Labor contract talks among the Pacific Maritime Association, representing a multitude of U.S. West Coast ports and the International Longshore and Warehouse Union (ILWU) formally begin this week, prior to the July 1 deadline to the current labor contract.

The previous five-year labor contract was ratified in 2014, after a total of nine months of contract negotiations and considerable urging from government officials for both sides to reach resolution. Leading up to and during the prior labor talks, port operations were impacted by various slowdowns in the processing of inbound and outbound ships. Both parties accused the other regarding the slowdowns as well as the economic impacts. Fortunately. a later three-year extension of the contract was agreed to in 2019.

After a tumultuous two years of pandemic-driven supply and global transportation disruptions, the stakes are obviously high that both parties can reach a timely resolution to this period of contract renewal. As The Wall Street Journal noted in its reporting: “The risks have seldom been as high as they are this year.”

The ongoing logistical disruptions occurring among China’s manufacturing regions are reportedly not improving and a recent published survey by the American Chamber of Commerce in China indicates more than 60 percent of 121 companies polled have indicated that production operations have slowed or reduced because pf population lockdowns  with the same number lowering their income forecasts for the current year.  If and when the current China restrictions lift, it could provide a wave of shipments destined for U.S. West Coast ports during the time of ongoing negotiations.

Businesses and their supply chain logistics and transportation teams, anticipating this period of contract renewal talks, have either initiated re-routing of inbound shipments from China to other U.S. Gulf Coast or East Coast port facilities to try to avoid any added disruptions. Reports indicate that many do not believe that contract talks will be completed by the July 1 time period and that negotiations will likely extend further into the second half of this year.

Industry supply chain teams should therefore hope for the best but plan accordingly, in that added transportation disruptions this year are likely and that contingency plans, if available, should be exercised. Supply Chain Matters would not at all be surprised if U.S. federal or state level representatives eventually become involved in these talks if progress is not perceived.

 

 

© Copyright 2022, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.