Port of Los Angeles

As the Holidays Approach, Ships are kept at Bay

As the Oregonian reported recently, labor issues on the West Coast are “threatening the on-time delivery of some holiday goods.”

The Pacific Maritime Association (PMA) is charging that union workers are staging an intentional slowdown as the holidays approach in order to gain leverage. Members of the International Longshore and Warehouse Union (ILWU) contend that poor working conditions and a lack of trucks to pull containers off the ports are contributing to the slowdown, but it’s clear that the dockworkers are frustrated with contract negotiations over their contract which expired in July.

There are 29 ports between Seattle and San Diego, and as containers build up on the docks, boats are beginning to backlog. Currently there are 10 ships anchored off the coast of Los Angeles waiting for dock space.

How will the slowdown impact commerce?

Last year, almost $900 billion in goods were brought into the U.S. via the West Coast ports. While a work slowdown at almost any time of the year has an impact on the economy at large, slow-downs or stoppages this close to Black Friday, the kickoff of the retail holiday season, could make or break some retailers.

The Los Angeles Times reports that fear over a strike or lockout looms as the fight between the union and the PMA escalates and becomes more public. In fact, the National Retail Federation (NRF) has written a letter to President Obama urging the installation of a federal mediator to avoid work disruptions.

The NRF in association with the National Association of Manufacturers (NAM) issued a report in June that warned of a $2 billion a day cost to the U.S. economy if the ports were shut down. A shutdown could reduce U.S. GDP by $1.9 billion a day during a five-day stoppage, reports Global Trade magazine. A 20-day stoppage could result in a loss of $2.5 billion a day.

Will this impact your business?

If you have goods sitting on a ship that’s anchored off the cost of California, you can very well expect a delay in delivery – and vice versa if your goods are on their way out of West Coast ports. What can you do? Communicate with customers in your supply chain who might be waiting for delivery, and then communicate with your representatives in Washington, D.C., to urge action on behalf of the federal government.

If work stoppages do occur, check with your insurance provider to see if you are covered for supply chain disruption or if you have any kind of coverage that might lessen the burden of your losses from a strike.

Work stoppages and slowdowns happen. The last prolonged shutdown in the U.S. was in 2002, but depending on what kind of business you own, work stoppages elsewhere might be just as harmful to you.

Talk with your insurance provider about what kind of coverage is available. If you feel the coverage offered in the market is inadequate for your needs, consider forming an enterprise risk captive that can help you bridge this very real risk in the future. Call us if we can help you.