The likelihood of an October 1^ststrike is closer to becoming a reality as the U.S. Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) broke off contract talks August 22^nd.

Shipper’s fears are mounting as the current USMX / ILA contract expires on September 30^th and any outage would greatly impact the flow of trade via East and Gulf Coast ports.  An ILA strike would have a staggering impact on the trade and retail industries as operations at 14 major ports from Maine to Texas would be affected if the ILA’s estimated 15,000 person workforce walked off the job in solidarity.

While July negotiations cited progress regarding the ILA’s concerns in the areas of continued automation and jurisdiction over chassis maintenance, USMX concerns regarding pay for unionized workers is ‘the elephant in the room.’  Citing a combination of outdated work rules / practices and a compensation structure based on a system of payment guarantees and overtime fees resulting in millions of dollars being paid for time not actually worked, USMX Chairman / C.E.O. James Capo stated a final contract offer can not be presented until these issues are addressed.

ILA President Harold Daggett confirmed a breakdown in the August talks took place within minutes of the USMX’s insistence that work rules and pay structure be included in the negotiations.  Citing the USMX’s demand for changes in the eight-hour pay guarantee and a desire for radical changes to overtime rules Mr. Daggett stated, “These issues should not even have been part of the contract discussions, but the USMX insisted talks could not continue unless these points are negotiated.”

Standing firm on its position that outdated work rules and an unreasonable pay structure are harmful to the Alliances competitive ability and long-term viability, the USMX’s stance is clear.   Responding to the ILA’s position, James Capo was quoted as saying, “I am not sure how the ILA can expect a final offer when we have been unable to engage in any comprehensive negotiations for a new contract, including economic issues.”

As a result of the stalled negotiations, the National Industrial Transportation League (NITL) has appealed to U.S. Transportation Secretary Ray LaHood imploring him to “strongly encourage the two sides to find a common ground.”

While shippers have not yet taken steps to divert cargo to unaffected ports, such action could quickly become a necessity, but at a risk due to the possibility of ILA members of ports striking in solidarity with fellow union members.  Nonetheless, with East and Gulf Coast port disruptions becoming a strong possibility, shippers and retailers may feel they have no choice but to try to seek alternative routings which would result in increased shipping costs and further negatively impact the U.S. economy.   To complicate the economy issue even more, with the Holiday shopping season almost upon us introducing changes in shipping habits to avoid port disruptions and costly delays will ultimately result in higher prices for retail goods doing even more damage to the U.S. economy.

Save a resolution to the existing impasse between the negotiating parties, one available option to avoid this whole problem would be the invocation of the Taft-Hartley Act by the President.  Doing so would allow for a ‘cool down’ period but at this time this option remains only a possibility.

In response to the possibility of East and Gulf Coast port disruptions, several ocean container carriers have published Port Congestion surcharges in accordance with the FMC’s 30 day advance filing requirement.   It is our understanding the congestion surcharges will take effect only if East or Gulf Coast port operations are terminated as a result of the expiration of the ILA’s work stoppage.

While increases may vary from carrier to carrier, following is a sampling of the Port Congestion surcharges received thus far.