Drayage truckers ramp up chassis-rate dispute with ocean carriers

U.S. trucking companies claiming that foreign ocean carriers have been manipulating the intermodal chassis-leasing market at the truck carriers’ expense are ready to take their dispute to federal regulators.

In a May 4 letter to the Ocean Carrier Equipment Management Association (OCEMA), whose members represent 80% of the U.S. container market, the Intermodal Motor Carriers Conference (IMCC) warned that they will be filing a formal complaint with the Federal Maritime Commission (FMC) unless OCEMA members change their chassis leasing practices.

IMCC, an affiliate of the American Trucking Associations, contends that the downstream effect of ocean carrier “sweetheart” contracts with intermodal chassis leasing companies are trucking companies being overcharged for chassis they lease from those same leasing companies so that the leasing companies can make up the difference. Over the last three years, IMCC alleges, this has amounted to $1.8 billion in overcharges to intermodal trucking companies for which OCEMA members are liable under the U.S. Shipping Act.

IMCC pointed out significant gaps in pricing between container “merchant” haulage, which is arranged between the trucking companies and the chassis leasing company, and “carrier” haulage, arranged between the ocean carrier and the leasing company.

“Merchant haulage prices are three to eight times higher than carrier haulage prices, indicating a dramatic overcharge on merchant haulage movements above the average daily cost of chassis for chassis providers,” IMCC’s letter states. “These overcharges are a direct result of OCEMA member and affiliated entity conduct and are paid by IMCC members.”

Ocean carriers had traditionally owned and leased out their own intermodal chassis equipment to move their ocean containers to and from ports to inland destinations. Since roughly 2009, however, they began divesting themselves of the asset to chassis leasing companies to reduce the cost of owning and managing them.

As part of that change, the ocean carriers informed intermodal motor carriers that provide drayage to and from ports that their containers were to be moved “on a chassis rented with the leasing company designated by the ocean carrier at rates already set in the purchase contract with the chassis leasing company,” the FMC noted in 2015, which is responsible for overseeing intermodal chassis pools.

“In most cases, motor carriers currently must deal with these directives and, thus, have few opportunities to select their chassis provider or to shop for more competitive charges and terms from alternative providers.”

As a result, according to IMCC Executive Director Tyler Rushforth, “the ocean carriers are getting the better deal on chassis leasing that we aren’t,” Rushforth told FreightWaves. “So the chassis leasing companies have to make up for that by charging us higher rates.”

Rushford said that his committee has attempted to hammer out a more equitable business model with OCEMA over the past three years, but has so far made little progress. “That’s why we feel we need to take this to the next level,” he said.

IMCC is therefore demanding that OCEMA and its members remove and limit certain contractual requirements it considers unjust and unreasonable and that result in rate overcharges and chassis market imbalances. IMCC’s letter requests a reply by May 25.

OCEMA did not respond for comment on when or how they would respond to IMCC’s letter.

“With notification of pending legal action at the FMC or other possible legal action in federal court, we’re hoping they will instead negotiate directly with us for a fair process,” Rushforth said. “We’re not just looking to address rates, we’re looking for a new system, because the container market needs to be fluid so that there are chassis at ports to choose from and that it not be dictated to us which ones to use.”

Chassis providers and the chassis market are being analyzed as part of an FMC fact-finding mission to identify cargo delivery challenges during the coronavirus pandemic.