A strike seems inevitable for Tuesday, October 1, as the International Longshoremen’s Association (ILA) contract is set to expire at midnight on Monday, September 30, with no resolution in sight. If this strike comes to fruition, it will shut down operations at the majority of ports on the US East and Gulf Coasts, which could cripple the industry.
Below is an overview of what we know today.
Strike Likelihood
With no talks between the ILA and the United States Marine Alliance (USMX) taking place—or even scheduled—the chances of a negotiated settlement are slim. The ILA has made it clear that they will not work without a contract, showing no willingness to continue to operate during any negotiations.
Further, the Biden Administration has taken no concrete steps to aid in the negotiations. The administration has taken no stance on whether they will invoke Taft-Hartley, which would require the union to resume operations, should they strike.
Unless an intervention or resolution is reached, a strike is the most likely outcome. Importers and exporters should prepare as if the strike is going forward.
Potential Impact
Except for a few small ports, the ILA staffs most of the labor for ports from Portland, Maine to Corpus Christi, Texas. This includes the major gateways of New York, Houston, Savannah, and others. A strike will shut down almost all cargo traffic in and out of these ports.
We have already seen ocean and rail carriers refuse new export containers, as they are unsure that the ships will be able to load and depart before the labor action.
Vessels already en route to the impacted ports will likely idle outside, waiting for a swift resolution. This will strand large amounts of inventory outside US ports—unable to be retrieved.
Some ocean carriers have begun to discharge containers in unscheduled ports—even if that is not the end destination of the container—to avoid being caught up in the strike. Carriers in this situation are declaring Force Majeure to avoid added costs.
Carriers may continue to accept US East Coast and Gulf Coast bookings from various origins. However, they could limit the number of bookings accepted out of fear that vessels will sit idle for too long, while the strike takes place.
Length of Strike
It is not clear how long the strike could last. The immense pressure this action would put on the economy could spark a government intervention, but it is not guaranteed.
There are still concerns even if the Biden Administration invokes Taft-Hartley. The ILA has already said they will execute “work slowdowns” if they are forced to work, which would seriously impede operations at ports, even if they are open. While an open port is better than a total shutdown, these slowdowns would still create significant delays to cargo.
The longer a strike occurs, the worse the inevitable congestion and backlog will be.
Additional Charges & Surcharges
Ocean carriers have released a large amount of “Port Disruption Surcharges,” among other charges, in preparation for congestion and various issues that will have to be dealt with. Depending on the carrier and trade-lane, these surcharges are anywhere from $1000 – $3000 per container.
In addition, concerns about detention and demurrage charges have been raised. While most terminals and carriers have said that they will not apply these charges during a work stoppage, it is unclear how it will be dealt with once operations are restored but congestion is still being cleared.
Further, if a container is already in detention or demurrage when a strike occurs, those charges could continue to accumulate.
Other Concerns
Canadian ports on the East Coast, as well as the US & Canadian ports on the West Coast, are the only places available to accept cargo otherwise bound for the US East Coast.
However, significant congestion has already been reported amongst almost all the West Coast ports, with rail backups and gate activity pushing appointment systems to their limits. A significant increase in volume to these areas will increase this struggle.
In addition, the Port of Montreal—which is a main target port for East Coast volume—is under threat of their own strike. The Canadian Union of Public Employees has voting to approve a strike mandate, which would allow them to initiate a 72-hour strike notice. However, a 72-hour strike notice has not been issued, at this time.
Last, air freight will be a popular choice for shippers needing to bring in short-term inventory to cover any delays from the strike. However, with limited air freight capacity and the industry already in air freight “peak season,” the costs to use air as a solution could escalate significantly.
Mohawk Global will continue to monitor the situation and provide updates, as necessary. If you have questions, reach out to your Mohawk Global representative.
By Chris Lindstrand, Vice President of International Transportation