Learn why GRIs are introduced, what drives them, and how your business can respond strategically.
Like most SMBs and eCommerce businesses that usually use ocean freight services, you may often wonder what drives increases in shipping costs.
General Rate Increases (GRIs) remain one of the most impactful reasons for increased shipping costs, making it necessary to find ways to preserve or improve your profitability and operational efficiency.
But what exactly are GRI shipping changes, and how should small and medium-sized businesses react to them? What strategies can you use to remain in business in the face of the additional costs?
The good news is that you don’t have to react to the increments or implement the cost-optimization strategies alone.
Experienced freight forwarders can help you. We can research and recommend trade routes without pending or active GRIs.
Register a free account with Ship4wd today to optimize your ocean shipping processes and costs.
What Is a GRI in Shipping?
GRI in shipping stands for General Rate Increase and is the amount by which ocean carriers raise their base rates across all or specific trade routes or shipping lines.
GRIs and the amounts are announced by carriers under the Federal Maritime Commission (FMC) guidelines.
The FMC requires carriers to file any GRIs with them at least 30 days before they take effect. Where a rate change increases the shipper’s costs, it is usually implemented at least 30 days after its announcement.
Why GRIs Are Implemented
Carriers can implement GRIs for several reasons:
- To Mitigate the Added Costs of Shipping: Carriers usually use a GRI to offset increases in their basic operational costs, especially labor and fuel.
- To Secure Higher Profit Margins: A carrier can use a GRI to leverage increased container demand and realize higher profits. The idea is to ensure that shipping not only remains viable but also achieves profits so the carrier can remain in business.
- Reinvestment in Shipping: Carriers often plow back the revenues from GRIs into the business to improve infrastructure and operational efficiency. They can upgrade containers or ports, invest in eco-friendly technology, or boost the service quality. The end result is a better overall client experience.
- Promote Environmental Compliance: GRIs can help carriers comply with environmental regulations and sustainability policies, such as cleaner technologies and fuels, to reduce the industry’s ecological footprint.
Factors Influencing GRI Charges in Shipping
GRI charges depend on five major factors:
- Demand and Supply: Too much pressure on shipping capacity due to increased economic activity triggers higher GRIs.
- Fuel Costs: Fuel prices are highly volatile, and carriers usually need to adjust their rates to continue serving their clients efficiently.
- Carrier Decision Not to Implement GRI in Full: In some cases, a carrier may not increase rates by the full amount filed with the FMC. This usually happens if they realize they could lose significant business because the increase is too high. For example, they may choose to lower it to $350 instead of the planned $500.
- Carrier Operational Costs: Increases in operational costs, such as port fees and labor expenses, usually lead to higher GRIs.
- Regulatory Changes: Some policy or regulatory changes could lead to GRIs, such as new environmental policies that require carriers to invest in new technologies or cleaner fuels. Trade policy changes, like new trade agreements, can also impact shipping volumes and routes, leading to GRIs.
How GRI Affects Shippers and Forwarders
Generally, an ocean freight GRI increases shipping rates and can cause significant business losses for both shippers and freight forwarders.
Shippers may have to increase product prices to remain in business or improve their profit margins. Price increments can lead to the loss of customers who shift to cheaper products or stop using a certain product altogether.
Freight forwarders may lose clients if shippers flee to other cheaper service providers or shipment methods.
Here are some specific effects of GRIs on shipment and cargo:
- Effect on Pending Shipments: If you hand over your cargo to the carrier’s possession on or the day after a GRI starts, your charges will increase by the GRI amount.
- Effect on Cargo Already in the Carrier’s Possession: Shipping rates are usually locked down once you turn your cargo over to the carrier’s possession. You won’t have to pay a GRI amount even if the cargo doesn’t set sail until after the GRI takes effect.
- Effect on Cargo Not Yet Loaded onto a Vessel: In some cases, a carrier may apply a GRI to any cargo that’s not loaded onto a ship, regardless of when you booked the shipment. For example, if you booked it on the 25th at a specific rate but loaded on the 1st when the GRI takes effect, you’ll have to pay the GRI amount.
Next, let’s look at how the GRI affects LCL and FCL shipping specifically:
- LCL Shipments Become Too Expensive for SMBs: Less-than-container load (LCL shipping) can become too expensive for smaller shippers and eCommerce businesses. The costs can add up quickly because the GRI increase applies to each weight unit or cubic meter.
- Bigger Increase in Absolute Costs in FCL Freight: In full container load (FCL) freight, the change is usually a flat rate increase per container. The result is a bigger absolute increase in cost for larger shipments. However, if you fill the container, the per-unit cost effect is lower than in LCL.
4 Tactics to Minimize GRI Impact
As a shipper, you’ll always look for ways to ship more efficiently and cost-effectively.
You can use these four techniques to reduce the cost increment impact of a GRI:
1. Strategic Planning
You may find this cliche, but excellent planning helps. Start by analyzing how GRIs could affect your shipping costs in the long run.
Next, use strategies like shipment consolidation to optimize space and reduce your shipping frequency, which can help you reduce costs despite increased rates.
