West Coast ports to begin tackling backlog after labor deal

By Reuters

Feb 21, 2015 05:49 PM EST

U.S. West Coast ports will resume full operations from Saturday evening after a tentative labor deal was reached between a dockworkers union and a group of shippers, easing months of disruptions to trans-Pacific trade that have hit businesses from automakers to meat exports.

The agreement involving 29 ports was announced late on Friday in a joint statement by the two sides. It was reached three days after U.S. Labor Secretary Thomas Perez arrived in San Francisco to broker a deal with the help of a federal mediator who had joined the talks six weeks earlier.

The White House called the deal, reached after nine months of negotiations, "a huge relief" for the economy, businesses and workers. President Barack Obama urged the dockworkers and the shipping companies to work together to clear the port backlogs.

The 20,000 dockworkers covered by the tentative five-year labor accord have been without a contract since July. Tensions arising from the talks have played out since last fall in chronic cargo backups that increasingly slowed freight traffic at the ports.

The dispute had reverberated throughout the U.S. economy, extending to agriculture, manufacturing, retail and transportation, and even hitting consumers of French-fried potatoes at McDonald's Corp (MCD.N) restaurants in Japan.

Automakers had turned to more expensive air freight to get parts to North American assembly lines. Japan's Honda Motor Co (7267.T) said its Ohio plant would resume full production on Tuesday but facilities in Canada and Indiana would be at lower production levels through March 2. The backup on the docks will cost Honda about 25,000 vehicles in lost production this month, a company spokesman said.

Toyota Motor Corp (7203.T) said earlier this week it had reduced overtime at some factories and Nissan Motor Co Ltd (7201.T) said it had been somewhat affected.

Wal-Mart Stores Inc (WMT.N), the world's largest retailer, said on Thursday the dispute had caused delays of "pockets of merchandise" and that the potential cost had been included in the company's earnings forecasts this week.

Groups such as the National Association of Manufacturers and the U.S. Meat Export Federation welcomed the deal.

U.S. meat exporters have had to put millions of pounds of beef and pork into cold storage, ship by air or use Canadian or Mexican ports. Tyson Foods Inc (TSN.N) and Cargill Inc CARG.UL are among the leading U.S. pork and beef producers.

According to the American Association of Port Authorities, some $3.8 billion worth of goods move in and out of U.S. seaports each day.

The West Coast ports handle nearly half of all U.S. maritime trade and more than 70 percent of the country's Asian imports.

During the dispute, shipping companies sharply curtailed operations at the marine terminals, suspending loading and unloading of cargo vessels for night shifts, holidays and weekends at the five busiest ports.

Perez said the International Longshore and Warehouse Union and the shippers' bargaining agent, the Pacific Maritime Association, agreed to fully restore all port operations starting Saturday evening.

The deal is subject to ratification by the union rank-and-file and the individual shipping lines and terminal operators that make up the PMA. No details of the terms were immediately revealed.


California farmers were especially hard hit by the port disruptions, with export losses estimated to be running at hundreds of millions of dollars a week.

The California Citrus Mutual trade group said the slowdown had cut members' exports by half this season compared to recent years. It said that if it takes two months for the ports to become fully operational, the window for shipping this season's crop will have closed.

Perez was sent to California on Tuesday as an emissary for Obama, who had come under mounting political pressure to intervene in a labor conflict that by some estimates could have ended up costing the U.S. economy billions of dollars.

The principal sticking point when he first joined the talks, Perez told reporters after the agreement, was the arbitration system for resolving workplace disputes under the contract. He did not disclose how that was resolved but said the parties agreed to changes that would improve the system while "ensuring fairness to both sides."

Each side blamed the other for using disruptions at the ports as pressure tactics. Cargo loads faced lag times of two weeks or more as dozens of inbound freighters stacked up at anchor along the coast, waiting for berths to open.

Port officials have said it would take six to eight weeks to clear the immediate backlog of cargo containers and several months for freight traffic to return to a normal rhythm.

The West Coast waterfront still faces a range of systemic problems cited by port authorities as factors in the backups.

Still, the settlement stopped the labor dispute from devolving into a full-scale, extended shutdown of the ports, which the retail and manufacturing industries have projected could cost the U.S. economy some $2 billion a day.

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