WHAT ARE THE COST DRIVERS OF LESS-THAN-CONTAINER-LOAD OCEAN SHIPPING?
Cost efficiency is one of the main reasons why shippers use less-than-container-load (LCL) ocean shipping. But LCL pricing is different to other methods, so here’s a helpful overview.
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Before you use less-than-container-load (LCL) ocean shipping, you’ll want to drill down into the various charges. You’ll find there are more items on an LCL invoice than on a full-container-load (FCL) invoice, which can be daunting to begin with. But everything should add up to a cost-effective shipping solution.
This article reviews how costs are calculated and where charges are applied. It also provides useful guidance on when LCL is likely to be your cheapest shipping option compared with FCL and air freight.
How Are My LCL Freight Costs Calculated?
Less-than-container-load costs are driven by two things – the weight of your cargo and the measurement or volume of your cargo (W/M). Weight is described in metric tons, while the volume is described in cubic meters (CBM). Your shipment cost is based on whichever of these two is the larger. A helpful hint here – you’ll usually find that cargo volume is larger than cargo weight.
Let’s take a look at how much you’ll be charged if you’re quoted an LCL freight rate of $100 W/M. For a shipment that weighs one metric ton and measures 10 CBM, you’ll be charged US$1,000.
What About Origin and Destination Charges?
You’ll notice a significant difference between LCL and FCL invoices. On a typical LCL invoice, you’ll see more than just freight charges and the usual fees and surcharges – you’ll also see local origin and destination charges which are based on the exact W/M of your cargo.
Why is there a difference? When you use FCL, local charges for container processing are bundled into the overall freight rate. But with LCL, because you are sharing container space, you only pay for a proportion of the container processing costs. You also pay fees for cargo loading/unloading and handling; these are based on the T&Cs of the incoterms agreed with your supplier. It’s good that local charges are itemized on your LCL invoice – you can check whether you’ve been fairly charged.
Do I Pay Any Other Freight Charges?
Whether you pay any other freight charges depends on what you’re shipping. You may be asked to pay extra if your goods are non-stackable and if they are classified as dangerous goods (DG).
Once filled, the container is tendered to an ocean carrier for international transportation. At the other end, when the vessel arrives at the destination port, your freight forwarder collects the container and brings it to a destination warehouse or CFS.
Will LCL Cost Me Less Than Air Freight or FCL?
LCL is much cheaper than air freight in almost all trade lanes, and especially for high-volume cargo.
The downside is that the transit time is usually much longer. You can overcome this challenge with forward planning. For example, many of our manufacturing customers extend their production schedules to allow finished goods to be delivered with longer transit times. This way they benefit from the significant cost savings of LCL over air freight.
Usually, but not always, LCL will be cheaper than FCL.
How can you find out? Once again, it’s all about weight and measurement or volume (W/M).
The answer is that LCL is very likely to cost you less than FCL if:
- Your cargo volume is less than 20 CBM
- Your goods are moving on a common trade lane with direct LCL services
- It’s general or DG cargo with proper stuffing conditions and it complies with International Maritime Organization (IMO) regulations