Steve Block, Foster Pepper PLLC, USA
Spring cleaning at the ports: a summary of recent legislative and regulatory attention directed at the wharves.
This spring saw quite a bit of activity in the administration of U.S. seaports, regionally and nationally, in response to challenges up and down the seaboards.
Problems actually began some years ago with tension about contemplated congestion, particularly in ports on the west coast. Carriers’ usage of megaships through larger alliances that are said to clog up loading and offloading at ports; getting out of the chassis business, resulting in equipment shortages; and signing contracts with fewer terminals, all set the stage for concern about congestion issues. Carrier groups responded by pointing to inefficient port, trucker and shipper practices that are beyond vessel operators’ control.
Then, spikes in demand spurred by an improving economy and seasonal demand; U.S. Customs slowdowns resulting from adjustments in government spending budgets; and truck driver shortages exacerbated the situation.
And then, west coast longshore workers commenced an unprecedented work slowdown last fall. The International Longshore & Warehouse Union (“ILWU”) originally was upset just with minor arbitration terms in its union agreement with the Pacific Maritime Association (“PMA,” which represents ports in Washington, Oregon and California). But this snowballed into a giant labor dispute ILWU and PMA representatives couldn’t finally hash out through a new labor agreement until this past May.
Estimates as to the damage the congestion-wreaking slowdown did to the economy are as high as $2 billion/day for months. Shippers were the biggest losers, with contract and seasonal deadlines passing as cargo sat in harbor-anchored ships. Disputes over “congestion surcharges” carriers suggested were due to them from shippers almost came to a head, but were largely averted.
While port labor issues have at least temporarily eased up, concern about future such predicaments prompted Senators Cory Gardner (R-CO) and Lamar Alexander (R-TN) to introduce on June 5th the Protecting Orderly and Responsible Transit of Shipments Act of 2015 (“PORTS Act”). The PORTS Act would expand the Taft-Hartley Labor Act’s provisions to cover port labor slowdowns, strikes and lockouts. It also would empower state governors to get federal court injunctions; and set up boards of inquiry if the president doesn’t act within ten days. In other words, it puts more power in the hands of state executive branches to deal with port issues affecting their communities.
While the PORTS Act is supported by dozens of business groups and trade associations, getting new legislation on a topic as politically sensitive as labor, especially quickly, is one tough nut to crack. Some observers see the bill as more of a nod to the introducers’ business constituencies than one actually expected to make it into law, especially if both houses of Congress and, potentially, the next president, are all Republican.
Some west coast ports have formed working groups to study means to optimize port operations in advance of the upcoming holiday season, but the environment remains uncertain regarding congestion management now that the labor issue is at bay. Last year, the U.S. Federal Maritime Commission (“FMC”) conducted a series of port forums at the country’s major ports, and summarized its findings in a report issued this month entitled “U.S. Container Port Congestion & Related International Supply Chain Issues: Causes, Consequences & Challenges.” The report boils down the forums’ results into six major themes: “Investment and planning; chassis availability and related issues; vessel and terminal operations; port drayage and truck turn-time; extended gate hours, PierPASS and congestion pricing; and collaboration and communication.” Needless to say, addressing congestion will involve analysis of vast and systemic issues beyond labor unrest.
Another port development of note is the marriage the Ports of Seattle and Tacoma, known as the Northwest Seaports Alliance, which FMC blessed this month. Washington’s two primary seaports realized they had been spending a level of energy and resources competing with each other. This was detrimental to both, especially in light of Canada’s bolstered competition in the Ports of Vancouver and Prince Rupert. In addition to joint planning, management and marketing of the two ports’ services, the arrangement includes establishment of a Port Development Authority to develop cargo operations and other aspects of port business. FMC agreed the alliance wouldn’t harm competition or service, and noted that the combined facilities create the nation’s third –largest trade gateway (behind LA/Long Beach and New York/New Jersey).
Let’s hope the discussion about port administration and promotion becoming part of a national strategic initiative, as opposed to pork doled out to keep local constituencies happy, gels into reality.
Ref: The Protecting Orderly and Responsible Transit of Shipments Act of 2015, available at https://www.congress.gov/bill/114th-congress/senate-bill/1519; FMC’s U.S. Container Port Congestion & Related International Supply Chain Issues: Causes, Consequences & Challenges, available at
http://www.fmc.gov/assets/1/Page/PortForumReport_FINALwebAll.pdf.