Lightning like Steve McQueen I'm in the fast lane when the light turns green and I built tough Find nothing but grit cause I made rugged blood sweat and spit yeah like a horse I fly self in for a bumpy ride I like to play hard but I work harder and I weather the storm cause I'm built stronger. What is up, ladies and gentlemen? We are back. We are live. It is a freight coach podcast, the top podcast in transportation coming to you guys every single weekday, 8:30am Pacific, 10:30 Central, to break down some industry headlines. But most importantly, you guys provide some actual insight into what you can do with all of this information. If this is your first time tuning in, welcome. This is the real side of freight, ladies and gentlemen. And I say that before every single show.
And what I mean by that is I only speak with transportation professionals because at the end of the day, you guys, I want to talk to the right individuals who have done what you're looking to do or who are currently doing what you're trying to achieve. So you can take that information, apply it, utilize it, and see a meaningful difference in your business and your life. I got a couple of quick show announcements here, actually. Just a couple of quick announcements. The newsletter, the weekly newsletter releases tomorrow. The FreightCoach.com register for that. We have expanded that out. We started adding in weekly fuel pricing and then we also started adding in some lane data for my friends over at Green Screens, you guys, to kind of help you guys start tracking market shifts and everything else.
I mean, speaking of Green screens, I bid a same day load on their platform this morning and won it today for a flatbed, you guys. And then I built it on my friends over at Revanova's platform, who I use for my TMS as an official freight coach TMS provider, which was pretty freaking cool because I'm out here actually brokering freight, ladies and gentlemen. I'm not just a pretty face, although that is a large part of who I am. We are out here actually using those products, you guys. But let's get into the show today, you guys. I always bring subject matter experts on this show because when it comes to labor negotiations at the port and anything to do with the port, it's not really my area of expertise.
But this is definitely her area of expertise and she's been on the show before and she is back today to break down what is actually going on out there. So I got my good friend Lauren began back on the show. Lauren, thank you so much for joining me.
Thanks so much for having Me, I'm so happy to be here. Always love chatting with you and your audience.
No, it's, you know, it's funny, we got to come out and just say, Lauren predicted exactly what happened at the port, like two months ago. The last time she was on my show, she had said, just watch, something's going to come about. And then when I was, were chatting back in December about, hey, do you want to come on, literally the day before the port strike. And she's like, I will. But the caveat is it's probably going to be resolved by then. And there was a different level of confidence that gave me the confidence to last week put a very bold prediction out there that this is going to get resolved. I got a feeling Trump publicly supported the union. I have a feeling that they are going to come to a short term resolution. So nothing disrupts his inauguration.
And voila, 24 hours later, it happened.
You know, it's funny, I kept telling people, like, at first I said, I wouldn't be surprised if we saw something before Christmas, but I kind of just remained like, I still don't think we're going to a strike. And then, because they had their meeting in mid December and then we got to the new Year and I was like, all right, well, nothing's going to happen between Christmas and the New Year. But I go watch the first 10 days. If we go past the first 10 days, I think that's when we slide back into, you have to strike because you're so close to it now. But I go, I really think that we're not going to get past that first ten day mark. I mean, it was, what, the eighth that the agreement came out.
So I'm telling you on the 7th, I was like, gosh, I told a lot of people this is not going to strike. But like, all always with the. So I think, I don't know, we'll see. Right? This was totally a fluid situation.
Yeah, no, and it definitely would. And like, I think that it, I mean, at least for my perspective, it still kind of is. Right. Like, because it's a tentative agreement and I want to be abundantly clear about that. It's tentative. So it's essentially they're resorting back to like what we've been in since, like September, right?
Yeah. So they're resorting back. They're kind of status quo for now. But the reason why it's tentative, I'm confident with it. But the reason why it's tentative is because what they call the rank and file. Basically, all the members on both sides have to vote on it. So even though the negotiators came up with this deal, they need to still vote on it. Word is that vote, at least for the ILA side, might happen mid February. So, like, we might be in. We might not be in this purgatory for too long, but both sides are kind of taking victory laps, I feel like, especially the ila. So I can't see this negotiation disintegrating unless something major comes up. But, like, we're in the world of unprecedented time. So, like, there's that.
