With peak season of the year about to begin, a logistics threat looms over the entire global supply chain. Dockworkers at the major ports on the East Coast and the Gulf of the United States began a strike in the early hours of October 1, after failing to reach an agreement with the United States Maritime Alliance (USMX) regarding their working conditions and wages.
While the International Longshoremen’s Association (ILA) is seeking a 77% wage increase over the next six years, the USMX is only willing to offer 40%. As a result, dockworkers at 36 facilities across 14 ports, stretching from New England to Texas, will cease operations indefinitely in an area that handles 60% of North America’s total container volume. This could have negative consequences for the international supply chain, delaying shipments and increasing transportation costs.
The ILA is demanding a 77% wage increase over a six-year period, arguing that workers should receive a share of the profits shipping companies gained during the pandemic. Additionally, the association is calling for clauses to protect workers’ jobs from automation in dockworkers’ tasks.
On the other hand, shipping companies have stated that dockworkers already earn wages above the average and argue that introducing technology at the ports improves work efficiency.
With no agreement reached, approximately 65,000 American workers have stopped their tasks indefinitely.
Meanwhile, the USMX has filed an unfair labor practice charge with the National Labor Relations Board (NLRB), stating that the ILA has not negotiated in good faith. The maritime alliance also issued a statement accusing the ILA of systematically refusing to sit down and negotiate a new master contract.
Although the effects of the strike might not be felt immediately, if U.S. ports remain closed for an extended period, the consequences could be severe. Transportation costs would rise, and exports and imports, especially those coming from Asia, would face delays. This would create bottlenecks in global supply chains, inventory shortages, production slowdowns, and even temporary plant closures—a true domino effect.
The problem is that there does not appear to be a viable alternative for the ships that will be stranded on the East Coast of the United States. Even if vessels are redirected to other ports on the West Coast, the inland transportation infrastructure would be unable to handle such a large volume of goods. Additionally, Mexican ports are already operating near full capacity, and a diversion through the Panama Canal would be extremely costly.
According to the U.S. Federal Maritime Commission regulations, any increases in tariffs or surcharges on maritime freight must be communicated at least 30 days before they take effect. Since September 1, anticipating a potential ILA strike, the first notices of an “Emergency Operations Surcharge” were issued, which apply to shipments made from Europe to the East Coast and the Gulf of the United States.
In this regard, the major shipping lines have published notices of surcharges due to the dockworkers’ strike, which will be implemented between October 1 and October 19. These surcharges can range from $800 to $2,400 for 20-foot containers and from $1,60 to $3,000 for 40-foot (12.192 meters) containers. These announcements indicate the potential rate increases that could occur if the strike continues.
This conflict adds to the challenges the sector was already facing due to the crisis in the Red Sea, which has forced the suspension of transit at the end of 2023 and the beginning of 2024, redirecting trade routes away from the region.
Additionally, international logistics recently suffered from the closure of the Suez Canal in 2021, when the Ever Given, a 400-meter container ship operated by the Evergreen Group, became stuck. Moreover, the impact of the Omicron variant in China and the surge in COVID-19 cases in 2022 forced the closure of Shenzhen, the world’s fourth-largest container port and China’s leading technology hub.
We still do not know how long this conflict will last or what the real short- and medium-term consequences will be. Once again, we will have to wait and see.
Photo: ChatGPT
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