Mat: Hello and welcome to the Robinson Roundup, our regular series where we cover critical and timely topics on the transportation marketplace. My name is Mat Leo and I'm here with my colleague Ryan Hammett. Hey there Ryan.

Ryan: Hey Mat, hi everybody!

Mat: Ryan, this month we're going to focus primarily on international trade. Global shipping had a busy Friday the 13th with the release of the Section 301 tariffs and an announcement on ‘De Minimis.’  Over the last few months in our Robinson Roundups we have mentioned a few of these topics and several of them seem to be coming together here in the fall to make life, should we say, interesting for people involved with international ocean, air, and customs as well.

So today we plan to focus on the potential strike at U.S. East and Gulf Coast ports, but at the end we'll also cover impacts of the U.S. election on freight and trade policy, as well as those actions being taken by the government that shippers of international freight should be aware of. So without further ado let's get into it.

Ryan: Yeah, lets go. So last month North American shippers were faced with creating mitigation plans around the Canadian rail strike. And while that strike was temporarily averted, shippers should remember that the threat of a rail strike actually still remains in Canada - that topic is essentially on pause as the parties are currently in arbitration, so shippers with Canadian freight would be wise to continue monitoring the rail labor situation in the coming weeks and months.

But the focus of labor challenges has now transitioned to United States ports as the International Longshoreman's Association and the U.S. Maritime Alliance are negotiating a new labor contract for 36 ports between Maine and Texas. And even if you aren't shipping through one of these ports, it could have an impact on everyone.

Now there is plenty of information available related to this topic if you want to learn more, but to set the stage, at this time it is looking likely that a port strikes going to occur. There is still time for an agreement to be reached before the current contract expires on September 30, but the sides appear to be very far apart and are positioning the marketplace to be prepared for a strike. 

Meanwhile, many people are wondering if the government will intervene. While the Biden administration has historically shown a willingness to be active in labor negotiations, the ILA has asked the government to not get involved and there is also election year pressure that really influences how and when they would get involved. It’s important to remember that government intervention before a strike would require an act of the legislative branch.

Now, some people will ask if Taft Hartley can be invoked. The Taft Harley Act does allow government intervention after a strike is called if there is a possibility of the strike endangering national health or safety. So should that be invoked after a strike begins, it would provide an 80-day cooling off period where the strike pause would allow everybody to negotiate.

So, Mat if we've reached the point where shippers need to anticipate this will likely happen, what do they need to know? What's the impact here?

Mat: So think of it this way, generally speaking we know that the average number of days on the water from Europe to the East Coast of the U.S. is about two weeks, from China that’s about three weeks…

Ryan: Wait wait. So sorry to interrupt with a dad joke, but you’re saying your proverbial “ship has sailed” for shippers with freight on the water. Anything departing will arrive after the strike starts?

Mat: Yes, yes. Unfortunate Dad jokes aside that is pretty accurate and literal because those decisions that needed to be made in order to get that freight there on time well that’s already in the past. Anything that moves now moving forward will likely hit at that time or afterwards.

So in many cases, you would still have air cargo as a fall back, but even in the air sector, capacity has diminished since we’ve passed through summer, and so the number of passenger lines to accommodate that cargo has shrunk and so much of that capacity is being consumed by e-commerce shipments that we talked about last month. So if demand will naturally surge in this event of a strike, then shippers that aren't planning for that today, well I mean they may ultimately end up being unsuccessful in securing that air capacity moving forward.

Mat: So, in order to help folks understand the impact this could have, let’s walk through it visually. So, the potential strike would have an impact on the East and Gulf Coast ports, as you mentioned Ryan, a total of 36 impacted ports going from Texas to Main. So, in terms of volume, 3 of the top 5 container ports in North America – being New York, Savannah, and Houston—all those would all be impacted.

And it's not just these top ports that have containers flowing through, in fact since 2022 over 50% of all TEUs entering the U.S. from ocean shipments have passed through these East and Gulf Coast ports, which honestly may be surprising to some considering the historic importance of the West Coast ports, but really when you think about it, it just shows the impact this strike could have on our economy here.

