Once again, as it has many times during its history, the International Longshore Association(ILA) is threatening a strike. The ILA membership covers a wide range of ports primarily along the Atlantic and Gulf coasts of the United States. Some of the major ports include:
The Parties at the Table
The ILA was founded in 1892 in New York City and initially aimed to unify longshore workers to improve working conditions and wages.
On the other side of the bargaining table is the United States Maritime Alliance(USMX). The alliance consists of Container Carriers, including the largest carriers and carrier alliances worldwide, all majorMarine Terminal Operators, and Port Associations representing each port on the East and Gulf Coasts. USMX’s members are responsible for the transportation and handling of cargo shipped to and from the United States. The alliance is the designated representative of its members in ILA contract bargaining.
The PotentialConsequences
The threatened strike would have severe consequences, especially considering surging fourth quarter port volumes. These would likely include:
✓ A complete shutdown of loading, unloading, and container handling for more than half of U.S. container volume.
✓ Significant delays at ports, specifically EastCoast and Gulf Coast entry points.
✓ Major disruptions to cargo already on the water and inbound to affected ports.
✓ Carriers rerouting vessels to avoid potential delays or disruptions at affected ports.
✓ Longer cargo transit times and additional costs.
✓ Ocean carriers placing an embargo on cargo coming from the East Coast.
✓ If operations are halted due to a strike, cargo could become stranded at the port, leading to higher charges.
✓ Increased freight and container fees, including storage, per diem, demurrage, detention, chassis, storage, and pre-pull charges.
✓ Downstream impact on importers, retailers, and others in the run-up to peak season.
✓ Increased capacity costs and congestion for international freight.
✓ Global disruption and economic damage to international supply chains.
This strike will effectively bring more than half of the United States’ container operations to a complete halt, leaving goods stuck on ships and in ports. Importers, exporters, shippers, carriers, and others will be affected.
Although ILA strikes have typically been relatively short, the longest strike in the history of the ILA occurred in 1977-1978. This strike lasted for approximately 11 weeks, from September 1977 to December 1977. It was primarily focused on wage disputes and working conditions. The strike significantly affected cargo operations at ports along the East Coast and demonstrated the union's determination to secure better contracts for its members.
The Cargo insurance policy covers physical loss or damage due to Strikes Riots and CivilCommotions, however there are some paramount exclusions that are a cause of concern:
1) Increased Delays and Damages: Strikes often cause delays in loading, unloading, and transporting cargo, increasing the risk of perishable goods deteriorating. Delay is a paramount exclusion on most policies and unless Deterioration/Spoilage of perishable goods due to delay is specifically endorsed onto the policy, cargo owners could be left without coverage.
2) Loss of Market Due to Delays: Loss of market due to delays is a major concern for cargo owners, especially for seasonal goods that are intended to hit the market for specific time-sensitive periods, like the holiday season. Cargo insurance policies will cover the physical loss or damage to goods, but typically exclude financial losses due to delays in transit, including loss of market opportunities.
3) Higher Risk of Theft: Cargo held up at congested ports may have a higher risk of theft. Insurers may see an uptick of theft related claims resulting from the strike and port congestion.
4) Increased Demurrage and Detention Fees: Delays due to port strikes might also lead to increased demurrage and detention fees incurred by the cargo owner. A Cargo policy will typically only provide coverage for demurrage upon the insurer’s request to detain the container at the port for inspection. Demurrage charges and detention fees outside of an insurer inspection are typically not covered on the cargo policy.
Here are some steps recommended by logistics services providers to deal with the risks posed by the strike:
· Delay shipping freight from your port of origin until after the strike.
· Prepare for significant congestion at U.S. West Coast ports.
· Realize that freight in transit to East and Gulf Coast ports will be drastically delayed.
· Use airfreight for your most urgent shipments.
· Transfer your landed cargo via intermodal and ground freight.
· Expect options to redirect freight via Canada and Mexico may be limited.
· Prepare for higher capacity pricing rates.
· Expect increased freight and container fees.
· Understand the financial responsibility for such enhanced charges and fees.
- Tom Ptacek, SVP, Lockton Company
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