Unanimous support for strike by Port union escalates U.S. supply chain fears.

• On Tuesday, October 1, at 12:01 AM, the ILA, led by president Harold Daggett, informed its members that they must be ready to take action and strike.
• Despite the ILA's history of resolving disputes and not striking since 1977, businesses in various sectors, including retail, manufacturing, and logistics, are worried about a potential strike.
• The ILA is signaling that it has already decided to strike, according to USMX's statement to CNBC.

The longshoremen's union in North America has been holding meetings for two days without reaching a new contract with port ownership, leading to growing concerns of a strike among those in the business and logistics community.

The International Longshoremen's Association's strike would affect 43% of all U.S. imports and result in billions of dollars in lost trade each month.

The union's wage committee unanimously supported a strike on Oct. 1 if a new contract doesn't meet their demands at the conclusion of their two-day meeting on Thursday. Union president Harold Daggett, the chief negotiator, stated that he wants a favorable economic agreement for his members, which includes opposition to port automation and exclusive port contracts.

Daggett stated in a video that the only way to achieve an agreement is through good faith bargaining and warned of a worker slowdown if the Biden administration uses the Taft-Hartley Act to force union workers back to the docks.

"Daggett stated that after the cooling off period, he would have to return to work for 80 days under Taft-Hartley. He questioned whether the men would go back to work on the pier after those 80 days, which would cost them money. He made a gesture of putting his hands around his throat in a choke hold to emphasize the financial strain. He also pointed out that the company's money would be used to pay their salaries while they transitioned from 30 container moves an hour to eight. He suggested that it would be better for both parties to sit down and negotiate a contract to move forward."

Recent labor strife involving ILWU negotiations covering West Coast ports resulted in a worker slowdown, causing delays in expeditiously working on vessels and creating backlogs of container pickups for trucking and rail. In recent years, there has been a surge of union actions affecting ports, rails, and the global supply chain, including Europe, the West Coast, and Canada's rail strike, the most recent action, which occurred last month.

The USMX stated that it remains committed to resuming negotiations with the ILA on a new master contract before the current agreement expires and avoiding a strike. However, the ILA has not shown any signs of reopening dialogue or sharing its current contract demands, which has caused concern among port owners.

In recent years, governments have employed national law to compel union workers to return to work, as seen in the Canadian rail strike and the U.S. freight rail strike in 2022.

The Biden administration supports collective bargaining as the best way for American workers and employers to reach an agreement, and has never invoked Taft-Hartley to break a strike and is not considering doing so now, according to an administration official.

On 37 occasions, presidents have intervened in labor disputes under Taft-Hartley.

The ILA's strike could have substantial economic consequences for the U.S., as Sea Intelligence predicts East Coast ports will handle 2.3 million TEU in October, which amounts to 74,000 shipping containers per day. With an MDS Transmodal estimate of $50,000 per container, the daily freight value is over $3.7 billion.

If the ILA goes on a one-day strike, it could take five days to clear, according to Sea-Intelligence. A one-week strike in October could cause slowdowns until mid-November.

In June, the National Retail Federation, along with 158 state and federal trade associations, sent a letter to President Biden advocating for the administration to collaborate with negotiating parties to achieve a new agreement. Prior to that, NRF had written to ILA and USMX in the beginning of the year, urging the resumption of port labor negotiations.

Ports management was accused of violating contract terms related to automation use by the union, which ceased communication with them in July.

"The National Association of Manufacturers' managing vice president of policy Chris Netram stated that any disruption resulting from the United States Maritime Alliance and the International Longshoremen's Association negotiations would have an immediate impact on the manufacturing supply chain. A work stoppage at East Coast and Gulf Coast ports would disrupt logistics for U.S. businesses and hinder the movement of goods upon which millions of Americans depend. As a result, costs will rise and manufacturing jobs will be lost if parts and supplies don't arrive on time."

The U.S. Chamber of Commerce, in collaboration with Mitre Corporation, has shared with CNBC a recent analysis of potential ILA strike impact. The analysis indicates that while no coastwide disruption has occurred since 1977, opposition to increased port automation and demands for higher wages are significant issues in the current negotiations.

The Mitre analysis predicts that a 30-day strike at the ports of New York and New Jersey could result in an economic impact of up to $641 million per day. In Virginia, an economic impact of $600 million per day is expected, or approximately $18 billion over 30 days. The export impacts at Houston operations could reach $51 million per day, and $41.5 million per day for imports.

Chris Shay, NRF President, states that the possibility of a strike during the busy shipping season has prompted retailers to implement expensive risk management measures.

"If inflation is decreasing, a strike or disruption would negatively affect retailers, consumers, and the economy, according to Shay. The government should provide assistance to help the parties reach a new contract agreement."

According to Steve Lamar, president of the American Apparel & Footwear Association, a disruption to the East and Gulf Coast ports would significantly affect the cost and availability of apparel, footwear, and travel goods, as more than half of these items move through these ports. Lamar stated that a strike this fall, which would occur during the peak holiday shipping season, would exacerbate the impact of the ongoing Red Sea crisis and increase the cost of these goods even further.

According to Xeneta data, there has been a nearly 2% decrease in import tonnage processed on the East Coast between Q4 2023 and Q2 2024. Emily Stausbøll, Xeneta senior shipping analyst, suggests that some shippers are shifting imports from the East Coast to the West Coast. ILA longshoremen receive royalties based on the amount of tonnage they process annually at their port. As a result, it is in their best interest not to have cargo diverted, as this could decrease their bonuses.

The call to action and strike preparations were discussed in the two-day meetings, with videos playing during the meetings. The current contract expires in three weeks and four days from Thursday. Daggett addressed delegates at the meeting, stating, "We must be prepared to hit the streets at 12:01 on Tuesday, October 1, 2024."

The ILA and USMX each submitted F-7 forms to the Federal Mediation & Conciliation Service, indicating their collective bargaining agreement was expiring. This is a mandatory step under the National Labor Relations Act for all private-sector agreements. The USMX was informed by the union that it had filed the F-7 form on August 19, and the USMX filed its own form with the FMCS on August 23.

The FMCS, a neutral, independent third-party, reviews the forms and reaches out to both parties to discuss potential services for building relationships and negotiations. Both parties must agree to any assistance provided by the FMCS. The FMCS has contacted both parties but has not disclosed any information regarding its involvement.

The ILA has said details of its contract demands will not be released.

"Daggett stated at the union meeting that these companies, which are generating billions of dollars, should include us in their success. We have contributed to their growth, yet now they want to eliminate us. This is unfair and the union has been in existence for nearly 200 years."