As some of the largest ocean carriers prepare to abandon their practice of providing chassis at U.S. ports and terminals, the shipping industry still is trying to figure out what supply chains will look like after their exit.
Will truckers be able to fill the void? Who will wind up paying for the chassis that carriers used to provide?
Inland distribution may face some profound changes as shippers and carriers come up with solutions to these questions and more in coming years. Experts and industry officials say there won’t be a single answer or model that will replace carrier-provided chassis. Indeed, some carriers may continue to provide equipment to shippers, stretching services from seaports to distribution centers.
But many scenarios will emerge in a patchwork quilt at ocean and rail terminals nationwide, depending on local patterns and need. The one thing certain is that shippers will pay for solutions as carriers pass through the costs.
“It’s going to take some time,” said Steve Rubin, president and CEO of Princeton, N.J.-based chassis lessor TRAC Intermodal. “In every region, how chassis are used by the ports, the railroads and even the truckers is different. I don’t think there’s a light switch that gets turned off. It’s going to develop regionally and in fits and starts.”
For now, the industry is in a state of uncertainty.
Trucking companies, many of them relatively small operators operating on thin margins and tight credit, wonder how they can muster the capital they need to buy, lease or rent the chassis they will have to provide. “We have major concerns about making any investments in the chassis as an industry,” said Vic LaRosa, president and co-founder of TTSI—Total Transportation Services, a Long Beach, Calif.-based port drayage company. “We’ve made a significant investment in the trucks, and now to have to invest in chassis would be difficult to force the industry to swallow.”
LaRosa knows his company will have to rent or lease chassis for the 450 trucks that TTSI operates in and around Los Angeles, Seattle and Norfolk. But he intends to pass that cost along to the shippers that use TTSI’s services. “We cannot absorb that cost,” he said.
During the summer Cosco, CMA CGM, NYK Line, Orient Overseas Container Line, Atlantic Container Line and Evergreen Marine announced they are exiting the chassis business. The withdrawal is starting in smaller ports and inland locations such as Boston, Miami, Philadelphia and Pittsburgh, and eventually will extend throughout the United States.
The move has been percolating since Maersk Line announced in June 2009 it was setting up a nationwide chassis pool that would make its fleet of chassis available for lease by drayage companies, ocean carriers, marine terminals and railroads across the United States. It established a subsidiary, Direct ChassisLink, to roll the pool out across the country.
The actions this year also were precipitated by the added cost of meeting federal chassis “roadability” regulations for maintaining the road equipment, rules that also upended the liability risks for the chassis. The shuffling of equipment services raises questions over the future of chassis pools operated by Consolidated Chassis Management, a for-profit subsidiary of OCEMA, the Ocean Carrier Equipment Management Association, a trade association of 20 major ocean carriers.
OCEMA formed CCM in 2007 to establish chassis pools around ports and rail terminals across the country. It now has more than 100,000 chassis under management throughout the Southeast, the Southwest and Midwest — everywhere except the West Coast and the Northeast.
“There has been no effect on CCM pools,” said Jeffrey Lawrence, OCEMA’s general counsel.
He said CCM pools have established enormous efficiencies by reducing the space taken up by chassis in container yards, repositioning equipment and improving the maintenance of carrier-owned chassis. “I don’t think anybody who is working with these pools, whether they be the lines or the railroads or the terminals, wants to see them go away.” He said stakeholders in the container business don’t want to lose the advantages of the CCM pools.
Many of the CCM pools are managed by the two major companies that lease chassis to the ocean carriers, TRAC Intermodal and Flexi-Van. Carriers will decide individually what they will do with the chassis they own or lease as they exit the business. They may decide to turn leased chassis back to leasing companies and already are discussing this possibility with them. Or they could turn CCM into a company that rents the pooled chassis to truckers. But OCEMA may not have the ability to do this under Federal Maritime Commission regulations.
The first test of the new world without carrier chassis was set to take place at the Port of Mobile, Ala., where CMA CGM announced in July that it would stop providing them on its direct weekly call there.
TRAC Intermodal, which manages a chassis pool in Mobile, has been signing up truckers through its new TRAC Connect service, which rents chassis to truckers at $11 a day on a short- to medium-term basis, the same daily rate as Direct ChassisLink. “Truckers are already using our wheels to pick up Maersk containers,” Rubin said. “We and DCLI are competing for the Maersk business right now. It gives truckers a choice if they don’t want to rent DCLI equipment.”
Rubin said he hoped truckers who were already using TRAC chassis for free to pick up CMA CGM containers would rent them under the TRAC Connect program. “It would be a seamless change. The only difference is our invoice will go to the trucker, who can then pass that along to the customer,” he said.
Chassis-leasing companies have been aggressively courting port truckers. “Where before, trucking companies would be contacting us to look at possible leasing of equipment, we are actively pursuing them now,” said Philip Connors, executive vice president of Flexi-Van Leasing. “Our trucker base is growing exponentially since the carriers said they are getting out of the chassis business.”
Connors said Flexi-Van has been discussing long-term chassis leasing agreements with large national trucking lines as well as shorter-term rental agreements with smaller lines under its new FlexiDay program.
Truckers are uncertain, Connors said, “how the new world without carrier chassis will play out over time, how they will be able to pass on the cost of renting or leasing chassis to their customers and whether they will find themselves operating the chassis pools in two years time that the carriers now operate.”
Contact Peter T. Leach at email@example.com.