Post by DOCKER on Feb 13, 2014 16:19:22 GMT -5
‘Chaos’ as Ocean Carriers Exit Chassis Ownership
Bill Mongelluzzo, Senior Editor | Feb 10, 2014
A chassis-shortage contagion that has plagued the three largest U.S. ports since late last year is a stark reminder to cargo interests, trucking companies and waterfront labor that the cozy world of ocean carrier-owned chassis has come to an end.
A new world in which equipment-leasing companies and chassis pool operators will call the shots is taking shape right now, but this transition period is creating all kinds of problems for port communities, especially those in Los Angeles-Long Beach and New York-New Jersey.
“It’s unmanaged. It’s chaos,” said David Adam, president of USMX, the employers’ organization that negotiates and administers the waterfront contract with the International Longshoremen’s Association on the East and Gulf coasts.
Labor jurisdiction over chassis continues to be an issue in New York-New Jersey, and jurisdiction is certain to be an issue in this year’s contract negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union on the West Coast.
But labor jurisdiction over maintenance and repair is just one component of an extremely complex chassis environment. Ownership of the equipment, billing, chassis repositioning and equipment availability are actually more important issues as shipping lines finalize their departure from the chassis business.
Since the dawn of containerization 50 years ago, carriers have owned and maintained chassis. When a cargo owner sent a truck to pick up an inbound container, the terminal operator mounted the box on a carrier-owned chassis and turned it over to the trucker. Somewhere in the invoice there might have been a charge for the chassis, but not always.
Carriers three years ago began to sell off their chassis, and in the process they relieved themselves of the costs and headaches associated with chassis ownership, storage and repairs. Many of the chassis were sold to equipment-leasing companies.
In many ports the transition from carrier-owned chassis to neutral fleets was smooth. In the high-volume ports, however, problems such as marine terminal congestion, long truck lines and delayed cargo deliveries because of a shortage or dislocation of chassis have hit the big ports with a vengeance.
Smooth transitions at ports with gray chassis pools
Ports that have had gray chassis pools for several years are generally operating smoothly. Gray chassis can be picked up at one terminal, or at an off-dock storage yard, and they can be dropped off at a completely different location. The “split moves” that cause nightmares for harbor truckers — dropping the container off at one terminal and the chassis at another location — are eliminated.
Consolidated Chassis Management manages gray chassis pools in the South Atlantic and Gulf ports, and at a number of inland locations and rail ramps. CCM is a pool manager. It doesn’t own the equipment, but acts as a cost pass-through, said Phil Wojcik, president and CEO. CCM is owned by the Ocean Carrier Equipment Management Association.
Providers of the equipment, which include leasing companies and those shipping lines that have not yet sold their chassis to a third party, each contribute equipment to the gray pool according to their projected need each month, and they are billed according to their usage.
For example, if Provider “A” contributes 1,000 chassis and ends up using 1,200 units, it is charged for 200 extra chassis. If Provider “B” contributes 1,000 units but uses only 800 that month, it is credited for 200 chassis.
The benefits of this arrangement are many, Wojcik said. Chassis shortages have been largely eliminated. Billing is simplified. Split moves are not a problem. There is 100 percent inter-operability in the pool, so a trucker can pick up a chassis in one location and deliver it to another. The environmental benefits are obvious.
This arrangement has also resulted in a significant decrease in the number of costly chassis that are needed to serve a port community. The Georgia Ports Authority went from having 8,000 chassis to 2,400, Wojcik said.
While the CCM model works well in the South Atlantic and at inland locations, it probably won’t work at the nation’s three largest ports, which are landlord ports.
The South Atlantic ports are operating ports. They can influence all chassis providers using their facilities to join the gray pool. Los Angeles, Long Beach and New York-New Jersey lease their facilities to terminal operators, and they can not dictate to shipping lines, leasing companies or any other business entity how to manage their chassis.
Competition for market share among private-sector companies at these ports is fierce. “There are six pools in Los Angeles-Long Beach serving 13 marine terminals,” said Bill Shea, CEO of Direct ChassisLink Inc. DCLI is one of the three national leasing companies and several smaller, terminal-specific, pool operators in the port complex.
The environment at the largest ports is also complex because of the large number of units spread out over a massive usage area. There are more than 100,000 chassis in the Los Angeles-Long Beach port area, Shea said. By comparison, CCM manages a total of 137,000 chassis at the dozens of ports and inland locations nationwide where it operates.
Gray chassis model for LA-LB?
