Retailers and manufacturers avoided the worst when dockworkersagreed Friday to continue contract talks and keep major U.S. portsopen. The next five weeks will determine whether a strike can beruled out completely.

The International Longshoremen's Association and the U.S.Maritime Alliance, representing container carriers, struck atentative agreement on a royalty payment for workers that had beena sticking point in negotiations, federal mediators said yesterday.The two sides will push back a deadline for reaching an overallcontract from midnight tonight until Feb. 6.

While the extension averts a strike that would have halted theflow of goods through ports responsible for about 45 percent ofU.S. commerce, it didn't guarantee supply-chain stability.Retailers including Home Depot Inc. and Lowe's Cos. rely on theports, stretching from Maine to Texas, to deliver supplies for thelucrative home and garden season starting in April.

“Only until we have a final contract will retailers and othershave the certainty they need,” Matthew Shay, president of theNational Retail Federation, said in a statement yesterday. “Acoast-wide port shutdown is not an option. It would have severeeconomic ramifications for the local, national and even globaleconomies and wreak havoc on the supply chain.”

After reaching the tentative agreement on container royalties,used to supplement wages, the next step is for dockworkers andtheir employers to reach a binding contract that includes the deal.The two sides should have a smoother path now, said Mike Asensio, alabor lawyer at Baker Hostetler LLP in Columbus, Ohio.

“In every negotiation, there is always a critical issue or setof issues, and from what's been available publicly, it's beenapparent that this container royalty issue has been the primaryobstacle to a deal,” he said in a phone interview. “With the mostcontentious one out of the way, I would say the prospects look goodfor resolving the remainder.”

Contract negotiations had broken down with the alliance seekingto cap royalty payouts it says totaled $211 million last year, oran average of $10 per hour, while the Longshoremen called the fees“untouchable.”

George Cohen, director of the federal mediation agency, declinedto give more details on the royalty fee agreement, as did BethMonica, a spokeswoman for the Maritime Alliance. Jim McNamara, aunion spokesman, didn't return phone messages seeking comment.

'Long-Term Cost'

Both sides have been outspoken in the past about theirunyielding stances on royalty fee demands, signaling the disputemay not be fully resolved, said Ed Sands, a logistics specialist atprocurement management firm Procurian in King of Prussia,Pennsylvania.

The USMX isn't “going to give up an opportunity to reduce thelong-term cost structure,” while Longshoremen President Harold J.Daggett probably “didn't hand over the keys to the kingdom,” Sandssaid in a phone interview. “I think it's going to be a battle foranother 30 days.”

The lack of a definitive solution forces retailers who rushed toprepare contingency plans in advance of this month's looming striketo grapple with ongoing uncertainty, according to the retailfederation.

“We continue to urge both parties to remain at the negotiatingtable until a long-term contract agreement is finalized,” Shaysaid.

A strike may prove more damaging to the industry if it occurs inFebruary, according to Jock O'Connell, international trade adviserfor Los Angeles-based Beacon Economics LLC. January is typically aslower month for shipping, while cargo should increase heading intospring, particularly if the U.S. averts the so-called fiscal cliffof more than $600 billion in automatic spending cuts and taxincreases set for next month, he said.

“The good news is that they didn't go on a strike this month,”O'Connell said in a phone interview. “The bad news is that theymight go on strike at a time when the economic impact is likely tobe greater.”

While most retailers have their biggest quarter around theyear-end holidays, Home Depot may generate 28 percent of its annualrevenue in the quarter ending in July as consumers stock up forhome and garden projects, according to analysts surveyed byBloomberg. Lowe's may get 29 percent of its revenue in the period,analysts estimate.

Contingency Plans

Home Depot has contingency plans in the event of a strike,Stephen Holmes, a spokesman for the Atlanta-based company, saidthis week by e-mail, while declining to discuss those preparations.Lowe's, based in Mooresville, North Carolina, is monitoring thesituation and will make changes to its shipping and transportationif needed, Maureen Wallace, a spokeswoman, said in an e-mail.

Dockworkers and their employers may have extended negotiationsto avoid competition with the fiscal cliff for federal attention,said K.C. Conway, executive managing director at consultantColliers International in Atlanta. Calls by the retailers group andFlorida Governor Rick Scott for President Barack Obama to interveneand pre-empt a strike earlier this week went unheeded.

“The strategy just kicks the strike down the dock,” Conway wrotein an e-mail. “We just wait another 30 days and put retailers atrisk for uncertainty about inbound spring/summer merchandiseimports. Now manufacturers and retailers have to decide as towhether they should accelerate imports and absorb warehousing coststo avoid the uncertainty.”