FedEx rolls out new pricing increases for 2024, as well as for ‘Demand’ surcharges

Memphis-based global freight transportation and logistics services provider FedEx announced rate increases today for its FedEx Express, FedEx Freight, and FedEx Ground subsidiaries, which will take effect on January 1, 2024.

FedEx announced that its pending rate hikes are comprised of the following:

• FedEx Express shipping rates will increase by an average of 5.9% for U.S. domestic, U.S. export, and U.S. import services;
• FedEx Ground and FedEx Home Delivery shipping rates will increase by an average of 5.9%. FedEx Ground Economy shipping rates will also increase; and
• FedEx Freight shipping rates will increase by an average of 5.9%-6.9% dependent on the customer’s transportation rate scale. This change applies to shipments within the U.S. (including Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands) and between the contiguous U.S. and Canada

“The average annual rate increases are one percentage point lower than last year’s general rate increase,” said FedEx. “The price adjustments reflect incremental costs associated with the current operating environment, while enabling FedEx to continue investing in service enhancement, fleet maintenance, technology innovations, and other areas to serve customers more effectively and efficiently.”

Rick Watson, president of New York-based RMW Commerce Consulting, told LM that this announcement reflects what he called a pretty standard rate increase.

“Some in the industry have commented with the slack in demand that you might see carriers holding prices firm or even reducing prices,” noted Watson. “I think that turned out to be wishful thinking on the part of shippers.  

And Jerry Hempstead, president of Orlando-based Hempstead Consulting, told LM that he suspected FedEx might wait for UPS to announce its 2024 rate increases, as it will need to pay for its recently-completed contract with the Teamsters, with FedEx then following suite.

“With inflation still high and [likely to] cut into the margin of the announced increase, I’m very surprised FedEx did not go up the 6.9 % they did last year,” he said. “The parcel business is always full of surprises 

As for UPS, he said that history shows it waits until November around to announce rate increases.

“If it’s their plan to take the 6.9% increase, then it’s best they hide for as long as they can,” he added. “Normally, they try to give customers 30 days advance notice prior to implementing.

It’s rare now that the 30 days is baked in the customers’ contracts. It used to be routine to have ‘prior written notice,’ but those days are gone.” Now the thought process at FedEx and UPS is ‘we do it because we can.’”

Other FedEx pricing changes: FedEx also stated that effective September 4, it will officially rebrand “peak” surcharges to “demand” surcharges, explaining that during times of elevated volumes, high demand for capacity, and increased operating costs across its network, it will implement Demand surcharges. Which it said are determined for each market based on regular assessments of shipment volume and capacity within its network to accommodate.

Some examples of these new Demand surcharges, for FedEx Express and FedEx Ground, include:

• Demand-Additional Handling Surcharge for U.S. Express Package Services, U.S. Ground Services, International Ground Service, with a surcharge amount of $6.95 per package, effective from October 2, 2023-January 14, 2024;
• Demand-Oversize Charge U.S. Express Package Services, U.S. Ground Services, International Ground Service, with a surcharge amount of $73 per package, effective from October 2, 2023-January 14, 2024;
• Demand-Ground Unauthorized Package Charge for U.S. Ground Services, International Ground Service, with a surcharge amount of $410 per package, effective from October 2, 2023-January 14, 2024;
• Demand Surcharge for FedEx Ground Economy Package Services, with a surcharge amount of $1.60 per package, from October 30, 2023-November 26, 2023, $2.60 per package, from November 27, 2023-December 10, 2023, and $1.60 per package, from December 11, 2023-January 14, 2023; and
• Demand-Residential Delivery Charge for FedEx Express, FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy, and FedEx One Rate packages that will be assessed by shipper customers’ peaking factors, from October 30, 2023-January 14, 2024