Stalled Port Talks Lead to Lockouts

The stalled negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have blossomed into worker lockouts. The development comes after union slowdowns were reported in the California ports of Long Beach and Oakland in late September.

On Sept. 29, the PMA made the decision to lock out the workers after failing to resolve a contract extension with the ILWU. PMA representatives were hoping that an extension would ward off any work interruptions, including slowdowns or an actual strike.

Both parties began meeting on Sept. 30 with the assistance of the Federal Mediation & Conciliation Service (FMCS), but by the following day, the ILWU had walked out, complaining that PMA armed guards were present in the hallway.

FMCS director Peter J. Hurtgen expressed hope that the meetings would continue until a resolution is reached.

“I am pleased that the parties agreed to meet,” said Hurtgen. “I remain hopeful that these negotiations can move forward. We all want to see the ports opened and functioning normally again.”

Estimates of the economic impact of a port shutdown lasting five days are as high as $4.7 billion. For a shutdown of 10 days, the estimates rise as high as $19.4 billion.

In an already struggling economy, President Bush could invoke the Taft-Hartley Act, which would prevent workers from walking off the job for two weeks—giving both sides more time to negotiate and come to some resolution.

The National Retail Federation, which represents some of the nation’s largest retailers, is urging the president to take action to reopen the ports.

Apparel industry executives, like many importers, are watching the developments closely because of the potential negative impact of continued port closures.

“This is the wrong time for this—the economy is down and the stock market is in trouble,” said Ron Mata, vice president of Access Basic Blue Jeans, a new Hong Kong-based denim resource that recently opened a corporate showroom in the California Market Center.

Mata continued: “A lot of the major retailers are going to be hit hard if nothing happens in the next 10 days. What’s at the harbor right now—piling up—is all Christmas merchandise. The merchandise that is on the ships filters to all the chain stores, the rest of the retailers, the suppliers, truck drivers— everybody. It’s like a domino effect.”

Mata said that some manufacturers will be able to mitigate immediate damage by asking their customers for extensions.

“I have an order coming in to fill orders already placed by major chain stores. If we can’t get it unloaded, we have to get an extension, and then we can reroute the merchandise. They want the merchandise, so we’ll work it out,” he said.

Mata explained that if the West Coast ports remain closed for too long, he has plans to reroute his merchandise, including using East Cost harbors.

“We can even land in the free-trade zone in Panama and truck it in through Mexico,” he said. “We can even fly the goods in.”

Linda Butler, a spokesperson for Levi Strauss & Co, said that the San Franciscobased denim manufacturer created a backup shipping plan earlier this year and implemented it in June.

“We had planned for it after monitoring the situation for months and decided to execute that plan in June,” said Butler. “We began diverting our shipments that originated in Asia to East Coast ports instead of the West. We decided to do that early to ensure that we wouldn’t be put at risk on critical deliveries for the Fall and Holiday seasons.”

Mata also said that his company is in good shape to weather negative port actions because of the quantity of merchandise the company stocks locally.

“Every month we bring in four to five 40- foot containers,” he said. “We don’t pre-sell merchandise. If we like it, we cut it, produce it and bring it in. We are in beautiful shape right now because we have stock.”

Robert Krieger, president of Norman Krieger, a customs brokerage firm and international freight forwarder, said that some of his clients have expressed concerns that orders may be canceled, and while he previously had been advising them to have as much inventory on hand as possible, in July one client followed another plan in anticipation of negative port action.

“Their planning was that there would be a strike, and they had some deadlines, so they shipped through the port of Vancouver and trucked the goods down to Southern California,” said Krieger. “They met their deadline for delivery to the customer.”

Krieger said that the rerouting cost the client a week in time loss and an additional cost of $10,000. Based on the additional cost and potential loss of time, Krieger is now advising his clients to sit tight and, if necessary, ask their customers for extensions.

“I’m advising them not to look at other alternatives by sea, but instead to look at small air shipments to meet emergency needs,” he said. “If you utilize some of these [alternate sea] solutions and things settle, you may add weeks to your supply chain and thousands of dollars to your cost. You can’t change your mind once goods are loaded on that vessel— whether you are using the Panama Canal, the Suez Canal or Vancouver.”

Krieger said that he is optimistic that a settlement will be reached soon. —Darryl James