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June 25 2018

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June 25 2018 | The Journal of Commerce 27 www.joc.com Surface Transportation on trans-Pacific lanes, even though vessel capacity will rise 8 to 9 percent while imports will climb 5 to 6 percent, according to industry analyst Alphaliner. Daily rental rates on chassis also are rising as equip- ment providers upgrade their chassis with radial tires and LED lighting. Globe Express Services locked into a chassis contract in 2017, ahead of the curve of NVOCCs stepping up their services as ocean carriers reduce their door contract exposure. A pri- mary reason for the decision was to simplify the invoicing process with BCOs, the company said. David Bennett, president of the Americas at Globe Express Services, described the problem of the current chassis system using a haul from Hong Kong to Charlotte, North Carolina. "I give the BCO one invoice, includ- ing charges for ocean freight, customs duties, brokerage. Before we made this deal, I would have to wait for the chassis bill from the drayage provider. NON-VESSEL-OPERATING COMMON carriers (NVOs) are entering into partnerships with chassis providers to offer US shippers lower rates, but it's a decision set to antagonize the trucking community, which believes in open choice. These exclusive contracts are similar to arrangements between ocean carriers and chassis providers, which some truckers characterize as anti-competitive. CMA CGM, for example, has a contract with TRAC Intermodal to provide chassis to truckers, and Mediterranean Ship - ping Co. (MSC) has an agreement with DirectChassis Link. These new agreements, some of which are subject to ongoing negoti- ations, operate under the same rules but substitute NVOs for ocean carri- ers. They receive discounts on chassis rates in exchange for a commitment to a specific neutral pool. The amount of the discount is about 30 to 40 percent less than the market rate on a daily chassis rental. These savings in turn can be passed onto the beneficial cargo owner (BCO) at a time when ocean carriers are hitting shippers with emergency surcharges. Maersk Line and MSC will assess bunker surcharges on shippers to off- set the rising fuel costs just months after ocean carriers instituted emergency intermodal fees to cover rising US inland transportation costs. Carriers also are trying to raise rates If they kept the chassis for six, seven, or eight days, then they would get a second bill for the extra chassis usage, 60 to 90 days later. Our customers don't like multiple bills," he said. By controlling their own chassis, Bennett said the entire transaction should be covered in one invoice because the NVO is working directly with the chassis provider. An executive at a New York-based NVO, who spoke on condition of ano - nymity, told The Journal of Commerce that its contract will save money and provide a competitive advantage. The company plans to sign a deal with one of the top national chassis pro- viders in late 2018 or early 2019. The attraction of such simplicity for shippers could allow NVOs to continue to build on the market share gains for US imports from Asia that resulted from some ocean carriers resisting "door moves." NVOs gained 2 percentage points of that market in the first quarter of this year for a share of 44.3 percent, up from a gain of 0.7 percent in the same period last year, according to data from PIERS, a sister product of The Journal of Com- merce within IHS Markit. NVOs "can feel a little more confi- dent that there will be no equipment availability issues when they try to recover a container — plus it keeps costs pretty static, which is always an issue for [NVOs] when negotiating with their partner(s), as daily costs for chassis rental can fluctuate and cause rating/quoting discrepancies," the executive said. Weston LaBar, CEO of the Harbor Trucking Association (HTA), said his members already have seen NVOs exerting more control over chassis in Southern California. "The HTA supports an open-choice chassis model that allows the trucker to decide how equipment is procured and deployed. We have an ongoing concern with inefficient operating issues that result from contracts that bake in fringe benefits, such as chassis utilization," he said. "By changing that and allowing the trucker to control the logistics of a move, we will mitigate congestion, increase efficiency and productivity, and ultimately reduce cost to the [BCO]." JOC email: ari.ashe@ihsmarkit.com twitter: @ariashe_joc Locking up chassis NVOs are signing contracts directly with providers of chassis to ensure cheaper rates for BCOs By Ari Ashe Trucking companies object to the chassis contracts because they say the restrictions oen lead to chassis splits and shortages. The Journal of Commerce "The HTA supports an open-choice chassis model that allows the trucker to decide how equipment is procured and deployed."

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