Container lease

From CEOpedia | Management online

Container lease - is a term usually used in shipping industry. Basically it refers to the contract concluded by the owner of the container and the entity, which rents this container for an agreed fee. Generally, it is a market answear for the empty containers problem, which is a major challenge for this industry and its efficiency.

Container lease concept

As it has been already said, the concept of the container lease was caused by the problem of empty containers and the need of their fast relocation. It should be mentioned that the relocation of empty containers is a frequent reason for the decline in the efficiency of inland carriers and port container terminals. The congestions, which arose during the waiting time for the delivery of an empty containers, was the consequence of unbalanced global distribution on the largest shipping routes. Therefore, container lease is one of the tools for empty containers management to improve the logistics system of their relocation. Moreover, the purpose of this concept is also to increase the usability of containers, which currently half of their time spends empty in anticipation of relocation or for cargo (Dundović C., Karmelić J., Kolanović I. 2012, p. 223).

Container lease agreement

It has to be mentioned that there two basic categories of the container lease agreements (Jiao W., Pang K. W., Yan H. 2016, p. 3):

  • master lease - (also called full service lease), where the shipper has a guaranteed right to correct the number of leased containers and the possibility of pickup or return them at the convenient time without changing the basic terms of the contract, while the lessor is obliged to relocate empty containers as well as their possible repair and maintenance;
  • term lease - the terms of the lease are strictly defined, including its duration (short or long term), this contract is used in case of one-time lease and leasing for up to 8 years, while the lessee is that entity, which is obligated to carry out repairs and to maintain the containers.

It should be noticed that there is also other classification of the container lease agreements due to their duration, according to which the following are mentioned (Dundović C., Karmelić J., Kolanović I. 2012, p. 224):

  • long term lease (up to 8 years),
  • medium term lease (up to 5 years),
  • voyage lease.

Obviously, the main task of the container leasing companies is to provide equipment there where is a demand for it, however it is not logistically simple. Therefore, special clauses are used in the agreements, which specify the place of container return so this is some security for the company's interests. On the other hand, to maintain efficiency at an appropriate level, these companies sometimes have to provide the container to the customer's current location and in this case foldable containers are particularly useful. The advantage of this solution is the reduction of service costs, storage costs of containers in the warehouses and overall transportation costs. This is important especially in relation to the high costs of exploitation, which are crucial for the container leasing companies (Konings R. 2005, pp. 243-244).

Container leasing industry

It should be also noticed that the concept of the container lease was caused by an increasing demand for these services, therefore companies specializing in this field have appeared on the market. Besides the container leasing companies there are also other entities in the shipping chain, which are included in the matter of containers. There are such entities as the following (Konings R. 2005, pp. 241-244):

  • shipping companies,
  • terminal operators,
  • empty depot operators,
  • inland transport operators,
  • shippers and consignees.

Examples of Container lease

  • One example of Container lease is the contract between container owners and freight forwarders. This type of agreement is usually concluded in order to guarantee the transportation of cargo from one port to another. The container owner provides the container and the freight forwarder pays the agreed fee for the use of the container.
  • Another example of Container lease is the agreement between the container owner and the shipping companies. In this case, the container owner provides the containers for the transportation of goods and the shipping company pays the agreed fee for the use of the container. This type of agreement is beneficial for both parties as it helps the shipping company to minimize its expenses and the container owner to obtain additional income.
  • Another example of Container lease is the agreement between the container owner and the port authorities. In this case, the container owner provides the containers to the port authorities and the port authorities pay the agreed fee for the use of the containers. This type of agreement is beneficial for both parties as it helps the port authorities to manage the incoming and outgoing containers more efficiently and the container owner to obtain additional income.

Advantages of Container lease

Container lease is a beneficial solution for both the container owners and the leasers. It provides a cost-effective way for the container owners to reduce the empty container problem and for the leasers to secure the necessary containers in a timely manner. The advantages of container lease include:

  • Reducing cost for both the leaser and the owner - The container lease agreement helps the owner to reduce losses from empty containers and the leaser to save on purchasing and maintenance costs.
  • Flexible rental terms - The rental terms for container lease can be easily adjusted to suit the particular needs of the parties involved.
  • Timely availability - Container lease ensures that the necessary containers are available in a timely manner. This helps to reduce delays and maximize efficiency.
  • Reducing environmental damage - By reducing the number of empty containers, container lease helps to reduce the environmental damage caused by these containers.

Limitations of Container lease

Container lease has its own limitations such as:

  • The high cost of container lease compared to other shipping costs. This is because the cost of buying, leasing, and maintaining a container is quite high, and the cost of renting can be even higher depending on the type of container and the length of the lease term.
  • Limited availability of containers for lease due to the shortage of containers in the market. This can be a major issue for businesses that need to ensure timely delivery of their goods.
  • The potential for delays in the delivery of leased containers due to the fact that they are often leased from multiple sources. This can cause delays in the shipment of goods, especially if the containers need to be transported over a long distance.
  • The risk of damage to the leased containers due to improper handling or storage. This is a major risk for businesses as any damage to the container can lead to costly repairs or replacements.
  • The potential for legal and financial complications in the event of a dispute between the owner and the lessee. This can be a major issue for businesses as any disputes can lead to costly legal fees and potential financial losses.

Other approaches related to Container lease

The other approaches related to Container lease are:

  • Intermodal container pooling - it is a service, which allows companies to share their containers with other companies and thus reduce the costs of transportation.
  • Lease to purchase - it is an agreement, which allows the rentee to purchase the container after the lease contract has expired.
  • Container swaps - it is an agreement, which allows two companies to exchange containers and use them as needed.

In summary, Container lease is a contractual agreement between the container owner and the entity that rents it for an agreed fee. Other approaches related to Container lease include Intermodal container pooling, Lease to purchase and Container swaps.


Container lease — recommended articles
Accessorial charges — Door to door service — Freight carrier — Bonded warehouse — Freight prepaid — Container depot — Transloading — Inventory in transit — Freight insurance

References

Author: Agnieszka Wierzba

Retrieved from "https://ceopedia.org/index.php?title=Container_lease&oldid=90722"