5 charges that impact the total freight price

5 charges that impact the total freight price

Shipping accounts for 90% of global trade, it is safe to argue that the ocean freight sector is essential to maintaining the modern economy. The dozens and millions of businesses that import and export goods in shipping containers to and from every part of the world are also the biggest contributors.

Due to shipping’s tight relationship to the economy, even the smallest shifts in the markets can have a significant impact on global trade, supply, and demand. Generally speaking, shipping costs are determined by volume, route, and port and carrier fees. However, there are also outside variables that have a significant impact on container freight price but over which shippers have little control.

General Rate Increase

The General Rate Increase, or GRI, is the increase that shipping lines make to the cost of ocean freight. As part of the seasonal cycle, this is typically used to aid carriers in recovering from weak market movements. A GRI is often used just once, assuming an annual period of stability. However, there have been instances when the GRI was utilized frequently.

The GRI can theoretically be used with any ocean freight price. However, we have noticed that it now has an impact on the majority of imports, particularly those from the far east.

Carriers alone are responsible for deciding whether to apply the GRI, which routes it will effect, and how much. Shipping lines are required to submit rate increases to the Federal
Maritime Commission in the US 30 days before the hikes are scheduled to take effect. This could be as short as a week in other nations. This implies that if your reservation isn’t confirmed before the GRI takes effect, you might have to pay the new, increased price, which might occasionally be double as much.

Lack of trucks

To put things mildly, the lack of truckers is a regular logistical issue for shippers. And one that is out of their hands. Since the ELD mandate’s adoption in December of last year, the trucker scarcity issue in the US has gotten worse, making it difficult to find trucks and resulting in supply chains that are all but paralyzed.

Price increases for maritime freight are a typical market response to trucking shortages. Rates increase as a result of declining capacity and correspondingly rising demand. If you’re a shipper, your supply chain will either be disrupted or you’ll have to pay a premium price to hire a driver.

There are a few techniques to prevent delays in the case of a trucking shortage, including rerouting freight via alternate routes and/or ports, planning your shipment considerably earlier than you normally do, and having a backup plan.

Shipping Peak Seasons

From July until November/December, when businesses start to get ready for the holiday season, there is a large volume of business. In response to the increased demand for their services during the start of the high season, shipping lines hike freight prices. There may also be a peak season premium in some circumstances to cover the additional logistical work required to meet the spike in demand.

China, the second-largest exporter in the world, has additional peak shipping seasons to be aware of. It is especially difficult during the weeks that coincide with the Chinese New Year (anytime in January or February) and National Day Golden Week (first week of October), when all manufacturing and sales in the nation halt completely. Every year, this has a significant impact on supply chains all across the world.

Emergency Bunker Surcharge (EBS)

Shipping lines have a number of surcharge options at their disposal that they can use as needed. The Emergency Bunker Surcharge, or EBS, which addresses the increase in fuel prices, is one such surcharge.

The Bunker Adjustment Factor (BAF), which is used to cover the fluctuating fuel costs resulting from regular market fluctuations, should not be confused with the EBS. Additionally, the BAF is typically disclosed beforehand. Contrary to the EBS, which can be applied as a last-minute emergency measure and result in unexpected cost imbalances in shippers’ logistics budgets, this is not the case.