Cargo Shipments at Risk as Strike Looms at U.S. Ports

4798Shipments of clothing, auto parts and frozen food risk being gridlocked at U.S. ports from Maine to Texas as about 15,000 dock workers prepare to strike.

Container ships stand at Port Jersey in Bayonne, New Jersey. Photographer: Peter Foley/Bloomberg
The International Longshoremen's Association is vowing to walk out if a deal isn't reached before the Dec. 29 expiration of its contract with the U.S. Maritime Alliance, whose members include container-carrier companies. Talks broke down this week after nine months of negotiations.

A strike would be the first at East Coast and Gulf Coast ports since 1977. The fallout may be greatest for the New York and New Jersey area, still reeling from superstorm Sandy, and on automakers such as Bayerische Motoren Werke AG (BMW) with factories in the U.S. Southeast that might struggle to get parts, according to consultant Martin Associates.

"It's going to be expensive and painful," said Ed Sands, a logistics specialist at procurement management firm Procurian. "If you consider the East Coast labor picture, Maine to Texas, and the amount of the economy that is tied to the flow of goods in and out of U.S. ports in that geographic range, there's an enormous amount of potential impact for the U.S. economy."

Union workers wouldn't move containerized cargo, including frozen foods, household goods and clothing, ILA President Harold J. Daggett told members in a Dec. 19 letter. Military cargo, mail, bulk items, finished autos and perishable items with a "limited shelf life" would still be handled, he wrote.

'Huge Effect'
Even with the exemptions, a shutdown would have "a huge effect" on the economy, particularly if it lasts beyond mid- to late January, according to K.C. Conway, executive managing director at consultant Colliers International.

"You pile it on at the time that if these guys can't do something in Washington with the fiscal cliff, it's a compounding unknown that I think definitely puts us into recession," Conway said in a telephone interview from Atlanta. The so-called fiscal cliff refers to more than $600 billion in automatic tax increases and spending cuts set for next month.

The union and employers deadlocked in bargaining that has already required one extension and a federal mediator's intervention. The dispute centers on so-called container royalty fees, or levies on cargo that supplement wages. Employers seek to cap the payouts that the workers say are "untouchable."

While the union hasn't changed its stance, ILA's executive officers met yesterday and reached out to the lawyers for the USMX and the federal mediator expressing willingness to resume talks, Jim McNamara, a spokesman, said by phone. The ILA hasn't yet received a response from the USMX and no meetings are currently scheduled, he said, boosting the risk of a walkout.

Source: Bloomberg | Brooke Sutherland
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