• U.S. East Coast and Gulf Coast ports handle 43% of all U.S. imports and billions of dollars in trade monthly, but companies have been moving shipping containers to the West Coast over strike fears.
• Critical talks between the labor union representing workers, the ILA, and ports management broke down over the summer, with automation a key sticking point.
• ILA leadership said in a video released on Wednesday that it is ready to "hit the streets" on Oct. 1 and described the negotiating positions as "very, very far apart" and at a "contract impasse."

A series of key labor meetings being held this week by North America's largest longshoremen union could provide insight into the likelihood of a strike by workers at U.S. East Coast and Gulf Coast ports threatened for October 1.

Delegates representing chapters of the International Longshoremen's Association are meeting on Wednesday and Thursday to discuss a proposed contract with the union's wage scale committee. ILA president Harold Daggett has described the September meetings as a "two-day marathon" session offering its members a chance to strategize ahead of a potential strike. The union's contract expires on September 30.

Negotiations with the United States Maritime Alliance, which represents ports ownership, broke down in July after labor said it canceled the talks after discovering that automated technology was being used by APM Terminals and Maersk, the world's second-largest shipping company and APM Terminals' parent company, to process trucks at port terminals without union labor. Daggett said in an August 5 statement that membership was 100% behind ILA leadership and its decision to go on strike on October 1 if its demands are not met. He reiterated that threat in strong terms on Wednesday.

"The ILA most definitely will hit the streets on Oct. 1 if we don't get the kind of contract we deserve. ... Mark my words, we'll shut them down," Daggett said in a video released by the ILA on Wednesday.

Speaking in the same video, executive vice president Dennis Daggett added, "We're at an impasse ... we are very, very far apart" on a new contract (He indicated in his comments it was "less than 60 days out" from the end of the current contract, suggesting he was filmed roughly a month ago). He characterized the relationship between the ILA and port owners as "pretty fragile."

The ILA did not immediately respond to a request for comment on any progress made since his filmed comments.

The ILA and USMX each filed forms with the Federal Mediation & Conciliation Service to request a mediator or arbitrator. The USMX said it was notified by the union that it had filed for mediation on August 19. The USMX filed its form with the FMCS on August 23.

On August 30, the USMX posted an update, stating "While negotiations with many ILA Locals have continued to progress, despite repeated efforts and continued outreach, USMX has been unable to secure a meeting with the ILA to resume negotiations on a new Master Contract."

This latest labor battle is part of a wave of worker actions in recent years impacting ports, rails, and logistics providers around the world, from Europe to the West Coast and Canada's rail strike, the most recent action, last month. The battles have intensified since the pandemic and amid a period of high inflation, and as more ports look to utilize automation as part of their logistics solutions.

Dennis Daggett referred to the automation being deployed at some port terminals as "cancer" in the new video. "We're not going to allow that cancer to come here on the East Coast," he said.

Fears of an October strike have already motivated U.S. shippers to import their back-to-school and holiday items early to avoid delays in delivery. Back in March, logistics managers told CNBC they were planning to import their items in June versus the traditional July to ensure delivery.

The East Coast and Gulf ports process 43% of all U.S. imports.

ILA said in a release about its two-day meeting that Thursday's session will be devoted to presenting delegates the union's strike mobilization plan. It also stated that details of the ILA's contract demands will not be released.

A Biden administration official told CNBC it supports collective bargaining as the best way for American workers and employers to come to an agreement. "That's why we encourage all parties to remain at the bargaining table and negotiate in good faith. Since taking office, the Biden-Harris Administration has developed a comprehensive whole-of-government approach to monitor and mitigate potential supply chain impacts, from severe weather to transport service interruptions to this spring's Key Bridge collapse in Baltimore. We've never invoked Taft-Hartley to break a strike and are not considering doing so now."

West Coast port imports booming, and congestion building

U.S. companies have been rerouting freight originally bound for the East Coast to West Coast ports, trade diversions that add both time and money. According to Xeneta, the East Coast share of total container imports into the U.S. from the Far East decreased from 34.4% in Q4 2023 to 32.6% in Q2 2024. The West Coast ports' share increased from 57.7% in Q4 2023 to 60% in Q2 2024 (the remainder of the containers were imported through the Gulf Coast).

As a result of the increase in containers, rail congestion out of the Port of Los Angeles is building up. In a recent advisory to clients, HLS Shipping wrote rail container dwell times at some U.S. West Coast port terminals "are close to double what they were earlier this summer amid booming imports."

"Carriers say rail dwells and chassis shortages could become an issue during the next two months if Southern California's already busy docks continue to receive extra volume because of a potential port strike over the East and Gulf coasts and rail disruption in Canada," HLS Shipping wrote in its advisory.

