Small Business

Port slowdown costing small businesses time and trust

Businesses dig out from port slowdown
Businesses dig out from port slowdown

The tentative labor agreement between the Pacific Maritime Association and the International Longshore and Warehouse Union is a welcome relief to businesses around the globe, ending a nine-month standoff between the two groups that at times brought ports on the West Coast to a halt. The total economic damage of continued congestion could cost retailers as much as $7 billion this year, according to the National Retail Federation.

But for smaller businesses, there's more at stake than just late imports and exports. Regaining what was lost due to the dispute will take months, with no guarantee of normalcy in the end.

Dwight Bonewell, Director, Grand Napa Vineyards
Photo: Rubin Photography

Time may cost some businesses money, but it is costing Dwight Bonewell trust, which isn't easily regained. Bonewell's West Coast Wine Group in Napa, California, relies on exporting to Asia and South America for about 70 percent of its business, and the port slowdowns in Oakland in particular have caused him to miss deadlines over the past several months.

"The biggest dilemma, when you have customers in Asia and Brazil, is in losing trust," he said. "They don't understand [the intricacies] of what is going on in America, and they feel like you're delaying their shipment. That's a huge obstacle for us as a smaller company—trying to convince customers this issue is not specific to you."

As for whether or not this will actually cost him business, only time will tell, Bonewell said, adding the next three months will be crucial.

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The slowdown in exports has also slowed operations for Paul Cramer's Star Milling in Perris, California. He exports animal feeds and pet food to the Philippines, Japan and China. Due to the standoff between the two groups, Cramer said he has been losing between $40,000 and $60,000 a week for the past nine months, what's more—his clients are losing market share because of his inability to get them product. This means, their orders from him will likely be lighter in the future.

"It's lost revenue," he said. "It's great that [the unions] have reached a tentative agreement but once things get bad it's already too late. The biggest destruction we have seen is the customers we potentially lose, because they are then out of business in the locations we are shipping to."

For others, the inability to export has had a ripple effect. Iraheta Bros. 2 is a small trucking company in Hayward, California, that has been unable to return shipping containers to the Port of Oakland in a timely manner, according to Kim Sulsar, vice president of operations at Iraheta. As a result, it's getting hit with per diem charges from steamship lines that vary from $85 to $135 a day.

Over the past nine months, Sulsar said Iraheta Bros. has amassed $50,000 in fines.

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"They port won't accept the containers, because they don't have the space to accept them," she said. "And because we can't return the containers, the lines are charging us."

The trucking company, which has seven workers and 25 drivers, says it hasn't paid out the funds yet and is in the process of disputing them. The agreement will help in the future, but is so far meaningless to the company, Sulsar said.

"We have to wait for the vessels to open up, we have to wait for their earliest return dates," she said. "I'm sure this will get pushed back."

Another group that stands to be impacted in the States is independent costume and party-supply stores, according to the Party Club of America's vice president and general counsel, Jonathan Erwin. The Ennis, Texas-based group represents around 400 stores, and displaced Halloween costume orders are already on his mind.

"If the port's delays last as long as the direst predictions look like—we will start missing Halloween sales, which are much more critical," Erwin said. "Some of our stores do about 30 percent of their sales in the Halloween season."

Correction: This story has been updated to reflect that Party Club of America does not represent any Party City stores.