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Industry Awaits Dock Solution

LOS ANGELES — While mediated talks continued through the weekend between the Pacific Maritime Association and International Longshore and Warehouse Union, vendors and customs brokers planned alternate routes for cargo and fretted about what...

LOS ANGELES — While mediated talks continued through the weekend between the Pacific Maritime Association and International Longshore and Warehouse Union, vendors and customs brokers planned alternate routes for cargo and fretted about what would have to be done to resolve the labor dispute that has closed West Coast ports for over a week — at an estimated cost of $2 billion a day.

“At this point, we’re waiting for the madness to end and the chaos to begin,” said Robert Krieger, president of freight forwarder Norman Krieger, whose hopes had been falsely elevated by rumors from the union camp that workers would be back on the job Saturday, under the old contract. Over the weekend, the PMA reiterated its stance not to open ports until the union extends the old contract, which forbids it from striking or engaging in work slowdowns.

Despite lengthy meetings on Thursday and Friday, the two sides reached only a partial agreement to service passenger ships and carriers bound for Alaska and Hawaii, which depend on ships for life-supporting supplies.

That news provided little relief to the fashion industry. At the Fashion Industry’s Guild “Man-of-the-Year Gala” on Saturday night, honoree Richard Clareman bemoaned $1 million worth of goods stranded off shore, while vendors swapped stories about their ongoing efforts to make alternate deliveries. They have continued to ship goods by air, procured space on ships bound for Vancouver, or diverted shipments to the East Coast or to Ensenada, Mexico. Some carriers have even deposited goods at staging areas along the Panama Canal, according to Krieger.

Meanwhile, in Washington, President George W. Bush continued to refrain from a direct intervention, although two senior administration officials said he is considering appointing a board of inquiry to look into the lockout to determine the economic impact of the shutdown and whether both sides are negotiating in good faith, according to wire reports. It is the first step toward ordering the workers back to their jobs under the Taft-Hartley Act, which would allow for an 80-day cooling off period.

As the lockout enters its second week, lawmakers and industry trade groups, including retailers and manufacturers, continue to turn up the pressure on the Bush administration to intervene.

Sen. Tim Hutchinson (R., Arkansas) introduced a resolution on Friday calling for Bush to invoke Taft-Hartley and end the shutdown of West Coast ports. Nine Republican Senators cosigned the resolution, including Senate minority leader Trent Lott (R., Miss.) and Jesse Helms (R., N.C.).

However, it is unlikely the Senate will take up or pass the resolution, due to a crowded agenda this week dominated by the debate over a resolution on war with Iraq.

Also on Friday, the International Mass Retail Association sent a letter to administration officials requesting a board of inquiry to investigate the economic impact of the port shutdown.

“These damages will increase exponentially if the shutdown continues,” said Robert Verdisco, president of IMRA. “Even if the ports were to reopen tomorrow, it could take several months to recover from the backlog the shutdown has caused.”

Freight forwarders said steamship companies, which have more than 100 ships mired in the dispute, were not taking cargo bound for West Coast ports until after Oct. 15.

A spokesman for shipping company APL said, as of Thursday, the company was “still accepting bookings, but asking customers wherever possible to hold on to their cargo.”

“It’s peak season and we are chock-a-block full,” the spokesman said. “I’m not sure we would have any space to accommodate a last-minute diversion to Vancouver at this point.”

Even those who were able to divert goods found themselves facing a host of other problems, including added cost and time, as well as worries that quota for highly competitive categories will be filled by the time the wayward goods reach their destination.

Enrico Salvo, ceo of Los Angeles-based freight forwarder Carmichael International, said two ships carrying apparel for his clients unloaded in Ensenada, but “the cargo won’t be available very quickly. There is not the right equipment in Mexico.”

Savvy vendors should “get as much of an extension on deliveries as they can,” noted Cliff Katab, vice president of consolidator Gale Triangle, which works with more than 150 apparel importers. “It’s not as if the port will reopen and they’ll immediately be able to ship to their customers.” With demand set to surge once the ports reopen, Katab estimated it could take up to two weeks to establish the labor, trucks and equipment necessary to move goods to distribution centers. Plus, an imbalance of ships may wreak havoc with deliveries later this month.

“We’ve got too many ships on the West Coast, which will need to get back to the Far East. That’s not going to solve itself immediately,” Katab said.

As for cancellations, Katab said, “The word is that retailers who are in good shape will extend, and those whose business is not so good, anyway, won’t.”

Analysts have pointed to chains like Abercrombie & Fitch, Gap Inc. and Limited Brands, which rely on the West Coast ports, as being most likely impacted by a long dispute, while the nation’s biggest mass retailers have moved up seasonal merchandise deliveries to cover their selling floors in anticipation of the upcoming holiday shopping season. Still, more than half of the country’s apparel imports arrive through the West Coast docks, which handle approximately $300 billion in trade annually.

Laura Willson, vice president of Gardena, Calif.-based Spacegirlz, sounded grateful she’d caught a delivery of novelty moleskin in time to have it sent by air. The company has been able to offset some of the additional costs incurred by air shipments by splitting the tab with its overseas contractors.

“These are factories we use consistently, so we have some room to negotiate,” she said. “But this is very serious for us. We’re a small house. Every order counts.”

Meanwhile, there were also a lot of unanswered questions over how the U.S. Customs Service will process goods that are stranded in the ports.

Importers and retailers plan to continue pressuring Customs to issue a directive that would guarantee entry on products under quota that are stranded. Apparel and textile importers are concerned about how goods will be processed once ports reopen.

Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles and Apparel said she has been making the case to administration officials and hopes Customs will set up a special procedure to handle quota status merchandise.

Many apparel and textile categories are subject to quotas and are close to filling for the year, but there are no guarantees a container of garments on the docks since last Sunday will get processed before a container arriving the day ports are back in business.

“We are desperately hoping to get news from Customs on how they will handle quota status merchandise,” said Hughes. “We are saying we need to present our goods immediately because merchandise is still entering Gulf Coast ports and East Coast ports.”

Robin Lanier, executive director of the West Coast Waterfront Coalition, whose members include major retailers, said another big concern is the effect the port crisis will have on Asian economies.

Lanier, who has been lobbying in Washington on behalf of retailers and importers, claimed most major shippers are no longer taking bookings out of the Far East due to the shutdown.

“There is one school of thought that starting Tuesday or Wednesday, even if the ports reopen, factories in Asia will begin to shut down and then this will not be just an American economic issue,” said Lanier. “It will be a global issue.”

She also noted the business community is “incredulous” the Bush administration has not yet intervened.

“This has become Iraq versus the economy,” she said. “I can’t think of one American company that isn’t going to have to notify its shareholders there is a downside risk to the stock in the fourth quarter.”