Figuring out the best time to ship goods can feel like a gamble. Sometimes you find cheap rates with great space, while other times, you’re struggling to find acceptable rates.
We’re here to help you to understand what are peak season surcharges, with tips and some advice on how best to navigate these rate adjustments.
The two most common types of rate adjustments that ocean carriers can apply to freight rates are peak season surcharges (PSS), and general rate increases (GRI).
PSS are additional charges added to your base rate when there is an increase in demand for carrier space, generally during a specific season. GRI is another additional charge that is added to your base rate when there is a rise in operational costs for a carrier. But unlike PSS, these are not subject to only peak seasons.
Ocean freight rates are cyclical, meaning they go through cycles of upward and downward price changes. The peak shipping seasons lead to surcharges as the demand for shipping goods increases. This peak season usually occurs between July to October, as well as before the following holidays:
- Black Friday
- Chinese New Year
Peak season surcharges can be a burden, particularly if you desperately need to move goods, or if you’ve entered into contracts without negotiating a clause on PSS being added to your base rates.
There isn’t a lot a freight forwarder or shipper can do against peak season surcharges, but here are some tips for minimizing PSS that include:
- Negotiating for fewer PSS adjustments in your contracts
- Making sure to include a clause that PSS can only be included in mutual agreements
- Booking shipments before or after peak seasons
- Leveraging relationships with freight forwarders, NVOCCs or carriers
- Booking NOR (Non-Operating Reefer) if your commodity is suitable for NOR
- Considering carriers with lower PSS adjustments
- Booking on slower routes to reduce costs
With careful planning and knowing where to search for rates, you can minimize a significant increase in your ocean freight rates during peak seasons. However, reducing the effects of PSS may not always be possible. For example, booking shipments too soon may increase warehousing costs, which may be more costly than a higher rate cost. Sometimes, it may not be possible to offset PSS.
As explained earlier, the other rate adjustment that’s common in ocean freight is a general rate increase (GRI). This term can be often confused with PSS. Unlike PSS, GRI adjustments to shipments can be applied during any time of the year due to an increase in operating costs for carriers or if there’s an increase in demand, while PSS adjustments are only subject during peak seasons.
If BCOs and freight forwarders don’t negotiate a clause to reduce GRI, they may have no choice but to pay GRI adjustments.
Ocean freight peak season surcharges are a reality in the freight industry. Another reality is effectively paying your PSS and other freight expenses.
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