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July 20 2020

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38 The Journal of Commerce | July 20 2020 Surface Transportation US SHIPPERS HAVE become more aggressive than they were six months ago in negotiating the terms of their intermodal partnerships, demanding a waiver of all container rental fees as a precondition for con- tracts, four intermodal marketing companies (IMCs) tell The Journal of Commerce. Shippers are linking their cost-conscious approach to the COVID-19 pandemic, the IMC sources noted. Revenue is down sharply for companies forced to close at the height of the pandemic, causing upper management to order trans- portation spending cuts, according to non-asset IMCs that asked not to be identified. The pricing pressure puts non-asset IMCs at a disadvantage against industry heavyweights J.B. Hunt Transport Services, Schnei- der National, and Hub Group, the non-asset IMCs argue. Schneider and J.B. Hunt can provide shippers free container and chassis usage because they own the equipment and control costs better than non- asset competitors. One Midwest IMC executive estimated J.B. Hunt and Schneider incur about $4 to $5 per day in equipment costs, while rail-owned UMAX and EMHU boxes cost $20 per day. If the railroads are unwilling to budge on their rental fees, options for the non-asset IMCs are limited, and mostly unattractive: Eat the container costs, negotiate a lower rate with the railroad on the ramp- to-ramp linehaul, or submit a bid higher than that of the IMCs with their own containers. A West Coast-based IMC owner said he understands why shippers leave his company to tender freight to J.B. Hunt, Schneider, or Hub Group in these turbulent times. "These shippers are getting creative with their model because of COVID-19. It's unorthodox, and it may go against their company culture, but they're doing it because they have to capture the revenue loss," the source said. "Shippers are pushing on the linehaul rate, dray- age rate, and accessorial charges. Everything is on the table." One electronics shipper made eight days of free container use a pre- condition in its intermodal bid, which put the West Coast IMC company $160 behind the large asset-based IMCs from the start, he said. 'Transactional' thinking The Midwest-based inter- modal executive said supply chain executives may negotiate more transactionally this year because their jobs might be in jeopardy. Even long-term strategic partners are act- ing differently in some cases. "Most transportation managers have their job performance and bonus predicated on hitting that budget number. They can't handle variable costs like per diem, so they reach the number by getting an IMC to waive per diem," he said. "They want to know if they turn in a budget of $30 million to their CFO, it's going to be $30 million and not $36 million because of accessorials; $36 million is going to get them fired." A Southeast-based US intermodal executive added that J.B. Hunt, Schneider, and Hub Group are much more willing to waive container fees now than they were in January. "They are trying to compete against trucking and also outbid each other," the source said. "They don't want to lose market share, Fee fracas Intermodal shippers pushing hard on container charges By Ari Ashe If the railroads are unwilling to budge on its rental fees, options for the non-asset IMCs are limited, and mostly unattractive. Trucking | Rail | Intermodal | Air & Expedited | Distribution

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