Carriers continue to collude

It's difficult for carriers to give up the long held practice of colluding on rates.   In the past
it was legal, but no longer.

From The Journal of Commerce

Antitrust investigation also includes car carriers

CSAV said it and some of its employees have received subpoenas from U.S. government authorities and the Competition Office of Canada in connection with an investigation under antitrust law that includes it and a group of car carriers.

Although the Chilean carrier did not identify the car carriers that are also being investigated, they may be among the 10 Japanese, South Korean and Norwegian shipping lines being investigated by the Japan Fair Trade Commission.

CSAV said it notified the Chilean Securities and Insurance Supervisor of the investigation and that its management “has dedicated itself to gather information.” It said its board of directors has instructed the company management to provide maximum cooperation in connection with the investigation.

“The investigation seeks to inquire into the existence of antitrust law violations related to cooperation agreements on prices and allocation of clients between car carriers,” CSAV said.

Additional charges if there is a strike.

From The Journal of Commerce

Surcharges will take effect if ports shut down in labor dispute

Several container ship lines have announced congestion surcharges that will take effect if East or Gulf Coast ports are closed in connection with the International Longshoremen’s Association contract expiration.

The carriers are required to provide 30-day notice of the surcharges, which will be rescinded if the ports stay open. Among the announced surcharges:

-Maersk, for all shipments to from the U.S. and Canada: $800 per 20-foot container, $1,000 per standard 40-footer, $1,125 per 40-foot high-cube, and $1,266 per 45-foot container.
-Cosco, for shipments between Asia and from the U.S. and Canada: $800 per 20-foot container, $1,000 per standard 40-footer, $1,125 per 40-foot high-cube, and $1,266 per 45-foot container.
-NYK Line, for shipments to the U.S. from Asia, the Indian subcontinent and Australia: $1,000 per container.
-Hanjin, for shipments to and from U.S. and Canadian ports, $800 per 20-footer, $1,000 for other sizes.

I don't really know how they can justify these as "congestion surcharges", because no one knows
for sure what ports will be congested.  I really think these should be filed under "strike surcharge",
but of course there could be lots of service contracts which would be exempted from a strike
surcharge, although that would have been pretty foolish on the part of the carriers.

The other thing I would point out...notice how all these charges are "per container", which is
standard in the industry, EXCEPT for the ILA charges.   (see my previous post)
Idiots.

How the ILA gets paid

Contract negotiations between the ILA (union for the longshoremen...and they are mostly men),
and the representatives for the ocean carriers resume next week, thought it would be
interesting to look into their current contract.

The ILA load and discharge vessels, and move the containers around the terminals, at U.S. East and
Gulf Coast ports.

I don't know if there are any ships worked by the ILA which are not containerized, or ro/ro
(roll on-roll off cargo).  I doubt it.
But yet, the union has not conceded to change their pricing based on containerization.  They
still use an outdated method of charging some of their charges based on weight....and not just
weight, but the commodity.  This is used to fund what is called the "Container Royalty Fund".
I don't know the entire history of this fund, but most likely it came into being when
ships went from bulk to containers.

The calculation using weight and commodity  is a throw back to the truck tariffs, which
disappeared around 1980 as trucking was deregulated.  In fact, when the ILA comes to
your office to audit this report, they drag in an old trucking classification book.

If you want to know more about this, I found a bit of the history at ftc/gov.  Click here for the link.

The basis for the calculations is so convoluted and complicated that many carriers hire outside
companies (I think they are old retired ILA guys...but don't quote me on that), to file their reports.
It's something which is very difficult to capture from the computer system.
 Here's what is says in the master contract regarding Container Royalty Payments

.RULE 10 – CONTAINER ROYALTY PAYMENTS
The two Container Royalty payments, effective in 1960 and 1977
respectively, shall be continued and shall be used exclusively for
supplemental cash payments to employees covered by the
Management agreements, and for no other purpose. The remaining
royalty payment effective in 1971, also shall be continued and shall
be used for fringe benefit purposes only, other than supplemental
cash benefits, which purposes are to be determined locally on a portby-
port basis. The Container Royalty payments shall be payable only
once in the continental United States. They shall be paid in that ILA
port where the container is first handled by ILA longshore labor, at
longshore rates. Containers originating at a foreign port which are
transshipped at a United States port for ultimate destination to another
foreign port (“foreign-sea-to-foreign-sea containers”) are exempt
from the payment of container royalties. Container Royalty payments
shall be asserted against all containers moving across the continental
United States by rail or truck in the foreign-to-foreign
“LANDBRIDGE” system.

This is in addition to the hourly wage paid to the employees, which ain't small
change.

Here is the link to the Master Contract of the ILA which was signed in 2009.   Click here.http://www.ilaunion.org/pdf/MasterContractAndMemorandumOfSettlement.pdf

I'll be posting about it and other things about the ILA over the coming days.

ILA and the Mafia

The ILA has a long history of association with organized crime.   It seems everyone has just
accepted this is the way it is, because they certainly have not cleaned it up, although every once
in a while The Waterfront Commission does something to justify their existence.

This was posted on their web-site.   Click here for the link.

