New Highway Bill to Have Important Impact Upon Intermodal Equipment Providers and Users, and Equipment Lessors

John C. Lane¹

You have already heard about the pork-barrel spending in SAFETEA-LU (“Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users”), including the “Bridge to Nowhere” in Alaska. Indeed, some of the funding may actually even benefit the public. Deep in the details of the bill, however, are two substantive provisions that (1) eliminate vicarious liability for equipment lessors, and (2) instruct DOT to devise regulations which impose clear lines of responsibility for maintenance of intermodal equipment, especially chassis which carry containers and thief cargo on the nation’s highways. The new regulations will be far-reaching.

U.S. seaports are “home port” to thousands of chassis, which are made available to truckers to pick-up container loads from their customers, for export, and deliver import loads from the seaports to the consignees. The chassis and containers are owned by or leased to the steamship companies. Currently, although the steamship companies endeavor to maintain the chassis, contractual relationships with the truckers, including Equipment Interchange Agreements and the ubiquitous “UIIA” (Uniform Intermodal Interchange and Facilities Access Agreement) place heavy burdens of indemnity upon the intermodal truckers who enter the seaports and utilize the Equipment. Federal Motor Carrier Safety Regulations, similarly, place significant responsibility upon the truckers. Similar situations exist in the railroad industry.

Intermodal Equipment Safety Regulations

Congress seems to have agreed with the intermodal trucking industry that existing relationships place unfair responsibility upon truckers for maintenance of chassis and trailers which are the property of the ocean carriers and railroads. As a result, Congress included in SAFETEA-LU § 4118, a new addition to Title 49 (new § 31151 – “Roadability”). This section directs the Secretary of Transportation to establish a program “to ensure that intermodal equipment used to transport intermodal containers is safe and systematically maintained.” The enactment gives the Secretary a list of 15 factors, at a minimum, which must be included in the new regulatory program.

The requirements include the following:

A.     A means to identify intermodal equipment providers responsible for inspection and maintenance of equipment intended for interchange to motor carriers;

B.     A system of unique identifying numbers to match intermodal equipment to an intermodal equipment provider;

C.     A requirement that the provider arrange for systematic inspection, repair, and maintenance of intermodal equipment intended for intermodal interchange with a motor carrier;

D.     A requirement that each provider maintain a system of maintenance and repair records for such equipment;

E.      Requirements that a specific list of equipment components be identified for visual or audible inspection by the driver, to be conducted pursuant to Federal requirements, so that the driver is satisfied that the intermodal equipment components are in good working order before the equipment is operated over the road;

F.      A requirement that a provider’s facility have a process and available space for a motor carrier to have such equipment repaired or replaced prior to departure;

G.     A program for evaluation and audit of compliance by intermodal equipment providers with applicable Federal Motor Carrier Safety Regulations;

H.     A civil penalty structure for intermodal equipment providers who fail to attain satisfactory compliance with applicable FMCSRs;

I.        A prohibition upon providers from placing their intermodal equipment upon the public highways to the extent such providers or their equipment pose an imminent hazard;

J.       A process by which motor carriers may request FMSCA to investigate an intermodal equipment provider that is alleged to be not in compliance with regulations issued under this section;

K.    A process by which equipment providers may request FMCSA to investigate a motor carrier that is alleged to be not in compliance with regulations issued under this section;

L.      A process whereby a driver transporting intermodal equipment is required to report to the provider or its agent any actual damage or defect in the equipment of which he is aware at the time the equipment is returned to the provider;

M.   A requirement that any actual damage or defect so identified be repaired before the equipment is made available for interchange to a motor carrier, and that such repairs and reports submitted pursuant to subparagraph (L) be documented in the maintenance records for such equipment; and

N.    A procedure by which motor carriers, drivers and intermodal equipment providers may seek correction of their motor carrier safety records so as to delete violations attributable to deficiencies in an intermodal chassis or trailer for which they should not have been held responsible.

