and Vancouver have been working
without a contract since their one-year compact expired Sept. 30.
Despite alternating threats of a
union strike and a lockout by grain
elevator owners, labor remains on
the job while management seems
bent on imposing a contract with
terms the ILWU opposes. Hanging
in the balance is the one-fourth of
the nation’s grain exports that flow
through the terminals.
LIMITED OPTIONS FOR RELIEF
If the ILA had struck, companies
shipping to and from the ports
where the 14,500-member ILA
mans the docks would have had little choice but to endure the work
stoppage for the duration. According to a report issued
Jan. 31—one day before the contract announcement—
by London-based consultancy Drewry Supply Chain
Advisors, ocean carriers do not view ports on Mexico’s
East Coast as a viable alternative for large amounts of
cargo. Similarly, the ports on Canada’s East Coast have
their limitations. Few services call at the Port of Halifax,
and big containerships cannot sail up the St. Lawrence
River to reach the Port of Montreal, Drewry said.
At best, the Canadian and Mexican ports would serve
as backups for limited traffic flows, according to the
firm.
Trans-Pacific shippers who normally use the Panama
Canal to send shipments to the East and Gulf Coasts
could reroute their freight over West Coast ports and
then move the goods inland by rail or truck. But that is a
more costly option and is subject to capacity limitations
and dock congestion, especially if the ILWU acts in sympathy with its brethren in the East.
One advantage for West Coast shippers and importers
is the close proximity of the Mexican ports of Lazaro
Cardenas and Manzanillo. The ports are linked to the
U.S. mainland by cross-border rail connections and are
considered less geographically remote than their counterparts in the eastern part of the country. “Their capacity may be limited but they could act as a useful safety
valve” should U.S. ports get congested, Drewry wrote in
its Jan. 31 report.
Since an ILA strike became a possibility, trans-Atlantic
shippers began diverting some of their traffic to the West
Coast. But such a remedy might have been difficult to
implement at this late date, and it would have come at a
cost to liner carriers for redirecting their ships, an
expense passed on to the cargo owner.
In its report, Drewry said carriers would levy a congestion surcharge of about $1,000 per 40-foot equivalent
unit container, or FEU. They may also charge demurrage
fees on containers stuck in port beyond a contractually
agreed-upon “free” time period, according to the firm.
Based on the average weekly throughput of 300,000 20-
foot equivalent unit containers, or TEUs, at East and
Gulf Coast ports, the surcharges alone would cost cargo
owners about $150 million for each week of a strike,
Drewry forecast.
Ann Bruno, vice president of global trade for New
Freedom, Pa.-based consultancy TBB Supply Chain
Guardian, whose firm has worked closely with carriers to
develop strike-related contingency plans, said a few days
prior to the Feb. 1 announcement that the surcharges
could go as high as $2,000 per FEU, in some cases.
Then there are other costs that would be hard to quantify, but which could inflict more substantial and durable
pain. For U.S. exporters, they include delayed deliveries,
canceled orders, financial penalties, and expiring letters
of credit. For importers, it could mean lost production
and sales. Both may incur additional expense to pay for
expedited shipping via air freight.
It is believed that a strike lasting two weeks would take
the supply chain about six weeks to get back to normal.
A YEAR OF LIVING DANGEROUSLY
Even as the ILA and management settle their scores, the
uncertainty sown by the 2012–13 labor wars will not be
lost on those in the trenches. The question for stakeholders, many of whom stand to be around for the next
