FedEx rolls out rate changes for certain package types, effective during holiday shipping season

Earlier this month, Memphis-based transportation and logistics power FedEx said it will not implement additional residential holiday season surcharges, save for oversized or unauthorized shipments or those that require additional handling. The company initially instituted this policy a year ago.

“FedEx delivers possibilities every day for millions of small- and medium-sized businesses,” said Raj Subramaniam, executive vice president, chief marketing and communications officer, FedEx Corp., in a statement. “We are demonstrating our support for these loyal customers during this critical timeframe by not adding additional residential peak surcharges, except for situations where the shipments are oversized, unauthorized or necessitate additional handling.”

As for shipments that require charges from November 19, 2018 through December 24, 2018, FedEx said they will be as follows:

• Peak-Additional Handling Surcharge of $3.20 per package for U.S. express package services and U.S. and international ground services;
• Peak Ground Unauthorized Package Surcharge of $150 per package for U.S. and International; and
• Peak-Oversize Charge of $27.50 per package for U.S. express and package services and U.S. and international ground services

FedEx also announced general changes to surcharges on unauthorized shipments and some packages that require additional handling and will go into effect on September 3, 2018.

For packages with an actual weight of more than 70 pounds, the surcharge will go from $12 per package to $20 per package for U.S. express package services and U.S. international ground services, with the same increase per shipment for international express package services. And the Ground Unauthorized Package Charge will go from $300 per package to $675 per package.

FedEx said that it “continues to experience strong demand for transportation of larger and heavier packages,” adding  “[t]his increase reflects our commitment to continually invest in our business and responsibly manage capacity through our network to maintain outstanding service for these larger packages.”

FedEx is not alone in raising rates for oversized packages. On June 4, its biggest competitor, UPS, began to implement rate increases for large packages moving through its parcel network.

These charges, which were initially announced by the company last October, call for an increase for Over Maximum Limits and the Oversize Pallet Handling Surcharge to increase by $150, from $500 to $600, as well as a new Shipping Charge Correction Audit Fee.

UPS said the audit fee is assessed if the average shipping charge correction in an invoice week is more than $5, with the fee being the greater of $1 per package, or 6% of the total cost, that is subject to a shipping charge correction (SCC) or the total amount of the shipping charge.

A parcel management consultant told LM that the driver for these rate increases stem from various factors.

“These oversized packages don’t belong in the UPS small parcel network,” said John Haber, CEO of Atlanta-based Spend Management Experts, in a recent interview. “They belong in the UPS LTL (less-than-truckload) network, which is for more palletized types of freight. What UPS has been communicating [to shippers] is ‘we don’t want this stuff in our network, and if it is there we are going to charge you a lot of money.’ Customers obviously have not been getting the message close enough.”

UPS’s “overmax” charge was previously $150 and during peak season last year it went up to $500, for every time a shipper sent an oversized package through its network, which is now heading up to $650 as of June 4.

Haber said this is a surcharge only, meaning it does not take freight and fuel costs into account.

“That same shipment could move via LTL even as a residential delivery for half the cost,” he said. “It is really e-commerce that is driving it.”

New FedEx fuel surcharges are coming: Another charge announcement coming later this week from FedEx is in regards to certain fuel surcharge tables for FedEx Express and FedEx Ground, which will take effect on September 10, 2018, with details made available on August 10, 2018.

Jerry Hempstead, president of Hempstead Consulting, said that it is likely the adjustment in the fuel surcharge tables will match or be close to those of UPS, FedEx’s primary competitor, which, he said, would amount to roughly a 1% increase on shipment freight charges, along with a residential fee, and area surcharges.