generous, employer-paid health care plan. The agreement also features wage and pension increases for ILWU members," the PMA statement continued.

The one catch in this contract that is now causing problems for trucking companies at the port is the agreement the PMA made with the ILWU workers allowing them jurisdiction over the maintenance and repair of truck chassis. While this agreement does not allow the ILWU to inspect trucker-owned chassis, the process is creating a slowdown in trucks' ability to enter the port. All trucks are pulled over because there is no way to immediately tell if they are privately owned. Curtis Whalen, executive director of the American Trucking Association's (ATA) intermodal conference told DTN via phone, "The whole process is illegal and the ILWU has no legal right to stop the truckers." Even still, Whalen said the unions continue to "do what they want," whether it is legal or not.

Whalen pointed out "the intermodal equipment provider (IEP) is responsible for roadability and under law, inspections are done long before the trucks arrive at the ports." Shipping lines no longer own the chassis after selling most of them to IEPs, mainly to save themselves money. Whalen said this means the PMA, which represents the shipping lines, has no authority over the chassis inspection. Whalen said the "union and PMA had no right to negotiate over something they do not own."

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The Federal Motor Carrier Safety Administration (FMCSA) has rules and regulations governing ocean carriers, railroads, chassis pool operators and other IEPs. These rules, issued in December 2008, affect the chassis, which are special trailers that hold cargo containers when they are transferred from ship or rail to truck for final delivery. The new regulations made IEPs subject to the FMCSA rules for the first time, and establish shared safety responsibility among IEPs, motor carriers, and drivers. "We want to ensure that every piece of equipment traveling on our highways is operating safely," said FMCSA Administrator John H. Hill in a Dec. 17, 2008 press release. Here is a link to the press release and new regulations: http://goo.gl/…

Whalen told DTN he has already notified the FMCSA in Washington DC, about what is happening on the West Coast. Whalen said if the ILWU continues to pull trucks over, truckers may refuse to haul to the ports, causing a loss of truck drivers in an industry that is already experiencing shortages.

NEGATIVE EFFECTS OF LABOR SLOWDOWNS STILL LINGER

Mike Hajny, vice president of Wesco International, a hay exporter in Ellensburg, Washington, told DTN in an email that their volume of orders has dropped off significantly due to too much inventory in certain countries such as Japan or Korea. "When the port slowdown was in full swing, customers such as Australia, Spain and Pakistan had to move to find other sources for forage. That product turned out to be less expensive and filled warehouses," said Hajny. "After the PMA/ILWU announced their agreement, cargo magically started to flow out of West Coast Ports. As it arrived in Japan and Korea, the warehouses were full of product from other countries and there was nowhere for USA cargo to go."

Hajny said now the market is in an "over-supply situation. Of course issues with container free time have caused many customers to move into 'price dumping mode' and offer product at a loss, just to get it off the docks. This has caused tremendous confusion in the market and has caused any vigor in the market to evaporate. Worst issue is, 2015 crop harvest is underway in USA, and there is little to no interest at this time from customers. Paint it however you will, but this is a direct result of the port slowdown and cargo not moving smoothly for four months."

Portland is another issue, Hajny added. "With no shipping line with direct call to Portland, everything has to be moved by rail or truck up to Seattle/Tacoma. Space is limited on the rail and it's difficult to get bookings at times. Trucking adds tremendous time and costs to the shipments. It's just not pretty, and it probably is going to stay that way."

The Washington apple industry also continues to feel pain from the West Coast slowdown. AP reported "a record crop of apples, coupled with the West Coast port slowdown earlier this year, is taking a toll on Washington apple growers. Nearly $100 million worth of apples that cannot be sold have been dumped into fields across central Washington, the nation's most productive apple region. The apples are being left to rot and compost in the hot sun, an unusual occurrence for an industry that has found ways to market ever-growing crops."

Todd Fryhover, president of the Washington Apple Commission in Wenatchee told the AP, "If we wouldn't have had the port slowdown, we wouldn't have needed to dump apples. The ports dispute created numerous problems for farmers. A big issue is that apples loaded into unrefrigerated containers sat on docks for weeks waiting to be loaded on a ship." Fryhover added that he estimates apple exporters lost at least three weeks of their season because of labor problems at West Coast ports. "Along with a record supply of apples, that created surpluses that could not be shipped profitably to markets or processors," Fryhover said in the AP article.

Mary kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

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