Bearing a Heavy Load
By Henry E. Seaton

April 2007
Reprinted from

Q Regulations have been proposed that would hold intermodal equipment providers accountable for the “roadworthiness” of their containers and chasses. I firmly believe the regulations do not go far enough. One thing that seems to be missing is the fact that terminals often load heavy containers on chasses that are not adequate to haul them. This exposes my company to risk by forcing us to use the same equipment that may have been subject to undue stress countless times.

A The Federal Motor Carrier Safety Administration issued its Notice of Proposed Rulemaking on roadability in the Dec. 21, 2006 Federal Register in response to a congressional mandate in the SAFETEA-LU legislation now codified at 49 U.S.C. §31136(a). Comments were due March 21. At issue is the high frequency of accidents due to latent defects and poor maintenance of intermodal equipment, primarily chasses. Intermodal draymen and intermediaries who interchange or lease chasses on a movement-by-movement basis have long complained they cannot be responsible for latent defects that were not able to be discovered by a thorough inspection at time of pickup.

As directed by Congress, FMCSA plans to address the problem by making the intermodal equipment provider responsible for maintenance, and therefore subject to carrier-like safety duties, responsibilities and enforcement actions for noncompliance. The proposed rule would regulate any party that tendered intermodal chasses or containers to motor carriers, including steamship lines, railroads, terminal operators and chassis pool owners. Each intermodal equipment provider (IEP) would be required to register with FMCSA, file a Form MCS-150C and display its own U.S. Department of Transportation number on each intermodal container and chassis it leases or interchanges.

IEPs would have to establish a systematic inspection, and a documented repair and maintenance program, including a system to respond to mechanical defects and deficiencies. FMCSA would be able to conduct “roadability” reviews similar to compliance reviews, with on-site examination of the IEP’s inspection, repair and maintenance records under 49 C.F.R. §390, §393 and §396. IEPs would be measured on SafeStat and verified for compliance; a pattern of accidents or noncompliance would be among the bases for a compliance review. Out-of-service orders and fines could be assessed.

While it appears the proposed rules are an important step in holding IEPs responsible for maintenance and repair, the proposed rules do not address the issue you raise. Under the Intermodal Safe Container Act, a shipper already is responsible for communicating the accurate weight of the cargo to the drayman. If other draymen and IEPs are overloading chasses intentionally to the point that the iron becomes tired and gives way, that is a latent defect that is not your fault or responsibility, and one that you are not responsible for finding on visual inspection under the Uniform Intermodal Interchange and Facilities Access Agreement (UIIA).

The proposed rule contemplates that drayman, on taking possession of the container, will conduct thorough inspections. Clearly, if your driver accepts and operates obviously defective equipment, you still will be liable as a matter of law for negligence. Yet, the roadability rules should shift the legal burden for latent defects to the IEP where it belongs. I have some residual concern, however, about what has been described as “the two-handed pickpocket” – broadly worded indemnification and additional insured language in contracts.

The rules contemplate that the UIIA is the industry standard. The UIIA has been modified over the past several years to limit previously overbroad indemnification language and exclude draymen indemnification for latent defects. Yet some IEP-drafted private lease agreements require the lessee of intermodal equipment to broadly indemnify IEPs against all loss “arising out of” the lessee’s use of the equipment, and to provide insurance for the IEP’s protection in the event of suit.

Can IEPs use broadly worded indemnity and additional insured language to escape the financial consequences of violating the roadability rules after they become effective? It’s not clear. So the prudent course of action is to use the new rules to define the duties and responsibilities of both the providers and the users of intermodal equipment, and to not vary from UIIA standards. The risk of injury to third parties should be allocated in accordance with the cause of the loss and the failure of each respective party to comply with the safety duties established by the regulations.

Users of equipment provided by IEPs are advised to examine contracts that do not incorporate the UIIA language in allocating risk as a result of equipment maintenance issues.
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