Ocean Carriers Announce Congestion Surcharge for All US/Canada Ports

September 10, 2012
By Rich Roche

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Due to the potential for strike on the U.S. east coast, ocean carriers have recently announced a new congestion surcharge of $1,000 per 40-foot container for all routings to or from U.S. and Canada ports. Other per diem and demurrage charges may apply if containers have extended dwell time at terminals.

Why is this happening?

Ocean carriers are reacting to contract negotiations between East Coast union workers and their employers.

Who’s Involved?

International Longshoreman’s Association (ILA)
The union responsible for labor that facilitates terminal operations at most ocean container terminals on the East Coast and Gulf Coast of the United States. They operate under a master contract that expires on September 30, 2012.

Represents the collective terminals that hire the ILA union labor. They are the other side of the bargaining table. They are attempting to negotiate a six-year master contract that covers container operations, as well as all of the local contracts that cover break bulk operations and pension.

What’s at stake?

We heard some of the first news coverage on this issue back in March when Harold Daggett, President of the ILA, addressed the Transpacific Maritime Conference. Daggett cited four hurdles that needed to be agreed to before ratification of the contract could be accomplished. They are:

  1. Automation
    As new technology is deployed, the ILA fears the risk of job loss. Their position is that they welcome technology but not at the expense of jobs. They are seeking certain job guarantees.
  2. Chassis maintenance and repair
    Traditionally an ILA function, now at risk of loss due to shift of chassis ownership away from carriers to truckers/leasing companies. The ILA is pushing to retain control of the maintenance and repair facilities that they operate.
  3. Jurisdiction, work rules, and customary practices
    Some of these concessions are more than 50 years old and have potentially run their course in view of employers. The ILA has a different view, in that they do not want to give up concessions previously granted (such as work hours, overtime, guaranteed wages, no show jobs, minimum call-outs, etc.).
  4. Weighing containers
    The ILA is pushing to weigh every container crossing the docks in order to eliminate underreported weights that result in smaller royalty payments. The royalty payments were granted as a concession in the 1960’s to offset possible wage reduction from the use of unitized container lifts in place of traditional bulk moves by weight.

Daggett openly threatened that if the they did not get agreement on each of these points that the result would be a labor strike.

Negotiations progressed through July, when an agreement was reached on automation and chassis maintenance and repair. On August 22 however, with three more days of talks scheduled to discuss jurisdiction, work rules, customary practices, and weighing containers, the ILA accused USMX of a “take it or leave it” attitude and walked out of the meetings.

The two sides remained deadlocked until September 6, when the Federal Mediation & Conciliation Service stepped in to oversee the bargaining process. Both sides have agreed to move forward on talks.

What COULD happen

It’s anyone’s guess what the result of ongoing bargaining will be when the master contract expires on September 30. Four possible outcomes exist:

1. Strike
2. Lockout
3. Agreement
4. Extension of deadline

If there is a strike or lockout, President Obama can invoke an injunction for an 80-day cooling off period. This injunction is allowed under a provision of the Taft-Hartley Act, which was enacted in 2002 after a 10-day lock out of West Coast union workers by their employers. Taft-Hartley is rarely invoked by presidents. However, the ILA holds the record for the union with the most Taft-Hartley injunctions invoked (seven times as of the date of this article).

It would be an unpopular move for President Obama to make nonetheless, in light of the election being so close to the master contract deadline. It might affect votes from labor. Although, if a strike or lockout comes, it is likely that a Taft-Hartley injunction will be sought, with the only variable being the number of days in the cooling off period.

If no agreement is made by September 30, there will most likely be an extension to the contract deadline, especially now that the Federal Mediation and Conciliation Service is involved. This will not paint President Obama into a corner. Not to mention the pressure it would relieve from the import and retail industry groups, who have pushed to avoid a potentially damaging strike/lockout during peak season, when Christmas retail goods are still coming into the East Coast.

Contingency Plans

We are frequently asked what contingency plans can be taken to avoid the strike. We recommend that clients avoid ETA’s in the first two weeks of October. Rerouting cargo to the West Coast or Canada is problematic, as we’re still in peak season. There is very little room on these ships. Even a two or three percent shift from East to West Coast routings would put these vessels into an overbooked scenario where rolls and other delays would result.

Rich Roche is Director of International Transportation at Mohawk Global Logistics.