Trucking companies can have a difficult time winning with NVOCC, SSL and BCO private chassis agreements
Steamship lines often offer included chassis for trucking companies. Similarly, non-vessel operating common carriers sometimes offer private chassis pool deals for their carrier partners. While these offers sound attractive on the surface, is a typical “chassis deal” really a deal at all?
When a chassis is provided by a steamship line or NVOCC, trucking companies end up footing the bill for any maintenance issues that come up during use.
“A steamship line or freight forwarder might include a chassis when booking, which sounds really good,” Port X Logistics Founder Brian Kempisty said. “Once truckers go pick up that chassis from whatever pool it is being rented from, however, they become financially responsible for the equipment. If they get a flat tire, the trucker is paying for that flat tire even though it isn’t the trucker’s chassis.”
Not only do truckers become responsible for equipment they do not own, but the chassis tend to be in poor condition from the outset due to heavy wear and tear, making them more prone to expensive maintenance issues during use.
In addition to unforeseen maintenance costs, “double invoicing” can be an issue. This is what happens when a trucking company gets a bill for a chassis that was supposed to be “included” by their SSL or NVOCC. At that point, truckers have to either pay the bill or take on the costly burden of disputing it.
Disputing invalid invoices or unexpected maintenance fees is often frustrating and fruitless, especially for small and midsize carriers operating with limited staffs and minute margins. For most trucking companies that have to rely on this “included” equipment, disputing the bill is a cost-prohibitive process, so they simply pay the unfounded fees.
“If you can’t get that resolution done in time, you end up simply paying the bill anyway so you don’t get shut out of the chassis pool,” Kempisty said. “NVOCCs and steamship lines are using this equipment as a profit center, while small and medium-sized truckers get stuck disputing invoices and fixing worn-down chassis.”
All in all, it is clear that these chassis “deals” are only deals for the SSLs and NVOCCs, not the trucking companies.
“These companies are owned by private equity firms, and all they’re worried about is what kind of cash they’re generating off the chassis,” Kempisty said. “Large companies have seized the opportunity to make money and dodge maintenance work. It is a smart business move for them, but it’s bad for everybody else.”
Looking at the size and financial power of these SSLs and NVOCCs, it is not surprising that the average trucking company cannot compete.
“About 72% of drayage drivers in the United States are owner-operators,” Kempisty said. “They’re one- and two-man crews, and they just don’t have the business savvy, the relationships and the scale to be able to stand up to these people.”
Carriers are far better off purchasing their own chassis. While they are, of course, still responsible for equipment maintenance costs, they also have control over how the chassis is used and cared for on a day-to-day basis. This makes a world of difference when it comes to increasing efficiency and reducing costs.
“We are the only country in the world where truckers don’t routinely own their own chassis,” Kempisty said. “If you go to Canada or Europe, the trucker owns the chassis, maintains the chassis and makes sure the chassis is in good shape.”
While obtaining chassis from SSLs and NVOCCs is far more expensive in the long run, most trucking companies in the U.S. cannot afford the upfront cost of purchasing their own equipment.
Kempisty believes government-funded grant programs could go a long way in helping carriers secure their own equipment, making them more profitable and self-reliant over time. The idea is not unprecedented. The U.S. government is currently issuing grants to help carriers reduce carbon emissions and meet upcoming eco-focused innovation deadlines in several states. A grant program aimed at allowing trucking companies to purchase chassis could be orchestrated in much the same manner.
Ultimately, giving carriers the power to purchase their own equipment — whether through grants or other means — is the most efficient and reliable way to fix the chassis situation. Chassis deals are not really “deals” for the drayage community.