Promotional products suppliers and importers from across industries are keeping a nervous eye on just-started contract negotiations involving unionized West Coast port workers.

There’s concern in the branded merchandise market that potential contentiousness in the talks, which center on a new contract for longshoremen and warehouse workers, could intensify already problematic supply chain disruption that’s resulted in inventory shortfalls and higher product prices in promo.

Negotiations began this week between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA). ILWU represents 22,000 dockworkers that labor at 29 West Coast ports. Those include the ports of Los Angeles and Long Beach, through which about 40% of cargo containers imported to the U.S. flow. PMA represents 70 employers – ocean carriers and marine terminal operators that include heavy hitters like Maersk.

Potential Effect on Promo

Importers in promo and beyond are concerned that antagonistic negotiations could cause slowdowns or outright work stoppages at the ports, which have already been plagued by backups in the rampant importing rush that’s occurred in the economic bounce-back from COVID-19.

Should they come, further delays due to contract disputes could have serious consequences for the promo products industry, potentially making it much more difficult for suppliers to replenish imported product stock. The vast majority of promotional products sold in North America are produced abroad, especially in China.

“Any significant slowdowns or stoppages would have a very significant impact on our ability to import product and maintain inventory,” said Jeremy Lott, CEO of Issaquah, WA-based SanMar (asi/84863), promo’s largest supplier, and a member of Counselor’s Power 50 list of the industry’s most influential people.

“While we use ports on the West Coast, the Gulf and the East Coast,” Lott continued, “the West Coast ports are incredibly important to Trans-Pacific trade and would have a significant impact to our business and the industry in general.”

“Any significant slowdowns or stoppages would have a very significant impact on our ability to import product and maintain inventory.” Jeremy Lott, SanMar

Picking up a similar theme, Teresa Fang told ASI Media that, should slowdowns or stoppages occur, importers will scramble to reroute shipments to other ports, such as those on the East Coast. That comes with potential challenges and complications.

“East Coast port congestion will then be something to watch for as everyone makes moves to mitigate the risks on the West Coast,” said Fang, vice president of supply chain at Trevose, PA-headquartered alphabroder (asi/34063), the second-largest supplier in promo.

Operations at East Coast ports could possibly start to drag too if longshoremen there “slow work down in solidarity” with West Coast port workers, said Fang. “The contract negotiations have been on our radar for a while at this point, and we’re monitoring them closely,” she said.

Koozie Group (asi/40480), a Florida-based firm that’s promo’s seventh-largest supplier by revenue, believes it’s possible that the West Coast dockworker contract talks could lengthen the time it takes for some of its product-carrying import containers to reach port and get processed for delivery.

Nonetheless, Koozie Group reported that it has padded its transit times from Asia to account for delays and found other ports through which to move goods. “This diversification gives us options if there are work disruptions,” said Pierre Montaubin, Koozie Group’s senior vice president of product management and sourcing.

Some promo executives think that an impasse in port talks (that leads to operational disruptions) could accelerate demand for Made-in-USA products within the industry, at least for a time.

“We’ve seen this movie before,” said David Miller, a member of Counselor’s Power 50 and president of New York-based Top 40 supplier NC Custom (asi/44900). “Hopefully, distributors have partnered with suppliers in which the product line is heavy in domestically manufactured items and in which decorated items are well inventoried.”

Outlook on the Contract Negotiation

As the port contract talks get going, Montaubin suspects mutual interest may help progress without significant disruption to port operations. “Container lines and terminals have done very well financially over the last 24 months,” he said. “Even if labor’s asks are high, both parties have an incentive to strike a deal and keep containers moving.”

The current contract expires July 1. ILWU and PMA have pledged to talk every day until a new contract is reached. Even if July 1 passes without a new contract in place, something that’s certainly a possibility given how past negotiations have gone, talks can still continue and it doesn’t mean that slowdowns or stoppages will necessarily occur.

ILWU and PMA have played down fears of port disruption. Both sides have said they expect cargo to keep moving until an agreement is reached.

Both sides say they expect cargo to keep moving until an agreement is reached, the two parties said in a joint press release Monday. https://t.co/YQAF7YmhHN pic.twitter.com/M9MOXvTek3

— Supply Chain Dive (@SupplyChainDive) May 9, 2022

Even so, just how things will play out remains to be seen. There has been productivity-affecting acrimony in previous contract talks. As Supply Chain Dive reported, talks drew out three months past a July 1 deadline in 2002 and there were port shutdowns before a deal was finally inked. In 2014, the most recent previous negotiations, the talks stretched on for eight months past the contract’s conclusion and resulted in work slowdowns.

Importers likely hope that 2022’s talks mirror or improve upon the negotiations of 2008, when talks went a few weeks past deadline but were reportedly resolved with what PMA CEO Jim McKenna has described as “little to no disruption.”

“Each contract is different,” McKenna told Supply Chain Dive. “[You can’t] decide them on the front end. Again, I think everybody is optimistic going into this one that we’re going to get to where we need.”

Intensifying COVID lockdowns in China are causing supply chain imbroglios for North American #promotionalproducts suppliers & are poised to delay replenishment of inventory levels at the domestic industry firms. https://t.co/bOL3KwrXTO @asicentral @ASI_MBell

— Chris Ruvo (@ChrisR_ASI) April 25, 2022

Potential flashpoints include issues like automation. PMA wants to enhance use of automation at ports to speed efficiencies, but union workers see at least some of that tech push as a threat to jobs.

The port concerns come as global supply chains for promo products and other industries are enduring mounting pressure due to issues like COVID-related societal shutdowns in China. Labor issues have also factored in.