For the first time in 12 years, the White House has been asked to intervene in a labor-management dispute that threatens to cripple every West Coast seaport from Seattle to San Diego.
A coalition of more than 100 industry associations sent a letter yesterday to President Obama urging the federal government to step into contract negotiations between the International Longshore and Warehouse Union (ILWU), which represents dockworkers at 29 U.S. West Coast ports, and the Pacific Maritime Association, which represents employers such as ocean carriers and terminal operators. Even a five-day port shutdown would cost the U.S. economy approximately $2 billion a day, the groups said in the letter. They urged the president to encourage both parties to begin working with a federal mediator, and to exercise his authority to intervene under the Taft-Hartley Act should there be a strike or lockout.
The last such labor action at West Coast ports, a 10-day lock-out in October 2002, cost the economy an estimated $1 billion a day. That crisis was considered more serious for holiday deliveries because it occurred earlier in the cycle than the current situation.
ILWU members have been working without a contract since July 1 while negotiations continued. Through the summer and most of fall, it had been business at usual at the ports. But last week trouble emerged at the ports of Seattle and Tacoma, when the union refused to dispatch skilled labor such as yard crane operators, and slowed down the pace of other operations. Productivity, measured in container moves per hour, dropped by about half at both ports; cargo backlogs ballooned, and Tacoma sent longshore gangs home yesterday morning, said Sue Coffey, a Port of Tacoma representative attending the Nov. 6 Coalition of New England Companies for Trade (CONECT) Northeast Cargo Conference in Foxboro, Mass.
The ILWU yesterday took similar actions at Los Angeles and Long Beach, which together handle some 40 percent of the nation's containerized imports. Philip Sanfield, a spokesman at the Port of Los Angeles, said port congestion has remained essentially the same at the San Pedro port complex, the country's busiest. As of mid-day Friday, there were 12 vessels sitting at anchor at the Ports of Los Angeles and adjacent Long Beach, according to Sanfield.
At yesterday's CONECT conference, speaker Michael DiBernardo, director of business development at the Port of Los Angeles, did say that in addition to the union's failure to dispatch the necessary number of skilled workers, dockworkers there have been slowing their pace by "working to rule." He cited examples such as driving below speed limits and conducting more thorough and time-consuming chassis inspections than the contract specified—"since they don't have a contract, they say they don't have to follow those provisions," he said. DiBernardo told attendees that the labor problems "are not going to be fixed today or next week." When pressed by an audience member for something more specific, he responded, "We are hoping to see something by Thanksgiving."
There's no mystery about the timing of the ILWU's alleged slowdowns, according to some observers. CONECT's Washington counsel, Peter Friedmann, who also leads the Agriculture Ocean Transportation Coalition, noted that the Los Angeles/Long Beach development occurred almost immediately after the mid-term elections. The union is taking advantage of the opportunity to worsen the already huge backlog at those ports, caused by a surge of import cargo and a shortage of drayage drivers and container chassis, that has been building for months, he said.
"The problems in the Pacific Northwest are due solely to ILWU's negotiating tactics. Southern California's problems are due to a combination of ILWU's actions and too much cargo," he said.
Friedmann said in a subsequent phone call that it's hard to predict whether Obama, now a lame duck whose party took a drubbing in the mid-term elections, will use the Taft-Hartley Act to intervene in the dispute. "You have to be willing to take on people ... I don't know that he has an appetite to take on labor," he said. If the president does do anything, Friedmann suggested, it could be something informal, such as bringing both sides together to talk.
THE BEST-LAID PLANS ...
There has been some concern about the potential impact of the labor slowdown on the holiday shopping season, a major driver of U.S. economic activity. But National Retail Federation Vice President, Supply Chain and Customs Policy Jonathan Gold said in an e-mail to DC Velocity that most holiday merchandise is already in retailers' hands. The slowdown is affecting normal replenishment deliveries and deliveries of early spring merchandise, Gold said.
"The industry started deploying their contingency plans earlier this year, even before the negotiations began. ... This was especially true when we saw the heavy congestion at the Canadian ports, which impacted rail service," Gold said. Retailers are looking at all options to ensure they get their cargo and merchandise to the store shelves, Gold said, adding that "congestion issues aren't limited to LA/Long Beach, as a lot of other ports are also facing issues."
That fact is making it harder for importers to carry out alternative plans in either the U.S. or Canada. At the CONECT conference, a logistics manager for a mid-size importer with a warehouse near Seattle and another in Illinois said she tried bringing Chicago-bound containers through the Port of Prince Rupert in British Columbia, but chassis shortages and intermodal service backlogs there had made that alternative untenable. To mitigate risk, she split cargo between Pacific Northwest and Southern California ports. With Seattle, Tacoma, Los Angeles, and Long Beach jammed, her company currently has 48 inbound containers either en route to or currently held up in those ports, she said.
Because her company's biggest customers, Wal-Mart Stores, Inc. and Target Corp., assess hefty fines for late deliveries, the logistics manager said she's considering airfreighting critical orders. Another audience member, who works for a major international freight forwarder, said that demand for trans-Pacific air cargo services had suddenly jumped within the last few weeks and that much of that additional demand was coming from importers that usually bring in merchandise via ocean. Inbound airfreight rates on suddenly busier routes are climbing, making the airfreight alternative even more costly than usual, he said.
The Port of Oakland is one of the few West Coast ports that says it has no congestion issues and can accommodate diverted vessels. However, that advantage may disappear if the ILWU decides to take action there, too.