Chris Butler is growing anxious as a longshoreman strike threatens to shut down ports on the East Coast and Gulf Coast starting this week.
Mr. Butler is CEO of the National Tree Company, which, like many companies, was in transit from Asia before the longshoreman attack scheduled to begin at 12:01 a.m. ET on Tuesday. They are expecting cargo that never arrives at the port.
The New Jersey-based company is an importer of artificial Christmas trees and other Christmas decorations. Even if the strike only lasts a few days, there may be time afterward to take down the trees, transport them to a warehouse, and prepare them to serve customers this season.
But if the strike closes the port until, say, November, about 150,000 trees could be missed in time for the peak shopping season, creating costs for National Tree and other businesses. In a worst-case scenario, these costs could rise across the industry, fueling inflation and weighing on the U.S. economy.
“It’s not an ideal situation by any means,” Butler said.
National Tree has already stockpiled or delivered most of the approximately 2 million artificial trees it sells each year. But if 150,000 trees get caught in the pipeline, revenue will be lost.
Other companies are facing similar predicaments, with goods potentially stranded at sea if the 45,000 members of the International Longshoremen’s Association follow through on their strike threat. It could close 36 ports from Maine to Texas, which handle about half of the goods entering and leaving the United States. (West Coast longshoremen belong to a separate union and are not participating in the strike.)
If the strike lasts longer, companies may be forced to pay delivery companies for delays, and goods may not arrive in time for the peak holiday shopping season. Biden administration officials met with port operators on Friday to discuss negotiations with unions ahead of Tuesday, according to a White House official who spoke on condition of anonymity to discuss ongoing meetings. He reportedly told them that.
Mr Butler said he was hoping for an agreement or government intervention to end the strike. But the American Maritime Alliance and longshoremen unions, which represent shippers and ports, have not met since June. And there are no plans for a meeting.
The union is demanding significant wage increases and a complete ban on automation of cranes, gates and moving containers for loading and unloading cargo.
The Toy Association, a major U.S. toy industry group, was one of about 200 groups that wrote to President Joe Biden this month asking him to work with both sides to reach an agreement. The National Grain and Feed Association also called on Biden to take action to avert a strike that would occur as harvest season begins.
Their pressure has put Biden and Democratic presidential nominee Vice President Kamala Harris in a delicate position. Both parties are appealing for the support of the union and do not want to be seen as pressuring longshore workers to reach a settlement. But if the strike continues, leading to shortages of consumer goods or high inflation, Harris could lose votes in November’s election.
Under the Taft-Hartley Act, Mr. Biden could seek a court order to end the strike with an 80-day cooling-off period. White House press secretary Robin Patterson said in a statement that the administration has never invoked the law and is not currently considering it.
Mr. Biden and Congress intervened two years ago to stop an impending freight rail strike and force workers to accept a deal amid concerns that the strike would damage the economy.
Alex Hertel Fernandez, an associate professor of international and public affairs at Columbia University who served as a Labor Department official during the Biden administration, said the administration will follow the strategy it used in last year’s negotiations between West Coast ports and local unions. He suggested that he was deaf. Negotiate without direct intervention.
Toy Association CEO Greg Ahern said the strike would come at a critical time for toy sellers and manufacturers. Up to 60% of annual sales occur from October to December. Some toy companies have shipped items faster, but the strike will make it difficult to replenish top-selling items, Ahern said.
He warned that a strike could cause toy prices to rise “based on scarcity and rising costs.”
At National Tree, Butler and his crew began preparing for the strike in July. They accelerated all shipments as best they could. But one major retail customer asked for trees early, he said. And until recently, factories in China and elsewhere were unable to produce the remaining orders for National Tree.
The ship loaded with wood is heading to New York, but is not expected to arrive until Tuesday. Butler said if the strike continues, most of the trees will be in storage until next year’s Christmas season.
The coastal strikes will deal a further blow to global supply chains already enduring disruptions from attacks on commercial shipping by Yemen’s Houthi rebels. Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation, said the attacks had largely cut off access to the Red Sea and Suez Canals. The attack has forced longer sailing times for ships that must detour around the Cape of Good Hope to reach ports on the East Coast and Gulf Coast.
Gold said the longshoremen’s strike could be even more damaging than the pandemic-induced port congestion in 2021 and 2022, when cargo was allowed to move, albeit slowly.
Eastern ports may remain stagnant. Gold noted that airlines have already announced surcharges on containers to deal with potential disruptions that could push up inflation.
Many retailers may find it difficult to charge customers extra to cover these expenses. Gold said the most vulnerable businesses will be small and medium-sized businesses that don’t import directly and lack the financial resources to bear the higher costs.
Shippers may transfer some cargo to West Coast ports. However, these ports were not able to absorb the additional cargo. For example, the Port of Los Angeles moved 960,000 containers in August, about 80% of its capacity, said Gene Seroka, the port’s executive director.
Union Pacific and BNSF, two major railroads in the West, have added capacity to their systems to handle more freight as import volumes increase. Eastern Railroad CSX and Norfolk Southern Railway say they can move cars and crews to handle more freight coming into Chicago from the West. But it’s unclear how much control the railways will have.
In any case, it would be too expensive to ship trees across the country by rail, Butler said.
Taylor Green, co-founder of Artificial Grass Solutions, a Los Angeles landscaping company that imports artificial turf, said he bought 25% more grass than usual to ensure he had enough for his customers’ projects. He also made arrangements with alternative suppliers in case the strike continues indefinitely. Green said if that happens, prices will likely need to be increased.
Still, artificial turf, like some major retailers and manufacturers, say they are better prepared for shortages than they were during the pandemic.
“We’ve learned to be proactive rather than reactive,” Green said.
