Negotiators Avert ILA East Coast Strike in Port Talks

• Updated December 28, 2012, 7:40 p.m. ET

Negotiators Avert ILA East Coast Strike in Port Talks

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By CAMERON MCWHIRTER and SHELLY BANJO
Negotiators averted a potential longshoremen's strike that would have stopped container cargo at U.S. ports from Boston to Houston beginning Sunday, but the tentative agreement came too late to prevent retailers from rerouting spring products deliveries.
Federal mediator George Cohen said on Friday that talks "in principle" resolved a major sticking point, a decades-old agreement that pays union members a royalty based on the weight of containers they handle each year. Both sides agreed to extend dockworkers' existing contract until Feb. 6 to complete the negotiations.

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European Pressphoto Agency
A preliminary deal gives dockworkers until Feb. 6 to reach a newcontract. Above, a container ship arrived in Bayonne, N.J., on Friday.

Neither Mr. Cohen nor the cargo-handling firms and International Longshoremen's Association union would discuss details of the tentative container royalty agreement. Mr. Cohen described it as "a major positive step" said he believes remaining issues could be resolved and a ratification vote held before the extension expires.
The tentative labor agreement came after some major retailers, such asHome Depot Inc. HD -0.69% and Lowe's Companies Inc., had already spent extra money to keep their shelves stocked by routing coming deliveries via air freight or other ports and railroads.

Strike Averted

• Ports: Boston; New York-New Jersey; Philadelphia area; Baltimore; Hampton Roads, Va.; Wilmington, N.C.; Charleston, S.C.; Savannah, Ga.; Jacksonville, Fla.; the Miami area; Tampa, Fla.; Mobile, Ala.; New Orleans; and Houston.
• The union had authorized a strike to begin Sunday morning if a new contract wasn't reached. Talks on a new, six-year contract resumed this week by request of federal mediators.
• An agreement including container royalty pay was struck in the 1960s to compensate the unions for job losses from the introduction of automation that increased productivity. The International Longshoremen's Association union argued the payments are an essential part of compensation for 14,650 members at the ports.

"We've put plans in place to deal with any possible interruptions and ensure our most critical spring freight will be available for stores," Home Depot spokesman Stephen Holmes said. "At this point, we are focused on replenishment" of goods. He would not elaborate on the retailer's plans or say how much in additional costs it incurred.
"I would not have been excited if I thought they were just kicking the can down the road," said Curtis Foltz, executive director of the Georgia Ports Authority. "But this has a different feel to it. They absolutely want to get this thing concluded."
Rick DeLoach, an ILA local president who represents about 250 union workers in Georgia, said its members had made strike preparations. With agreement on the container royalty stipend, "Now we think that we can work things out," he said.
The U.S. Maritime Alliance Ltd., which represents container-handling companies, had wanted to reinstitute caps on the royalty payments and restrict newer workers from receiving the stipends, said they have become a burdensome tax that cost businesses tens of millions of dollars a year. The pay averaged about $15,500 a year for each eligible worker, and had risen sharply in recent years.
The agreement to provide container royalty pay was first struck in the 1960s to compensate the unions for job losses from the introduction of automation that increased productivity.
The ILA argued the payments are an essential part of compensation for its 14,650 members at these East Coast and Gulf Coast ports.
The union had authorized a strike to begin Sunday morning if an agreement wasn't reached. The talks on a new, six-year contract resumed this week by request of federal mediators.
Some shipping companies, including Hapag-Lloyd America Inc., earlier had warned customers of potential disruptions due to the prospect of a strike.
Since clothing, garden supplies and patio furniture can take months to arrive at stores, "Decisions were made as early as October to divert shipments through Canadian and West Coast ports, or via air freight," said Jonathan Gold, vice president for supply chain and customs policy at trade group National Retail Federation. "These are costs that weren't planned for when retailers put supply chains together for the year and are already hitting retailer's bottom lines," he said.

More

• Corporate Intelligence: What's Still at Stake In January?
• Strike Hinges on Costly Royalty 12/27/12
• Should Port Workers Be Paid for Work That Disappeared? 12/26/12
• Port Closures Approach, as America Nears the Container Cliff 12/24/12
• Ports Brace for Strike 12/20/12

For instance, shipping goods via air is eight to ten times more expensive than ocean freight, Mr. Gold said, but declined to elaborate on how many companies used air transportation. Many retailers also shipped goods earlier than planned, increasing inventory levels.
Diverting goods to West Coast and Canadian ports, which requires companies to pay to move items across the country to the East Coast, could increase retailers' costs by between 20% and 50%, said Tony Ward, a retail specialist at consulting firm Kurt Salmon.
The higher costs are likely to pinch profits at some chains, which struggled through a lackluster holiday selling season.
Retailers applauded the contract extension that avoided a strike, but called for a long-term solution.
Store executives are "eager to see the parties reach a long-term agreement that will ensure stable and predictable operations at East and Gulf Coast ports," said Kelly Kolb, vice president for government affairs at the Retail Industry Leaders Association, a Washington, D.C., trade group.
The contract extension is a relief for the White House, now negotiating with Congress about 2013 income tax rates and federal spending and borrowing limits. A ports strike could have loaded new worries on an already fragile economic recovery.
Retail business, manufacturing and trade groups recently had pressed President Barack Obama to invoke national emergency provisions of the Taft-Hartley Act of 1947, which allows the president to order strikers back to work for an 80 day cooling off period. The White House had declined earlier to say whether the president was willing to use such a measure if a strike had been called.
An ILA strike affecting container cargo on the East Coast and the Gulf of Mexico would have capped a difficult year for shipping. An eight-day strike led by clerical workers at Los Angeles and Long Beach, Calif., ports recently caused distribution problems. Superstorm Sandy also wreaked havoc on the Port of New York and New Jersey in October.
—Ann Zimmerman and Karen Talley contributed to this article.