Truck drivers and railroads struggle to move billions worth of freight

With a potential strike at ports along the East Coast and along the Gulf Coast set to begin after midnight Monday, logistics managers told CNBC that the remaining hours are crucial to clear as much trade as possible before a shutdown that causes serious damage will wreak havoc on the functioning of the US economy.

Based on data from ImportGenius, which tracks Bills of Lading – the digital receipts of cargo containers – a total of 54,456 20-foot equivalent units (TEUs) arrived on Friday at the 14 ports under the framework agreement between the International Longshoremen's Association and the International Longshoremen's Association are operated by the US Maritime Alliance (USMX), which expires on Monday at midnight. The approximate value of this cargo was over $2.7 billion, based on MDS Transmodal's estimate of $50,000 per container. On the weekdays of September 23-27, a total of 273,417 TEUs worth approximately $13.67 billion were cleared through customs at these ports.

Alan Baer, ​​​​CEO of OL USA, said the huge volumes of cargo arriving on Friday alone show how hard logistics companies are racing to get containers off the dock by close of business on Monday. “Importers, in coordination with their logistics partners, should try to clear as many of their containers as possible from open terminals in order to avoid possible delays in the procurement of their inventories,” said Baer.

On average, it takes a week to clear one day of a port closure. Up to 43% to 49% of total containerized cargo entering the United States passes through ports on the East Coast and Gulf Coast.

Michael Kanko, CEO of ImportGenius, tells CNBC that the economic impact of ports affected by an ILA strike is enormous. “As our data shows, a week-long strike will block the flow of hundreds of thousands of containers into the US,” he said. “These ports are also an important gateway to the US for refrigerated products. Time is not on the importers’ side.”

“Every importer, exporter and even domestic shipper should monitor developments very closely this week, as the impact of a port strike at U.S. East Coast and Gulf Coast ports could potentially affect all modes of transportation if a strike occurs and is prolonged .” than a few days,” said Brian Bourke, global chief commercial officer of Seko Logistics.

The ILA is North America's largest longshoremen's union. In a social media post on Sunday, the ILA said its 85,000 members, “joined in solidarity by tens of thousands of dockers and maritime workers around the world,” at 12:01 a.m. on Tuesday, Oct. 1 Pickets will strike at all ports on the Atlantic and Gulf coasts from Maine to Texas.

Approximately 50,000 ILA union members work in the ports of Boston, New York/New Jersey, Philadelphia, Wilmington, Baltimore, Norfolk, Charleston, Savannah, Jacksonville, Tampa, Miami, New Orleans, Mobile and Houston.

A Reuters report said no negotiations were underway or planned before Monday's deadline.

In recent days, senior Biden administration officials, including Transportation Secretary Pete Buttigieg, acting Labor Secretary Julie Su and National Economic Council Director Lael Brainard, spoke separately with representatives from USMX and ILA and urged the parties to quickly reach a fair agreement to come. The Biden administration has said several times recently that it will not use federal authority to force longshoremen to stay on the job. “We have never asked Taft-Hartley to break a strike and are not considering doing so now,” White House officials said.

The union suspended talks with the USMX in June on issues such as the use of automation at ports, and the port ownership group has said in recent weeks that the ILA continues to “strongly signal” that it has already made the decision to strike.

A port strike could jeopardize recent successes in reducing inflation and prices paid by consumers for a wide range of goods and give former President Donald Trump another talking point on the key voter issue of the economy in the final month of the campaign.

Because of previous port strikes, shipping lines typically benefit from rising freight rates based on demand at other ports, as well as detention and demurrage fees for containers stranded during a port closure. Analysts have warned that spot prices at sea could rise by 20% to 50%. UBS predicted that 20% of Maersk's total volume would touch a U.S. port affected by the strike. Maersk is on the board of USMX. UBS estimated that a 30% increase in freight rates over two quarters would generate a revenue decline of over $1 billion.

Meanwhile, union support is a critical issue for Democrats, and President Biden recently stressed to reporters that he “doesn't like” Taft-Hartley.

Business groups have called on the Biden administration to intervene. The U.S. Chamber of Commerce released a poll Monday morning showing that a majority of both registered voters (58%) and the general population (54%) support the Biden administration's intervention and order to force the union through the operation of Taft-Hartley to work and negotiate. About 20% of respondents said they opposed federal intervention.

In a recent video in which ILA President Harold Daggett played to rank-and-file union members who voted unanimously to authorize a strike, he threatened to intentionally slow down workers moving containers if the Biden administration forces union workers to agree to return to the docks Taft-Hartley Act. “You’d better sit down and get us a contract and then move on,” he said.

U.S. Customs data showed a variety of products were still arriving at the Port of New York/New Jersey, the largest port on the East Coast, on Friday – containers of cosmetics and perfume Estee Lauder and L'oreal, auto parts and tires as well as electrical materials and circuit breakers from the leading automation and electrical company FIG.

Last week, hundreds of containers arrived for retailers from Walmart to Walgreens, filled with winter clothing, groceries, electronics, towels and holiday items, from Disney Halloween pieces to Christmas lights.

Walmart is the largest importer of all threatened ports, according to ImportGenius.

A spokesman for the NY/NJ Port Authority said it was closely monitoring developments. The port began preparing for a strike two weeks ago.

“We are coordinating with partners across the supply chain to prepare for potential impacts,” the spokesperson said. “With over 600,000 regional jobs our port supports and $240 billion worth of goods moving here each year, we urge both sides to find common ground and the flow of cargo for the betterment to maintain the national economy.”

Depending on the duration of a strike, the damage to the U.S. economy could be tens of billions of dollars. For the port from For New York/New Jersey, the economic impact could be up to $641 million per day; In Virginia, however, an economic impact of $600 million per day is possible, according to an analysis by Miter.

U.S. East Coast ports are expected to handle 2.3 million TEUs (20-foot equivalent units) in October. This equates to 74,000 shipping containers per day and a daily cargo value of over $3.7 billion.

Steve Lamar, president of the American Apparel & Footwear Association, recently told CNBC that a disruption to East and Gulf Coast ports would have a significant impact on the cost and availability of apparel, footwear and travel items, as more than half of all clothing – and footwear items and accessories move through these ports.

German shoe giant Birkenstock had over 32,000 packages and cargo imported and processed at the Virginia Port of Norfolk between September 23rd and September 23rd. 27.

Amazon.com Services, a subsidiary of Amazon.com which provides e-commerce services to third-party sellers, over 26,000 mini smart cameras and other products arrived and cleared customs between September 23 and 25.

Ace Hardware cleared over 64,000 items in 57 containers through customs between September 23rd and 26th.

Anheuser-Busch InBev has also been one of the major importers whose products have been cleared by customs in recent days.

Paul Brashier, vice president of global supply chain at ITS Logistics, said discussions with customers about freight pickup strategy have taken place over the past two weeks.

“If shippers were to wait until Monday to bring in additional trucks to pick up their cargo, I think it might be too late to get available containers out of the terminals so they can avoid excessive demurrage charges during the strike,” Brashier said. “Shippers should not be lulled into a false sense of security during the strike because, just like during the coronavirus crisis, the supply chain collapse only occurred after operations resumed following the shutdown,” he said.

In a recent note to customers, the Georgia Ports Authority recommended import delivery “well before October 1 to minimize any disruption.”

In addition to clothing, the Port of Savannah on Friday saw thousands of LED panels, Keurig coffee Brewers and wine for Constellation marks. The Port of Houston sells Tempur-Pedic mattresses and products for Home Depot and Ikea were identified as arriving on Friday.