Oct. 1 was looking like a very bad day for businesses that import wine and specialty foods to the eastern United States. The contract between the International Longshoremen's Association (ILA) of dockworkers and the U.S. Maritime Alliance (USMX), which operates all East and Gulf Coast ports from Boston to Houston, was set to expire. With key labor negotiations unsettled, dockworkers would strike, and the ports would go dark.
"We were on pins and needles," said Geoffrey Giovanetti, managing director of the Wine and Spirits Shippers Association (WSSA). With ports closed along the coast, especially at the critical Port of New York and New Jersey, how would importers get their products into the U.S. during the buildup to the critical holiday shopping season?
Then, on Sept. 20, the Federal Mediation and Conciliation Service (FMCS) issued an announcement that the ILA and the USMX had agreed to put 90 more days on the clock, taking negotiations through the end of 2012, "for the good of the country." But while importers have dodged a bullet, the new deadline still looms—any strike would hurt their businesses and could possibly mean price increases for consumers.
"I think the 90-day extension was sort of a welcome relief for both sides," said Giovanetti. "This is not an issue [the two sides are] going to solve before the end of September, and any port shutdown is going to jeopardize what's already not a very strong economy. You don't really want to cave in the entire house just to prove a point on some issues." The USMX declined to comment to Wine Spectator during ongoing negotiations. An ILA spokesperson expressed hope that future negotiations would bear fruit, but also declined to discuss specifics.
Jim Lisa, import director at Kobrand, whose portfolio includes Louis Jadot, Champagne Taittinger and the Taylor Fladgate partnership, described his contingency plan: "We were going to divert our containers that we deemed urgent over to the West Coast and then have them moved [by rail] to the East Coast for our distributors." The extra 90 days allows him to, "bring in as much as I can now before the end of the year so that if there is a strike, I already have the merchandise here."
But if there is a walkout at year's end, consumers could see prices go up. "If [a strike] did go on five, six, seven months, then obviously we're incurring a lot more cost, and it would spread down to the retail level," said Lisa. He does think negotiations will work before it comes to that.
Carolina Villa, director of operations for Pasternak Wine Imports, who bring in Domaines Barons de Rothschild (Lafite) and Jean-Pierre Moueix, among others, was similarly optimistic. "At this point we haven't discussed anything regarding pricing," she said. Pasternak also has a California facility.
But smaller importers with fewer resources would feel the heat more acutely in the event of a strike. "Most businesses in this industry are small," said Ron Johnson, founder of Encore, a specialty-foods importer of goods like olives, peppers, basmati rice and vinegar. For Encore and similar importers, the strike is "a big worry. I think it would be a disaster for the food industry. The consumer is always going to be asked to pick up the difference" after a certain point. Air freight and shipping to California aren't viable options for Encore.
While the ILA and the USMX reached some accords on some difficult items in July, according to Giovanetti, talks broke down in August over money issues. In a statement that month, the USMX called for an end to "inefficiencies that threaten the economic viability of the ports," primarily related to longshoremen's compensation.
Negotiations are bound to be more productive with a federal agency, the FMCS, now presiding. But even a short January strike would be a headache for many. Giovanetti cited a lockout on the West Coast from 10 years ago that cost $10 billion to $12 billion, most of that eaten by importers and distributors. The congestion from that 11-day shutdown took three months to clear, as containers were offloaded and products distributed. Giovanetti predicted the same this time. "The backup would probably be close to a week for every day that the ports were shut down."