What’s Causing Chassis Shortage in the U.S. and How to Manage it?
- U.S. railroad companies and ports are levying high demurrage fees amidst the growing shortage of chassis
- Tariffs on Chinese equipment to impact chassis supply in 2022
- Strategies to manage the crisis could be broadening the chassis pool, exclusion of the box rule and reusing old equipment
BNSF, a U.S. railroad company, some months ago proposed demurrage fees due to the worsening shortage of 53-foot chassis equipment in various locations such as Dallas, Phoenix and Stockton, California. Also, Los Angeles and Long Beach are some of the highly congested ports imposing an emergency fee for excessive container dwells at marine terminals again amid shortage of chassis at their ports.
However, chassis shortage is not a new impediment to intermodal shippers. The shortage has simply been exacerbated due to the pandemic and created challenges along supply chains.
Chassis shortage behind high demurrage charges and delayed deliveries
A chassis is a customized trailer equipment that truckers use to transport containers between ports, rail yards, container depots, and delivery locations. It is a wheeled metal frame on which a shipping container is attached.
So, when a terminal or a rail ramp witnesses a shortage of chassis, truckers are burdened with a delayed turn time. This results in unnecessary delays for shipments, which act as an additional strain for shipments that are already facing persistent port and rail ramp congestions. As a result, the shippers incur significant detention and demurrage penalties.
Why is there a shortage of chassis at ports and rail networks?
Here are some of the main reasons:
Implementation of the ELD Mandate
After the implementation of the electronic logging device or ELD Mandate drivers aren’t allowed to carry extra loads with them like they were used to doing prior to the regulation.
Even 50% of the load for that isn’t allowed. Therefore, units end up sitting unused longer and along with them the chassis.
Higher freight volume
The surge in freight volume continues to outstrip not only the supply of chassis but also the availability of containers and labor at ocean and rail hubs. This extraordinary demand has forced shippers to hold on to their chassis units longer than the usual 3-5 days further limiting supply.
Displacement of chassis
Another key factor constraining the supply of chassis is the dislocation of chassis. Most chassis aren’t returned to the marine terminal from which they originate, exacerbating the shortage.
U.S. tariffs
Tariffs, antidumping and countervailing duties on the import of chassis from China have effectively cut off the supply of at least 250,00-30,000 new equipment into the U.S.
Difficulty in acquiring chassis subcomponents
Further, the domestic chassis manufacturers in the U.S. have been facing setbacks in acquiring subcomponents of chassis such as axles, air tanks, and suspension systems, threatening to push the delivery of orders from 2021 into the first half of 2022.
How to manage the crisis?
The logistics industry must handle the shortage of chassis and other equipment as both a near-term crisis and a long-term structural problem by initiating a robust plan. Here are the major action-points the plan should include:
Exclude ‘box rule’ guidelines
Some of them could be the exclusion of ‘box rule’ guidelines and broadening the chassis pool arrangements to get rid of any barriers restricting which chassis can be used at a port.
Up-to-date maintenance and repair
Accelerating the maintenance and rebuilding of deactivated chassis might open more capacity into the market. Broken and poorly maintained chassis contribute to the shortage.
Incentivize shippers to return chassis on time
To tackle the chassis displacement issue, service providers should consider incentivizing shippers for early returning of the chassis. They should also coordinate better with the shippers regarding which container would dwell longer than others. It would help the drayage providers and the terminal operators to repurpose the chassis to other priority cargo thereby improving the current slow movement of containers through congested logistics hubs.
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