One of the biggest lessons we learned during the pandemic was how complex the global supply chain is and how a disruption, no matter how large or small, can have an impact and cause delays.
The supply chain continues to face challenges today from ongoing Houthi attacks on commercial shipping that have essentially shut down the use of the Red Sea and Suez Canal. That is forcing longer transit times for vessels that have to travel around the Cape of Good Hope to reach East Coast and Gulf Coast ports.
Contract set to expire
We are now less than three weeks away from a potential major disruption that will impact all container ports from Maine to Texas. The contract between the International Longshoremen’s Association and the United States Maritime Alliance, which covers all these ports, is set to expire on Sept. 30. Unfortunately, there has been no progress negotiating a new contract. In fact, the parties haven’t even sat down for formal master contract negotiations for months.
While there was some hope in 2022 when the parties started to have conversations about an early contract extension, those talks stopped in 2023. This January, NRF sent a letter to the leaders of the ILA and USMX encouraging them to return to the bargaining table to negotiate a contract and avoid any kind of disruption.
Hopes were raised in early 2024 when the parties issued a joint statement that they would seek to conclude local negotiations by mid-May and then turn to negotiate the master contract. On May 12, the parties issued a joint press release saying they expected to complete local negotiations that week and then resume master contract negotiations.
The negotiations were set to resume on June 11. Unfortunately ILA President Harold Daggett announced a halt to the master contract negotiations on June 10 because of an automation issue at the Port of Mobile.
Asking for negotiations to continue
With that, the rhetoric around an actual strike, which hasn’t happened since 1977, started to pick up. In response, NRF led a coalition letter to President Biden signed by over 155 trade associations urging the administration to engage with the parties to help them get back to the table to negotiate a contract without any disruptions.
With no meetings in July or August, the rhetoric and the threat of a strike continued to pick up. On Sept. 3, NRF issued a statement again calling for the parties to return to the negotiating table and avoid disruption. The statement also called on President Biden to offer any and all support to the parties necessary to help them get a deal.
The ILA held Wage Committee meetings on Sept. 4 and 5, where they focused their conversations on the union’s final contract demands as well as a strike mobilization plan. They concluded the meeting by granting unanimous support for a strike.
Retailers’ response
The question now with only a few weeks left and rhetoric at an all-time high, is whether the parties actually reach a deal or will we see a strike at the East Coast and Gulf Coast ports for the first time in over 40 years?
NRF members have been very concerned about the potential for such a strike. Many have taken steps to mitigate the potential impact by bringing in products earlier and frontloading the peak shipping season or by shifting products back to the West Coast.
Imports at U.S. ports followed by the Global Port Tracker report prepared for NRF by Hackett Associates have been at or above 2 million Twenty-Foot Equivalent Units since April, and September is expected to see 2.31 million TEU — import levels not seen since 2022.
Retailers have also been shifting cargo to the West Coast — similar to how many shifted cargo to the East Coast/Gulf Coast during prolonged West Coast port labor negotiations a couple of years ago. These shifts come at a cost to retailers and others.
If a strike does occur, that means operations at the covered ports stop. Neither imports nor exports will move, vessels will start to back up outside the ports, containers will sit and industries from retail to manufacturing to agriculture will be impacted.
For retailers, that means holiday shipments might not arrive on time. Manufacturers might not receive parts, materials and supplies needed for production, which will lead to assembly lines shutting down. And farmers won’t be able to get their products to overseas markets, which could lead to lost sales.
All in all, this would have a significant impact on the economy, just at a time when inflation is on a downward trend. One need only look back to the 2002 West Coast port lockout — an 11-day closure of those ports. Many economists believe that disruption cost the economy about $1 billion every day and took six months to recover from.
The impact could be more significant in today’s economy: Daggett has said “we’ll shut them all down” with a strike.
Options for resolution
So, what can be done? The easiest solution is for the parties to immediately return to the table and resume negotiations on the master contract. We would hope this would include an option to extend the current contract in case a new deal is not reached by Sept. 30, in the hopes of avoiding an Oct. 1 strike.
If that does not occur, and a strike does happen, the options are limited. President Biden can certainly use his bully pulpit to try to get the parties back to the table and encourage them to seek the help of a federal mediator. The administration to date has engaged in several key supply chain labor negotiations including the West Coast ports, the railroads, and the Teamsters and United Parcel Service.
Supply Chain
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As a last resort, Biden could decide to invoke the Taft-Hartley Act, which would implement an 80-day cooling off period to open the ports, and urge the parties back to the table with the help of mediation. Former President George W. Bush used this option to end the 2002 lockout. Unfortunately, there is no guarantee such an action would lead to a new contract.
The best way to avoid a costly strike is for the parties to return to the table and actually negotiate a new deal. The downstream impacts on businesses, workers, consumers and the economy at large are too large to see a coastwide port strike.
Source: Jonathan Gold VP, Supply Chain & Customs Policy, National Retail Federation
September 10, 2024
