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When it comes to sea freight, there are two types of shipments:
FCL: Full Container Load
One container with goods for one importer. This is the cheapest option, counted on a per unit basis.
LCL: Less than Container Load
‘Mixed’ containers carrying goods for several importers.
LCL can be 2 to 3 times more expensive, per shipped unit, compared to FCL. This can be explained by the fact that the administrative cost (which makes up a big part of the total shipping cost) is as high for an LCL shipment as an FCL container.
Hence, you can save quite a bit of money if you combine several individual LCL shipments into one single FCL shipment.
Let’s assume that you are shipping 4 LCL shipments:
Estimated cost (To Los Angeles)
By comparison, an FCL 20’’ container, from Shenzhen to Los Angeles, cost around $1500.
By coordinating these 4 shipments, you could therefore save as much as $1765. This further reduces the customs value, which lowers your total import tax bill.
Now, I’ll explain how that works.
1. Buy according to FOB or FCA terms from all suppliers
Your cargo cannot leave the country without export clearance documentation. There are two ways you can obtain these documents:
Option A: Order FOB or FCA
FOB stands for Free on Board (Export documents and shipping to the port), while FCA stands for Free Carrier (Export documents, no shipping).
Each supplier will provide export clearance documents.
Option B: Order EXW
The suppliers will not provide the export clearance documents. Instead, this is managed by the freight forwarder.
The second option can be complicated, as the export documentation shall normally be issued by the supplier. This is not always easy when it comes to lithium batteries, and other hazardous goods.
2. Coordinate delivery to the same forwarder warehouse
All shipments must be forwarded to the same port of loading. You can do this in two different ways:
Option A: Order according to FOB terms
This means that each supplier book transportation to the port of loading, for example Shenzhen. The FOB charges vary, depending on how far the goods must be transported.
When you ask for a ‘regular’ FOB quote, the supplier quotes based on the closest port.
Hence, you need to instruct the supplier to:
a. Provide an FOB quote that includes transportation to a specific city
b. Make sure that they declare that port as the port of loading
Option B: Order according to FCA terms
FCA includes the issuing of export clearance papers, by the supplier, but the cargo is not transported from the factory to the port of loading.
Instead, the freight forwarder picks up the goods at each factory, and brings each shipment to their port warehouse.
This is the most effective method, if you ask me.
This also allows you to make sure that the goods are properly insured, when transported from the factory to the port of loading.
Co-founder of Asiaimportal (HK) Limited and based in Hong Kong. He has been quoted in and contributed to Bloomberg, SCMP, Alibaba Insights, Globalsources.com, China Chief Executive, Quartz Magazine and more.
Hey there, I’m Fredrik!
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