Hello, it’s IINO.
I would like to broadcast IINO san’s Logistics Radio.
I would like to talk about the news, “Chinese Shipping Companies Tighten Container Controls, Change Free Time”.
As you know, the supply chain is currently is confusion due to the global shortage of containers. Because of this factor, Chinese shipping companies have changed the way they calculate Free Time in Japan for dry containers from October 1st.
Furthermore, Free Time for reefer containers has been abolished.
Daily Logistics Radio by IINO san in 4th Oct. 2021
How to Calculate the Conventional Free Time
There are two points for Free Time calculation.
1. starting date
2. business day or calendar day
Whether Free Time start on the day when the ship arrives in port or on the day when it is brought into the terminal, they are different for each shipping company.
This time, the Chinese shipping companies changed Free Time from business days to calendar days (including weekends).
Big Impact of Saturdays and Sundays
Previously, Free Time was counted only business days (from Monday to Friday) and it was not included Saturdays and Sundays.
However, with the change of this time to the calendar days, Saturdays and Sundays are included, which means that Free Time has actually been shortened.
On Saturdays and Sundays, customs and shipping agents are closed and cannot clear customs. However, they are counted as Free Time, so in case Free Time expires on Friday, the demurrage for Saturday and Sunday will be automatically fixed.
Abolition of Free Time for reefers
The big change this time is that they have abolished Free Time for reefers. Normally, Free Time for reefer containers was about three days.
However, due to this change, demurrage (excess storage fee) will be charged from the time the container is brought into the terminal.
– SITC’s demurrage: About USD 45/20’&40′ (1-4days)
– Sinotrans’ demarage: About USD 45/20’&40′ (1-4days)
Customs Clearance Related to Other Laws and Regulations
Reefers often carry mainly food products. For this reason, they are subject to more customs clearance processes than normal cargo due to food sanitation and quarantine laws.
Therefore, it is naturally difficult to clear customs within Free Time, however, if Free Time will be zero, the amount of demurrage will increase and the burden on the importer will become even greater.
Consider the Reasons for the Revision of Free Time for Japan by Chinese Shipping Companies
Why did the Chinese shipping companies decide to revise Free Time to Japan this time?
I think there are two possible reasons.
1. To increase the turnover of containers
2. They do not want to send containers to Japan
To Increase the Turnover of Containers
With the current container shortage, shipping companies want to recover containers as quickly as possible and use them for the next voyage.
If Free Time is too long, containers will be held up at the ports, so they might decided to shorten or abolish Free Time in order to recover them as quickly as possible.
They Do Not Want to Send Containers to Japan
SITC, for example, continues to have three days as Free Time for reefers in Thailand. This time, they have abolished Free Time for Japan only.
By abolishing Free Time for reefers for Japan, shippers will consider using other shipping companies. As a result, Chinese shipping companies such as SITC will be able to use more containers for long haul services such for North America.
Japanese Low-Cost Market
In Japan, ocean freight rates had been low for a long time due to the strong power of shippers in business practices.
Even if shipping companies offer rates, major shippers would settle for lower prices as a reason of high volume bookings.
Shipping companies cannot stock space, so they had prioritized to deal with low prices more than to carry empty space.
However, nowadays, shipping companies can earn higher profits by sending containers to other markets where they can be sold at higher prices than such cheap markets.
Because of it, it is believed that they dropped the priority of Japan.
With the revision of Free Time by Chinese shipping companies, shippers will use non-Chinese ones such as ONE, Maersk and CMA, which offer three days as Free Time, for transportation to Japan, especially for reefer containers.
This will lead to more space shortage for these shipping companies and higher ocean freight rates. This news had a great impact on me as a practitioner.