Thanksgiving is over, Christmas is coming, and the East and Gulf Coasts are bracing for another possible International Longshoremen’s Association (ILA) strike in January 2025. To give some perspective to what a possible ILA strike means, 45,000 dockworkers at 36 ports on the East and Gulf Coasts from Maine to Texas would not be going to work. This is no small thing. About half of U.S. containerized imports come in through the East and Gulf ports, and almost 70% of exports exit the country the same way.
The story starts earlier this year when the ILA and the United States Maritime Alliance (USMX) could not agree on the details of the labor contract. This resulted in the ILA walking off the job on October 1st, 2024. The main sticking points were money and automation. After receiving some concessions on raises (61.5 %) pay increase over six years) the ILA agreed to return to work after three days. No one wanted to see a long port workers strike just before the holidays and an election, including the White House, which helped in the negotiations. Both sides agreed to kick the can down the road until mid-January 2025. If a new and complete agreement can’t be hammered out by Jan 15th, 2025, the ILA is set to strike again.
The elephant in the room now is automation, which is a big elephant. USMX believes the port system they use cannot remain competitive if the ports do not move toward automation. The ILA believes their workers will not survive if the ports do move to automation. For obvious reasons, this impasse will be a high hurdle to jump. I can’t tell you how the point of disagreement will work out in the end, but if I were a betting person, I would wager both sides would dig in, and there would be an ILA strike over an automation standoff.
What is a shipper to do?
If you have not begun routing your ocean cargo away from the East and Gulf Coasts, you are late. You better get moving, rerouting your shipments, and building up inventory if you can. It may cost more to route away from the East and Gulf Coast ports, but having your cargo stuck at a port or on a vessel for extended periods can be even more costly.
Can you depend on War & Strikes Coverage?
No, you cannot. In some cases, depending on the policy and variables, such as the origin or destination of the shipment, the shipment may not be covered by War & Strikes coverage at all. Moreover, the major risk from port strikes is delays. Cargo insurance, including most Strikes, Riots, and Civil Commotion coverages, typically does not cover losses, including perishables, from delays or loss of market experience during transit.
If you can route your cargo away from the East and Gulf Coast ports, are you out of the woods?
You may be able to see the edge of the woods, but you are not out of them. Remember that in case of an extended strike, if you are routing your cargo away from the striking ports, so is everyone else. The shift in volume will heavily tax ocean carriers, other ports, and even the Panama and Suez Canal(s) as shippers force ocean carriers to get creative with rerouting and trans-shipping. Also, the backlog at U.S. West Coast ports, including truck, rail, and equipment capacity, should be considered.
In short, if a mid-Jan strike becomes a reality, prepare for delays and frustrated freight. It is unclear what role the Fed will have if there is a strike. In Jan 2025, presumably five days after the potential strike deadline, one administration will leave the White House, and another will move in. One administration will try to solve the potential issue before they leave, and the other administration trying to solve the same issue the day they show up. What could go wrong?