ILA and USMX Fail to Reach Agreement, Strike at East Coast and Gulf Ports of the U.S.

By Jeff Berman October 1, 2024

About 14,500 union workers at 36 ports along the U.S. East Coast and Gulf Coast went on strike as of midnight today, marking their first walkout since 1977.

This development had been widely anticipated in recent weeks. As previously reported by LM, the current six-year labor contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) expired yesterday, concluding a six-year labor agreement that covered approximately 14,500 dockworkers along the U.S. East Coast and Gulf Coast since September 2018. At the completion of this agreement, ILA had stated that the extended six-year contract would bring substantial wage increases, landmark protections against fully automated ports, and labor peace and stability until September 30, 2024.

USMX said late yesterday that over the past 24 hours, USMX and ILA exchanged proposals on wages.

“USMX increased our offer and requested an extension of the existing master contract as both parties abandoned their previous positions,” the statement read. “We hope this will allow us to resume collective bargaining around other unresolved issues to reach an agreement. Our offer would increase wages by nearly 50%, triple employer contributions to employee retirement plans, strengthen healthcare options, and retain current language regarding automation and semi-automation.”

ILA officials countered that they rejected the offer, noting it fell far short of what ILA members required in terms of wages and protections against automation.

“This strike is caused by USMX when they decided to earn billions of dollars in profits at U.S. ports without compensating American ILA dockworkers,” said USMX President Harold Daggett. “We are prepared to fight as long as necessary until we get the wages and automation protections that our members deserve. USMX now owns this strike, and they must meet our demands to end it.”

The prospects for a new agreement had been bleak in recent months.

On June 10, just before ILA and USMX were set to hold talks, ILA announced the suspension of negotiations while local agreements under their coastal master contract were still being negotiated. ILA officials explained that they canceled discussions with USMX after discovering APM Terminals and Maersk Line were using automated gate systems without ILA labor, which was first identified in Mobile, Alabama, and used at other ports.

On July 12, Daggett of the ILA explained that a strike threat across all Atlantic and Gulf Coast ports became more likely as employers represented by USMX had less time to negotiate a new master contract agreement before October 1 to avoid a coastwide strike.

In response to comments from ILA, USMX officials on July 18 stated they remained committed to keeping negotiations confidential until completion.

With the prospects for a new agreement growing dimmer, last week USMX filed an unfair labor practice charge with the National Labor Relations Board (NLRB) in an attempt to bring ILA back to the negotiating table.

“USMX clearly values the work of the ILA and has great respect for its members,” the statement read. “We have a history of cooperation and are committed to negotiations. Due to multiple refusals by the ILA to participate in talks over a new master contract, USMX filed an unfair labor practice (ULP) charge with the NLRB and requested immediate court injunctions—demanding that the union resume negotiations—to reach an agreement.”

Given the escalating disputes between both parties in recent weeks, the chances of this application succeeding from the outset appeared slim.

This was made clear in a statement released by ILA on September 24, which stated despite USMX’s misleading publicity campaign claiming that ILA refused to negotiate with them, communication had taken place multiple times in recent weeks. It added that negotiations over the master contract were at an impasse because USMX continued to offer unacceptable wage increases to ILA dockworkers.

Harold J. Daggett, International President of ILA and chief negotiator for the union, said: “USMX knows what our wage bottom line needs to be for our ILA rank-and-file members to approve a new master contract agreement. They call me several times a week trying to get the ILA to accept an insultingly low wage increase offer. My ILA members will not accept these insulting offers considering the work they do and the billions of dollars in profits companies earn from their labor. The responsibility for this national strike that will shut down all Atlantic and Gulf Coast ports lies entirely with USMX.”

Furthermore, ILA refuted USMX’s claim that union wage demands would amount to over 75% growth over a possible six-year agreement period.

As to what happens next, the situation remains unclear as the strike at East Coast and Gulf ports continues. However, several potential issues may disrupt supply chains and logistics operations and have negative impacts on economic prospects.

These include: expected increases in freight rates; impact on U.S. retailers’ ability to meet winter holiday demand; disruptions to supply chains and trade flows; and port congestion and backlogs.

According to the Conference Board, 36 East Coast and Gulf ports handle 57% of container volume in the United States, primarily processing goods such as electronics and automobiles that account for approximately one-quarter of U.S. international trade annually, or about $3 trillion. The organization also stated that a week-long strike could cost the economy $3.78 billion and increase consumer prices, putting pressure on inflation.

Erin McLaughlin, senior economist at the Conference Board, said: “A port strike will paralyze U.S. trade and push up prices just as consumers and businesses start to feel relief from inflation pressures. There are no simple alternatives. While shippers have already started diverting some cargo to the West Coast, alternative capacity is limited.”

Industry veteran and consultant Tom Nightingale told LM that the impact of the strike could last for months, adding that although peak season volumes were not strong, it was now in the peak season.

“These anomalies are causing chaos to today’s longer and more finely tuned supply chains. Since January 2022, inventory-to-sales ratios have risen by 9%, and capital costs of holding inventory haven’t sufficiently declined. If a strike occurs, retailers may face outdated and expensive inventories that could be devastating to their balance sheets. Although strikes are unlikely to last beyond a few days, their impact is already visible in traffic diversion to the West Coast and effects on multimodal systems. Ultimately, both Democrats and Republicans want to see America running as efficiently as it can because supply chain disruptions mean economic interruptions. Let’s hope that cooler heads prevail, and any labor action is brief.”

While some East Coast and Gulf ports’ traffic could be diverted through West Coast and Canadian ports, according to Karyn Booth, a partner at Thompson Hine LLP in Washington D.C., these ports may not have sufficient capacity to handle the traffic affected by the strike.

“Additionally, moving these goods across the country via rail and truck can present operational challenges. Moreover, for many low-value items, including certain agricultural products, such diversion could be too costly,” she said.

Regarding measures that affected shippers can take to minimize the impact of the strike, Booth cited various efforts, including: picking up and returning containers before port closures; understanding their responsibilities regarding demurrage and detention fees; documenting difficulties in the process of picking up or returning containers; monitoring carriers’ additional charges; and assessing the potential scope of supply chain disruptions and its implications for suppliers, customers, and rights and obligations under logistics contracts.

Despite widespread discussions about this development, its actual impact on holiday peak season supply chains may be less severe than expected, explained Proxima Vice President Spencer Shute.

“Most holiday goods are already in the U.S., although delays remain a concern, many items for the holiday peak have arrived. Direct impacts will likely affect certain manufacturers reliant on these ports, such as automotive and industrial production sectors. Consumers may experience shortages of perishables like bananas, given that about one-fifth of banana imports into the U.S. come through these ports, potentially pushing prices up. What we’ll witness is resilience plans implemented by manufacturers post-pandemic. Companies that shifted from just-in-time to just-in-case models have stockpiled some inventory to mitigate risks.”

Source: Logistics Management