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Feb. 17, 2014

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TRADING PLACES 62 THE JOURNAL OF COMMERCE www.joc.com FEBRUARY 17.2014 Peter Tirschwell CHASSIS CHOKEPOINTS IT WOULD BE a convenient story line to link one of the major reasons for this winter's gridlock at the ports of New York-New Jersey and Los Angeles-Long Beach to deficien- cies in infrastructure. But the topic that yielded seaports a rare men- tion in last month's State of the Union address is just one factor in the winter of discontent that users of the three largest U.S. ports are currently enduring. Of much more immediate impact is the anarchy surrounding chassis, and the root cause of that is to be found not on land but at sea. A s a nyone respon sible for moving large numbers of contain- ers through major U.S. gateways knows, the availability of chassis on which containers are mounted and hauled among ports, distribu- tion centers and railheads used to be a foregone conclusion. Ocean carriers owned virtually all the chassis, often making them freely available to customers that came to fetch their own containers or used them in providing transportation to inland points. But in a classic knock-on effect, carriers' inability to earn profit- able freight rates for ocean transits led them to focus on costs in their search for elusive profits. One cost that stood out as having no offset- ting revenue was chassis — at least in the U.S., the only market in the world where, thanks to Malcom McLean being a trucker, carriers were obligated by customer expec- tation to provide chassis. Beginning about three years ago, following the multibillion- dollar losses racked up by carriers in the aftermath of the Great Reces- sion, carriers' bottom lines took precedent over concerns about market share. One by one, they began selling their chassis f leets and announcing, one carrier and one market at a time, that chas - sis would no longer be available. In one such announcement from 201 2 , O O CL s a id , " Ef fe c t ive Sept. 1, 2012, OOCL will no lon- ger provide chassis for import and export shipments to/from Atlanta, Ga. All motor carriers, either work- ing as suppliers for OOCL or OOCL customers, must provide chassis for these shipments. Chassis usage fees for Merchant (CY) moves should be billed by the motor carrier directly to their customer." To say such announcements — and there have been many — opened a can of worms is an understate- ment. Carriers were essentially saying to the market, "You guys figure it out. This isn't our problem any more." That meant someone else had to pay. Making it harder still is that whoever that someone is, unlike the carriers, they won't tolerate losses year after year. There's no law that prevents a company from walking away from unprofitable business, but unless solutions are found soon, the prob- lem will get worse because the economic growth is accelerating and economists expect a corre - sponding pickup in growth at U.S. ports this year. As my JOC colleagues Bill Mon- gelluzzo and Joe Bonney have been reporting regularly in recent weeks, while the vacuum in chassis provi- sion has been slowly developing for three years, it wasn't really notice- able until a rush of pre-Chinese New Year cargo flow revealed in recent weeks how incomplete the transi- tion to a new industry model is. One question is whether the so- called gray chassis pools that have functioned effectively at several smaller ports could be adapted at the main U.S. gateways that are experiencing the greatest strains today. As Mongelluzzo reports on page 48, gray chassis can be picked up at a terminal or off-dock stor- age yard and can be dropped off at a different location. The system eliminates "split moves" where the container and chassis must be dropped off at different locations, causing delays for harbor truckers. The chassis pool at Savannah elimi- nated shortages and reduced the number of overall chassis needed to serve the port from 8,000 to 2,400, according to Phil Wojcik, CEO of Consolidated Chassis Manage- ment, a chassis pool operator that manages chassis fleets on behalf of owners and handles functions such as billing. But Savannah is fundamentally unlike Los Angeles-Long Beach or New York-New Jersey. The port authorit y operates Garden Cit y terminal while terminals at the two larger port complexes are pri- vately run and the ports serve in a landlord role with less control over operations. For exa mple, t here a re six chassis pools in Los Angeles-Long Beach serving 13 marine termi - nals, a chaotic system on the best of days. There are complex issues to be worked through, involving bill- ing and especially longshore labor jurisdiction over maintenance and repair, an issue likely to be raised in upcoming negotiations to replace the contract with the International Longshore and Warehouse Union that expires on June 30. This is not an issue that will be solved by federal dollars. It will require hard work by all parties involved. The free flow of U.S. trade depends on solutions being found, and quickly. JOC Peter Tirschwell is executive vice president/ chief content officer at JOC Group. Contact him at ptirschwell@joc.com and follow him at twitter.com/petertirschwell.

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