Case Study - LCL Costing & Decision Making

Triveni International has got an export order recently for export of CPG
goods (Curtains, Bed Sheets, Pillow Covers, and Bathmats etc.) to Berlin in
Germany. The destination port would be Hamburg, Germany.

However, this is a small shipment and cannot be sent as a FCL. The only
choice Mr. Sushil Bansal of Triveni International has is to send it as a LCL
shipment. Since the size of the shipment is comparatively big for LCL
shipments, Sushil wants to make sure that he gets the best offer from a
Freight Forwarder and thereafter appoint him as a ‘carrier’ for a through Bill
of Lading from ICD Patparganj (Also referred to as ICD PPG and is the
closest ICD as goods are manufactured in and around Delhi) to Berlin
(Buyer’s warehouse). After stuffing at ICD PPG, the selected freight
forwarder will have the container railed out to the port of Mundra, arrange
for shipment to Hamburg, custom clearance at port of discharge (Hamburg)
and transport from Hamburg Port with final delivery at Berlin. As per the
discussions between the buyer and the seller, the Insurance cover has to be
taken by Triveni International and hence premium amount to be also paid by
them.

Sushil calls in for 2 quotations and compares the rates given below. Since he
has to execute the order in the next three weeks, he is busy in his follow up
with his vendors so that the export shipment leaves on time. He has sought
your opinion and wishes you to compare the two quotes and give your advice
in the matter. The brief details of the shipment are given below. All 65 cartons
will move as one shipment.

Commodity: CPG (Cotton Piece Goods) packed in cartons

Number of cartons: 65
Size of cartons: 70 cms x 55 cms x 55cms (Each carton) – (Total 30 cartons)
95 cms x 65cms x 50 cms (Each carton) – (Total 35 cartons)
Total weight of shipment: 8,700 Kgs

Sr. Charge Head Quote from FF Quote from FF

No 1 2
1 Transportation from INR 6,500 INR 6,000
warehouse of Triveni Int’l to
ICD PPG

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2 Off-loading from Truck to INR 60/M.T. or INR 60/M.T. or
warehouse at ICD PPG part thereof part thereof
3 Custom Clearance (Lump INR 5,500 INR 4,700
sum)
4 THC (Stuffing & Handling INR 890 W/M INR 860 W/M
Charges ICD PPG, Rail
charges ICD PPG – Mundra,
THC Mundra Port)
5 Ocean Freight (Mundra to USD 58 W/M USD 49 W/M
Hamburg)
6 Custom Clearance at Euro 115 Euro 125
Hamburg
(Lump sum)
7 Insurance charges (Triveni USD 25 USD 28
Int’l warehouse to Buyer’s
warehouse at Berlin) –
(Lumpsum)
8 On-carriage from Hamburg Euro 220 Euro 240
to Berlin (including loading at
Hamburg) –
(Lump sum)
9 Transit Time (ICD PPG – 38 Days 47 Days
Berlin)
10 Transshipment None One (At
Rotterdam)

Notes:

1. FF1 & FF2 mean Freight Forwarder 1 and Freight Forwarder 2

respectively
2. All the 65 cartons will be clubbed and move as one shipment
3. W/M means weight (Metric Tonne or M.T.) or measurement (Cubic
Metres or CBM), whichever generates higher revenue
4. GST @ 18% applicable on all INR charges only
5. Exchange rate to be taken: I USD = INR 76.50 & 1 Euro = INR 82.55

Questions

(a) Calculate the total charges for each of the above quotes
(b) Which is the better option and why considering the factors of transit

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 time, Transshipment at Rotterdam and lot of other factors that you
can possibly enumerate?

Answer

Shipment A :
0.70 X 0.55 X 0.55 = 0.21175 CBM/ carton
Total CBM = 30 X 0.21175 = 6.3525 = 6.36

Shipment B
O.95 X 0.65 X 0.50 = 0.30875 CBM/ carton
Total CBM = 35 X 0.30875 = 10.80625

Total CBM = 6.36 + 10.80625 = 17.15875 = 17.16

Total Weight of Shipment = 8700 Kgs = 8.7 MT

Description FF 1 FF2
(INR) (INR)
From Warehouse to ICD PPG 6500 6000

Offloading from truck to warehouse at 540 540

ICD TKD

Custom Clearance at ICD TKD 5500 4700

THC (Stuffing & Handling, Rail Charges 15272.40 14757.60

TKD – Mundra, THC Mundra)

Total 27812.40 25997.60

GST @18 % 5006.23 4679.57

Total FOB Mundra 32,818.63 30,677.17

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 Description FF 1 FF2
(USD) (USD)
Ocean Freight Mundra to Hamburg 995.28 840.84
CBM 17.16

Insurance charges
Warehouse to Berlin Warehouse - 25 28
Lumpsum

Total 1020.28 868.84

Exchange rate @ 76.50 INR

Total (INR) 78,051.42 66,466.26

Description FF 1 FF2
(EUR) (EUR)
Custom Clearance 115 125

On-Carriage Hamburg to Berlin 220 240

Total 335 365

Exchange rate @ 82.55 INR

Total (INR) 27,654.25 30,130.75

Total Origin to Destination (INR) 1,38,524.30 1,27,274.18

Difference(INR) 11,250.12

Important Points:

 Offloading charges at ICD TKD is on the basis of per M.T. or part

thereof. Hence any part of a whole number is rounded to the next
higher whole number. In this case 8.7 MT would become 9 MT as
chargeable

 If the shipment is being arranged on CIP (Berlin) basis, the

custom clearance at Berlin would be done by the consignee.
Though quoted, it would not form a part of the calculations.

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 However, delivery from Hamburg to Stuttgart would be on
shipper’s account basis CIP Incoterms 2020.

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