Containers play a big role in the shipping industry. Be it a freight forwarder, a carrier, or a shipper, containers are important assets for them in terms of organizing and carrying goods. In most cases, shippers/carriers want the cargo transported to the exact right place at the exact right time with the lowest possible costs. To do this, they have to look at two options: SOC and COC.
In the context of the Covid-19 pandemic, the influence of containers exert on freight shipping is ever-widening. Slower container circulation cripples the original balance of the global container system. A shortage of containers in some ports adversely affects the supply chains. To buffer the cushion, some major BCO (Beneficial Cargo Owner), and NVOCC (Non-Vessel Operating Common Carriers) have bought their own containers.
Buy or rent? In this article, we will cover the basics of SOC and COC and clarify their differences. So you can determine whether to invest in owning containers and which option to choose. Read on.
1.1 Some Specifics about COC
COC stands for Carrier Owned Container. If a container belongs to a carrier or a shipping company, it is called COC. The carrier is responsible for the management of COCs.
COCs will be rented out to the carrier’s consignee for shipping cargo. And they will be returned to the carrier after the delivery. Under agreed terms, the consignee has use of it until the due date.
Using COCs can be relatively hassle-free because it falls upon the carrier to control the majority of the transportation. Customers make an "all in" payment, and the carrier will supply containers and move goods. Once the cargo is unloaded, and the container is returned to the terminal or yard, customers no longer have to worry about it.
The "all in" payment means that customers only have to pay for the physical use of the container. The costs of maintenance is borne not by customers but by carriers.
However, do not forget the costs associated with logistics delays. Extra charges like DET (Detention) and DEM (Demurrage) become payable if a container is overdue or the "last free day" has passed.
In most cases, COCs will be in service for standard sea shipments when there is abundant cargo flow. That means you will have a much more traditional shipping experience because you need to wait for the container to be available.
1.2 Pros and Cons of COC
● Pros:
● Carriers or shipping companies will take the responsibility for supplying containers.
● If there are enough containers available in some port, shippers can go fetch them at the nearest container yard so trucking fees can be saved.
● When there is a glut of containers in some port, using COCs can probably bring along freight rate discounts.
● Cons:
● LFD (Last Free Day) refers to the date when the free storage period ends. Consignee has to pay DET (Detention) if Last Free Day passes.
● The long-term shortage of containers at some port may lead to increases in freight rates because carriers have to wait for the vessel to be fully loaded, thus forcing shippers to eat the shipping costs.
2.1 Some Specifics about SOC
Essentially, SOC means Shipper Owned Container. SOCs are usually owned by a shipper or a freight forwarder. Likewise, SOCs are used in importing, exporting, and storing cargo. When the delivery is complete, the container will be returned to the shipper, who is responsible for storing and maintaining the container.
As a shipper, owning a container instead of renting one may bring convenience and save costs for your business. For example, a port with a limited stock of containers will charge you higher fees, and carriers will make you cover the costs at remote places where it is hard to provide containers.
What about DEM and DET? If a shipper fails to return the container within a certain period, using SOCs can help them avoid DEM and DET. After all, SOCs mean that shippers have control over containers.
For a shipper, whether to invest in SOCs calls for careful consideration. If you are going to transport goods from and to locations that lack enough cargo flow, buying SOCs can be cost-effective for your shipping business. Or, if you know the cargo may be stored in containers for a long period, using SOCs can be even cheaper because there is no need to pay for DEM and DET.
2.2 Pros and Cons of SOC
● Pros:
● In addition to shipping cargo, SOCs can be used to store the cargo for a long time when there is no space to do that.
● Using SOCs can keep your supply chain stable when you cannot load and ship your cargo in time because of a shortage of containers.
● Shippers can ensure that their SOCs are kept from aging and damaging so the exposure to relevant risks can be reduced.
● Charges like Detention can be absolutely avoided.
● Cons:
● Of course, investing in SOCs can be expensive.
● Your cash flow may be compromised because you have to buy SOCs prior to engaging in freight shipping.
● You are responsible for covering the costs of maintaining, lifting, trucking, and storing SOCs.
Purchasing containers instead of renting indeed can do some help to your business since you have control over them. But whether it is worthwhile to do that remains a question.
Owning SOCs can be really expensive. A 20-foot SOC may charge you 1,500-2,200 USD, and a 40-foot one may cost you 1,800-3,200 USD. Besides, you are required to pay for maintaining, storing, and managing SOCs. However, it is also worth noting that using SOCs can avoid extra fees like DEM and DET, costing less in this regard.
Investing in containers is not something that can be taken lightly. You should weigh the pros against the cons before reaching a decision.
In this article, we have given an overview of how COCs and SOCs will make your service look. We hope we can help you choose an option best suited for your business.
If you have purchased SOCs, you may want to optimize their use. There is one thing you may want to bear in mind: using SOCs requires you to apply to the shipping company in advance. And that’s what a freight forwarder can do: reducing paperwork and simplifying procedures for you. At Seabay Logistics, we provide shipping and logistics services. Contact us and let us become your reliable logistics partner.
