Navigating the Potential ILA Strike: What's at Stake for U.S. Supply Chains

Introduction

The International Longshoremen's Association (ILA) and United States Maritime Alliance (USMX) are locked in tense contract negotiations that could lead to a major work stoppage at U.S. East and Gulf Coast ports starting October 1, 2024. With the current contract set to expire on September 30, the potential for disruption looms large over U.S. supply chains.

This situation creates significant risk for global supply chains, especially as we approach the busy holiday season. Let's break down the key issues, potential impacts, and how shippers can prepare.

Key Developments in the ILA-USMX Negotiations

The multi-month negotiations between the ILA, representing 45,000 dockworkers, and USMX, representing port employers, have centered around several critical issues:

• Wage increases
• Port automation
• Healthcare and retirement benefits

Negotiations reached an impasse in June when the ILA discovered that some ports had implemented automation technology processing trucks without union labor, which the union viewed as a breach of the existing contract.

In August, both parties filed notices with the Federal Mediation and Conciliation Service (FMCS), though no formal mediation has taken place. ILA President Harold Daggett has stated firmly that the union will "hit the streets on October 1" if a satisfactory contract is not reached.

Adding to the complexity, the International Longshore & Warehouse Union (ILWU), representing West Coast dockworkers, has pledged support for the ILA. This implies that ILWU members may refuse to work vessels diverted from East Coast ports in the event of a strike.

Potential Impacts on North American and Global Supply Chains

An ILA work stoppage could have far-reaching consequences for supply chains across North America and beyond:

Scale of Impact

U.S. East and Gulf Coast ports handle approximately 54% of U.S. imports. A work stoppage would affect an estimated 2.3 million TEUs in October alone, representing over $3.7 billion in daily economic impact.

Widespread Disruptions

Even a short work stoppage could lead to significant bottlenecks. Sea-Intelligence estimates that a one-day stoppage would take six days to recover from. A week-long stoppage in October could create disruptions lasting until mid-November, severely impacting holiday season preparations.

Cascading Effects

A prolonged work stoppage could trigger pandemic-level disruptions:

• Overwhelmed West Coast ports due to rerouted shipments
• Container pile-ups and strained railroads
• Chassis shortages
• Skyrocketing trucking rates
• Potential General Rate Increases (GRIs)
• Additional detention and demurrage costs

Global Ripple Effects

The effective capacity of the global container shipping network could fall if ships en route to East and Gulf Coast ports go out of rotation. This could lead to equipment shortages and delays that may take months to resolve.

Intermodal Market Disruptions

The work stoppage could severely impact the intermodal market:

• Increased pressure on U.S. West Coast rail gateways
• Potential for 3+ weeks of rail dwell times
• Transit times increasing 3-4 times in core lanes
• Strain on transloading and cross-dock facilities
• Increased drayage rates and accessorial charges

Industry-Specific Impacts

While no industry would be immune, some sectors face higher risks:

• Automotive and pharmaceuticals relying on just-in-time inventory systems
• Exporters shipping to Europe, Latin America, and the Indian subcontinent

How FreightAmigo Can Help Navigate Potential Disruptions

At FreightAmigo, we understand the challenges that a potential ILA work stoppage could pose to your supply chain. Our Digital Logistics Platform offers several solutions to help you navigate these uncertainties:

Real-Time Visibility and Tracking

Our platform provides real-time visibility into your shipments, connecting to over 1000 reputable airlines and shipping lines. This enhanced transparency allows you to proactively manage potential delays and make informed decisions about rerouting or expediting critical cargo.

Flexible Routing Options

We offer a wide range of routing options, including air freight, sea freight, rail freight, and trucking solutions. This flexibility allows you to quickly adapt your shipping strategy in response to port closures or congestion. Our platform enables you to compare door-to-door freight quotes and book online, streamlining the process of finding alternative routes.

Customs Clearance Support

With potential backlogs and delays at ports, efficient customs clearance becomes even more critical. FreightAmigo's one-stop solution includes arranging customs clearance, helping to minimize additional delays once your cargo reaches its destination.

Risk Mitigation Through Cargo Insurance

In times of supply chain uncertainty, protecting your shipments becomes paramount. We offer easy access to cargo insurance options, providing an extra layer of security for your goods in transit.

Document Automation

Our platform automates shipment documents, reducing the potential for errors and delays in paperwork processing. This efficiency can be crucial when navigating complex rerouting scenarios or dealing with multiple modes of transport.

24/7 Expert Support

Our team of logistics experts is available around the clock to assist you with any challenges that may arise. We can help you develop contingency plans, identify alternative shipping options, and provide real-time advice as the situation evolves.

By leveraging FreightAmigo's Digital Logistics Platform and comprehensive solutions, we can help you mitigate the potential impacts of an ILA work stoppage and maintain the resilience of your supply chain. Our technology-driven approach, combined with our industry expertise, positions us to support you in navigating these complex logistical challenges.

Guidance for Shippers

To prepare for potential disruptions, we recommend the following steps:

1. Conduct a Scenario Planning Exercise

Evaluate your inventory levels, sales forecasts, upcoming product launches, and inventory in transit. Brief your finance, sales, and marketing teams early and often.

2. Assess Risk for In-Transit Inventory

Review all inventory heading to East and Gulf Coast ports. Decide whether to reorder critical SKUs via West Coast routes or air freight to diversify risk.

3. Evaluate Upcoming Shipments

For shipments to Midwest and East Coast locations, determine if they can be delayed until more information is available. If you have sufficient inventory, it may be best to wait.

4. Plan Alternative Routes

For urgent shipments, decide whether to book via East/Gulf Coast ports, West Coast ports, or a combination. Consider using rail or transloads to reach final destinations.

5. Consider Air Freight or Premium Services

For time-sensitive cargo, evaluate air freight or premium fast boat services based on your gross margins, current inventory levels, and risk of lost sales.

Conclusion

The potential ILA work stoppage presents significant challenges for U.S. supply chains. By staying informed, preparing contingency plans, and leveraging FreightAmigo's Digital Logistics Platform, shippers can navigate these uncertainties more effectively. We will continue to monitor the situation closely and provide updates as developments unfold.

At FreightAmigo, we're committed to helping our clients adapt to changing market conditions and maintain resilient supply chains. Our comprehensive Digital Logistics Solution is designed to provide the flexibility, visibility, and support needed to overcome logistical challenges, even in times of significant disruption.