Long-standing practices for feeding chassis into intermodal markets have been dealt another blow in legal proceedings before the Federal Maritime Commission.

In a 4-1 vote Tuesday, the FMC upheld an administrative law judge’s (ALJ) ruling from just over a year ago that the current system of major oceangoing carriers designating exclusive chassis providers for port-to-port moves, also known as merchant hauling, violates federal law. 

The case was brought in 2020 by the Intermodal Motor Carriers Conference (IMCC), an arm of the American Trucking Associations. The defendant is the Ocean Carrier Equipment Management Association (OCEMA). It is a U.S.-based group of 12 major ocean carriers, and the intermodal movement of freight is its sole activity.

Specifically, IMCC said the chassis pool system violated 46 U.S. Code § 41102, a part of the U.S. code that deals with ocean shipping.

Among other provisions, that law says “a common carrier, marine terminal operator, or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”

OCEMA operates the chassis pools that were the subject of the IMCC action. In a 73-page ruling, the four FMC commissioners made clear that they agreed with the ALJ who first ruled against the practice.

“[OCEMA’s] practice of designating a chassis provider for merchant haulage moves deprives motor carriers of service and denies them the opportunity to negotiate rates and terms of service,” the commissioners wrote. “Interfering with motor carriers’ ability to choose among chassis providers affects basic interests that promote economic efficiency.”

In the original complaint from August 2020, the IMCC said the Consolidated Chassis Management Pool  (CCMP) agreement dated back to 2006 and was filed that year with the FMC. The IMCC said it was “ostensibly designed to permit motor carriers the freedom of chassis choice, i.e., the right of a motor carrier to choose a chassis from a gray pool owned by an independent Intermodal Equipment Provider, and to be billed by that IEP.”

The IEPs include such chassis providers as Direct Chassislink Inc.

“In reality, and notwithstanding that OCEMA members do not themselves own chassis, OCEMA members control the operation of chassis pools at ports and intermodal terminals nationwide through the rules and practices they adopt for pool operation, their contracts with equipment providers, and their own rules and practices governing how the cargo containers that they own may be interchanged,” IMCC said of the CCMP agreement. “As a consequence of these unlawful practices, ocean carrier respondents have caused motor carriers, their shipping and receiving customers, and ultimately the consuming public, to be overcharged in an amount that IMCC estimates to be as much as $1.8 billion during the three years prior to the filing of this Complaint.”

The ALJ’s decision focused solely on practices in four port areas: Savannah, Georgia; Los Angeles/Long Beach, California; and inland terminals in Memphis, Tennesse, and Chicago. The ruling by the full FMC moves the issue for other ports back to the ALJ.

The FMC decision summarized the arguments put forth by OCEMA. “Without the challenged restrictions, [OCEMA] contends there is no practical means of ensuring a sufficient supply of chassis at ports and inland facilities around the country,” the FMC writes. Citing a study, OCEMA said the current system leads the IEPs to “commit to make their assets available at particular locations in exchange for the assurance that they will not be underutilized and that assurance comes primarily from IEP’s contracts with container lines.”

Without that assurance, OCEMA argues — according to the FMC summary — “there is a risk that IEPs would find their equipment [is] underutilized and this would endanger the ability of the container lines to ensure a chassis supply sufficient to handle cargo.”

Whether there is financial impact from the chassis pool system is not relevant to the FMC decision, the agency said. “[OCEMA’s] arguments that [IMCC] failed to prove financial harm or actual loss are legally immaterial,” the agency said.

In a statement hailing the FMC decision, IMCC Executive Director Jonathan Eisen said the FMC “has now confirmed that the actions of these ocean carriers are a clear violation of federal law and must stop.”

“IMCC and ATA have been fighting this conduct by foreign-owned ocean carriers for more than a decade, so this ruling has been a long time coming,” he added.

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