Is the end of the GRI near?
16 March 2016
Last February, the European Commission announced to take measures against the General Rate Increase (GRI). The GRI has been used in the shipping industry for over 20 years. It allows shipping companies to publish their intended rate increases for freight towards Europe almost simultaneously. The EU commission is worried that this might harm both competitors and users and therefore wants to put an end to it.
Rate increases are published every month. In practice, this would allow shipping companies to communicate their intended prices with each other. This might in turn facilitate unfair competition. Because of that, the European Commission wants to settle arrangements with shipping companies about rate changes. These are the most important agreements in the draft proposal:
- Shipping companies no longer publish a GRI;
- Rates increases may no longer be named as an amount;
- Rate announcements must be transparent. The total price must be split up into categories, such as: base rate, bunker price, security, terminal handling and seasonal charges when applicable;
- All rate announcements are binding. Shipping companies may not institute an increase, only a decrease;
- Rate announcements cannot take place earlier than 31 days before the effective date.
Above agreements only apply to the so called spot rates. These are only applicable to one shipment. The law will not concern fixed contract prices or ongoing contract negotiations.
The investigation of the European Commission concerning the GRI has not yet been completed. Therefore, the above agreements are not binding at the moment. Rate increases are still being announced regularly, although they usually are not (fully) implemented.
It is to be expected that the ban on the GRI will not have much influence on customers of shipping companies, though it will result in less commotion. The anticipation on rate increases will disappear. Also, the stock acquisition can no longer be negatively influenced. Last-minute price adjustments or attempts to purchase stock more cheaply frequently happened. Sometimes, it even proved to be unnecessary in retrospect. In the future, these kind of actions won’t be necessary anymore.
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