Navigating the potential East and Gulf Coast ports strike

09/26/2024

A potential strike by dockworkers could bring 36 ports on the East and Gulf Costs to a halt on October 1, disrupting shipments ahead of the busiest season for retailers and dealing a blow to other industries, including manufacturing and automotive.

Ports from Maine to Texas, which handle around 50% of the nation’s sea cargo, could be impacted by a dispute between the International Longshoremen's Union and United States Maritime Alliance over wages and automation.

If the strike goes ahead, it will be the first to impact all East and Gulf Coast ports since 1977. It could cost the US economy $5 billion every day, according to estimates by JPMorgan transportation analysts. And the backlog of even a one-day strike could take up to six days to clear.

Although the 1947 Taft-Hartley Act allows the President to step in to avert the strike, multiple news sources have quoted White House officials saying that President Biden does not plan to force dockworkers back to work.

Strike could have far-reaching consequences

Talks to avert the strike have been at a stalemate since June, leading many businesses to take costly action to mitigate the impacts of a potential shutdown, including rushing in orders months ahead of schedule and diverting shipments to West Coast ports.

Still, this potential strike could disrupt already fragile supply chains and have a staggering impact on retailers, manufacturers, and other importers as well as exporters.

Aside from depleting inventories and impacting the availability of perishable items — such as bananas imported from Latin America and soybean, meat, and egg products exported from the US — a strike, especially a prolonged one, could lead to the idling of manufacturing plants and significant inventory carrying costs as shipments of goods are backed up at sea.

For retailers, the consequences could be especially dire, leading to empty shelves reminiscent of the early months of 2020 after the COVID-19 pandemic disrupted global supply chains.

Mitigating the impact of a major port disruption

With just days to go before the 36 East and Gulf Coast ports possibly grind to a halt, there are still some actions that businesses can take in an attempt to minimize the potential impact of a strike.

1. Assess the overall situation and specific impacts on your organization

Businesses relying on East and Gulf Coast ports should closely monitor the potential strike and evaluate how it could affect their operations. Take stock of current inventory and shipments enroute to impacted ports. Depending on inventory levels and expected needs, consider ordering additional stock, using alternative routes that do not go through impacted ports.

Monitor demurrage, storage, and detention fees that may continue to be charged during a strike to minimize the risk of unexpected expenses.

Supply chain disruptions may lead to accumulation of goods, either at a business’ own premises or at third-party locations. Regular assessments of inventory levels and storage capacity can help identify accumulation risks.

2. Maintain communication with logistics experts and clients

Although it may be too late to divert shipments already at sea, it is important to get in touch with logistics providers and explore the possibility of moving shipments already in ports to alternative storage locations. Consider, however, that demand for alternative storage may lead to additional costs or higher rates.

Where possible, closely monitor the progress of shipments and work with logistics providers to determine the most effective way forward, especially for those shipments that have not yet left their destination. Note that some shipping companies may proactively opt for different routes to avoid being impacted by potential port disruptions, which could lead to additional land transportation costs to get supplies to their final destination.

It is also important to communicate with clients and inform them about any expected delays, maintaining transparency in business relationships and minimizing reputational risks.

3. Review insurance and contract language

Different policies, extensions, and endorsements may offer varying levels of coverage. For example, while marine cargo insurance and traditional property policies do not generally provide coverage in the event of a strike unless there is physical loss or damage, other lines — such as trade disruption, supply chain, and specialty business interruption coverage — may respond. It is important for organizations to work with insurance advisors or brokers to determine whether specific policies may provide any coverage and if so start preparing for potential claims.

Consider whether existing policies provide adequate coverage for any changes in shipment or storage, especially increased valuations due to accumulation of supplies at owned or third-party premises.

It is also important to work with legal counsel to carefully review contracts with providers, customers, and logistics operators to assess the allocation of liability for delays or cancellations caused by a strike or port disruption.

The widespread ramifications of the potential strike highlight the complexity and fragility of global supply chains, underscoring the continued need for organizations to take proactive action to constantly monitor their supply chains using the latest technologies available and take action to build resiliency that allows them to better withstand emerging and evolving risks.

Navigating the potential East and Gulf Coast ports strike: 3 actions for retailers and other businesses

Strike could have far-reaching consequences

Mitigating the impact of a major port disruption

1. Assess the overall situation and specific impacts on your organization

2. Maintain communication with logistics experts and clients

3. Review insurance and contract language

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Navigating the potential East and Gulf Coast ports strike: 3 actions for retailers and other businesses

Strike could have far-reaching consequences

Mitigating the impact of a major port disruption

1. Assess the overall situation and specific impacts on your organization

2. Maintain communication with logistics experts and clients

3. Review insurance and contract language

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Related insights

Unlocking possibility in the logistics industry

Unlock revenue-generating potential from digital cargo insurance

Transporting lithium-ion batteries: Know your risk

COVID-19: Safeguarding Employees in Logistics and Haulage