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What the Heck is Going On at the Port of Portland by Molly Harbarger Oregonian, February 13, 2015

A beginner's guide to longshore, Hanjin, more

The Port of Portland's container port just lost 78 percent of its business. The port operator is only five years into a 25-year lease. The port's executive director said it might take years to find a new Asian carrier.

From The Oregonian/OregonLive's first report that Hanjin Shipping Co. dropped Portland from its long-range schedule, people directly or indirectly related to the trade business have been in an uproar.

Hanjin's decision, though, is based on years of labor strife at the Port of Portland's marine Terminal 6.

If you haven't been devouring every story about the longshoremen and Terminal 6 over the years, I will valiantly try to bring you up to speed. I'm sure I've missed something, so ask it in the comments.

First things first, what do you mean when you say Terminal 6?

Let's back it up even further. The Port of Portland has two legs: the marine port and the airports.

The marine port is the one with all the turmoil right now. The marine port has four main terminals. One is engineered to best handle lumber, one large cargo -- such as cars, one is a grain elevator and Terminal 6 is the container terminal.

OK, well, what's a container terminal?

If a train has passed your car, making you late for work, you can imagine a container terminal. Those large metal rectangles are the containers. They come in various sizes, but that's the general idea.

A large quantity of all imported and exported material comes in containers. Terminal 6 is where all those containers, both filled and empty, are loaded onto and unloaded from ships.

The containers are then sent to their respective homes -- either on the way to be unpacked and the material sold, or on to another port to be filled and loaded onto another ship.

Great. So, who are the longshoremen?

The International Longshore and Warehouse Union is composed of all the workers on the docks who do that loading and unloading -- and many of the other jobs that go along with that movement of containers.

They are a large union, and members work at most West Coast ports. The union headquarters are based in San Francisco and there are 60 local unions. Portland's is Local 8.

And so they are fighting the Port of Portland?

Well, not really. In 2010, the Port of Portland decided to lease out the terminal to ICTSI, a private company.

The Port of Portland wasn't making money, and so privatizing was a way to stem the losses. The Port of Portland now acts as a landlord, rather than port manager. ICTSI does all the work to keep Terminal 6 running, attract new business, hire the workers and so on.

Hold up, tell me more about ICTSI.

ICTSI Oregon is the first foray into U.S. port operations for International Container Terminal Services Inc., a Philippines-based company. The company signed a 25-year lease with the Port of Portland in 2010.

The Oregon headquarters, though, are run by CEO Elvis Ganda, who spent most of his career in port operations in California. Ganda, and his crew, make decisions about hiring, firing, scheduling, drumming up new business, all of that stuff that port operators do.

Why don't the longshoremen like ICTSI?

Longshoremen have complained that ICTSI Oregon is poorly managed, is responsible for driving business away, doesn't care about safety and on for years.

Read: At trial, longshore union blames Port of Portland, terminal operator for driving away business

They've also gotten into several dustups with the port operator.

A labor judge ruled in 2014 that the dock workers were intentionally slowing down work over a 2012 dispute over whether the longshoremen or members of the International Brotherhood of Electrical Workers Local 48 should plug, unplug and monitor refrigerator containers.

Read: Port of Portland longshore union intentionally slowed work at Terminal 6, NLRB judge rules

The ILWU also accused the Port of Portland of giving illegal subsidies to container carriers to keep the business in Portland. A federal judge ruled in favor of the port.

Read: Longshore union blasts Port of Portland payments to keep Hanjin Shipping, saying they'll benefit wealthy ICTSI

Port of Portland approves another rebate for terminal operator due to continued labor problems

In April, ICTSI Oregon was hit with $18,360 after a routine safety inspection by the Occupational Safety and Health Administration found numerous worker safety violations.

Read: OSHA fines Port of Portland terminal operator

Suffice to say, there's bad blood here.

But, you said ports all along the West Coast are slowed down. How does Portland affect that?

This is where it gets complicated. First, there's the long-standing tension between ILWU Local 8 in Portland and ICTSI Oregon.

Layered on top of that is about nine months of contract negotiations between the ILWU and 29 West Coast port operators. This round is particularly contentious, because there are many related industries that are feeling the hurt from disruption of normal business.

And that's why they're fighting ICTSI now?

"Fighting" is a debatable word. American unions have a longstanding history of collective bargaining, and this is part of that process.

ICTSI Oregon is part of a coalition of 29 West Coast port operators, called the Pacific Maritime Association. The Pacific Maritime Association kind of acts similarly to the union, but for managers. Representatives from the association sit at the negotiating table with the representatives of the ILWU and they argue about what a new contract will look like.

