East Coast and Gulf Coast Port Strikes Impact Supply Chains

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Sep. 27, 2024
By: Chaney A. Finn

As we have reported earlier this summer, the current Master Contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) which is an alliance of container carriers, direct employers, and port associations serving the East and Gulf Coast ports of the U.S., is set to expire on September 30th. Since our initial reporting of this situation, negotiations have not resolved the dispute to extend, renew or replace the current contract ahead of its expiration date. At this time, a strike appears to be imminent.

A port strike will have significant consequences for supply chains and the larger economy, essentially halting the transportation of ocean container traffic at some of the U.S.’s largest ports. Ocean freight is not isolated in the strike. International and domestic rail and over the road freight will also be impacted. As we have seen in a similar, but unrelated rail strike in Canada, U.S. rail carriers are beginning to reject exports in preparation to scale down operations to the ports, so it would not be stuck on the rails or at the port, should the strike continue for an extended period. This is to prevent safety hazards such as organic material spoiling, or the ion-batteries in electronics from possibly catching fire when unmaintained and being inaccessible during the duration of the strike.

Importers and logistics companies anticipating the strike have already been rerouting East and Gulf Coast shipments to West Coast ports ahead of the work stoppage. This rerouting adds shipping constraints including longer lead times and increased ocean freight rates and accessorial fees associated with limited container capacity and congestion. This compounds the capacity impact caused from other international freight disruptions, such as the drought restrictions of the Panama Canal, avoidance of the Red Sea due to the attacks on commercial vessels, and the recent Canadian rail work stoppage.

However, West Coast ports cannot absorb the diverted volume that is being rerouted, as they have recently encountered historic congestion, which resulted in significant supply chain disruptions that we have covered. The increased volumes from rerouting EC and GC shipments poses risks of repeating the supply chain-related events that were exacerbated during the COVID-19 pandemic. The strike will mark a work stoppage at East and Gulf Coast ports for the first time in nearly 50 years and comes before the peak season for imports of retail ahead of the holiday season, when capacity is already limited without the additional freight disruptions further add to the constraints.

Despite the economic and potential safety impact the strike would have on logistics and supply chains, and calls from coalitions President Biden will not intervene to prevent workers from striking. The federal Taft-Hartley Act grants the president powers to intervene in labor disputes that threaten national security or safety by imposing an 80-day cooling-off period, requiring employees to work while negotiations continue. Intervention by the White House could deter both parties from negotiating in good faith and could have implications with the upcoming presidential election.

The White House-led Supply Chain Disruptions Task Force, along with the Commerce Department is monitoring the situation to track any potential disruptions and are “engaging with industry stakeholders that could be impacted.”

Should you have any questions regarding international trade compliance, do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.