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June01, 2015

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86 THE JOURNAL OF COMMERCE JUNE 1.2015 TRADING PLACES TOP 100 IMPORTERS AND EXPORTERS Peter Tirschwell SEARCHING FOR A SAFE HARBOR WITH NO CLEAR path to prevent a recur rence of t he cr ippling, nearly yearlong disruption visited upon West Coast ports and, as of this writing, no final ratification of a new contract by West Coast dockworkers, shippers are exer- cising their right of free choice and walking away. Many in the industry still doubt shippers will permanently divert large quantities of cargo from the West Coast, and that may prove true. The Wa ll Street Journal recently reported that Costco plans no diversions from the West Coast, for example. But it's been three months since the Feb. 20 settlement between West Coast dockworkers and management, and the numbers so far tell a different story: In April, container volumes at East Coast ports grew at a 12 percent clip and those at Gulf Coast ports grew at 20 percent, while West Coast port totals dropped 4 percent, accord - ing to PIERS, a sister product of within IHS Maritime & Trade. Savannah alone grew 26 per- cent during the month, while Los Angeles and Long Beach were up a combined 1 percent, according to port-reported numbers. Savannah is so busy that it "strongly encour- ages all motor carriers to take advantage of the Memorial Day gate operating hours." Shippers can be forgiven for doubting the long-term stability of the West Coast. Despite rallying cries of "never again" from various industry leaders — most recently Pacific Maritime Association Presi- dent James McKenna, who told that the current system is "not sustainable" — no clear road- map to preventing another round of wholly artificial and unneces- sary disruption has emerged since the negotiations ended. If Republica ns capt ure t he Wh ite House wh ile reta in ing control of Congress, there may be a shot at what some view as one option, placing West Coast dock- workers under the Railway Labor Act through leg islation, which would potentially make it easier to combat disruption. But according to Peter Fried- mann, director of the Agriculture Transportation Coalition and a Washington insider on transpor- tation matters, Democrats would fight tooth and nail to prevent it. "Any amendment to the Railway Labor Act, whether it's regarding longshoremen or anyone else," he said, "is such an incendiary topic in the labor movement and with the labor movement's supporters on Capitol Hill, that I think it would be very difficult to take that battle forward and to actually achieve any change whatsoever." Others have arrived at essen- tially the same conclusion. "While some have pointed to the Railway Labor Act as one potential solu- tion, at this point in time, it is more an attempt to galvanize attention rather than a feasible legislative option," said Stephen Schatz, a spokesman for the National Retail Federation. The group, he added, will continue to work "to ensure that a protracted port labor contract dispute is never repeated again." To the extent there has been any policy reaction to the labor standoff, it was a bill introduced in the Senate in mid-May exclusively by Republi- cans from farm states to monitor port performance through data collection, a seemingly benign idea that was nonetheless viewed with suspicion by unions as manifest by the absence of Democratic support- ers. It therefore faces an uncertain future with a Democrat occupying the White House (Story, page 62). But one Washington insider views the bill in itself as a big deal, because it's evidence the heartland finally understands the economic impact of port disruption on U.S. exports. That said, an unsatisfying policy response to ensuring that labor- induced disruption is never repeated isn't all that's at work in the continu- ing market share shift to the East and Gulf coasts. A s repor ted t h is month, major retailers right up to the CEO and board level may have simply seen enough, according to one retail consultant, not caring any more whether there is a contract negotiation under way, but rather seeing the West Coast as funda- mentally unfriendly and unreliable. They are willing to move up manu- facturing lead times by as much as a month to adjust, the consultant said. And beyond that, as a general trend, major shippers are increas- ingly accepting of the extra week to two weeks of transit time needed to get goods from Asia to the East Coast, having gradually lengthened lead times in recent years in response to slow-steaming and earlier bouts of West Coast dockworker unrest. " I b el ie ve t h at le s s t h a n 20 percent of freight is transit time- sensitive, and it's getting lower every year," James Newsome, CEO of the South Carolina Ports Author- ity, told The Journal of Commerce in May. "I don't think there is that much transit time-sensitive freight." Combine that with the labor disruption and congestion-free environment that exists at Southeast ports such as Charleston, Savannah, Jacksonville and Miami, and it is no surprise that shippers are fleeing to a safe haven. JOC Contact Peter Tirschwell at and follow him on Twitter: @petertirschwell.

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