About shipping containers
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 (day) rate, minimum period of use, along with other terms & conditions are documented within the terms of theAi??lease agreement.
40’GP is a standard box with 40ft length and 8ft 6 inch height HCGP is 40ft length but its height is 1 feet more than 40’GP (9ft 6 inch) All other dimensions remain same. With the height increase, the cubic capacity increases from 68 CuM to 76 CuM
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.
It is the repair and maintenance standard for containers internationally agreed by users ( shipping lines, NVOCC’s , other users ) and Leasing company.
‘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 ).
‘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.
‘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’.
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’).
Any container can be sold as per agreement terms once the domestication is done.
The six month period provided by the customs to give the container operator time for the following activities- import, free days to consignee, movement to ICD for loading, repair for export etc. Carriage of domestic cargo during this period is illegal.
Domestic containers are available on short term and long term leases depending on the agreement between the leasing company and lessee.
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.
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/picked up “. The charges are only payable from the date of use of equipment. It is common to sign agreements anticipating requirements even though they may not be put into use. However, having an agreement in place ensures quick mobilisation and on hire without having to rush through the credit process, agreements of terms etc.
“Caps” is a location wise per month limit given to the customer for off-hiring containers. The “Caps” are based on two criteria: The total volume on lease The pickup locations
Drop off charge is the cost that applies at the time of off-hiring a unit. This is to compensate on the container idling cost incurred due to the repair cycle. As per contract, the customer is obliged to return the containers in IICL condition. But since leasing companies accept containers back in the depot in ASIS condition, they are effectively stopping the rentals early and bearing the storage cost on the customers behalf during the whole repair cycle. Hence the DOCH.
The leasing company sometimes gives incentives in the form of credit to a lessee when they pick up a container from a very bad location (i.e., where containers are idling with no prospect for lease). Hence ‘PUCR’ is paid to the lessee for helping move containers out of such locations.
In the case of leasing company containers multiple handlings are done by the depot to carry out repairs from off-hire- offhire survey/ re-survey when disputed/ taking to repair stack, repair/ on-hire survey to 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. Is an insurance cover required for leased containers? All lessees are obliged to take an insurance cover for the equipment on hire to them for total loss and public liability.
This is a cover taken by the container user for third party liability. This could be damage that occurs in transit where there is damage to the public or property etc.
Buying and selling of marine containers mostly older containers
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)
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.