U.S. Retailers Brace for Potential Pain from Longshore Strike

As a dock workers' strike threatens to close ports on the East and Gulf coasts starting this week, Chris Butler is growing increasingly concerned.

Butler is CEO of the National Tree Company, and like many companies, he's counting on shipments coming from Asia that won't reach their ports before an expected longshoremen's strike starting at 12:01 a.m. Eastern. Tuesday.

The company, based in New Jersey, is an importer of artificial Christmas trees and other Christmas decorations. If a strike lasted only a few days, it might be time to unload the trees, transport them to warehouses and prepare them for customers this season.

Yet if a strike were to keep ports closed until, say, November, about 150,000 trees might not arrive in time for the peak shopping season, imposing costs on National Tree and other businesses. In the worst case, these costs, multiplied depending on the sector, could fuel inflation and put pressure on the American economy.

It's definitely not an ideal situation, Butler said.

National Tree has already stocked or delivered most of the approximately 2 million artificial trees it sells each year. But it would lose revenue if 150,000 trees got stuck in the pipeline.

Other companies face the same situation, with goods potentially stuck at sea if the 45,000 members of the International Longshoremen's Association follow through on their strike threat. They could close 36 ports from Maine to Texas, which handle about half of the goods shipped to and from the United States. (West Coast dockworkers belong to a different union and are not participating in the strike.)

A prolonged strike would force companies to pay shippers for delays, and goods could arrive too late for the peak of the holiday shopping season. Senior Biden administration officials met with port operators on Friday and told them they would have to negotiate with the union before Tuesday, according to a White House official who insisted on anonymity to discuss a meeting in progress.

Butler says he's hoping for an agreement or government intervention to end a strike. But the American Maritime Alliance, which represents shippers and ports, and the longshore union have not met since June. And no discussions are planned before their contact expires Monday evening.

ILA unity remains strong and growing, James McNamara, a spokesman for the International Longshoremen's Association, said Sunday. He said the union would inform the public of any new developments by 11 a.m. Monday.

The union is demanding significantly higher wages and a complete ban on the automation of cranes, gates and mobile containers when loading and unloading goods.

The Toy Association, the nation's leading toy trade group, was among about 200 organizations that asked President Joe Biden in a letter this month to work with both sides to reach an agreement. The National Grain and Feed Association also urged Biden to take steps to avoid a strike, which would come just as the harvest season begins.

Their efforts have put Biden and Vice President Kamala Harris, the Democratic presidential nominee, in a sensitive position: Both have sought support from unions and do not want to be seen as pressuring longshoremen to reach a settlement. . Still, if a prolonged strike were to cause a shortage of consumer goods or fuel high inflation, it could cost Harris votes in the November election.

Under the Taft-Hartley Act, Biden could seek a court order to suspend the strike for an 80-day cooling-off period. Robyn Patterson, a White House spokeswoman, said in a statement that the administration has never invoked the law and has no plans to consider it at this time.

Biden and Congress intervened two years ago to block a looming freight railroad strike and force those workers to accept a deal because of widespread fears that a railroad strike would have hurt the economy.

Alex Hertel-Fernandez, an associate professor of international and public affairs at Columbia University who served in charge of the Labor Department under Biden, suggested the administration would follow the playbook it used during negotiations last year last between the west coast ports and the union: Mediate negotiations without directly intervening.

Greg Ahearn, CEO of the Toy Association, said a strike would take place at a critical time for toy sellers and manufacturers: up to 60% of annual sales take place between October and December. Although some toy companies shipped goods early, Ahearn said a strike would make it difficult to restock top-selling items.

A strike, he warned, could drive up toy prices due to scarcity and increased costs.

At National Tree, Butler and his team began preparing for a strike in July. They sped up shipments for everything they could. But a major retail customer, he said, requested trees early on. And until recently, factories in China and elsewhere couldn't produce the remainder of National Trees' orders.

Ships containing the trees are en route to New York but will not arrive there until Tuesday. A prolonged strike, Butler said, would force most trees into storage until the next Christmas season.

A longshoremen's strike would further disrupt a global supply chain that has already suffered slowdowns due to attacks by Yemen's Houthi rebels on commercial shipping. These attacks have virtually prevented use of the Red Sea and Suez Canal, said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. The attacks are forcing longer transit times for ships that must round the Cape of Good Hope to reach ports on the East Coast and Gulf Coast.

A dockworkers' strike, Gold said, could prove even more damaging than pandemic-induced port congestion in 2021 and 2022, when goods were allowed to move, albeit slowly.

Eastern ports could be left idle. Gold noted that carriers are already announcing container surcharges to deal with possible disruptions, a trend that could increase inflation.

Many retailers may struggle to charge their customers more to offset these expenses. According to Gold, the most vulnerable would be small businesses that do not import directly and lack the financial resources to bear higher costs.

Shippers could reroute some goods to West Coast ports. But these ports were unable to absorb the additional freight. The Port of Los Angeles, for example, moved 960,000 containers in August, or about 80% of its capacity, said Gene Seroka, its executive director.

The major Western railroads, Union Pacific and BNSF, have increased the capacity of their systems to handle more freight as imports have increased. Eastern railroads CSX and Norfolk Southern say they can move rail cars and crews to handle more goods arriving in Chicago from the West. But it’s unclear how much more the railroads can do.

Either way, Butler said, it would be too expensive for him to ship trees across the country by rail.

Taylor Green, co-founder of landscaping company Artificial Grass Solutions in Los Angeles, which imports artificial grass, said he purchased 25 percent more grass than usual to ensure that there would be enough for his clients' projects. It also made arrangements with other suppliers in case the strike continued indefinitely. If that's the case, Green said, price increases would likely be necessary.

Still, like some large retailers and manufacturers, Artificial Grass says it is better prepared for shortages than it was during the pandemic.

We learned to be proactive rather than reactive, Green said.

____

Associated Press writers Anne DInnocenzio, Mae Anderson and Cathy Bussewitz in New York, Josh Boak in Washington and Josh Funk in Omaha, Nebraska, contributed to this report.

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