East and Gulf Coast port strikes, ILA longshoremen walk off jobs from New England to Texas, stall billions in trade

Billions in trade were halted at US East Coast and Gulf Coast ports after members of the International Longshoremen's Association (ILA) began walking off the job after 12:01 a.m. ET on Oct. 1. The ILA, North America's largest longshoremen's union, is making good on strike threats at 14 major ports with nearly 50,000 of its 85,000 members subject to a just-expired master contract with the United States Maritime Alliance (USMX), and picketing workers have begun to appear at the ports. Unions and port ownership groups failed to reach agreement on a new contract by midnight in a long battle over wage increases and the use of automation.

In a last-ditch effort Monday to avert a strike that could cause significant damage to the U.S. economy if it lasts — at least several hundred million dollars a day in the biggest ports like New York/New Jersey — the USMX offered a nearly 50% wage increase over six years, but the ILA It has refused, according to a source close to the talks. The port ownership group said it expects the offer to restart collective bargaining.

The 14 ports preparing for a strike are Boston, New York/New Jersey, Philadelphia, Wilmington, North Carolina, Baltimore, Norfolk, Charleston, Savannah, Jacksonville, Tampa, Miami, New Orleans, Mobile and Houston.

New York Governor Cathy Hochul said in a statement issued shortly after midnight that “the first large-scale eastern dockworker strike in 47 years has begun at ports from Maine to Texas, including the Port Authority of New York and New Jersey. In preparation, New York is facing much-needed shortages in our grocery stores and medical facilities.” Working around the clock to ensure product is available.”

ILA leadership's rhetoric has been aggressive In the weeks leading up to the strike, ILA President Harold Daggett, who was a member of the union when it last went on strike in 1977, told rank-and-file members — who voted unanimously to authorize a strike — in a recent video message, “We will crush.”

In a video posted on an ILA Instagram account, Daggett addressed union workers at Maher Terminals in Elizabeth, New Jersey. “It's going down in history, what we're doing here,” he said. “They don't last very long,” he added.

For now, it's the supply chain and the US economy that will take an immediate hit.

Shana Ray, chief solutions architect at supply chain intelligence firm Forkites, told CNBC that the strike comes at the worst possible time, with supply chain congestion adding to the devastation left behind by Hurricane Helen.

“Helen has caused port opening delays at the Ports of Charleston and Savannah, as well as power loss at intermodal facilities in Savannah, Charleston and Atlanta,” Way said. “This has caused congestion for ocean, trucking and rail carriers throughout the Southeast and Gulf ports.”

Logistics experts told CNBC there has been an exodus of cargo from the east to the west coast in recent months, and companies have increased orders for the peak shipping season because of the risk of a strike. Both economists and logistics executives say the impact of a strike depends on how long work is stopped.

“A week or two of disruption will create some backlog but the broader consequences will be minimal outside of a handful of port-dependent areas, including Savannah,” said Adam Cummins, an economist at Moody's Analytics. “But anything else will lead to shortages and upward price pressures,” he said.

The most significant problems will face the food and automobile industries, Cummins said, because they particularly rely heavily on the closed ports. While inflation is unlikely to rise despite a prolonged strike, even a modest acceleration could create uncertainty and force the Federal Reserve to be more cautious about cutting interest rates, which would weigh on the overall outlook for job growth and investment.

A one-week strike could cost the U.S. economy $3.78 billion and slow supply chains by mid-November, according to an analysis by the Conference Board. After all, ports handle $3 trillion in U.S. international trade annually and are threatened by strikes.

Many industries are preparing for a major response. Naushin Shamsili, CEO and president of Nuco Logistics, which specializes in pharmaceutical imports and exports, said the strike comes at a critical time for the pharma sector to replenish inventories.

“Almost everything in this industry is just in time,” Shamsili said. “Raw materials are being brought in to complete drug production. The ship carries medical supplies for clinics and hospitals. For some time importers did not bring in much cargo as they were overwhelmed with supplies post-Covid. Now they have started rearranging. Medical Devices, Gloves, Syringes and Tubing.”

