US East, Gulf Coasts Brace For First Dockworkers' Strike In 35 Years, Longshoremen Job Action May Halt Nearly All Ship-borne Cargo

Prospects that ports from Massachusetts to Texas will be shut down Sunday by a dockworkers' strike -- something that has not happened in 35 years – rose this week after efforts by federal mediators to broker a deal appeared to die.

On Dec. 18 talks that had been going on since last spring between the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX), which represents port operators and shipping companies, broke down.

Shortly thereafter ILA delegates voted to authorize their president, Harold J. Daggett, to call a strike beginning Sunday, Dec. 30, if bargaining does not produce a new contract by the time the current contract expires on Saturday, Dec. 29.

Last week federal mediators asked the union and the shippers to extend their contract for a month to allow time for further talks, but it was not clear as of Thursday whether both parties would agree to an extension.

A strike by some 14,500 dockworkers would devastate numerous businesses and industries. It would halt cargo shipments on the East and Gulf coasts, though shipments of vegetables and fruit, mail, non-containerized cargo and military equipment would be exempted, as would tourist ship activity.

"Unless something miraculous happens, I think we're looking at a strike," Kevin M. Burke, president of the American Apparel and Footwear Association, which represents an industry that imports $72 billion in shoes, dresses and other goods each year through the East Coast and Gulf Coast ports, told the New York Times.

"Our companies are preparing for the worst, but hoping for the best."

Ports at risk of a shutdown include Boston, New York-New Jersey, Baltimore, Charleston, S.C., Savannah, Ga., Miami and Houston.

The Port Authority of New York and New Jersey estimated the weekly cost to the region of a seven-day strike by the area's 4,000 dockworkers would be $140 million in personal income and $113 million in economic output. Last year facilities under the oversight of the Port Authority of New York and New Jersey handled cargo valued at $208 billion. Port authority facilities comprise the largest on the East Coast and are the second largest to handle manufactured goods from China.

Any supply chain disruption at the ports would immediately affect every importer and exporter -- potentially disrupting or delaying spring and summer retail merchandise -- that uses the facilities.

"The Port Authority continues to closely monitor negotiations between the ILA and the United States Maritime Alliance," spokesman Steven Coleman said Thursday in a statement. "The Port of New York and New Jersey is a major engine of economic growth, generating 280,000 jobs and more than $48 billion in revenue to the region. Any disruption to port activity will negatively affect tens of thousands of local jobs as well as both the regional and the national economies. We urge the parties to resolve their differences as soon as possible."

Business groups and state officials warn a longshoremen's strike could cost billions, citing estimates that a 10-day port lockout in 2002 cost $1 billion a day -- and caused a major backlog in shipments.

"The last thing the nation needs right now is a strike that would shut down the East Coast and Gulf Coast ports,” Jonathan Gold, the National Retail Federation’s vice president for supply chain policy, said in a statement. "This will have a huge ripple effect throughout the economy.”

The key sticking point is container royalties, which are payments to union workers based on cargo weight. The payments aim to compensate workers whose work becomes unnecessary because shippers use containers. Port operators and shipping companies want to cap the royalties at last year's levels to stay competitive. They believe the royalties have become a huge expense unrelated to their original purpose and amount to a bonus averaging $15,500 a year for East Coast workers already earning more than $50 an hour. The ILA says the payments are an important supplemental wage, not a bonus.

"USMX seems intent on gutting a provision of our master contract that ILA members fought and sacrificed for years to achieve," ILA President Harold J. Daggett said in a statement. "We have repeatedly asked them to leave this item alone -- it was a hard-won gain by ILA members and a wage supplement achieved through hard-fought negotiations."

According to the USMX: "Container royalties were first established in 1960 as a way to protect ILA members in New York from job losses created by containerization. Today, thousands of ILA workers who were not alive in 1960 continue to receive container-royalty payments that in 2011 totaled $211 million -- an average of $15,500 for ILA workers at the 14 East and Gulf Coast ports." The employers' group added it is not attempting to cut the container royalties in their entirety but trying to limit the payments.

The strike would come on the heels of a separate labor action that temporarily shut down ports on the West Coast. Earlier this month, striking harbor clerks reached a tentative deal with management at the ports of Los Angeles and Long Beach after an eight-day labor clash.

The strike cost Southern California an estimated $8 billion, including lost wages and the value of cargo rerouted to other ports.

Because of the major role played by the container-shipping industry in U.S. supply chains, government lobbyists and officials both have asked President Barack Obama to employ his authority under the Taft-Hartley Act to order a so-called cooling-off period of 80 days should the current dispute escalate to the point where either a lockout by management or a strike by labor appears imminent.

Matthew Shay, CEO and president of the National Retail Federation, presented his request for Obama's intervention in a letter, saying, "We call upon you to use all means necessary, including Taft-Hartley, to keep the two sides at the negotiating table and head off a coastwide strike."

Shay said that the "recently resolved [eight]-day strike at the Ports of Los Angeles and Long Beach has impacted importers, exporters and other transportation industries that depend on the ports. While the full impact of this disruption is still being calculated, one only needs to look at the 10-day lockout in 2002 that shut down all of the West Coast ports to see what kind of impact a coastwide strike could have. According to economists, the 2002 lockout led to lingering supply-chain disruptions and cost the U.S. economy $1 billion for each day of the lockout."

Florida Gov. Rick Scott also presented his request for Obama's intervention in a letter, with Reuters quoting him as saying, "The threat to national safety and security that would result from mass closure of ports cannot be overstated."

Scott pointed out: "The Taft-Hartley Act provides your administration with tools that can help avoid this threat. On behalf of the State of Florida, I respectfully request that you invoke the act when the contract ... expires at the end of the month."

Historically, Democratic presidents have been less likely and Republican presidents have been more likely to invoke their Taft-Hartley Act power to order a cooling-off period.

"To throw that kind of a strike on top of the economy right away in January, I’m sure is something the administration would rather not see," Mike Asensio, a labor lawyer at Baker Hostetler LLP in Columbus, Ohio, said in a telephone interview with Bloomberg News. "Now, would it create that much of a nightmare for him that they would be willing to do something that would anger part of their constituency in organized labor? That’s the $64,000 question."