Uncertain Labor Situation Forces Cargo Elsewhere
By DAVID GREENBERG
Staff Reporter
With only a week remaining before a strike deadline set by workers at West Coast ports, a few importers are permanently rerouting portions of their Asian cargo to less tumultuous East Coast and Gulf ports.
Tired of labor unrest, inefficient operations and massive traffic congestion at local ports, other importers said that they, too, would consider permanently redirecting some of their cargo eastward if the West Coast facilities are saddled too long with a strike.
Hopes for a settlement between the Pacific Maritime Association, which represents ship companies, and the International Longshoremen and Warehouse Union, appeared to be fading late last week. The two sides met for only 30 minutes the week of June 10 after not meeting the entire week of June 3, sources said. Local ports have not had a strike since 1971.
Negotiators on both sides have had a self-imposed media blackout since the talks began May 13.
“The ports on the West Coast have gotten a reputation for being unreliable,” said Robin Lanier, executive director of the West Coast Waterfront Coalition, a Washington D.C.-based trade group that represents retailers and other importers. “Every three years you have these labor negotiations that now have a history of becoming contentious. The uncertainty is just a big pain in the neck.”
She said five of the 50 large importers she represents have permanently rerouted some of their Asian goods to East Coast ports. She would not reveal the names of the companies for fear that West Coast laborers would retaliate by refusing to unload their cargo that still comes into West Coast ports.
Although the long-term financial impact is unknown, no one believes that the strategies of a handful of importers will severely impact western ports, particularly locally where the value of container traffic is still expected to double over the next decade from the current annual total of $200 billion. But industry sources said that diverting cargo is a strategy seriously being considered by many importers.
Threat seen
“(Traffic diversion) is not something new,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. “But when you have serious strike talks (importers) are stepping up their efforts. We really don’t know the magnitude of the potential diversion but it is a real threat.”
New York-New Jersey; Charleston, S.C.; Savannah, Ga.; Norfolk, Va., and Miami rank as the major East Coast ports while Houston and to some degree New Orleans handle the bulk of the Gulf Coast cargo.
With the Panama Canal too narrow and shallow to handle today’s ships carrying 6,000 TEUs (20-foot equivalent units) from Asia, importers bringing Asian goods to the East and Gulf must use the Suez Canal in Egypt.
This route doubles the three-week timeline it takes to transport goods from Asia to the West Coast. But some manufacturers and retailers believe the extra time is a preferred alternative if it guarantees fewer labor tensions.
All labor at the East Coast and Gulf Coast ports belong to the International Longshoremen Association, but each port has a separate bargaining agreement lessening the chance of several ports being shut down at the same time.
Maritime officials and importers believe this system makes for a more user-friendly system than the West Coast ports, which collectively operate under one contract with the International Longshoremen and Warehouse Union.
“There’s more of a willingness to cooperate to get business at each port,” said Lanier. “There’s more competition between the ports. The terminal operators will bend over backwards to provide services to the customer. If you’re an importer that already has East (or Gulf) Coast facilities distribution centers, factories or stores than those routes look more attractive.”
Officials at El Segundo-based Big 5 Sporting Goods Corp. have contingency plans to divert cargo to East Coast ports if a strike occurs this summer. But they would consider sending a portion of their cargo eastward as a future strategy.
“If the ILWU and the PMA are always in a state of turmoil, it’s going to put shippers at risk,” said Emsley Lopez, director of transportation for Big 5, which operates 270 stores in 11 western states. “We need to get the product to our customers. For us to do that, we need ports who are going to ensure a steady flow of commerce.”
Asked whether importers were actually changing their transportation strategies ILWU spokesman Steve Stallone said, “I have no way of knowing whether it’s true or not.”
Action downplayed
Meanwhile, local port officials downplayed the impact of the loss of business, adding that some of the importers who claim they’ve made permanent changes will eventually return to the West Coast.
“I’m sure some of the cargo will be diverted but I doubt we’ll even notice it because of the growth we’re experiencing this year, last year and the year before,” said Al Fierstine, director of business development for the Port of L.A.
The major stumbling block for a new three-year agreement centers on implementation of computerized work assignment and container traffic systems.
PMA officials claim the technology will make the ports run more efficiently, but the union claims it will eliminate jobs for the next generation of dock workers. (The PMA promised that all existing permanent workers would be able to keep their jobs until retirement.)
The trade group raised the bar this year, however, when it announced that it would stage a port lockout if union members staged a “work slowdown” which decreases productivity by 20 to 50 percent per port during talks.
PMA officials accused the union of using the tactic during the 1999 and 1996 talks charges the union has denied.
