ILA Contract Secures Labor Peace at East, Gulf Ports
After two years of tense negotiations, the International Longshoremen’s Association (ILA) is preparing to present its new six-year collective bargaining agreement to its 45,000 members at East and Gulf Coast ports. The ratification process is expected to take about a month, culminating in a member vote near the end of February. If approved, the new contract will bring six years of labor peace to these ports.
Next week, the ILA will hold a meeting in Florida with its local wage scale committees to review the details of the agreement, which was finalized after four days of talks in New Jersey. These committees will then present the coastwide master contract, along with port-specific agreements, to local union members. The USMX board has reportedly already approved the contract.
The new agreement includes a 62% wage increase over the six-year term (an average of $4 per hour annually), which ended a brief three-day strike last October – the first such strike on the East and Gulf Coasts since 1977. In addition to the wage increase, the contract also guarantees minimum staffing levels for ILA members when ports implement semi-automation technologies.
Norfolk Southern Brings Mandatory Appointments to Chicago Container Terminal
Norfolk Southern Railway has implemented a mandatory appointment system for truckers retrieving import containers at its Chicago Landers terminal. This follows similar rollouts in Memphis and Atlanta. The system aims to improve terminal efficiency by allowing the railroad to pre-position containers for pickup, reducing congestion and streamlining operations. While similar systems in other locations initially faced challenges like equipment malfunctions and logistical hurdles, Norfolk Southern says these issues were eventually resolved. The railroad is transitioning terminals from “wheeled” to “grounded” operations, which increases storage capacity but can also increase truck turn times. While turn times might be slightly longer, the railroad argues that the appointment system provides more predictability and less idling time for truckers, ultimately benefiting importers. The success of the system depends partly on truckers booking appointments further in advance, which can be difficult due to the unpredictability of container availability. While the railroad claims ample appointment availability in Chicago, some truckers remain skeptical about the new system.
Major Changes Coming to LTL Freight Classification
A major overhaul of the US less-than-truckload (LTL) freight classification system is underway, raising concerns among shippers about potential pricing impacts. Industry experts predict a “resetting” of LTL rates, with potential increases for some shippers.
Industry experts acknowledged shipper anxieties about rate hikes but emphasized the goal is not to raise rates. Instead, they anticipate a period of rate adjustments as freight classes are redefined. Shippers are highlighting the need to accurately measure freight dimensions, a task many are still preparing for.
The National Motor Freight Traffic Association (NMFTA) has released a docket with over 90 proposed changes to the National Motor Freight Classification (NMFC), a significant departure from the typical 15 proposals. NMFTA is actively engaging with shippers through webinars and meetings to address concerns. A key question is whether shippers need to invest in dimensioning equipment to comply with the new rules.
The NMFC, dating back to 1936, assigns products to 18 classes based on density, handling, stowability, and liability. The current system is considered overly complex and in need of simplification. The proposed changes aim to standardize the density scale, create identifiers for special handling needs, and streamline commodity listings. Two new density classes (50 and 55) will be added, and items with no special requirements will be moved to “full density.”
This overhaul is expected to reduce reclassification and repricing of freight. With carriers increasingly using dimensioning equipment, shippers often face unexpected cost revisions.
Industry leaders urge shippers to proactively prepare for the changes. They emphasized the importance of collaboration with carriers, sharing information about freight characteristics. While many haven’t experienced significant LTL price increases yet, they are closely monitoring the NMFC changes.
The NMFTA stressed that this is an ongoing process, with further revisions expected beyond the current docket. Feedback on the proposed changes is due by February 25, with a public meeting on March 3. The final changes are scheduled to take effect on July 19.
Trump Postpones Tariffs Against Mexico and Canada Amid Border Security Agreement
On February 3, President Donald Trump postponed his planned tariff increases on imports from Mexico and Canada for 30 days, following agreements by the two neighboring countries to enhance border security.
Initially, on February 1, Trump ordered a 25% tariff on most imports from both nations and a 10% tariff on Canadian energy products, set to take effect at midnight on February 4. This prompted threats of retaliation from Mexico and Canada, raising concerns of an escalating trade conflict.
In a statement on X, Canadian Prime Minister Justin Trudeau announced that during a call with Trump, he offered to enhance cooperation on border security efforts, a commitment echoed by Mexico on the same day. “Proposed tariffs will be paused for at least 30 days while we work together,” Trudeau said. The delay in tariffs was also contingent on Mexican President Claudia Sheinbaum’s agreement to deploy 10,000 national guardsmen to the border to combat drug trafficking.
