• Port of New York/New Jersey executives tell CNBC they are preparing for a complete work stoppage by the International Longshoreman's Association, the largest union in North America.
• The ILA represents over 85,000 port workers, and a strike would shut down five of the 10 busiest ports in North America, and a total of 36 ports along the East and Gulf Coasts.
• Close to half (43%-49%) of all monthly U.S. imports would be impacted, representing billions of dollars in trade, and logistics firms are preparing contingency plans last used during Covid and 2018 tariffs.
• Currently, there is an estimated $34 billion in freight in route to these ports on 147 ocean vessels.

Port of New York/New Jersey executives tell CNBC they have begun preparations for a potential complete work stoppage by the International Longshoreman's Association, the largest union in North America. The ILA represents over 85,000 longshoremen and a strike would shut down five of the 10 busiest ports in North America, and a total of 36 ports along the East and Gulf Coasts, on October 1. Between 43%-49% of all U.S. imports and billions of dollars in trade monthly are at stake as the union moves closer to the Oct. 1 deadline for a new contract. Cruise operations would continue.

Talks with port ownership broke down over the summer and it remains unclear how much progress, if any, is being made. The ILA rank-and-file recently voted unanimously to authorize a strike and the group which represents port management, the United States Maritime Alliance, recently stated that it believes the union has already made the decision to strike.

Beth Rooney, port director of the Port Authority of New York and New Jersey, told CNBC on Thursday that individual ocean carriers and terminal operators are announcing their ramping down of operations to avoid a pile-up of containers. The Port of New York/New Jersey has been involved in discussions with ocean carriers and terminal operators about managing cargo leading up to an interruption, ensuring appropriate measures are in place to complete cargo movements off the terminals before any shutdown.

"A number of ocean carriers have announced their plans in terms of embargoing export cargo coming to the East Coast from the Midwest," said Rooney. "So the further afield that the cargo might be coming to us from within the hinterland, the earlier that it would be embargoed," she said. "If there is a strike and operations cease, the vessels would either wait in a designated area or slow steam as they did during Covid to delay their arrival. Once the strike is over the Coast Guard would lead the charge in an orderly flow of vessels entering the port."

According to Kpler, 147 vessels (a combination of containerships and roll-on/roll-off vessels) are in route to the East Coast and Gulf ports by October 1, with 38 of those vessels headed to the Port of NY/NJ. The total carrying capacity of the inbound vessels is 686,181 twenty-foot equivalent container units. The value of that freight is upwards of $34.3 billion, based on an MDS Transmodal estimate of $50,000 per container.

In a recent blog post, Jim Mancini, CH Robinson's vice president of North American surface Transportation wrote that not only U.S. companies and suppliers would be impacted, but also supply chains across Europe, Oceania, Latin America, and Asia.

"While the APAC region typically has more options to shift freight to the West Coast, over half of the automotive freight coming in today is heavily dependent on the East Coast. For example, the Germany to Charleston and Savannah corridor is crucial for European automakers which would be shut down in the event of a strike. Currently, there are only two container service loops operating between Europe and the U.S. West Coast."

The Biden administration has said it will not invoke powers under the Taft-Hartley Act to force union members to go back to work, as first reported by CNBC, and urged the parties to return to the bargaining table. "We've never invoked Taft-Hartley to break a strike and are not considering doing so now," a Biden administration spokesperson told CNBC on Sept. 4.

ILA President Harold Daggett recently warned at a union meeting that if members were forced to go back to work they would deliberately slow down. That would only add to the pile-up of containers crippling supply chain fluidity.

The Port of New York/New Jersey has joined other ports that have publicly posted strike contingency plans.

The Port of Houston, for example, has published its strike prep guidance for customers. The port has indicated that it may extend gate hours during the week of September 23, if necessary. It is also planning to open the gates on Saturday, September 28, subject to confirmation early next week.

The vessels scheduled to come into the East Coast and Gulf ports have been traversing the ocean since early to mid-August.

