Among the many causes of port congestion in the last two years is the much-discussed chassis shortage, which has created major problems along the supply chain. But how exactly did we arrive at this shortage, and what will happen going forward. Here is a brief look at some of the outlying factors:
1. The Roadability Rule – In 2009, the Federal Motor Carrier Safety Administration (FMCSA) began strictly enforcing its regulations for Requirements for Intermodal Equipment Providers and for Motor Carriers and Drivers Operating Intermodal Equipment Rule, also known as the “Roadability Rule.” The rule called for the following changes:
- All intermodal equipment must be registered.
- This equipment must undergo regular inspections and repairs for brakes, tires, and other elements.
- The results of the inspection must be distributed to carriers.
- Mandatory Driver Vehicle Inspection Reports (DVIRs) for regulatory compliance.
This shift in regulations means that the government is placing the burden of responsibility of inspecting and maintaining equipment on the drivers. While this mandate has been great for safety, it has added costs and delays all around. It has also made it so that every chassis requires a serious cost-to-benefit analysis of what is worth repairing and what isn’t. Many chassis have been removed from service because they just weren’t worth salvaging.
2. Exiting Ocean Carriers – For ages, steamship liners were the ones that owned the container chassis, which they rented to drivers for a daily fee. With the new Roadability Rule in place and the high costs associated with pooling chassis, ocean carriers are exiting the business. The previous business model is no longer viable.
3. Down Economy – The Roadability Rule enforcement was announced in 2009 and went into effect in 2010, right at the time when the economy was at its low point. The economic slump forced many companies – individually and collectively – to make decisions about their long-term prospects. With less funds to go around, the chassis side of the industry took a hit.
So what does this chassis shortage mean for the long term? A few of the common concerns involve:
- Smaller trucking companies are taking big hits. Some are going out of business which only further fuels the trucking shortage.
- Drayage costs are expected to increase.
- Significantly fewer intermodal chassis will be stored in ports.
- The business of chassis rentals will continue to remain in flux, as leasing companies and drayage firms do not have uniform tariffs for chassis rentals. Logistically and technologically, these industries have yet to fully develop.
- Steamship lines will continue divesting intermodal equipment.
Though the situation is currently bleak, it will normalize once drayage firms, ocean liners and trucking companies in Los Angeles (and other port cities) come to grips with this tricky situation. The U.S. shipping industry will likely fall into a system similar to the ones seen in the majority of foreign markets, where the chassis are owned or operated by shippers, drayers, and consignees. However, we will have to wait and see how it all plays out.
Download the Desktop Service Guide for a comprehensive guide to the Los Angeles and Long Beach ports, as well as related warehouse and transportation logistics information.