The new regulations are to be issued within one year of the Act, which became law on August 10, 2005. They are to preempt any state or local law that exceeds or is inconsistent with any requirements imposed pursuant to the new section. The Secretary is empowered, in paragraphs (b) and (c) of the section, to inspect intermodal equipment, copy related maintenance and repair records, and place out of service any intermodal equipment determined to be out of compliance with applicable FMCSRs, until necessary repairs have been made.

The new Intermodal Equipment Safety Regulations will have a profound effect upon the way that equipment providers – railroads, ocean carriers, terminal operators, trailer and chassis pool managers, and those with contractual responsibility for maintenance – do business with intermodal motor carriers. Equipment providers rely upon their own Equipment Interchange Agreements, or the Uniform Intermodal Interchange and Facilities Access Agreement (known as “the UIIA”) to establish the responsibilities, and liabilities, of the motor carrier and the equipment provider. These agreements are generally favorable to the equipment provider, including provisions for indemnification of the provider in the case of an accident on the public roadway. The agreements will have to be reviewed and modified to conform to the new regulations.

The UIIA is a single document, administered by the Intermodal Association of North America, largely on behalf of the member ocean carriers. The Agreement provides that truckers who sign on to its provisions will be permitted access to terminals in order to interchange – pick up or deliver – intermodal equipment. The Association will doubtless be monitoring the development of the new regulations to ensure that any new version of the UIIA conforms with their requirements.

Who Is A Provider?

The new Section defines “intermodal equipment provider” as one who interchanges intermodal equipment pursuant to a written interchange agreement with a motor carrier (such as the UIIA or private equipment interchange agreement), and any person who has contractual responsibility for maintenance of the equipment. A lessor of equipment who does not provide (“interchange”) equipment to a motor carrier and is not contractually obligated to maintain intermodal equipment, is not a provider for purposes of the law and regulations.

In many instances an ocean terminal operator will perform interchange services for its steamship company customers, including maintenance and repair functions. Also, many chassis pools have been established through cooperative efforts of ocean carriers, with one of the carriers, or a terminal operator designated to manage and maintain the pool. These managers would all appear to be “providers” as well.

Further, some traditional trailer and chassis lessors also establish and manage their own equipment pools. To the extent that such activities involve the interchange of intermodal equipment to motor carriers, they, too, will fall within the reach of the Intermodal Equipment Safety Regulations.

A Break for Equipment Lessors

Quite apart from the Interchange Equipment Safety Regulations program, Section 30106 of SAFETEA-LU abrogates all state laws, such as New York’s Vehicle & Traffic Law § 388, which place vicarious liability upon owner-lessors of vehicles. This safe haven from liability exists provided that (1) the owner-lessor is engaged in the trade or business of renting or leasing motor vehicles, and (2) there is no negligence or criminal wrongdoing on the part of the owner.

This provision applies not only to trailer and chassis lessors, but to lessors of all motor vehicles. Thus, tractor lessors and car rental companies also achieved a great victory, especially in New York. The provision abrogating vicarious liability for non-negligent lessors took effect immediately, for all lawsuits commenced on and after August 10, 2005.

Conclusion

SAFETEA-LU, a bill filling over 800 pages, has some important substantive provisions found deep in its details. The abrogation of vicarious liability for lessors (Section 10208 of the Act, codified as 49 U.S.C. § 30106) will bring a great savings to these companies in terms of litigation costs in states like New York.

The new Intermodal Equipment Safety Regulations will be significantly more far-reaching. Our ocean carrier clients tell us that there are tens of thousands of equipment interchanges in the United States every day. Every one of those interchanges will be governed by the new regulations. As transportation lawyers representing railroads, ocean carriers, motor carriers, terminal operators and equipment lessors, we will all need to stay up to date on the changes in regulations that will affect our clients.

[1] Law Offices of John C. Lane, Wyckoff, NJ and New York, NY. Mr. Lane practices transportation law in New York and New Jersey.