Longshoreman Indicted for Multiple Counts of Perjury Suspended by Commission
August 1, 2012
           The Commission voted to temporarily suspend Dominick Dinapoli's registration as a longshoreman pending an administrative hearing on charges based upon his five count indictment for perjury. Dinapoli has been charged with testifying falsely in a Commission investigation regarding Port personnel associating with an organized crime figure and another career offender. The notice of hearing, approved today by the Commission, charges that Dinapoli violated the Waterfront Commission Act by associating with career offenders, convicted racketeers, and members or associates of organized crime groups, including Mario Gallo (an associate of the Bonanno and Lucchese crime Families), Samuel Santiago (a member or associate of the Latin Kings), and five other career offenders.
           The criminal case is being prosecuted by the Manhattan District Attorney's Office.

A big part of the problem with the contract negotiations which will resume shortly, is too many people
are concerned if they cause the union problems, they will be wearing cement shoes in the river.

This is not to be taken lightly.   I know of  people who were threatened by the ILA.  They gave in.

The negotiations really should be moved out of the NY/NJ area.

           
           

ILA and the Waterfront Commission

Below is part of the letter from USMX (who is negotiating with the ILA).  Apparently the ILA
thinks (or maybe it's true) that all they have to do is threaten to strike and they will get what they want.

What I don't understand is the comment in the second paragraph about the Waterfront Commission
of New York and New Jersey.  What's this all about?   The contract covers all of the US East/Gulf
ports.   Is the Waterfront Commission still influenced by the mafia?   

When we met during the week of August 20th, USMX presented the issues that we believed
were critical to successfully reaching an agreement. Those issues all center around inefficiencies
that have crept into our operations over the years. I’m referring to archaic work rules and
manning practices, and the system of guarantees and overtime pay practices that result in
millions of dollars being paid for time not worked. These inefficiencies are causing many of our
ports to become prohibitively expensive, harming our competitive ability and threatening the
long term viability of our operations. USMX was hopeful that we would receive the same
consideration from the ILA as we had given it on its critical issues. Instead, our presentations
were simply rejected without any consideration, and when management objected to this lack of
consideration, the ILA responded with a threat to strike.

Many of these issues are the same ones cited in a recent report compiled by the Waterfront
Commission of New York and New Jersey. I’m somewhat at a loss to understand why the ILA
would appear to be willing to have an outside agency attempt to force a solution on the parties,
rather than have the parties address the issues in the collective bargaining arena, at the
bargaining table, where they properly belong.

click here for link to complete letter

ILA Wages

The ILA goes back to the bargaining table next week.

The United States Maritime Alliance is the group negotiating with the ILA.  This is a group which
represents the carriers, who pay the ILA.   I don't really know of another industry where the
negotiations are not directly between the employer and the employee, so if you know of an
example, post a comment.   It would really seem more logical to have the ILA paid by the
terminal, and the terminal would charge the carrier for the total cost to work a ship.  But,
that's just silly me talking.

Anyway, the carriers have always given in to the ILA in the past, because, after all it's a big
group and it's difficult for a few carriers to convince all, that they need to take a hardline
position and let the ILA strike.  After all, it would really cause a lot of problems for everyone,
and cost a lot of money.   However, times are tough, and maybe now the carriers will
at least ban together, let them strike, and then pass on the additional costs of diverting cargo to the importers
and shippers.

If I had a contract with a carrier, I would certainly be looking at the "strike clause".

Below is from the web-site of the USMX  (United States Maritime Alliance).
As it is said "nice work if you can get it".   I guess these folks do!

Longshore workers are among the best paid union workers in U.S.

Longshore workers have a superior wage and benefits package that places them among the best paid union workers in the country. ILA members on the East and Gulf Coasts earn an average of $124,138 annually in wages and benefits. In wages alone, they make $50 an hour, more than double the average hourly wage of about $23 earned by all union workers in the United States, according to the U.S. Department of Labor’s Bureau of Labor Statistics.
ILA members also have one of the best healthcare plans in the nation, paying no premiums for family medical, dental and vision coverage and only minimal co-pays.  

click here for link to web-site

What's Up?

Or, as the kids say "wasup?".   Meaning, what is new and different?

In the shipping industry, it's not so much what is new, as everything is staying the same.

Carriers keep saying, "OK, it's going to get better", and it does a little, and then  falls back.

I don't know how long they can hold on, but I have been surprised many carriers haven't been forced
to sell out or close down by now.   I think there are still a lot of investors with money, and with
no other options for a good return, are willing to wait it out with shipping.

And shipping does have very, very, long business cycles.  This is the reason only the ones
with "deep pockets" really last through the decades.  

I guess the biggest news recently is the ILA  (International Longshoremen Association),
which is the union which controls the docks on the East Coast of the U.S., has a new
contract coming up for renewal.  They are now negotiating, and talks recently broke down.

It will be really interesting to see if the carriers have the guts to hold the line.  In the past they
 never did, as they didn't really have any other options to move their cargo.   The ILA has a lot
of power, and even blocked ports in Canada from handling ships which tried to divert..

But now everyone is hurting for money, and the U.S. ports are the most expensive in the world.
That's because the union has not allowed new efficiencies, which would allow reduction in staff.

I don't know if it's still true, but it wasn't that long ago that there was still a union position for "water boy"...
someone who took water to the working longshoremen.   Crazy, huh?

The other item of interest is the price of oil.  It topped $100 the first of the year when everyone thought
the economies were improving (and hedge funds were trading in oil), but then it dropped,  and
then came back up.  It's in the 90's now.  It should really be lower, but there is too much manipulation
in the market.

So, that's wassup.

Hope ya'll  (that is U.S. Southern talk for "you all") are doing well.