Breaking down the latest FedEx rate increases

The FedEx/UPS near duopoly has allowed the two large carriers to control marketplace pricing for years, echoing each other’s rate hikes to the detriment of parcel shippers both small and large. It’s no surprise then, on the heels of UPS’ latest intra-year pricing changes, that FedEx has recently announced its own set of rate increases, which will be effective Sept. 3.

The Additional Handling surcharge for packages weighing greater than 70 lbs. will increase from $12 to $20 for domestic express, international express and domestic and international ground. Similarly, on July 8 UPS raised its Additional Handling surcharge from $12 to $19 and increased its Large Package surcharge from $80 to $90.

FedEx’s Unauthorized Package Charge will increase 125%, from $300 to $675, keeping it in line with UPS’ increased Over Maximum Limits charge which jumped from $500 to $650 on June 4.

In addition, shippers will also see incremental peak season increases from FedEx to some of these surcharges on domestic express and domestic and international ground shipments between Nov. 19-Dec. 24. Compare these to the peak increases that UPS will institute between Nov. 18-Dec. 22 to all service levels and all domestic destinations.

  • Additional Handling fee: FedEx $3.20; UPS $3.15
  • FedEx Ground Unauthorized Package Surcharge: $150 per package; UPS Over Maximum Limits: $165 per package
  • Oversize Charge: FedEx, $27.50; UPS, $26.20

Shippers saw changes to these same charges earlier this year, in terms of the surcharge amount as well as to how they’re calculated.

These rate increase announcements signal the continuation of a trend that began last year. The carriers want these packages in their freight/LTL network, not in their parcel network. If shippers don’t adjust accordingly, they’ll find themselves paying a premium. Expect this trend to continue.

The one area FedEx and UPS differ in their latest rate increases is in the Peak Residential surcharge. Surprising many, FedEx will not implement this surcharge for the second straight year, while UPS will not only apply it once again but will raise the rates established last year.

This could give FedEx a competitive advantage with shippers looking to shift some volume prior to peak.

David Sullivan is the Director of Pricing and Analytics for Shipware LLC