What is GRI?
General Rate Increase, also known as GRI, is an increase in ocean freight rates by shipping lines across specific or all trade paths during a particular period of time.. The rates are imposed by shipping lines, and the amount of the increase in rates is decided based on the demand and supply on that particular route. Since the GRIs are applied by ocean shippers, freight forwarders are compelled to raise their prices too.
When does GRI apply in shipping?
When the market is non-volatile, GRI will take place on a semi-annual or annual basis. However, the demand and supply for ocean shipping can change rather quickly. In the United States, the rise in ocean freight price needs to be reported to the Federal Maritime Commission 30 days prior to it taking effect. During the course of it being reported and executed, the carriers can oppose the GRI or decide to decrease the exact value based on the demand/supply changes.
In short, carriers can either keep the GRI as reported or lower it, but they cannot raise the prices over the reported GRI value. Due to this, there is a lot of negotiation that goes on behind the scenes during the days leading up to the GRI.
The larger freight forwarders will try to go against the increase of rate (as their clients generally blame the price raise on them). The smaller forwarders will also find ways to decrease GRIs but with lesser influence over the process.
From the perspective of cargo owners, GRIs can make freight operations really tricky. When the GRI takes effect, it affects all the cargo, whether loaded onto the ship or not, irrespective of when the booking of shipment was made.
What is the need for GRI?
The industry of international ocean freight is extremely cut-throat, where the shipping carriers compete with each other for the best routes and prices. When one carrier decides to minimize its rates to provide more attractive prices, other carriers often follow the same. This course continues until it hits a floor, so the shipping lines decide to raise the prices and recover the expenses. That's when GRI takes effect.
Also Read: Importer Of Record (IOR) in US Customs | Meaning, Requirements & More
Which entity charges GRI, and which one regulates it?
GRIs are charged by the giants of ocean freight carriers, and it is regulated by the Federal Maritime Commission. It is an independent agency of the United States and is responsible for regulating inter-coastal and international commerce of ocean shipping via the ports of the U.S. The GRI needs to be reported to the commission 30 days before it takes place.
In which countries are GRIs applicable?
GRIs can affect any geographical area, on both export and import. However, in recent years GRI's are more applicable to imports that come from the far east (China, South Korea, Japan, Bangladesh etc.).
In the current year (2022), CMA CGM (Compagnie Maritime d'Affrètement (CMA) and Compagnie Générale Maritime (CGM) announced GRI will be applied to the following countries - All of Asia, Bangladesh, and Far east Ports of Load, to all of Canada and the U.S. Ports of discharge, and all inland points through said ports.
Also, it will be applicable in Pakistan, Sri Lanka, and India to all USA west coast and Canada Ports of Discharge and island points through said ports.
An example of how GRI works
Whenever there is a GRI, there may be an announcement along the lines of "Effective the 1st of February 2022, a General Rate Increase of USD 300 per 30 containers and USD 600 per 50 containers will be imposed on the Canada-Far East trade. The additional charge will be applicable to all cargos withheld, from the 1st of February."
What is PSS? What are the differences between PSS and GRI?
Ocean freight rates go through cycles of downward or upward changes in price. The peak seasons of shipping leads to an increase in rate as the demand for the goods surges. PSS, short for Peak Season Surcharge, is a variable surcharge carriers might apply during peak demand seasons. It can be enforced at any time of the year but usually is more common before the fall or winter holidays and between July to October.
PSS is an extra surcharge that is added to the shipper's base rate when there is a rise in the demand for carrier space during peak seasons. GRI is also an additional fee that is added to the shipper's base rate when there is an increase in demand, regardless of whether it is peak season or not.
Can shippers reduce the impact of GRI?
Additional fee on shipping can impact the shippers in a negative way. Therefore, reducing its effect is necessary. Shippers can minimize the impact of GRIs by taking certain actions, which can include:
Applying SKU Analytics
Presently, all traded goods have scannable barcodes that contain information about the product size, price, manufacturer details, and other information. Therefore, by employing tools to constantly analyze SKUs and barcodes of products, shippers can improve the end-to-end tracking and visibility of supply chains. This avoids confusion through the supply chain, and arrests shipping GRIs and costs through better control and visibility. SKU and barcode analytics enable shippers to get better insight into how they can reduce their costs.
Also Read: Country of Origin | What is it & How do you determine it
Facilitating Advance Pay Cycles
Shippers monitor payment cycles to ensure that the orders are completed and payment is made on time. Effective tracking and examining of pay cycles can give shippers more freedom during uncertain and volatile market conditions while making GRI less surprising and impactful. It also helps shippers to find out which carriers provide the lowest charges and reduce the total shipping costs.
Forecasting Shipping GRIs and Surcharges
Rate increases and surcharges cannot be avoided, but planning budgets and cash flows using estimates based on historical data can help to soften the impact of GRI.
Eliminating Excessive Packaging
Dimensional shipping means applying rates of shipping to a load not based on the weight of the goods but instead on dimension or size. Cutting down on bulky packaging can help to decrease the shipping cost.
