Shipping Surcharges Explained — And How to Present Them to Clients Without Losing the Deal

Every freight forwarder has been in that conversation. The rate you quoted a client last week no longer matches the invoice this week. There is a surcharge on it — BAF, PSS, GRI, ERS — that the client was not expecting and is now asking you to explain. That conversation goes better when you understand exactly what each charge is and have a clear, honest way to communicate it.

The surcharges that move freight rates most frequently

BAF — Bunker Adjustment Factor

BAF is the fuel cost surcharge applied by ocean carriers to recover changes in bunker fuel prices. It is calculated based on the vessel's fuel consumption on the lane, adjusted for the current price of marine fuel — either VLSFO (Very Low Sulphur Fuel Oil, the standard post-2020 IMO regulation) or LNG on vessels with that capability. BAF fluctuates with global oil markets. On India-GCC lanes, BAF can represent 8 to 18 per cent of the total freight cost depending on the fuel price environment.

GRI — General Rate Increase

A GRI is a blanket rate increase announced by carriers — usually with 30 days' notice — when they determine that current market rates are below their cost recovery threshold. GRIs are not universally imposed — they succeed when market conditions support them (when demand is high and space is tight) and fail when they do not (when there is excess capacity). Most GRIs are announced at a higher level than what actually sticks in the market.

PSS — Peak Season Surcharge

The PSS is imposed during high-demand periods when vessel utilisation is consistently above 90 per cent. On the India-GCC corridor, peak season surcharges typically emerge in October to December and again in March to April, coinciding with pre-Ramadan restocking and Indian festival season export surges.

ERS / ERCS — Emergency Recovery Surcharge / Emergency Cost Surcharge

These are the surcharges carriers impose when an unexpected operational event — a canal closure, a port congestion event, a vessel diversion — creates abnormal costs that BAF alone does not cover. The Suez Canal disruption that ran through 2024 and into 2025 triggered sustained ERS charges across multiple carriers on Europe-facing lanes.

How to communicate surcharges to clients without damaging the relationship

Clients accept surcharges they were warned about. They resent surcharges that appear on an invoice without context. The most effective approach: include a surcharge clause in your service agreement that explicitly states that freight rates are subject to carrier-imposed surcharges, with 48 to 72 hours' notice where possible. Then communicate each surcharge proactively, before it appears on the invoice, with a one-line explanation of what it is and why the carrier has imposed it.

A message that reads 'Maersk has announced a GRI of USD 200 per container effective June 1 on the JNPT-Jebel Ali lane — this will be reflected in bookings from that date' is a message clients receive without friction. An invoice line that reads 'GRI — USD 200' without context is a complaint.

When you should absorb a surcharge — and when you should not

On long-term contract clients where the relationship is valuable and the surcharge is small, absorbing it once, with a note explaining what you did and why, builds loyalty. On spot clients or single-shipment bookings, pass it through with explanation. The mistake most forwarders make is absorbing surcharges silently — which trains clients to expect that surcharges are always negotiable and eventually kills the margin that makes the relationship viable.

Key Takeaways

1. BAF, GRI, PSS, and ERS are the four surcharges that move freight rates most frequently. Know how each is calculated and what triggers it.

2. Clients accept surcharges they were warned about — communicate each surcharge proactively, before the invoice, with a one-line explanation.

3. Absorb a surcharge strategically and explicitly. Absorbing it silently teaches clients that your invoice is always negotiable.

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