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Docks Start Working As Retailers Scramble To Cope With Backlog

LOS ANGELES — The chains came off and the gates of West Coast ports swung free Wednesday evening, letting hundreds of locked-out dock workers back to work — at least for now —but it will be a long time for the backlog to be...

LOS ANGELES — The chains came off and the gates of West Coast ports swung free Wednesday evening, letting hundreds of locked-out dock workers back to work — at least for now —but it will be a long time for the backlog to be alleviated.

Mandated by the Taft-Hartley Act invoked by President Bush and ordered late Tuesday in a San Francisco federal courtroom, dock workers are required to remain on the job under the terms of the expired 1999 labor contract for an 80-day cooling-off period.

In some ways, it’s an unhappy ending — and, many contend, only a Band-Aid fix — to a 10-day port closure that left nearly 200 ships stalled off the West Coast while bananas rotted, the seasonal sweater business was at risk and the U.S. economy hemorrhaged more than $7 billion.

The Pacific Maritime Association, representing shippers, and the International Longshore & Warehouse Union, representing 10,500 dock workers, are required to keep negotiating, according to spokesmen from both sides.

“It’s been very strange to see the water so still and the crane arms all stuck upright because no one is operating them,” said Theresa Adams-Lopez, public information officer for the Port of Los Angeles, the harbor landlord and a neutral party in the dispute. “Now, we’re literally holding our breath to see what happens next.”

The first task at hand is an arduous cleanup. Estimates of how long it will take for workers to dig out the mess range from six weeks to more than two months. Observers said the effort will be complicated by a shortage of truck chassis, warehouse space, trains and knowledge of how to deal with a cargo backlog of this magnitude.

Few people currently working were around for the last major port shutdown in 1971, when cargo volume was a fraction of what it is now.

“The whole freight system — trucks, trains, ships — runs in a continuous circle,” said Cliff Katab, vice president of freight consolidator Gale Triangle. “When something stops it, it’s very complicated to find out where everything is and to pick up the pieces.”

The Marine Exchange, a nonprofit organization that works with the Coast Guard to monitor ship traffic, is updating its Web site every 15 minutes with the unloading queue of ships.

To importers’ relief, the U.S. Customs Service on Wednesday provided a road map for how ports should process quota for apparel and textiles. Importers are worried their merchandise won’t be allowed into the U.S. because quotas will fill, even though their cargo may have arrived first.

Quota is still being allocated on a “first-come, first-serve” basis, said Janet Labuda, director of Customs’ textile enforcement and operations division. However, deciding who’s first in line will be determined when a ship drops anchor. If a ship has been diverted from one port to another, then the time of first anchorage will decide where in the quota queue merchandise stands, Labuda said.

“Customs has tried to be as flexible as possible within the constraints of the quota requirements,” she said.

The ILWU’s mood is also a major “X factor” in how quickly goods will move, sources said. Rumors swirled Wednesday that the steadies — the workers who normally service a given terminal — are going to be held home and that inexperienced crews will be sent.

An ILWU spokesman emphasized that under Taft-Hartley, the union is legally bound to the terms of its 1999 contract, which prohibits slowdowns. In addition, the PMA can bring the union to court if it detects productivity drops below certain levels.

If the judge rules in the PMA’s favor, the ILWU could be slapped with a $100,000-per-day fine.

“We think it’s very clear PMA will try to make claims and push court action in these areas,” the union spokesman said. “It will be a constant battle just to defend ourselves on these claims.”

A PMA spokesman said the association will “do everything we can to ensure cargo is handled as well as possible.” He declined to be more specific.

Robin Lanier, executive director of the West Coast Waterfront Coalition noted: “We have to keep pressure on the two sides to get together. That’s the harder part. It’s influencing private parties to do what they may not want to do.”

Concerned about the ports being shut again, the American Apparel & Footwear Association on Wednesday sent a letter to Bush. Kevin M. Burke, AAFA president and chief executive officer, wrote: “We cannot afford another shutdown of the ports, for any reason. I urge you to use all means at your disposal to get the parties to stay at the negotiating table so that the real issues at the core of this crisis can be resolved as soon as possible.”

