Los Angeles and Long Beach Port Congestion Update by Bill Mongelluzzo
06 November 2014
The four companies that control about 95 percent of the chassis at Los Angeles and Long Beach agreed on Thursday to develop a neutral, or gray chassis pool for the largest port complex in the Americas, with the phased rollout to begin on 1 Feb 2015.
Chassis shortages and dislocations are a significant contributor to the congestion crippling the Southern California port complex. While a dozen or more factors are contributing in some way to the congestion, returning the ports to normalcy rests upon resolution of the chassis problem.
The goal of the parties that participated in the four-hour meeting at the Port of Los Angeles headquarters is to develop and implement a program to provide interoperability of chassis among the equipment providers. “We think the final product will look good, but there is still a lot of work that must be done,” Gene Seroka, the port’s executive director who helped to broker the meeting told JOC.com on Friday.
The attendees included the three largest chassis pool operators in the harbour, Direct ChassisLink, TRAC Intermodal and Flexi-Van, as well as SSA Marine, which operates three container terminals and has its own chassis pool, as well as executives from the Port of Long Beach.
The meeting was held under the auspices of a discussion agreement the two ports have on file with the Federal Maritime Commission. The agreement allows the ports to jointly discuss a number of issues related to safety, security, infrastructure, congestion and equipment.
Ocean carriers in the U.S. provided chassis to trucking companies and cargo owners since the early days of containerization in the 1960s. The U.S. is the only country in the world where shipping lines provided the equipment, with forwarders or truckers providing it elsewhere. After losing millions of dollars year after year purchasing, managing and maintaining their chassis fleets, the carriers in the years after the Great Recession began selling their assets to equipment leasing companies. The transition went smoothly at most ports and inland locations, but not at the two largest U.S. gateways, Los Angeles, Long Beach and New York-New Jersey.
The chassis problem came to a head over the summer in Southern California. Some groups, including the Port of Long Beach, the Harbour Trucking Association and Pier Pass Inc., say chassis issues are even more nettlesome than the challenges posed by big ships operated by carrier alliances; rail service issues; a shortage of truck capacity and the uncertainties surrounding the lack of an International Longshore and Warehouse Union contract since 1 July.
Seroka, who was named executive director of the port in June after serving as top executive in the Americas at APL Ltd., vowed to address the complex chassis issue, which is affecting cargo interests, truckers and terminal operators, and is tarnishing the reputation of the ports and leading shippers to divert cargo elsewhere.
Although the private sector companies must work out the details and structure of the gray chassis concept with the guidance of legal counsel, Seroka said Friday the first phase of the program will go live on 1 Feb. The assets of the four chassis pools will be interoperable, which means that a trucker pulling a container and chassis can pick up or deliver the equipment at any of the 13 terminals in the harbour without regard to which pool serves a particular shipping line or terminal. A third-party company will handle back office services, including billing.
The vast majority of all chassis in operation in the harbour will fall under this program. DCLI has approximately 30,000 chassis, Flexi-Van has 19,000, TRAC has 37,000 and SSA Marine 9,000.
Winning support from the four parties was not easy. Although DCLI and Flexi-Van have worked closely over the past year on the gray concept and recently received a letter of approval from the Department of Justice to pursue that goal, TRAC has expressed concerns about management and control of the assets and SSA is hesitant to lose control of its chassis, which it uses to dray imported containers from its marine terminals to off-terminal sites.
However, Seroka said Friday that all four parties committed to be willing participants in working toward developing a new model for Los Angeles and Long Beach, to begin a phased implementation of the new model on 1 Feb. The four companies next week will have a conference call with their attorneys to begin the process.
Also, the 13 container terminals will be represented in development of the new model by the West Coast Marine Terminal Operators’ Association, which also has a discussion agreement on file with the FMC. Seroka said the parties believe it will be easier to move the process along through the association rather than having to work individually with all of the terminals.
News updated by: Bill Mongelluzzo Senior Editor for The Journal of Commerce