Contract negotiations between the Pacific Maritime Association and its International Longshoremen and Warehouse Union (ILWU) employees began on Monday, May 12, 2014. Industry sources report that negotiations started on a good note with both sides stating they expect cargo to continue moving throughout the negotiation process. The ILWU represents dockworkers at ports along the U.S. West Coast, which includes the country’s largest ports of Los Angeles and Long Beach. Although negotiations began on a positive note, many in the trade anticipate a contentious bargaining process; therefore, shippers are advised to consider contingency plans.

The existing agreement ends at midnight on June 30; however, many in the trade don’t believe that an agreement will be reached prior to the contract’s expiration. If an agreement is not reached, negotiations could continue without a strike, but other labor actions, such as work slowdowns, may result. A West Coast strike would have major implications, including economic damage and impact to the fluidity of trade throughout the U.S., as well as neighboring countries as shippers try to reroute cargo. Even one day of strike causes major entanglements. For each day of striking, one week is required to clean up the resulting congestion. Most experts in the trade believe that a strike would last no longer than two weeks before the government intervenes.

Supply Chain Preparations

Shippers should consider the impact of West Coast port disruptions to their supply chain. By planning in advance, importers have a greater chance of finding alternate shipping routes, services, or strategies. Companies may choose to find back-up suppliers closer to their distribution points or may build onshore inventory supplies beforehand. In the event of a strike, companies scramble to find alternative transportation, which results in capacity issues. Airfreight bookings or contingency routings may help alleviate the crunch if booked prior to any negotiation misfires or labor unrest. By prioritizing critical supplies and planning ahead, companies have greater opportunity to minimize disruption to their supply chain if West Coast labor conflicts arise.

Ocean Carriers Announce Congestion Surcharge

In the event of congestion caused by labor unrest or other disruptions to normal workflow associated with the West Coast port negotiations, ocean carriers have announced a congestion surcharge. The surcharge is applicable to cargo arriving at any U.S. port or transiting Canada or Mexico for arrival in the U.S. The charges will only be assessed if labor disruptions occur.

USD $895.65 per 20’ container for all equipment types

USD $1,125.65 per 40’ container for all equipment types

USD $1,265.65 per 40’HC container for all equipment types

USD $1,415.65 per 45’ container for all equipment types

USD $22.65 per W/M

The above information was provided by A.N. Deringer Inc.