ILA/USMX negotiations face a significant challenge in overcoming automation as they work towards a deal on the East and Gulf Coast ports.

• The U.S. ports strike suspension has been extended until January 15th, as the International Longshoreman's Association union and USMX ownership group have reached an agreement on wage increases. However, the contentious issue of port automation remains unresolved.
• On Thursday night, logistics executives who were relieved about the deal to reopen ports expressed concern that automation would be a significant obstacle, and 100 days may not be sufficient to resolve the differences between labor and management.
• While many U.S. ports are slow to adopt automation compared to other countries, the union has been vocal in its opposition, with ILA executive vice president Dennis Daggett and ILA president Harold Daggett's son describing automation as a "cancer."

The tentative agreement to suspend the International Longshoremen's Association strike may provide relief to consumers and businesses, but logistics experts warn that the deal is far from finalized. While the union and port ownership have agreed on a wage increase in a new master contract, the issue of port automation remains a significant hurdle in negotiations, and it is unlikely to be resolved easily.

The ILA has stated that it wants to strengthen the language related to the use of automation at ports. The ILA has previously negotiated restrictions on automation and semi-automation in the last contract. The ILA is now seeking to tighten the language to ensure that no automation means no automation.

Despite having three months to finalize a deal, logistics executives remain cautious.

"The strike has ended, but automation at ports remains a significant challenge, according to Peter Sand, chief shipping analyst at supply chain intelligence firm Xeneta. He stated that shippers are not out of the woods yet, as the agreement is only tentative, and there is a 100-day deadline to reach a final agreement. If no agreement is reached, further strike action could occur."

In a video message to union members at a September meeting, Harold Daggett, the lead negotiator and ILA president, pledged that wages, health care, royalty payments based on cargo containers moved, and "no automation terminals or semi-automated terminals" were among the conditions to prevent the union from shutting down.

Daggett kept his word and the USMX raised its initial 50% wage increase offer to 61.5% over six years, according to sources with knowledge of the tentative deal. At one point, the ILA was demanding an increase of up to 77%.

The negotiation of automation will be more challenging due to Daggett's stance against it.

In a recent video message to union members during the September meeting, Dennis Daggett, the executive vice president of the ILA and Harold Daggett's son, referred to automation as a "cancer."

We will continue to fight against the idea that robotics should replace human beings in their jobs, even if they are historically performed by humans, and we will not accept jobs in the future, no matter how much they pay.

The GAO found that all 10 of the largest U.S. container ports have implemented automation technology to manage cargo, with at least one terminal at each port utilizing it for tracking and communication purposes.

Harold Daggett, ILA president, began his career on the docks before containerization revolutionized global shipping and ports operations. He has consistently opposed automation, semi-automation, and specific technologies. Daggett has publicly expressed his opposition to cameras placed at ports and roads to monitor trucks.

"In the September video, Daggett stated his opposition to the big brother concept, stating that it is unjust for individuals to be constantly monitored and have their every move recorded without their consent."

He also called semi-automation a "back-avenue into automation."

He stated that computers help increase productivity and they have doubled the amount of cargo.

Sand explains to CNBC that no deal can be assumed due to these reasons.

According to a study by Dr. Michael Nacht and Larry Henry, the increase in automation output at the two semi-automated terminals in the ports of Long Beach and Los Angeles, California resulted in more jobs for the International Longshore and Warehouse Union.

A study conducted by the ILWU revealed that automation resulted in reduced job hours and wages.

The PMA includes both TraPac, which operates a semi-automated terminal in Los Angeles, and APM Terminals, an independent unit within A.P. Moller-Maersk.

In his September video message to members, Daggett stated that the fully automated terminal at the Port of Los Angeles resulted in the loss of 800 longshoremen jobs. He accused maritime companies from "overseas" of wanting to "enter America and construct fully automated terminals, thereby eliminating American jobs." These jobs, he emphasized, were "good-paying" and provided "medical, pensions, and annuities" to families.