In an advisory to clients, the Georgia Ports Authority recommended import delivery "well before October 1 to minimize any disruptions," and added that it will offer weekend gates to support this effort. On exports, the port explained both refrigerated and non-refrigerated containers will be received up to September 30.

The contingency plans are a result of the stalemate between the International Longshoremen's Association's six-year contract with the United States Maritime Alliance. The two sides are far apart on wages and automation. The ILA announced on June 10 the suspension of talks over the use of an automated gate system in Mobile, Alabama and other ports.

Logistics experts have told CNBC in recent months there has been an exodus of cargo from the East to West Coast in anticipation of a potential strike.

In anticipation of additional freight, Port of Long Beach CEO Mario Cordero said it is equipped to handle an uptick in cargo if a labor strike at the East and Gulf Coast ports does occur. The month of August was the port's strongest month in its 113-year history, with imports surging 40.4% year over year and exports rising 12% YOY.

"Our terminal operators are also prepared to flex their gate hours as necessary and our overflow site, the Short Term Overflow Resource yard (STOR) facility at Pier S — is open and has available capacity," said COO Noel Hacegaba at a press conference.

In recent comments to rank-and-file union members, Daggett also invoked the last ILA strike, in 1977, when Daggett was among ILA members who traveled to the West Coast during the 44-day strike to make sure West Coast port workers supported its efforts.

Port of Los Angeles executive director Gene Seroka told CNBC, "I believe Harold [Daggett] has to say that and I don't have any evidence right now of cargo ships taking a left-hand turn that normally go to the Eastern, Gulf Coast port and coming here to the West or specifically Los Angeles. There has been a decades-long tradition between labor organizations that one will not take advantage of another's collective bargaining process, and as you rightly say, this hasn't happened since the 70s. I don't see it happening again here."

The ILA did not respond to a request for comment.

The Port of Los Angeles reported a near-record 960,597 twenty-foot equivalent units (TEUs) in August, a 16% increase over the previous year. The month was the busiest non-pandemic month ever at the port. The Port of Los Angeles is 17% ahead of its 2023 pace, already moving nearly one million more containers than it did last year, only eight months into 2024.

Fears of supply chain congestion

Congestion levels are already being forecast by the maritime industry. 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. Two weeks would take you into January because of the congestion of ships and the backup of containers.

Fears of a strike by the labor union pushed peak season earlier by a month this year as shippers wanted to ensure their holiday products would be in before a work stoppage.

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

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. Meanwhile, the West Coast share increased from 57.7% in Q4 2023 to 60% in Q2 2024 (the remainder of containers were imported through the U.S. Gulf Coast).

Trade diversion impacts ILA workers since they receive a royalty on the amount of containers they move.

A Mitre analysis commissioned by the US Chamber of Commerce estimates that a 30-day strike centered at the ports of New York and New Jersey could result in economic impact as high as $641 million per day. In Virginia, an economic impact of $600 million per day is forecast, or roughly $18 billion over 30 days. Export impacts at Houston operations could reach $51 million per day, and $41.5 million per day for imports.

Transport companies tell CNBC they are continuing with their container diversions. Seko Logistics transitioned some clients to West Coast, and is moving eastbound containers via transloading from the West Coast to help mitigate some of the congestion. 

A CSX spokesperson tells CNBC, "We are closely monitoring the situation and will proactively communicate with our customers on any operational actions that may become necessary."

Goetz Alebrand, Head of Ocean Freight Americas at DHL Global Forwarding, tells CNBC it is diversifying client routes and also transloading. "We are also utilizing peel piles to manage the flow of containers," said Alebrand. "We are aware of the backlog caused by the limited supply of rail cars on certain lanes and our teams are actively working to explore additional rail and trucking options to minimize disruptions."

Airfreight, although more expensive, is also an alternative for time-sensitive or high-value goods.

Paul Brashier, vice president of global supply chain at ITS Logistics, tells CNBC it has implemented its post-Covid and 2018 tariff contingency operation.

"We have repositioned truck chassis and are grouping trucks in the Southeast, Gulf, and Mid-Atlantic regions to maximize the movement of freight at the ports that have extended hours. We are then putting the containers at yards we have expanded for later delivery."