The Federal Maritime Commission recently made a landmark decision that will likely ripple through the U.S. supply chain for some time. The FMC upheld an administrative law judge’s ruling from a year ago relating to a lawsuit filed by the American Trucking Associations’ Intermodal Motor Carrier’s Conference against the Ocean Carrier Equipment Management Association, which determined that the current intermodal chassis pooling system violated the Shipping Act of 1984. The primary point of contention in the lawsuit was that OCEMA, whose membership is comprised of 12 of the major ocean shipping lines and other participating nonmembers, imposed unjust and unreasonable regulations and practices by requiring the use of OCEMA member default intermodal chassis providers and denied motor carriers their right to select a chassis provider for merchant haulage movements, referred to as “chassis choice.”
In the late 2000s, when the roadability regulations took effect in the U.S., the ocean carriers divested their ownership of intermodal chassis. To fill the void, chassis leasing companies, also referred to as intermodal equipment providers, accepted the responsibility of managing and providing intermodal equipment to motor carriers for moving shipping containers in and out of marine ports and rail terminals. The ocean lines and leasing companies adopted various policies and practices for chassis pool operations and how ocean carrier-owned cargo containers were to be interchanged, the designed intent of which was to provide motor carriers the right to choose a chassis from an IEP that was part of a neutral or “gray pool.”
In the lawsuit, the IMCC argued that motor carriers were not given freedom of chassis choice through these pooling arrangements, and depending on the type of move, IEPs were undercharging ocean carriers for ocean carrier haulage movements and overcharging motor carriers for chassis usage on merchant haulage movements. The result, they argued, denied motor carriers chassis choice and price competition – to which the ocean carriers ultimately benefitted, to the tune of $1.8 billion over a three-year period. They argued that the ocean carriers, while having divested themselves from the chassis business, were still controlling the market through these pooling arrangements and the contracts they had set up with the IEPs.
This decision is a big win for intermodal motor carriers with operations at marine ports and terminals. It should help promote more transparency and competition in the market and more flexibility and efficiencies on equipment use and interchange, which should ultimately improve congestion at ports and fluidity in the supply chain. While this decision by the FMC is specifically for four geographic areas of the country, it likely will expand nationwide over time. What remains to be seen is what comes next, as the ocean carriers and chassis leasing companies will have to adjust their business models, and the FMC may choose to exert oversight at inland intermodal terminal operations. There also is the issue of detention and demurrage charges that is in front of the FMC for their review, and there will likely be impacts to the Uniform Intermodal Interchange and Facilities Access Agreement. All these issues will take time to resolve. Let’s hope the end the solution is collaborative and for the benefit of all, and motor carriers are treated with the respect and equality they deserve since they are so critical to the first and last mile in the intermodal supply chain.