Contingency plans, new surcharges emerging ahead of expected strikes in US
NewsWith a potential strike by the International Longshoremen’s Association (ILA) approaching, industry stakeholders are implementing contingency plans.
Biden administration won’t intervene as imminent East Coast strike looms
With the Biden administration declining to intervene, the threat of a port strike on the East Coast and Gulf of Mexico is increasingly likely to materialise.
With a strike at US East Coast and Gulf Coast ports increasingly seen as imminent the threat of supply chain disruption is becoming a fulfilling prophecy as shippers respond to a raft of advisories and put contingency plans into place.
The International Longshoremen’s Association (ILA) has warned that its members are prepared to halt work in two weeks, impacting approximately three dozen US ports from Maine to Texas that handle about half of the nation’s ocean imports. What is more, the Biden administration has indicated it will not intervene using the federal Taft-Hartley Act to prevent the strike, allowing negotiations to proceed without federal disruption.
“We’ve never invoked Taft-Hartley to break a strike and are not considering doing so now,” the Biden administration official told Reuters. “We encourage all parties to remain at the bargaining table and negotiate in good faith.”
Taft-Hartley is a 1947 law that places limits on the power of unions to strike and gives the President the power to seek an injunction from the Attorney General to prevent a strike or lockout that imperils national health or safety. Taft-Hartley was used by President Bush in 2002 to end an 11-day lockout that brought West Coast ports to a standstill. The Taft-Hartley Act is the product of a Republican administration in a period when the Republican party had control of both the Senate and the House of Representatives. It has never been invoked by a Democratic President.
Talks ground to a halt
The contract between ILA and the United States Maritime Alliance (USMX) covering East and Gulf Coast ports is set to expire on September 30. The ILA has continued to threaten to strike if a new contract is not reached by then. The union is adamant in securing a new six-year contract that would lock in a wage increase of US$5 per hour for each year, as widely reported in the media. This would amount to a 76% wage increase over the duration of the contract. The union said on Tuesday that tens of thousands of ILA longshore workers were ready to strike for wages that are commensurate with the billion-dollar profits earned by the ocean carriers.
“A strike at all ILA ports on the Atlantic and Gulf Coast at 12:01 am on October 1st seems more likely as time is running out to get a new Master Contract Agreement settled with USMX,” the ILA said. The union accused USMX of engaging in an ugly propaganda campaign designed to paint ILA longshore workers as “greedy”, by leaking details of its talks with ILA leaders about the union’s demands for increases in wages and protections against automation.
“USMX claims to offer industry-leading wages, however, their interpretation of ‘leading wages’ is polar opposite to ours,” the ILA said in a letter to its membership earlier this week. “Inflation has completely eaten into any raises and wages. Everything is more expensive, even compared to six-years ago. Our members are struggling to pay their mortgages and rent, car payments, groceries, utility bills, taxes, and in some cases, their children’s education. USMX’s corporate greed has made them delusional – profits over people. They have taken advantage of a low entry-wage and a tiered progression system for thirty years.”
The ILA said it will reject USMX’s position on the new entry wage.
Shippers have done their homework
In response to these developments, and having learned lessons from the COVID-19 pandemic, shippers have been ramping up preparations by shipping goods earlier and shifting cargo to West Coast ports. As a result, several ports have been experiencing an early peak season including the Port of Long Beach, Port of Los Angeles as well as South Carolina Ports and New York and New Jersey.
“This is a critical time as retailers prepare for the all-important holiday season, and we need every port in the country working at full capacity,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Many retailers have brought cargo in early and shifted to alternate ports as a precaution, but it is vital that labor and management at the East Coast and Gulf Coast ports actually sit down at the negotiating table and bargain in good faith for a new contract so we can avoid a disruption of any kind when their contract expires. A strike would be another blow to the supply chain as it continues to face challenges, and to the nation’s economy at a time when inflation is finally coming down and the Fed is poised to lower interest rates.”
“Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
US ports covered by Global Port Tracker handled 2.32m TEU in July, the latest month for which final numbers are available. That was up 8.1% from June and up 21% year over year for the highest July on record. Ports have not yet reported August’s numbers, but Global Port Tracker projected the month at 2.37m TEU, up 20.9% year over year and the highest level since the record of 2.4m TEU set in May 2022. September is forecast at 2.31m TEU, up 14% year over year; October at 2.08m TEU, up 1.3%; November at 1.92m TEU, up 1.6%, and December at 1.89m TEU, up 0.9%. That would bring 2024 to 24.98m TEU, up 12.3% from 2023. The first half of 2024 totaled 12.1m TEU, up 14.8% over the same period in 2023.
NRF said that if the forecasts prove correct, 2024 will have seen a seven-month stretch of import levels at or above 2m TEU, the longest since a 19-month stretch through September 2022.
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