No. And. And it's, you know, what. What I don't understand. So I, I always go to the JOC when it comes to a lot of this stuff because I know they are very much ingrained in all things ocean freight and in general. And, you know, they had put an article out there literally on January 8th about this, and I pulled this one up, and, you know, it. It's, you know, this agreement protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing the ports, making them safer and more efficient and creating the capacity they need to keep our supply chain strong. So that said, everything and nothing at the exact same time, in my opinion, because it's like, you know, again, I, I think that, you know, I, I have spoken about this.
Like, I understand, and I actually stand with the union in their, like, stance. I'm like, hey, we don't want to automate ourselves out of a job. But, like, I think that the consensus is also, like, we're severely lacking in a lot of areas.
So.
So, like, what kind of protections are they talking about there when it comes down to this?
Yeah, so, I mean, for a long time, they were talking about no automation. No, no. Technology advances is kind of what it was, what the conversation was turning into. And it was saying, you know, our workers need to be paid more. Our workers can do everything better than the machines, which there are. Report. There's conflicting reports on that. Right. But what we do see is nobody really wants robots to replace people, as a general statement. But on the other hand, we have to get effic as a nation. Right. Our ports need to be competitive on the international scene, and we are falling off that list of most competitive ports in the world. Obviously, our people are making up for it with plenty of demand. Right. We, like, our ports will not go dry anytime soon. We have plenty of cargo coming in and out.
But on the other hand, we need to make sure that cargo moves efficiently. Otherwise we might miss out to cargo that goes up to Canada and then gets railed into the center of the country. I don't think that was ever going to be the only way that we're going to get our goods. But I do think that we need to make sure, as kind of a national freight strategy or national maritime strategy that the new administration has been talking about is how do we make our ports competitive? One way we do that is keeping costs down and keeping efficiency up. And so that kind of goes against some of the messaging that was coming out here. But the other side is you got to make it fair, right? These are still people.
These are still people doing very specialized work, very dangerous work at the port. And so how do you balance all of that? So what we know. Well, what we know is only what's come out in these joint press releases. Because as this has gone kind of the whole time, there's been a little bit of a skew between public press releases and what's reality. We won't know what's in this agreement until it gets fully agreed to and really filed. You know, I've actually was surprised to find that these are filed at the fmc. So you will be able to find the contract and the agreement at the fmc. The interim agreement was filed at the fmc, Federal Maritime Commission, for those of you who are on the surface side of things.
So we'll know the actual content, but we won't know that yet because in all of these joint agreements or joint press releases coming out from both the USMX and ila, they're saying we're not going to talk about any of the specifics. But they also say but we've agreed to. And some of the things that we know is it's a 62% wage increase or at least that's what the ILA side of things said. It's a six year contract, or at least that's what they've typically done. So we could probably assume that's about what it is. And then there was a quote unquote secret meeting that happened the Sunday before. They were set to sit down on Tuesday last week. I don't think it was a secret meeting. Right. I think it was just pre deliberations.
But they said for any new tech you need new jobs. And so makes sense, right? That's what they were worried about is losing jobs. So tech should equal jobs. So.
And you know, and so like when they say a 65% wage increase, I think you know, that's a sticker shock for a lot of people out there is now when you say a six year contract, is that essentially a 10% raise year over year through that six years?
That's how I understand it is it's really like a 10% each year. I mean still you're getting to 62% increase over six years. That's a lot, right? I mean cost of living. Well, I mean you never know what cost of living is going to be but for the federal government it tends to fall around like 3 to 5% I think cost of living adjustments. So it's a big jump. But on the other hand, they haven't had an increase in eight years, nine years because they had a six year contract previously and then they extended it in 2019. They just happened to have Covid in the middle of that. So that's partly why, you know, all of this turned into a big. Well, excuse me, I'm mixing it up a little bit with the lwu but granted they hadn't had an update in a while.
