UPS announces pricing changes for dimensional weight packages and additional handling charges

After announcing rate increases for various service offerings in early September, global transportation and logistics bellwether UPS recently announced additional pricing hikes on its website late last week.

Perhaps the biggest change it announced is the change Big Brown plans to make for its dimensional weight calculations for U.S. domestic services and UPS Standard from Canada import packages that are subject to UPS Daily rates.

UPS said that effective January 8, 2017 U.S. domestic service packages greater than 1,728 cubic inches will use a 139 divisor to calculate dimensional weight, and U.S. domestic services packages less than or equal to 1,728 cubic inches will continue to use a 166 divisor, while UPS Standard from Canada import shipments will use a 139 divisor.

When UPS and its primary competitor FedEx announced rate changes for 2011 in late 2010, they both announced they would be implementing a change to the dimensional weight volumetric divisor, which is used to tally the amount of space allocated to a specific shipment. It is derived by multiplying a shipments length, width, and height, and then dividing that figure by its weight and then dividing it by a specific number (typically 139 or 166), with the shipper being charged the greater of the result of the actual weight or the dimensional weight as determined by the aforementioned formula.

The reduction to a 139 divisor puts UPS in line with FedEx, whom also announced price increases in September, with its 139 divisor to take effect January 2, 2017.

In a September interview, Rob Martinez, president and CEO, Shipeware Systems Corp., a San Diego-based parcel consultancy, said that the change FedEx (and subsequently UPS) made in lowering the divisor is “cataclysmic…and paralyzing to many shippers not under custom contract DIM’s.” 

Another change announced by UPS set to take effect on January 8, 2017 is that its Additional Handling charge will be assessed for any package exceeding 48 inches, rather than the current limit of 60 inches.

In its 2017 “Selected Daily Rates Surcharge Changes, on the company’s Website, UPS noted that the additional handling surcharge will apply to any package with the longest side exceeding 48 inches, instead of 60 inches for all Air and International packages, with the additional handling charge increasing by $0.35. And it also said that effective January 8, 2017, the additional handling surcharge will also apply to UPS SurePost packages.

UPS and its biggest competitor, FedEx, announced additional handling surcharges last May.

On May 6, UPS said it is changing the measurement that determines whether the UPS Additional Handling charge will be applied to UPS Ground services packages in the U.S. explaining that any package with the longest side exceeding 48 inches, instead of 60 inches, will be assessed the fee and that the additional handling fee of $10.50 remains the same, with the change not impacting UPS Air or International shipments.

“This change is being implemented due to the additional handling required for these types of packages in the UPS network,” UPS said at the time.

Jerry Hempstead, president of Orlando, Fla.-based Hempstead Consulting, said that over time “we have seen the two carriers [UPS and FedEx] dance back and forth, at times letting the other lead. In the end the shippers are going to pay more, and their only leverage is to put their business in play and allow the competitive bidding process to play out.  Nobody should be surprised that UPS did this. The surprise was they did not try to capture all the additional yield at this time.”

Given the ongoing strides e-commerce is making in terms of boosting ground delivery volumes, coupled with the vast UPS-FedEx duopoly continuing to dominate the domestic ground package market, it wouldn’t make sense for them not to raise rates, according to industry stakeholders.