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Leal Sundet commentary: ICTSI

Printed in the Oregonian:

Hanjin departure from longshore union’s point of view: Guest opinion
Print By Guest Columnist
on November 02, 2013

By Leal Sundet

ILWU Coast Committeeman Leal SundetSince Hanjin Shipping Co.’s Oct. 17 announcement that it intends to stop calling on Portland, ICTSI Oregon Inc., the local arm of the Philippines-based company that operates Terminal 6, has been publicly blaming its local ILWU-represented workforce for Hanjin’s departure.

ICTSI’s first three years of attempting to run a U.S. port terminal have been a failure for reasons that have nothing to do with the men and women who have made Portland a productive port for decades.

ICTSI inherited the Port of Portland’s terminal use agreement with Hanjin when it leased Terminal 6 in 2010. That agreement expired in December 2012, and after months of negotiations between ICTSI and Hanjin, the parties couldn’t agree on new terms. The negotiations failed because ICTSI insisted on charging Hanjin rates that were substantially higher than normal — rates that ICTSI intended to increase, as part of its business model, regardless of any alleged labor issues. ICTSI further sought to terminate the throughput arrangements that Hanjin had negotiated with the Port prior to the terminal use agreement’s assignment to ICTSI. ICTSI insisted on a cost-per-unit deal (i.e., unbundled services) that would have substantially increased Hanjin’s costs in Portland. Unfortunately, there was little negotiation over these terms. ICTSI quickly rejected Hanjin’s compromise proposals, making the cost of calling on Portland prohibitive.

Twice in 2013, the Port intervened to assist ICTSI and prevent Hanjin from ending its direct-call service in Portland. In January, the Port created a direct subsidy program, paying $10 per container to carriers calling at ICTSI’s Terminal 6 container yard. In February, the Port initiated a rent rebate program for ICTSI, which was described in Port Commission minutes as being “designed to facilitate competitive pricing by ICTSI to carriers calling on Terminal 6.” The Port’s subsidy program to carriers expires at year’s end.

Hanjin’s planned termination of direct-call service to Portland coincides with the end of the Port’s subsidy program, and is a direct result of ICTSI’s failure to negotiate an acceptable Terminal Use Agreement with Hanjin.

Bottom line: ICTSI is in Portland for one reason: to extract deep profits. Internationally, ICTSI reaps the highest profits in the industry — $33.30 per 20-foot container, compared with a $15.60 average for competitors that operate on the West Coast. The Journal of Commerce reported that ICTSI’s global net income in the first quarter of 2013 was $43.2 million, jumping 20 percent from $36 million in the first quarter of 2012. Unfortunately, ICTSI does not care about our region or the institutions that provide its stability and profit.

ICTSI has decimated labor relations with its Portland workforce by creating a work atmosphere of hostility, based on a model of employee intimidation that is ICTSI’s method of operation around the world. (ICTSI operates largely in developing nations, and Terminal 6 is the only facility that ICTSI operates in this country.) ICTSI voluntarily joined the Pacific Maritime Association, the association of employers that includes all West Coast terminals and most carriers, including Hanjin. ICTSI then defied the collective labor policy of PMA and promptly sued the very entity that it joined. Ironically, Hanjin is a significant member and policy maker in PMA as well as a respondent to ICTSI’s legal claims against PMA.

Turnover of ICTSI’s operational management is unprecedented by West Coast terminal industry standards. Experienced superintendents have quit because of upper management’s instructions to supervise personnel in a manner that is outside of U.S. standards, much less the terms and conditions of the labor agreement that ICTSI and Hanjin collectively have with the International Longshore and Warehouse Union. The chaos created by inexperienced and incompetent front line operational management and ICTSI’s insistence on a sub-standard labor model (one often seen in countries with weak labor rights and deplorable working conditions) have more to do with productivity at Terminal 6 than anything else.

ICTSI is the problem, and until ICTSI respects the culture and institutions of the U.S., it will continue to be the problem. ICTSI needs to accept that its profit margin in the U.S. will not be the same as it is in countries where workers have no rights and there are no alternate ports of call.

Instead of blaming ICTSI’s workforce and speculating on any potential economic impact to the region of the loss of service of a single carrier, we should be asking ourselves what the long-term economic impact is of harboring a foreign enterprise that has absolutely no scruples when it comes to the Port’s former business partners, American workers, and the economics of the region that built Terminal 6 with our public dollars.

Leal Sundet is a Local 8 Longshoreman who lives in Mulino, Oregon, and serves as Coast Committeeman for the ILWU Coast Longshore Division.

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