Shamsili also said that East Coast ports are gateways for generic drugs made in India. About 48% of the active pharmaceutical ingredients used in the US are imported from India. Without these APIs, medicine cannot be produced. APIs are also developed in Europe, using East Coast ports as US points of entry.

Steve Lamar, CEO of the American Apparel and Footwear Association, said these ports are important to the retail industry. In 2023, East and Gulf Coast ports will account for 53% of all U.S. apparel, footwear and accessory imports, he said, worth more than $92 billion.

“The clock is ticking,” Lamar said. “Every strike day brings five more days of disruption as our consumer-driven economy gets stuck in port backlogs as we hit the heavy holiday shopping season. Both sides must come back to the table and the administration must be prepared to use all. To ensure this Reaching a fair, long-term, and sustainable agreement is task No. 1 for all parties.”

Importers eg Walmart — the No. 1 importer across affected ports — as well as other top importers Home DepotIkea, SamsungAnd LG Electronics will find little choice to move business to Canada or the West Coast as other unions stay close in support of the ILA's labor battle.

According to ImportGenius data, these companies are among the top importers in 14 major ports that an ILA strike would impact.

The last time the ILA went on strike in 1977, the West Coast Ports ILWU union supported it by allowing ILA members to go to the Port of Los Angeles to stop the discharge of diverted ships. ILA President Daggett, who was involved in this activity as a young union member, recently referred to this historic example in communications with the rank-and-file.

The ILA also clarified that all its members, including those not subject to expiring agreements, would remain in terminated positions. “You can be sure that the 85,000 members of the ILA will support their sisters and brothers,” ILU spokesman James McNamara recently told CNBC.

The Teamsters issued a statement Monday night from its president, Sean O'Brien, saying it stood “100%” with the ILA in its fight for a new contract and reminded its members that the Teamsters do not cross the picket line. “Ocean carriers are striking against themselves after failing to negotiate an agreement that recognizes the value of these workers,” O'Brien said, and he added some harsh words about any attempt by the federal government to interfere with labor action.

The National Retail Federation said it is restocking items for the holidays as well as just-in-time products such as auto parts and pharmaceuticals to ship items on track for Oct. 1 arrivals.

Between 43%-49% of all US imports and billions of dollars in monthly trade are now caught up in failed negotiations on a new union deal, which broke down in June amid complaints from the ILA that the ports were violating rules on usage. automation

The White House has since late last week deployed senior officials, including Transportation Secretary Pete Buttigieg, Acting Labor Secretary Julie Sue and National Economic Council Director Lell Brainard, in an effort to bring the ILA and USMX back to the bargaining table for talks. A quick deal.

Late in the day on Monday, the USMX released a statement saying that over the past 24 hours it had traded counteroffers with the union, including a proposal to raise wages by nearly 50% over six years, triple employer contributions to employee retirement plans, strengthen health care options, and automate and semi- Maintain current contract language around automation.

The union had already said in a statement issued Monday at 11 a.m. ET that “Ocean carriers represented by USMX want to enjoy the billions of dollars they are making in 2024, when they offer ILA longshore workers an unacceptable wage package that we reject. ” The statement added that the union viewed the USMX as “intending to strike all ports from Maine to Texas within approximately 12 hours.”

The Biden administration finds itself at a delicate political moment, with the presidential election a month away and President Biden vowing that he will not use existing labor laws to force union workers back to work, which is within his power under the Taft-Hartley Act.

The Taft-Hartley Act, passed in 1947, was an amendment to US laws governing labor relations and union activity that gave a US president the power to suspend strikes for an 80-day “cooling off period” in cases where “national health or security” was at risk.

The White House has reiterated its position several times in recent days that “we have never called on Taft-Hartley to break the strike and are not considering doing so now.”

Cruise operations and military operations in ports will continue.