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Storing products in either carrier or forwarder-owned containers can lead to expensive detention and demurrage fees. But for shippers wishing to use their own equipment, making bookings can be difficult to arrange.
Freight forwarders are failing to support shippers wishing to use their own containers, despite the benefits the option provides, according to a new report from container repositioning service Containers xChange.
“Shipper-owned containers are the fastest growing container market segment, with a compound annual growth rate of 15.8% between 2014 and 2015, and account for $11bn of carrier revenue,” the report said.
“However, due to difficulties in handling SOC shipments operationally, only 18% of the 50 largest freight forwarders have been able to offer SOC containers.”
SOC shipments allow shippers to use their own containers instead of those of the forwarder or carrier.
Among the benefits of SOC are equipment availability, access to less well-served locations and the avoidance of detention and demurrage charges when using carrier-owned containers beyond the contracted free time.
Shipper-owned containers can be used for storage at a destination without concerns about returning them on time, and where there are delays in trucking or unpacking containers, charges of $300 to $400 per day can be avoided.
In an effort to assess the scale of the issue, Container xChange set up two test companies for a mystery shopping exercise. Requests were sent to 50 freight forwarders seeking information on shipments from China to Hamburg.
The first asked for delivery of 50 containers ex-Guangdong for pulp and paper products that needed storage inside the containers for 45 days in Hamburg.
“Without carrier-owned containers that would cost us approximately $200,000 in demurrage and detention charges,” the report said. “Companies being aware of SOC containers should advise us to use SOC containers to avoid these tremendous charges.”
Of the 50 companies asked to quote, only half responded. Of those that did offer a quote, three quarters were not for SOC services and included detention and demurrage.
A second test specifically asked for quotes for SOC transport. In this instance, positive replies came from under a fifth of respondents and only three could offer SOC shipments.
But the cost of SOC shipments was high, the report added.
“One included a SOC surcharge of $100 per containers, another company would have charges us a $1,200 pickup charge per container.”
It added that because 42% of companies responded at all indicated they did know about SOC shipments and the potential benefits, but would still not take the business, the report added.
Organising SOC shipments can be difficult and can take weeks. Finding and vetting partners, setting up legal agreements, negotiating, sending emails back and forth for pick-up references all meant that managing SOC shipments was complicated.
Aggravating this, freight forwarders need an NVOCC licence to issue their own House Bill of Lading to their customers, which is expensive if only used for project business.
“Compared to the full-service offer when using carrier-owned containers, SOC shipments require a strong agent network to, for example, have someone in the drop-off location with pickup reference to get your containers out of the port,” the report said.
The result was that forwarders would only offer SOC shipments for large volumes or for their best customers.
To solve the problem and make SOC shipments more readily available, the report recommends a greater use of technology and industry platforms to reduce the overheads in organising shipments.
“Recent studies confirm a huge platform interest,” the report added.
“The first timid attempts of data standards by the Digital Container Shipping Association and platforms as connectors between different stakeholders support decrease transaction costs between companies even further. For the SOC market this means that technology providers create transparency to make the sourcing of equipment and the managing of deals less complicated.”
Source: lloyd’s