The port communities in Southern California and New York-New Jersey have reason to hope that their chassis problems will be fixed, though, because forces are at work that should result in gray chassis pools for their regions.
The ports of Los Angeles and Long Beach in 2012 formed a chassis working group that includes the major stakeholders in the harbor area. San Francisco consultant Joe Palazzolo is working with stakeholders to develop a gray chassis model for the harbor. The draft report was submitted to the group in late January.
The voluntary model that will be developed for Los Angeles-Long Beach will probably not resemble the CCM model or the program at the Virginia ports managed by Virginia International Terminals. “There are so many issues that make Los Angeles and Long Beach unique. You must start with a clean sheet of paper,” Palazzolo said.
Flexi-Van will be one of the main participants in the program, and Phil Connors, executive vice president, believes a model for the harbor will be developed over the next few months. “I think it can be a good solution — potentially 100 percent gray chassis,” he said.
Flexi-Van and DCLI are working together to develop a gray chassis regime and a use agreement that, if approved by the participants, will allow complete interoperability among all of the members. TRAC Intermodal, the third large leasing company in the harbor, is expected to join the others and adopt the usage agreement, Connors and Shea believe.
If that happens, the program will start with about 68,000 gray chassis and cover 11 of the 13 container terminals in the port complex, Shea said. When the few remaining shipping lines that still own their chassis join, and other pools such as the West Coast Chassis Pool operated by SSA Marine participate, a gray fleet covering 95 to 100 percent of the assets in the harbor will emerge.
Complex challenges remain
If the Southern California program works as envisioned, many of the issues that drive truckers crazy will be eliminated, Connors said. Those problems include long waits at marine terminals, chassis shortages and dislocations, split moves and waiting to “flip” a container from one chassis to another.
To make this happen, all complex problems will have to be addressed. For example, even those ocean carriers that have sold their units to third-parties are still involved in the chassis supply chain. Carriers control the movement of some chassis in their “store-door” contracts with BCOs in which the container and chassis are trucked as a unit to a local distribution center.
There are also merchant-haulage arrangements in which the importer controls the move. Billing arrangements for store-door and merchant-haulage arrangements are handled differently. Truckers generally don’t want to be involved in the administrative and billing functions associated with those arrangements. Nor do they want to pay the bills on behalf of another party and then have to go to that company for reimbursement.
Billing becomes even more complex when deals are struck between shipping lines and BCOs in which the larger accounts receive a discount from the standard per-diem charges for the chassis.
If the Southern California plan is implemented, the parties intend to contract with a separate data-processing company to handle accounting complexities.
However, in order to avoid any conflict or perceived perception of collusion, each pool in the harbor will maintain a separate and independent operation, and the pools will not discuss rates and charges among themselves, Shea said.
Labor jurisdictional questions
As for the labor component involving ILWU jurisdiction over maintenance and repair — a topic that is likely to be raised in negotiations leading up to the July 1 contract deadline — the existing waterfront contract is rather clear in stating that if M&R is required while the chassis is on the terminal, that work belongs to the union that has jurisdiction at the facility, said Jim McKenna, president of the PMA.
However, if the roadability issue involves a container at an off-dock site, such as a storage facility operated by a leasing pool, that is an issue between the ILWU and the pool operator, he said.
Labor jurisdiction over M&R work has been an even more volatile issue in New York-New Jersey, and was an especially hot issue in the 2012 contract negotiations with the ILA. The three major leasing companies worked out arrangements with the ILA to preserve ILA jurisdiction over M&R work that takes place in the overall port area, Adam said.
However, one of the suspected problems that has contributed to weeks of chassis shortages and dislocations in New York-New Jersey involves a large backlog of equipment that has been tagged as “out of service” because of roadability issues.
Truckers and others who are affected by the unusually large backlog of out-of-service chassis charge that dockworkers are looking for the slightest defects in order to red-tag chassis because they believe some companies are performing M&R at off-site locations in order to circumvent the ILA.
Adam does not agree with that theory. He said the leasing companies may be contributing to the problem by being especially scrupulous in requiring that defects be addressed whenever and wherever they are detected.
Waterfront employers in New York-New Jersey say a number of factors are contributing to the chassis shortages, including foul weather in the Northeast and Midwest, a hesitancy among chassis providers to authorize repairs as they seek to cut down on M&R costs and operational issues at some marine terminals.
Contact Bill Mongelluzzo at bmongelluzzo@joc.com and follow him at twitter.com/billmongelluzzo.