It’s too late for some retailers depending on shipments through West Coast ports. If they have no contingency plans for a potential strike or slowdown tied to International Longshore and Warehouse Union negotiations, they sit with fingers crossed.
The contract between West Coast dockworkers and their employers, the Pacific Maritime Association, expires at midnight June 30, and so far there is little news on how those talks are progressing.
Negotiations between the two entities have never been free of some sort of disruption, and in 2002 the talks ended in a 10-day port lockout and significant work slowdowns.
Trade groups, particularly retailers, have pressed the ILWU and PMA for an early conclusion to the negotiations, before the current contract expires on June 30, but that is unlikely. Still, PMA President Jim McKenna throughout the spring said an agreement would be reached by mid-July.
A sports apparel retailer told the JOC that accelerating shipments ahead of possible West Coast disruptions was never possible because of sourcing issues.
The retailer said they asked their suppliers ― which mostly operate in Central America and Asia ― to accelerate shipments ahead of the expiration of the ILWU’s labor contract, but were told they couldn’t be slotted into factories’ schedules without at least six months’ notice, and in some cases even longer.
“They couldn’t fit us in,” a source from the retailer said. “We had already placed purchase orders as early as November and December. The suppliers’ objective is to keep their lines running all the time ― they don’t care if we’re dealing with a strike. They want to minimize changeovers to drive efficiency within their factories.”
Furthermore, because apparel can change with the season, orders can’t be placed too far in advance.
Less than one-third of shippers surveyed by investment research firm Wolfe Research last week have accelerated shipments through U.S. West Coast ports and built up additional inventory ahead of potential work stoppages or slowdowns. Nevertheless, the beneficial cargo owners that did accelerate shipments were enough to cause a bump in containerized imports in May through west coast ports in both the U.S. and Canada.
The other option for shippers in the event of a West Coast labor disruption was to create contingency plans to divert shipments to other ports in the U.S., Canada or Mexico. Although a JOC survey in May suggested that two-thirds of those replying were planning to divert at least some cargo away from U.S. West Coast ports to avoid the potential looming labor disruption, the sports apparel retailer that talked to the JOC said that option simply wasn’t logical for them.
The retailer, which is a subset of a larger, well-known brand, was told by its corporate headquarters that if it was going to change its routes, it had to start doing it as early as January or February. Furthermore, all three of the container lines used by the retailer ― Maersk Line, Hanjin Shipping and NYK Line ― told them they must establish and implement their new trade route months in advance in order to accurately manage their capacities.
“To set up a whole different supply chain, and the expense of all that, seems ridiculous,” the spokesperson said. “You’re better off sticking with your normal routings than setting something up ad hoc.”
A plan to divert cargo months in advance would also mean longer transit times for an extended period of time, the spokesperson said.
But even if planning and implementing diversions didn’t cost any extra time and money, the ports available to accept diverted cargo are not attractive options, the spokesperson said. When considering contingencies plans, the possibility of diverting to the U.S. East Coast was taken off the table immediately, following the “terrible” experiences related to congestion from the weather this past winter, the spokesperson said.
“The East Coast is already so congested. They’re not equipped, and rates are higher on the East Coast anyway. We don’t want to divert there,” the spokesperson said. “But where do we go that’s logical?”
Traveling farther down the Eastern Seaboard would extend transit times too much, and Canadian ports don’t have the capacity, the spokesperson said. Not to mention, the company’s third-party logistics provider might not even have offices at South Atlantic or Canadian ports in order to set up the deals, which would require a new contract with a different forwarder. In addition, moving to new ports temporarily would likely cause even more delays from Customs, the spokesperson said.