Faced with a growing threat to the American economy and American jobs, the President today used his statutory authority under the Taft-Hartley Act to convene a Board of Inquiry to examine the work stoppage at the West Coast ports. A Board of Inquiry is part of a framework established by Congress to address labor disputes that threaten national health and safety.
The dispute is a threat to America’s national health and safety. The health of our economy in every corner of America is in jeopardy because of the dispute. In many areas of the economy, layoffs have begun, thousands more jobs may be lost, and all Americans may soon begin to pay sharply higher prices for household goods.
Each shipping container at these ports holds a part of the national economy – from produce to computers, spare auto parts to lumber, consumer electronics to grain and wheat. Any household good imported to be sold on an American store shelf can be found in these containers.
Exports, too, are critical to a growing American economy. American exporters need the ports to operate, so they can ship their products overseas, including agricultural exports such as wheat, corn, soybeans, and pork products, and manufactured goods of all shapes and sizes.
The dispute is estimated by some to be costing America’s economy as much as $1 billion a day:
West Coast ports are crucial to US trade, handling over $300 billion in trade a year. These ports handle more than half of all containerized imports and exports.
West Coast ports handle 25 percent of all US grain exports, 40 percent of all wheat, 14 percent of all corn, and seven percent of all soybeans exports.
Sixty-five percent of all US containerized food trade moved through these ports in 2001.
Layoffs have already begun in multiple industries around the country.
Millions of dollars in produce, fish, meat and poultry are rotting on docks and ships.
Trade with Asia is particularly affected. Japan, Korea, Taiwan, Hong Kong, China, Indonesia, Thailand, the Philippines, India, and Malaysia are the top 10 destinations for containerized US agriculture products. Together, these nations receive 85 percent of all agricultural shipments from the West Coast.
The costs to the economy become larger and more permanent the longer the ports remain closed.
Improvements in supply chain management mean that shipping delays quickly translate into empty store shelves and cancelled orders.
Air cargo carrier rates are increasing dramatically, increasing the retail cost of those goods shipped by air.
October is a critical inventory-building month for retailers: the value of imports through West Coast ports is greater in October than in any other month of the year. If the ports remain closed, revenues from the holiday shopping season will soon be affected.
As the duration of the shutdown increase, more manufacturers and retailers will use up their remaining inventory. Trucks and trains transporting goods to and from the ports are backing up – the longer the shutdown continues, the more time it will take for shipping to return to normal.
Reopening the ports, even if only for 80 days, will benefit the economy. The parties will be given time to settle the dispute. Manufacturers and retailers will be given additional time to adjust and prepare.
Manufacturing is only barely beginning to recover from the recent recession, having lost nearly 1.9 million jobs in the last two years. Manufacturing cannot afford further jolts.
With modern inventory techniques and the increased integration brought by globalization, shutting off much of our trade with Asia will affect not just large importers and producers, but also the tens of thousands of smaller U.S. firms that supply directly-affected firms.
Three times as much of the U.S. economy is now directly related to trade as was the case in 1971, the last time the United States had a major West Coast port work stoppage.
The employment consequences of a continued shutdown would fall hardest on those with the least economic opportunity – workers with less job seniority are likely to be laid off first, and low-income families may have little savings to weather the effects of a shutdown.
The dispute has implications for national defense. The American military relies on commercial ships using the West Coast ports to carry exports necessary for the support of armed forces. In addition, defense contractors receive components and materials through the West Coast ports that are necessary to supply the military's needs. The disruption of the flow of such military-related goods could impact national security.
The Taft-Hartley process is the government’s principal legal means of addressing a labor dispute that could have a devastating national impact. The government first sought mediation as an alternative solution to this dispute. Since the beginning of the dispute, the government has made itself available to help both parties resolve their differences. The Federal Mediation and Conciliation Service (FCMS) has been on the ground seeking a solution since before the work stoppage began. However, the mediation process has not been successful, and the President has decided to take action in order to protect America’s national health and safety.