Yeah, no, I gotcha. So now do you think, you know, and this is for anybody out there who's listening that maybe is thinking about joining the union? What is the like when they talk about new jobs out there that are, you know, from the technology, is that where they're going to unionize it, jobs for the ports or how, you know, and I'm using that as a very broad term here because I have a very simple brain and when I hear tech I think it. So are they going to un those level jobs that are coming into the port like that or is it going to be they're going to, you know, invest in the education aspect of it to train their current union members to become more tech savvy in their roles.
So I think it's yet to be seen. But what I would guess would be I think that some of the new tech will also have a learning curve with it. And so when that happens, I think that's part of these new jobs need to be associated with it. And so it might have been like running a rubber tire gantry crane was just a, you sit there, you drive it around. Now perhaps the new tech is a remote control and maybe even a remote control from your own house. And I think that's where I've always said, I think that there's a little bit of a disconnect or and I haven't heard of this but I can imagine there's a Disconnect between the new generation of workers and the old generation of workers. Right.
I mean, and I don't, I think that's going to be true at the ILA too, where the old generation, perhaps they're happy showing up for work, clocking in, you know, doing their seven to threes or six to twos or whatever their, you know, time period was, whereas the new generation, I mean, certainly people kind of hitting the workforce post Covid, are going to want the flexibility. And I don't know if this is true for the ila, but I can only imagine it is because it's true for the rest of society, right? Like, they want the flexibility. So would they prefer to be able to sit at their house and remotely control something? Maybe. I wouldn't say. The answer is no. And I think that was part of the argument here was, well, no, of course we wouldn't. I don't know.
I don't think that the answer is entirely no for this new generation. So I think that maybe that's part of the thought here.
I gotcha. I mean, I could see that, right? Like, if I'm just trying to draw some form of parallel out there, you know, Like, I know in the military, for example, drones have pilots who are clearly not on the drone. They're in military bases around the world operating them. So it's like, maybe that's where the tech transition comes in, where, you know, you're right. And, and I look at it as, you know, even inside of trucking right now, where it's like, you know, I, I've been around this industry my entire life and the way that I brokered Freight Prior is vastly different than the way I'm able to do it right now with technology and everything at my disposal. And, you know, I look at, you know, I'm not a fan of autonomous trucking, so I want to put that out there right now.
But what is important to that next generation of transportation professional that's coming up through college right now, right? Like, that 20 to 25 year old has a lot different desires from a tech perspective than I do. We're like, we're not even speaking the same language at this point. I mean, Jesus, my son teaches me more stuff about myself. Like I finally reached that age where my son's a teenager, he knows way more about my iPhone than I do, and I'm not even that old. But anyways, I digress. I just view a lot of this stuff kind of moving into that because you're right, like a lot of the older generation and I'm including myself in that. Not that I'm old, but, you know, I'm pushing 40 here.
I look at the way I operate a lot differently than what maybe somebody who's coming up is going to look for. And the union is probably now accepting the fact that like, hey, our next generation of union members are not like the 50 to 60 year olds who are about to retire. What can we do to attract that membership? Because that's what it is, you guys, the union is a membership. They need those dues. They need those members to even have a business, I. E. The union doesn't exist without its members. But I think that's where a lot of that stuff is going to transition into. But again, how do we make ourselves more competitive?
And I think that, you know, because again, to kind of summarize this article here, the last excerpt was from Harold Daggett, who is the, you know, the Tony Soprano of the, of the ports. But you know, he had said Trump, President Trump clearly demonstrated his unwavering support of our ILA union and longshore workers with a statement heard around the world backing our position to protect American longshore jobs against the ravages of automated terminals and, you know, end quote. And I look at it as that of what Trump's vote of confidence there is probably what created this stopgap. But again, I think Daggett and everybody else out there is like, they're going to be more like open to the fact that like, hey, we have to become the global leaders. Like we have to do it. That's going to come in the form of technology.
We're just not going to automate ourselves out of a job. And you know, I know that obviously we're not here to talk about tariffs or anything like that, but with all of this talk with tariffs and everything else, there's, you know, the ports are going to be at the forefront here for the next four plus years of what's going on. Especially, you know, it's yet to be seen on what these tariffs are going to do for our imports and exports and everything else that go along with it.
