Those of us who’ve been around retail for a while remember the shutdown that brought West Coast port operations to a halt in the fall of 2002.
A dispute between the Pacific Maritime Association and the International Longshore and Warehouse Union continued well past the expiration of dockworkers’ contract that summer and ended with a lockout that began in late September. By the time then-President Bush invoked the Taft-Hartley Act to order the ports reopened, the docks had been idled for 10 full days during the peak of the shipping cycle for retailers’ crucial holiday season. The impact was felt by all industries that rely on the ports to move their products in or out of the United States.
Much like a rush-hour accident that leaves traffic tied up long after the wreck is gone, the shutdown left an estimated 250 ships sitting at the docks or waiting at anchor to be unloaded. It took months to work through the backlog, and retailers were panicked that cargo couldn’t be unloaded in time for the holidays. NRF’s most often-quoted sound bite was “There are a lot of toys on those docks that need to be under a tree by Christmas.”
Nobody wants to see that happen again. And that’s why NRF has been urging both labor and management to settle on a new contract before the current agreement expires June 30.
“Contract negotiations come at a critical time,” we warned in a letter last month. “A failure to reach agreement could seriously harm the U.S. economy.”
Negotiators sat down in San Francisco on Monday, and have promised to meet daily until an agreement is reached. However, most observers expect the contract to expire before a deal can be struck, which will hopefully happen before the end of July.
We’re sincerely hope there won’t be any issues, and that the parties can come to an amicable agreement even if it is after the June 30 deadline as long as there are no disruptions. But the sooner labor and management can agree on a new contract, the better it is for everyone who relies on the ports. We don’t want to see another situation like 2013 and 2013, when the industry had to deal with the constant threat of a strike at East Coast and Gulf Coast ports as labor and management went through contentious negotiations.
Nonetheless, retailers aren’t waiting to see what happens. Many are already preparing contingency plans to bring merchandise into the country early, divert shipments to ports on the East Coast or even in Mexico or Canada, and take whatever other steps might be necessary. Unfortunately, those moves cost money – sending cargo to another port can result in extra maritime costs and adds rail or trucking costs to get it where it belongs. Even storing merchandise that comes in early costs money because of increased warehouse costs. In addition, at least a dozen shipping companies have filed plans with the Federal Maritime Commission for congestion surcharges, saying they want to charge extra if their ships get stuck waiting to be unloaded.
One of the contingency moves that appears to already be happening is that retailers are bringing merchandise into the country earlier than ever this year. For many years, October was the peak of the shipping season, with the bulk of holiday merchandise hitting the docks just weeks before Christmas. After 2002, the peak began coming earlier, shifting into September and eventually even August as retailers began moving up shipping dates to protect themselves against any port problems. This year, NRF’s monthly Global Port Tracker report shows that ports will handle just under 1.5 million cargo containers in July, the same number expected for August and the earliest in the year that we’ve ever seen numbers that high.
The Port Tracker report, which is produced for NRF by consulting firm Hackett Associates, is itself an outcome of the 2002 shutdown. We began tracking port traffic in order to help retailers anticipate port issues and plan around them. Port Tracker expects imports to be up 5 percent over last year by the time the ILWU contract expires, and more than two-thirds of the cargo comes through West Coast ports, including the bulk of cargo from Asia.
Like 2002 and every year, a lot of toys and other products will be coming across those docks this summer and fall that need to be under a tree by Christmas. This year, let’s make sure they’re safely in retailers’ distribution centers — not still sitting on a ship – long before they’re needed.
Jonathan Gold is VP for supply chain and customs policy at the National Retail Federation in Washington, D.C.