Today, over 80% of the volume of international trade is carried by sea, and container shipping is the key to international commerce. Container shipping is not just a means of business; it helps connect countries and economies and enables manufacturers to source raw materials and consumers to access goods from all corners of the world. It is, in fact, the lifeline for many businesses today.
Whether you are an importer looking to buy goods from other countries around the world or an exporter who wants to expand their market or consumer base, you must understand the basics of container shipping, the shipping process, freight costs involved, transit times, and regulations.Â
The better you know, the easier it will become for you to manage your logistics and costs.
What is Container Shipping?
Container shipping is a global method of transportation for moving goods from one country or place to another in a large, standard-sized container. The container can be transported via ships, trucks, and trains without the need to unload and reload the cargo.Â
Shipping is the foundation of modern international trade. In 2022, almost 840 million TEUs of containers moved through global land and sea routes. Every year, millions of containers take a host of goods or cargo, such as electronics, food items, machinery, automobiles, medical supplies, and raw materials, from one port to another.Â
Businesses cannot thrive today without container shipping; it’s becoming a strategic part of their logistics, especially if they consider importing and exporting products. Thankfully, container shipping has also become quite fast, cost-effective, and secure with the recent advances in international trade.
Shipping container was first introduced in 1956 by Malcolm McLean, an American entrepreneur. According to him, it was a simple idea where the goods were stored in a standardized metal container, and the entire container was loaded on the ship, train, or truck without unpacking the shipment or touching it.Â
In this way, he found that it significantly reduced the cost and the shipping times. The first ever container ship was SS Ideal X, which carried 58 containers from New Jersey to Texas.Â
Here, we’ll talk about another interesting term: containerization. Containerization is the concept of storing cargo or goods in a standardized container. This brings a lot of efficiency, scalability, and security to your global supply chain. Using standardized containers has several advantages for business; let’s talk about a few.
Standardization
Before we had these containers, the cargo was loaded onto the transportation vehicle or vessel manually. Then, it was sent off to the destination, where it was unloaded manually again. This manual handling led to a lot of delays and often resulted in damaged cargo, affecting the business reputation and causing a lot of inconveniences.Â
Today, we have standardized intermodal containers: the 20-foot equivalent units (TEUs) and 40-foot equivalent units (FEUs).
These containers can easily transport goods and cargo on ships, trains, and trucks. The 20-foot containers can hold up to 33 cubic meters of goods, and the 40-foot containers have a 67 cubic meters volume. These standard sizes are globally recognized at different ports by shipping companies and logistic providers.Â
So, just by standardizing the containers, the entire shipping process has been streamlined today. The process of loading, transportation, stacking, and even holding can occur without any disruptions or damages.
Cost Savings
When we have standardized containers, it becomes very easy to load and unload them. This reduces your handling costs and optimizes the space. You can easily stack them up and gauge the volume or amount of goods that can be transported per shipment, saving you a lot of administrative hassle.Â
Also, these containers can go all the way on trains and trucks on land without needing to be unpacked or offloaded. It becomes quite an efficient process and saves a lot of labor costs otherwise involved with manual handling.Â
Safety
When the goods were handled manually, they were onboarded and offloaded a lot at different points during the transit period. The extensive manual handling led to an increased risk of damage to the cargo. Also, during transit, there was always a risk of theft and contamination.Â
With the standardized containers, the chances of tampering and theft decreased. Many containers also come with cracking systems and weather-resistant steel exteriors that keep the cargo safe and protected from environmental damage.
Scalability
Today, many businesses are scaling their operations and sales up and down according to seasons, demand fluctuations, or other business requirements. With containers, businesses can scale their operations easily by utilizing flexible shipping options.Â
You can either go for the Full Container Load (FCL) if you have a big shipment coming in or going out, and you get the entire container for yourself.Â
If your shipment is small, you can use the Less-than-Container Load (LCL), where you share the container space with other shippers. It is a very cost-effective option, especially if your shipment is small, as instead of booking and paying for the entire container, you just get a part or space as needed.
Containerization has transformed global trade, and its impact has also touched the industries and economies of the world. Container shipping is fast and cheap. You can now source products globally at much-reduced rates as the labor costs are minimal.Â
This is why companies such as Alibaba and Amazon rely extensively on container shipping to move their goods from one place to the rest of the world in the most efficient and cost-effective manner.
Types of Containers
Here are the types of containers we have today, as well as their capacities, dimensions, and specialized uses.
Standard Dry Containers
These are fully enclosed weatherproof containers. They have a rigid roof, floor, and side walls. These are the best for transporting textiles, machinery, furniture, and electronics. The container sizes are as follows:
- 20-Foot Standard Container: This container has the external dimensions of 20′ L x 8′ W x 8’6″ H. Internally, it is 19’4″ L x 7’8″ W x 7’10” H. The capacity is 1,172 cubic feet, and its maximum payload is 55,126 lbs. The tare weight is 5,071 lbs
- 40-Foot Standard Container: The 40-foot container has external dimensions of 40′ L x 8′ W x 8’6″ H and internal dimensions of 39’5″ L x 7’8″ W x 7’10” H. The volume capacity is 2,389 cubic feet, and the maximum payload is 61,200 lbs. Its Tare Weight is 8,268 lbs.
