Contct us Tracking

Sparx Logistics

06/27/2014

U.S. West Coast Update: Customs, Shippers Bracing for Potential Disruptions

According to multiple media sources, several reports and contingency plans have surfaced this week, in anticipation that a new U.S. West Coast labor deal may not be struck by midnight on June 30, when the current contract between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) is scheduled to expire. In recent weeks, both parties have declined public comment on the progress of their negotiations, leading to widespread speculation on how the 29 ocean ports governed by the agreement will be impacted by a labor-related disruption.

In case of a strike or lockout, U.S. Customs & Border Protection (CBP) has released interim procedures for how filers should handle cargo that is:

  • Discharged in a foreign port
  • Transshipped at a foreign port for delivery at the original port of destination
  • Diverted to another point on the U.S. West Coast
  • Diverted to an East or Gulf Coast port
  • Held onboard a vessel at anchor until it can be discharged at its original port of destination

 

CBP has also committed itself to publishing notices on its Unified Business Resumption site, both when these interim procedures take effect and once normal processing resumes. Notification of new messages will also be transmitted by CBP via the Cargo System Messaging Service.

In related news, a report commissioned by the National Association of Manufacturers and the National Retail Association found that the potential impact to GDP of a labor disruption could average $1.9 billion per day for a five-day strike; $2.1 billion per day for a 10-day strike, and $2.5 billion per day for a 20 day shutdown. The report, issued by Inforum, the Interindustry Forecasting Project at the University of Maryland, considered a number of variables in arriving at these estimates, including direct losses (i.e. lost sales on time sensitive goods), indirect costs (i.e. increased consumer costs or acceptance of less desirable alternatives) and "induced" costs (i.e. Layoffs due to supply chain disruptions). The report also assumes that the majority of affected goods would eventually be delivered, though at a higher cost than originally budgeted.

Another report issued by Wolfe Research found that over 30% of surveyed shippers have accelerated their U.S. Imports an anticipation of a potential strike. In all, those shippers have increased their inventory by 7%, in close proportion to the 6.5% increase in U.S. West Coast import volume thus far in 2014. Wolfe Research claims that its contacts at U.S. West Coast ports "are confident there won't be a prolonged work stoppage," though isolated stoppages or slowdowns are possible, especially if negotiations extend past the current contract's expiration. Wolfe Research went on to speculate that, if faced with a prolonged shutdown, President Obama would issue a Taft-Hartley injunction, as President Bush did in 2002 to end a 10-day West Coast port lockout.

Finally, the ports of Vancouver and Prince Rupert have reported double-digit growth (year-over-year) in May, confirming speculation that some shippers are already diverting their U.S. West Coast shipments to transit Canadian ports.

SPARX logistics will continue to monitor this situation and keep our customers informed of the latest developments. If you have any questions or concerns related to specific shipments, please contact your SPARX representative.

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