Shippers plan for possible East Coast dock strike
Larry Thomas -- Furniture Today, September 4, 2012
HIGH POINT — Furniture retailers and manufacturers began preparing for supply chain disruptions last week after contract talks between East Coast port operators and unionized dockworkers suddenly collapsed.
The negotiations breakdown, which was ongoing as of this morning, means a strike by dockworkers at 14 U.S. ports is a distinct possibility once the current contract expires on Sept. 30. However, the three- to four-week transit time for goods shipped from the Pacific Rim means importers must decide almost immediately if they need to redirect their containers to West Coast ports.
"The situation seems to have just blown up," said Robert Buford, logistics manager for Home Meridian. "Our hope is that they will find a way to resolve things quickly."
Buford and other logistics executives said containers leaving Asia within the next two weeks may have to be redirected to West Coast ports, whose dockworkers belong to a different union and aren't covered by the same contract as those on the East Coast and Gulf Coast.
Containers landing on the West Coast would have to be moved by rail if their final destination is in the eastern United States, a process that can add $1,500 to $2,500 to the cost of every container.
"Then, there's the possibility that West Coast ports will become gridlocked," said Scott Prillaman, director of transportation and logistics at Hooker Furniture. "We're continuing to follow this real closely."
Prillaman said his company has been planning for a possible work stoppage since spring by slowly building up its inventory. He said Hooker has no current plans to redirect containers to West Coast ports because of the high costs of rail transport, but might have to reevaluate that stance if a strike were to last more than a couple of weeks.
"Even a work stoppage of one or two days can cause weeks of disruption," he said.
Barry Bailey, director of transportation at Bernhardt Furniture, agreed, noting that furniture logistics executives are in a classic "no-win" situation.
"You have a choice between more transit time, if there is a work stoppage, or more transportation costs, if you use the West Coast," Bailey said. "And if the West Coast ports become congested, you could face more transit time and higher costs."
If a strike occurs, Bailey and other executives said there's a good chance the Obama administration would order longshoremen back to work under provisions of the Taft-Hartley Act, which gives the president the authority to end strikes and lockouts by declaring a national emergency.
President George W. Bush invoked Taft-Hartley in 2002 to end a lockout of West Coast dockworkers.
Until mid-August, a strike by East Coast and Gulf Coast dockworkers seemed unlikely as talks between the United States Maritime Alliance and the International Longshoreman's Assn. appeared to be going smoothly. During the spring and summer, the two groups issued several joint statements touting the progress they were making and noted they had successfully negotiated contracts without a work stoppage since 1977.
The two sides met again on Aug. 22 for what was supposed to be three days of talks, but the negotiations suddenly collapsed early on the first day, with each side blaming the other for being uncompromising.
The Maritime Alliance, which goes by the acronym USMX, claims the union is unwilling to get rid of antiquated work rules that make the ports uncompetitive, while the union says the wage proposal made by USMX, which is made up of port operators and shipping companies, is inadequate.
About 14,500 workers at 14 ports are covered by the expiring contract. The USMX says ILA members receive an average of $124,138 a year in wages and benefits, and pay no premiums and minimal deductibles and co-payments for health insurance.
As of late last week, no new talks were scheduled, and the National Retail Federation sent both sides a letter urging them to return to the bargaining table.
"We are facing a critical time," said Matthew Shay, the federation's president and CEO. "Now that there is a real risk of disruption, most retailers using East Coast and Gulf Coast ports will be forced to execute contingency plans within the next week to meet in-store holiday deadlines."
"We understand and recognize that there are tough issues that need to be resolved," Shay added. "The issue will only be resolved, however, by agreeing to stay at the negotiating table until a final deal is reached. Failure to reach agreement will lead to supply chain disruptions which could seriously harm the U.S. economy."
The two sides are hoping to agree on a new six-year contract.
Ports that would be affected by a work stoppage are Boston, New York/New Jersey, Delaware River, Baltimore, Norfolk, Va., Wilmington, N.C., Charleston, S.C., Savannah, Ga., Jacksonville, Miami and Tampa, Fla., Mobile, Ala., New Orleans and Houston.
The largest of those facilities in the Port of New York/New Jersey, which employs 3,327 unionized longshoremen.
West Coast dockworkers are represented by the International Longshore and Warehouse Union, whose contract doesn't expire until 2014.
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