(Reuters) - The union representing nearly 15,000 dockworkers at U.S. Atlantic and Gulf Coast seaports stretching from Boston to Corpus Christi, Texas, reached a tentative contract deal with shipping companies on Friday, averting a strike that threatened to wreak havoc on the U.S. economy.
The International Longshoremen's Association (ILA) and the U.S. Maritime Alliance clinched a deal in federally-mediated talks less than two days before a strike deadline set by the union to coincide with expiration of the contract on Sunday.
The threatened walkout would have brought container cargo operations to a halt at 15 ports along the Eastern seaboard and Gulf Coast, marking the first such work stoppage in 35 years. Friday's announcement came hours after the White House urged the parties to settle their dispute.
Under Friday's deal, the two sides agreed to extend the terms of their expiring labor pact for 30 more days while negotiators finalize details of their settlement, the Federal Mediation and Conciliation Service said in a statement.
The breakthrough came as the parties agreed "in principle" on the contentious issue of "container royalties," or bonus payments earned by ILA dockworkers based on the tonnage of cargo moved through their respective ports.
The new contract does not eliminate the royalty payments, as the shippers had demanded, according to Benny Holland, an executive vice president for the ILA.
"The royalty will stay intact. We have worked out a formula for it," he said in an interview. He did not elaborate and the shippers declined to comment. No further details were disclosed in the government's statement.
LONG-TERM AGREEMENT AWAITED
Established in 1960, the royalty payments to ILA workers are based on the tons of container cargo that move through a port. That tonnage has risen from 50 million tons in 1996 to 110 million tons last year, according to the alliance.
Total payments last year were $211 million, according to the USMX, or an average of $15,500 per worker.
The original idea of the royalty payments was to protect longshoremen from wage losses expected as a result of "containerization," in which more and more goods are packed in the now-familiar 20- and 40-foot long boxes. Those take less manpower to offload than the less-standardized containers they replaced.
The two sides also fought over the guaranteed eight-hour workday in the current contract as well as the seven-man "lashing gang." Lashing crews, or gangs, secure the cargo containers to the vessel using metal lashing rods to keep them from moving while the vessel is at sea. The maritime alliance wanted to eliminate each.
A new long-term agreement has an 80 percent chance of happening by January 28, Capital Alpha Partners analyst Loren Smith said in a research note.
The temporary agreement comes as labor forces felt emboldened by recent victories by other unions across the United States. At the same time, shipping companies and port operators have been using more automation, but have seen profits shrink.
The Baltic Dry index, which tracks the cost to ship materials overseas, is down 55 percent in the past year and currently trading at levels it has not seen in a decade.
(Additional reporting by Kevin Gray in Miami and Steve Gorman in Los Angeles, editing by Mary Milliken; desking by G Crosse)