Category Archives: Logistics

Navigating the new world of sanctions

Posted on February 14, 2023 by | 2 comments

Sanctions are increasingly complex today, due to the Ukraine war. P&I Clubs are increasingly on point sorting these out for carriers and shippers.

P&I Clubs form risk pools to insure carriers on specific voyages, covering such risks as damage, war risks, and environmental damage.

The annual joint conference of the Hellenic American Chamber of Commerce included several P&I club members and attorneys who represent them and others.

I especially noted the comment by Nikolai Ivanov, of Skuld.

 “being in between the sanctions authorities, and the practical part of the shipping industry…we act as a buffer between the two and have to effectively police up and down the sanctions chain”

Nikolai Ivanov, Skuld, in Navigating the new world of sanctions

He points out that Skuld had to deny coverage to some old customers as a result of the sanctions. His remark clarifies that the P&I clubs are on the front lines of sanctions enforcement. No one else is allocating substantial resources to it.

What can happen if this enforcement mechanism fails? The result could be a kind of free-for-all in which sanctions for the Ukraine war, for instance, are no longer of much use. There have been attempts to circumvent the major clubs, for instance, by Russia attempting to provide similar insurance. I don’t think anyone believes that Russian entities could do this on a very large scale.

It appears most of the issues are in the energy transport and bulk carrier transport areas. Extreme shortages in these areas could be the trigger for massive violations of the sanctions, possibly without insurance, with only shadow coverage, or with insurers looking the other way. This wouldn’t be a good situation.

So far the insurers have been able to cope with the sanctions increases.

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Barry Parker | Feb 14, 2023

Navigating the new world of sanctions

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The worst January for US intermodal for ten years, and no sign of relief

Posted on February 10, 2023 by | Leave a comment

It’s no wonder that US intermodal traffic is declining. Poor service from the railroads has made using any system that involves a transfer an invitation to delays. And shippers can’t afford delays.

Companies offering intermodal container service don’t have enough pull with the railroads in the US to get highly regular service. And now that container rates are dropping fast, shippers won’t pay an excessive amount for the service. So the large rails don’t feel any obligation to serve them well.

Will the major rail lines make any adjustments? My guess is they will be dragged kicking and screaming to provide more reliable service. The fuss they are making over simply making regular deliveries of feed grains to major customers, and the resistance to reciprocal switching, and the labor difficulties they are experiencing show that they don’t feel that customer service is top of their mind.

Why not? Recently I read a book about Charles Lowell, a young man from Massachusetts who fought in the Civil War. Before the war, and after graduating first in his class from Harvard, he worked as an agent in Iowa for a firm building railways west in that state. Each time they completed 25 miles of railway, the firm got a large new swath of land from the US government. The firm had to survey the land, decide on their route through it, and sell the land they didn’t need to fund the next 25 miles. They sold the land to migrants, from the east or from other countries, who were moving west to obtain cheap land for farms and businesses, their piece of the American Dream. There was a lot of graft in these land dealings. But Lowell insisted that his firm sell at a fair price and not engage in special deals with investors speculating on the land. His reason was interesting and farsighted.

Lowell believed that the railroad needed customers, and that was what he was creating by selling them land.

Today’s railroad executives don’t seem to think they need customers.

There are plenty of reasons to use intermodal for container shipment. It reduces emissions. It could be faster. It could require fewer transloads. (Most US truck traffic from ports is transloaded to 53-foot truck chassis before a cross-country trip). And it could be safer, and cheaper, or at least no higher in price, for the shipper. Rail lines could participate in this effort to reduce pollution while making the business profitable for them by operating their lines efficiently to accommodate it. But it does require them to serve their customers, those who want to ship on intermodal.

Too bad rails can’t seem to focus on the advantages it offers and shape their business around it. It would save the hassle of government regulation forcing them to accommodate it.

By Ian Putzger, Americas correspondent 10/02/2023

The worst January for US intermodal for ten years, and no sign of relief – The Loadstar

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Intermodal truckers secure win against ocean carriers

Posted on February 8, 2023 by | 1 comment

The chassis world is always coming up with a new twist.

Two large chassis pool operators, in Chicago, LA/Long Beach, Memphis, and Savannah, have to allow truckers to use a provider of their own choosing.

The formation of chassis pools about 10 years ago was sparked by ocean carriers’ desire to stop providing chassis. The reason given was that US rules on who is responsible for damages if there is an accident placed the burden on the chassis owner. To escape, the ocean carriers decided to leave the chassis business in the US. That’s typical worldwide; for instance, in Europe most chassis are owned by trucking firms.

But how do ocean carrier customers in the US get chassis to move the containers once they are off the boat? A game theory analysis (Hartman, Bruce and Christopher B. Clott, 2014) showed that truckers would not buy chassis unless they were virtually certain (over 90%) that the shipper would use their chassis rather than deal with the ocean carrier for one. Cargo gotta move — so the ocean carriers needed to find a way.

The answer was ‘chassis pools’. Ocean Carrier Equipment Management Association (OCEMA) developed Consolidated Chassis Management(CCM) to form and manage pools of container chassis at various ports to insure that chassis would be available for cargoes.

Clearly the pools were an advance. Pooling always allows demand to be satisfied with smaller inventory; it’s essentially a newsvendor situation. One big issue, however, is maintenance. A trucker expects to be given a chassis that is in good repair, and will probably not need maintenance during the trip. In the US, the trucker is responsible for on-the-road maintenance. So the question arises— how diligent will pool operators be in maintaining chassis that are turning over quickly?

That question alone was the spark of a putative strike at the LA/Long Beach pool. The union wanted to have control over workers at the pool yard, who were doing the maintenance. It became a big deal in the union negotiations. And the union won– union workers were hired to staff the yards. This went some distance to resolve the problem since the quality of the workforce was controlled by the union and not the owners of the yard.

All this sounds good so far. But issues can arise when individual carriage contracts are made. To what extent can carriers specify what equipment is used, and where it must be delivered when empty? What rates will be set for the use? And can contracts be altered while the chassis is moving, to specify return at a different place, or somewhere well off the route of the trucker?

In this case, the Administrative Judge ruled that motor carriers cannot be forced to use pool chassis; they may use their own chassis source. It’s a victory for truckers. There’s a tricky question of ‘default chassis provider’ when the contract does not specify the chassis source, but it’s clear now that the Judge wants truckers to be free to use their own provider.

That’s a win because it puts truckers in control of their chassis source, and frees them from potential hassles over contracting and repairs they might get into with CCM. They can manage their chassis choice themselves.

It’s interesting that over 9000 pages of documents were filed in this proceeding. Clearly both sides felt there was something to argue.

John Gallagher·Monday, February 06, 2023

Intermodal truckers secure win against ocean carriers – FreightWaves

FMC Summary Decision Text

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