Congestion Crisis Continue in Chicago Rail Ramps
Huge demurrage bill for BCO highlights Chicago rail meltdown
Ari Ashe, Senior Editor | Jun 24, 2021 12:14PM EDT
Containers have been stuck in Union Pacific’s Global IV terminal since early May in some cases, with one beneficial cargo owner on the hook for more than $10,000 in fees even though his box was unavailable for pickup. Photo credit: Randy Decker.
A Midwest importer was forced to pay $11,000 in storage fees to secure a container with some $266,000 worth of goods inside that was tied up at a Chicago rail terminal for two months, illustrating what draymen and truckers say is the worst congestion in history.
The plight of Michigan City Paper Box is familiar to fellow importers struggling to get thousands of containers at Union Pacific Railroad’s (UP’s) Global IV terminal in Joliet, Illinois, as the western US railroad struggles to handle more ocean containers than it has ever seen during springtime come into the Midwest.
Al Hoodwin, owner of Michigan City Paper Box, tried phone calls, emails, and sending truck drivers into the terminal, but UP could not tell him where his container was located, or when it would be available for pickup. He said communication with UP was poor and the information was “conflicting and puzzling.”
He finally received his cargo of jewelry pouches and other items on June 21 after 50 days in limbo when chassis provider TRAC Intermodal stepped in on his behalf.
Hoodwin’s ocean container was one of thousands stacked in UP’s Global IV terminal — inaccessible, yet still subject to rail storage fees, a form of demurrage. While UP declined to provide an exact number of containers, JOC.com estimates the total to be between 1,500 and 2,500 based on conversations with draymen, non-vessel-operating common carriers (NVOs), and chassis providers, although some sources peg the number closer to 3,000.
“Each of those containers is a story probably of a small business just like me,” Hoodwin told JOC.com. “Many small businesses cannot afford [the storage fees], and there are probably hundreds just like me with a story, if not more.”
Record volume on rails between West Coast and Midwest
In April and May, the Intermodal Association of North America reported the number of 40-foot containers traveling on rail between the Southwest and Midwest rose 45 percent compared with a year ago, 31 percent compared with the same period in 2019, and 13 percent versus 2018. That corridor covers ocean boxes moving between Southern California and Chicago-area terminals, such as the Michigan City Paper Box container, on both UP and BNSF Railway (BNSF).
Intermodal volume on the two western US railroads in the last four weeks is up 22 percent, combined, versus a year ago and 8.4 percent versus two years ago, according to the Association of American Railroads, although that total encompasses all lanes and both domestic and international loads.
BNSF has also struggled with the volume in Logistics Park Chicago, removing track to add more space for containers. Turn times have deteriorated for both railroads, with a driver taking 23 minutes longer than a year ago in BNSF Logistics Park Chicago and 10 minutes longer in UP Global IV, according to the Illinois Trucking Association and data analytics firm Geostamp.
UP Global IV stack. Photo credit: Jim Shu.
Other cargo owners also have containers sitting in the Global IV stack for more than a month, according to three NVOs, which spoke on the condition of anonymity. Based on UP’s storage policies, shippers owe $6,500 per container after 30 days in storage. In Hoodwin’s case, he had to pay an additional $4,500, or another 20 days at $225 per day, before getting his container.
Trucking companies have offered to use their own chassis as a temporary solution until the intermodal equipment providers (IEPs) — TRAC, DCLI, and Flexi-Van Leasing — can supply enough chassis, but UP has refused these overtures under its “no cherry-picking” policy, while also not waiving fees.
The Federal Maritime Commission, which has ruled that container availability is a precondition for demurrage, does not have authority over US railroads. The Surface Transportation Board cannot officially intercede either, despite oversight authority, because containerized rail was deregulated in the 1980s.
UP argues yard workers must concentrate on unloading containers from trains, rather than deconstructing and reconstructing stacks all day. The storage fees are meant to “encourage the IEPs to increase their chassis inventory,” according to a June 7 UP email provided to JOC.com by one of the three NVOs.
UP’s chassis usage policy
UP’s policy not only prohibits the trucker-owned chassis solution, but also outlines how TRAC, DCLI, and Flexi-Van chassis are being used on incoming trains rather than on the stack.
If TRAC provides 500 chassis, for example, then UP puts them on containers arriving that day, not the 500 containers sitting the longest. UP will mount containers in the stack only when surplus chassis are available, according to the June 7 email.
TRAC and DCLI, the largest chassis providers by market share in Chicago, told JOC.com they provide surplus chassis when possible, but are also facing shortages in other Midwest markets where shippers are taking too long to return equipment.
Val Noel, chief operating officer of TRAC, is reluctant to reposition chassis to Chicago from the Gulf Coast and Northeast, where there are no shortages, because demand could quickly increase as peak season approaches, he told JOC.com. Noel does not want to solve one problem while creating new ones.
Some solutions on the table
UP declined to discuss Hoodwin’s case specifically, but said the problem is “due to the inability of the supply chain to pick up containers at some of our inland terminals.” The railroad would not say how long it would take to whittle the stack at Global IV.
“To assist in addressing this industry challenge, Union Pacific has been working proactively with ocean carriers to encourage more rapid out-gating of boxes, including seeking alternate solutions,” UP said in a statement this week. “Union Pacific recently held an ocean carrier symposium to discuss the supply chain, identify areas of constraint, and review actions to relieve congestion. One example of a solution Union Pacific has offered has been the opening of Global III as an interim container storage location as a means to maintain overall Chicago traffic flow.”
Ocean Network Express implemented its own temporary solution last weekend, hauling containers to Illinois Transport and making them available for pickup. Illinois Transport owns a 32-acre depot in Chicago and an 85-acre depot in Wilmington, Illinois.