With about a week left until a potential strike would essentially shut down East Coast and Gulf Coast port activity, the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX) last night announced an agreement on a new long-term master contract. The six-year pact, which covers all items, takes one obstacle away from supply chains, allowing shippers, logistics providers and carriers to maintain (or return to) normal routing of both imports and exports. The port strike possibility had also been seen as a barrier to a freight market recovery in 2025.
The two sides released a joint statement yesterday, saying the agreement "protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coasts ports - making them safer and more efficient, and creating the capacity they need to keep our supply chains strong." Full details of the agreement will be held back until full membership of both sides reviews the tentative deal and votes on its approval. Work will continue under the prior contract until then.
The ILA (representing about 50,000 dockworkers) briefly staged a strike in October when the previous contract expired, but its employees returned to work after just a few days thanks to an agreement on raises. But that was only part of the conflict between the union and the USMX. Having solved the wage issue, the two sides set a deadline of Jan. 15 to try to address what was always deemed the larger conflict, the use of automation at the ports.
As months went by, negotiations stalled, but the two sides were able to reach a compromise with seven days to go. The USMX had said it wanted to maintain language in the prior agreement that bars fully automated terminals - and have shown willingness to add a ban on semi-automated equipment. But the ILA indicated it wanted to go further, looking for a complete ban on automation of gates, cranes and any container movement involving the loading or unloading of cargo.
While we'll have to wait for the full details, last night's joint statement suggests each side moved off its initial position to some degree. October's tentative agreement on wages reportedly included a 61.5% raise over the life of the new contract for ILA dockworkers.
The ILA and USMX statement calls the new deal a "win-win." By avoiding a strike, 36 ports from New York/New Jersey to Houston will maintain normal supply chain operations. Additionally, potential surcharges that were announced by major ocean carriers should be avoided. The National Retail Federation weighed in last night as well, with VP of Supply Chain and Customs Policy Jonathan Gold praising the deal, saying "Providing certainty with a new contract and avoiding further disruptions is paramount to ensure retail goods arrive in a timely manner."
Cargo traffic had already shifted for the past several months to the West Coast to some degree in anticipation of disruptions - but those shifts are no longer necessary. Had a strike occurred, exports to Europe could have been paused indefinitely and shortages of goods like bananas and other produce, as well as cars, and raw materials for manufacturing could have occurred. In all, some estimates had a strike costing the economy as much as $5 billion a day.
So the answer to how the agreement affects supply chains is, it allows normal patterns to return and takes one obstacle away from a freight recovery this year. Now, logistics pros can focus on other concerns, like potential tariffs and ongoing geopolitical conflicts.
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