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West Coast Ports Start to Clear Backlog After Tentative Labor Agreement

Wednesday, February 25, 2015
Sandler, Travis & Rosenberg Trade Report

A tentative agreement on a new labor contract announced Feb. 20 will allow normal cargo operations to resume at 29 West Coast ports, but it could be weeks or even months before the existing backlog is cleared.

The Pacific Maritime Association, representing shipping lines and terminal operators, and the International Longshore and Warehouse Union, representing about 20,000 dockworkers, reached a deal on a new five-year contract after nearly ten months of negotiations and involvement by federal officials in recent weeks. The agreement must now be ratified by both sides, a process expected to take about 30 days.

Congestion at West Coast ports worsened after the expiration of the previous labor agreement last summer, and the White House called on both sides to “work together to clear out the backlogs and congestion … as they finalize their agreement.” The congestion has led to higher costs for companies that had to divert shipments to other ports or rely on more expensive air cargo services to ensure timely delivery. U.S. exports of agricultural and other goods have also been affected. Dozens of cargo ships are currently waiting to unload, primarily at the ports of Los Angeles and Long Beach. However, Labor Secretary Thomas Perez said “the parties have agreed to ensure that there are fully operational ports up and down the West Coast beginning [Feb. 21]” and expressed confidence that “they understand the urgency of the task of eliminating the backlog.”

There are also other factors unrelated to the labor dispute that have contributed to the slowdown, including a surge in container volume associated with visits by larger ships and difficulty obtaining trailer chassis so trucks can haul containers off the docks. Some observers are warning that unless these problems are addressed as well West Coast ports will continue to see “similar backups, delays, higher costs and lost productivity.”

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