Mark Szakonyi, February 9, 2015, JOC.com
As negotiations between the International Longshore and Warehouse Union and waterfront employers drag on, the impact of U.S. West Coast port congestion is rippling far beyond just U.S. supply chains and hampering shippers from Canada to Japan.
But despite the delays, affected countries — including Mexico, Japan and China — haven’t yet publicly put pressure on the Obama administration to help resolve the standoff between the ILWU and Pacific Maritime Association. Aside from the Japanese government in December expressing concern to the U.S. government regarding delays of U.S. forage exports, there have been scarce signs of foreign ministries working diplomatic back channels.
“I would be surprised if it wasn’t happening,” said Jon Gold, vice president of supply chain at the National Retail Federation. He said, however, he wasn’t privy to any of those diplomatic discussions.
Foreign frustration with U.S. port congestion could surface, though, as the pain from delays deepens and becomes a more glaring line item on major company balance sheets. The Obama administration, at least in public, has taken a hands-off approach to the months of gridlock. The Federal Mediation and Conciliation Service is involved, but that came about at the request of the two negotiating parties, not the White House. The White House didn’t respond to a JOC.com request for comment.
While the impact of delays on Japanese manufacturers, and agriculture shippers has received much media attention — from Honda and Fuji Heavy Lift having to ship parts by air and McDonald’s not getting enough spuds for Tokyo fast-food customers — the the effects of delays is also being felt closer to home.
Canadian Tire, Canada’s largest container importer, is seeing delays on average of five days, but sometimes imports can be as tardy as six weeks, Neil McKenna, vice president of transportation for Canadian Tire Retail, told JOC.com last week. Other Canadian importers are receiving shipments two to three later than usual as vessels arrive late at western Canadian ports after having been caught up in congestion to the south, said Ruth Snowden, executive director of the Canadian International Freight Forwarders Association. Those same delayed vessels often leave port early, resulting in some Canadian exporters missing export windows.
Similarly, Mexican importers moving goods through Los Angeles-Long Beach are also experiencing delays.
Meanwhile, port congestion is become a higher-profile issue on Wall Street because of increasing company complaints of delays during earnings calls. Leapfrog Enterprises, for example, told investors on Feb. 6 that delays of its educational toy tablets “compounded the decline in consumer demand,” while Spectrum Brands Holdings went further by putting a price tag on the cost of delays to its consumer products in its first fiscal quarter: $20 million. Interestingly, closeout retailer Tuesday Morning has actually been able to capitalize on the port congestion.
“We actually like dislocation in supply chain because usually that means retailers aren’t taking product. They’ve missed their shipping window, and vendors are stuck with it,” Jeffrey Boyer, chief financial officer, said Jan. 29 during the company’s second fiscal quarter earnings call, according to a Seeking Alpha transcription.
Though the U.S. Congress has been mainly silent on West Coast port congestion — largely because there is little they can do but pressure both sides to stay at the table and work out a deal — a Senate hearing scheduled for Tuesday will likely raise the issue’s profile on the Hill.
The Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety and Security will address “the U.S. supply chain, particularly the importance of efficiently functioning ports,” according to the Senate website. Executives from major agricultural shipper Cargill and BNSF Railway are scheduled as hearing witnesses.