Putting aside the larger debates about dependence on Chinese manufacturing, it’s clear that this particular policy was a mistake.
Putting aside the larger debates about dependence on Chinese manufacturing, it’s clear that this particular policy was a mistake.
T ruck chassis are used to haul cargo containers. They are the trailers that shipping containers rest on so that trucks can pull them. The United States needs a lot of them. A chassis is needed to carry a container even for very short drayage trips within or near a port complex. Each chassis can carry two TEU (20-foot equivalent unit) of freight, and the largest container ships today can drop off as much as 8,000 TEU of freight at one port call. Given that lopsided relationship, there are over 700,000 chassis registered in the U.S. That’s higher than the populations of Wyoming and Vermont.
And even then, 700,000 isn’t enough. With the historic influx of goods in the wake of the pandemic, America is experiencing a chassis shortage.
The largest maker of chassis is a company called CIMC, headquartered in Shenzhen, China. CIMC has a U.S. subsidiary called CIE Manufacturing (formerly known as CIMC Intermodal Equipment). You can see examples of the chassis it sells here.
In 2016, CIMC announced that it would be focusing more on U.S. production to meet demand for the North American market. CIE has facilities in South Gate, Calif., and Emporia, Va. The company imports parts from China and assembles and inspects the finished trailers at both locations. In 2018, the 78,500-square-foot Emporia facility was growing rapidly, assembling about 20 percent of CIE’s North American chassis. In 2019, CIE began moving its full manufacturing capabilities to the U.S. so it could deliver to American customers faster. Between South Gate and Emporia, the company was set to employ about 275 Americans.
In 2019, under President Trump, the federal government raised tariffs on Chinese imports from 10 percent to 25 percent as part of its “trade war” with China. According to a January 2020 story from Truckinginfo: “When they were 10%, explained CEO Frank Sonzala in an interview, customers absorbed the difference. But when those tariffs went to 25%, the company started losing orders. ‘Our customers would have had to pay for five and get four,’ he said.”
Nevertheless, CIE was still doing well — and U.S. companies had had enough. Seeing that they were getting beat by a subsidiary of a Chinese company, they filed a petition with the federal government in July 2020, claiming that CIE was “dumping” chassis into the U.S. market. (“Dumping” is the grievous misdeed of providing products that Americans need at a lower price than domestic companies do.)
In 2021, the federal government ruled in favor of the U.S.-based chassis companies and imposed new taxes on Chinese chassis. They include a 44.32 percent countervailing duty and a 188.05 percent anti-dumping duty, bringing the combined total tariff — remember, Biden left Trump’s tariffs in effect — on Chinese chassis to about 250 percent.
A 250 percent tax might as well be a ban. Tariffs are taxes on imports, but they end up being paid by Americans. This particular tariff is a special case in that the government isn’t even getting revenue from the tariff. We’re all paying the tax right now in shipping delays and higher prices, which are partly caused by the chassis shortage.
Have U.S. chassis makers picked up the slack? Nope. According to the Journal of Commerce, delivery of most chassis orders from this year will be made in the second half of 2022. The story describes the situation as follows:
With Chinese chassis priced out of the US market, manufacturers in the US, Canada, Mexico, and Vietnam were suddenly flooded with orders from intermodal equipment providers (IEPs), port authorities, railroads, and trucking companies.
But most North American manufacturers had completely shut down their chassis business because they couldn’t compete with CIMC, refocusing instead on building truck trailers. The companies had to restart their operations, hire new workers, and build new production lines quickly. But similar to many US businesses, chassis manufacturers are struggling to find labor.
The Department of Transportation put out a notice of request for information in the Federal Register on September 16. This is a regulatory process by which the government collects information from members of the public, including individuals, corporations, and trade groups, on a pressing issue. This notice asked about 13 topics related to the supply-chain crisis. In the second topic, they asked about what’s causing the chassis shortage.
The commenters were admirably diplomatic in their responses, but many of them pointed to the obvious answer: the 250 percent tax on chassis from the world’s leading chassis producer. Consider some of the responses. The American Trucking Associations said, “ATA is concerned that the combination of the tariffs and duties only will increase the cost of chassis without providing a sizeable increase in domestic production.” The American Association of Port Authorities said, “2019 tariffs and aging equipment contribute to the shortage, and not enough new chassis are being manufactured.” The American Association of Exporters and Importers said, “Tariffs that are being applied to new chassis have made chassis importation cost prohibitive.” Even the American Apparel & Footwear Association got in on the act, saying that “targeted tariff relief on chassis . . . would unlock a restriction that is currently depressing availability of critical equipment.”
The Coalition of American Chassis Manufacturers’ comment points to every other cause of supply-chain problems except the chassis shortage. In fact, it rejects the notion that there is such a shortage. While the coalition is correct in suggesting that there are many other problems, nobody is seriously contending that the chassis shortage is solely responsible for the shipping crisis. The federal government could eliminate the tariffs entirely, and it wouldn’t cause the crisis to magically disappear.
In truth, there’s no single thing the federal government can do to cause the crisis to magically disappear. But there are things it can do to help — and eliminating the effective prohibition on imported chassis is one of them.
To review, the federal government disrupted a U.S. subsidiary of a Chinese company that was in the process of moving its entire North American manufacturing process to the United States so that it could give protection to a domestic industry that had completely shut down and could not meet America’s needs. Putting aside the larger debates about dependence on Chinese manufacturing, it’s clear that this particular policy was a mistake and is harming America’s ability to respond to a crisis that is presently unfolding.