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  February 11th, 2015 | Written by

Port Labor Negotiations Creating Long-Term Negative Effects

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The imposing threat of a shutdown of U.S. West Coast ports has led to a surge in import volumes at ports along the Gulf and East Coast ports, which can now claim the largest share of the 10.1-percent growth in inbound container volume forecasted this month over the same time last year.

Mark Hirzel, president of the Los Angeles Customs Brokers & Freight Forwarders Association, says that in the long term, shippers, “may shift imports to other ports and that West Coast ports will handle fewer imports and exports in coming years, consistent with the fall from handling 60 percent of U.S. container volume in 2002 to under 44 percent in 2014.” Hirzel made his comments during a recent podcast panel discussion produced by the National Association of Manufacturers (NAM).

During the discussion, Peter Freidman, executive director of the Agriculture Transportation Coalition, commented that “the agriculture industry is not only taking multi-million dollar losses every day that goes by, but will likely lose many overseas customers permanently to other countries that can supply potatoes, hay, corn, beef, lumber and other commodities more reliably because ports in those countries are far more efficient as well as mechanized, and less subject to union labor slowdowns or strikes.”

Addressing the impact of the situation on seasonal shipping trends, Jason Brewer, vice president of Communications & Advocacy for the Retail Industry Leaders Association, stated that, “The volume of containers that peaks in the fall also peaks again in the spring, and the current situation, even if a contract was signed today, won’t be cleared out by the time those ships are making port with imports for spring sales at the major retailers his association represents.” Spring, he said, “is the second holiday season for many retailers that will be adversely affected, with one retailer in particular being unable to access one-half of their Valentine’s Day goods hung up at the ports.”

Jonathan Gold, vice president for Supply Chain and Customs Policy for the National Retail federation (NRF), says that while many retailers have contingency strategies in place, “even the advanced lead times were not enough in some cases because the unions implemented a work slowdown in the fall and the resultant losses are going to hit the corporate bottom line. … This isn’t just a retail issue but it impacts every segment of the economy and ripples outward on a global scale.”

Although a recent study conducted by the NAM and the NRF indicated that a port strike could create as much as $2 billion per day in losses, the panelists agreed that damages may already be approaching that daily amount because of the ripple effects the container congestion has already caused in the transpacific supply chain.