Covid lockdowns proved that any disturbance in the flow of containers has enormous consequences and terminals are a good example of that.
One of the biggest issues being discussed by the Federal Maritime Commission (FMC) and being debated by Congress in a pending shipping bill is detention charges. These usually happen when a container is out of the terminal for an extended period of time and since shipping companies cannot utilize containers timely they assess charges to cover their losses.
Out of an estimated 24.4 million TEUs of containers circulating the world, close to half of that volume (11.39 million) are containers that are owned by shipping lines. The remaining 13 million TEUs are leased by various companies. When it comes to owning these containers, Maersk is the leader as they own 2.36 million TEUs, and when it comes to leasing containers, MSC is the clear leader where 2.83 million TEUs are leased. The containers that are either owned or leased by shipping lines are called COCs (carrier-owned containers). There is another way that importers can book shipments that is less widely known called SOCs (shipper-owned containers).
There are some advantages and disadvantages in using SOCs. Below is a snapshot.
1. The biggest advantage of using SOCs is it provides a stop clock when it comes to charges like per diem.
This is very important especially when an importer has a large project at a remote location far from the port or rail ramps. As is the case with projects, a large number of containers arrive at the same time in batches and importers will have limited time to unload and return them to terminals in order to not have expensive surcharges (like per diem). Some importers may use SOCs for that project where they are not obligated to return the containers where they came from.
There is also a calculation that importers use to determine if they should use SOCs or COCs when booking their cargo. Assuming the per diem cost is $150 per day and the project owner assumes they cannot turn the container in 30 days then it makes sense for them to use SOCs because the extra charges in holding a container (in this case over $4,500) far outweighs the cost of owning the container.
2. SOCs allow for easy reusing of a container.
Once an SOC is used, it also provides the opportunity to reuse their equipment in job sites for storage or even being creative by turning them into temporary offices.
3. SOCs allow containers to be sold locally, but this is time-consuming.
Once SOCs are utilized and unloaded, the importer can sell the containers locally to recover some of the extra cost. However this takes time and effort, so this is one of the drawbacks.
4. SOCs can sometimes offer a specialized, lower freight rate, but there’s a catch.
One last advantage of SOCs is sometimes a company needs to bring empty containers to a specific destination (especially inland locations in the U.S.) so they offer a specialized freight rate which might be lower than the regular container price. The empty containers usually go to a specific location when it arrives that is close to a rail ramp. One disadvantage though is if that empty return location is full, the shipper may ask the empty to be returned to another warehouse which might be further away from the rail ramp. In that case, there might be some extra trucking charges to transport the empty container to that remote location.
SOCs have been utilized by some of the largest corporations in the U.S.
Large BCOs like Walmart and Home Depot chartered their own ships during the Covid lockdowns since their shipping contracts were not enough to cover all the extra business that they received. So when booking their containers, they did use SOCs so that they reuse those containers on their charter vessels.
SOCs, just like regular containers, are used in different modes of transportation. SOCs are widely used in ocean container ships, cross country trucks, as well as airfreight. Specialized aircrafts designed to hold SOCs can handle them. However, the cost is extremely high, so an SOC is suitable for high-value cargo.