What’s the difference between a SOC Container (Shipper Owned Container) and a COC Container (Carrier Owned Container)? We’ve been asked this question several times lately, so here is your answer!
Containers are important assets that have brought tremendous value to the shipping industry. The containers go through several interactions between the point of loading and the point of destination.
Each of these steps adds complexity and costs to the transfer of goods. Ideally, a shipper (let’s say that is you!) wants the goods moved to the right place at the right time. And at the same time, you want to keep costs as low as possible. To achieve this, you have several options for every individual transport needed.
But regardless of what move it is, there is you first have to decide on whether you want to use SOC or COC.
What is a COC container?
Essentially a container is considered a COC container when the carrier (container liner or steamship line) owns the container and controls the majority of the entire transport chain.
COCs are normally used for standard shipments on stretches with a lot of cargo flow. There is little to no incentive for using your own container if the carrier has ample boxes available. And if you at the same time pay a fair price for the end-to-end move.
An example would be if you are Beiersdorf, shipping cosmetics e.g. Nivea from Hamburg to Singapore. There is nothing extraordinary about this stretch and usually, carriers have enough containers in Hamburg to supply the move. Moreover, Singapore is not a far-flung location which could entail difficulties for the carrier when re-use / moving the container after discharge.
The benefits of COC containers
Using a COC is simple: You pay the carrier a given “all in” rate to move your freight from A to B. The carrier is then responsible for the “in-between”. This includes the provision of the container itself. One resulting benefit is that once the move has been completed, the consignee does not need to worry about the container anymore. After the container is unstuffed, it is returned to the carrier’s depot and there are no further obligations to move or utilize it.
In cases where the shipment originates in a “high surplus” area—i.e. a region where trade imbalances resulted in an overstock of empty containers—using a COC can even yield significant freight rate discounts. The shipper helps the carrier evacuate some of the equipment by using it for export cargo, saving the carrier money.
SOC Container as an alternative
Problems arise when it comes to shipments that move away from the standard everyday transport of a carrier. This often leads to situations where the carrier prefers the shipper to “bring his own box”. Also known as Shipper Owned Containers.
Do you want to know how the 50 biggest freight forwarders gain flexibility with SOC containers?
A route that could become problematic with COC containers is Hamburg, Germany to Karachi, Pakistan. Karachi is a location with significant overstock and less sophisticated local processes.
The simple and cost-effective COC container in Hamburg suddenly gains in complexity. That raises the costs exponentially. If the carrier has limited stock of containers in the port of departure or no need for additional units at the point of return (e.g. because in that specific location there are always more imports than exports or it is a remote hinterland location), naturally they will charge you a higher rate to cover their costs.
Besides surcharges on freight rates, it does not take much to turn an easy and efficient COC move into a shipper’s nightmare.
The keywords here are demurrage and detention. Essentially you have to pay a penalty if you exceed the agreed free time for using the carrier’s container. While this helps to ensure a fast turnaround of the containers (great for carriers!) — for you it can easily destroy the value proposition of using a COC. Demurrage costs can add up quickly to the tune of 15-20 USD per day and are oftentimes outside of your control. This is especially true for locations that are known to have a high process uncertainty. Places where there are slow customs procedures or unreliable port workers.
Let’s continue our example above. Here you could imagine the container being stuck in customs for 30 days. And thereby racking up additional demurrage charges that destroy your original calculation.
Shipper owned containers
A container is considered a “SOC” when the BCO, freight forwarder, or NVOCC organizes their own container. In other words, a SOC is a shipper owned container. They then hire a carrier and usually several other parties to transport their goods. Instead of using a container liner’s assets, you “bring your own box”. You then only purchase the slot on the vessel from the carrier.
A frequent example for SOC shipments are project cargoes into remote hinterland locations (think of a construction site in the jungle). Here it might take 30-40 days to return the container back to the port.
Main benefits of a SOC Container include
⚡️Control of supply:
You can source containers on your own. That is essential for locations where carriers are unable or unwilling to provide boxes or only offer them at very high rates.
⚡️Control of ownership:
You can choose accurately which containers you need in which condition for which period of time. It includes the choice between whether to buy or simply lease the container depending on the current need.
⚡️Control of cost:
You avoid unexpected demurrage and detention costs as you are not obligated to move and/or return the containers to and from the carrier within a certain time frame. You have to take loading time, customs clearance, drayage, port congestion, etc. into account when planning your shipment. Demurrage and detention charges can quickly escalate to hundreds of dollars per day.
A choice to make
But with great power comes great responsibility. A SOC allows for control, flexibility, and independence. This also means you must put the time into finding the right partner for every step along with the transport. The more effort it takes to organize a SOC container, the lower the net cost/time benefit gets. There are many touchpoints, so when it comes to a standard move where the benefit of a SOC over a COC is marginal, it might not make sense to go through this process.
When you organize SOCs, you must also consider what to do with the containers once they have reached the destination. This problem can be alleviated by leveraging one-way containers, cabotage containers, or sell-and-buy-back deals. All these are alternatives that are facilitated through our online platform at Container-xChange.com. Here container users can find SOC containers, negotiate and execute one-way container moves.
How do you source SOC Containers?
Most exports can be managed perfectly fine using COCs. However, there is a growing number of market participants who turn to SOCs. They can be an attractive alternative to save costs and gain back control over their logistics processes.
Whether in port locations or inland there are many people that can supply you with shipping containers. Especially container traders, shipping lines, freight forwarders, and leasing companies can help you with containers. Sometimes these people own containers or work as a broker. Regardless, in the end, you should get what you need if you approach these companies.
Digging into it
Usually, that starts with asking people you know for references. But often it ends with doing your own research. You try to find the right contact person of a company you have never heard of before. The process of finding partners for SOC shipments includes many steps. Such as background checks, negotiating rates and terms, setting up legal agreements, and adding services. Do your customers with cargo to ship wait for weeks until you finally can confirm their request?
We built a neutral online platform to let you source containers in minutes instead of weeks. Just type in your location and you’ll get a list of results and get deals done quickly. Increase flexibility in your freight bookings and avoid Demurrage & Detention with xChange now. More than 300 companies such as Kuehne + Nagel and Seaco already use the neutral online platform on a daily basis.
See how xChange can help your business and schedule a free demo by clicking on the banner below.