The supply chain operates very efficiently when there are enough containers shipped to and from various locations around the world to meet the demand at all locations. When the number of containers are off, this creates what's known as a container imbalance.
There are a number of issues that this can cause for shippers around the world, and it's a problem that often results in extra charges. Let's take a closer look at the issue, including what causes it and what some extra charges might be.
How Does Container Imbalance Happen?
In a perfect world, a container is shipped from one location, unloaded and then loaded back up with new products to be shipped again. In this scenario, there is never any product waiting to be offloaded from or loaded onto shipping containers. The global supply chain operates very efficiently when this happens.
There are times, though, when there simply isn't this perfect balance of container supply and demand. If, for example, there are fewer containers being shipped to a location than are needed to refill the product on the dock, an imbalance will be created.
This happens a lot of times in countries that have far more exports than they have imports. China and India, for instance, export more products than they import. Because of this, they might not have enough containers coming into their country to meet the demand for the products they want to ship out.
The flip side of this also occurs. Countries that import more goods than they export often have extra containers that sit in a port empty.
Once the imports are offloaded, there isn't enough exports to ship back out, so the containers just sit there.
Finally, as has been seen through the pandemic, container imbalance can occur when warehousing capacity has been reached. If containers aren't able to be offloaded efficiently, they may just sit full of products at a port. This, then, creates a shortage in the number of containers that are needed for future exports.
What is a Container Imbalance Charge?
Whenever there is a container imbalance, there are fees that are charged to ship empty containers to where they are needed. This is referred to as a container imbalance charge.
Industry estimates say that roughly 10% of all global containers around the world are empty, and the container imbalance charges total roughly between $15 billion and $20 billion annually.
At times, though, there is no avoiding this cost. It is often out of the control of the shipper and/or the country that requires the containers to move their goods. While it's an unavoidable cost, it's certainly an expensive one.
What Are CIC Charges?
CIC is the acronym for container imbalance charge. CIC charges essentially are the fee that shipping lines will charge to relocate a large number of containers that are empty.
These fees are what is charged to move empty containers around so that they can be filled with more goods.
Included in the CIC charges are fees for shipping the containers within the terminal, storing them in warehousing while they wait for relocation and other fees. Then, there is the fee for shipping the containers back to the country that needs them, even if there are no goods being stored within.
What is Container Service Charge?
Container Service Charges, or CSC, are fees that are charged by the terminals in shipping. These fees are used to pay for the positioning and storage of various containers prior to being loaded on a ship or other mode of transportation.
Included in these fees are the cost of handling the goods, unloading the goods from the container, moving them around and stacking them, and using a crane to position and reposition them.
CSCs are typically charged to all shipping containers, since they all will be subject to at least some of these duties. However, they can become higher if there is a container imbalance, since there might be a need for extra positioning, stacking and storing while the empty containers are waiting to be shipped to a new location.
What is EIS in Shipping?
Sometimes, shippers may face what's known as an EIS, or an Emergency Imbalance Surcharge. This occurs most often when there are multiple destination ports on a route. When this happens, it's more likely that a container imbalance will occur, since it's very challenging to perfectly match up the demand for containers on all import/export routes.
Again, when a container imbalance occurs in this scenario, the companies that handle the shipping and terminals may have an excess number of containers that just sit empty on its quayside.
The shipping company is usually interested in off-loading these empty containers as quickly as possible, so as to not clog up their own operations. What they'll do, then, is ship them to the closest hub where they are needed so they can be re-used.
To pay for that, the shipping company will charge an EIS. This fee is typically charged on the cargo that is going out, since that is what the containers are being transported to ship.
Avoiding a container imbalance as much as you can is important to reduce your own costs of shipping.
While some of the moving parts of the global supply chain are obviously out of your control, the more you can try to balance the container imbalance, the cheaper your shipping costs will be.