High Cube Containers
These containers are quite similar to the standard containers but have an extra foot in height, so you get more vertical space in these.Â
This kind of container is best for carrying lightweight cargo that takes up a lot of space or volume, like clothing, furniture, and other bulky stuff.
The common sizes are the 40-foot-high cube container, which has the following external Dimensions:
40′ L x 8′ W x 9’6″ H
A volume capacity of 2,694.5 cubic feet, and a maximum payload of 58,450 lbs.
Refrigerated Containers (Reefers)
Next, we have the reefers. These come with a temperature control system to maintain a specific temperature inside the container. These are used for perishable goods like fruits, vegetables, frozen items, meat or fries, pharmaceuticals, and dairy products that need to be kept at a certain temperature to retain their freshness.
We have two Reefers sizes: the 20-foot size and the 40-foot size. Both can maintain a temperature of -30 degrees centigrade to +30 degrees.
Open Top Containers
These containers do not come with a fixed roof. They have a removable tarpaulin so cargo can be loaded from the top. These, too, are best for overseas cargo that cannot be easily loaded through the standard doors of the container. If you have scrap metal, timber, or machinery, you can use the open-top container.
Flat Rack Containers
These come with collapsible sides. So, the container floor remains exposed to cargo that exceeds the standard dimensions of the container. These, too, come in 20-foot and 40-foot flat rack container sizes. These are best for transporting heavy machinery equipment and vehicles that are too tall or too wide for the standard containers.
The Container Shipping Process
Now, let’s talk about the container shipping process.
Step 1: Export Haulage
First, the goods are shifted from the origin port to the factory or warehouse. From there, they are taken to the port of departure by truck or rail.
Goods are unloaded from the truck at the port, where they undergo several procedures like inspection, customs clearance, and security screening before being loaded onto the vessel. Depending on the type of cargo, it may also undergo quarantine and temperature checks, fumigation, and special handling before finally being loaded.
Step 2: Origin handling
At this stage, several processes take place:
- If the goods come in from multiple suppliers, they have to be consolidated at the warehouse before being loaded. (FCL shipments are directly containerized).
- The cargo is carefully handled and loaded. Special care is taken to keep a balanced weight distribution in the container and to keep the shipment safe from damage. Fragile or perishable goods are handled and packaged specially.
- The container is securely sealed with a unique seal number and labeled for easy tracking and security.
- Documentation like the Bill of Lading, packing list, and customs paperwork are attached at this stage, too.
- The sealed container is transported to the port via truck or rail, and the container is weighed, inspected, and processed for customs clearance.
Once the export documents are submitted and verified, the goods are authorized for shipment.
Step 3: Ocean Freight
When the containers are cleared for shipment, they are loaded onto the vessel following a specific strategy for the stowage plan.
The stowage plan is a detailed blueprint widely used by freight forwarders. The plan determines how the containers are to be strategically loaded on the vessel in the safest, optimized, and balanced manner.
The perishable goods are placed in the desired temperature-controlled sections, and hazardous materials are stowed separately. Once the containers are loaded, the vessel begins its journey across the oceans on the predetermined route. Sometimes, the shipment may have to undergo transshipment, where the containers are shifted onto another vessel at a port before reaching the destination. Otherwise, the shipment will continue on the same vessel.
Today, we have advanced tracking systems like GPS and AIS that can give you a real-time location of the vessel.Â
Unloading Preparations
In this stage, another interesting thing happens: the preparations for unloading the shipment at the final port begin as the vessel nears the port. The import authorities are given advanced shipping notices to facilitate customs processing so the cargo is efficiently handled at the port.
Step 4: Destination Handling
At the destination port, the containers are carefully offloaded using gantry cranes and placed in the storage area. To avoid port congestion, a predetermined stowage plan is followed at the port, and the containers being offloaded are scanned and recorded in the port’s logistics system.
The customs officers then conduct an initial inspection of the containers, which may be via scanners or physical checks. The documents like:
- Bill of Lading (B/L)Â
- Commercial Invoice & Packing ListÂ
- Import License (if applicable)Â
- Customs Declaration FormsÂ
They are also checked for clearance. Also, if import duties like VAT or GST apply, they must be paid before the container is finally released from the port.
Step 5: Import Haulage
Once the cargo has cleared customs and other destination handling procedures, it is transported to the final destination.
This can be a warehouse, distribution center, or retail outlet where it’s offloaded securely. The container is loaded on a truck, rail, or barge, depending on the location and agreed logistical arrangement, and sent to the final destination. There, the goods are unloaded. The empty container is either sent back to the port or container yard or reused for another shipment.
