To get the most out of SOCs and to show the value to your clients, focus on the following parameters:
- Pickup charge/credit (when using lease containers)
When using lease containers, you can negotiate a one-off charge or credit with the owner of the container.
The logic is usually: If containers in the POL (Port of Loading) are more readily available than in the target POD (Point of Discharge), the user will receive a credit from the owner. This is due to the fact that the local value of a container is typically determined by its scarcity: The scarcer a container is, the higher its value. Typical examples for stretches with credits to the user are Europe -> China or USA -> China.
Conversely, if you move a container from deficit to surplus, the owner of the container might require you to pay a one-off charge to balance out the price differential. Typical examples for such stretches are China -> Europe.
- “Buy—Resale” price difference (when buying containers)
When buying containers to use as SOCs, you’ll also have to keep the price differential between POL and POD in mind. Similar to the owner’s situation under #1, you will face the issue that a container is not worth the same amount in different locations globally.
If you move a container from a high-demand (= deficit) location into a low-demand (= surplus) location, the container will lose value and you will not be able to recover your investment when reselling the unit. However, the opposite also holds true and you might be able to make an extra profit by reselling the container at a higher price in the POD!
- Per diem (when using lease containers)
When you lease containers to use as SOCs (either for longer-term or for “one-way”), you will be required to pay daily rental charges = “per diems” for those units. For a typical 20DC standard container, these can be anywhere between 0.6 USD to 1.5 USD depending on the age, location and supplier of the unit.
The beauty is: This rental charge is significantly lower than any detention charges that might be levied by the shipping lines. This will be particularly interesting for all clients (shippers/consignees) that need to use the container for a longer time, either at POL or POD.
In some cases, e.g. when you just issue your inhouse B/L to your client, you could even charge the full carrier detention charges to the client while only paying the lower leasing charges to the container owner.
- Free time (when using one-way lease containers)
When you lease containers on a “one-way” basis, you essentially promise a repositioning move to the owner of the container. That means that you pick up the container in location A and promise to return it in location B.
For the owner of the container that might be interesting because he has no cargo in location A but only in location B and his alternative would have been to move the container empty. It might also be interesting for him because he bought the container in A and has a client for resale in B.
As this move is attractive to the box-owner, he is likely to give you a certain number of “free days” to use the container without having to pay rental charges. This can be anywhere from 0 to 120 days, but intra-regional moves typically see 30-45 days and inter-regional moves typically see 60-90 days.
This will help you to avoid detention charges levied by the shipping lines—while you can offer a more competitive price to your client.
- Container condition
As a container user (whether you are a forwarder, shipper, or carrier), you will always have to pay close attention to the condition of the container. This is to make sure that it satisfies the requirements of the cargo therein.
For SOCs that you lease in for long-term or one-way, checking the container condition at the time of pickup becomes particularly important that the owner of the container will invoice you for any damages to the container that happened during the time of lease. To reduce your risk of unexpected repair claims, you can do a few things:
- Make sure to agree on a DPP for your lease
DPP = Damage Protection Plan is the level of repair charges that are paid by the owner of the container without claiming anything back from the user. A typical DPP on xChange is 100 USD, which means that any damages below 100 USD (e.g. small scratches or cleaning) are on the owner’s account. If the repair estimate is 125 USD, only 25 USD (= 125 USD repair - 100 USD DPP) will be invoiced to the user.
- Survey the container at the time of pickup
Surveys are a great way to ensure that (a) your container is in the right condition for your cargo and (b) no “old” damages can be claimed at the time of return. xChange supports all its members in arranging surveys for any unit in any transaction, anywhere in the world. The cost for the survey will be quoted before giving the order to the surveyor—and all survey costs at the time of pickup are on the user’s account.
- Insure your containers against damages
xChange provides the option to add comprehensive insurance to your transactions and all of the containers included in a transaction. The standard insurance option is to just insure the container for the worst case (= total loss including constructive total loss) while the premium option is to insure the containers against all impact damages. Premium, of course, also includes all services from the standard insurance.
When a container with premium insurance faces a repair claim, the insurance will send their own surveyor to assess the damage and “Estimate of Repair” (EOR) and negotiate with the owner of the container on the user’s behalf. The settlement of repair claims then proceeds as follows.
- The insurance’s surveyor approves/adjusts the EOR
- The user pays the repair charges (after surveyor’s adjustments) less DPP to the owner of the container
- The insurance pays the insurance settlement to the user of the container
- Make sure to agree on a DPP for your lease
- SOC slot rate with the carrier
Once you have your equipment secured, you need to get a SOC rate from a carrier—which is often just the COC rate with either a discount or a small premium. What we have seen done successfully: Negotiate a COC rate with a carrier—then switch to SOC at time of booking and ask for a small discount.
Especially in intra-regional bookings (e.g. intra-Europe, intra-Med, Gulf/ISC, SEA, etc.), many feeder carriers offer highly competitive rates for slots on their vessels. A key advantage is that you don’t compete with the carrier’s own containers—as a feeder primarily offers just the slot on the vessel (e.g., as a service for the mainliner to feeder boxes between outports and main ports).
In some cases, you can also negotiate an individual / specific rate for SOCs—e.g. when you have a project at hand or where you require regular slots on a given service. Some of xChange’s clients also have a regular service (e.g., weekly sailings) that they offer as NVOCC where they have “reserved” regular space on a mainliner or feeder carrier.
To make even better, business informed decision, make sure to check our data product Insights.