30 July 2021 • 22 min read
FCL Shipping: Streamlining Large-Scale Shipments for Businesses
Optimize your logistics with FCL shipping. Explore the advantages of full container load and streamline your supply chain.
When exporters and importers send and receive large quantities of goods by sea, they might use a shipping mode called FCL or “full container load”. FCL is one of the most commonly used terms in ocean freight along with LCL, which is short for “less than container load”.
Our readers might have already familiarised themselves with LCL shipping in our previous blog. In this blog, we will tackle the intricacies of FCL shipping. Read on to find out:
- What is FCL shipping?
- Its benefits and drawbacks
- Cost and factors influencing cost
- When to pick FCL over LCL
- Ways to stuff and deliver an FCL shipment
- Truck transportation
- Documents required
- A final checklist
- How to book and manage FCL shipments using Cogoport
What is FCL Shipping?
In FCL shipping, a shipper (exporter) hires an entire shipping container for his cargo. This does not mean he has to fill up the container space entirely. It is more accurate to say that he has exclusive rights to the container. However, it is usually seen that FCL shipments are large.
FCL shipping is different from LCL shipping, where multiple shippers share a container for their goods – which are usually smaller – and pay only for the volume they need.
Benefits of FCL
- It is the fastest way to ship goods after air freight
- It is cheaper than air freight
- It costs less than LCL for shipments with volumes of 13 cubic meters and above
- Cargo isusuallyloaded and unloadedjust once, which means a shorter transit time than LCL. [Note: There are exceptions to this rule though, as when cargo is rolled over (fails to get on the ship) or in the case of transshipments (container is transferred from one ship to another while in transit)]
- The container stays sealed in transit, lowering risk of cargo damage
- No risk of contamination from other cargo. Example: Cotton clothes might smell if kept in the same space as spices or chemicals. Shipping FCL ensures that doesn’t happen
- FCL is the best bet for shipping large, fragile (ceramics, chemicals) and expensive goods
- FCL uses refrigerated containers (reefers) for cargo like fresh produce, ensuring temperature, humidity and ventilation control. Reefers are not commonly used in LCL
Drawbacks of FCL
- Shipping large quantities means paying for more inventory space. In Mumbai,for instance, a 1,000-square-foot warehouse for your FCL cargo would cost you Rs 60,000 a month in rent while a 300-square-foot space at a monthly rent of Rs 20,000 would suffice for your LCL cargo (rents are approximate, meant for comparison)
- Loading and delivering large shipments requires more equipment and manpower
- Expensive choice for small shipments, though shippers choosing to send small quantities of fragile or valuable goods by FCL might put the benefits over the extra cost
- Rates are more volatile than LCL
- Reduced availability in peak season is a probability
- Tight deadlines make collection of FCL shipments by importers complicated. Importers must watch out for factors such as demurrage and detention (discussed in detail in a later section). Last-mile delivery in LCL is comparatively simpler.
How Much Does FCL Cost?
In FCL shipping, you pay a flat rate for the container called a commodity box rate. An FCL quote usually includes:
- Pick-up charges from your warehouse
- Terminal handling charges (storage, equipment) at port of origin
- Ocean freight, which is the cost of the ship journey
- Terminal handling charges at port of destination
- Delivery charges for transporting the cargo by truck to the destination warehouse
Factors that Influence FCL Rates
Availability: As with all businesses that operate on a demand-supply model, ocean freight rates rise and fall with the availability of containers and space on carriers.
Peak season price spike: Ocean freight demand peaks in India in February-March when the annual agricultural harvest is exported. This is called the peak season or high season. Internationally, the shipping peak season is from August to November ahead of the holiday shopping season (Thanksgiving, Christmas).
Holiday delays: Ocean freight demand and prices tend to go up ahead ofmajor holidays such as Chinese New Year, Golden Week (in China), Eid.
GRI (General Rate Increase): Carriers periodically take up container prices in response to demand and supply. This is called GRI. It can be announced at the beginning of the month or mid-month. A GRI usually happens once a year in a stable market but there have been instances of multiple GRIs in a year or none at all.
Surcharges and Additional Costs
Shippers need to watch out for multiple surcharges that might inflate their FCL bills:
1. BAF (Bunker Adjustment Factor): A fee levied by carriers to negate the impact of fuel price fluctuations on their operations. It might change monthly or quarterly and differs regionally. It is charged based on the number of TEU (Twenty-Foot Equivalent Unit, which is used to measure container capacity – a 20-foot container equals a TUE and a 40-foot container 2 TEU). The formula to calculate BAF is:
Fuel Price x Trade Route* = BAF
*Trade route is average fuel consumption on a given trade, dependent on variables such as transit time, fuel efficiency, trade imbalance and so on
2. CAF (Currency Adjustment Factor): A surcharge imposed by carriers to compensate for exchange rate fluctuation risks. It is also charged on the basis of TEUs.
