The Difference Between Premium And GRI Rates In Shipping?
What is the Difference Between GRI and Premium Rates in Shipping
It is of interest what has occurred over the last 4 to 5 months where all the shipping carrier’s started to implement this “premium strategy”, which is actually just a GRI variation without the 30-day notice that the FMC (Federal Maritime Commission) requests.
This is a policy that allows the steamship lines a way to adjust their rates daily by taking advantage of a sudden increase without notice or any possibility to dispute. It also comes as a great surprise how neither the authorities nor any of the companies have pointed out the distortions or irregularities in the broken system.
What Is GRI?
Let me first give an explanation of a GRI for people that don’t know a lot about the shipping sector. It stands for General Rate Increase, that all carriers are required to report to the FMC, which stands for Federal Maritime Commission when they plan to increase freight levels for specific trade lanes. In this way, the exporters, importers, NVOCCs, forwarders, and any other party is ready to change prices and fees accordingly. It also gives these parties a chance to react to any price variations to maintain a balanced supply chain.
Carriers with a large volume surge over the last few months have experienced massive opportunities to make ridiculous profits (and the fact that they have already implemented stringent blank sailing programs to adjust the capacity according to the demand) and they understand that the sole obstacle to increase and change rates very suddenly, used to be the GRI regulation.
This is why each one came up simultaneously (very interesting timing), with a “priority/diamond/premium and any other random terminology linked with this” strategy, which is in fact very simple. The carriers are now adding on a specific amount on rates that are already extremely high, without notice, and totally arbitrarily. In these ways, the carriers have maximized their profits with very high-revenue cargo on their vessels.
One might have thought that services provided should be exceptional, especially since the rates have just about tripled from what these fees were a year ago. However, the services have not improved. For example, here is a mention of just 1 piece of this type of data. The reliability schedule has actually declined from 80 to 85% to 40 to 45%.
Let Me Give A Concrete Explanation On What Has Happened With This Situation
A business that plans to import asks a freight forwarder to schedule a booking. Then the freight forwarder arranges a booking with a carrier, which if they happen to be fortunate enough, accepts this booking.
It is at this point that we are faced with three scenarios:
The carrier will cancel the booking directly before a vessel begins receiving without moving onto another one. It will just simply cancel the booking.
The carrier accepts the booking, yet they won’t provide any guarantees that the necessary equipment will be made available.
Equipment and space are provided on an intended vessel based on the “regular” rate.
If the booking has been placed with the “premium, priority, diamond, or golden”, apparently equipment and space become available rather suddenly.
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