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HomeShippingWhat is the Difference Between GRI and Premium Rates in Shipping?

What is the Difference Between GRI and Premium Rates in Shipping?

It is extremely interesting what has happened over the past 4-5 months where every shipping carrier started implementing this “premium” strategy which is nothing but a variation of a GRI without the 30-day notice requested by the Federal Maritime Commission (FMC.)

This policy has allowed steamship lines to basically adjust rates on a daily basis by playing with sudden increases without any notice and any possibility to dispute. It’s also very surprising how no one – either companies or authorities – have raised their hands pointing to irregularities and distortions in this broken system.

What is a GRI?

Let me just go back and explain what a GRI is for the people new to the shipping industry. It’s simply a “General Rate Increase” that every carrier has to communicate to the FMC (Federal Maritime Commission) if they are planning to increase the freight level for a specific trade lane. This way, importers, exporters, forwarders, NVOCCs, and other parties are ready to adjust prices accordingly and react to price variations in order to keep the supply chain balanced.

Carriers, with the big volume surge of the past few months, have seen a huge opportunity to make a ridiculous profit (also considering that they had already set in action a very strict blank sailing program to adjust capacity according to demand) and have understood that the only obstacle to change and increase rates suddenly was the GRI regulation.

This is the reason why they all came up at the same time (interesting timing) with the “premium/priority/diamond (and whatever random terminology can be associated with this)” strategy which is very simple. The carriers add a certain amount of money on already skyrocketing high rates, totally arbitrarily and without any notice. This way, they maximize the profit with high revenue cargo on a vessel.

One would think that the service provided would be exceptional considering that we are seeing rates literally triple from what they were one year ago. However, the answer is no. For instance, just to mention one piece of data, the schedule of reliability has declined from 80-85% to 40-45%.

Let me explain concretely what is happening with this situation.

A company that is importing asks its freight forwarder to place a booking. The freight forwarder places the booking with the carrier, which if they are lucky, accepts the booking.

At this point we have three scenarios:

  • The carrier cancels the booking right before the vessel start receiving without even rolling to the next one. It simply cancels the booking.
  • The carrier does not cancel the booking but does not provide the guarantee that any equipment will be available.
  • Space and equipment are provided on the intended vessel at the “regular” rate.

If, instead, the booking was placed with “premium, golden, diamond, or priority,” apparently space and equipment become suddenly available.

This is food for thought for the FMC at this point.

Michele Marinellihttp://www.mts-logistics.com
Michele was born and raised in Italy and spent most of his early years in Bologna, a nice and vibrant city in northern Italy. He graduated from the University of Bologna with a master’s degree in industrial Engineering with a specialization in Logistics and Production in 2007.  Michele worked for a French-based Corporation in Bologna for almost 6 years as Project Manager. In January 2014, Michele moved to the U.S. for a fresh start in New York, and worked for 3 years for one of the major Steam Ship Lines as an Export Commercial Liner, in North European trade. He started at MTS Logistics in January 2017 as Sales Executive. Michele is currently covering and developing several areas: Texas, New York/New Jersey, Georgia, South Carolina, and North Carolina. His first priority is to create strong relationships based on trust, competence, and honesty. Michele loves to travel and does so for at least twice monthly to meet his customers/prospects in person to hear face-to-face how he can help them by providing the best service possible. Fun Fact: Michele, despite being Italian, loves basketball (watching and playing) instead of soccer and the NBA is his secret passion.
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