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Free use

By Maria Barnes,2014-05-26 12:40
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Free use

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     1. Please define the term and purpose 'free-use'.

     Free-use is no rental charge to user for a given period of time offered by a lessor. In general, the free days is varied depends on supply and demand in the area. For example, lease inventory is low in Chicago and demand is high, the free days offer may be 30 days. If box returned within 30, there??ll be no rental charge otherwise rental will kick in on the 31st day until the box is returned. In Long Beach, lease inventory is high and no demands, shipping lines are all surplus in the area. The free days offer for LGB may be as high as 180 days.

     2. Please provide scenarios where 'free-use' is put to use.

     In general there are long term leases and short term lease in the lease market, that rental will start on the first day of lease. Free use is one of the lease terms that available to shipping lines, where we are deficit and lease inventory is high. Leasing companies will offer the most in order to get their boxes leased out. In this case, it becomes a win-win situation that we enjoy the free use and leasing company can get their idling assets utilized to their demand areas at lower cost.

     Free use is usually one way. For example, North America is a surplus region and there??re very limited chances for the leasing company to get their idling assets out. Once they are able to get them out by offering an attractive incentive, they??ll not accept their boxes to be returned back to North America. Normally, one way from North America to China is the most common one way traffic for their regular leasing business.

     There are also one way free uses coming into North America from other regions. They are mostly sale boxes or brand new that owner bought them in other regions and offer free use to shipping line for off hire to their buyers in North America. In this case, shipping line can save the empty repositioning cost and owner can get their product delivery to buyer here at lower cost.

     3. How is the process initiated, and by whom?

     For NAT, flow team monitors inventory and plans for the equipment supply to deficit locations. If we are unable to meet the booking needs and Trade confirms that must be covered, then the flow team will request the equipment team for possible lease in. Equipment team will contact leasing companies for free uses and keeping CLOG in the loop in case we need approval. ? ? ? ? ? ?

     Flow team reviews the need Trade confirms that booking (customer) must be covered. Equipment team negotiate with leasing for possible supply of free use CLOG approval OSC perform system update for on hire

    creation Regional OPS & CSU coordination to get units release for customer/trucker pick up.

     Operations colleagues in other regions to arrange off hire

     4.

     Who are the parties involved in a 'free-use' scenario, which party(ies) benefit from employing

     'free-use'? ? ? ?

     Please refer to above 3) for parties involved Shipping lines and leasing companies Container manufacturers

     5. Which territories/regions utilize 'free-use'? ?

     ALL territories/regions when there??s a need.

     6. What territorial/regional-specific biz processes exist, or are all 'free-use' biz process globally uniform? ?

     ALL follows guidelines issued by CLOG.

     7. Of these territories/regions, are only specific types of containers qualified for 'free-use'? ?

     They are normally GP boxes (20GP, 40GP, 40HQ and 45HQ) and meet cargo worthy standard

     8. Ownership-wise, which containers are available for 'free-use': OOCL-owned, leased from lessors, borrowed/exchanged containers from other carriers? ? ? ?

     Leasing company??s Owner (trader) for free use of sale boxes Manufactures for new boxes delivery buyer in NAT

     9. Can a 'free-use' container be loaded onboard for international transport, or is it limited to domestic carriage? ?

     Mostly International transport

     10. If a container is used as 'free-use', how is it documented and tracked: create manual (or spreadsheet) list, etc.? ?

     Lease info (contract no.; ru-lable; off hire contacts & agreed locations; total qty; rental; DPP etc.,) will be updated in system

     ?

     Regions are using MERIT to identify coming offhireable units in their area and arrange redelivery accordingly. Once off hired, unit will be terminated in system.

     11. Per territory, what is the percentage of usage of 'free-use' containers, and is this a trend that is foreseen to continue long-term? ? ? ? ?

     In 2006, total NAT import was 980,000TEU. Total phased out (off hires & sale boxes) in NAT was 26,200TEU Approx. 3% It??ll be continue as one of our cost savings initiatives.

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