From an import perspective, a strike would obviously impact cargo coming in from Europe, but also from Asia and Oceania. In fact some ocean liners have already made announcements around when they will no longer be accepting bookings heading into these ports. For example, one steamship line said they are no longer accepting bookings from Asia into these ports if they set sail after October 1. And instead they already are redirecting those bookings to the West Coast ports from the U.S., or to the U.S.

As far as industries goes, all industries are going to be impacted, but there’s going to be more that are going to feel it a little more than the others do. As we learned a couple months ago when whenever the Port of Baltimore closed due to the bridge outage, the Automotive industry heavily utilizes these East coast ports for both finished vehicles and parts used in manufacturing.

The Healthcare industry also utilizes these ports heavily for pharmaceuticals, PPE, medical equipment, etc. But even things like furniture manufacturing, construction materials, like wood and gypsum, those things and even food and beverage products like grapes, and wine, and bananas, and nuts, and things like that, all those are going to be impacted as well.

Ryan: Yeah, it’s no small thing. Even beyond just those industry impacts let's not just think this is only going to affect ocean shipments. The surface transportation networks, specifically truckload and intermodal, would see a reduced amount of demand out of these port cities and for long-haul truckers that means that these locations would be less desirable destinations due to the lacking backhauls.

And whenever the strike is over and all freight begins to come back, all of that port congestion will mean pent up demand.  So similar to the aftershock impact that hurricanes can have on coastal cities, this too would this create increased demand and costs outbound the East and Gulf Coasts until this backlog is cleared.

Now broadly speaking, for each day that a strike persists, that would equates to 6 days of congestion.  So, if the strike lasts a week, then we can expect over a month's worth of congestion. And historically it takes more time for rail to bounce back than trucking. Now for those who think just use air freight, remember what we said earlier that capacity will be lower and much of that space is already being filled.

Or perhaps you maybe you’re thinking my vessel doesn't arrive until mid-October, so I’m not going to be affected. Well the length of the strike will be critical, as we talked about Mat, congestion will build up which means the vessel with your container on it is then going to be waiting in line. So everything is going to be slowed down.

So to wrap up this topic, while we don't yet know if a strike will occur or not, due to the timeframe it takes for containers to arrive at the east and gulf coast ports, most shippers should have already taken action to divert freight as needed. Of diverting to Wes Coast, transloading, or air charters, well all of these are options shippers could or maybe should consider at this point.

If a strike does occur on September 30th, then that’s when we will start to see those bottlenecks occur and disruptions in other modes in the U.S. So, we’ll continue to monitor this situation closely and will provide just pertinent information on both our client advisories and our LinkedIn page.

Mat: And beyond the potential port strike, the area of trade policy has also been pretty eventful over the last month as well. On September 13th, the White House announced new action to target abuse of that de minimis classification which you know stems from that increasing volume of low value products being shipped into the U.S. with a retail value of under $800.

And I know we’ve mentioned this before, but this primarily has an impact on air freight through the e-commerce industry. The U.S. Trade Representative office announced final modifications of the Section 301 tariff actions, with several updates to strengthen the originally proposed actions there too.

The Section 301 updates those specifically target China and impact products produced in China such as electrical vehicles, solar cells, battery components, and even some certain medical supplies. Overall, I’d say these Section 301 updates impact about 40% of imports into the U.S., so no small feat there. If either of these policy updates are impactful for you and you want to learn more about it, reach out to your C.H. Robinson account member and they’ll be able to help you out there.

Ryan: Yeah finally, with the U.S. election only weeks away, many shippers are wondering what impact the election may have on the freight industry. Well the main message is that elections don't have over-night impact on freight markets. Policy, political appointments, well these things do influence long term trends around supply and demand through legislation and agency action, but little is going to happen immediately.

From a global trade perspective, well neither presidential candidate is planning to revert to pre-2016 trade policies. If Democrats win, we can expect more enforcement scrutiny. Republicans, however, view tariffs as punitive to China and propose significant increases on Chinese goods, which have already seen a 50–100% hike in August. So regardless of the election outcomes, little will change immediately on inauguration day. But shippers should know that C.H. Robinson is constantly monitoring these trends and we are always available to consult with you or answer any of your questions.

Well, thanks for joining us. Remember, Robinson goes further than anyone else in providing you with global perspectives for how to manage your complex transportation strategy. For more details and additional insights reference the Robinson Report on our website.