The Issue
West Coast ports have been closed since the second shift on Sunday, September 29, when the Pacific Maritime Association (PMA) shut down the ports in response to a reported work slow-down by members of the International Longshore and Warehouse Union (ILWU).
What Happens Next
Step 1: The President’s Executive Order
The President’s Executive Order establishes a Board of Inquiry. The Executive Order states that:
A labor dispute exists;
The dispute affects a substantial part of the maritime industry, an industry engaged in trade, commerce, transportation (including the transportation of military supplies), transmission, and communication among the several States and with foreign nations; and
A continuation of this lockout will imperil the national health and safety.
The law states that the President may establish the Board of Inquiry if he determines that the labor dispute issue “will imperil the national health and safety.” The President has determined that the short-term and long-term damage to our economy and our national health and safety constitute such a threat.
The President has appointed the following three Board of Inquiry members:
Bill Brock (Chairman) – Served as a member of the House of Representatives from 1963 to 1971, as a U.S. Senator from Tennessee from 1971 to 1977, and as U.S. Trade Representative and Secretary of Labor from 1985 to 1987. Currently Chairman of Bridges Learning Systems, an intervention program for academically troubled students
Patrick Hardin – W. Allen Separk Distinguished Professor of Law, University of Tennessee College of Law. Former Chief Counsel to the Chairman and Associate General Counsel in charge of the Division of Enforcement Litigation of the National Labor Relations Board, he has been on the faculty of the University of Tennessee since 1975. Editor-in-chief of The Developing Labor Law (3rd ed.)
Dennis R. Nolan – Webster Professor of Labor Law, University of South Carolina School of Law. Professor Nolan has been on the faculty of the University of South Carolina since 1974. Currently serves as Vice President of the National Academy of Arbitrators. Author of eight books and numerous articles on arbitration, collective bargaining, and labor disputes.
The President has chosen these three individuals for the Board because they are unbiased, fair and experienced at labor and employment issues.
Under the Taft-Hartley process, the Board’s job is to inquire into the issues involved in the dispute and issue a public report that outlines the facts of the dispute – including each party's statement of its position. However, the law prevents the Board from making any recommendations or choosing sides in the dispute. The Board may only state the facts.
The Executive Order requires the Board to report back to the President by no later than October 8th.
Step 2: Petition for Injunction
After the President receives the Board’s report, he may then direct the Attorney General to seek a court injunction to halt the work stoppage. To receive this injunction, the Government must establish that the dispute affects a substantial part of an entire industry and imperils the national health or safety.
If the court issues the legal injunction against further work stoppage, an 80-day clock begins, the ports would open, and employees would return to work.
Step 3: Reconvening the Board of Inquiry
After 60 days, if no agreement has been reached, the Board is required to issue a second public report to the President that includes:
The current positions of the parties involved;
The efforts which have been made for settlement;
A statement by each party of its position; and
A statement of the employers’ (PMA) last offer of settlement.
Step 4: NLRB Secret Ballot Vote
Between days 61 and 75, the National Labor Relations Board (NLRB) will conduct a secret ballot vote of ILWU employees on the PMA’s last offer of settlement. The NLRB is required to certify the results to the Attorney General no later than five days thereafter.
At the end of the 80-day period the legal injunction is discharged. If the dispute is unresolved, and if ILWU employees have rejected the PMA’s final offer in the NLRB secret ballot vote, the parties become free to engage in work stoppages again.
Step 5: President Reports to Congress
The law requires the President to send a final report to Congress on the entire Taft-Hartley process. The report may include further recommendations on how to resolve the labor dispute.
The Threat to America’s National Health and Safety
The President is taking this first step to protect our economy because the West Coast port dispute is causing serious damage to multiple industries and putting thousands of American jobs in jeopardy. This growing economic damage constitutes a threat to America’s national health. The examples which follow detail some of the damage which has already occurred, and more that will occur if the plants do not reopen.
