A General Rate Increase (GRI) is the average amount by which a carrier increases their base ocean freight rates along a given lane. For cargo that has a destination within the United States, a GRI is announced and filed 30 days before the increase as required by the Federal Maritime Commission (FMC).
Once a GRI is effective, it becomes part of a new ocean freight rate that includes both the previous market rate and the GRI. This is known as a GRI being “rolled” into a base rate. Carriers impose GRIs to remain profitable when servicing specific lanes. Fuel costs, over capacity, competition, and changes in demand can all contribute to carriers imposing GRIs.
Are you prepared for peak season?
As shippers begin to ramp up for the holiday season, demand for ocean freight space is increasing. With this rise in demand and vessel space tightening up, we expect to see rates continue to climb through Q3.
We have already seen many trade lanes experiencing increases this peak season, especially on foreign-to-foreign (F2F) shipments. These lanes are always the most volatile as they are not regulated. On the other hand, U.S. exports to Latin America should remain steady as they are monitored and controlled by the Federal Maritime Commission (FMC).
Mitigating General Rate Increases
GRIs can greatly increase your shipping costs, especially if you’re moving large volumes of freight during peak season. Fortunately, there are certain steps you can take to minimize the effect of GRIs on your shipments.
- Be Flexible If you cargo has a flexible ship date, you can to wait for any implemented GRIs to decrease or be dropped completely.
- Compare rates Ocean carriers can have different prices for similar services. Prices are constantly fluctuating. It’s possible for the most affordable carrier today to be much more expensive one or two months down the road. It’s important that you pay attention to current rates very carefully and look for pricing trends.
In the U.S., a GRI is implemented at the beginning of every month, but later on the rate is dropped weekly. A GRI is then added the following month to the reduced rate from the second week of the month before.
In essence, it’s a carrier rate increase that is announced monthly. The amount of the increase always depends on market conditions and are sometimes mitigated or postponed. Usually, they are finalized one week before they become effective. GRIs are hard to pin down because they are very unpredictable.
GRIs are an unfortunate cost of shipping international ocean freight, and are sometimes unavoidable. However, by paying diligent attention to market trends and comparing carrier rates, you can significantly decrease the effect of GRIs on your bottom line.
2 Comments on “The Unpredictable GRI: Implementation and Effects on Ocean Shipping”
Hi Eli…question for you…when GRIs are applied are they based on the gate-in date, the cutoff date, or the sailing date?
For example, let’s take a FF that delivered a container to port on Dec 26, for a ship that had a cutoff date of Dec 30, and ATD of Jan 3. If the GRI took effect on Dec 28th, is the GRI applied? What if the GRI was set for Jan 1st?
Hi Gidon – that is a great question! GRIs are applied on the gate-in date.