Unionized dockworkers at ports along the United States’ West Coast have approved a new six-year contract, ending the threat of a strike that would have crippled supply chains for the promotional products industry and the American economy more broadly.

But even as that good news comes, some importers in promo and beyond are already keeping hopeful eyes out for progress on talks to establish a new contract for port workers on the Gulf Coast and East Coast.

The Evergreen terminal at the Port of Los Angeles.

‘Labor Stability Is Good for all Importers’

On Aug. 31, members of the International Longshore and Warehouse Union (ILWU) voted 75% in favor of approving the new agreement, which will expire on July 1, 2028.

Retroactive to July 1, 2022 when the previous deal expired, the new contract reportedly includes a 32% pay increase over its span and a one-time bonus for working through the COVID-19 pandemic’s early days. It covers 22,000 workers at 29 West Coast ports, including the sister ports of Los Angeles and Long Beach, which have traditionally been the busiest in the nation, receiving imports, including promotional products, from sourcing hubs in Asia.

Leaders for the ILWU and Pacific Maritime Association, which represented employers, reached a tentative agreement on the new contract in June 2023 following a protracted, often contentious negotiation period that began before the previous deal expired and continued for nearly a year after its conclusion.

Still, workers needed to ratify the contract for it to be put in place. That’s now happened, and sourcing leaders in the promotional products industry are relieved, since the vast majority of promotional products sold in North America are produced overseas and brought stateside on cargo ships.

A strike at West Coast ports would likely have caused significant delays in importing promo goods, potentially driving up costs and leading to inventory shortages in the branded merchandise industry, depending on how long a stoppage would have lasted.

“We prepare for the worst but hope for the best. This time, with the West Coast ports, it looks like the best has come through.” Jing Rong, HPG

“Labor stability is a good thing for all importers,” said John Janson, vice president of global logistics at SanMar (asi/84863), the largest supplier in the promo industry. “With the ILWU ratifying the agreement, it will ensure ports along the West Coast will remain open and cargo flowing.”

Promo sourcing executives Teresa Fang and Jing Rong expressed similar sentiments.

“The deal is really great news for our industry and others because many of the ports covered are among some of the busiest in the nation,” Fang, vice president of supply chain at Top 40 supplier alphabroder (asi/34063) and Counselor’s 2023 International Person of the Year, told ASI Media. “Having the stability established just before the upcoming holiday season is a big relief for many.”

“Any even small hiccup in the supply chain might or might not turn out to be a bigger problem in the long run,” said Rong, vice president of sourcing at Top 40 supplier HPG (asi/61966). “We prepare for the worst but hope for the best. This time, with the West Coast ports, it looks like the best has come through.”

More Cargo Heading Back to West Coast Ports?

The prolonged West Coast contract negotiations created uncertainty that resulted in some importers and exporters diverting their cargo to ports on the East Coast and Gulf Coast. Certain shipping industry analysts believe at least some of that cargo could start to return to West Coast ports.

“The stability that comes with the contract gives the West Coast ports an opportunity to recapture some of the business that was diverted to the East Coast,” Fang said. “Even though it’s not as relevant in our industry, this also helps exports gain more options for schedules to the Asian markets, like Japan and Korea.”

Like other large importers, SanMar diverted some shipments from West Coast routes to East Coast and Gulf Coast destinations during the West Coast port contract challenges. Now, some of the company’s cargo traffic could be headed back to West Coast docks. “At this point, we feel very good about aligning origin cargo with the West Coast for delivery,” Janson told ASI Media. “We also feel good that we demonstrated the nimbleness to move cargo when needed.”

Contract Concerns for East Coast & Gulf Coast Port Workers

Some analysts say it’s possible that a redistribution of at least some cargo back to West Coast ports could spread imports/exports out more and potentially allow for greater collective efficiency across all U.S. ports.

Still, that depends on just how the movement of goods may play out – and, seemingly as always with the global supply chain, there are ample variables in play. A big one is the need to establish a new master contract for 45,000 dockworkers who labor at 14 ports from Maine to Texas along the U.S. East and Gulf coasts.

The current contract expires more than a year from now: Sept. 30, 2024. The International Longshoremen’s Association (ILA), which represents the workers, instructed local chapters to begin negotiations with employers late in 2022 as part of an effort to reach a “fast track” early agreement.

“All eyes now turn to Sept. 2024, when the ILA agreement expires. The gains by the ILWU on the West Coast will place added pressure on the East Coast negotiations.” John Janson, SanMar

However, things apparently did not go swimmingly. The Wall Street Journal reported in late June that ILA President Harold Daggett had in March ordered the local chapters to desist in the talks because the United States Maritime Alliance, which represents East/Gulf Coast ocean carriers and port terminal operators, was “unwilling to meet” union demands.

In late July, the Journal of Commerce reported that little progress had been made on talks to date: “Longshore workers and maritime employers … have reached local agreements in just two of the 14 ports under the master labor contract …. That lack of progress on the local level has stalled movement on a new master contract.”

Nonetheless, word is that both sides hope to have a deal before the current agreement expires.

Promo sourcing executives are hoping for that, too. If talks turn acrimonious, slowdowns and even temporary stoppages at East Coast and Gulf Coast ports are a possibility – as was experienced during West Coast contract talks. And if a strike were to occur, it could come with essentially the same repercussions for promo as if there’d been a West Coast walkout: importing imbroglios and the prospect of inventory shortages.

“All eyes now turn to Sept. 2024, when the ILA agreement expires,” Janson told ASI Media. “The gains by the ILWU on the West Coast will place added pressure on the East Coast negotiations.”

The talks are occurring at a time in which organized labor is flexing what may be growing strength, as evidenced by the recent deal achieved for unionized UPS workers and the current strike threat from auto workers.

Still, sourcing pros including Fang and Janson are remaining optimistic that there’ll be an amicable conclusion to the East/Gulf Coast talks before supply chains receive any significant rattling.

“It was generally seen as a positive sign that talks have begun so soon, even though they were halted,” Fang told ASI Media. “I think the West Coast contract gives some guidelines, so that’s a benefit for the East Coast talks. I also think the East Coast wants to hold on to as much of the business as they can that they’ve taken from the West Coast, so to the extent that they can provide stability, that will be motivation for them to negotiate.”

Added Janson: “The head of the ILA is loud and making lots of noise, but with that said, I think they know if the contract is not settled early, importers will begin to move cargo back to the West where available.”