What’s Next If There Is a Port Strike?
A ports strike on Oct. 1 involing the East and Gulf Coasts now seems inevitable since neither side seems willing to budge.
Fashion and retail trade groups—the National Retail Federation, the American Apparel & Footwear Association, and the Retail Industry Leaders Association—have all issued statements calling for the Biden administration to intervene to avoid a strike. The Biden administration has already said it doesn’t plan to invoke the 1947 federal Taft-Hartley Act, a move that would pause the strike and move the parties back to the bargaining table.
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Sources told Sourcing Journal that the U.S. Department of Labor (DOL) has been in contact with the United States Maritime Alliance (USMX), which represents employers of the East and Gulf Coast longshore industry. But the outreach by the federal government shouldn’t be read as a possible shift in the Biden administration’s openness to help broker a deal. Rather, the DOL has been reaching out every week for the past month solely to get updates on possible movements in contract talks, one source familiar with those calls told SJ.
The International Longshoreman’s Association (ILA) broke off talks on June 10th, the last time the workers’ union was in talks with the USMX to hammer out a Master Contract. Last month, the ILA sent out a notice to employer groups indicating that the current collective bargaining agreement was expiring on Sept. 30, and would not be extended. One source familiar with the talks, who asked not to be identified, told SJ that the impasse since June was “highly unusual” since parties typically push on with negotiations until the deadline, and often will extend contract talks to try to get a deal done. That’s because parties in union talks are supposed to negotiate in “good faith” as they try to work out a deal that’s agreeable to both sides.
Credit ratings firm Fitch Ratings said that a strike wouldn’t impact the credit of the East and Gulf Coast port owners, the largest being the Port Authority of the New York and New Jersey. Its revenue bonds are rated “AA-,” adding that the ports have long-term contracts—usually 10 to 30 years—with terminal operators, which insulate them from volume and revenue fluctuations. But Fitch did note that a new ILA contract would likely lead to higher labor costs. “Terminal operators, in turn, are expected to pass along higher costs to shippers via rate increases where possible,” Fitch said.
Other credit and equity analysts tracking the possible port strike seem to be on the same page in thinking that a strike won’t last beyond two weeks. How one gets to that outer time limit remains a question mark.
The legal framework for the invocation of Taft-Hartley has three required elements. There has to be a threatened or actual strike, the strike has to affect all or a substantial part of an industry participating in “trade, commerce, transportation” among the several States or with foreign nations, and it is the President’s opinion that a continuance of the strike “would imperil the national health or safety.”
But what constitutes national health or safety?
A 2023 report from the Congressional Research Service on Taft-Hartley said former President Bill Clinton chose to stay on the sidelines in the 1997 UPS strike that lasted 15 days. Clinton said there must be “severed damage to the country” before the President is authorized to intervene under Taft-Hartley. In 2002, then President George W. Bush chose to intervene when 29 Pacific Coast ports locked out members of the International Longshore and Western Union (ILWU). Bush said the lockout was detrimental to the economy and national security because it impeded foreign trade and had the potential to slow the movement of military supplies.
The process is started when the President appoints a board of inquiry (BOI) regarding the labor dispute. The BOI issues a report, after which the President may direct the U.S. Attorney General to petition a federal court to implement an injunction. The effect of the injunction would be a halting of the strike for 80 days, the so-called cooling off period. Meanwhile, the longshoremen back to work, while the two unions would return to the bargaining table.
If the two are still in talks between days 60 and 75, the USMX would make its final offer and the National Labor Relations Board (NLRB) would hold a secret ballot for voting on the offer. The certified results are sent by the NLRB to the Attorney General, who then seeks to have the injunction removed. In a situation where the final offer is not adopted, the President forwards to Congress the BOI reports, election results, and recommendations for Congress to take appropriate action.
The two known sticking points center on wages and automation. One source told SJ that the base rate is $39 an hour, but the ILA is seeking a $5 annual increase each year over the six-year term of a new contract, or what has been deemed a 77 percent increase. The wage increase that the ILA is seeking is larger than the 32 percent that the ILWU agreed on last summer when they agreed to a new six-year deal that prevented a West Coast port strike.
The other major bone of contention is automation. The 2018 contract is said to have a provision that there can be no full automation unless both parties agree, this person said. While the indication is that the USMX isn’t changing its stance on that requirement before it can be fully automated, the ILA points of contention seem to be about other aspects in connection with automation of some responsibilities.
“Dockworkers fear they will lose their jobs due to automation. Unlike other strikes, this one is real and the concern over automation is legitimate,” Tracey Ortiz, SPS Commerce’s director, project management, said. She said ports across the country haves started automating equipment because it saves money, time, and has a higher degree of reliability.
Ortiz noted that the pattern among longshoremen to not negotiate is atypical, but that they’ve taken a stand because the issues at stake is more than just about money.
“This is about future automation replacing a large majority of jobs within the ports and that reality is valid. It will eventually happen,” she said, adding that the current reality is that the ports are not prepared with nearly enough automation to absorb a strike, even for a day or two.
Historically, the Ports of Los Angeles and Long Beach have been the busiest U.S. ports, with the highest volume of import and export freight. In 2024, that shifted with the Eastern port volume spiking 20 percent over 2023.
“First Houston saw an increase in volume and, last year, Savannah started to see spikes,” Ortiz said. “Now Savannah is projected to be the busiest U.S. port in the next five years.”
She said that with the large shift of cargo heading for Eastern ports, the risk of immediate impact on the supply chain “is very high” should a strike occur on Oct. 1.
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