CH Robinson: How shippers can prepare for a potential ILA

CH Robinson’s North America Ocean Director Mia Ginter takes an in-depth look at the upcoming ILA East Coast and Gulf Coast port strikes and how shippers can prepare now. While there is still hope that a strike can be avoided, labor issues in Canada and ongoing ocean disruptions could exacerbate the impact of a strike for shippers that don’t have a contingency plan in place. Here’s an overview of the potential strike and what shippers can do now to strategically prepare for it:

See also: East Coast and Gulf Coast ports face strike threats as ILO suspends labor talks

As master contract negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Union (USMX) continue to advance, the likelihood of a strike at ports along the U.S. East and Gulf Coast is growing. With less than two months until the current contract expires and a potential strike begins, shippers should begin preparing now to avoid major disruptions.

The International Chamber of Shipping has not had a coast-to-coast strike in nearly fifty years. But there is no doubt that a strike across the East Coast and Gulf Coast (where five of the ten busiest ports in North America are located) will have far-reaching effects. No industry or region will be immune to the ripple effects of this major disruption. U.S. importers and exporters alike will need to consider how port closures will affect their shipments. Shippers shipping goods to the U.S. from Europe, Oceania, and Asia will particularly feel the impact, which will have a ripple effect disrupting shipments in the U.S., Canada, and Mexico. As we have seen with other global supply chain disruptions, this ripple effect will result in increased shipping times and costs, including congestion charges, possible detention, and demurrage.

While no industry is immune to the impact of an ILA strike, some will be more affected than others. For industries that operate on a just-in-time inventory model, such as automotive or pharmaceuticals, even two days of strike activity could severely disrupt operations. Many auto parts are imported through the East Coast, so the risk of production delays is high. On the export side, shipments to Europe, Latin America, and the Indian subcontinent primarily depart from the East Coast of the United States, so exporters that rely on these trade routes may face a higher risk of disruption.

Today, shippers have two options for responding to the ILA strike. They can wait it out and deal with any impacts from the strike. Or, they can immediately put contingency plans in place to reduce the impact of the strike on their freight and balance sheets.

Waiting for a solution

The U.S. government could step in to help the ILA and USMX reach a deal. The Biden administration has shown a willingness to actively participate in labor negotiations, as they did to avert a railroad strike in 2022. However, the ILA has said they do not want government help. The upcoming presidential election further complicates government intervention.

If the government does not intervene before the strike begins, it will almost certainly intervene after it ends. A shutdown of ports along the East and Gulf coasts would be devastating to the economy. As a rule of thumb, a week of port shutdowns could delay cargo shipments by a month.

Unlike the U.S. railroad strike, the president or Congress cannot force longshoremen to sign a contract without first passing legislation. However, if a port strike threatens to endanger national health or safety, the president can ask the court for an 80-day cooling-off period under the Taft-Hartley Act. This action would temporarily stop the strike while negotiations continue.

Prepare to strike

For shippers who don’t want or can’t risk the delays and disruptions that a potential strike would bring, planning ahead is critical.

This year, many importers have already brought forward shipments to the US in anticipation of a possible strike, not only because of the ILA strike, but also because of the constant rerouting of Red Sea routes and the threat of tariffs on certain goods.

Even those importing cargo early need to remain vigilant as the full scope of the impact is not yet known. Considering alternative port destinations is one thing, but planning for inland trucking and rail is also a key component to saving costs and reducing risks.

Two potential ports on the U.S. East Coast to call for capacity should a strike occur are the non-union ports of Portland, Maine, and Chester, Pennsylvania. However, these ports are served by small niche carriers that only support the European market with limited capacity. Shippers who want to secure space from these carriers need to start booking immediately and establish a strong support rhythm with them. Otherwise, capacity may be exhausted by the time a potential strike occurs.

If shippers are willing to pay more to reroute cargo to the U.S. West Coast, contingency plans will need to include inland support, assuming capacity is available. Without advance planning, East Coast and Gulf Coast cargo that is rerouted to the West Coast is unlikely to be prioritized for domestic intermodal truck or rail service. In addition to capacity and delay issues, warehousing space may be needed to store rerouted cargo until inland capacity becomes available.

Eastbound rail congestion could also cause delays. Many railroads are ready to move freight from Southern California and the Pacific Northwest to the East, but shippers should still expect significant increases in transit times.

For exporters, booked ocean freight capacity could be stranded at East and Gulf Coast ports until the strike ends and ships can dock. The longer the strike, the longer it will take for ports to clear backlogged containers and resume outbound cargo. Similar congestion could occur at other ports if importers turn to Canadian and U.S. West Coast ports to keep goods moving.

If cargo needs to be transshipped through Canada, shippers need to ensure their intended gateway is not at risk of a strike. The Teamsters union, which supports workers on Canada’s two main railways, issued a 72-hour strike notice on August 18. This will paralyze the country’s supply chain and eliminate alternative ports and entry capacity for shippers diverting from the U.S. East and Gulf Coast. International Longshore and Warehouse Union members at the Port of Vancouver are also expected to vote on a strike soon. Meanwhile, longshoremen at the Port of Montreal continue to work without a collective agreement.

Switching to air freight will be a more expensive option than using other seaports, but will allow shippers to make temporary adjustments. Shippers considering air freight should keep in mind that there will be fewer passenger flights during the current busy summer travel season through October. Air capacity is already limited due to increased e-commerce demand in Asia and the Red Sea diversion. Some carriers are already discussing imposing peak season surcharges in late August or early September. The longer shippers wait to book space, the less capacity will be available and costs will only rise.

Even if you don’t import or export from the East Coast or Gulf Coast of the United States, any shipments within North America could be affected by the ripple effects of this strike. Shippers should consider how to adjust their domestic supply chain in the event of a strike. Leveraging their full network of distribution centers and warehouses, if they have one, will be key to avoiding costly cross-country shipments.

Plan for the Unprecedented

If the ILA goes on strike, alternative ports and transportation options could quickly become overwhelmed. Now is not the time to press the panic button; an ILA-USMX deal is still possible.

But shippers who want to be prepared should take actions now — such as staying informed about labor conditions in the U.S. and Canada, looking for alternative gateways, or potentially starting to shift freight to niche carriers or alternative modes of transportation.