Well, and that's, you know, not to get too far into the tariffs, but I mean, that's if they get put into place. Right. And so, you know, it's part of the negotiation. Right. I mean, going back to the ILA usmx, I mean, so mid December is where Daggett Harold Daggett and Dennis Daggett, the CEO and executive vice president, were. Went to meet with Trump in Mar A Lago.
Nepotism. Nepotism.
All right, anyways, back to me, they went down to Mar a Lago and they met with President Trump. And one, I think at the time I said, I love this because the conversation is happening a month in advance. Right. Last time, end of September, were like, is anybody talking to anybody come September 29th, September 30th. Right. So were like, gosh, this looks like it's going to tip over into a strike this time around. We had press in mid December and actual conversations happening. It's recently come out that actually when they had that December meeting, President Trump called USMX leadership at that meeting. And so there was already a pre discussion in December, mid December. So that was all good.
But it was a surprise to the industry to see Trump aligning with ILA labor instead of perhaps aligning with tech, because at the time mid December, it was all about Elon. So you can't tell me Trump, who's aligning with Elon, is anti technology. Right? So to me, I saw this as two New York, New Jersey guys getting together, you know, chatting it out. And now he's got the confidence, Trump's got the confidence of Daggett. And so if a deal starts to come about that perhaps Daggett needs to drop down a touch on, now he has Trump, the mass. The art of the deal guy, telling him, it's a good deal, man. You got to go with it. I don't know if that's all that happened, but look, we did come out with still advances in technology, but ultimately, what was he looking for?
More jobs. And I think probably taught the. Perhaps. But the way that I was kind of reading this pre. This announcement was that Trump might have been the voice of reason telling Daggett, look, what are you looking for here? Jobs. Right? You want jobs to support your retirement, you know, to. To support your members, to support all of the different benefits that come along with union membership. So we have to have tech, but you want the jobs to not be replaced by robots. Let's stay focused there. So that's ultimately what we. What the reports are saying that we're seeing here is that tech didn't get curbed. It's more that we just need to make sure that people are associated with that tech.
I think we're, you know, we'll change topics here, but I think we're in a very interesting time when Republicans are voicing public backing of UN labor unions out there because that's generally not the way it goes. And I think this might be the first time in, well, at least from what I can remember, where the union has a direct line into the Oval Office as opposed to going through any other avenue that's out there. I think it's a powerful statement. And again, back to what I've said before, I think that this is going to be the most pro business president that we're ever going to see. And that is going to bode well for everybody in the long term. But you know, I do want to change gears a little bit here.
But you know, here's another thing that this also came from the joc, and it's two US Shippers are the latest to allege carriers bump contract cargo into the spot market. And two US Shippers, including the parent company of retailer Craft and Barrel. This is from the joc. You guys want the FMC to investigate ocean carriers for not providing enough vessel space during the pandemic surge, alleging they also extracted surcharges and higher rates for previously agreed upon container volumes. The complaint are a further shot across the bow for the enforceability of service contracts and whether service refusals for some customers were a legitimate response to the overwhelming demand.
And a pair of complaints published by the fmc, Euromarket Designs, the parent of Craft and Barrel, or Crate and Barrel, excuse me, and houseware and furniture distributor Nielsen and Bainbridge both alleged that a host of ocean carriers failed to honor service contracts in 2020 and 2022. Now this is kind of like, this is kind of a big deal, right? Because especially with the FMC's contract that essentially came out that prohibited a lot of what is kind of going on with this right now? Is this something that's too little, too late or is this like, hey, this is the current thing, we can backdate this stuff.
So this is part of a series of cases hitting the city, hitting a similar idea. So this all comes down to service contracts. So in the ocean shipping world, you could have a beneficial cargo owner. So the owner of the shipments negotiating directly with ocean carriers for I'm going to commit to a certain number of boxes a year. And so in exchange they get a reduced rate. So there's the publicly available rate and then you can negotiate a shorter, a smaller rate. Right. And so you get kind of like a benefit of bulk cargo or amounts of cargo that are going through for a better rate. So these are service contracts. And so they get filed with the fmc, it's a limited antitrust protection, meaning it's a little bit monopolistic.