The importer confirms the receipt of goods and verifies they match the Bill of Lading and invoice.
Key Players in Container Shipping
Container shipping is a diverse field, with multiple layers of people who work together to get the goods safely from the point of origin to the destination. Each party involved has a crucial role to play, ensuring that the cargo is transported most cost-effectively while complying with local regulations.
Shipping Lines
Shipping lines or ocean carriers are the companies that own the container ships. They provide scheduled services on fixed rates for transporting goods from one place to another across the oceans. The shipping lines have a fleet of container ships of different sizes, from small feeders to ultra-large container ships.Â
Ports and Terminals
The ports are the facilities where cargo ships load and offload the goods. The terminals are located within the ports. These are the specific areas where container handling takes place. The containers may be handled, stored, or transferred in the terminals while the ports provide the maritime facilities.Â
On the terminals, you may see cranes with automated systems that move containers between the ships, trucks, and trains. Some also provide temporary storage areas for cargo holding inbound and outbound shipments, customs clearance, cargo scanning, and other regulatory-compliant procedures at the ports.
NVOCCs (Non-Vessel Operating Common Carriers)
NVOCC is a logistics provider that doesn’t own the shipping vessels but books the cargo space for the business. They issue their own Bills of Lading and provide cargo consolidation services for LCL shipping.
Costs Involved in Container Shipping
Container shipping involves multiple costs and different levels. These can be broken down into five basic categories.
Ocean Freight Costs
Ocean freight is the charge for transporting goods in a shipping container from one port to another. You book the space on a massive cargo ship, which accounts for the ocean freight cost.
The cost depends on the destination; the farther the destination, the higher will be the shipping cost. Moreover, some shipping routes have high demand, which also affects the prices, and if the ship has to stop at multiple ports before getting to the final destination, it will also add to your cost.
Another factor that affects the cost is the size of the container you book. The 20-foot container will cost less than the 40-foot container, and specialized containers like the reefers will cost even more.Â
Then, during peak seasons, especially the Chinese New Year or before Christmas time, you will see higher shipping costs when businesses rush to the ports to restock inventory. For instance, check out these container freight rates on major East-West trade routes on Drewry’s World Container Index.
Terminal Handling Charges (THC)
Before the container is finally loaded on the ship, it has to be handled at the port, which can involve lifting, moving, storing, or placing it on the truck or train. The cost incurred here includes the terminal handling charges.
There is the Origin THC, which is incurred at the port from which the shipment is being sent, and the destination THC, where the shipment finally arrives and is offloaded from the ship. Other fees like port security and congestion fees may also add to your costs. For more about THCs, check out this ultimate guide by Xeneta.
Inland Transportation Costs
When the container reaches the port, it has to go further up through the land route or via truck, train, or barge to the final destination. Whichever method we use has a different cost, constituting the inland transportation costs. These vary by county, fuel prices, and port distance to the final destination.
Customs Duties & Taxes
All countries have different customs, duties, and taxes imposed on goods entering their borders. It’s like a toll tax and varies depending on the product being imported. Electronics may have a different rate compared to alcohol, which usually has higher rates.
Value-Added Taxes (VAT) or GST may also apply. There are also custom processing fees, which include the cost of scanning, inspection, and documentation. For more information on these rates, check out the World Trade Organization tariff data here.
Documentation & Compliance Fees
There’s a lot of paperwork involved in exporting or importing goods. At every stage, the companies charge a specific fee for it.
There are multiple points where you will need this paperwork, such as the Bill of Lading, the custom brokerage fee, the Telex Release, or the express release fee.
Important Considerations in Container Shipping
Incoterms
Incoterms are international commercial terms, a set of standardized shipping rules published by the International Chamber of Commerce. These rules clearly delineate the responsibilities of each party and set the ground rules for documentation and risk transfer.Â
In this way, they help avoid confusion about the payment and processes.Â
Essential Documentation
There are also several key documents that are used during different stages of the shipment process. They are the Bill of Lading, commercial invoice, packing list, certificate of origin, customs declaration, and import-export license, which may be required for restricted goods or pharmaceuticals.Â
Cargo Insurance
Cargo insurance protects your shipment from damage and theft during transit. Since the shipping process is vulnerable to storms, theft, and accidents, insurance keeps you safe from financial losses.
Lead Times
Lead time is the time it takes a container to travel from the origin to the destination. This time depends on many things like the distance and the port congestion, which can cause delays of up to weeks, customs clearance, which can also cause delays and weather conditions.
Some shipments have to stop over at multiple ports, which can also affect shipping times.
Bottom Line
Global trade connects businesses with buyers and enables them to transfer their goods efficiently and in the most cost-effective manner across the oceans. Understanding the shipping process, the key players involved, and associated costs is very important for importers and exporters so they can overcome the complexities of the logistic system.
Another very important aspect is to have the right logistics partner by your side. Choosing a reputable and expert freight forwarder like Gorto Freight can help you stay compliant and safe and optimize the shipping cost and process for you.
