90 Day Extension on Labor Negotiations at East Coast Ports!!!

I’m sure many of you have already heard the good news that the collective bargaining agreement between the longshormen on the East Coast (ILA) and the East & Gulf coast port terminals received an 90 day extension. The original contract was set to expire on September 30, 2012. The extension allows for negotiations to continue through December 29, 2012 without any work stoppage. You can read the formal statement from the Federal Mediation and Conciliation Service on the following website: http://fmcs.gov/assets/files/Public%20Affairs/2012%20Documents/AA_USMX-ILA_Release_Draft-_9-20-12.pdf

In the meantime, the question to ask is “what does this mean for the shipping community?” Let’s start off with the obvious.

  • Anyone with shipments going to East and Gulf Coast ports can immediately start booking their containers with all-water vessels. Rates on all-water vessels were at a slight discount the last few weeks due to a decrease in demand as importers shifted their bookings to West Coast + Rail service. If you move fast enough, you might still be able to take advantage of some discounts.
  • Importers who were holding off on shipping for fear of having to pay the Port Congestion Surcharge get a temporary reprieve and should start shipping their containers immediately.

There is no crystal ball that can help determine whether a labor negotiations will succeed or fail in the next three months. The message from the FMCS seemed to imply that there was “progress” made in the negotiations. However these negotiations could easily go south. I would therefore take a worst-case scenario approach to planning. Which leads to the less obvious action importers should be taking. If importers are able to forecast in advance, try to push forward the shipping of goods to arrive prior to the end of December. From talking to various importers, this may or may not be possible for various reasons ranging from capital to production time to warehouse space. Importers do not want to be facing a situation where they have shipments on the water and a strike actually takes place on December 30, 2012.

I will continue to keep you updated.

-Jimmy Ting

jimmyting@great-world.com

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