Ford Motor Co. has 14 plants -- 10 assembly plants and four power train plants -- that receive parts from affected ports in Seattle and Tacoma, Wash., and Long Beach, Calif. The assembly plants that receive parts are Atlanta Assembly, Chicago Assembly, Kansas City Assembly, Louisville Assembly, St. Louis Assembly, Ontario Truck, Twin Cities Assembly, the Edison, N.J. assembly plant, the Norfolk, Va. assembly plant and an assembly and stamping plant in Hermosillo, Mexico. The power train plants affected are Cleveland Engine No. 2, Dearborn Engine, the Sharonville, Ohio, transmission plant and Van Dyke Transmission in Sterling Heights.(Detroit Free Press, October 5, 2002)
New United Motor Manufacturing Inc. (NUMMI) of Fremont California has run out of material for their production line and has been forced to lay off two shifts, about 5,100 employees. They were told to take two days off. NUMMI builds the Pontiac Vibe, Toyota Corolla, Voltz, and Tacoma pickups. Honda of America Manufacturing is resorting to airlifting critical parts from Japan. (Automotive News, October 4, 2002 and reports to Maritime Administration)
Matsushita Kotobuki, which manufactures televisions and VCRs for Panasonic, has had to stop production. They have laid off 150 workers in Vancouver, Washington. They could be rehired in one to two weeks. (KOIN, October 4, 2002)
Hawaiian Express Service, a freight forwarder in Hayward, California, laid off 100 employees Friday. (The Mercury News, October 6, 2002)
A shipment of blankets, clothing, and medical supplies destined for hurricane victims in Haiti has been stuck in Lynnwood, Washington, since Monday. And a container of similar supplies for Nicaragua is backed up on a rail car destined for Long Beach. (Heraldnet, October 5, 2002)
Tyson, the world's largest meat producer, said it might have to adjust production in its beef, pork and poultry operations because the fresh meat it exports is perishable. More than half of the country's beef, pork and lamb export products go through West Coast ports, according to the U.S. Meat Export Federation. George's Inc., a poultry and egg company based in Springdale, also is being affected. (Arkansas Democrat Gazette, October 3, 2002)
If the shutdown lasts even another week or two, it could take more than a month to unsnarl the backlog of idled or ruined goods -- a delay that could torpedo the holiday sales plans of a variety of retailers. Within three weeks, the shutdown could force companies around the country to jettison nearly a quarter-million jobs. (Contra Costa Times, October 2, 2002)
Eastern Washington farmers and others shipping perishable goods are particularly anxious because the dispute comes during apple and potato harvests. Washington, on average, exports one of every three apples picked in the state, and it's the biggest exporter of french fries in the world. Apples farmers must get off to a quick start in the fruit selling season, said Richard Thomason, who grows red, granny smith, fuji and honey crisp apples on 120 acres in Brewster. If buyers can't find Washington apples, they will simply turn to other suppliers, he added. "I think agriculture is probably going to take the biggest hit on this thing," Thomason, chairman of the Washington Apple Commission, said yesterday. – Seattle (WA) Post-Intelligencer, October 2, 2002
Nissan North America eliminated the Saturday shift at its 6,000-employee plant in Smyrna, Tenn., and will soon shut down if the port lockout continues. The Smyrna plant manufactures almost 500,000 Altimas, Xterra SUVs, and Frontier pickups each year. (Buffalo News, October 5, 2002)
No. 1 U.S. railway Union Pacific Corp. said the stoppage was cutting sales by as much as $5 million a day. The Consumer Electronics Association, whose members include Microsoft Corp., said a prolonged lockout could cut consumer electronics sales by $22-billion this year. – Financial Post, October 5, 2002
Food is rotting in cargo holds, and railroads have halted grain shipments from the Midwest. Wheat futures dropped sharply Thursday on the Chicago Board of Trade as concerns rose that the lockout would hurt U.S. grain exports. (Associated Press, October 5, 2002)
