101 Guide to Understanding the U.S. Port Strike and How to Avoid Supply Chain Disruption

Greetings!

With the potential U.S. East Coast and Gulf Coast port strike looming on October 1st, 2024, the impact on global supply chains could be significant. Whether you're a logistics company, freight forwarder, or business reliant on imports and exports, it's crucial to be prepared for the disruptions this strike may cause. Here’s a simple guide to understanding what’s at stake and how you can mitigate risks to your supply chain.

The International Longshoremen's Association (ILA), responsible for dockwork at major East and Gulf Coast ports, is negotiating with the United States Maritime Alliance (USMX) for a new master contract. If no agreement is reached by October 1st, 2024, a strike is likely, potentially halting operations at major ports such as:

• New York/New Jersey
• Savannah
• Charleston
• Houston
• Miami
• Port Everglades

Ports are critical to the U.S. economy, acting as vital gateways for imports and exports. If port workers strike, we face significant delays and higher costs across multiple sectors. Unlike supply chain issues caused by demand spikes (such as during the COVID-19 pandemic), this disruption is caused by reduced port capacity—a more serious and long-lasting issue that can affect not just your current shipments but future supply flows.

Key Impacts of the Strike:

1. Delays in Import/Export Operations: With major ports shutting down, goods won't move in or out, causing severe backlog.
2. Congestion at Other Ports: As businesses redirect their shipments to West Coast or Canadian ports, these alternative routes may quickly become overwhelmed.
3. Price Hikes: With limited shipping capacity, the cost of transportation will likely surge. Surcharges like the recently announced Maersk Port Disruption Surcharge will add to operational costs.
4. Demurrage and Detention Charges: Cargo sitting idle at terminals during the strike will lead to increased storage costs, exacerbating financial pressures.

Here are some proactive steps to minimize potential impacts on your operations:

1. Move Goods Early

• If possible, expedite the shipment of goods ahead of the potential strike. Many terminals are extending hours to help clear out containers before the deadline. For example, Port of Virginia is encouraging importers to remove their cargo by September 30th to avoid unnecessary demurrage charges.

2. Explore Alternative Ports

• Consider using West Coast or Canadian ports to reroute your shipments. Ports such as Vancouver or Los Angeles may offer viable alternatives for shipments bound for the Midwest or Eastern U.S. However, these ports could also face congestion as more shippers seek alternatives.

3. Leverage Air Freight

• For high-value or time-sensitive shipments, consider air freight as an alternative, especially for industries like automotive, pharmaceuticals, or retail. Although air freight costs are higher, it can provide a temporary solution for urgent shipments.

4. Work Closely with Partners

• Maintain open lines of communication with your shipping and logistics partners. Shipping lines like Maersk and ZIM have already issued advisories, and regular updates will help you stay informed of operational changes. For example, Maersk has introduced a Port Disruption Surcharge effective October 21st, which could affect your costs.

5. Prepare for Longer Lead Times

• Adjust your logistics and inventory strategies to account for potential delays. Implement a buffer in your inventory to avoid stockouts and service disruptions.

6. Understand the Contingency Plans

• Many ports are developing contingency plans. For example, Port of Virginia and Port of New Orleans have outlined schedules for halting and resuming operations. Understanding these plans will help you make informed decisions for your cargo.

7. Monitor for Federal Intervention

• The U.S. government has the power to intervene under the Taft-Hartley Act, which allows the President to halt strikes for 80 days in the interest of national security. While the White House has not indicated plans to do so yet, the political calculus could change as the situation evolves.

While the full impact of the U.S. port strike remains to be seen, proactive planning can help you mitigate the worst effects. Whether rerouting shipments, speeding up delivery schedules, or utilizing air freight, these steps will help keep your business running smoothly during the disruption.

Key Resources:

• U.S. Government Updates: Stay updated on federal intervention and strike developments.
• Port Contingency Plans: Regularly check the websites of major ports for updates on operational hours and changes.
• Logistics Partners: Keep close contact with your freight forwarders and logistics companies to ensure you are prepared for any shifts in operations.

By staying informed and planning ahead, you can ensure your supply chain weathers this storm with minimal disruption.