Harold Daggett was elected to his fourth four-year term as ILA International President in July 2023. His current term runs until July 2027. As International President, he serves as the Chief Negotiator for the ILA-USMX Master Contract Negotiations.

According to the World Bank's Container Port Performance Index 2023, the U.S. has several ports that rank below many other countries in terms of efficiency. No U.S. ports are in the top 10, and the highest-ranked U.S. port is Philadelphia, with an overall ranking of 50.

During an interview with CNBC on Friday morning, Acting Secretary of the Labor Department Julie Su reiterated the sentiment expressed by Harold Daggett in his video message, stating, "Machines don't have families." Su's comment was in response to a question about U.S. port efficiency and its impact on labor.

"While the U.S. has been slower to adopt automation at ports compared to other countries, Su noted that in many countries, people are less fearful about the impact of automation because there is a greater focus on job security."

The terms of automation were not disclosed in the 2023 deal between the PMA and ILWU.

The ILA seeks to strengthen its current contract's automation and semi-automation protections.

In the September video, Dennis Daggett stated that the terminal operators were using automation, which he believed was a violation of the contract.

The breakdown in negotiations between the ILA and USMX over the summer was due to allegations of using an automated processing gate for trucks at the APM Terminals in Mobile, Alabama. The stalemate lasted until the day before the strike began on Oct. 1.

"Sand warned that the two sides have been unable to resolve the automation issue in over a year of negotiations, and now they have only 100 days to reach an agreement or further strike action could occur."

Why ports automate, and why the U.S. lags

Vespucci Maritime CEO Lars Jensen stated that automation and semi-automation are used to increase terminal throughput, rather than reduce the workforce. He added that automation leads to a more stable level of productivity, as seen in the use of remote-controlled cranes, which make jobs safer and less physically demanding.

Nick Vyas, the founding director of USC Marshall's Randall R. Kendrick Global Supply Chain Institute, stated that while automation can improve operations, cargo flow, and reduce costs, it also poses a threat to workers who have been striking. The outcome of these negotiations may establish a precedent for the future of port operations in the U.S., determining whether labor-intensive jobs will endure in the face of technological advancement, according to Vyas.

The decision to automate or not automate U.S. ports may depend on various factors, including union contract language, but adoption levels among overseas ports may also play a role.

The GAO report suggests that a terminal must handle at least 2.5 to 3 million TEU of cargo to achieve a potential return on investment, despite the high initial cost. However, most U.S. container ports handle less than this amount of cargo. Additionally, foreign ports tend to have more transshipments, which favors automation. Officials from the Port of Singapore, which has a large percentage of transshipments, stated that this was a key factor in their decision to automate.

The Port of Norfolk, Virginia, is currently expanding its NIT terminal, which will eventually have over 90 semi-automated stacking cranes, increasing container capacity. Stephen Edwards, CEO of the Virginia Port Authority, stated that the port's semi-automated operations helped it handle the container surge following the Baltimore bridge collapse.

The Port Authority of New York/New Jersey's port director, Beth Rooney, stated at a press conference on Friday that the Port of New York and New Jersey does not have automation. However, there is limited semi-automation at the port Liberty terminal in Bayonne, New Jersey, which was agreed upon several years ago between the terminal operator and the ILA. The current master contract includes a committee of six to seven members from the USMX and the ILA to review any requests for semi-automation or automation implementation from the terminal operators.

"Ports and terminals must have some automation to improve their efficiency," Sand said. "I can't see them give in to the ILA's demand for no automation or semi-automation."

The establishment of an international union of all dockworkers worldwide to challenge automation is crucial to Harold Daggett's objective, which is centered on the automation aspect of the contract.

"In the September video, Daggett declared, "I've had it up to here," while raising his hand to his forehead. He emphasized that the only way to combat the issue was through the formation of an Alliance. "We're going to show the companies we have the power, not you," he stated. "We're going to fight it with that Alliance," he added. "I'll shut them down.""

The tentative deal and suspended strike may not be enough, says Sand, as the hurdle of automation may bring around another strike in mid-January.