UPS rolls out rate changes to take effect in late 2017 and mid-2018

On the eve of its third quarter earnings call, UPS yesterday rolled out United States rate changes set to take effect later this year and in the middle of 2018.

Big Brown said that effective December 24, 2017, rates for UPS Ground, UPS Air and international services, and UPS Air Freight rates within and between the U.S., Canada, and Puerto Rico will head up by an average net of 4.9%.

“UPS continues to make investments in the speed, scope and coverage of our transportation network in order to support our customers’ growth and service needs,” the company said in a statement. “Rate increases support ongoing expansion and capabilities enhancements, while UPS maintains the high service levels customers expect.”

For packages, a large package surcharge will apply to any U.S. Domestic package with a length exceeding 96 inches or a length plus girth greater than 130 inches, effective December 24. And the dimensional weight divisor for packages less than or equal to one cubic foot in size (1,728 cubic inches) will be 139 for all U.S. Domestic services subject to Daily Rates or Alaska and Hawaii Rates. And effective July 8, 2018, the Large Package Surcharge for any U.S. Domestic package delivered to a residential address will be $90 and the Additional Handling surcharge for any U.S. Domestic package exceeding 70 pounds in actual weight will be $19.00.

And for UPS Air Freight shipments with “non conforming freight,” or shipments that are unusually shaped, non-stackable, difficult to handle or require special handling in transit or be subject to service delays and additional charges customers will now be subject to pay 30% of Air Freight charges or a minimum of $165.

Saturday Pickup selected by a shipper for UPS Next Day Air Freight and UPS Next Day AIR Freight NGS where available to A.M. points only will have to pay $30 per 100 pounds, with a $180 minimum in the U.S., Canada, and Puerto Rico. 

Rates for UPS Freight non-contractual less-than-truckload (LTL) shipments rated on the current UPS Freight Tariff 580 will increase an average net 4.9% effective December 24, 2017, UPS said.

Rob Martinez, president of San Diego-based parcel consultancy ShipWare LLC, said that as feels for larger packages in the form of Additional Handling Service and Large Package Surcharge are skyrocketing.

“This demonstrates how much more it costs the carriers to handle this type of traffic, which is common today due to ecommerce explosion,” he said. “Things like trampolines, basketball rims, large screen TV’s, mattresses, etc. were rarely shipped via parcel previously.  Now it’s up to 10% of the shipments in the carrier networks.  Not good traffic for conveyor belts.”

With all packages receiving the 139 dimensional divisor and the elimination of the 166 dimensional divisor for shipments under one cubic foot, Martinez explained that UPS is essentially eliminating the “advantage” over FedEx that UPS has been selling for the past year.

As for the announced 4.9% increase, Martinez said it does not come as a surprise, as it essentially matches the GRI’s recently announced by FedEx.   

“What’s unknown, however, is whether or not UPS will go back to matching FedEx to the penny, or continue to maintain its own unique pricing that’s better or worse than FedEx depending on the service, weight and zone,” he noted.

Hempstead Consulting President Jerry Hempstead said that looking ahead, the 2018 rates are loaded with accessorial land mines for shippers.

“It's good for UPS but extremely onerous for shippers,” he said. “It's so complex that shippers are going to have great difficulty getting their arms around the impact, without external professional help. These are significant increases, and it will be hard for many shippers to calculate the impact in their budget. For example the elimination of the dimensional waiver on the first cubic foot can cause the cost of a lightweight transaction to rise significantly. This combined with the increase in the extended zip residential could end up doubling the cost of some transactions especially for ecommerce shippers.  Most recent data shows shippers having fewer extended zip transactions than delivery area surcharge shipments but having a higher experienced cost.”