Labor Negotiations at US West Coast Ports: What Can We Anticipate?

All eyes and attention are on the renewal status of this year’s master labor contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) set to expire on July 1, 2022. The significance of the expiry and renegotiation of this agreement cannot be overstated as it covers operations at all US West Coast ports from Puget Sound to San Diego, including North America’s busiest terminals in the Los Angeles/Long Beach complex. 
 
With severe congestion and delays at west coast port facilities already slowing imports and affecting the entire US economy, the Biden administration as well as state governments and trade organizations have been at work behind the scenes for months attempting to encourage a timely settlement.  
 
With so many eyes on these negotiations and so much at stake, what can shippers likely expect in the coming weeks and months? 

Historical background 

One of the most contentious aspects of the current labor negotiation has been and continues to be automation. Terminal operators view automation as central to global and regional competitiveness and essential to reducing congestion and increasing overall productivity. The union has historically resisted automation of any kind based on concerns that automation results in loss of jobs and ultimately a continued decline in overall ILWU membership.  

Conflict around automation between the PMA and ILWU first surfaced during the 2002 contract talks, when operators sought to introduce computers to transmit cargo data between ships and the terminal facilities. After months of increasing disagreement, on September 27 the PMA locked out dockworkers, forcing President George W. Bush to invoke the Taft-Hartley Act. Ports were back in operation after ten days, and a new master contract was finally signed in December 2002.  

In 2008, renegotiation of the 2002 agreement once again focused on automation. Despite starting talks in March, a new master contract wasn’t signed until August 2008. During this period there were work slowdowns that led to increased port and terminal congestion and vessel backups, but no lockouts or strikes. The new 2008 master contract gave individual terminals the right to introduce automation, including unmanned ship-to-shore and container stacking cranes and driverless yard tractors and other ground container transport. 

The next ILWU/PMA contract renegotiation stretched from May 2014 to February 2015 and required the Obama administration’s intervention following severe work slowdowns that bottlenecked PMA ports for nearly four months. This led to loss of West Coast market share and pushed several terminal operators to finally move forward with automation.

To avoid a replay of 2014, negotiations in 2017 quickly led to the approval of a five-year contract extension through July 1, 2022. Official negotiations for a new contract are set to begin on May 12, 2022. 

2022 Top Negotiating Points 

To finalize a new contract, the parties must reach agreement on two key points: future limits on automation balanced against (presumed) ILWU requests for a share of soaring terminal revenue.

Automation is “the future” for US west coast terminals if they are to remain competitive, keep or grow market share and deal with rising import levels and associated congestion that is currently forcing shippers to send cargo elsewhere.   

As of today, 4 of the 29 PMA terminals on the US west coast have significant automation in place or planned: Long Beach container Terminal (LBCT) and TraPac in Los Angeles have full automation of all cargo handling within the yards, but the ship-to-shore cranes are manned. Pier 400 is implementing automated straddle carriers in part of the facility. Pier T in Long Beach announced plans in summer 2021 to begin an automation project. 

There is no question that automation greatly improves “minutes per move” for containers, as well as reliability and safety. But some estimates indicate wide-scale automation could eliminate up to 40%-50% of current longshore jobs. Therefore, it is widely expected that the ILWU will once again seek guarantees to maintain or even increase the size of the labor force, as well as additional monetary compensation for automation. The union will also seek to continue placing limits on automation in an effort to slow it down and curtail its footprint. 

As part of the current contract, the PMA paid $800 million in additional dockworker salaries and benefits in exchange for the right to automate. Terminal operators will view any backing down on automation as “throwing money out the window.” 

A request to give ILWU members a share of terminal revenues would be unprecedented, but so are the revenues that terminals and ocean carriers are currently realizing. Both parties in this negotiation are making more money than ever before. For example, ILWU members are working record-breaking overtime hours while March 2022 was the third highest month ever for goods imported at Southern California terminals. Ocean carrier revenues have likewise been record-breaking. 

What shippers can expect 

The excessive money being made combined with “the eyes of the nation” being fixed on this critical supply chain link puts pressure on both parties to come to agreement by July 1.

The big question is: will the negotiations be affable or argumentative? Will there be threats of slowdowns, strikes or lockouts?

Based on experience, if negotiations are going well there tends to be little comment by either side in the media. If talks are rough, both parties will leak rhetoric and rumors in various ways in attempts to gain sympathy and support. We have seen evidence of the latter earlier this week with the May 3rd release of PMA sponsored report promoting the benefits of automation. This led to a swift response from ILWU representatives calling the report “self-serving” and an “insult to all workers who will see their jobs replaced by machines.”

Optimistically, what we will hear at the end of the first day of negotiations on May 12 is that everyone is confident they can work together, and a new contract will be in place by July 1. From there, we can expect that future official negotiation dates will be announced. We may also get other official announcements about the situation in the interim.

If negotiations ultimately fail to deliver an agreement by July 1, it seems most likely that the ILWU will agree to continue work without a contract for some agreed period of time. If a new contract still isn’t signed, old antagonisms could finally manifest in the form of labor unrest.  

But given how intensively the Biden administration and others will be looking to steer outcomes in the other direction, combined with all that both sides stand to lose by failing to come to terms, major additional supply chain disruption due to labor issues at PMA ports seems less likely both after and certainly before July 1, 2022.  

Meanwhile, to some extent “the damage is done” as shippers have preemptively implemented risk diversification strategies that include shifting some container volume to non-PMA ports.   

Next steps 

Stay tuned to Laufer’s News and Insights online for more updates as we move closer to the July 1 contract expiration date.  

To connect with an expert for advice on how to plan your international logistics during an uncertain future, contact Brian Martorano, National Director of Business Development, Ocean Import or your local Laufer Group International sales representative.