What is Container leasing?
Container leasing is similar to any other leasing eg. Vehicle or a property.
The end user, or lessee, which could be a Shipping line , NVOCC , Forwarder or anyone else who needs containers for their transportation or storage requirements enters into an agreement with the leasing company , or the lessor.
The lessor agrees to hand over containers to the lessee, with the understanding that the containers will be picked up by the lessee, used & subsequently returned at any one of the predetermined locations.
The per diem rate, minimum period of use, along with other terms & conditions are documented within the terms of the lease agreement.
Difference between 40GP and HCGP?
40'GP is as standard box with 40ft length and 8ft height
HCGP – is 40ft length but its height is 6 inch more than 40'GP (8ft 6 inch)
All other dimensions remain same. With the height increases the cubic capacity increased from 68 CuM to 76 CuM
Why lease?
Shipping Lines & NVOCCs prefer to lease boxes, even if they do own containers, because:
- Leasing provides flexibility in use of container equipment for the period that you need it The containers can be picked up when needed & off leased when no longer required.
- The user is not saddled with huge cost of equipment.
In other words leasing:
- Avoids high capital expenditure at the beginning stage of your business / during the trial run / temporary needs.
- Avoids locking up cash flow needed to run the day to day business.
- Provides flexibility in operations - owned container stock is not easy to get rid off when not needed.
What is IICL/CW/WWT?
It is the repair and maintenance standard for containers internationally agreed by users ( shipping lines, NVOCC's , other users ) and Leasing company .
IICL – 'Institute of International Container Lessors' – it is an international agency based in USA which specifies repair and maintenance standards and methodology to ensure safety while the container is in use. ( www.iicl.org )
CW – 'Cargo Worthy' – a repair Standard used by shipping lines / NVOCC for their in house service. Eg. When a container comes as import into a port, they need not follow IICL standard as it may be expensive and not required; the container may just require repairs to the extent to a level where the cargo is carried in the container safely and securely.
WWT– 'Wind and water tight' – mostly used by leasing company for the older equipment when they want to dispose or sell. Generally 'WWT' is a little lower standard than 'CW'.
Container Specification?
All the technical details of a container like Manufacture date / CSC reference / Internal and external dimensions / cargo carrying capacity / Intermodal requirements like TIR and Wood Treatment
What is CSC?
In general, any container used for international transport must have a valid safety approval plate or "CSC plate". CSC is the abbreviation for 'Container Safety Convention 'which is provided by the classification societies. The CSC certification is normally valid for 5 years and has to continually
What's a master lease?
Master Lease is a general agreement signed between the suppliers and Shipping lines. It may or may not specify the lease period or quantity but will have all the Commercial and General Terms.
What if I sign a master lease contract and do not lease anything?
This is a commonly accepted practice in the container leasing industry.
Master lease agreements are only a preparation for the event when containers may be required. There is no obligation for the lessee to actually lease or pay any charges unless the containers are taken 'on hire / pick up ". The charges are only payable only from the date of agreed use of equipment.
It is common to sign agreements anticipating requirements and also well accepted that they may not get used. However, having an agreement in place ensures quick mobilisation and on hire without having to rush through the credit process, agreements of terms etc.
What is and why "Caps "?
"Caps" is the per month limit given to the customer for off-hiring the equipments in one location. If it is not given customer can off-hire any number of containers in one location per month, which can affect the leasing company and may be can be misused by the customer by carrying like one way (picking-up from one good location only and off-hire only in a location where the market is bad )
The "Caps" are based on two criteria
- The total volume on lease.
- The pickup locations
Why drop off charges/ 'DOCH'?
Normally when a container is off-hired, it has multiple activities by the depot to make it to "Available" / "AV "condition, so that it can be put on lease to other customers. There is an inherent time lag between " offhire " of a container and making it " AV " .
These activities include estimation , handling for intermediate inspection by customer / customers surveyor , surveyor of the next lessee , owner's inspection , joint inspection , Drop off charges ( DOCH ) are collected for all these activities and also as part compensation for the approximate idling time expected in certain regions where the market may not see the box being on hired quickly .
What is pickup credit / 'PUCR '?
Supplier gives lease or cash credit to a lessee from a location, which is extremely bad or from where the Leasing Company needs to take it to a location where the market is good. Hence 'PUCR' is paid to the lessee doing this service.
Why is handling charge higher than what the depot quotes me?
In the case of leasing company containers multiple handlings are done by the depot to carry out repairs – from off-hire / giving it for offhire survey / re-survey when disputed / taking to repair stack , repair / on-hire survey / loading. So most leasing companies just agree on one handling charge to cover these multiple internal handling unlike shipping lines that pay per handling activity.
What is Insurance cover?
There is an obligation to take Insurance cover by all lessees for the equipment on hire to them for total loss and public liability.
What is public liability damage?
Cover taken by the container user for third party liability, damage occurs in transit where the damage is to the general public or property etc.
What is a domesticated container?
In some countries, including India, the container needs to be "domesticated" by paying the customs duty on the depreciated value of the container for use within the country (DTA - 'Domestic Tariff Area').
Why not just use an international container for 6 months bond period, in India?
Six month period given by the customs is just to take care of the time period from import / free days to consignee / getting it repaired for export / shipper taking to ICD for loading etc. This is not permission for use of carriage of domestic cargo and it is illegal.
Can domestic containers be sold?
Any container can be sold as per agreement terms and with all the local taxes taken care of
Can domestic containers be used for short and long term leasing?
Domestic containers are available on short term and long term leases depending on agreement and economics between leasing company and lessee.
What is trading of containers?
Buying and selling of marine containers – mostly older containers
What is RE-EXPORT detail in INDIA?
All the shipping line or NVOCC file a customs bond (currently equivalent to Rs.20, 000 per TEU) for some total volume (say 500Teus at one port). If they import 400Teu at a time, then the balance they can import will be only 100Teus unless they re-export the earlier lot of 400Teus. Hence re-export details are provided to the customs to cancel the bond so they can bring in more imports. (re-export details are Vessel name – voyage – PC number and date)
Can we buy the container and domesticate it in India?
The customs law allows domestication after payment of appropriate duty. But the operational part of doing it in most ports is very cumbersome and bureaucratic with no clear guidelines of how this can be done.