West Coast Port Slow Down To Cost Retailers $7B

The slow down at the Port of Long Beach wears on.

After failing to be the Grinch that stole Christmas, the labor dispute that will not end is now putting Spring 2015 merchandise collections at risk for retailers nationwide.  Estimates suggest that the dispute could cost retailers north of $3 Billion dollars in lost sales as a result of inventory not making it to its intended destination.

Negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association – which represents Port employers- have ground to halt in the last few days, despite the fact that the two opposing parties have managed to reach an agreement on chassis maintenance and health care.  The sticking point seems to be premium wages for weekend and holiday shifts, and with accusations that the union is intentionally slowing down their work to force their position in the negotiation.

And activity at the Port is certainly slow, yesterday was the sixth day out of ten that employers at the Ports along the West Coast refused to unload ships.  Truckers that normally haul five containers a day out of the Port are averaging less than one, China Ocean Shipping (Group) Co. said it will skip at least one Port and Maersk Line has canceled some sailings. One West Coast customs broker told The Wall Street Journal that her customers are being assessed as much as $300 a day for containers that are sitting at the Port waiting to be unloaded, despite the fact that her customers would like more than anything else to remove said containers and are being forcibly prevented from doing so.

Small business owners, that traditionally keep lower inventory supplies, have been hardest hit by the slowdown, but its effects on retail are slowly creeping up the chain.

“We’re in trouble right now with some of our customers,” said Softline President Jason Carr. “It’s a major headache.”

Softline Home Fashion is a major importer of fabric for curtains and other home decorations.  Currently it has about $800,000 of goods waiting to be unloaded for retailers including Wal-Mart Stores Inc., J.C. Penney Co. and Bed Bath & Beyond.

Auto-makers, such as Honda, are also feeling the slowdown and have officially complained that it is hurting their bottom line and causing parts shortages.  The company reported earlier this week that plants in Ohio, Indiana and Canada are facing disrupted production throughout the next week.

“At this time, we do not have a sufficient supply of several critical parts to keep the production lines running smoothly and efficiently,” said Honda. “These parts include a small number of critical parts, such as electronics, and some larger assemblies such as transmissions.”

And, as the difficulties between Port owners and workers spreads out into its ninth consecutive month (the dockworkers’ contract expired in July of 2014) the effects of the showdown continue to ripple outward through manufacturing, retail, and agriculture.

Facing mounting pressure from the U.S. Chamber of Commerce and agricultural lobbies, President Obama has decided to step into the fray at the Port.  Labor Secretary Thomas Perez will meet with the parties and “urge them to resolve their dispute quickly at the bargaining table,” according to a statement released by the White House.  Perez hopes to mediate a settlement.

Direct federal intervention in contract negotiations in unusual, but then so is the situation.  The Ports in question handle just under half of the imports coming into the U.S. each year.  Collectively, retailers, the Chamber of Commerce and agricultural exporters claim to have already lost hundreds of millions of dollars because of mounting Port congestion.

The White House statement said the President was acting “out of concern for the economic consequences of further delay” and added, “Secretary Perez is already in contact with the parties and will keep the President fully updated.”