Locked In

Standardizing the shipping container in the mid-1960s was a pivotal step in globalization. Up until that point, containers came in a multitude of designs, so one ship line’s containers might not fit aboard other carriers’ vessels. A crane equipped to lift one type of box from a wharf or a rail car might not be able to handle another. Only after years of arduous negotiations did the International Organization for Standardization (ISO) agree on standards for container size, structure, locking devices, and other features. Once the standards were set, container shipping boomed, helping transform the world economy.

ISO designated the 40-foot box as the “standard” full-size shipping container in 1964. At the time, 40 feet was the maximum length allowed for truck trailers in most U.S. states. But over the years, state governments have gradually permitted longer loads, especially on Interstate Highways. A considerable share of U.S. domestic freight now moves in 53-foot containers. These boxes rarely cross the seas. Instead, in a little-known example of supply-chain inefficiency, warehouses near some U.S. ports specialize in unpacking 40-foot containers of imports and stuffing the cargo into 53-footers for land transport across the country. The freight in three 40-footers can fit into two 53-foot boxes, reducing trucking costs.

The BNSF Railway has now gone a step farther, announcing that it will build a yard to transload freight between 40-foot containers and 53-foot containers. As planned, containers that now go by truck from Southern California docks to warehouses will move inland by rail instead, a shift that can only help air quality. Once a train of import containers arrives at the new yard, electric yard trucks will transport the containers to a warehouse, where the goods will be transferred into 53-foot containers, which will be moved back to the rail yard for shipment to points east. The process will be reversed for exports, with the contents of 53-foot containers being stuffed into 40-foot boxes to fit aboard container ships.

I don’t doubt that BNSF, which says it will spend $1.5 billion on this project, has run the numbers carefully. But transferring freight between bigger and smaller containers seems to defeat the very purpose of containerization, to reduce the handling of goods.

This is an example of what economists call “lock-in,” which occurs when a technology remains in use because the cost of change is high. In this case, 53-foot boxes generally aren’t allowed on roads outside North America, so the 40-foot container is still in demand. Most of the 5,500 or so container ships on the seas were designed for them, and carrying 53-footers as well hasn’t proven financially viable. While some 45-foot and 48-foot boxes are transported by sea, after nearly six decades of international container shipping, the 40-foot container remains the standard, and there is no practical way to make a change.

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