Tag Archives: Chassis

New California law designed to rein in detention and demurrage charges

California again takes the lead in denying demurrage and detention charges by marine terminals and intrmodal equipment providers, such as chassis providers, when return is prevented by actions outside the control of the users. Such conditions might include gates being unavailable for return, a provider diverting the equipment from the original intrchange location, and when the carrier documents an unsuccessful attempt to return the item, or because a vessel’s booking date is changed.

All these changes will be good for the business. They will force carriers and equipment providers to pay attention to the effects of congestion, and work to reduce it.

Congratulations to California for this law. Now let’s see how it works.

John Kingston Wednesday, October 5, 2022

New California law designed to rein in detention and demurrage charges – FreightWaves

Your ‘chassis deal’ – and terms – may be costing you

Obtaining a chassis from a pool is a good idea for some truckers. But beware the terms and conditions. The article indicates that pools, often owned by leasing companies and investment houses, have a goal of making money. I believe the biggest risk of renting from a pool is that the pool may be cheating on maintenance, so the chassis you pick up may have deficiencies that show up during the trip. In that case, the trucker must fix it at her expense. It’s always true that who is in possession of the chassis is required to pay for fixing the problems that occur on the trip.

Some pools, such as the one in SoCal connected with the ports, have union workers doing the maintenance. There’s probably less risk of under-maintaining chassis there. But privately operated pools have an incentive to cheat on the maintenance, because they can lay it off on the truckers.

And there is information asymmetry. There are few figures on the incidence of repairs for chassis from various pools. Such real data would inform everyone whether a pool is doing enough preventative maintenance. But without such data, it’s just a gamble for the trucker.

The article claims carriers are better off purchasing their own chassis. But I’m not convinced. Owning the chassis requires an upfront expense, or a lease, which is money out the door. If you buy the chassis you will need to put it to use often to recover your investment plus your profit. You now have to do all the maintenance. And chassis vary for different needs; a chassis for forty-foot ocean cargo won’t fit twenty-foot ocean cargo; or you might need a reefer-compatible chassis. Unless you have high predictability, you are better off taking what you need for each load.

My understanding of the situation in Europe was that chassis were mostly owned by the large drayage firms. That prompted the movement several years ago by ocean carriers in the US to divest themselves of chassis, to try to get the truckers to own them as in Europe. But as the author points out, most drayage drivers in the US are owner-operators, and don’t work for a large firm. They can’t support the capital expense of a chassis unless they are convinced that they will be able to employ the chassis for money on most loads. We did a paper on this in 2014. They would need to believe that they could almost always get paid for using the chassis. But that isn’t the way it is; somewhere around 40% of all cargoes come with a chassis provided by the ocean carrier. And that is going up nowadays, with ocean carriers getting into last-mile and end-to-end delivery promises.

So I wonder. But there should be ways to make maintenance data more visible, and make it easier for truckers to dispute charges for chassis repairs if the repairs should have been done at the pool first. I’m afraid that will be quite a while coming, though.

Ashley Coker Thursday, September 29, 2022

Your ‘chassis deal’ – and terms – may be costing you – FreightWaves

IANA panel: Intermodal chassis squeeze easing, but it’s far from over

Chassis have always been an Achilles’ heel of container or intermodal transport.

Chassis utilization is now about 90%, a high figure. And a chassis is essential to move a container. So people are holding on to chassis so they can reuse them, say for a reverse load. But that means the dwell time for the chassis is higher than it should be.

Some of the holding is due to the shortages; it’s too hard to get another chassis, so I’ll hold onto the one I just got, and even pay the dwell fee to have it for my outbound load.

If containerized cargo goes down from its current heights, the chassis situation will improve. But that would mean a reduction in cargo, and probably a recession; certainly decreased demands. For demand at this level, we definitely need a larger buffer of chassis, so there is some liquidity in the system.

One interesting point mentioned is the pressure ‘gray pools’, which hold chassis from multiple vendors near a large port or logistics hub, are seeing. We’ll find out if the cooperative approach can hold up under this stress.

Essentially, the pools provide a single shared inventory to a number of users. If a user, or a group of them, holds chassis on their own without sending them back, they are separating from the coalition, and they’re probably doing it because they see it as more favorable than returning the units. The separating group sees that they can do better by separating rather than remaining in the pool.

It’s a classic example of a breakdown in a cooperative game from operations research. Inventory pools have been studied for quite a while, by me and many others. The success of the cooperative scheme requires a ‘fair’ allocation of the benefits. If an individual participant, or some group of participants, are not seeing a better allocation of the gains than they would get separating, they will stay apart. This definition of fairness is called the ‘core’ of the cooperative game for the inventory pool. Under some fairly generous assumptions, we find there is always a core set of allocations, in which every group does better with the allocation than it does separately.

And a core allocation can be computed (there may be many of them), which will be fair. However, it’s virtually impossible to define a core allocation by using a pricing scheme for the use of the chassis. It’s almost never fair. There have to be subsidies beyond the price to make the groups stay in the pool.

That’s what is happening when the pools need to badger firms to return chassis, or when they charge dwell fees.

This would make a good project for an operations researcher, to study the rewards of using a pool over time, and examine how disruptions would affect the reward schemes that are in use now.

To find a fair allocation for a given pool is a good task, but once found, it’s probably not readily explainable to the participants. So they would be skeptical of their rewards, and might still split off. Hard computational results don’t always get the job done; the adopted solution must be ‘explainable’ or ‘interpretable’. There’s a growing body of literature on interpretable results, but not much on interpretable results for cooperative inventory games like this.

John Kingston Friday, September 16, 2022

IANA panel: Intermodal chassis squeeze easing, but it’s far from over – FreightWaves