ICTSI is not directly represented in this round of negotiations, meaning that no one from the Oregon headquarters is present during the negotiations.

However, the terms of the contract the Pacific Maritime Association works out with the ILWU will carry over to Portland.

Tell me more about this contract negotiation.

OK, so the ILWU and the port operators usually work together under fairly long-term contracts. The last contract lasted five years and and expired in 2014.

When the contract is in place, any disagreement between a port operator and the longshore workers is taken to an arbitrator, an independent third-party who acts as mediator and judge. The arbitrator hears both sides -- in Portland, the dispute usually centers around ICTSI Oregon officials saying workers are slowing down or stopping their normal pace of loading and unloading, and the workers saying they are not. Then, the arbitrator makes a judgment, usually pretty quickly, and the two sides abide by that decision.

Read: Port operators association ratchets up tension by casting doubt on longshore union's contract demands

Since there is no contract right now, though, the Pacific Maritime Association can't take the union to an arbitrator. You'll read that complaint in pretty much every press release the association sends out.

They are upset about it because the port operators say that longshore workers are staging slowdowns and work stoppages -- basically, working at a slower pace or not working at all -- to make life hard on port operators.

Why would they do that?

If you ask the port operators, the workers would want to make the ports unattractive to business. Then, the port operators stand to lose money.

This would make the port operators more likely to agree to the contract the ILWU officials want.

That is the theory.

If that's the theory, what's the actuality?

That is where the debate lies. The longshore workers say they are not intentionally slowing down operations, but that conditions at the ports are dangerous or disorganized, so they can't work at a routine pace.

There are several issues the workers have cited. One is the availability of chassis. (That's pronounced chass-y, by the way.)

Chassis used to arrive with the containers. Since dissolving that system, sometimes there are too many chassis at one location, but not enough at enough. Often, workers must wait for the right size chassis to arrive.

Read: Slow progress at America's biggest (and most dysfunctional) port

There are more issues at play, but you get the gist. The port operators say it's the workers playing hardball, the unions say they just want to be safe.

Sounds like he said/she said stuff. Why does everyone care?

If this were just the two sides bargaining, probably fewer people would care. But, the ports are an integral part of American commerce. Any disruption at the ports creates ripples that are felt throughout the American economy.

And not just America, but the countries trading with the U.S.

Sounds frightening.

At least nerve-wracking.

Let's start with the shippers. Those are the companies that pay to rent space on container ships to move products from one country to another. The West Coast, especially Portland, does a lot of moving containers between Asia and the U.S.

The shippers are all feeling anxious because every time a shipment arrives late, or takes a long time to get through the port, that puts the shipper behind schedule. They've made schedules and promises based around consumer demand.

But, this is not just a shipper's problem. There are the manufacturers and farmers who rely on shippers and the shipping lines being on time to meet deadlines.

What kind of deadlines?

For farmers, mostly seasonal deadlines. If a farmer is shipping fresh Christmas trees, those evergreens are actually going to turn brown after a while. Plus, there is little demand for Christmas trees after, you know, Christmas.

Likewise, if you are shipping fresh or processed fruit, the deadline is up to the bacteria that will turn those blueberries into mush or mold.

Ouch. That's rough.

It can be. Sometimes, those fruits and trees are a loss. Sometimes, farmers can sell them domestically, instead of shipping them.

That's a relief.

Kind of. The problem with selling domestically a product you planned to export means that you risk flooding the market with the same product, which drives the price down you can sell your product at.

For instance, Oregon grows enough Christmas trees for a family of five people to buy eight trees. Clearly, that is not going to happen.

That's why at least half of all Oregon-grown Christmas trees are shipping or trucked elsewhere.

Read: West Coast longshore talks, tactics may keep Christmas trees in the country

Oregon Christmas trees begin their annual export journey

Christmas tree farmers enter 'ethical agriculture' realm with new sustainability certification

If those trees that were meant for elsewhere go into competition with the trees that were meant to be sold outside the local grocery store, both growers' trees must be priced competitively to attract the family looking for the perfect tree.

Got it. It's a problem.

And that doesn't take into account the drayage drivers, the truck drivers who often work on commission to transport containers and cargo, or the train systems that do a similar job.

The Federal Reserve's Beige Book recently mentioned West Coast port disruptions as a reason why one Boston toy company took a revenue hit in 2014.

What are the financial implications of all this?

That's a moving target right now and generally depends on how long the negotiations last. But, there's also pieces of the puzzle that aren't influenced by the contract negotiations.

The West Coast port operators feel vulnerable right now because the East Coast ports are gaining business each year as West Coast ports lose it.

