As of 12:01 AM ET this morning, roughly 14,500 union workers at 36 East and Gulf Coast ports, stretching from Maine to Texas, are on strike for the first time since 1977.
This development was largely expected, especially in recent weeks. As previously reported by LM, the current six-year labor contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) expired yesterday. That ended a six-year labor deal between the parties, which was completed in September 2018 and covers roughly 14,500 U.S. East and Gulf Coast port workers. ILA said at the time of the deal’s completion that this six-year contract extension will bring generous pay increases, landmark protections against job-killing fully automated ports, and labor peace and stability through September 30, 2024.
Late yesterday, USMX said that over the previous 24 hours, the USMX and ILA had traded counter offers related to wages.
“The USMX increased our offer and has also requested an extension of the current Master Contract, now that both sides have moved off their previous positions,” it said. “We are hopeful that this could allow us to fully resume collective bargaining around the other outstanding issue—in an effort to reach an agreement. Our offer would increase wages by nearly 50 percent, triple employer contributions to employee retirement plans, strengthen our health care options, and retain the current language around automation and semi-automation.”
ILA officials countered, saying that it rejected this offer, noting it fell far short of what ILA rank-and-file members are demanding in wages and protections against automation.
“USMX brought on this strike when they decided to hold firm to foreign owned Ocean Carriers earning billion-dollar profits at United States ports, but not compensate the American ILA longshore workers who perform the labor that brings them their wealth,” said President Harold Daggett, the leader of the 85,000-member ILA union. “We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve. USMX owns this strike now. They now must meet our demands for this strike to end.”
Prospects for a new deal had been grim for the past several months.
On June 10, one day before talks were scheduled to take place between the ILA and USMX, the ILA announced it had suspended talks, at a time when negotiations of local agreements under the parties’ coast-wide Master Contract were ongoing. ILA officials explained that it cancelled Master Contract talks with the USMX upon learning that APM Terminals and Maersk Line are using an Auto Gate system that autonomously processes trucks without ILA labor, adding that this system, which was initially identified at the Port of Mobile, Alabama, is also being used at other ports, too.
And on July 12, ILA’s Daggett explained that the threat of a strike at all Atlantic and Gulf Coast Ports was becoming more likely, adding that employers represented by the USMX were running out of time to negotiate a new Master Contract agreement and avoid a coastwide strike on October 1.
Not long after ILA made its comments, USMX officials said on July 18, it remained steadfast in its commitment to keep ongoing negotiations out of the press until bargaining is complete.
With things remaining dire as prospects of a new deal coming to fruition continued to dim, USMX last week filed an unfair labor practice charge with the National Labor Relations Board (NLRB) in an effort to get ILA back to the negotiating table.
“USMX has been clear that we value the work of the ILA and have great respect for its members,” it said. “We have a shared history of working together and are committed to bargaining. Due to the ILA’s repeated refusal to come to the table and bargain on a new Master Contract, USMX filed an Unfair Labor Practice (ULP) charge with the National Labor Relations Board (NLRB) and requested immediate injunctive relief—requiring the Union to resume bargaining—so that we can negotiate a deal.”
Chances of this filing being successful appeared to be slim from the start, given the heightened quarrelling between the parties, especially in recent weeks.That was made clear in a September 24 statement issued by the ILA, which said that despite engaging in a misleading publicity campaign with claims that the ILA refused to negotiate with USMX, the two sides had communicated multiple times in recent weeks, adding that the stalemate remains in Master Contract negotiations because USMX continues to offer ILA longshore workers an unacceptable wage increase package.
“USMX knows what our bottom line with wages needs to be for our ILA rank-and-file to ratify a new Master Contract Agreement,” said Harold J. Daggett, ILA International President and Chief Negotiator for the union. “They call me several times each week trying to get the ILA to accept a low-ball wage package. My ILA members are not going to accept these insulting offers that are a joke considering the work my ILA longshore workers perform, and the billion dollar profits the companies make off the backs of their labor. The blame for a coast wide strike…that will shut down all ports on the Atlantic and Gulf Coasts falls squarely on the shoulders of USMX.”
What’s more, the ILA said it refutes USMX claims that the union’s wage demands amounts to a better than 75% increase over the life of a possible six-year agreement.
In terms of what happens now, with East and Gulf ports on strike, the situation is relatively unclear, given that it remains to be seen how long this work stoppage will last. That said, there are a number of potential issues awaiting, in how it can potentially upend supply chain and logistics operations, as well as negatively impact the economic outlook, too.
These things include: an expected jump in freight rates; an impact on U.S. retailers’ ability to meet demand for winter holiday operations; disrupted supply chains and trade flows; and port congestion and backlogs, among others.
Data from The Conference Board observed that the 36 East and Gulf Coast ports handle 57% of U.S. container volume, with those ports, whose leading types of cargo include electronics and automobiles, handling around a quarter of U.S. annual international trade, at around $3 trillion. It also stated that a one-week strike could cost the economy $3.78 billion and increase the cost of consumer goods, putting pressure on inflation.
“A port strike would paralyze U.S. trade and raise prices at a time when consumers and businesses are starting to feel relief from inflation,” said Erin McLaughlin, Senior Economist at The Conference Board. “There’s no easy Plan B. While shippers have already begun diverting some cargo to the West Coast, capacity for such alternative options are limited.”
