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Retailers Gear Up for West Coast Port Contract Negotiations

The contract between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) expires on July 1, 2014 and is causing uncertainty among retailers who import goods from West Coast ports.

Come July, the destination and delivery dates of one million tons of cargo will be in jeopardy for each day that a new contract isn’t signed. It takes up to two weeks to recover from West Coast ports being closed for just a single day. With 68 percent of all containerized shipments to the U.S. coming through these ports, any suspension of the system is cause for worry.

Nonstop, face-to-face contract negotiations between PMA and ILWU are scheduled to begin May 12. Wade Gates, a PMA spokesman, conceded that a primary point of contention is over healthcare and the $150 million so-called “Cadillac tax,” which will be implemented in 2018. ILWU employees are accustomed to paying nothing for their health insurance, and just a mere dollar per prescription, however, this infrastructure may be subject to change because neither party is eager to take full responsibility for the new tax. Other deliberations are expected to cover jurisdictional disputes and the dockworkers’ pension plans.

PMA President James McKenna expects an agreement to be reached in mid to late July, but is not fearful of any strikes or lockouts during the contractual respite. It’s commonplace for negotiations to continue past deadlines; the delay is used as a leveraging strategy to force settlements. McKenna anticipates smooth negotiations, largely because the more difficult topics such as technology and automation issues (both involving potential job loss at the waterfront) were widely resolved during the 2002 and 2008 negotiations.

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Despite McKenna’s confidence, the Retail Industry Leaders Association (RILA) remains on edge and encourages the signing of a new contract as soon as possible. In a letter dated May 1, RILA president Sandra Kennedy reminded the PMA and ILWU presidents that the American economy lost nearly one billion dollars a day while waiting for an agreement on the 2002 contract. She cautioned that, “Failure to secure a deal by the June 30 deadline would be particularly undesirable to the retail community as it jeopardizes the movement of goods destined for shelves during the all-important back-to-school and upcoming holiday seasons.” She added, “Securing an agreement to prevent strikes and work stoppages is of paramount importance to the retail industry.”

Logistic experts are also erring on the side of caution, suggesting that retailers import their goods before the current contract expires. With only four weeks remaining until June 30, that window is quickly closing.

At this point, Raphael Javaheri of Ecotex, a fabric and private label garment importer based in Los Angeles, told the Sourcing Journal that the only options left are to either ship goods to the ports closest to their delivery destination, or to air them in. The latter, he says is a very costly investment but worth considering in order to maintain positive customer relations. “For us,” he said, “it will be combination of airing lighter weight goods and diverting the heavier weight goods, as we can’t accept any delays.”