What is chassis leasing? What is a chassis? Whether you’re new to these terms or in the logistics industry, a refresher is sometimes needed. Most people don’t realize how much coordination it takes for companies to get their products to your front door. We’re going to provide you some background and then define some of these terms for you.
The ocean transportation industry in the US has seen significant change over the past 10 years in how a chassis is secured. Before 2009, the majority of chassis to be used for delivery of the containers coming off the vessels were provided by the ocean carriers.
There was no charge for this, normally, as it was generally included in the ocean transportation cost. You didn’t have to make a reservation for a chassis. Since it was a part of the ocean transaction, the drayage carrier was sent to the port to pick up the container, and it was on wheels or placed on wheels when the driver arrived.
In 2009, one of the major ocean carriers decided to divest themselves of the chassis, and the majority of the other ocean providers followed suit. They either spun off chassis leasing companies or sold or returned their chassis to the leasing company from where they got them.
When this happened, the major leasing companies went from having less than 100 customers to thousands of customers. It was the truckers who now had to secure the chassis to transport an ocean container.
Additionally, a chassis usage fee was implemented for using the chassis on a daily basis. Unless a financial arrangement is made between the ocean carrier and the customer, someone is paying the fee.
Let’s break this down a little bit:
#1 What is a Transportation Chassis?
A chassis in the shipping business is a steel frame with wheels that connects to a semi-truck for the transporting of a cargo container.
When an ocean or intermodal container is shipped either on a vessel or train, it is typically not shipped with the “wheels” to transport it once it arrives and is unloaded. The container is then placed and secured on a chassis and transported to the destination.
This is a bare chassis:
#2 What is Chassis Leasing?
Chassis leasing occurs when a transportation company leases a chassis in order to move a shipping container to or from an ocean container port or a rail yard. This type of transportation is known as drayage.
#3 How to Lease a Chassis
There are three main ways to lease a chassis: chassis pools, term leases, and daily rentals. The main difference is the length of time you are charged for the use of the chassis. Let’s dive in.
Utilize a Chassis Pool
There are chassis pools. In certain parts of the country, chassis asset owners (primarily chassis leasing companies) contribute chassis to a cooperative pool that has a pool manager who maintains the equipment and ensures enough availability when truckers need to use one.
Most of these pools operate inside port operations, but, in the past few years, some companies have begun to operate depots and chassis yards outside the port complex in order to compete with the pools. When you use a pool chassis, you pay for the usage from the time you out gate at the terminal until you return it. And sometimes you can return it to a different terminal, if that is the pool arrangement. These look simple on the outside, but they are quite complex. That might be for another time though.
Chassis Term Leases
There are private term chassis leases. Since 2009, more and more trucking companies have started to lease their chassis. There are many reasons for this but control of cost is one. By leasing a chassis you are not paying the daily rate at a pool which is beyond your control. Roadability is another.
Knowing that a chassis you take to the port is safe and roadable allows the trucker to move through the port complex more quickly. When using a pool chassis, they have to go through inspection at the gate and potentially off to maintenance if something is wrong.
With a long term lease, you are paying for that chassis even if you don’t use it. Plus, you are generally responsible for all maintenance.
Daily Chassis Rentals
There are daily chassis rentals. Most chassis leasing companies offer a daily rental option that includes maintenance, and commitment to a long term lease for a specific block of chassis is not required.
Some of the leasing companies have even developed technology allowing you to make your reservation online. This allows you to move through their depot quicker. Some of these systems also include Business Intelligence tools for the trucker to monitor their daily usage. In this model, you make a reservation for a chassis, pick it up, make your delivery, then drop the chassis back off at their depot and pay a daily rate.
#4 How to Buy A Chassis
Many truckers and some shippers are starting to buy their own chassis from manufacturers. Why would they do this? It provides them with the same benefits as leasing; however, the new build of the chassis leads to reduced maintenance charges. In general, the trucker can depreciate this capital expense.
The daily cost of the chassis should drop significantly since the chassis has a long life span. This is a pretty significant expense and requires the financial team to do the ROI analysis.
#5 Who leases a chassis?
By now, you might be asking who rents or leases a chassis. It used to be that the drayage operator, we’ll call them the “trucker”, would be the primary user. The majority of the chassis usage is still to the account of the trucker who is contracted by the ultimate customer. This means that the trucker is now passing along a chassis usage fee to the ultimate buyer of the transportation. However, we are seeing more and more importers and exporters, as well as Third Party Logistics companies, take control of this cost by procuring chassis directly using one of the above options.
Bonus Tip: Chassis Leasing Around The World
The US is one of the few places in the world that uses this type of chassis model. At other ports around the world, the chassis is the responsibility of the trucker. The chassis is not provided at ports via the pools we discussed above.
This story isn’t finished by any means. The chassis model continues to evolve, especially as more drayage operators look for “truckers choice”, and we are excited to play our part. Stay tuned for more exciting times ahead as we continue to look for better ways to serve the customer in a more timely manner.