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Thursday marks day three of a massive strike by nearly 50,000 members of the International Longshoremen’s Association (ILA), causing ports along the East and Gulf coasts to shut down and disrupting the nation’s supply chain ahead of the holiday shopping season.
Workers at ports from Maine to Texas, which handle about half of all goods shipped to the United States in containers, walked off the job as part of the union’s first strike in nearly 50 years.
The labor contract between the ILA and the United States Maritime Alliance (USMX), which represents the ports, expired late Monday after the parties couldn’t reach an agreement over pay and a cap on the ports’ use of automation.
Businesses across nearly all industries, including the promotional products market, have been scrambling to figure out how to handle such a large work stoppage – which is causing the U.S. economy to lose between $3.8 billion and $4.5 billion each day that the ports are closed, according to analysts at J.P. Morgan.
“If this starts to go more than a week, then we must start to worry about a bigger economic doomsday scenario,” says Anthony D’Ambrosio, vice president of sales at Supply Chain Solutions, a transportation and logistics consultancy in Grand Rapids, Michigan.
Jing Rong, vice president of supply chain and sustainability at HPG, PPAI 100’s No. 6 supplier, says that the ramifications of a prolonged strike won’t be limited to the East and Gulf coasts. “Vessels that are delayed in offloading containers also mean that their return trip will be delayed, and so on and so on,” Rong says.
“Promo suppliers that use mainly the West Coast port will also start experiencing congestion and price increases as vessels are diverted to the limited ‘open’ ports. I would advise fellow suppliers to keep a close eye on the situation for the next week, looking at product substitutions and air freight, if necessary.”
D’Ambrosio says that for every week that the ports are closed, it will take at least one month for them to normalize and clear any backlogs. However, he doesn’t anticipate the strike to last long.
“I would be blown away if the Biden-Harris administration allowed this to continue for weeks,” D’Ambrosio says. “If it does, we’re talking about throwing the entire U.S. economy into a recession.”
Union Demands
Despite being urged to enact the Taft-Hartley Act, which allows the government to force union workers back to work when it’s deemed sufficiently necessary for the good of the country, President Joe Biden has refused to intervene.
“Collective bargaining is the best way for workers to get the pay and benefits they deserve,” Biden said on Tuesday, when the strike began. “It’s time for USMX to negotiate a fair contract with the longshoremen that reflects the substantial contribution they’ve been making to our economic comeback.”
Acting Secretary of Labor Julie Su said on Tuesday that she has spent hours on the phone and in meetings with the parties, urging them to find a way to reach a fair contract. “The parties need to get back to the negotiating table,” Su said, “and that must begin with these giant shipping magnates acknowledging that if they can make record profits, their workers should share in that economic success.”
ILA President Harold Daggett said the union demands a $5 an hour increase in wages for each of the six years of a new contract, “absolute airtight language” that there will be no automation or semi-automation, and that all container royalty money goes to the ILA.
In a last-ditch effort to avert a strike, USMX offered a nearly 50% wage hike over six years, CNBC reported. The ILA rejected the offer.
“USMX is proud of the wages and benefits we offer to our 25,000 ILA employees, and strongly supports a collective bargaining process that allows us to fully bargain wages, benefits, technology and ensures the safety of our workers, day-in and day-out,” USMX said in a statement on its website.
“We have demonstrated a commitment to doing our part to end the completely avoidable ILA strike. Our current offer of a nearly 50% wage increase exceeds every other recent union settlement, while addressing inflation and recognizing the ILA’s hard work to keep the global economy running.”
The ILA responded by claiming USMX’s final offer “fails to address the demands of our members adequately.”
“Our position is firm: we believe in the value our incredible rank-and-file members bring to this industry and to our great nation. They deserve a contract that recognizes their contributions, secures their jobs and reflects the profits generated by their labor. This is what it will take to bring the ILA back to the table to continue talks,” the ILA said in a statement on its website.
Promo Perspective
Echoing the sentiments of business leaders in the promo industry and beyond, Paul Hirsch, MAS, CEO of HIRSCH – PPAI 100’s No. 20 supplier – hopes that a resolution is reached sooner rather than later.
“While it’s unfortunate that a deal couldn’t be struck in time to prevent the strike, we’ve been monitoring it closely like many other suppliers and took the necessary precautions to avoid disruptions as much as possible,” Hirsch says.
“The greatest impact we see on our supply chain is that suppliers will re-route containers to West Coast ports, which will greatly increase the congestion there, creating delays and almost guaranteeing higher unloading and transit costs. Plus, we’ll have to contend with possible limited availability of train and truck trailer carriers.”
Gemline – the No. 11 supplier in the PPAI 100 – began shifting some shipments to West Coast ports a couple months ago, according to Tim Behling, vice president of supply chain at Gemline.
“We don’t expect any immediate impacts to our supply chain,” Behling says. “We did take proactive steps earlier this year to allow Gemline to minimize and mitigate potential disruptions.
“We’ll continue to work with our logistics partners to manage our inbound freight to alternate locations and utilize other ports as we dispatch new shipments from our supplier partners. If the strike does stretch out for a couple of weeks, we believe our proactive measures have positioned us well to navigate these potential disruptions, and we will continue providing excellent service to our customers in Q4.”
Beyond direct and immediate impact, it’s possible that the entire promo industry would be affected by the ramifications of a prolonged strike.
Sea Intelligence suggests even just one day of work stoppage would cause 5-7 days of slowdowns, and a strike lasting one week would result in a slowdown that wouldn’t be cleared up until nearly Thanksgiving.
The domino effect of this would have consequences for the supply chain and, ultimately, the economy, quite possibly affecting the budgets of promo clients.
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