The crisis surrounds the implementation of technologies such as bar-code scanners which would replace an estimated 300 union jobs and which, the union believes, would pave the way for shipping companies to outsource more jobs to nonunion, remote locations. Stevedoring Services of America, for example, has a substantial nonunion clerk workforce in Utah.

PMA president Joseph Miniace told reporters in a conference call Monday that “all employees would be guaranteed jobs and guaranteed work in their classifications. Clerks will work as clerks, guaranteed, and all work that is an offspring of that technology would go to the same jurisdiction.”

The problem for retailers and vendors is more immediate. Although Wal-Mart moved the bulk of its holiday goods before the lockout, the megaretailer is concerned about day-to-day products held up for “tens of thousands” of suppliers, said a spokesman.

“The other thing that concerned us was the overall effect on the American economy, which really translates to the customer,” the spokesman noted. “Soft consumer confidence could become an issue. If this had continued beyond this week and into the next few weeks, it would have had a really negative effect. Certainly, Wal-Mart would not have been immune to that.”

The Bentonville, Ark.-based company is gearing up to prioritize items and determine where they need to go first. It will add more volume to an already “tremendous” movement of product now “going full blast” through January, he said. “It will be hard work for a couple of weeks.”

The smaller players were also prioritizing. Brad Egna, ceo of New York-based Briefly Stated, dispatched his chief financial officer and head of logistics to the West Coast today to help his freight forwarder determine which goods to grab first. The intimate apparel firm has roughly 50 containers stuck at the ports and Oct. 15 deliveries to make.

So far, Egna has not considered a “Plan B” if he gets a cancellation on these goods. He said: “Thankfully, we’re in licensed product and Sponge Bob is selling.”

In Los Angeles, some vendors showed incomplete spring lines because samples were held on boats and the backup samples, whipped up at the last minute, got stuck on airport tarmacs, waiting availability in planes.

“We will have another shot at spring bookings at November market, but it’s frustrating,” said Bubblegum cfo Ken Spiegel, one of the vendors showing a partial line at the Los Angeles market this week.

Spiegel recently cancelled an order of imported fabric that was caught in the port troubles and sourced similar goods domestically. Some textile reps said they’ve been getting frantic inquiries from vendors who sew here, but rely on imported fabrics. Velour, in particular, is in short supply and is crucial to the tracksuit trend.

Although the industry has not seen major cancellations so far, industry observers said the real bloodbath may come in a couple of weeks, as goods start to clear and create a glut in a market already burdened by sluggish retail sales.

“There’s going to be selective acceptance of goods, both for retailers and manufacturers, based on what’s selling,” said F.G. Gozashti, president of Blanc Noir.

Manufacturers that work with importers on a landed-duty-paid basis, which means they don’t own the goods until they clear Customs, may yet cancel, Gozashti speculated.

“There will be some litigation, relationships affected, and the secondary market is going to be completely flooded with merchandise,” he said.

While vendors continue to sweat it out, retailers — among the most politically active in calling for the Taft-Hartley action — breathed a sigh of relief and said the current situation could have been worse.There also remains the specter of future dock problems, since the PMA and dock workers remain far apart in their negotiations.

There is no guarantee the cooling-off period will end with an agreement between the two sides, meaning there could be another lockout of dock workers or, worse, a full-blown strike just as deliveries are due for the spring selling season.

Cincinnati-based Federated Department Stores was able to move all of October deliveries and half of November to its 460 stores.

“Given the extent of things we have to worry about in this economy and internationally, this is a relatively small pimple in the midst of a bad case of acne,” said Carol Sanger, vice president of corporate affairs for retailer.

Even if goods are held up for an additional 10 weeks, the vast majority of holiday product has been delivered to J.C. Penney’s distribution centers.

“There may have been a few items that needed replenishment, but our up-front planning in regard to this positioned us in very good shape,” said a spokeswoman for the Plano, Tex.-based retailer with 1,068 stores.

“We feel confident that we are going to meet our customer’s needs for the holiday.”