International shipping can be a somewhat complex subject to decipher, even if you strip it down to its most basic form. The world is fuelled by global trade, particularly maritime shipping. However, many of the key processes are still inefficient and can prove to be quite challenging in terms of day-to-day shipping operations, particularly for SMEs.
The issues of container deposits is not brought up frequently enough when discussing potential issues and challenges to deal with in the shipping container industry – despite the fact that they often lead to some pretty significant cash flow issues for exporters.
In this article, we’re going to go over a brief overview of the container deposit problem, why it’s such a major issue for businesses, particularly SMEs, and what can be done about it.
Shipping containers are absolutely vital for shipping lines, helping shippers safely and securely transport their goods.
Whenever shippers book containers, they must return them back in good condition and within the agreed timeframe, as a commercial obligation. If there’s any delay in the return, or there’s damage or total loss during this period, the shipper must pay the resultant charges to shipping lines, termed demurrage, damage, or total loss.
Emerging markets like Africa, for example, carry a higher risk of delay, damage or loss because of infrastructure challenges, political instability, and often cumbersome customs protocols, which naturally, affects the international transfer of goods.
Due to these challenges and many others, shipping lines need to have container deposits in place before they can release containers to their clients. And, unfortunately, due to a lack of better alternatives, shipping lines only have container deposits as their sole security measure – which may range from a few hundred dollars to thousands of dollars per container. These deposits are used as cover for charges arising due to demurrage, damage, or total loss, should their clients fail to pay the charges.
However, there are multiple issues with this arrangement, causing SME’s in East Africa alone an estimated cashflow burden of $1.5b each year:
The mandatory container deposits means that SMEs looking to embrace new business opportunities will be discouraged as they may not have the financial resources/cash flow to do so, leading to lost business opportunities.
The high cost of container deposits can really put a strain on SMEs, putting them at a competitive disadvantage, compared to larger companies who have enough resources to afford the deposits.
Paying container deposits can be a very complex and time-consuming administrative process, especially in emerging markets where no structure for standardisation and transparency exists, making it extra-difficult for SMEs to navigate the process smoothly.
Container deposits can tie up SMEs’ cash flow, especially if they must pay deposits for several containers, creating cash flow problems and limiting investment opportunities.
At Willbox, we closely collaborate with the industry’s key stakeholders, including public and private players in the logistics sector. Our shipping container rates are some of the most competitive in the market, and we are always willing to help ease the pressure on new businesses and SMEs entering their respective industries.