West Coast ILWU Contract Talks – Update
Coastwise negotiations between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) have been on hold pending a local National Labor Relations Board (NLRB) hearing over competing claims of two unions, the ILWU and the National Association of Machinists, to work involving plugging in ships to shore power at a terminal at the Port of Seattle. That issue is an outgrowth of a larger acrimonious dispute between two unions over jurisdiction over maintenance and repair jobs at the same terminal, an issue at the big-table negotiations which the ILWU believes undercuts the contractual right of PMA members to automate West Coast marine terminals to the extent it’s not resolved in their favor.
Mixed Railroad Union Vote on Ratification of Tentative Labor Agreement
Several of the unions representing the 115,000 national railroad workers voted on the ratification of the tentative labor agreement made by union leaders with the Class I railroads in September. Of the twelve unions which must ratify the agreement, two have rejected the contract (BMWED & BRS), seven have approved the contract (ATDA, BRC, IAM, IBEW, NCFO, SMART-MD, TCU) and three have yet to vote (BLET, IBB, SMART-TD). The remaining three unions are scheduled to vote by November 21st. The unions which have rejected the agreement continue to negotiate citing paid sick leave as an issue and have set December 9th as a deadline before labor action could occur, which is after the return of Congress from Thanksgiving break, should they act to avoid disruption.
New CA Law Limits Equipment D&D Charges on Truckers & Shippers
A new CA law effective January 2023 (AB 2406) limits Marine Terminals and Equipment Providers from assessing Demurrage & Detention (D&D) fees on Trucking Companies, Shippers, or other Intermediaries which hold equipment (e.g., Containers) beyond the allowed free time (e.g., 5 days) if the causes are beyond their control (Terminal congestion, lack of appointments, etc.). According to Container xChange (www.container-xchange.com), fees for equipment demurrage (within the Terminal) and detention (outside the Terminal) at the Ports of Los Angeles/Long Beach are among the highest in the world (e.g., $2,730 avg. for a container held more than 14 days) and global average D&D charges in 2022 have risen 12% since pre-pandemic levels.
West Coast Ports Losing Asian Import Market Share to East & Gulf Coast Ports
The West Coast Ports’ Asia import market share continues to be lost to East and Gulf Coast Ports. According to the Journal of Commerce and PIERS data, during the first nine months of this year, the share of Asian imports landing at West Coast Ports dropped from 61.2% to 57.5%, whereas the East Coast Ports’ share rose from 32.8% to 35.1% and the Gulf Coast Ports rose from 5.7% to 7.1%.
The imports diverted from West Coast Ports are primarily discretionary cargo that would otherwise be transported by rail to eastern destinations. Among the reasons for the diversion are Shipper concerns about potential disruptions from West Coast Port labor union contract negotiations, Port of Entry congestion, and increased costs, including drayage and warehousing, and distribution. According to CBRE (Q3 2022), the scarcity of SoCal Port-related warehouse space in the Inland Empire region, with a vacancy of 0.5%, is driving rents to be 60% higher than last year.
CA Zero-Emissions Heavy-Duty Vehicle Regulations Proposals Moving Forward
The California Air Resources Board (CARB) proposed new regulations to accelerate a large-scale transition to zero-emission medium- and heavy-duty vehicles in California by 2045. For Port and Rail Terminal drayage fleets, the proposed Advanced Clean Fleets (ACF) regulation requires that only zero-emissions trucks be added to drayage service starting in 2024 and that all drayage trucks be zero-emissions by 2035. At a public hearing held Oct 27, 2022, trucking industry groups, including the California Trucking Assoc., expressed concerns over the lack of charging infrastructure and costs of heavy-duty zero-emission vehicles. The Board is expected to hold another public hearing and vote on the matter in the Spring of 2023.
CA Receives Funding Towards Electric Vehicle Charging Station Infrastructure
The State of California received approval for funding from the National Electric Vehicle Infrastructure program in the amount of $383 million over 5 years. The State’s August 2022 Electric Vehicle Infrastructure Deployment Plan calls for 250,000 public and shared private electric vehicle chargers by 2025 and 1.2 million chargers including 157,000 chargers for medium- and heavy-duty vehicles by 2030. The initial deployment focuses on light-duty vehicle charging infrastructure along 55 Alternative Fuel Corridors, consisting of 19 Interstates, 32 State Routes, and 4 U.S. Routes covering nearly 6,600 miles in California.
China’s Loss is Mexico’s Gain
According to Bank of America, in a recent article in Fortune magazine, one of the many buzzwords to have come out of the supply chain crisis of the past few years had been “nearshoring”: companies investing in production closer to home so that they don’t have to deal with global sourcing challenges.
In the U.S. the supply chain crisis had added fuel to the country’s inflation fire, and a growing number of industries have chosen to bring production closer to home as a result. U.S.-based companies that have already re-shored their operations to nearby countries in Latin America and the Caribbean include carmaker Ford and aerospace manufacturer Boeing.
The nearshoring momentum could represent a major rethink of global supply chains, and some countries could be in line for a windfall because of it. Bank of America analysts believe that based on early signs, Mexico is poised to be the main beneficiary of the new nearshoring wave sweeping the U.S.