FedEx Rolls Out Rate Increases For 2018

Transportation and logistics bellwether FedEx yesterday announced rate increases for various business lines, including FedEx Express, FedEx Ground, and FedEx Freight, which will take effect on January 1, 2018.

The announced 2018 rate changes by the Memphis, Tenn.-based company include:

FedEx Express shipping rates will head up by an average of 4.9% for U.S. domestic, U.S. export and U.S. import services. FedEx One Rate pricing will increase by an average of 3.5%;
FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 4.9%. FedEx SmartPost rates will also change;
FedEx Freight shipping rates will increase by an average of 4.9%. This rate change applies to eligible FedEx Freight shipments within the U.S. (including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands), between the contiguous U.S. and Canada, within Canada and between the contiguous .S. and Mexico. FedEx Freight rates within Mexico will also change;
Effective January 22, 2018, a Third Party Billing Surcharge will apply to FedEx Express and FedEx Ground shipments that are billed to a third party;
Effective January 22, 2018, applicable criteria and pricing for packages that require additional handling, are oversized, or are unauthorized, will change;
Effective January 22, 2018, FedEx SmartPost will apply dimensional weight pricing, and the Non-Machinable Surcharge will change; and
Effective January 22, 2018, FedEx Freight will implement an Over Length Surcharge of $85 per shipment and will be applied to shipments with dimensions of 8 feet or greater and less than 12 feet

FedEx officials did not provide any additional comments about the scheduled rate increases.

And the company’s primary competitor, UPS, has not announced 2017 rate increases at this point.

“Of note in this years FedEx annual General Rate Increase is the new fee of 2.5% on invoices that are third-party billed,” said Jerry Hempstead, president of Hempstead Consulting, in an interview.

“Nobody can fault FedEx for doing so because UPS has had this fee for this since January 2016. It was just money left on the table for FedEx this past year. The reality of this is that because so many now drop ship in this e-commerce world, there is an ever-increasing number of third party-billed transactions. But as has happened in the past this fee is negotiable if the carrier rep fights for your account.”

What’s more, he added that FedEx’s dimensional pricing rules, which include the FedEx Express and FedEx Ground U.S. domestic dimensional weight advisor change from 166 to 139 that took effect in January, will now be inflicted on transactions for SmartPost, the company’s last mile” delivery service partnership with the USPS, and is expected to be a net negative for customers.

“Because this hybrid postal product [SmartPost] is designed to be a B2C (business-to-consumer) solution it's going to hurt the e-commerce world tremendously,” said Hempstead.

“We also continue to experience growth in demand for large, heavy package delivery as a growing array of items are now being sold online ”Rajesh Subramaniam, FedEx EVP, Chief Marketing & Communications Officer

Other announced changes by FedEx that shippers need to focus on, according to Hempstead, are the announced changes to the Additional Handling/ Oversized transactions, including:

the Additional Handling Surcharge applying to any FedEx U.S. or international express package that measures greater than 48 inches along its longest side. All other Additional Handling Surcharge size, weight and packaging parameters remain unchanged; and
the Oversize Charge will apply to any FedEx Express U.S. package or FedEx Ground package exceeding 96 inches in length or 130 inches in length and girth. The shipping charges for an Oversize package will be based on the greatest of the package’s actual rounded weight, dimensional weight, and 90 lbs

These changes were somewhat telegraphed in comments made by Rajesh Subramaniam, FedEx EVP, Chief Marketing & Communications Officer, on the company’s fiscal fourth quarter 2017 earnings call in June.

“We also continue to experience growth in demand for large, heavy package delivery as a growing array of items are now being sold online,” he explained.

“Furniture, mattresses, sports and exercise equipment are increasingly moving to the FedEx Ground network for residential delivery. This trend has accelerated over the past 12 months, and we have made adjustments to facilities and investments in sortation technology that enable outstanding service for these larger packages. We're continuing to analyze pricing and surcharges for oversized packages to ensure that we have appropriate pricing for the service provided.”

The company's stock has climbed 14.2% this year, with the S&P 500 index SPX, +0.10% gaining 10.4%. FedEx announces earnings after Tuesday's market close.

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