ELI5: Are container ships (or cargo ships) filled with prepaid cargo, or do exporters ship goods with the expectation of selling upon arrival at port?
ELI5: Are container ships (or cargo ships) filled with prepaid cargo, or do exporters ship goods with the expectation of selling upon arrival at port?
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Some is prepaid, and some is paid later.
It’s agreed by both people.
When the actual ownership changes is also set by a separate agreement!
Like “it’s mine until it’s on the ship, and then it’s yours”, or “it’s mine until it gets to your port, and then it’s yours”, or something else.
/ELI5 look up “terms of trade” for more info
Pre-paid. Somebody has ordered the product and paid for it, paid for shipping it. Could be a retailer, could be a distributor/wholesaler, could be a manufacturer (getting parts), etc.
These days the cargo ship is just hired transport , they typically don’t own any of the cargo they’re shipping. The same way a mailman is just delivering the mail, he doesn’t own it
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It depends.
Let me put it this way:
In almost all cases products are only shipped once there is a confirmed buyer/order. Sometimes sellers require payment up front. Sometimes when the buyer/seller know each other well, the buyer doesn’t pay until after they get the product.
About 5% of cargo is shipped before there is a buyer/order – and the shipper tries to find a buyer before it hits the destination port.
I can answer this one as I work at a container terminal!
All cargo is prepaid, none of it is owned by the terminal or ship at any time (these are two separate companies.) The purchaser buys the cargo before the shipping order is created and placed in a container. The container itself is owned by a shipping company separate from the ship owner and the terminals, even if it’s the “same” company. For example: MSC owns ships such as the MSC Orion, but they also own the containers through a different subsidiary than the ship operating subsidiary. The containers are leased out and just bounce wherever they’re needed.
Now someone shipping something from China to the United States for example would call the ship owner company and place an order, sometimes the cargo is dedicated to one container, but most often containers are commingled with other shipments in the same container. The container is placed on a ship and when it arrives at the terminal, it goes into the terminal yard and sits until a truck or train comes to get it where it will be shipped to a distribution hub or directly to a warehouse (in the case of one container’s contents being owned by one buyer.) The empty containers are loaded onto a truck and sent back to any terminal needing empty containers to send overseas for filling before that truck takes a different full container wherever it needs to go.
Hope this helps.
Ever since the Internet went international we’ve seen more and more cargo being shipped with a buyer in mind. This isn’t necessarily mean the cargo is paid for, buyers and sellers can arrange any deal they want and often do for insurance and legal reasons. Rather, the internet has made it a lot easier to find a buyer or vendor who will sell the product before even arranging for shipment.
my dad worked for a chemical tanker company and i interned there for a few summers when i was in college, beta testing their new software that tracked everything from contracts to voyages. think of shipping companies like UPS, FedEx, any other delivery service. you pay to have it sent, they handle the logistics of moving it.
all of the cargo was shipped based on contracts that determined how much product and how often it was to be delivered. some smaller companies might do one-off shipments, but companies like DOW or BASF would have massive contracts and regular space on scheduled voyages.
some cargo may have been sold from company A to company B, or other times, company A might just be moving cargo to another of its own facilities in a different location.
Oh I can answer this!
Cargo ships are usually just a means of transportation these days. The space on them is sold to a “freight forwarder” who is usually dealing with a buyer or seller to move goods from A to B on a contractual basis.
Ownership of the goods on the ship depends on the contracts between the buyers and sellers of the goods but most space on a cargo ship is taken up by goods that have already been purchased, usually by companies, who will then distribute the goods to customers in the destination country.
The ships and ship owners have nothing to do with this. They just collect their fee from the freight forwarders and are off again.
There are a few types of business. You might be buying on terms, which means you have 30/60 days to pay upon delivery. Usually that’s shipped FOB (Freight on Board) so you technically take delivery when it leaves origin, though that’s not really how it works. Normally actual delivery is when the timer starts.
You can also ship LC (Letter of Credit) which means the cargo is paid for upon delivery. That’s usually for very expensive orders. Like a container that’s worth $1.5 Million.
Generally, the goods are not sold upon arriving at the port of Long Beach. But, there are anticipated sales. With terms, that’s plenty of time to have the cash to pay for the product after the sale.
It’s complicated but all based on flow of goods. If the flow stops, the system breaks down and nothing gets sold or bought. There is normally no credit being used. Only self financing on all ends. You just have to keep the flow of goods moving so the cash flows.
Think of container ships as courier trucks with parcels, just larger. Each and any container/parcel can contain goods from a different seller and be destined for a different buyer. How each buyer and seller agreed about the transaction is up to them.
If you’re an exporter importing something for the first time from a new importer, you usually need to pay upfront (and often even pay some advance before the production even starts).
If you have a relationship with a factory, you have been buying their products for years, always paying on time and your volume is steadily increasing, you can very likely negotiate a credit with them in which they can send you the goods and you will pay upon arrival or even some time after arrival.
Basically, it’s the same as when a company buys something locally from a domestic wholesaler. If they’re a new customer, they need to pay first. If they have a good relationship, they can have a buyer’s credit. Means of transport doesn’t change anything, other than the fact that one side of the transaction needs to freeze their funds for longer when the cargo travels.
Edit: after re-reading your question I realized that you ask whether the goods already have a buyer or are they sent blindly by the exporter hoping that they’ll find an importer.
It always already has a buyer (importer) who ordered the goods to be shipped to them. An exporter is just a store or a factory. Somebody orders from them and they fulfill the order. Nobody sends their products without a buyer, just as no online store brings their products to the post office just in case someone made an order later.
Now a days cargo ships are just like trucks, they own the ship and sell that capacity to people who want to move things.
The ship owner rents space to cargo owners.
As for the shippers and receivers, that is going to depend on the “Terms of Trade”.
There are a couple different things to separate:
When the buyer pays the manufacturer and when goods transfer ownership.
A buyer can have net 30 payment terms IE: they pay for the stuff 30 days after they take ownership because of the accounting in the contract. There could also be consignment or they paid the manufacturer before the manufacturer started making stuff.
For actual ownership of the freight, ownership can transfer when the container goes on the boat, when the boat reaches the destination port, or when the goods are unloaded by the buyer. Again, that’s determined by the contract between the manufacturer and the buyer.
The old days of the ship owner buying 40 tons of stuff then sailing somewhere and trying to sell that 40 tons of stuff at a different port are over (there may be exceptions but for 99% of international shipping, the boats never take ownership of the freight.)
I’m everything on board has been pre-sold prior to shipping. There a differing arrangements regarding when the receiving party takes possession, but very little is shipped without knowing in advance who the buye(s) will be.