New chassis business model would cut costs, trucker says

From the Journal of Commerce –

Long Beach – Truckers and beneficial cargo owners (BCOs) could save almost 50 percent on daily rental fees for chassis if the industry would agree upon a common model that allowed the party paying for chassis use to choose the equipment provider, according to a national trucking representative.

Dave Manning, president of TCW trucking in Nashville, Tennessee, and incoming chairman of the American Trucking Associations, said, for example, that his cost for use of a chassis from the trucker-controlled North American Chassis Pool Cooperative, of which Manning is president, is $12-14 per day. However, if a trucker is instructed by a shipping line to use a chassis from an intermodal equipment provider (IEP) it designates, as often happens when carriers are involved in the transaction, the daily rental fee can be $20.

“If you are paying for the chassis, make sure you can pick the provider of your choice,” Manning told the annual Agricultural Transportation Coalition conference Thursday in Long Beach.

Probably the main obstacle standing in the way of a smooth chassis regime is the decision by most carriers to stay tangentially involved in equipment decisions for container moves they control through their ocean contracts with BCOs. In those moves, the shipping line includes the cost of the chassis in the all-in charge for ocean move plus delivery of the container to the customer’s door.

In the United States, there was basically one chassis mode from the beginning of containerization in the 1950s until 2009 – ocean carriers owned the chassis, stored them at marine terminals, and provided them to BCOs along with the containers. In 2009, Maersk Line announced its decision to exit the chassis business. It formed a new company known as Direct ChassisLink Inc. to own, maintain, and provide chassis to customers.

Other carriers over the ensuing years began to pull out of the chassis business, and then on March 1, 2015, the three major IEPs in Los Angeles-Long Beach formed a neutral, or “grey” pool of pools with about 80,000 chassis that are interoperable, meaning a chassis can be picked up or dropped off at any location by users of the pool. Other pool arrangements have been formed over the years at different locations throughout the United States.

Truckers generally agree that of all the models, the grey chassis pool is the most versatile in the options it offers and the operational inconveniences it eliminates, and therefore preferable, at least in meeting their needs. “We believe this is the answer,” said Donna Lemm, executive vice president of IMC Companies in Memphis.

In reality, though, the gradual exit of about 20 ocean carriers from the chassis business since 2009 has not gone smoothly. Arrangements vary from region to region, and chassis shortages and surpluses occur too frequently in major harbor complexes. Truckers complain that the national fleet, which Lemm estimates as having an average age of 19, has too many unsafe or out-of-order chassis. “This things is a mess,” she said.

The problem with the current system, from the prospective of truckers, is that for moves controlled by a particular shipping lines, truckers must use only the chassis owned by the equipment provider with which that shipping line has a business relationship. That equipment works against truckers that own or lease their own chassis, which is becoming more popular in the industry. In another common scenario, the shipping line instructs the trucker to use a particular IEP-owned chassis, but the terminal where the inbound load is located may not have that IEP’s chassis on hand, so the trucker has to go to another site to retrieve an acceptable chassis, sometimes without compensation.

Manning said another residual impact to truckers is that each carrier has a business arrangement with an IEP that provides the shipping line with a discounted price fot the door moves that it controls. To compensate for lost revenue, the IEPs increase the price of other chassis that are used in “merchant haulage” in which the BCO controls the move. “The shipping lines continue to increase their merchant haulage rates,” he said.

There e is no single solution to this condition as long as ocean carriers choose to remain at least partially in the chassis business, but Manning advised truckers to begin by approaching the carriers directly and explaining the inconveniences and extra costs their policies are creating. He said that in many instances carriers will respond with an acceptable arrangement.

If that does not work, truckers, possibly through their associations, can approach the Federal Maritime Commission or the Department of Justice. Manning said Congress may also be interested in the issue as it reviews the Shipping Act. Truckers can also tell their story publically to the press, or, if needed, consider lawsuits.

In Southern California, another strategy is being considered. Weston LaBar, executive director of the Harbor Trucking Association, said the ports of Los Angeles and Long Beach are actively exploring the feasibility of encouraging the removal of chassis from marine terminals, which would free up more land for cargo-handling. This could happen if the ports are able to locate enough parcels in the massive port complex for establishment of common chassis storage depots. If enough suitable properties can be repurposed for these start-stop operations, sufficient chassis from all of the IEPs in the pool of pools could be made accessible for truckers within the general harbor area.