2. Using Alternative Shipping Methods and Routes
You can shift to new ocean shipping routes or lines that aren’t affected by GRIs.
Using trucking, rail, or air freight shipping services can also help because they may be cheaper during GRI periods.
3. Exploring New Carriers
You can shop around for new service providers by comparing the services and shipping rates to discover lower costs without jeopardizing service quality.
Our freight forwarding cost calculator can help you obtain and compare shipping quotes from multiple carriers.
4. Raising Product Prices
In some pressing situations, you might have to increase the prices of your products to remain profitable or offset the increase in your shipping costs. However, you must tread carefully here, as you might lose clients.
Most techniques for reducing shipping costs require working with a freight forwarding company.
A forwarder can help you implement them more easily because they have more exposure in the industry and can stay abreast of developments like new GRIs.
GRI Shipping Trends to Watch
Observing GRI trends can help with proactive forecasting and early adjustments that allow you to sidestep higher costs.
Here are some GRI ocean freight trends to consider:
- Large Carriers Following Suit to Match Competitors: When a major carrier announces and implements a GRI, other large carriers usually follow their lead. For example, when FedEx announced a 5.9% GRI for 2024 in 2023, UPS and DHL also announced 5.9% GRIs for 2024.
- Smaller Carriers May Also Follow Suit: Smaller carriers may introduce a GRI when a major carrier does the same. For example, Lonestar also announced a 5.9% GRI after FedEx and UPS announced their rate changes.
- Potential Decrease in GRI Percentages: Carriers may reduce the percentage of the shipping GRI from previous years. For example, FedEx’s GRI in 2023 was 6.9%. The new GRI in 2024 was 5.9%. UPS had the same decrease.
- GRIs Becoming More Common and Targeted: GRIs for shipping were usually less frequent and often happened after a major cost change, such as a spike in fuel prices. Expanding global trade has led to shipping complexities, making GRIs a more frequent tool for adjusting shipping rates.
Manage GRIs and Optimize Shipping Costs with Ship4wd
As an SMB-dedicated forwarder, we can help you manage sea freight GRIs and optimize your shipping costs in various ways:
- Tracking GRIs for Timely Cargo Drop-Offs: We can proactively track GRIs from carriers to ensure we turn your cargo over to the carrier’s possession before a GRI takes effect, leaving ample time for loading it onto the vessel.
- Proactive Coordination with Suppliers: We can communicate and coordinate with your suppliers on your behalf to avoid cargo shipping delays that would make your shipment coincide with a GRI.
- Researching GRI-Free Trade Routes: Our shipping and logistics experts can proactively research trade routes, shipping lines, and carriers without pending or active GRIs.
- All-in-One Dashboard for Searching and Comparing Rates: Our digital platform allows you to search and compare shipping quotes from different carriers to choose the most favorable.
- Secure and Digital Credit Facilities: Since GRIs are technically inevitable, you can use our pay-after-cargo-arrival credit services to free up your cash flow.
- Online Payments: Whether you pay instantly for your shipment or use our credit facilities, our fully digital payment system can reduce your costs. You can avoid costly wire transfer fees and slow, outdated banking payments.
Sign up with Ship4wd today to optimize your international shipping costs.
Frequently Asked Questions (FAQs)
Let’s answer common questions shippers usually ask about GRI freight changes.
What Is the Difference Between GRI and PSS?
GRI, or General Rate Increase, is the amount sea carriers add to their base rates for all or specific ocean shipping lines to offset increased operational costs, among other reasons.
PSS, or Peak Season Surcharge, is an increase in shipping rates applied by carriers, specifically during peak seasons, to offset increased operational costs and congestion.
Unlike a GRI, a PSS is limited in time as it applies during the peak season and is removed afterward.
How Often Do GRIs Happen in Shipping?
In stable or non-volatile markets, GRIs typically happen once a year.
However, some years see no GRI, while some may have multiple increases.
Are GRIs Applied to All Types of Shipments?
GRIs apply only to sea shipping, affecting both full container load and less-than-container load shipments.
What Industries Are Most Affected By a GRI?
Industries that rely heavily on international shipping for raw materials and finished goods are typically more affected by GRIs.
The main industries affected the most include:
- Manufacturing industry, especially in the electronics, automotive, and textile subsectors.
- Retail industry, which relies heavily on affordable shipping to bring goods to their storage facilities or clients.
- Oil, gas, agriculture, and fishing industries as they have significant social and environmental impacts.
Conclusion – General Rate Increase in Shipping
GRIs are helpful adjustments for carriers to remain in business, boost profitability, and provide better services to shippers amidst increased operational costs.
Despite the financial impacts of GRIs, shippers can still benefit by making certain adjustments, such as:
- Seeking alternative routes and carriers.
- Optimizing routes.
- Consolidating shipments.
- Raising product prices carefully.
While freight forwarders also feel the financial impacts of GRIs, which they usually pass onto the shipper, businesses can still work with them to manage GRIs and optimize shipping costs.
At Ship4wd, we can help you stay informed about potential and active GRIs, ensuring you plan your shipments strategically to avoid increased costs.
Let us streamline your shipping operations and optimize costs going forward — create a free account with us today.