Tag: Incoterms

FCL and LCL – Which one is better in varying situations?

An FCL container can also be LCL for freight forwarders, groupage operators, NVOCC operators, or cargo consolidators. To elaborate, let’s just assume there are two or more shippers who want to ship their cargo, but each cargo is not enough to fill an FCL container, so they connect a cargo consolidator.

This cargo consolidator could accept the cargo belonging to these customers and book it to them as an LCL cargo and provide them with individual House Bills of Lading. The cargo consolidator could then book these three cargoes as FCL cargo with a shipping line that will move. The cargo consolidator will then become a shipper to the shipping line and collect the Master Bill of Lading in his name. These are some of the ways how an FCL container may be operated.

It is an important question whether to choose FCL or LCL for shipment. To make it easy and in familiar words, we will see factors like volume, cost, security, urgency, and logistics.

Volume 

The choice of method of shipment is made easy by the amount of cargo you have, but as we saw that how you can ship less amount of freight as FCL with the help of a cargo consolidator. Cubic meters (m3) are often the way of measuring cargo volume. For low-volume shipments of between 2m3 and 13m3, LCL shipments tend to be better.

When the shipment uses more than 10 standard pallets or occupies more than 14m3, FCL looks like a better option. But the decision cannot be only made on the basis of volume as other factors such as security and safety of shipment play an important role.

Security and condition of shipment

Everyone wants their shipment to arrive the best in condition and least damage.  An FCL shipment is known to be more secure because the whole container is yours for the shipment. An FCL container is sealed at the same premises once the packing is done and is only opened once the customer receives the same at the destination. So the risk of damage or contamination from other merchandise is eliminated.

However, under certain circumstances, an LCL shipment may be the safer choice. Low-volume shipments are more compactly packed, leaving less room for movement.

Cost

This is also an important factor while shipping, as the cost of shipment, plays an important role in everything. It can be very simple If you have less cargo go with LCL and if you have enough cargo or want maximum security go with FCL. But it is not as easy as it looks, try contacting service providers like Siam Shipping or other freight forwarders for suggestions.

Urgency

This one no doubt FCL is the best choice. As FCL is transported from port to port and isn’t open until arrived, so it is a better choice of shipment.

Logistics

LCL makes it easier to split your shipments. In FCL, as we saw, you can use it by contacting a freight forwarder and shipping differently.

Characteristic Of An FCL Container

1. FCL containers are usually charged at a single loading point, which can be the shipper’s warehouse or facility, or a third-party warehouse contracted by the shipper.
2. The FCL container will be sealed at the same place after packing and will not be opened until the customer picks it up at the destination.
3. FCL containers are shipped from one port to another port, and cannot be partially shipped from one port to another port.
4. An FCL container can be transported by various modes of transport, using the road, rail, and sea at both ends of the transport chain.

Major Container Types

• Dry or Dry Van (DV) or General Purpose (GP) – 20′, 40′ – General reason holder with no unique attributes, utilized for general freight. These holders are the most well-known sort of compartment available for use today.
• High Cube (HC or HQ) – 40ft and 20ft in certain nations – A 1ft taller holder than the GP for use where clients require a somewhat bigger limit. These compartments are utilized to ship merchandise like apparel, cotton, tobacco, and so on.
• Open Top (OT) – 20ft, 40ft – For conveying larger than average freight when it is excessively high.
• Refrigerated (RF) – 40ft, 20ft (albeit some transportation lines are transitioning away from 20ft RF) – For shipping transitory products like organic products, vegetables, meat, drugs, and so on.
• Flatt rack (FR), Platform or Collapsible Flatt rack (PL, COFL) – 40′, 20′ for shipping larger than usual freight that might be excessively wide, tall, and long.

Profit Of Shipping An FCL Container?

1.   It does not go to multiple handling and prevents damage to the cargo. This means that there is very little chance of cargo damage (unless the cargo is not properly stored in the FCL).
2. Shipping benchmarks are easy when using FCL.
3. FCL can be tracked directly through the carrier’s e-commerce portal
4. In many cases, it is cheaper to ship goods in FCL containers (even partially full FCL containers) because there are no LCL or additional cargo handling charges compared to LCL shipments.
5. Depending on the Incoterms® used, FCL containers can be shipped to various locations in the country, including direct to the customer’s door.
6. Cargoes in FCL containers reach their destination faster than LCL cargoes because the cargo does not have to be re-transported elsewhere or wait for other cargoes to be consolidated.

What is Incoterms?

Whether you are importing or exporting or both, it is important to have a grasp of Incoterms and how they interact with purchase agreements and underlying contracts (transportation, insurance, customs) to create an efficient and successful supply chain.

Incoterms are international rules that define the respective responsibilities of sellers and buyers concerning the delivery of goods. They determine how risks and costs are shared between exporters and importers.

They were created by the International Chamber of Commerce (ICC) in Paris in 1936 and entered into force on 1 January 2011 in their latest edition, Incoterms 2010. Since they are regularly revised, they keep up with changes in international trade. The International Chamber of Commerce has started consultations on a new revision of the Incoterms, known as Incoterms 2020; the new Incoterms are expected to be published in the last quarter of 2019 and will come into force in early 2020.

Example of conditions covered in Incoterms :

• Information about the timeline and tracking of the shipment.
• Who will pay transportation, insurance, and other costs.
• To which location the transport should take place.
• If loading and unloading are included. (and if include who pays and where)
• When the risk passes from the seller to the buyer. (at what time whether at the time of shipment, sale or etc.)

Most Common Incoterms

Factory (EXW)

When shipped on EXW terms, the seller provides the goods at his company or other designated location. This condition places the highest margin on the buyer and the lowest margin on the seller

FCA

The seller delivers the goods cleared for export to the designated location (and possibly to the seller’s location). The goods may be delivered to the carrier nominated by the buyer or to another party nominated by the buyer.

Seller is responsible for loading the goods onto Buyer’s carrier in the event of delivery at Seller’s premises or other location under Seller’s control. However, in the case of delivery to another location, the goods are deemed to have been delivered by the seller as soon as the conveyance reaches the designated location; the buyer is responsible for unloading and loading the goods onto their carrier.

FOB

This is only used in sea freight. The word FOB stands for ‘free on board. In this term, your supplier is responsible for the local charges and taxes for the transport to the port. In this term, the supplier makes the goods available for export and the shipping document will be transferred when the goods are transferred on the ship.

Conclusion 

In conclusion, when choosing between FCL and LCL for a sea freight shipment, several factors must be considered, such as volume, security, cost, urgency, and logistics. FCL (full container load) is more secure, as the container belongs to one shipper only, but LCL (less than a container load) can be a better option for low-volume shipments. Additionally, FCL is a better choice for urgent shipments, while LCL makes it easier to split shipments.

It is important to work with a freight forwarder such as Siam Shipping to ensure the best container type is chosen and to provide guidance throughout the shipment process. Contact us to know more and get a free quote in less than 24 hours!