HLS noted the rail-bound container dwell time for the ports of Los Angeles and Long Beach is 8 to 10 days across all ocean carriers from marine terminal reporting.

The Ports of Seattle and Tacoma, according to the customer advisory, are averaging a dwell of 10 days. The large spikes of containers are a result of shippers recently shifting their imports from Canadian ports due to the labor lockouts on the rails. This increased wait time can add to detention and demurrage fees a shipper would have to pay.

Harold Daggett noted in the video that he was a union member during the last strike in 1977, and he was part of teams sent by the ILA to the West Coast to foil plans by ports management to divert ships. That union effort, during which the West Coast ports labor union, the ILWU, did not cross picket lines, was successful. The ILWU did not immediately respond to a request for comment about any current strategic planning with the ILA ahead of Oct. 1.

The ILWU declined to comment.

C.H. Robinson has advised its shipping clients on various mitigation plans, ranging from diverting cargo to expecting additional transit times and paying extra costs, such as detention and demurrage fees and congestion fees.

"Importing into the U.S. early isn't an option for all companies," said Mia Ginter, director of North America Ocean at C.H. Robinson.

She noted that the automotive industry, for example, operates on a just-in-time inventory model, so it isn't set up to have extra inventory sitting around. "If a strike occurs, automotive and other industries that operate on a similar model would be more affected since they don't typically have a backlog of freight to pull from. U.S. exporters also don't have the same luxury to get ahead of the strike since they're at the disposal of their importers across the world," Ginter said.

As a result, Ginter said some exporters are preemptively shifting to the U.S. West Coast. "Right now, only about 5-10% of our export customers have made this move, but we expect this to grow as we near the potential strike date," she said.

Michael Aldwell, executive vice president for Kuehne + Nagel, told CNBC in March he was already tracking a double-digit shift in cargo moving away from the East Coast and advising clients to have an established method of getting cargo into the U.S. in advance of a labor crisis.

Trade has continued to divert to the West Coast after the union missed a self-imposed date of May 17 for all local contracts to be agreed on so an overall master contract could be negotiated. The ILA said its early summer decision to stop negotiations arose amidst "ongoing negotiations of local agreements under the coast-wide Master Contract."

Since then, the rhetoric has only escalated.

Daggett, the union's chief negotiator, said he wanted a good economic deal for his members, which included union opposition to port automation and exclusive port contracts for its members. During a summer speech before union members, Daggett vowed the ILA would not take a back seat to anyone. 

A series of opposing statements from both parties in August have led to increased worries about a strike. Unlike the West Coast ports, East Coast ports have a history of resolving labor issues and hammering out new contracts ahead of a port work shutdown. The last work stoppage in 1977 lasted 44 days.

Billions of dollars in trade at stake

Sea-Intelligence has estimated a one-day strike by the ILA would take five days to clear. A one-week strike in October could cause slowdowns until mid-November. Analysts at Sea Intelligence have estimated East Coast ports in the U.S. would handle 2.3 million TEU (twenty-foot equivalent units) in October. That translates to 74,000 shipping containers per day. The value of that freight is upwards of $3.7 billion based on an MDS Transmodal estimate of $50,000 per container.

During the West Coast International Longshore and Warehouse Union contract negotiations between 2022-2023, freight processing was stalled after a series of intentional labor slowdowns and walk-offs. At the ILWU Canadian West Coast Ports, a 13-day strike resulted in over $12 billion in trade stuck at sea and it took months for the back of containers to be cleared out.

The current ILA contract has union members making a range of $20-$37 an hour. Depending on seniority, skill rate, hazard pay, overtime differential, plus tonnage bonus (which can be anywhere between $15,000-$20,000 a year), a longshoreman can make between $150,000-$250,000 annually.

One of the differences between the ILA and their West Coast brethren, the ILWU, is the ILA longshoremen receive royalties based on how much tonnage they process in a year at their port. This compensation model makes it in the best interest of the ILA workers not to have cargo diverted or their bonuses will decrease. On the West Coast, longshoremen accrue additional compensation based on man-hour assessments.

Based on Xeneta data, East Coast labor has seen a decrease of almost 2% in import tonnage processed between Q4 2023 and Q2 2024.

Port insiders believe the ILA is targeting an increase larger than the 32% that was negotiated by the ILWU in its new six-year contract. The ILA is also said to be looking to secure a generous bonus package.

Harold Daggett said in the video released Wednesday that once the current ILA contract battle has passed, the ILA will seek to form a global alliance with dock workers' union to stop the automation of ports. "Now it's all about greed and money. ... They want to put a fully automated terminal in and get rid of us," he said. "I'm not going to allow that. I will never allow that. ... so this is a must. We're going to have this alliance and we're going to make it work."