WASHINGTON — Lawmakers on Capitol Hill voiced growing concern Tuesday about the West Coast ports dispute that has stymied the flow of commerce from Asia and impacted businesses across the country.
Senators and executives testifying at a Congressional hearing outlined the immediate impact of the slowdowns, as well as the dire consequences of a potential shutdown of the ports, as companies anxiously wait out the tense contract negotiations between the Pacific Maritime Association and International Longshore and Warehouse Union.
Sen. Deb Fischer (R., Neb.), chair of the Senate Commerce Committee’s subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety and Security, said she has heard from concerned constituents that can’t get their goods in or out of West Coast ports due to the congestion and uncertainty stemming from the impasse.
“Just last week, my office heard from an Omaha-based company that manufactures electric conductors with inputs from Asia,” Fisher said. “This company is seeing its import timeframe double and costs triple because of current slowdowns. For many businesses, changing shipping routes or modes is cost prohibitive. Unfortunately, whether they export agricultural goods or import retail, businesses are being forced to opt for air fright or are re-routing products to avoid losing market share due to missed shipments. Port congestion also impacts truckers and freight rail, as well as the competitiveness of the ports themselves. Everyone has a stake in seeing the ongoing negotiations between PMA and ILWU resolved quickly.”
Fischer cited a study by the National Retail Federation and National Association of Manufacturers that put the cost of a 20-day West Coast ports shutdown at $2.5 billion a day to the U.S. economy and a reduction in U.S. gross domestic product of almost $50 billion.
She said West Coast ports move 12.5 percent of U.S. GDP a year and a 20-day closure could disrupt 405,000 jobs.
Fischer called on the Obama administration to “pay close attention to the ongoing negotiations and the economic impact of service disruptions” at the ports, particularly in light of the potential of East and West Coast ports to be simultaneously negotiating contracts in 2018, the year when the current East Coast labor contract expires.
In written testimony submitted to the subcommittee, Kelly Kolb, vice president of government affairs for the Retail Industry Leaders Association, outlined the impact of the West Coast ports dispute and also called for Congress to address broader underlying factors and infrastructure challenges.
“Eight months of disruptions and increased congestion have stretched the ability of retailers to effectively manage inventory nationwide,” Kolb said. “A possible lockout or strike for even a short time could be disastrous and impact the entire economy. RILA has advocated for an agreement and remains hopeful that the parties will agree to a new contract before things go bad from worse.”
Sen. Steve Daines (R., Mont.), who said he worked for Procter & Gamble for 12 years on the supply chain side, said the dispute on the West Coast is having a “great impact” on the trust companies have built with their customers.
“When we lose the ability to deliver, our customers will look elsewhere to find the same products,” he said. “In fact, I got a haunting e-mail from the president of an outdoor products company that manufactures in Montana [and exports abroad]. They are the only producer of some of these products that still produce in the United States. The rest are all producing in China. So the president of the company e-mailed me about his concerns over what is going on as we speak today about the West Coast port slowdowns.”
Daines said the executive told him he will have no choice but to reduce his hiring plans and lay off employees if “something doesn’t happen soon” in the dispute.
Executives from Cargill Inc. and BNSF Railway Co. told the committee that the impact has already been felt.
“Far and away the most disruptive aspect to the supply chain over the last several months has been the reduction in port productivity as a result of the ongoing negotiations between the PMA and ILWU,” said Katie Farmer, group vice president of consumer products for BNSF Railway. “Port productivity has declined by as much as 50 percent over the period. The result is year–over-year disruptions in BNSF eastbound weekly train counts of as much as 20 to 30 trains per week carrying a minimum of 250 containers that are not being processed throughout the supply chain.”
Farmer said the delays have also impacted the return of freight for export from the East Coast to the West Coast.
“During the 11-day shutdown of port operations that occurred in 2002, freight permanently migrated away from the West Coast,” she said. “This is certainly a potential long-term consequence from the current situation.”
Norman Bessac, vice president of international sales at Cargill, told the panel that the company has 15 containers of chilled pork products en route to Japan out of West Coast ports that his customers are asking to guarantee will arrive with a useful shelf life.
“For me, that is about $1 million that I have to decide whether to put into the port system that will either face slowdowns or a potential closure, which would be a complete loss,” Bessac said. “I hope that gives you some perspective.”