Aerial view of the Port of Los Angeles.

West Coast Labor Dispute Damages Supply Chain

April 18, 2023
Port terminal operators accuse ILWU of selective work stoppages.

After more than a year of negotiations, union longshoremen at the West Coast ports recently engaged in a series of one-day work stoppages at selected terminal operators’ facilities.

At the same time, port officials and shippers continue to ask the Biden administration to step in to help resolve the disagreements blocking a new collective bargaining agreement. While there are reports that the administration has been working quietly behind the scenes and may be close to obtaining an agreement, the actions taken by the union seem to belie those reports.

The Pacific Maritime Association (PMA) announced that starting in mid-April the International Longshore and Warehouse Union (ILWU) withheld their labor over a two-day period, resulting in shutdowns of terminals at the Ports of Los Angeles and Long Beach, CA. PMA is the employer negotiating party seeking to obtain a new labor agreement with the union.

“The union has unilaterally delayed the standard dispatch process, which is jointly administered by PMA and the ILWU, and refused to allow PMA’s participation in the labor dispatch process,” the association explained. “These actions have slowed the start of operations throughout the Southern California port complex.” PMA also charged that the union had forced crucial cargo handling equipment to be taken out of operation at several key terminals.

The ILWU claimed that its members were absent from their jobs because they were busy attending union meetings and engaging in Good Friday religious observances. “Cargo operations are ongoing as longshore workers at the ports remain on the job,” said the ILWU local that represents workers at Los Angeles and Long Beach.

These actions occurred about a month after the ILWU in Southern California stopped complying with a contract provision providing employers the right to assign staggered shifts during meal periods so cargo can continue to be received and delivered without interruption. This harkens back to the time late in the last century when the entire port would shut down for an hour and a half in the middle of each day while all of the longshoremen took their lunch at the same time.

“As has been pointed out for years, any actions that undermine confidence in West Coast ports threaten to further accelerate the diversion of discretionary cargo to Atlantic and Gulf Coast ports,” PMA stressed. “Cargo diversion places quality jobs at risk far beyond the docks, including truck drivers, warehouse workers and thousands of others whose livelihoods depend on ongoing operations at the port.”

In fact, the diversion of freight to East Coast ports began more than a year ago when shippers started shifting their freight because of fears that the flow of West Coast port traffic would be disrupted in the event of a deadlock in the labor contract negotiations, which is what has happened since the most recent multi-year contract expired in July 2022.

Shades of the Past

“The ongoing and unresolved labor contract negotiations between the PMA and ILWU place additional unnecessary strain on our supply chain, resulting in significant delays and increased prices for American businesses and consumers,” commented Eric R. Byer, president of the National Association of Chemical Distributors (NACD).

“For nearly a year, businesses across the nation have experienced a transfer of cargo shipments away from West Coast ports due to the uncertainty posed by these labor negotiations,” Byer added. “Recent temporary port closures have proven that these long-standing tensions threaten the timely shipment of critical goods, including chemicals, that are essential to nearly every U.S. industry.”

The recent ILWU work stoppages also stirred up bad memories of the national supply chain disaster that was created by union work slowdowns in 2014-15, which resulted in a string of container ships waiting as much as 100 miles out to sea to land and unload their cargoes. The delays lasted for months although an actual strike was never officially called.

In that case, the delays impacted consumer goods that were targeted for sale during the 2014 Christmas season This turned out to be a disaster for importers and most retailers (although it proved to be a boon for discount chains like Ross and Marshalls who ended up with the unsold clothing and other items). Given their experience at that time, it is hardly surprising that steamship lines and their customers began shifting freight away from the West Coast before negotiations began in earnest last year.

In addition, the freight demand experienced during the height of the COVID-19 pandemic evaporated last year, and with it much of the difficult pressure it had exerted on the supply chain. As truckload rates have plunged, an increasing number of small truckload carriers have been closing their doors and the demand for warehouse space has lessened to the point that some operators are subleasing space and industrial real estate property owners are finally feeling downward pressure on rental rates.

In March, all of the North American Class 1 railroads except for Canadian National reported declines in rail traffic.

On April 7, the National Retail Federation (NRF) reported that West Coast imports are projected by the federation’s Global Port Tracker to reach 1.68 million twenty-foot equivalent units (TEU) for March, when all the numbers are in, down 28.2% year over year. April is forecast to be 1.86 million TEU, down 18% from last year; May at 1.91 million TEU, down 20.1%; June at 1.99 million TEU, down 11.8%; July at 2.1 million TEU, down 3.9%, and August at 2.13 million TEU, down 5.9%.

“The priority at the moment is resolving labor negotiations at the West Coast ports and avoiding any self-inflicted supply chain challenges on top of those we’ve faced the past three years,” commented Jonathan Gold, NRF vice president for supply chain and customs policy.

Ben Hackett, founder of Hackett Associates, which prepares the Port Tracker numbers for NRF, added, “Compared with last year, the flow of import containers on the West Coast continues to decline along with demand as carriers increasingly drop service to Los Angeles-area ports but stretch voyages to include other ports of call to help absorb excess capacity.”

In March, NRF led a group of 238 state, local and federal trade associations in sending a letter to President Joe Biden calling on the administration to provide support to help the negotiating parties quickly reach a new agreement.

Latest from Labor Management

#171785560 © Mark Gomez | Dreamstime
DOL Announces New Actions  to ProtectH-2B Workers
# 170547495 © VectorMine| Dreamstime
Labor Skills Needed for the Future