Since late last year, shippers have struggled with both a serious shortage of container chassis, as well as port congestion at the nation’s largest ports. These two challenges are inter-related and have been especially severe at the nations’s busiest ports of Los Angeles/Long Beach and New York/New Jersey. Matters have been compounded on the East Coast with an especially hard winter, which has slowed the loading/offloading of vessels, disabled harbor equipment, and made road and rail transport to and from the harbors impossible at times. In today’s post, we take a look at the root of the problems and what to expect moving forward.
Ocean Carriers Exiting The Chassis Business
Container chassis are the undercarriage on which the container is placed for towing to/from a shipper’s warehouse. They have historically been owned by steamship lines, who then charge truckers a fixed daily rental fee for the use of their equipment. That business model is about to change.
Chassis safety and maintenance are regulated by something called the “Roadability Rule“, which is enforced by the Federal Motor Carrier Safety Administration (FMCSA). Given the increased regulatory scrutiny of chassis, the cost of chassis maintenance and the enormous investment required to own a pool of rental chassis worldwide, many ocean carriers have begun to get out of the chassis rental business altogether.
In addition, many chassis have been taken out of service due to maintenance requirements and they will not be repaired. This increasingly places the burden of ownership directly on the truckers to provide the equipment. It is a cost many cannot afford. Many smaller truck lines are under-capitalized and simply unable to finance the cost of owning a pool of chassis to provide to shippers, especially when shipper’s often want to keep for multiple days at a time while they load/unload their containers. The result has been that many smaller truckers are simply being forced out of business.
To compound matters, a recent article in the Journal of Commerce indicated that “Trucking companies have been hoarding chassis because they fear they’ll be unable to obtain worthy equipment at terminals.” The result is that the shortage of chassis has become somewhat like a bank run, with everyone wanting to get their money out at the same time. It has only exacerbated the problem.
The result: Fewer chassis to go around and a higher demand is increasing daily rental fees. The basic laws of supply and demand apply.
Harbor Backlogs Increase Shipping Costs
When you take the growing chassis shortage, a brutal East Coast winter and U.S. Customs slowdowns brought on by reduced staffing, it all adds up to longer lines at the harbor. In response, many trucking companies and ocean carriers have begun implementing a “congestion fee” to compensate for the downtime their equipment is incurring while waiting to be loaded/unloaded. Many shippers have been caught unaware by the supplemental fees and have not budgeted for it in their transportation costs. This only adds to the frustration.
Even as springtime approaches, shippers should be prepared for further severe weather and chassis shortage delays. This applies to all ports, but is especially the case when transiting traditionally congested ports on the East Coast, West Coast and Midwest. Air & Surface Logistics is always looking for routings that will minimize transit time, reduces costs and avoiding unnecessary delays. When in doubt, make sure you ask your forwarder about current harbor conditions before you ship.
Plan Ahead to Avoid Delays
In the end, like so many other things, the chassis situation will work itself out as new companies step in to fill the need and winter fades, but it will take time. In the near term however, you may want to allow a few extra days for your ocean freight to reach its final destination.