Merchants reroute in anticipation of ILA longshore union strike

Merchants reroute in anticipation of ILA longshore union strike

http://www.usatoday.com/money/business/story/2012/09/18/merchants-rerout...

by Hadley Malcolm, USA TODAY

Updated 5h 43m ago

• Susan Tusa, Detroit Free Press
  A potential strike could have an impact on the upcoming holiday shopping season.

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Susan Tusa, Detroit Free Press
A potential strike could have an impact on the upcoming holiday shopping season.

Must-have items for the holiday shopping season could be delayed coming to store shelves if the threat of a strike by the International Longshoremen's Association becomes a reality when the union's contract expires Sept. 30.

Some merchants have already acted on backup plans in anticipation of negotiations between the ILA and managing group United States Maritime Alliance failing to produce an agreement, says Jon Gold, vice president of supply chain and customs policy for the National Retail Federation. A strike would hit retailers during peak holiday shipping season.

"Simply the threat of a strike has already caused shipping to slow due to equipment and space shortages," says Ed Desmond, spokesman for the Toy Industry Association, which represents more than 550 toy manufacturers and importers.

The contract under negotiation covers 15,000 to 20,000 workers from Maine to Texas who load and unload cargo from shipping containers, says Jim McNamara, ILA spokesman. The maritime alliance represents 24 East and Gulf coast oceanline carriers that employ the longshoremen. West Coast ports aren't affected.

When talks between ILA and the alliance broke down last month, the possibility of a strike prompted several retailers to start bringing products in early, move cargo through West Coast ports and use air freight instead of ocean freight, Gold says.

"They have deadlines and need to make sure they have goods on store shelves," he says of retailers preparing for holiday shopping and sales that start as early as October. But the contingency plans "all come at significant costs," he says.

A strike may look less likely with negotiations between the two groups expected to resume Wednesday with the help of a federal mediator, but that doesn't make up for a price tag Gold estimates at up to $500,000 per retailer for acting on alternate plans.

While Gold and Desmond declined to name specific retailers, Dollar General and Phillips-Van Heusen, which manufactures Tommy Hilfiger and Calvin Klein products, have both announced plans to reroute goods through West Coast ports should a strike happen. But those ports are already seeing high volume due to holiday shipping.

"It puts enormous pressure on the West Coast, and it delays shipment of product to some of the largest markets," says Kevin Burke, CEO of American Apparel and Footwear Association. Rerouting carriers adds an additional cost when merchants then have to transport products from the West Coast back to the East Coast.

Consumers would be affected, too, if union members stopped working, "either by a lack of availability of the products they want, a higher purchase price for those products, or both," Desmond says.

ILA President Harold Daggett said last month the union would prepare to strike after the maritime alliance proposed getting rid of the eight-hour workday guarantee, which guarantees pay when workers are called in but cargo is delayed or doesn't show up, and eliminating overtime pay at an Aug. 22 meeting. Longshoremen affected by the contract make $21 to $32 an hour, McNamara says.

But the union may now reconsider. "Negotiations are back on and that's a big plus," McNamara says. "Nobody wants a strike."