ILA Strike Shuts Down US Ports, Threatens Supply Chains

On Oct. 1, the International Longshoremen’s Association (ILA), the largest maritime workers’ union in North America, went on strike. This strike, the first since 1977, follows failed negotiations with the United States Maritime Alliance (USMX) over wage increases and labor conditions.

The strike has resulted in the complete shutdown of all ports along the Atlantic and Gulf Coasts, from Maine to Texas. The ILA, representing over 85,000 longshoremen, has been in negotiations with USMX since May, advocating for wage adjustments to reflect the billion-dollar profits enjoyed by ocean carriers. Harold Daggett, President, ILA, highlights that wage growth has averaged at just 2.02% annually over the last three decades, so inflation has significantly eroded workers’ purchasing power. “Inflation has eaten into any wage increases,” says Daggett, as previously reported by MBN. “Everything is more expensive compared to six years ago.” 

Economic Implications of the Strike

This strike could cost the supply chain up to US$5 billion per day, according to the law firm Huschman Blackwell. The National Association of Manufacturers (NAM) says that over 68% of containerized exports and over 56% of containerized imports pass through East and Gulf Coast ports, including but not limited to New York/New Jersey, Norfolk, Philadelphia, Baltimore, Charleston, Savannah, Jacksonville, Miami/Port Everglades, Mobile, New Orleans and Houston. These ports account for over US$2.1 billion in daily trade value, as they handle over 91% of containerized imports and 69% of exports of pharmaceutical products, alongside 76% of containerized vehicle exports and over 54% of containerized vehicle imports. For air and spacecraft, more than 77% of containerized exports and more than 51% of containerized imports go through these ports.

According to leader of in-transit supply chain risk management Overhaul, the core industries using these ports are:

• Retail, including electronics, clothing, and toys, especially during the holiday season. 

• Automotive: Ports like Baltimore and Brunswick, Georgia, are pivotal for vehicle imports and auto parts. 

• Agriculture: Ports such as Philadelphia and New Orleans handle large volumes of fruits, vegetables, coffee, and wood products. 

• Food and Beverage, including a significant share of imported beer, wine, whiskey, and rum. 

• Manufacturing, as many manufacturers count on imported components that arrive via these ports.

ILA’s Demands

The ILA’s demands include a US$5 hourly wage increase for each year of a new Master Contract, guarantees against automation that would threaten jobs, and a call for all Container Royalty funds to be allocated to the ILA. The union expressed dissatisfaction with the current wage proposals from USMX, citing that many longshore workers operate complex, multi-million-dollar equipment for as little as US$20 an hour, especially in states where the minimum wage is already US$15. The union has highlighted that two-thirds of its members are on-call, making their employment precarious.

“Our members feel underappreciated, especially given the sacrifices they made during the pandemic, keeping ports open and the economy moving,” says Daggett.

USMX’s Position

The USMX says that it directly supports hundreds of thousands of jobs and is committed to negotiating fairly. It claims the latest offer includes a nearly 50% wage increase and aims to address inflation while recognizing the hard work of the ILA members. However, the ILA has labeled this as misleading, arguing that the proposal does not sufficiently address the realities of its members’ working conditions and compensation.

The ongoing dispute comes against a backdrop of soaring shipping costs, with container charges reportedly increasing from US$6,000 to US$30,000 in just a few weeks. The ILA criticized ocean carriers for profiteering at the expense of American consumers.

Political Response 

US President Joe Biden has weighed in on the labor dispute, advocating for the USMX to offer fair negotiations that acknowledge the contributions of the longshoremen. He says that collective bargaining remains the best avenue for workers to secure appropriate wages and benefits, particularly in light of record profits made by ocean carriers during the pandemic. In some cases profits grew 800% compared to their profits prior to the pandemic. Biden emphasizes that dockworkers will play an essential role in getting communities the resources they need in the aftermath of Hurricane Helene. 

“My Administration will be monitoring for any price gouging activity that benefits foreign ocean carriers, including those on the USMX board. It is time for USMX to negotiate a fair contract with the longshoremen that reflects the substantial contribution they’ve been making to our economic comeback,” says Biden.

Julie Su, US Secretary of Labor, also highlights the need for both parties to return to the negotiating table, emphasizing that the sacrifices made by port workers during the pandemic should not be overlooked.

“The parties need to get back to the negotiating table, and that must begin with these giant shipping magnates acknowledging that if they can make record profits, their workers should share in that economic success,” says Su.

Private Companies’ Response

As labor disputes unfold, shipping lines and logistics companies are preparing for disruptions that could significantly affect global supply chains. Several private companies have issued statements detailing their responses to the ongoing labor issues at the ports.

Maersk has advised its customers that booking acceptance is contingent upon space availability. It is processing export bookings for container yard shipments, whether inland or port, reefer or dry. While the company has no restrictions on new import bookings via ports impacted by the ILA strike, export bookings involving refrigerated containers from store-door origins at ILA-affected ports are not being accepted. 

Maersk has also provided contingency inland routings from West Coast ports to select East Coast markets. It has urged customers to hold all empty containers until the labor disruption ceases, as it does not have alternative empty depots planned.

Hapag Lloyd is working closely with customers to expedite bookings on earlier vessels, prioritizing the movement of import containers off terminals to mitigate disruptions. It anticipates increased shipping costs due to heightened demand for alternative routes and port services, with emergency surcharges likely to be implemented for additional handling and congestion.

Ocean Network Express (ONE) has declared force majeure on several vessels, which has already impacted supply chains. Scan Global Logistics notes that strike-related surcharges are being introduced, expected to be passed on to the shipping community as add-ons to existing rates for both Full Container Load (FCL) and Less than Container Load (LCL) shipments. These charges could range from US$1,000 to US$2,000 per TEU (FCL) and upwards of US$80 per weight/meter (LCL).

CMA CGM is also introducing Local Port Charges (LPC) for the US East and Gulf Coasts, effective Oct. 11. Hapag Lloyd plans to implement a Work Disruption Surcharge (WDS) starting Oct. 18 and a Work Interruption Destination surcharge (WID) starting Oct. 19. Major shipping line MSC is also introducing an Emergency Operations Surcharge (EOS) for all US and Canadian ports, effective Oct. 26.

Mexico Impact

Mexico could emerge as a key transit point for goods amid the ongoing strike. “Mexico could take advantage of the current situation by redirecting maritime traffic to the country. This option would be particularly viable for companies with operations in both the US and Mexico, which could use the Manufacturing, Maquiladora, and Export Services Industry (IMMEX) regime to temporarily import and then re-export goods to the United States,” Miguel Roca, Director Commercial, United Freight Cargo, tells El Financiero.

Despite this opportunity, Alfonso De los Rios, CEO and Co-Founder, Nowports, highlights three significant challenges for the Mexican market: saturation at Mexican ports, rising costs, and decreased sailing reliability. “All companies in Latin America, especially those importing maritime cargo from China or the European Union to Mexico, should be aware that we will see increased congestion at the country’s ports in the coming weeks,” says De los Rios.

He adds that much of the cargo that would typically arrive in the United States would now be redirected to Mexico temporarily to cross by land, avoiding disruptions. “The other challenge is the potential rise in costs, not only for maritime movement but also for land transport. Finally, this disruption could lead to changes in itineraries and container prices,” he says De los Rios. 

De los Rios recommends that companies reach out directly to their freight forwarders or shipping lines to explore alternative itineraries and departures, as well as to understand the usual routes their vessels take to avoid extraordinary disruptions.