ICTSI, Port of Portland, Ore. agree to lease termination

The Pacific Northwest port said it hopes to restore container service at Terminal 6    The Port of Portland and a U.S. subsidiary of Philippines-based International Container Terminal Services, Inc. (ICTSI) said late Monday they have mutually agreed to terminate a 25-year lease agreement for ICTSI Oregon to operate the port’s container facility at Terminal 6.
   ICTSI had signed the lease agreement in 2010, but had come into intense conflict with the International Longshore and Warehouse Union (ILWU) over a jurisdiction issue and alleged worker slowdowns.
   “The agreement allows ICTSI Oregon to be relieved of its long-term lease obligations effective March 31, 2017, pending approval by the Port Commission,” the port and stevedoring company said in a joint statement. “In exchange, the port will receive $11.45 million in compensation to rebuild business, as well as additional container handling equipment, spare parts and tools at the terminal.”
   In a statement, ICTSI said, “Since 2012, the National Labor Relations Board (NLRB) has twice found the International Longshore and ‎Warehouse Union (ILWU) guilty of unlawful activity intended to drive business away from ‎Terminal 6. In addition, a federal judge in Portland found the ILWU in contempt of court ‎for failing to obey the court’s injunction against the ILWU’s illegal slowdown conduct. The union’s conduct ultimately led to decisions by the ocean carriers to cease calling on Portland. Despite ‎efforts by all concerned to get the ILWU to cooperate with bringing business back, the ILWU refused. Waiting for the ILWU to abandon its campaign of coercion ‎against ICTSI Oregon would only prolong the significant impact to the local economy.”
   ICTSI added, “For this reason and to lessen the substantial continuing damages caused to ICTSI Oregon by the ILWU’s unlawful conduct, ICTSI Oregon was compelled to seek termination of the lease. ICTSI Oregon fully intends to hold the ILWU accountable for its illegal conduct through pursuit of ICTSI Oregon’s damage claims against the ‎ILWU.”
   “Small businesses, farmers, agricultural producers, shippers and communities throughout the Columbia River region deserve and need a fully-functioning container terminal,” ICTSI Oregon CEO Elvis Ganda said. “Hopefully, this agreement with the port will make it possible for business to return to the terminal more quickly. However, ICTSI Oregon will continue to address the labor issues that gave rise to its decision to enter into this agreement and will pursue its legal claims against the ILWU.”
   “This is the best opportunity to launch a new strategy to restore carrier service for Oregon and Northwest shippers,” Port of Portland Executive Director Bill Wyatt said. “While the global carrier industry continues to undergo rapid change, we now have a new path to redefine our future in this business and launch new strategies to bring the terminal back to life.”
   The port signed a lease with ICTSI Oregon in 2010, but the terminal operator came into conflict with the ILWU over whether work having to do with refrigerated containers at Terminal 6 should be done by ILWU members or members of the International Brotherhood of Electrical Workers.
   John Kitzhaber, then governor of Oregon, brokered a deal that gave the jobs to the ILWU in 2013.
   However, even after that deal was reached, the ICTSI was in conflict with the union and complained of worker slowdowns.
   In October 2015, the NLRB upheld a decision from an administrative law judge and required the ILWU to post a notice, which said, “We will not induce or encourage employees of ICTSI Oregon, Inc. (ICTSI) to withhold their services, engage in slow downs and work stoppages, or interfere with the lawful and proper work assignments of other employee groups that perform services at Terminal 6 in Portland, Ore., in order to force or require ICTSI, or any sea-going carrier to cease using the services provided at Terminal 6.”
   “One thing led to another and it was also conflated with the last round of negotiations around the ILWU contract and then things just sort of spun out of control to be honest,” Wyatt said. He also noted how the conflict between the employer and the union occurred as the container industry was entering a slump.
   The largest user of Terminal 6 was Hanjin Shipping, which ended service in February 2015, followed by Hapag-Lloyd and Westwood.
   The ILWU has sued the Port of Portland over subsidies that were paid to attract container carriers to Terminal 6, and that litigation is ongoing.
   Wyatt said that rather than spending years “sorting through the various pieces of litigation” while continuing to pay annual rent of $5 million a year, ICTSI chose to negotiate an exit from the port.
   While the port has a strong lease with ICTSI and could have continued to collect rent, he said “that is not what we want. We want the terminal up and running.”
   At its peak in 2003, Terminal 6 handled about 300,000 TEUs of cargo, and when ICTSI first took over the facility, it was handling about 200,000 TEUs of containerized cargo, Wyatt said.
   He said without a Portland terminal, Oregon exporters of hay, lumber, grass seed, scrap metal and other containerized cargo have had to truck or rail cargo to Seattle or Tacoma in order to reach overseas customers. That can cost $500 to $1,500 – more than the ocean freight to get products to China – and is cost prohibitive for some commodities.
   Wyatt said now that an agreement has been reached with ICTSI, the port will look for a new tenant for the property. Terminal 6 is bounded on either side by automobile terminals, and he said it is possible that some portion of the container facility could be devoted to roll-on/roll-off cargo, but that the port is keen to attract container service.