A picket line at the Neptune Terminal at the Port of Vancouver during a dockworkers strike in Vancouver, British Columbia, Canada, on Wednesday, July 5, 2023.
Jimmy Jeong | Bloomberg | Getty Images
As a workers’ strike at West Coast Canadian ports enters its 10th day, trade associations both in the United States and Canada are warning the impact will inflate prices and cause weeks of delays in product arrivals.
Approximately $572 million in container trade arrives daily to the U.S. from Canada, according to a breakout of U.S. Census data. From January 2022 to May 2023, total monthly U.S. goods imports from Canada ranged from $31 billion to nearly $41 billion. Top commodity imports for May included mineral fuels, vehicles and computer-related machinery.
The U.S. and Canada have a historically strong trade relationship: Each country is the other’s top trading partner. Approximately 20% of U.S. trade arrives in the Canadian ports of Vancouver and Prince Rupert, where strikes broke out after union leadership and industry representatives each walked away from the negotiating table. The Canadian Chamber of Commerce estimates $605 million in trade moves through one of those two ports daily.
The volume of trade being disrupted by the ongoing strike has sparked supply chain concerns in the U.S.
Steve Lamar, CEO of the American Apparel and Footwear Association, told CNBC any disruption in supply chains, this strike included, poses both inflationary and inventory challenges. The biggest hurdle right now, he said, is accessing goods that are stuck on boats or being diverted to other ports.
“The strike is affecting everyone, either directly for those companies who use British Columbia as a major transit center or an e-commerce hub, or indirectly, as cargo is diverted to other ports,” Lamar said. “The Canadian government should use all its tools, including recalling Parliament, to get people back to work and goods moving again.”
The International Longshore and Warehouse Union and the British Columbia Maritime Employers Association are back at the negotiating table, each individually speaking with mediators. Reaching an agreement quickly is crucial.
“It’s hard to imagine a more disruptive event to Canada’s economy at this time than a work stoppage in our ports which will delay imports and exports at significant costs to consumers,” said Bruce Rodgers, executive director of the Canadian International Freight Forwarders Association, in a letter last month addressed to Canadian Minister of Labour Seamus O’Regan.
The CIFFA represents all parts of the supply chain: the freight forwarders, the drayage truckers, warehouses and customs brokers.
Logistics managers predict in three months, when holiday items are on store shelves, shoppers will see higher prices.
Vessels divert
Meanwhile, more vessels are diverting away from Canadian ports for American alternatives.
Destine Ozuygur, head of operations at maritime data and vessel tracking company eeSea, told CNBC two vessels, the MSC Sara Elena and the Ever Safety, have officially left Canadian ports and will not return.
“This has been confirmed by the ocean carrier,” said Ozuygur.
The company is also tracking two additional ships that previously listed Vancouver as their destination on the schedule, but no longer do.
One vessel, the MSC Matilde V which was anchored outside of Vancouver last week, pulled up anchor and left with the Vancouver-bound cargo and headed back to Qingdao, China. The containers will have to be rebooked for another voyage, adding expenses to the cargo.
There are four vessels identified by eeSea that have flipped their port schedules, leaving Vancouver for U.S. ports to supposedly go back to Vancouver, but that can change after the U.S. port service. It’s likely that many of the vessels that flipped their schedules will not go back to Canada.
This is what happened with the MSC Sara Elena, which was worked on in Seattle. After the service, the carrier announced it would not be heading back to Vancouver, which means the Canadian-bound freight was unloaded or will be unloaded in future U.S. ports.
The diversion of vessels raised the question of whether U.S. ILWU workers would work on the vessels. Only ILWU workers are allowed to process vessels at West Coast ports.
The ILWU U.S. West Coast chapter told CNBC last week its members would not work any of the diverted vessels.
“The ILWU will not be unloading Canadian bound cargo in solidarity with our Brothers and Sisters in ILWU Canada,” said ILWU U.S. West Coast chapter President Willie Adams in a statement.
However, it would be very hard for the ILWU to identify containers that had their final destinations changed because the union workers do not have access to container information for security reasons.
CNBC has reached out to the ILWU West Coast chapter in the U.S. for a comment on the diversions of the MSC Sara Elena and Ever Safety.
The diversions are the first of what could be widespread rerouting of ships, delaying planned arrivals and straining supply chains right at the beginning of peak season when holiday and back-to-school items are coming in.
The rerouting of containers also adds days to the delivery of products. For the auto industry which runs on lean just in time schedules, these delays can impact production.
Paul Brashier, vice president of drayage and intermodal at ITS Logistics, told CNBC the company is already seeing widespread rebooking of containers from western Canada to U.S. West Coast ports in Seattle, Oakland, Los Angeles and Long Beach.
“These options are getting freight back into the supply chain, but these solutions are adding additional touches and modes of transport, which is pushing costs up as much as 50% to 60%,” Brashier said. “Even unaffected containers will be affected as the newly rerouted freight will congest markets with additional volumes that were not planned for.”
Higher costs include fees to change the container destination, extra rail and trucking fees, extra customs fees, extra port fees, and container later fees as a result of congestion at the ports and rails once the higher influx of containers is processed.
Those fees are often passed on to consumers — similar to what occurred during the Covid pandemic.
The Canadian National Railway Company, which services the ports, told CNBC it will take weeks to months to clear out the congestion.
The Port of Vancouver and Port of Prince Rupert are popular destinations for U.S. trade because these ports are among the major ports of call for goods arriving from Asia. Some logistics managers have told CNBC that rail service out of those ports is a lot faster than going through the port of Seattle or Tacoma.
