As key longshoremen labor union meetings commence on the East Coast and Gulf Coast, fears of a port strike intensify.

• Billions of dollars in trade are handled monthly by U.S. East Coast and Gulf Coast ports, which account for 43% of all U.S. imports. However, companies have been relocating shipping containers to the West Coast due to strike concerns.
• The ILA and ports management failed to reach a critical agreement over the summer, with automation being a significant point of contention.
• This week, North America's largest longshoremen union is holding a series of key labor meetings, which could shed light on the possibility of a strike occurring in October.

This week, key labor meetings are taking place by North America's largest longshoremen union, which could shed light on the possibility of a strike by workers at U.S. East Coast and Gulf Coast ports scheduled for October 1.

The International Longshoremen's Association's chapter delegates are meeting on Wednesday and Thursday to discuss a proposed contract with the wage scale committee. ILA president Harold Daggett has described the September meetings as a "two-day marathon" session, giving members an opportunity to strategize before a potential strike. The union's contract expires on September 30.

The negotiations with the United States Maritime Alliance, representing port ownership, collapsed in July due to labor's discovery that APM Terminals, a subsidiary of the world's second-largest shipping company, was using automated technology to process trucks at port terminals without union labor.

ILA leadership received 100% support from membership for going on strike on October 1 if their demands are not met, as stated by Daggett in an August 5 statement.

The ILA and USMX both submitted forms to the Federal Mediation & Conciliation Service seeking a mediator or arbitrator. The USMX stated that it was informed by the union on August 19 that it had requested mediation. The USMX filed its form with the FMCS on August 23.

Despite ongoing progress in negotiations with many ILA Locals, USMX has yet to secure a meeting with the ILA to discuss a new Master Contract.

The ongoing labor battle is part of a global trend of worker actions affecting ports, rails, and logistics providers worldwide, including Europe, the West Coast, and Canada's recent rail strike. These conflicts have escalated since the pandemic and high inflation, with more ports turning to automation as part of their logistics solutions.

In order to avoid delays in delivery, U.S. shippers have already started importing their back-to-school and holiday items earlier than usual, in June instead of the traditional July, due to fears of an October strike.

The East Coast and Gulf ports process 43% of all U.S. imports.

The Biden administration official stated that collective bargaining is the most effective way for American workers and employers to reach an agreement. The administration encourages all parties to remain at the bargaining table and negotiate in good faith. Since taking office, the Biden-Harris Administration has adopted a comprehensive whole-of-government approach to monitor and mitigate potential supply chain impacts, including severe weather, transport service interruptions, and the Key Bridge collapse in Baltimore. The administration has never invoked Taft-Hartley to break a strike and is not considering doing so now.

West Coast port imports booming, and congestion building

The redirection of freight from East Coast to West Coast ports by U.S. companies has resulted in additional time and costs, according to Xeneta. The East Coast's share of total container imports into the U.S. from the Far East decreased from 34.4% in Q4 2023 to 32.6% in Q2 2024, while the West Coast ports' share increased from 57.7% in Q4 2023 to 60% in Q2 2024 (the remaining containers were imported through the Gulf Coast).

The surge in containers is causing rail congestion to accumulate near the Port of Los Angeles, according to HLS Shipping's recent client advisory. The company reports that rail container dwell times at some U.S. West Coast port terminals have nearly doubled since earlier this summer due to the influx of imports.

"If Southern California's docks continue to receive extra volume due to a potential port strike and rail disruption in Canada, rail dwells and chassis shortages could become an issue in the next two months."

The dwell time for rail-bound container ships at the ports of Los Angeles and Long Beach is between 8 and 10 days, according to HLS, across all ocean carriers.

According to the customer advisory, the Ports of Seattle and Tacoma are currently experiencing an average dwell time of 10 days. The reason for this is the recent shift of shippers' imports from Canadian ports to these two due to the labor lockouts on the rails. As a result, this increased wait time can lead to additional detention and demurrage fees that shippers have to pay.

Its shipping clients have been advised on various mitigation plans, including diverting cargo, anticipating additional transit times, and incurring extra costs such as detention and demurrage fees and congestion fees.

Mia Ginter, director of North America Ocean at C.H. Robinson, stated that not all companies can import into the U.S. early.

If a strike happens, the automotive industry and other companies that use a just-in-time inventory model will be more affected since they don't usually have a stockpile of freight to draw from. U.S. exporters won't have the same flexibility to get ahead of the strike because they are dependent on their importers globally.

Ginter stated that some exporters are proactively relocating to the U.S. West Coast. "Currently, only approximately 5-10% of our export clients have made this shift, but we anticipate this number to increase as we approach the potential strike date," she added.

In March, Michael Aldwell, executive vice president for Kuehne + Nagel, advised clients to have an established method of getting cargo into the U.S. in advance of a labor crisis, as he was already tracking a double-digit shift in cargo moving away from the East Coast.

The ILA announced its decision to halt negotiations on May 17, which led to a diversion of trade to the West Coast. This decision was made amidst ongoing negotiations of local agreements under the coast-wide Master Contract.

Since then, the rhetoric has only escalated.

Daggett, the union's chief negotiator, stated that he aimed to secure a favorable economic agreement for his members, which involved opposing port automation and obtaining exclusive port contracts for them. In a summer speech to union members, Daggett pledged that the ILA would not be surpassed in its efforts.

In August, conflicting statements from both sides have caused concerns about a possible strike. Unlike the West Coast ports, East Coast ports have a history of resolving labor disputes and reaching new contracts before a port shutdown. The last work stoppage in 1977 lasted 44 days.

Billions of dollars in trade at stake

The ILA's one-day strike would take five days to clear, according to Sea-Intelligence. A one-week strike in October could cause slowdowns until mid-November, analysts at Sea Intelligence estimate. East Coast ports in the U.S. are expected to handle 2.3 million TEU (twenty-foot equivalent units) in October, which translates to 74,000 shipping containers per day. The value of that freight is estimated to be upwards of $3.7 billion based on an MDS Transmodal estimate of $50,000 per container.

The West Coast International Longshore and Warehouse Union contract negotiations between 2022-2023 resulted in a stall in freight processing after a series of intentional labor slowdowns and walk-offs. At the ILWU Canadian West Coast Ports, a 13-day strike caused over $12 billion in trade to be stuck at sea, and it took months for the backlog of containers to be cleared out.

The ILA contract offers longshoremen an annual salary range of $150,000-$250,000, taking into account factors such as seniority, skill rate, hazard pay, overtime differential, and tonnage bonus (which can range from $15,000 to $20,000).

The ILA and ILWU have different compensation models for their longshoremen. While ILA workers receive royalties based on tonnage processed, ILWU workers receive additional compensation based on man-hour assessments. This means that ILA workers have an incentive not to have cargo diverted, while ILWU workers do not.

According to Xeneta data, there was a nearly two percent decline in import tonnage processed on the East Coast from Q4 2023 to Q2 2024.

Insiders claim that the ILA is aiming for a larger increase than the 32% secured by the ILWU in its new six-year contract, as well as a substantial bonus package.