The lack of progress in contract negotiations between a powerful union of West Coast port workers and representatives of shipping line owners and terminal operators is of growing concern to importers across all industries in the United States over substantial disruption to the supply chain.
On Wednesday, June 8, the American Apparel & Footwear Association (AAFA), the Retail Industry Leaders Association (RILA), and the Travel Goods Association jointly sent a letter to President Joe Biden urging his administration to get involved in contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) to ensure that “the needs of workers and ports are met and that further safeguards, delays and inflationary costs are avoided”.
The groups fear work slowdowns or stoppages at 29 critical West Coast ports could occur if talks become more contentious and drag on beyond the current July 1 contract expiry date.
“We urge you to encourage both parties to stay at the table until an agreement is finalized, as even a relatively brief port slowdown or closure would exacerbate current supply chain challenges and cause damage. to consumer and business confidence in America,” the letter to the Biden administration read.
Stoppages or slowdowns, particularly at the ports of Los Angeles and Long Beach, through which approximately 40% of imported cargo containers pass, could cause cargo to back up at the ports and ships to remain anchored in the water, unable to deliver goods. Such consequences can impede the ability of importers, including those in the promotional products industry, to replenish inventory, leading to product shortages and higher prices.
“There is less than a month left before the contract expires and if both parties do not remain at the table and the ongoing negotiations do not make meaningful progress towards an agreement, the consequences will exacerbate the chain’s existing challenges. of supply”, the letter from AAFA and others read. “It will be to the detriment of the American economy, American importers and exporters, the tens of millions of workers they employ and the hundreds of millions of consumers they serve.”
Talks over West Coast port worker contracts, which could have a significant impact on global supply chains in the #promoproducts industry and beyond if they go wrong, have been temporarily suspended. When will they resume? https://t.co/z52nDAR0fc @ASI_MBell @Tim_Andrews_ASI
— Chris Ruvo (@ChrisR_ASI) May 25, 2022
The groups sent the letter after insufficient progress in the negotiations caused talks to be suspended for 10 days. Negotiations resumed on June 1, but the parties reportedly remained at odds on key issues, such as automation. PMA wants to improve the use of automation at ports to speed up efficiency, but unionized workers see at least some of this technology push as a threat to jobs.
Top promotional products executives said slowdowns or shutdowns at West Coast ports would affect the industry.
“Any significant slowdown or shutdown would have a very significant impact on our ability to import product and maintain inventory,” said Jeremy Lott, CEO of Issaquah, WA-based SanMar (asi/84863), the largest supplier of promo and member of Counselor’s. Power 50 list of the most influential people in the industry.
“While we use ports on the West Coast, Gulf and East Coast,” Lott continued, “West Coast ports are extremely important to trans-Pacific trade and would have a significant impact on our business and the industry. in general.”
In their letter, AAFA, RILA and TGA called on the Biden administration, PMA and ILWU to use contract negotiations as a chance to improve the country’s port/import operations.
“We also hope that the administration, the PMA, and the ILWU will leverage this opportunity to address systemic operational challenges at U.S. ports, supporting infrastructure modernization and enabling transparency, data sharing, and transparency. interoperability to facilitate end-to-end visibility”, the letter. said. “These significant issues must be addressed to strengthen America’s competitiveness, to ensure our supply chains are fully prepared to support continued economic growth, and to mitigate potential disruptions in the future.”
A survey shows widespread concern that an impending surge in import demand could cause freight rates to skyrocket, trigger delivery delays and cause major backups at ports. https://t.co/iC3Ol3TVw0 #promoproducts
— Chris Ruvo (@ChrisR_ASI) May 19, 2022
As of this writing, the Biden administration has not responded to the letter. Earlier this spring, U.S. Labor Secretary Marty Walsh said the administration aims to observe negotiations and only get involved “if we have to,” saying it’s essential to prevent further port disruptions.
The COVID-19 pandemic has upended global supply lines – a mess that has included significant backups of goods and vessels at domestic and overseas ports, including major hubs in China. Although the situation at inland ports has improved lately, there are fears that the challenges could intensify again over the summer as US companies increase their imports to stock up on back-to-school products and the holiday shopping season. Port slowdowns/shutdowns would exacerbate the challenges that may be encountered.
Some analysts and procurement experts believe supply chain issues are here to stay until the effects of the pandemic wear off. A recent analysis from Citi, a multinational investment bank and financial services company based in New York, says as much.
“Ultimately, we find that supply chain pressures have proven to be more persistent and seemingly deeply entrenched than we anticipated just months ago,” the economist-led strategists wrote. Citi Research’s global chief, Nathan Sheets, in a note. “And the Russian-Ukrainian conflict seems to further amplify tensions. Given these realities, any hope for short-term improvement in supply chain conditions has been dashed. The challenges in the months ahead appear to be as acute as at any time in the past two years.