What does LCL mean in shipping terms?
LCL is a term used in sea freight to describe loads that are “less than a container load,” or a shipment that does not fill an entire container. Depending on the route, destination, and requirement, shipping via LCL may be more costly than FCL, so contact a reputable freight forwarder or 3rd party logistics company to obtain a few quotes.
How Does LCL Shipment Work?
In an LCL shipment, different shippers share a container. When cargo volume is not enough to fill a full container, an LCL shipment is usually cheaper, since the cost of shipping a full container is shared. When comparing the CBM cost between an LCL shipment and an FCL shipment, LCL will be higher, but the total price is often lower.
Advantages of an LCL Shipment for the Buyer
The buyer only needs to pay for the space that they need to use since the container is shared with other shipments. This option allows small businesses to take advantage of the low cost of ocean shipping without requiring high volume.
Air shipments are charging either by the gross weight or the volume weight, whichever is higher. Whereas the ocean LCL is charging fees per cubic meter (or per 1,000 kg whichever is higher), making it a more economical option for shipments that are small yet heavy given that the transit time is not an issue.
Disadvantages of an LCL Shipment for the Buyer
The ocean freight cost of an LCL shipment is per CBM, which is typically higher compared to the total cost of a full container. Because of this, the buyer is only buying a part of the whole container’s space. It is essential to keep in mind; there are instances wherein LCL may be more expensive than simply getting a full container.
Although LCL consolidators are categorizing the goods that they are putting together in a container, there is still a higher risk of the container being flagged for a customs examination compared to FCL simply because there are more types of products in the container.
In rare instances, LCL shipments can also be mixed up or misplaced with other shipments due to the handling involved in the deconsolidation process. Compared to FCL wherein the whole container is being transported and unloaded to the final destination, LCL containers are being unloaded from the containers in CFS (Container Freight Station) warehouses. For the same reason, LCL shipments also take some more days in transit compared to FCL, because of this deconsolidation process.
Generally, the ocean freight is known to take more time in transit than air freight, thus, shipments that are time-sensitive should be carefully planned. Though faster vessels are already available for LCL nowadays (for some routes), buyers are still looking at at least 16 to 24 days (for US west coast destinations) before they can get their goods delivered. The typical transit time of an LCL shipment to the US is within 4 to 6 weeks from the vessel’s departure date compared to 5 to 9 days if shipped via air cargo.
When to Use an LCL Agreement?
Even though LCL has some disadvantages, it is still a popular shipping method being used by the buyers because the advantages outweigh the negative. It is helpful to know when is the best time to ship using an LCL method. There are five factors to consider:
- volume
- the gross weight
- product category
- Route
- time
The volume of the shipment is being computed by the amount of space it occupies. A volume of a carton is calculated by multiplying the length, width, and height. Ocean freight is charged by its volume (unless it is more than 1,000 kg per CBM), and this includes the LCL shipments. It is ideal to consider an LCL agreement if the volume of the goods is between 1 to 18 CBM. Otherwise, shipping via air (for less than 1 CBM) or going full container (for greater than 18 CBM) might be a more economical option.
The gross weight is the total weight of the shipment as a whole, including the weight of the packaging and master cartons. It is best to consider shipping under an LCL agreement if the gross weight of the shipment is more than 150kg during peak season and 200kg during the off-peak season.
You might be wondering why peak and the off-peak season should be considered. It is because the shipping rates are dynamic and it easily changes in response to the changes in supply and demand. Since air shipping method is the number one choice for smaller shipments, it is also the method that is more vulnerable to changes in pricing when the demand for shipping goes up, thus, the alternative option to air freight is to use an LCL agreement.
The product category is also being considered when shipping. Some products are not allowed to be shipped via air due to airline restrictions such as compressed gasses, aerosol cans, and dry ice. In this case, ocean freight, specifically LCL, can be a good alternative depending on the volume of the shipment.
The routing is also considered when choosing an LCL agreement. Not all routes that are available for an ocean shipment can do LCL shipments due to a lack of consolidators. The usual reason for this is because there are not too many shipments to consolidate using that route. In cases like this, the next step is to find an alternative route or ports. If the alternative route is more expensive, then other shipping options should be considered.
The last factor is time. Time plays an essential element in any supply chain. As for businesses that are selling goods on e-commerce websites, the timing could be a hit or a miss. Having no stock for a couple of days can profoundly affect the page ranking of a listing. So imagine having no stock for an extended period, the listing can quickly dwindle to the last page, and there is a considerable possibility of a loss of income. That said, the timing of the delivery should be considered when shipping the products.
If you need your product in less than six weeks after the production is done, then you should consult a trusted freight forwarder for your possible options. Faster vessels are available on some routes, which only offer FCL. Because LCL shipments can take roughly four weeks to be delivered, paying for a full container might be a worthwhile option, and ultimately less expensive than air shipments. If time is not an issue, then an LCL agreement will be a better option.
Below is a checklist that you should help when planning to determine if an LCL agreement is right for you. If one or more of the items below don’t meet your requirements, then LCL might not be the best option to consider.
- The transit time can be within 5 to 7 weeks (depending on the route). You should still check with your freight forwarder for a possibility of a faster option.
- The gross weight of the shipment is more than 150kg.
- The volume of the shipment is between 1 to 18 CBM.
- The available shipping route is direct or does not require significant transfers.
- If the goods fall under the list of restricted air freight items, LCL might be one of the only available options.
What is the Cost for an LCL Shipment?
An average cargo vessel can hold about 3,000 containers. That is about 200,000 CBM worth of cargo! It is the reason why there’s a need to charge for a minimum when shipping under an LCL agreement since buyers are expected to be shipping as bulk.
The cost of an LCL shipment is calculated based on the actual volume or the space that the shipment occupies in a shared shipping container, which is usually at a minimum of 1 CBM. If the total volume of the load is less than the minimum, then the charges will be considered as 1 CBM. That being said, even if your goods take far less space than the minimal requirement, you will still be obligated to pay the cost for the minimum volume.
If ocean freight is calculated based on the actual volume, air freight charges either by the gross weight or the volume weight, whichever is higher. For example, a 0.8 CBM shipment with a gross weight of 50kg will have a volume weight of 160kg when shipped using Air express. If sent using LCL, the cost will be based on the ocean freight’s minimum of 1 CBM.
Freight forwarders have different terms on some of their line item charges but what they charge is usually an international standard. For an LCL shipment, aside from the cost of the ocean freight which is paid to the shipping line for carrying the goods from point A to point B, there are other fees involved. These fees are for services such as chassis fee, which is also shared between the consignments within the same container. Other fees that are usually added for LCL shipments are warehousing charges since the container needs to be transferred to a warehouse to get sorted out based on the consignments, as well as other specific handling fees.
The total cost per CBM for an ocean freight can be anywhere between $25 and $140, depending on the route. The rates for LCL freight usually changing monthly, so it is important to check the validity of the quoted rates that your freight forwarder provides, before arranging the shipment.
What is the Difference Between LCL and FCL?
FCL stands for “full container load.” The consigned shipment occupies the whole container on an FCL agreement and is not shared with other consignees. LCL, or less than container load, has multiple consignments sharing space within the single container. With FCL, the buyer is paying for the cost of the whole container space, while LCL only pays for the area that the shipment occupies in a single container.
Since this question is so common, we have created a whole article discussing the differences between the FCL and the LCL agreement.