The newly-widened Panama Canal will also direct more business to the East Coast and Gulf of Mexico ports.

Don't panic, the West Coast ports aren't going to cease to exist any time soon. The Port of Los Angeles, Long Beach, Seattle, Tacoma and Oakland are all doing well.

But ports like Portland's, which doesn't sit on the ocean, are in more peril. It just costs more to get ships and cargo through the more narrow channels needed to reach Terminal 6.

Read: By the numbers: What's the impact of the Port of Portland losing Hanjin Shipping?

Is that why Hanjin withdrew service from Portland?

That's one part of it. Hanjin hasn't been vocal about the company's decision, but officials and industry leaders explain it this way: Portland is already an expensive port to call on (calling at port is the industry term for stopping at a port), then compound that with unreliable service once the ship docks.

Read: Hanjin Shipping officially leaves Port of Portland, taking vast majority of port's business with it

Read: Port of Portland's biggest customer, Hanjin, notifies shippers it might drop Terminal 6

For instance, a Hanjin Copenhagen ship has been sitting at Terminal 6 for 10 days, as of this writing. Another Hanjin ship was steaming up the Columbia River already.

Why was it sitting there so long?

The ship carries cargo bound for Portland. All of those containers must be unloaded before it leaves.

First, there were four days where either the longshore workers refused to work, then the port operators canceled work. Then, there were several days of unloading -- but, again, it took a long time to unload the ship, either due the alleged intentional slowdowns or the congestion problems the longshoremen claim.

Then, the port operators association canceled work again for four days.

Read: Port of Portland shuts down for weekend, makes contingency plans in case of longshore lockout or strike

Read: Work at Port of Portland's container terminal stopped again as longshore union demonstrates

Read: West Coast port operators suspend work for four coming February dates

OK, I get it. How will ICTSI Oregon find another shipping line to replace Hanjin, then?

That is the million-dollar question -- or, as some estimate, the billions of dollars question.

The aforementioned port director Bill Wyatt is publicly skeptical that ICTSI Oregon or the Port of Portland will be able to attract a new carrier for years -- at least two.

Some wonder if Hanjin will ever be replaced, as long as ICTSI Oregon is the port operator and longshoremen are the dock workers.

Read: Port of Portland unlikely to replace Hanjin Shipping for 2 years, ILWU blames port operator for loss

Sounds hopeless.

Some people and industry leaders certainly feel that way right now. Economists think that the impact on Oregon, in general, won't be that great.

At the same time, business leaders see an inevitable exodus of small- and medium-sized companies that are in the business of shipping. That argument goes: why would anyone stay here if you are spending the money to truck or send by train your cargo to a different port? Just move to that port. That's why you moved to Portland in the first place.

Read: Oregon agriculture companies ask for federal intervention in West Coast longshore-port dispute

Companies in the agriculture business are already trying to adapt by bypassing Portland when the first signs of trouble started.

It'll be a long process to see how everything will shake out, and what the final impact will be, but it definitely is coming at a bad time.

Why is this time worse than any other?

Oregon has spent a lot of time and money lately building up trade partners in China, Korea and other Asian countries.

Asian countries are 7 of Oregon's top 10 global trade partners. Much of Oregon's agriculture products, specifically, are bound for Asia. Some worry that those relationships will be broken, since many are still fairly new.

The unfortunate truth is that almost all of Oregon's exports can be produced or bought somewhere else. Not to say Oregon's exports are a dime-a-dozen, or Oregon wouldn't have those ties in the first place. But, someone in Asia can't get the order they were promised a year ago, there's not much incentive to continue doing business with an Oregon company.

What's next?

Realistically, probably a lockout. That's when the port operators would shut the gates on the dock workers, so they can't work.

The union has the option to strike, but a lockout is more likely.

If that happens, President Barack Obama could use the Taft-Hartley Act, which is the only way government can get involved in the negotiations.

Oregon Gov. John Kitzhaber can't do anything?

Nope. He could apply pressure to both sides in hopes of urging them to a resolution. He has even done so in the past.

Read: Kitzhaber prods Port, unions, employers to keep Hanjin Shipping cargo vessels from abandoning Portland

But he can't take any direct intervention.

Congress can't either. Some Oregon, Washington and California politicians -- including U.S. Reps. Kurt Schrader, D-Ore., and Greg Walden, R-Ore. -- are calling for an immediate resolution or for invoking Taft-Hartley, which will ratchet up the pressure on both the White House, the Pacific Maritime Association and the ILWU.

Read: Kurt Schrader, West Coast legislators push for Barack Obama to invoke Taft-Hartley Act if labor dispute continues