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Retail Anxiety Over Possible Rail Strike Grows

A looming rail strike could pose new challenges to inventories and inflation, the National Retail Federation (NRF) warned Wednesday. 

Businesses across industries and logistics are preparing for the possibility of a rail work stoppage Friday as unions and employers continue negotiations. 

“Freight rail is critical to the retail supply chain, and retailers of every size rely on it to move cargo every day,” NRF president and CEO Matthew Shay said Wednesday. “Retailers are deeply concerned about the situation and the impact that a disruption would have on business operations throughout the country.” 

“Smooth and stable operations on the rails is crucial as we enter the busy holiday season,” Shay added. 

Nate Herman, senior vice president of policy at the American Apparel & Footwear Association, said 25 percent of the country’s apparel and footwear gets moved by rail

A disruption, mixed with pre-existing headwinds related to labor and equipment shortages, would mean “our industry will feel it, consumers will feel it and the economy will feel it,” Herman said. 

Both trade groups have sent letters to lawmakers urging Congressional intervention. 

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The labor contract negotiations, which have been ongoing for more than two years now, involve the railroads, represented by the National Carriers’ Conference Committee (NCCC), and 12 unions. 

So far nine of those unions have publicly confirmed they reached tentative carrier agreements, which now go before members for ratification. As of late Wednesday, two of those unions, representing 11,000 workers, have ratified agreements, while one union, representing 4,900 workers, rejected the contract and authorized a strike. 

The leadership of two other labor groups have yet to agree to tentative deals, with the sticking point being workplace attendance policies

Labor Secretary Marty Walsh met with both sides on Wednesday in an effort to avoid a rail shutdown. 

White House press secretary Karine Jean-Pierre told reporters Wednesday a shutdown is “an unacceptable outcome” and that “all parties must work to avoid just that.” 

Senators Richard Burr (R-N.C.) and Roger Wicker (R-Miss.) introduced a resolution this week aimed at stopping a strike by forcing the two sides to agree to contracts that adopt the recommendations of President Biden’s Presidential Emergency Board (PEB). The PEB was established in July to avert an earlier possibility of a strike and help workers and employers reach agreements.  

The Burr-Wicker joint resolution was blocked Wednesday by Senator Bernie Sanders (I-Vt.). 

The White House appears focused on having the two sides reach an agreement without lawmaker intervention, with Jean-Pierre saying “this is an issue that can and should be worked out between the rail companies and the unions, not by Congress.” 

Railroads preparing for the event of a strike began halting this week of shipments of hazardous materials and temperature-controlled items in some cases. Meanwhile, long-distance trips via Amtrak are cancelled as of Thursday.

“In the event of a work stoppage, Union Pacific will immediately activate plans to safely cease all train operations,” the railroad told customers Wednesday of its contingency plans. “If the work stoppage continues beyond 24 hours, we will issue embargoes for all rail traffic. When the strike ends, we will lift embargoes or issue permits to enable our network to safely resume operations as quickly as possible.” 

The American Association of Railroads estimated a strike would come at a cost of at least $2 billion a day. 

Any disruption would hamper an already congested transportation system and is expected to have far-reaching ramifications across the supply chain, from the ports and container yards to trucking and off-site warehouses. 

Analysts at Goldman Sachs said in a note to clients Wednesday any stoppage, even if only a day long, would impact supply chains and could drive up prices. The firm estimated a nationwide rail shutdown lasting a week would come at a cost of roughly $1.8 billion in lost revenue for the railroads.  

Supply chain data firm Everstream Analytics pointed to Oakland, New York, Tacoma and Savannah as ports at the greatest risk of seeing disruption based on their current yard capacity levels.

Everstream added Savannah faces the greatest risk, “with even only a few strike days likely leading to overwhelmed container yards and waiting times of 10-plus days for vessels to berth, as empty space is running out.”