Ship lines, truckers, leasing companies and other interests are still trying to decide how to fill the void left by ocean carriers that are ending their practice of providing U.S. customers with free intermodal chassis, several industry leaders agreed at the Journal of Commerce’s Trans-Pacific Maritime Conference.
“It’s a work in progress,” said Philip Connors, executive vice president at Flexi-Van Leasing, who spoke at a panel discussion at the TPM conference in Long Beach. “The problem is that it has been an inconsistent approach to date. Where it will go is anybody’s guess.”
Connors said many ocean carriers have done little except sending e-mails advising that they will quit providing chassis in certain cities on a particular date.
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He said industry parties need to discuss a new operating model that everyone can live with. “I think it’s absolutely incredible that some of the discussions that haven’t taken place, haven’t taken place,” Connors said.
Flexi-Van and Trac have followed Maersk’s Direct ChassisLink in providing truckers with rental chassis that ocean carriers traditionally have provided free. Carriers talked for years about exiting the chassis business but were spurred into action by losses during the recession.
The U.S. system for intermodal chassis is an anomaly. In other countries, chassis are generally provided by the trucker, shipper or forwarder. The practice of carrier-provided chassis got started in the U.S. when modern containerization was launched in 1956 to compete with trucking.
Bill Rooney, former president of Hanjin Shipping America, said the traditional U.S. system for chassis produces inefficiency and economic distortions. “I think carriers, shippers and the public in general would be better off with more properly priced chassis,” he said.
Rooney said the current system is an inconsistent operating model that ties up $2 billion to $3 billion in carriers’ capital, costs carriers $1 billion to $2 billion a year, and does not cover carriers’ cost of capital or provide them with competitive advantage.
Developing a new model for providing chassis is complicated by issues of finance, operations and liability. Truckers who are renting chassis they once used free will have to pass their costs to customers, Rooney said.
“The margins in the trucking business are not going to allow the trucker to absorb a chassis charge,” he said. “It’s not going to stop at the trucker.”
Jeff Bader, president of the Bi-State Motor Carriers Association in New York-New Jersey, said his company charges an administrative fee for its leased chassis.
Bader said the model pioneered by Direct ChassisLink has worked well but that the industry needs a more standardized system. He said truckers “need a scorecard” to figure out which chassis they can take to which terminals.
-- Contact Joseph Bonney at email@example.com.