3. Port congestion surcharge at ports with high traffic
4. Canal surcharge, which is applied while crossing a canal like the Panama Canal
5. War risk surcharge, which carriers might charge for the potential extra cost incurred on sailing in troubled waters (under threat of war, insurrection, piracy, etc)
6. EIS (Equipment Imbalance Surcharge), which is levied on a container that returns empty. This happens at certain ports that have export traffic but little import traffic
7. Port charges for the entry and exit of goods
8. Documentation expenses charged by carriers for issuing a bill of lading, for example
9. Customs duties and taxes
Demurrage and Detention
When it comes to additional expenses, demurrage and detention are words that often leave first-time FCL shippers grimacing over an unexpected bill. What do they mean?
- Demurrage is what the shipper pays the carrier for use of a container within a port beyond an allotted free time. This free time is known as demurrage free time. For an exporter, this means the container can be freely kept at the port terminal before loading on the vessel only till the allotted demurrage free time. Beyond the free time, a per-day demurrage is charged. For an importer, this means the container has to be collected from the port terminal before the demurrage free runs out, else a per-day demurrage fee will be charged.
- Detention is similar to demurrage but charged for use of a container outside a port. An exporter incurs a detention fee when he picks up an empty container for packing and doesn’t have it back at the port within the free time. Similarly, an importer who doesn’t return an empty container to the port on time pays the fee.
Demurrage and detention charges as well as free time vary as per carrier and country. In some cases, shippers may request the shipping line for special free time before booking.
To avoid these charges, shippers must ensure their cargo is ready well in time, plan their loading and unloading operations meticulously, and demand demurrage and detention information in their FCL quotes.
When FCL is Better than LCL
The general rule is to transport large, heavy shipments by FCL and smaller ones by LCL. But consider these points as well:
- By industry estimates, consignments with a volume of 13 cubic meters or more or comprising 12 pallets or more are better shipped by FCL. Since you pay a flat rate for an FCL container, it makes sense to fully utilise its space and weight capacities
- FCL is ideal for cargo with tight delivery schedules because of its shorter transit time. An FCL shipment is usually delivered between three and six weeks, depending on the route
- FCL is a better option for cargo that is expensive, fragile and sensitive to changes (in temperature, for example) because there is little risk of contamination from other cargo. It also offers more cargo security because there is less handling
Ways to Stuff and Deliver an FCL Container
- CFS Stuffing: A popular choice among Indian shippers, cargo is transported to a container freight station (CFS) near the port and stuffed into empty containers. Stuffing is preceded by the customs house agent finalising customs examination and clearance of the cargo.
- Live Load: The shipper has a trucking company drop off an empty container at his warehouse, where he loads and seals it while the driver waits to drive it back to a container yard. Live loads are free if completed within a stipulated time – usually a couple of hours – after which an hourly surcharge kicks in.
- Drop and Pack: An empty container is dropped off at the shipper’s premises for a few days, after which the driver returns to take it back to the container yard. It costs more than live loading.
- Similarly, when the container reaches the destination warehouse, it can be live unloaded while the driver waits on site or the driver can drop off the containerfor a couple of days and return for it thereafter.
- For FCL shipments, you can choose between door-to-door, door-to-port, port-to-door and port-to-port services.
Cogoport offers door-to-door services for imports into India, door-to-port services for exports out of India and Europe, and port-to-door services for imports in Europe.
Truck Transportation for FCL
- FTL (full truckload): FTL means the cargo is loaded directly on trucks that carry it to the warehouse or container freight station where stuffing would take place. Freight is charged on the basis of distance. FTL is the fastest and safest way to move your FCL shipment on land.
- Trailer pick-up service: FCL shippers use this service to pick up the empty containers to be dropped off at their premises for stuffing and then to take the stuffed containers back to port.
Documents Required for FCL Shipments
There’s plenty of paperwork involved in the shipping process and FCL shipping is no different. The bill of lading, commercial invoice cum packing list, bill of export (shipping bill) and bill of entry are all mandatory documents. But there are additional papers you might need to submit based on your cargo type and place of export/import. To know all about your documentation requirements, read:
- 3 Mandatory Documents Exporters and Importers Need for Hassle-free Shipping
- Supporting Documents in Shipping: What Exporters and Importers Might Need for Customs Clearance
Final FCL Checklist
You’re now ready to book your full container. But before that, a few last tips:
- Book in advance to get the best rates
- Weigh your cargo accurately so you know what container, equipment you need both for sea and inland transport
- Factor in the chance of your cargo gettingrolled over. This can happen due to the negligence of the carrier (overbooking, skipping ports) or shipper (paperwork, non-compliance issues). You can’t control the former but can avoid errors on your part by booking in advance, skipping peak season when possible, working with trusted freight forwarders, avoiding transshipments and, most importantly, handing over your cargo on time. A rollover could lead to additional expense.
- Pack your cargo securely. Think of all the jostling it will endure in transit. Understand the correct way of stuffing your commodity in the container.
Try Cogoport’s FCL Services
Cogoport offers door-to-door FCL shipments on a user-friendly interface. Click here for:
- Instant FCL freight rates and quotes
- FCL container bookings within minutes
- Verified and trusted freight forwarders
- Round-the-clock dedicated support
- All-in-one dashboard to track all your shipments