Shipper Owned Container – Meaning, Benefits, Drawbacks, and Example

In international trade, the buyers and sellers can either lease a container from the carrier or use their own container. And, when they use their own container, we call it Shipper-Owned Container. So, Shipper Owned Container, or SOC, is the container the consignee owns. Or, when the consignee uses their own container to ship the cargo, we call it SOC.

There are several advantages of a SOC, and the primary one is that it leads to savings. For the shipper, it relieves them from the risk of per diem or demurrage charges, as these charges are for the use of the carrier’s container beyond the free period.

Also, if a shipper is using their container, then they just need to organize their own SOC container and reserve a slot with their carrier for shipping it.

A point to note is that carriers usually charge additional fees for carrying a SOC. Also, there are a few documents that the shipper must produce to use the SOC. These documents are the SOC application form, images of the SOC boxes, and CSC (Container Safety Convention). Once the shipper or consignee submits these details, the carrier will review them and approve the SOC for the shipment.

Certification of Shipper Owned Container

To use the SOC for the import or export of cargo, it is crucial that the container is certified. The certification is to confirm that the container is sea/cargo-worthy. After the inspection certification, if found fit for sea/cargo worthy, the container gets a Container Safety Convention (CSC) plate.

Like certification, each container needs to have a registered container number. Basically, the container is identified by this registered number for all purposes. Or we can say this registered number is the identification code for the container. The number is an alphanumeric combination that usually has seven numbers and four alphabets.

Generally, the first three letters tell about the owners’ identity, and the fourth letter is the product-group code. These registration numbers are issued in line with the specifications suggested/prescribed by the BIC (Bureau International des Containers) and ISO (International Standards Organization).

Carrier-owned Containers (COC)?

Before we talk more about the SOC, it is important to know what a COC (carrier-owned containers) is. As the word implies, a COC is a container carrier’s rent to the importer and exporter. In other words, here, the ownership of the container remains with the carrier and not the shipper, as in the case of SOC.

So, when you use COC, you are basically leasing a container from the carrier to ship your cargo. Carriers charge a significant fee for renting the containers. Usually, the use of COC is simpler and easier as shippers do not need to worry about the requirements of the containers like certification of worthiness, identification code, space requirements, and so on.

Benefits of Shipper Owned Container

As said above, the primary benefit of SOC is that it helps bring down the shipment cost. Also, it gives parties more control over the shipment.

Carriers levy high fees in the form of demurrage and detention if the parties take more than the allotted time to empty the container and return it. Carriers allow a shipper a fixed number of days to take their cargo out from the container and return the empty container back to the carrier.

Specifically, if the shipper exceeds the free days to take the cargo from the port, it results in demurrage fees. And, if the shipper exceeds the free days in returning the empty container back to the carrier, it results in detention fees. Both these fees could drastically raise the cost of the shipment and could be as much as 20 times the value of the container.

So, it is recommended that parties use SOC to avoid these fees, especially if the shipment involves multiple modalities or the final destination is a remote location.

Another way SOC helps to avoid demurrage fees is when there could be delays due to port congestion. Owing to the surge of e-commerce, there is a significant spike in shipment. And this results in port congestion.

If you were using a carrier container, then port congestion could result in a delay in unloading the cargo and eventually demurrage fees. But, if you are using a SOC, then you can easily avoid the demurrage charge in this case.

The use of SOC also proves efficient if the shipper’s usual carrier is experiencing a shortage of containers. Another use of SOC is that they can serve as storage boxes if the storage facilities are unavailable.

SOC Example

The following example will help to bring out the benefits of SOC.

Suppose you are going for a geological survey at a remote location in South Africa. You need heavy equipment, generators, camping gear, rations, and more for the survey. Transporting all this requires a container.

At the nearest port at the survey location, it takes about 4 days to clear the cargo. And, from that port, it takes about 7 days to transport that container to the remote location. Then, it takes another 2 days to empty the container and 7 days again to send it back to the port. So, in all, it takes 20 days to return the empty container back to the container yard.

Now assume the demurrage and detention-free days are 7 days. And the total demurrage and detention charge are $150 per day. So, this means an additional cost of $1,950. Also, consider when the survey is complete; it would again take 7 days to get the container at the survey location and more than 7 days to ship it back.

But, if you have a container, you can easily avoid this extra cost and other inconveniences. Also, you will not have to worry about storing the equipment at a remote location as you can use the container for storing.

Drawbacks of Shipper Owned Container

There are a few drawbacks of a Shipper-Owned Container.

  • The first is that you will have to spend time and money on the repairing and maintenance of the container.
  • When you are not shipping, you will have to find a place to keep or store the container.
  • One more drawback is that you will have to file mandatory documents with the carrier to prove that the container is sea and cargo worthy.  

Final Words

Like any other thing, Shipper Owned Container (SOC) has its own advantages and drawbacks. If you regularly make international trade and with remote suppliers, then the use of SOC could prove very beneficial. On the other hand, if you do not do international trade frequently, then it would be better if you use carrier containers.   

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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