Tom Nightingale, industry veteran and consultant, told LM that the ripples of a strike will likely be felt for months, adding that Peak Season volumes, while not robust, are hitting now.
“These aberrations wreak havoc on today’s longer and more finely tuned supply chains,” he said. “Inventory-to-sales ratios have already risen 9% since January 2022 and the cost of capital to hold that inventory has not come down enough yet. Retailers could be left with outdated and costly inventory if the strike happens and it could be devastating for their balance sheets. While a strike is unlikely to persist for more than a few days, the impacts are already being seen in the West Coast diversionary traffic and the impact it is having on the intermodal system. In the end, both Democrats and Republicans want to see America working like the well-oiled beacon of consumerism that it is and disruptions to the supply chain mean disruptions to the economy. Hopefully, cooler heads prevail and any labor action is short lived.”
Although some East and Gulf Coast port traffic could be diverted through ports on the West Coast and Canada, those ports might not have sufficient capacity to handle a material portion of the traffic impacted by the strike, according to Karyn Booth, partner at Washington, D.C.-based law firm Thompson Hine LLP.
“Also, moving that traffic across the country by rail and truck may pose operational hurdles,” she said. “Further, diversions might be too costly for many low-value commodities, including certain agricultural products.”
As for ways affected shippers can minimize the impact of a strike, Booth cited various efforts, including: picking up cargo and returning containers before ports shut down; understanding their responsibility for demurrage and detention charges; documenting difficulties picking up or returning containers; monitoring carrier tariffs for new surcharges; and evaluating the potential scope of supply chain disruption and its impacts on rights and obligations under supplier, customer, and logistics contracts.
While this development is generating considerable discussion, its actual impact on the supply chain for the peak holiday season may be less severe than anticipated, explained Spencer Shute, vice president, at Proxima.
“Most holiday merchandise is already in the U.S., so while concerns about delays exist, many shipments for the holiday rush have already made it through,” said Shute. “The immediate impact will likely be felt by manufacturers reliant on these ports for parts in sectors like automotive and industrial production. Consumers may experience shortages of perishable goods, such as bananas, with a fifth of the U.S. banana supply coming through these ports, potentially driving up prices. What we’ll see tested are the resiliency plans manufacturers implemented post-pandemic. Those who shifted from a just-in-time to a just-in-case model have stockpiled parts to mitigate risks. However, companies that didn’t plan ahead may struggle to recover quickly. Anticipating disruptions, some manufacturers are already shifting trade routes or adjusting supplier volumes. With this strike underway, we can expect a surge in truckload capacity, particularly in the Gulf Coast and East Coast, which may temporarily lower rates as drivers adjust to meet demand.”
Additionally, Shute noted that significant disruptions to agricultural exports could impact both domestic and global markets, affecting supply and prices, also commenting that ultimately, manufacturers need to adopt long-term strategies to navigate these disruptions.
“While short-term solutions like air freight provide immediate relief, they are costly and unsustainable,” he said. “Companies that proactively adjusted trade routes or increased order quantities to account for delays are best positioned to maintain smooth supply chains.”
Jon Monroe, president and founder of Jon Monroe Consulting, told LM that the main issue for the ILA is it feels its workers are losing their jobs to automation and wages with the two sides almost 40% apart. While the ILA’s Daggett is very much against automation and wants gates to be manned by the union labor, Monroe said the reality is that the whole world is going to automation.
“We are behind Rotterdam, Shanghai, almost every Asian port, because they’re much better equipped and faster to automate,” he said. “I know one of the things that he wants to do is develop a type of global union force and get everybody on board. But I don’t think he understands how Asia works. There is China, which is still the biggest manufacturing base in the world, and the president of China controls that with an iron fist. There’s no way that Harold Daggett is going to go in and organize China labor or in Vietnam or anywhere.”
Now that a strike is underway, Monroe said there are three potential options for how things progress from here.
Option one is the USMX gives the ILA what it wants within 24-to-72 hours. Option two is that the ILA capitulates and gives them what they want within 24-to-72 hours, and number three is the strike itself.
“The question is, how long does it last,” he said. “I’m betting seven-to-10 days. The Biden administration does not want to invoke Taft-Hartley, but this is going to hit the economy pretty hard.”
But the National Retail Federation called on President Biden to use any and all available authority and tools—including use of the Taft-Hartley Act—to immediately restore operations at all impacted container ports, get the parties back to the negotiating table and ensure there are no further disruptions.
“A disruption of this scale during this pivotal moment in our nation’s economic recovery will have devastating consequences for American workers, their families and local communities,” said NRF President and CEO Matthew Shay. “After more than two years of runaway inflationary pressures and in the midst of recovery from Hurricane Helene, this strike will result in further hardship for American families. The administration must prioritize our economy—and the millions of Americans who depend on it for their livelihood and wellbeing—and intervene immediately to prevent further hardship and deeper economic consequences. It is essential that the ILA and USMX immediately resume negotiations with the intention of finalizing a new master contract without further disruptions and put an end to this stalemate.”
As for the possibility of the White House going forward with the Taft-Hartley Act, in which the President can seek a court injunction that triggers a back-to-work order and 80-day cooling-off period if a strike of essential workers affects national security, The Conference Board explained how election year politics makes it more complex calculus.
“The Administration has stated it has no plans to invoke Taft-Hartley, due to its support of unions and collective bargaining,” it said. “Since the 1970s, it has been used only once to end a work stoppage (a 2002 lockout at 29 West Coast ports).”