Elope Inc., a hat wholesaler in Colorado Springs, Colo., usually does brisk business this time of year. "We've already lost the Halloween business. It's Christmas I'm worried about now," said company chief executive Kevin Johnson. "If this isn't resolved in the next week, we're dead in the water." (Associated Press, October 5, 2002)
Layoffs may begin Friday for 15 full-time employees at Quality Trading, one of the largest straw exporters in Oregon. Quality Trading is made up of 22 Willamette Valley farmers who cut, bale, store and ship straw to farmers in Japan, Taiwan and Korea. (Associated Press, October 5, 2002)
Union Pacific, the nation's largest railroad, had 55 trains parked across the western United States, unable to move cargo. Grain shipments bound for export are sitting in warehouses and growers of perishable goods like apples and citrus worry that their harvests will not reach lucrative Asian markets. (Associated Press, October 4, 2002)
California almond growers, who exported $662 million worth of almonds in 2000, said each day of the shutdown threatens their ability to serve Asian consumers preparing for holidays. (Chicago Tribune, October 4, 2002)
“We're already in a crisis," said James McCranie, executive vice president of marketing at Seald-Sweet, a citrus growers' cooperative in Vero Beach, Fla. McCranie said the co-op had at least 30 containers trapped at West Coast terminals, the first shipment of a crop of grapefruit headed for Japan. The fruit, which is carried in refrigerated containers that have no independent power source, will quickly rot if not handled properly. "The problem is you have no confidence that your cargo is being properly refrigerated and there's no way to divert it," McCranie said. "It's perfectly fine fruit and could be sold in Washington or Oregon. He complained that shipping lines were not able to give any information about where the cargo was and in what condition. "For a perishable, it couldn't be worse." (Journal of Commerce, October 4, 2002)
Bill Ciesinski, manager of transportation and logistics at International Forest Products in Foxboro, Mass. said that the lock-out had brought some of his business to a halt. IFP had begun to load 6,000 metric tons of woodpulp aboard a ship in Eureka, Calif. just prior to the port shutdown. Ciesinski said his company was paying detention for the ship, hoping for a quick resolution of the dispute. "I'm holding the ship there because if I don't load it, I have to wait another month," he said. He also has had shipments of waste papers delayed. "It's jeopardizing letters of credits and if it is not settled by Sunday, we are going to lose a significant number of orders," he said. (Journal of Commerce, October 4, 2002)
Phoenix-based Action Performance (ATN), a maker of die-cast model cars, was hit the day shippers locked out dock workers, on Sunday. The company had a shipment of thousands of model cars that were supposed to be unloaded that day so Action could record a sale before the quarter's end. The cars, however, didn't make it off the ship, so the company had to issue notices saying it wouldn't book $5.7 million in expected revenue for the quarter. That caused Action's stock to slide $1.10 to $19.90 Thursday, a 5.2 percent drop. (CBS Marketwatch.com, October 4, 2002)
Reports are coming in that such companies as Chiquita Brands (CQB) and Del Monte (DLM) were having to leave perishable goods on docks. Those companies, along with Dole (DOL), are expected to feel the effects. (CBS Marketwatch.com, October 4, 2002)
Gap Inc., the nation's largest clothing retailer, was hoping to receive its first shipment of apparel intended for the holiday season when the port shutdown began last Friday. (Newhouse News Service, October 3, 2002)
Retailers might not be able to get enough toys made in China in time for the holiday season. Electronics and technology companies won't be able to get television or computers assembled in the Pacific Rim, or parts for electronics they make in factories here. Foreign automakers won't be able to import cars or trucks made overseas, or the parts for cars they made domestically. (Atlanta Journal-Constitution, October 2, 2002