UPS rolls out 2019 rate increases, leaving shippers with short notice

Earlier this week, UPS announced rate changes that are set to take effect on December 26. This December 5 announcement leaves shippers with little time to prepare for these coming rate increases, coupled with this announcement coming during Peak Season.

The Atlanta-based transportation and logistics bellwether said the following rate increases will take effect: UPS Ground, UPS Air and International services will head up by an average net of 4.9%; fuel surcharges will apply to Additional Handling, Over Maximum Limits, Signature Requires and Adult Signature Required accessorials; a processing fee of $2.00 per package will be charged when Package Level Detail (PLD) is not provided to UPS prior to delivery; and the rates for certain value-added services and other charges will increase.

UPS added that effective December 31, the index for determining the Domestic Air Fuel surcharge will change, and effective December 26, the rates for UPS Air Freight within and between the U.S., Canada, and Puerto Rico will increase by an average net of 4.9%. UPS’s announced rate increases are in line with those announced by its chief competitor, FedEx, at 4.9%, which have been at that level, for both companies, going back to 2010.

“This supports ongoing expansion and capability enhancements as we strive to maintain the high service levels you expect from UPS,” the company said in a statement.

For UPS package accessorial charges, UPS said that there will be $4.00 Additional Handling charge for any U.S. domestic package exceeding 70 pounds in actual weight, and the Additional Handling charge for all other packages will increase by $2.25. The Address Correction charge will increase by $0.50, and the per shipment maximum will increase by $3.50. The Large Package Surcharge for U.S. Domestic commercial packages will increase $15.00, and the Large Package Surcharge for U.S. Domestic residential packages will increase $25, with the Large Package surcharge for International packages to increase by $15.00.

Rate increases for UPS SurePost, its economy ground service for delivery to residential locations in which USPS performs the last mile delivery on behalf of UPS,will come in at roughly 9% for packages one pound or more and around 9.34% for packages less than one pound.

John Haber, CEO of Atlanta-based Spend Management Experts, noted in a blog posting that this does not come as a surprise, as the USPS announced its own significant rate increase in October.

“Retailers will be among the most impacted by this increase as many utilize this option in order to compete on ‘free shipping’ while maintaining tight margins,” he wrote. “In addition, Surepost DAS and Surepost DAS Extended fees will each increase $0.45, a year-over-year increase of 32.14% and 23.68% respectively. Will we see modifications of/or perhaps the end of ‘free shipping’ in 2019?

Jerry Hempstead, president of Hempstead Consulting, said that there is really no alternative method of or means to SurePost, explaining shippers could shop their business to FedEx SmartPost or DHL e-commerce or Pitney Bowes, but all the zone skipping alternatives are faced with covering the USPS increase.

Looking at the $4.00 Additional Handling charge for any U.S. domestic package exceeding 70 pounds and the $2.25 for all other packages, Haber said that fee is “somewhat fuzzy,” as it is assessed on any package that UPS says requires special handling, as determined by UPS in its sole discretion, with some of the items assessed being packaging, weight length, and width.

The announced large package surcharges, noted Haber, continue to emphasize how UPS does not want large, or overmax, packages in its small package network.

As a result, he said increases this fee, with the most recent increase coming in June, coupled with UPS’s Over Maximum Limits charge and the Oversize Pallet Handling Surcharge each rising by $200.

The address correction fees, which Haber described as one of UPS’s most overpriced fees, drives home the lesson, and need, for shippers to make sure to properly address each package. The reason for this is that the address correction fee for Ground deliveries has gone up 64% since 2010, from $10 to $16.40, and the fee applied to shipments billed to a third party will increase to 4.5% of total charges.

“UPS has presented a lot to digest in a short time period, 20 days to be exact and shippers need to prepare for not only these announced increases but potentially additional announcements in 2019,” Haber wrote. “We fully expect UPS to continue a trend started this year in announcing periodic increases throughout the year.”

And Hempstead explained that the timing of this announcement was different, in that last year UPS announced its 2018 rate increases in October, and the prior year they were announced in early September.

“This year they announced three weeks before their effective date and in the heat of the fourth quarter peak shipping season,” he said. “Large shippers will have little time, nor IT resources to sift through the nuances of this years’ announced changes.”

As for what categories that will be most impacted, Hempstead cited larger packages as the ones “that will suffer the most pain,” given how those transactions since last year are more subject to oversized and additional handling rules.

Hempstead also pointed out that an extension to a change in recent years regarding data transmission fees, which were previously shrouded as an invoice correction fee targeting shippers who don’t transmit dimensional data or whose transmitted weights don’t actually compare with the actual weight, will also see changes.

“This year the added dimension will be a fee if the shipment data (package level detail) is not into the UPS shipment data base at the time of the delivery of the shipment,” he said. “To UPS, the successful receipt of a valid execution of the shipment data before the package gets into the network is extremely important to the success of the movement and its efficient movement. This new fee is to hammer home how important this function is and will continue to be. Expect this fee to go up. The increase is not linear across services, weights or zones. Every shipper will have a different level of pain depending on their package characteristics. And some agile shippers have negotiated caps in the magnitude of their annual increase.”