Trump’s tariffs on China remain scheduled to go into effect on February 4, but questions linger about the stability of any agreements and whether these tariffs signal a wider trade war, as Trump indicated more import taxes could follow.
Despite Trudeau’s optimism, a senior Canadian official expressed skepticism about avoiding tariffs compared to Mexico, noting the varying demands from the Trump administration. This official spoke anonymously due to the sensitivity of the situation.
Before securing the agreement with Canada, when asked what Canada might offer to avert tariffs, Trump replied, “I don’t know.”
Following the conversations, Trump referred to a “very friendly conversation” with the Mexican and Canadian leaders and expressed eagerness for continued negotiations, which will involve Secretary of State Marco Rubio, Secretary of Treasury Scott Bessent, Secretary of Commerce Howard Lutnick, and senior representatives from Mexico. “I look forward to participating in those negotiations with President Sheinbaum,” Trump stated.
As part of the discussions, Sheinbaum confirmed the immediate deployment of troops to strengthen the northern border against drug trafficking, particularly fentanyl. She posted on X, “The United States commits to work to stop the trafficking of high-powered weapons to Mexico.”
In a separate social media post, Trump shared that he spoke with Trudeau and planned to continue the dialogue later that day. Both nations had braced for the possibility of implementing their own tariffs in response to U.S. measures.
Trump also reiterated his frustrations with Canada not allowing U.S. banks to operate there, despite the longstanding bilateral relationship.
As tariffs loomed, financial markets experienced modest declines, reflecting concerns that these import taxes might disrupt economic growth and elevate inflation. However, uncertainty prevailed regarding the implications of a president who has consistently advocated for tariffs.
On February 2, Trump indicated that tariff reductions would follow if Canada and Mexico stepped up efforts against illegal immigration and fentanyl trafficking, although specific criteria were not established. He also emphasized the need to rectify the trade imbalance with both countries.
Mexico faces a potential 25% tariff, while Canadian imports to the U.S. would incur the same rate, alongside a 10% tax on energy products. Furthermore, China is subject to an additional 10% tariff due to its role in the fentanyl trade, according to the White House.
Economists outside the administration have cautioned that these tariffs could increase prices and stifle economic growth, despite Trump’s assurances of manageable short-term pain, contradicting his campaign promises to control inflation.
Shipping Rates Under Pressure as Carriers Battle for Market Share
The restructuring of global shipping alliances is creating a highly competitive environment, leading to downward pressure on shipping rates, particularly on major east-west trade routes, according to Sea-Intelligence Maritime Analysis. A consistent decline in average rates has already been observed on trans-Pacific and Asia-Europe routes since December, and with the implementation of new alliances and Mediterranean Shipping Co.’s (MSC) independent network, this trend is expected to continue.
Sea-Intelligence highlights the significant shifts in competitive power among the new alliances compared to the past eight years. This increased competition will intensify the downward pressure on rates for shippers. The Ocean Alliance, comprised of Cosco Shipping, CMA CGM, OOCL, and Evergreen, holds the largest market share on three key routes from Asia: Asia-US West Coast, Asia-US East Coast, and Asia-North Europe. MSC dominates the Asia-Mediterranean route.
Specifically, the Ocean Alliance controls 35% of planned capacity on the Asia-North America West Coast trade, 37% on the Asia-North America East Coast route, and 35% on Asia-North Europe. MSC leads the Asia-Mediterranean route with 30% capacity, closely followed by the Ocean Alliance at 29%. The Gemini Cooperation (Maersk and Hapag-Lloyd) and the Premier Alliance (ONE, Yang Ming, and HMM) are smaller players on the Asia-North America routes.
Forwarders are already witnessing signs of a rate war, especially on the Asia-Europe route. Dimerco Express Group’s Kathy Liu notes that slowing demand forces shipping lines to fill capacity, inevitably leading to price competition.
This rate decline is evident in recent data. As of Monday, average spot rates from North Asia to the US West Coast were $3,700 per FEU (forty-foot equivalent unit), down from $5,250 at the start of January, according to Platts. Rates to the US East Coast have fallen to $5,500/FEU, a $2,200 drop since January. Similarly, Asia-North Europe rates have decreased from $5,000/FEU in early January to $3,000 this week, and Asia-Mediterranean rates have fallen by $1,000 to $4,300/FEU.
The impact of the late January Lunar New Year and uncertainty surrounding the resumption of shorter Suez Canal transits add complexity to rate forecasting. HSBC predicts a return to normal Red Sea transits by mid-2025, implying a 10.5% effective capacity growth in 2025, compared to only 2.7% volume growth. This potential capacity surplus could further contribute to downward pressure on rates.