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January 6 2020

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Januar y 6 2020 | The Journal of Commerce 35 www.joc.com In Perspective 2020 ANNUAL REVIEW & OUTLOOK Maritime FOLLOWING A SHORTAGE in January caused by frontloading of imports to avoid escalating tariffs, chassis pro- viders at ports across the US reported little to no disruption to equipment supply throughout 2019. This was largely a byproduct of lower cargo volumes in the ports of Los Angeles and Long Beach and manageable single-digit growth on the East Coast, but going into 2020, chassis providers are hopeful that fleet upgrades over the last two years have made the network more resilient. Chassis providers, how- ever, also acknowledge there is little they can do to absorb a sudden, unanticipated double-digit percent- age spike in cargo — as happened in January 2019 — without running into equipment shortages. Some chassis providers, such as Direct ChassisLink Inc. (DCLI) and TRAC Intermodal, bought new chassis in 2019, but for the most part, equipment providers were more likely to refurbish existing chassis due to increased US import tariffs on Chinese goods. Although there are North American manufacturers, the majority of newly purchased 20-foot, 40-foot, and 45-foot chassis are built by China International Marine Con- tainers (CIMC) and imported from China. With a 25 percent tariff on this equipment, which can total more than $10,000 per unit, many chassis providers chose to lean toward the less expensive refurbishment. The North American Chassis Pool Cooperative (NACPC), for example, made very few orders in 2019, while most other pools reduced their order counts from prior years. a position is also logical. As such, the industry in the coming years will see increased pressure on stakeholders located in between the carriers and major BCOs — ports, terminals, and intermediary logistics providers, for example — to recoup the added costs. Enforcement questions As a specialized agency within the United Nations, the International Maritime Organi- zation does not enforce its mandates. In the case of IMO 2020, national authorities who are entrusted with enforcement of the rules remain quite opaque in terms of how they will execute this task and, more worryingly, the penalties for non-compliance. Given the substantial financial impact, the risk here is that disproportionately small fines could encourage deliberate violations. When the low-sulfur rules were introduced in North Europe in 2015, it took the authorities about a year before effective enforcement was in place, including appropriate penalty schemes. This brings us back to the BCOs. Although it's not shippers' role to act as an enforcement agency vis-à-vis IMO 2020, they may have a role to play nonetheless. If certain national authorities prove unable — or unwilling — to fully enforce the mandate, or if that enforce- ment lacks "teeth" — i.e., penalties sufficient to discourage non-compliance — shippers can sim- ply shift their cargo away from carriers seen to deliberately flaunt the rules. This might prove to be an important factor in setting the scene for a stable, well-regulated, and well-enforced environment in 2021. Beyond 2022, there is the issue of lique- fied natural gas (LNG)-powered vessels. In 2020–2022, the impact of such vessels will be marginal simply because there are few of them in operation. These vessels resolve the sulfur issue, so an uptick in orders of LNG vessels may well be seen. If that begins to happen in earnest, the commercial impact on the markets will be felt in 2023–2025 when a new generation of vessels is phased in. JOC Lars Jensen is partner and CEO of SeaIntelligence Consulting. Contact him at lars.jensen@seaintelligence-consulting.com. Some providers bought new chassis in 2019, but with a 25 percent import tariff on new units from China, most opted to refurbish existing chassis instead. Shutterstock.com Predictive positioning Chassis providers hope fleet upgrades, better forecasting make for smooth sailing again in 2020 By Ari Ashe

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