But the FMC under the Shipping act says that's cool, it's fine, you know, file it with us. We'll make sure that nobody's getting totally gypped out here of any sort of bad deal or monopolistic behavior. And we're going to let you go forward with it. And so these cases deal with minimum quantity commitments. And so it really deals with that number that has been promised by the cargo owner to the carrier saying I will ship 2000 TEUs a month in exchange for a better rate. Everybody commits to it. Now we're seeing a series of cases trying to find out is that enforceable? Is that an actual contract term that is enforceable? Because it has to be specific to be enforceable. Is 2000amonth specific enough? Because what if they, or usually it's like 20,000 for the year.
So like what if it doesn't say in April we're going to ship 5,000? It says in 2023 we're going to ship 20,000. Okay, well you don't ship anything in February. Whose fault is that? And then here comes December and you want to ship all 20,000 TEUs in the month of December. Okay, well they don't have that capacity. So that's not exactly what's happening here in these cases. Mostly what's happening is they get to a point, it was Covid congestion years. They get to a point where the cargo owner is saying look, we want to ship and the carrier is saying we don't have capacity. Or this is what's being alleged, we don't have capacity. But you can go to our spot market.
The allegation is that they were pushed to the spot market to pay higher freight rates instead of the agreed upon reduced freight rate because of their previous agreement. So now this is going to come down to the FMC on all of these minimum quantity commitments of look, we pre negotiated this and they not only didn't honor it, but then they pushed us to $20,000 a box instead of our previously agreed to $2,500 a box. So. Right. Remember at the time a normal freight rate for Asia to the west coast was probably 2000 pre Covid. And then here you go, Covid happens it's 20,000 for the same route. So that's what's really happening here. And so it has to be a violation of the Shipping Act. And so they're throwing in all of these, you know, that Unfair, unreasonable.
You know, all these different areas of the Shipping act are. Their allegations are that it's a violation. But it really comes down to what's the enforceability of these service contracts. We don't have a lot of clarity, but all of these cases are probably going to fall the same way because they all kind of reduce down to the same basic questions.
Do you think that because, you know, they also brought up a, you know, in this article it talks about similar complaints here like Bed Bath and Beyond. They've Also, you know, two complaints from 2023 caused a combined 40 million in damages. Do you think that this is one of those, like, hey, let's just pile this on right now. So other companies are trying to do it to prove a point, to prove that, hey, there is some stuff that's going on. Again, I'm not trying to make any accusations, but you know, we're not talking about small sums here by any stretch of the imagination. And this seems to be a theme, right? Because this is just one. And then you think of Peloton, that lawsuit that was out there with, was it Flexport?
And you know, there's been some other big name ones that have kind of come up here. So is this people piling on or is this like, hey, we've reviewed our records, like this is a very viable complaint. And then ultimately does this just prove contracts are not worth the paper that they're printed on?
Well, I don't think it's the last thing. I do think that it's one. People realize this venue is a thing, right? People probably didn't even know what the Federal Maritime Commission was before and perhaps not the cargo owners, because why would they, right. They were going through freight forwarders, they were going through ocean transportation intermediaries. Like they may or may not have been privy to those service contracts or maybe they were directly negotiating it. But I think that there's a lot of awakening to the FMC and the available remedies or available options that they have, right? There's charge complaints now there's filing formal lawsuits, there's mediation, there's alternative dispute resolution. There's all sorts of things that the FMC offers. And then on top of that, there wasn't a lot of good case law on the enforceability of these service contracts.
And so why would you take that risk when it is a little shaky, right? Like you don't have that specific definitive. On February 15th, you will ship 50 TEUs, right? Like, and if that doesn't happen on February 15th, if you only hit 30 TEUs, you have something that you can go after. But you're like, the whole year of 2022, 20,000 boxes, you take up the whole ship more than the whole ship on most of these vessels. If you wait until December and you're like, it's December 20th, I want to cash in on our contract. So, I mean, on the ocean carrier side, you can kind of see their argument too, is like, well, we didn't have it per month. We might have had an average, but weren't bound to that average. It was a 20,000 TEUs for the year of 2022.
