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'Container Cliff' Talks Race to Avert Crippling Feb. Strike

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It's back to the negotiation table this week for the International Longshoremen's Association and the U.S. Maritime Alliance (USMX), as the two organizations race to avert a Feb. 7th strike of 14,500 longshoremen members in 14 major East Coast ports, including hubs in New York and New Jersey.

The agreement to extend talks was reached after a week of secret negotiations on December 27th. Yet strike fears were rekindled after Dec. 18, when talks between the dockworkers and the shipping companies broke down.

While the issues of wages remains unresolved, the key point of contention is container royalties, which are payments to union workers based on cargo weight. The ports in question are major transportation centers that span from Maine to Houston.

The National Association of Manufacturers (NAM) told CNBC a strike would come at a price tag of $1 billion per day. Robyn Boerstling, the association's director of transportation and infrastructure policy stressed manufactures rely on certainty and it is critical that both parties can conclude this contract negotiation well ahead of the February 6 deadline.

"The current longshore labor uncertainty is forcing increased costs upon manufacturers –including diverting cargo, advancing export volumes, increasing inventory – to prepare for massive supply chain disruptions," Boerstling said.

"Fortunately,the parties have allowed cooler heads to prevail ahead of the previous deadlines," she said. "While the December 28 announcement of an agreement in principle hasbeen received with cautious optimism, it's clear that challenges remain."

The New York-New Jersey port is the second largest port to handle manufactured goods from China, and is the largest port on the East Coast. According to shipping experts, the New York and New Jersey port handles approximately 10 percent of China imports, 69 percent of Israeli imports and 37 percent of Italian imports.

The products imported from these countries include furniture, plastics, apparel, beverages and chemicals.

In 2011, the New York-New Jersey port handled $208 billion in cargo — the most on the East Coast. Approximately 3,200,000 TEU, a shipping measurement that stands for twenty-foot equivalent units, of containers and 700,000 cars are handled per year in the port of New York New Jersey.

(Read More: Talks to Avoid East Coast Port Strike to Resume, Details Kept Mum)

According to economic data from the Port of New York and New Jersey, the port generates more than $5 billion in annual tax revenues to state and local governments.

Robert Kunkel, President of Alternative Marine Technologies and Technical Advisor for Mid Ocean Tanker Company and Alterna Capital Partners, warns despite averting a strike in December his analysis of the latest January 2013 import volume tells a story of caution.

"The report shows a projected 2.3 percent increase over the same period in early 2012." said Kunkel. "A definite sign that retailers are concerned over the final outcome of the negotiations as they increase their inventory and plan for a shutdown of nearly half of our major ports. The concern is real and the impact will affect consumers far beyond the container terminals and port areas no matter what the outcome."

Retailers which heavily rely on the shipping industry to transport their products are anxiously waiting to hear more on the talks between the union and port managers. The National Retail Federation,recently sent a letter to both the ILA and the USMX urging both sides to come to definitive agreement for the sake of the economy.

"We hope the parties will be able to make progress in the negotiations and be able to reach a new long-term agreement before the extension expires on February 6. "said Jon Gold, Vice President, Supply Chain and Customs Policy for the National Retail Federation.

"Failure to reach an agreement leading to a port closure, for any length of time, will negatively impact the economy and the hundreds of thousands of businesses, workers and consumers who rely on the ports to move the nation's commerce." Wal-Mart, Target and Best Buy are just some of the retailers that could experience product delays.

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