Crisis in the Making: Preparing for the Potential East Coast Strike

The supply chain has seemingly been in ‘crisis mode’ since early 2020, when the COVID-19 pandemic hit. Since then, we have experienced a series of significant disruptions: multiple rail strikes (including one this past summer and another narrowly avoided two years ago), labor disputes at West Coast ports, a drought in the Panama Canal limiting movement of containers, the ongoing turmoil in the Red Sea due to the Houthis, and the list goes on.  

We are now just a week away from the potential walkout of East Coast dock workers on October 1. While there is a complex background of how we got to this point, the undercurrent is that both sides — the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX) —are not meeting to negotiate directly and have drawn proverbial lines in the sand when it comes to a new labor agreement. From a 30,000-foot level, it appears that the USMX has gotten a little too greedy when it comes to increasing dockworkers' wages, while Harold Daggett, head of the ILA, has overplayed his hand in securing higher pay for his union members. The middle ground still needs to be reached, but until then, we once again go through the song and dance of preparing for the specter of another major port strike.

Over the past several weeks, importers have shifted strategies, leading to an increase in West Coast imports and an early peak season on the East Coast as companies rush to bring in goods before the potential strike. As a result, shipping rates to the East Coast have plummeted due to concerns over possible unloading delays should the ports be closed by the time containers arrive. Carriers have also adjusted their strategies, sending notices of additional surcharges as high as $3,000 per container if there are work disruptions.

Numerous terminals have extended their operating hours to facilitate container removal ahead of the strike. Should a strike occur, extreme congestion on the West Coast is expected as cargo is redirected. During the 2002 West Coast strike, which lasted just 11 days, the economic toll was estimated at $1 billion per day, with a six-month recovery period. According to a J.P. Morgan analysis, a similar strike on the East Coast could cost upwards of $5 billion a day. Considering that nearly 44.3% of U.S. imports enter through union-controlled ports, per data from PIERS, the potential impact is staggering.

On September 20, following discussions with government officials about what our members should expect, ACD alerted our member companies to take immediate action to move cargo out of the East and Gulf Coast ports, including:

1. If cargo begins accruing detention or demurrage charges on or before September 30, it is expected that these charges will continue after a strike begins, even if you have no access to the ports. If you have cargo that will begin accruing these charges on or before September 30, take action now.
2. If you are unable to reach your cargo due to appointment unavailability or other factors outside of your control, be sure to document your attempts and inability to gain access.
3. Several terminals have announced extended hours to help facilitate the removal or return of cargo to/from the ports, so be sure to take advantage of these opportunities if available.

Needless to say, the Alliance has been fighting like hell to push the White House to intervene to ensure a strike of this magnitude does not take effect.

ACD has signed two letters to the Biden Administration, both endorsed by over 150 shipper organizations. These letters urge the White House to pressure both sides to commence negotiations and highlight the severe consequences of a strike. The USMX published a press release in support of the second letter.

On September 23, the Alliance also sent a letter to the Federal Maritime Commission (FMC) raising concerns about additional surcharges and detention charges that terminal and ocean carriers intend to levy on shippers should a strike occur.

I am happy to report that the FMC did remind regulated parties that “all statutes and regulations administered by the FMC remain in effect during any terminal closures related to potential work stoppage at ports in the East Coast and Gulf of Mexico regions.” This means the FMC is on the watch for ocean carriers that are attempting to assess charges that could be unlawful.

All this being said, ACD members and Affiliates must plan as if a strike will prevail come the stroke of midnight on October 1. At this point, we know there are still no formal meetings scheduled between the ILA and USMX, and that in the event of a strike, the Biden Administration will not invoke powers under the Taft-Hartley Act to require the union to return to work while an agreement is hashed out. For those War Games fans, the War Operation Plan Response is at Defcon 2, and we are rapidly approaching Defcon 1. Every possible measure must be taken to avert this strike, as the alternative to the American economy and ACD member companies would be crippling.