However, chassis lessors oppose the West Coast Marine Terminal Operator Agreement members’ plan to implement a $5 fee on chassis that move in and out of container terminals at the ports of Los Angeles and Long Beach, saying it will cost them $29 million.
Federal Maritime Commission (FMC) Chairman Mario Cordero said the agency’s staff is reviewing plans by members of the West Coast Marine Terminal Operator Agreement (WCMTOA) to impose a new $5 fee on chassis as they move in and out of container terminals at the ports of Los Angeles and Long Beach.
The fee does not apply to bare chassis, but only to those mounted with full or empty containers.
“Our staff is reviewing this issue,” Cordero said. “I think any time you have any assessment of a fee it is of concern.”
Flexi-Van Leasing Executive Vice President Phil Connors said the intermodal equipment providers (IEPs) in Southern California – Flexi, TRAC Intermodal and DCLI – estimate the fees would cost them $29 million.
He said the IEPs collectively filed comments to oppose the fee through the Institute of International Container Lessors “and we intend to go further and ask the FMC for an investigation.”
Meanwhile, TRAC Intermodal CEO Keith Lovetro said, “with all the discussions going on at this time it would be inappropriate for me to comment on this situation.”
WCMTOA explained earlier this week that it was imposing the fee because shipping lines have moved away from providing the chassis (the truck trailer onto which containers are mounted) as part of their services and users in Los Angeles-Long Beach now arrange to obtain chassis directly from leasing companies including TRAC Intermodal, Flexi Van Leasing and DCLI.
“Terminals haven’t been compensated by the leasing companies for basic services provided such as storage space, stacking and unstacking the chassis, and electronic data interchange (which tells the chassis lessors who is using their chassis). Since the chassis leasing companies formed a ‘pool of pools’ in early 2015, the terminals have been working with the leasing companies to address the compensation and services issues,” WCMTOA said.
“We looked at the number of acres that the terminals were dedicating to the IEPs for them to run their business on the terminals, and this is very expensive real estate,” said John Cushing, the secretary of WCMTOA and president of PierPass. “We looked at the land cost for storage. When the terminals stack and unstack the chassis there is cost because it is terminal operators who need to use their labor which is ILWU labor. And the chassis providers, by having them on the terminal are able to lease the chassis out to their customers. And finally each day the terminals provide to the chassis providers information about which of their chassis came in and went out, who the trucking company was that it went in and out with, and whose box was on it so they can use that for billing. All of these services are being provide at no cost.”
“The terminal operators are looking to recoup their costs. That is what this is all about,” he said.
Cordero said fees are now being proposed for services that were previously part of a contractual transaction between terminal operators and ocean carriers, but noted he did not want “to get too specific in terms of our thought process and what our staff is looking at.”
However, he did say it was good news the WCMTOA decided to delay the imposition of this fee from Aug. 1 to Sept. 1.
Connors noted that in addition to creating costs, “chassis have always been an integral part of the terminal operations. The MTO (marine terminal operator) regularly uses the chassis for their own benefit, for free, to facilitate efficient terminal operations.
“While the benefits remain, the WCMTOA proposal shifts the costs to the IEP’s,” he said.
Connors also said terminal companies enjoy significant revenue well above the actual cost of parts and labor for chassis maintenance and repair (M&R), and that chassis lessors “have been advised in the past the M&R markup was to cover amongst other things, cost of land.”
Damage to chassis incurred on the terminal by MTO supplied labor is not absorbed by the MTO, but rather the IEP, he explained. MTO demands for adequate supply of chassis to facilitate operations are inconsistent and often contradictory to efficient supply flows, he said.
“We had one terminal, go unnamed, that asked us to take 200 chassis off and within 24 hours, asked us to put 200 chassis back on. All that costs a lot of money,” Connors said.
Shipper groups have expressed concern about the fee resulting in higher costs for their members.
National Retail Federation Vice President of Supply Chain and Customs Policy Jon Gold said its members “are extremely concerned about the continually increasing costs of doing business at the ports of Los Angeles and Long Beach. Between the recently announced Traffic Mitigation Fee increase and now this new chassis fee, those costs are all passed along to the beneficial cargo owner. Unfortunately, there has been no discussion or consultation with the cargo owners about the impact these new fees will have or their purpose.”
Don Pisano, the president of American Coffee and chairman of the National Industrial Transportation League Ocean Transportation Committee said, “We don’t dispute that the MTO should be compensated for services provided to chassis providers. But we suspect that the $5 fee charged both in and out will be passed along from the chassis lessee to the lessor or the user of the chassis. Thus the beneficial cargo owner will be now be expected to absorb an additional $10 on each import and export container. This new fee on top of the increased Traffic Mitigation Fee, which will become effective August 8, adds up. Shippers consider all direct and indirect charges in selecting which port to use for their shipments. We are glad the implementation date for this new chassis services fee has been delayed a month and hope all parties consider the impact of this new charge on the competitiveness of the Los Angeles/Long Beach port complex.”
Peter Friedmann, counsel to the Agriculture Transportation Coalition said in a note that “Our concern is that this fee will get passed from the chassis lessor to the shipper. The fee goes into effect September 1. Since then we have been in discussions with several FMC Commissioners, and have given them the hard data they need.”
FMC reviewing $5 chassis fee proposed by L.A./Long Beach terminals
