LOS ANGELES — The battle at the West Coast ports might be ready to boil over.
Fashion importers are bracing for major disruptions in their spring orders as negotiations for a labor contract covering 20,000 dockworkers continue to crawl along and a backlog of cargo accumulates at the harbors.
Talk of gridlock — or an outright shutdown — is growing, piling on the worries for retailers that have already suffered through shipping headaches during the holiday season. As painful as the slowdown’s been, many still remember the agony of the ports’ 10-day lockout in 2002, which was estimated to have cost the U.S. economy close to $1 billion a day.
A federal mediator entered the discussions last month, but the International Longshore and Warehouse Union and Pacific Maritime Association remain at odds.
The PMA, which includes 72 multinational cargo carriers and terminal-operating companies, said it presented a five-year “all-in” contract that would increase base pay by 14 percent, maintain fully paid health benefits and oversee maintenance and repair of truck chassis. While a spokesman for the PMA conceded that the two sides were “still far apart on several issues,” the association views its offer as an opening to resume normal operations at the ports, where it estimated productivity has decreased by as much as 60 percent.
In a teleconference with media on Wednesday, the PMA said the last thing it wanted to do after nine months of negotiations was close the ports. But the association also warned that the backlog of goods would cause a virtual gridlock in just two weeks.
“The terminals cannot withstand anymore,” said PMA president Jim McKenna in a video also posted on Wednesday. “These actions undermine the credibility of West Coast ports in an environment that is going to become more competitive with the expansion of the Panama Canal and the increase in trade to the East Coast through the Suez Canal.”
Having resumed negotiations on Thursday morning, the union criticized the PMA for threatening to shut down the ports. It said it was “extremely close” to reaching an agreement to replace the six-year contract that expired in July.
“We’ve dropped almost all of our remaining issues to help get this settled, and the few issues that remain can be easily resolved,” said ILWU president Robert McEllrath.
Such words did little to reassure importers.
“We are worried there will either be a lockout or a strike,” said Julia Hughes, president of the U.S. Fashion Industry Association. “It is all coming to a head.”
Hughes said the impact of the impasse in the talks between management and the union has led to major delays at the ports.
“We are continuing to hear from our members about the impact of incredible delays on the West Coast,” Hughes said. “Folks are saying their goods are being delayed weeks.…People are concerned because the issue seems to have proven intractable [even with the involvement of a federal mediator] and you need product in the stores when you need it. This is a crisis.”
Kelly Kolb, vice president of government affairs for The Retail Industry Leaders Association, said, “A West Coast port shutdown would be an economic disaster. A shutdown would not only impact the hundreds of thousands of jobs working directly in America’s transportation supply chain, but the reality is the entire economy would be impacted as exports sit on docks and imports sit in the harbor waiting for manufacturers to build products and retailers to stock shelves. The slowdown is already making life difficult, but a shutdown could derail the economy completely.”
U.S. stores that rely on goods from overseas are running out of places to turn.
“We have been hearing that Vancouver still has some capacity, but that capacity is dwindling,” said Nate Herman, vice president of international trade at the American Apparel & Footwear Association. “Prince Rupert, which is a small port, has maxed out and there have been issues at the New York-New Jersey ports for the past few weeks, including weather and capacity.”
To skirt some of the problems at the West Coast ports, apparel companies have rerouted their shipments and turned to air-freight services.
“We did have to air freight more product during the [fiscal third] quarter,” said Christopher Peterson, executive vice president and chief financial and administrative officer at Ralph Lauren Corp., on a conference call with Wall Street on Wednesday. “We also wound up routing a lot of product via all water-routing. So we shifted around the U.S. and received it in the East Coast ports….And what that did…was that allowed us to avoid some of the issues in the West Coast port situation.”
Terry J. Lundgren, Macy’s Inc.’s chairman and chief executive officer, said, “There’s definitely been a slowdown, but we anticipated the situation with our private brands,” so deliveries were accelerated ahead of time.
While not directly involved with the negotiations, the 29 ports affected by the contract negotiations have joined the chorus of companies urging the PMA and ILWU to resolve their differences and clear the backlog of cargo.
“Business has already moved to other ports due to the congestion,” said Jon Slangerup, ceo of the Port of Long Beach. “It’s critical that we stop the hemorrhaging. This region simply can’t afford to lose jobs because of cargo heading elsewhere.”
With the bulk of apparel and textile imports coming from Asia, companies have said the Panama Canal expansion, set for completion by the middle of this year and open for business by 2016, would speed the flow of goods to East Coast ports and offer alternatives to most goods being shipped to the West Coast, notably the ports of Los Angeles and Long Beach.
Expansion of the Panama Canal has seen Atlantic Ocean and Gulf Coast ports preparing for more traffic and larger ships that have become commonplace in ocean freight. The Port Authority of New York and New Jersey is in the midst of a $4 billion project to ensure that the port is ready to handle projected future volumes and the increasingly larger vessels.