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U.S. Proposed Chassis Tariffs in the Effect on the Chassis Shortage

Posted on Thursday September 6, 2018 by admin

Whether at a coastal port or a railyard in the heart of America, there is currently a chassis shortage throughout the United States. Major U.S. ports including the Port of LA, Port of New York- New Jersey, Savannah, Chicago, Baltimore, Memphis, Dallas and St. Louis, to name a few, have been greatly affected.

In an attempt to join forces and combine resources, port authorities in Georgia and South Carolina launched the Southern States Chassis Pool to help meet the demand of the post-Panamax vessels where they’re short an additional 7,000 to 10,000 chassis.  In addition, a recently proposed tariff by the Trump administration on Chinese-made goods could heighten the severity of the chassis shortage. But how exactly did this chassis shortage come about and what will be done moving forward?

What Caused the Chassis Shortage? 

Port congestion has reached an all-time high and finding an available chassis can takeChassis Shortage- What is the chassis tariff- Penn Leasing hours. While many factors have fed into the current shortage of chassis, the top contributors include an aging chassis fleet – the result of deferred maintenance and a lower investment in new chassis during the Great Recession, an increase in shipping volumes from the current economic boom, and port infrastructure (rail ramp) congestions.  So while the volume of shipped goods has been steadily increasing, the volume of chassis available has decreased. The chassis shortage, which is already causing delays in shipping, is only expected to worsen as ports ramp up for their busiest time of year, late summer through the holiday season.

What is the Chassis Tariff? 

A tariff is a tax placed on a particular class of imported goods. They typically are a government tactic to protect domestic industries while increasing revenue. The Trump administration proposed a tariff to be implemented on $34 billion dollars worth of various Chinese-made goods, including a 25% tariff on  chassis and various material handling equipment.

While the exact cost varies based on spec, the average cost of a chassis made in China is between $10,000 to $20,000. If approved, the tariff would add another $2,500 to $3,250 to the cost of each unit. Based on China International Marine Containers (CIMC) yearly revenue, the world’s largest manufacturer of chassis, chassis purchasers will be paying an additional $112.5 million to $146.3 million annually if the tariff gets put in place. This increase in cost would trickle down to shippers, freight carriers and ultimately to consumers.  

What Does the Chassis Shortage and Potential Tariff Mean Long Term? 

With the cost to purchase Chinese manufactured chassis for use in the USA increasing as result of the proposed tariff, attention has shifted to domestically manufactured chassis to help meet the growing demand. CIMC states that they have nearly 50,000 – 55,000 orders to fill in 2019 and more than 60,000 projected in 2020, which they still plan to fill even if the tariff is implemented. However, domestic manufacturers have struggled to keep up and if they plan to do so will need to ramp up and retool.

More specifically, Hyundai Translead manufactures around 7,000 chassis annually from their Tijuana, Mexico factory. Cheetah Chassis manufacturers around 4,000 chassis annually between their Berwick, Pennsylvania and Sumter, South Carolina factories. Both of which say they have the means to double their outputs if the tariff is put into action and generates new business. However, there is the underlying concern that political winds could shift in November 2020, when Trump is up for re-election, upon which a new president could reverse the tariffs. Until then, we will have to wait and see the what happens next.  

 

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