For decades, shipping merchandise in standardized container has been the most reliable and economic way in international trading, which is now accounting for 90% of world’s trade.
Due to the complexity in container shipping operation where multiple parties i.e. booking agent, freight forwarder, customs broker, trucker, carrier and terminal operator etc are involved, it is important for both seller and buyer to understand some of the basics.
There are many different types of equipment available and the most commonly used are
20’ - 20’DV - 20’ST - 20’GP => 20FT general purpose dry container
40’ - 40’DV - 40’ST - 40’GP => 40FT general purpose dry container
40’HC – 40’HQ => 40FT High Cube dry container
Except trucking fee and terminal handling charge varies from one shipping line to another, most of the handling charges applied to different type of equipment are the same.
Loose Vs Palletized
From cost perspective, proper packaging are very important in container shipping
It is true that most of the time cargo origin are developing countries i.e. China/India/Vietnam where labor cost is low;
It is also true that seller normally doesn't apply any surcharge for container stuffing, even if they have to send a team inside the container and stack one carton over another until the whole container is fully loaded;
It is universally agreed that when goods are not built on pallet, more cartons could be stuffed in the same container, and more goods mean less shipping cost per item. Sounds great!
However, when the container reaches destination and delivered to buyer’s premises, let’s say somewhere in the U.S. The buyer will then realize it costs more to hire a team to unload all the cartons than shipping the very same container from origin which is thousand miles away,
no jokes here!
Always request to load the goods on pallet although there is additional cost on the pallet
FCL vs LCL
Sometimes, deciding to ship in FCL or LCL (also known as CFS) may be difficult for buyer, especially when the volume is low or is not filling up a container.
Under such circumstance, always keep in mind to compare the cost of either method on a "ALL-IN " basis and to setup the "threshold".
When shipping in FCL, all the costs incurred will be billed to seller or buyer whoever is responsible for shipping as per incoterm on sales contract, seller or buyer shall receive Bill of Lading from carrier. As soon as shipping commenced, the cargo right always stay with either the seller or the buyer, so buyer or ultimate consignee stated on carrier Bill of lading is entitled to claim the container directly from ocean carrier once the container arrives at destination.
However, shipping in LCL is very much different as there are freights from more than one customer inside the container. Freight is collected from seller’s premises and sent to a consolidator’s warehouse, where consolidator shall combine the freights from other customers and load into one container. Shipping cost will be billed on the basis of cargo measurement (cbm as Cubic Meter) of respective shipment, and seller or buyer shall receive House Bill of Lading from consolidator. As soon as shipping commenced, the cargo right stay with seller or buyer, however, neither party is entitled to claim the container directly from ocean carrier.
Instead, the container will be claimed by the consolidator or its partner at destination, unload all the freights and deliver to respective buyer (or consignee) as per House Bill of Lading.
That’s why total lead time for sea transportation in LCL is longer than that in FCL.
Calculation of freight rates
Basically, the freight rates calculation for FCL is normally quite straightforward
Origin: Booking fee for placing booking with carrier, trucking fee for picking up and returning the container, THC and port charge collected by the terminal operator and customs clearance cost to customs broker
In-transit: Shipping cost to the carrier
Destination: similar to the cost at origin
However the calculation for LCL/CFS is looking more complicated
Origin: Booking and documentation fee for placing booking with carrier, trucking fee for picking up and delivering freight to consolidator warehouse, container stuffing, THC and port charge collected by the terminal operator and customs clearance cost to customs broker
In-transit: Shipping cost to the carrier
Destination ( most costly ): similar to the cost at origin but subject to various uploading, devanning, cleaning, co-loader handling etc
So it is highly suggested that buyer or seller shall always compare the total cost ( all-in cost ) of FCL and LCL and decide which is more cost effective.
Especially for freight with measurement exceeds 8~9cbm where it might probably end up cheaper in a 20’FCL with half of the container empty, than to load as LCL with consolidator.
Nominate a freight forwarder
Sea transportation requires a lot of coordination with multiple parties and a lot of paper works, i.e. booking confirmation, shipping order, shipping instruction, invoice and packing list, haulage order, customs voucher, carrier VGM, regulatory AMS etc;
All these process are related to each other and in any case there is delay or misconnection, there will be problem in shipping on time.
Always work with an experienced freight forwarder with extensive international network, freight forwarder act as cargo agent and for the benefit of buyer/seller, who shall then be relieved from all the paperwork and focus on their owned trading business.