Like, what are they going to do if somebody says, look, we want all of your space? Well, we already have other minimum quantity commitments with other carrier or with other cargo owners. So it's tough because it puts everybody in a weird position. Most of these aren't hinging on. Well, during the month of March, we got pushed to the spot rate. Most of these are, like, during the month of October, November, December, when things are really crunching and you're coming to the end of that contract term, you can kind of see it on both sides. And really this is going to be a. Well, what does the FMC interpret to be the enforceability of a service contract? What is that specific enough rate and amount that the FMC can say, no, you screwed up, you should have fulfilled that.
Yeah, no, I think that, you know, in. Again, you know, you always see headlines about this stuff and, you know, I, I actually admittedly never even thought about the. The dates associated with a lot of that too. Right. And, you know, it does make complete sense. Like, you can't backload that. And then, you know, it is. It's peak season for everybody. And let's call it what it is. Everybody's a business, right? And if manufacturer A is paying them $20,000 a container and manufacturer B has 10, who do you think is going to get priority? Especially if you didn't, like, if you backloaded everything and then there was no clear verbiage, like, hey, this is for second half of year, 20,000 containers, whatever that looks like. Again, without seeing the fine print of it.
But again, it makes you think, right, like, what more is going to come from this? Or is this going to be a blow to manufacturers if it goes to court? And they're like, yeah, there's no clarity on when this was supposed to ship. You're kind of shit out of luck here. So, you know.
Yeah, and some of the cases that are coming, too. It's not necessarily a hook over the actual service contract enforceability. It's more a hook of like, well then there might have been a bad regional rep who then was retaliatory, right? And saying, you know, they get pushed to the spot market, okay, maybe it was still normal course of business, you know, maybe it just they couldn't fulfill it. But then maybe the cargo owner comes back and is like, you guys are a bunch of jerks. I'm going to take you to court. And then the regional rep says, stop dealing with them. They're threatening lawsuits. Right? That might be a retaliatory action. And those are some of the things that the FMC is kind of weighing in on in the margins.
But ultimately the enforceability of a service contract is kind of what we're looking at here. And that's the larger theme that I think we're hopefully going to get some clarity on. There's some cases that have some initial decisions out of the FMC but then are now on appeal. But also the other thing, some of these minimum quantity commitments, Bed Bath and Beyond, you know, this one with Euromarket, they've also gone bankrupt. They filed for chapter 11. Right. So, like, what else do they have to lose? Like, and this one especially is saying we attribute part of our bankruptcy because of these giant costs that we incurred. Right. 30, $40 million is no small number on a PNL. So I think that's why we're probably seeing the uptick here is because why the heck not? You know, like, they're already chapter 11.
Let's try to recoup some of the cash.
Yeah, they're. Yeah, 100%. I agree. Well, Lauren, that absolutely flew by and I appreciate you jumping on to talk about all of this stuff because again, all of this has a direct correlation to the truckload market. It is all connected out there in that supply chain. But Lauren, how does anybody reach out to you to find out more about what you have going on?
So I have two companies. One is a law firm, it's Squall Strategies. So if you need me for attorney type work, you can call me at the Strategies. But if you just want to learn more about this, if you want some employee trainings, if you just want a webinar that goes over global Ocean Shipping or FMC101, come find me on the Maritime Professor. Maritime professor.com I love it.
Lauren, thank you for joining me. I will definitely put my vote of confidence behind her. I have person, my company has personally worked with her to help clarify a situation that were in. She was very prompt to the point and all of that. And I would definitely reach out to her if you guys have anything to do with her services. But that will be it for today, you guys. I got guests coming on later this week. As always, if you guys got value in what you heard, subscribe to the show. Share it out there. Dear Network, because if you see value, your network's going to see value as well. I appreciate you guys. I love you guys. And we'll be talking to you soon. Is do you use.