Monday, February 3, 2014

What is a GRI (General Rate Increase)?

It's a term that only people in select industries become familiar with.

Maybe whoever handles your freight recently raised their fees. Or perhaps your freight manager just told you that it's going to cost a lot more to get those products in from Asia.

They tell you this is the fault of something called a General Rate Increase, or GRI.

Here's an explanation of what that is, in plain English:

A GRI is when ocean carriers raise their fees for ocean freight.

That means if it's going over water, they will charge you more for getting things where they need to go. 

Correspondingly, freight forwarders, importers, and exporters have no choice but to raise THEIR rates to offset that increase.

GRIs are terrible news for anybody who relies on international freight. And there were hundreds of GRIs and Surcharges implemented by ocean carriers in 2013 alone.

So you might ask the question:

What's going on with the industry, and more importantly, why does it keep costing you more and more money to do business?

Why A General Rate Increase?

It's been a rough few years for shipping and freight, and it's also the reason why there have been so many GRIs.

Ocean freight carriers are losing money.

In fact, some are only saved from complete collapse by government assistance.

There are many reasons, but the main one being something all of us can sympathize with - high gas prices.

The cost of fueling a 60,000 ton cargo ship making a journey halfway across the world is astronomical. 

Accordingly, even a small increase in fuel costs can have a huge impact on the operating costs of freight carriers.

Fuel costs have remained stubbornly high since 2011, so it's no coincidence that there have been a large number of rate increases since then.

But it gets worse.

Overcapacity. Competition amongst services. Declining demand due to high rates.

It is a vicious circle that is detrimental to both the carriers and anyone seeking to move freight.

How To Minimize The Effects Of General Rate Increases

Freight carriers have continued to remain unprofitable even in 2013.

Which means you shouldn't expect the rate of GRIs to slow down anytime soon.

Depending on the ocean carrier, the price of a GRI can vary dramatically. In fact, competition among carriers sometimes causes certain carriers to forgo rate increases!

If you are planning to move large volumes of freight this year, we suggest the following:

1) Do It Early:

You can expect more rate increases this year, no matter what carrier you're using. If you can, try to get your product shipped as soon as possible to avoid the price increases BEFORE they happen.

2) Compare Rates Before You Commit:

Different ocean carriers will have drastically different prices. The carrier that is the most affordable today might not be two months from now. There has been extreme fluctuations in pricing, especially during these last few years. For this reason, we suggest you carefully pay attention to CURRENT rates and how they change. You can easily do so by using software that makes it easier to compare rates automatically.

A General Rate Increase is detrimental to everybody it affects.

But with some planning, you can minimize the effects of any GRI and avoid rate increases before they occur.