We have two major supply chain issues that could impact Asia to US trade, labor disruptions due to a lagging union contract with the International Longshore and Warehouse Union (ILWU) and the ongoing restrictions in the Panama Canal.

We remain committed to mitigating the impact on our customers and recognizing the importance of open communication, collaboration, and adaptability.

The ongoing labor contract negotiations between the ILWU, ocean carriers, and terminal operators have escalated to a critical point. ILWU Local 13, representing approximately 12,000 longshore workers in Southern California, has expressed deep disappointment with the current contract negotiations regarding safety, wages, and automation.

During the first week of June, several terminals across the US West Coast (USWC) faced disruptions due to the labor expressing their displeasure with the current contract negotiations specifically related to wage increases and automation. Many terminals from Los Angeles, Long Beach, Hueneme, Oakland, and Seattle have been shut down intermittently since June 2nd, with shifts being canceled due to a lack of labor or red-tagging equipment for safety inspections.

The labor may continue to target certain terminals to display their frustrations with the current contract negotiations. The ILWU has stated that despite playing a vital role in sustaining the nation's supply of goods throughout the pandemic, the workers feel their health risks and lives have been treated as expendable for the sake of maximizing profits by the shipping lines.

In response to the ILWU's dissatisfaction, the Pacific Maritime Association (PMA) has accused the ILWU of engaging in disruptive work actions at key marine terminals along the West Coast, including major ports such as Los Angeles, Long Beach, Oakland, and Seattle. These actions involve tactics like worker dispatch refusal, operational slowdowns, and baseless health and safety claims. The consequences extend beyond dockworkers, affecting truck drivers, warehouse workers, and others who rely on port operations for employment. The Pacific Maritime Association emphasizes the need to halt this harmful disruption and restore confidence in West Coast ports, as the stakes are exceedingly high.

The ILWU in Canada is on the verge of deciding whether to initiate a 72-hour walk-out at Vancouver and Prince Rupert ports. This decision has sparked worry among shippers who fear the subsequent surge in pressure and congestion on the east coast. The potential disruption looms large, considering that a considerable volume of cargo from Canada's west coast relies on rail transportation to traverse the continent.

The outcome of this vote carries significant implications not only for the shipping industry but also for the broader economy, as the prolonged disruption to the vital supply chain could lead to increased delays and logistical complexities. Stakeholders across the maritime and transportation sectors closely monitor the situation, emphasizing the need for constructive dialogue and exploring alternative measures to mitigate the expected consequences on Canada's trade and commerce. The impending vote will determine whether an amicable resolution can be reached or if the walk-out will proceed, which could have far-reaching consequences for the shipping landscape of Canada and the interconnected global trade network.

Retail and manufacturing groups are urging the White House to intervene in labor negotiations at West Coast ports to prevent shipping disruptions during critical holiday shopping seasons. These groups emphasize the importance of the ports in the supply chain and express concerns about potential consequences such as product shortages and delays, increased costs, and dissatisfied customers. By prioritizing this issue, the White House has an opportunity to protect the interests of businesses and consumers and maintain the economic vitality of the retail sector.

The other issue facing transpacific business is an exceptionally severe drought season. The Panama Canal Authority (PCA) has announced its decision to decrease further the maximum draft allowance for vessels navigating through the Panama Canal into June. This measure will require ocean carriers operating on Asia – US east coast Panama and Pendulum loops to reduce loads of their ships. Consequently, transpacific carriers have informed us that effective from June 1st, substantial surcharges will be implemented for shipments on Asia – US east coast of all water services.

Additionally, some carriers plan to redirect certain loops through the Suez Canal. The prolonged drought conditions in Panama have caused draft complications within the canal, resulting in a reduced capacity for the Panama string. Furthermore, carriers have stated their intent to apply Panama Canal Charges to all cargo loaded on their Asia to US east coast sailings via the canal. These measures are necessary due to the significant draft restrictions imposed by the unusually low water levels as vessels transit through the Panama Canal.

As a logistics company, NNR will continue to monitor the situation and provide updates to our clients. We understand these disruptions impact operations. We hope that the ILWU and PMA can reach a fair and mutually beneficial agreement soon so that operations can resume without any further disruptions.