LCL EXPORT PROCESS AND THE DETERMINANT FACTORS FOR SHIPPING THIS CATEGORY OF GOODS
The logistics process behind LCL (less than container load) exportation is quite different from full container load export process, the reason being that for a single shipment of a less than container load (LCL) consists of several consignees with at least two (2) consignees goods shipped with a container, irrespective of the number and size of packages shipped by each consignee.
To serve us better, articles regarding our subject analysis will be published in two different posts. The aim is to make sure we’re not faced with too much text just as we had in our previous post on FCL exportation.
Equally to note is the fact that we are yet to discuss FREIGHT INSURANCE, however, it will be analyzed in this post.
Looking at our core area of discussion, it’s important to state here that, explanations here will be detailed from cargo packing and how it’s originated coupled with the LCL export documentation process, as such, the basics are required. Similarly, as we did itemize in our previous post on the full container load export process, though with little variation.
- Identify what to export as less than container load cargo.
- Establish contact with your consignee(s).
- Draft application letter to the appropriate government agency responsible for the approval of the exportation of such goods.
- Proceed with the approved letter coupled with other documents to a shipping company that has an LCL (less than container load) console (agent) at the port of destination.
- Transfer goods to the shipping company warehouse.
- Obtain export documentation, commercial documentation of that cargo with the shipping company including charges.
- Submit the authorized letter and documents relating to the goods to customs.
While we pause on the steps over our subject topic, we will deviate a little bit as we dive into the determination of FREIGHT INSURANCE. However, the determination of freight insurance cost for a single shipment is as follows:
Insurance Cost = (CIF Value + CIF Value x 10%) x 0.5%.
Where, C = Cost, I = Insurance and F = Freight.
Insurance Cost = ((Cargo Value + Transportation Value) x 10%) x 0.5%.
Let’s take one example just for the purpose of illustration.
If a cargo meant to be exported cost $200 (200 dollars invoiced by the seller of goods) with its transportation valued at $40 (40 dollars). Here is how to determine its insurance cost!
Insurance Cost = ((Cargo Value + Transportation Value) x10%) x 0.5%.
Where, Cargo value = $200,
Transportation value = $40. Therefore,
Insurance Cost = ((200 + 40) x 10%) x 0.5%
Insurance Cost = ((240) x 10%) x 0.5%
Insurance Cost = ((240 x 10/100) x 0.5/100
Insurance Cost = 12/100
Insurance Cost = 0.12
Move the decimal point backward, and then you have 12.
Insurance Cost = $12.
I trust we understand how to go about this! This process is applicable for LCL exports and full container load export as well.
Application of this formula will enable the shipper to determine the freight cost, insurance, and freight of goods payable by the seller of goods to cover Cost, Insurance, and Freight against the possibility of loss or damage to a consignee’s order, while the goods are still on transit to the port of loading which will be noted in the sales contract.
NOTE: Under the terms of CIF, it is the responsibility of the seller to provide specific protection for an order.
Based on this, other stages of the LCL export process will be discussed in our next post. Congratulation
- I hope you found this article on LCL export process, helpful?