Chassis models vary widely at ports such as Los Angeles-Long Beach, New York-New Jersey, Norfolk, and at inland hubs such as Chicago and Memphis. Photo credit: Shutterstock.com.

TACOMA — The inability to ensure the availability and roadability of chassis has prompted a former carrier executive to propose a “utility” arrangement in which the port or hub operator would set prices and ensure adequate supply.

Bill Rooney, vice president of strategic development at Kuehne + Nagel and former president of Hanjin America, said the chassis utility model would be based on the full interoperability of chassis, which would save money for shippers and truckers while setting compensatory rates for equipment operators who contribute chassis to the grey pool.

Chassis models vary widely at ports such as Los Angeles-Long Beach, New York-New Jersey, Norfolk, and at inland hubs such as Chicago and Memphis. The one common thread at all these locations is that, “Truckers and shippers are getting screwed,” Rooney told the annual meeting of the Agriculture Transportation Coalition. The chassis utility model would be structured like that of the Port of Virginia, where the port authority leases equipment from a variety of sources and then handles the rates and billing itself.

Shippers, truckers coalescing around new chassis models

For more than 50 years, from the beginning of containerization in 1956 until the emergence of “grey,” or neutral, chassis pools in 2009, the equipment arrangement was the same throughout the US. “Carriers bought the chassis and gave them away for free to attract business,” Rooney said. Then, carriers went almost full circle by renting back the chassis from the equipment providers and offering them at discounted rates, once again to attract business, he said.

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Faced with chassis shortages during peak periods, poorly maintained equipment, and increasing prices, shippers and truckers at a number of ports and inland rail hubs are forming coalitions, demanding action from port authorities and hub operators, while experimenting with new models.

The ports of Savannah and Charleston in February 2018 reached an agreement with carriers to form the Southern States Chassis Pool. The pool would have been operated by the North American Chassis Pool Cooperative, which would charge a flat fee for chassis, but the arrangement was suspended this April for at least three years when the two ports said it was probably “too aggressive.”

In Los Angeles-Long Beach, the three large national independent equipment providers (IEPs) — TRAC Intermodal, Direct ChassisLink Inc., and Flexi-Van Leasing — have been operating the “pool of pools” since 2015. While cargo owners and truckers say the interoperable pool of pools is an improvement over the pre-2015 period when truckers wasted time and lost money repositioning chassis that were not interoperable, the system broke down during high-volume periods, such as last winter. Port stakeholders determined that continued carrier involvement in determining which chassis must be used for carrier haulage contributed to chassis shortages that rippled throughout the supply chain.

Ongoing chassis disruptions in Memphis motivated local interests to form the Memphis Supply Chain Innovation Team as part of a Federal Maritime Commission (FMC) fact-finding investigation into detention and demurrage issues. Shippers, carriers, railroads, truckers, and chassis pool contributors in the mid-South produced a white paper that issued suggestions similar in some ways to Rooney’s proposal for a chassis utility.

The closest existing model to what Rooney suggested is run by the Virginia Port Authority (VPA). John Reinhart, VPA executive director, says having all port users on board with the pool gives the Virginia ports a “competitive advantage” on the East Coast.

Rooney said he envisions a chassis utility model being established by the ports — be they operating ports such as in Virginia or landlord ports like New York-New Jersey and Los Angeles-Long Beach — or inland hub operators, which can act as facilitators within their respective communities.

The chassis utility model would require FMC approval, he said. Every chassis within the pool would be interoperable for all users, which would negate the need to “flip” containers from one chassis to another at the direction of ocean carriers because of arrangements they have with the IEPs.

In order to work, however, the chassis utility board “must set the rates” to ensure they are compensatory for the asset owners that contribute chassis to the interoperable pool, Rooney said. Ultimately, the IEPs would have to sign on to a new arrangement too, which occurred in Virginia, but was blocked by TRAC Intermodal and Direct ChassisLink Inc. in Memphis this March.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.