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5 FACTORS THAT AFFECT SHIPPING COST


Ocean freight is one of the major contributors to world trade. With a representation of 90% of world trade, it is imperative for us to know the factors impacting shipping rates. The biggest contributors to the industry are the millions of companies importing and exporting from different countries all over the world. Given its great impact on the economy, even the smallest change can greatly affect demand, supply, and international trade in general. Now, let’s delve into 5 factors that contribute to the fluctuation of shipping rates.

  • GRI

The GRI which is known as general rate increase is the adjustment of ocean freight prices by shipping lines, usually as a means of helping carriers recover from low market movement as part of the seasonal cycle. This change is usually made once a year on a stable year and other times, GRI is applied several times a year.

Generally, GRI can be applied to any ocean freight rate but recently, it is affecting most imports, especially from the far east. In the US, shipping lines must file rate increases 30 days before they are set to take effect. But in other countries, it may be as little as one week. This means, your booking has to be locked in not later than the day the GRI kicks in else, you may end up having to pay for the new increased price which is double in some cases

  • SHIPPING HIGH SEASONS

As is the case in every industry, shipping has its high and low seasons. When the demand for ocean freight services peaks, it in turn affects vessel capacities, the global supply chain, and freight prices. The peak season is usually from July up until November/December, such as companies preparing their merchandise for the holiday season. This increase in demand in turn causes shipping lines to raise their freight rates. In some cases, an extra surcharge is demanded to fit in the extra work that is required during this season.

  • EXTRA OCEAN FREIGHT COST

It is almost impossible to predict delay costs like demurrage, detention, and fee from customs inspection. Nonetheless, there are certain measures a shipper can take to mitigate the chances of incurring this extra cost which is never included in the shipping rate but can greatly affect your overall shipping cost. The smallest discrepancy in your paperwork is room for suspicion, causing customs to check your shipment therefore, endeavor to get all your documentation right and submitted on time. Planning your shipment in advance is also advisable to avoid running into the extra cost as it gives you enough time to be flexible and avoid high seasons and trucking shortage problems.

  • EMERGENCY BUNKER SHORTAGE(EBS)

this refers to the charge that addresses the increase in fuel costs. Shipping lines implement surcharges whenever the need arises and EBS is implemented as an emergency charge hence, one only finds out at the last minute leading to a sudden change in the shipping cost. Although shipping lines term it as an emergency surcharge, shippers believe it to be an unfair practice and claim it is a charge used by shipping lines to cover up operating losses.

  • TRUCKING SHORTAGES

The shortage of truckers is a common logistical problem for shippers. When trucking shortages occur, ocean freight prices increase as a natural reaction, and as a result, you will end up having to pay a high price to secure a trucker or face disruptions in your supply chain. However, redirecting cargo through an alternative route, planning your shipment earlier, and having a contingency plan are some ways to avoid delay when faced with trucking shortages

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