FedEx Increases Surcharge Rates Effective September 2018

FedEx has announced that its next rate increases will take effect in September.

Although only two surcharges are rising, the increases are big: The additional handling surcharge, which applies to packages weighing more than 70 pounds, will rise by 67 percent. And the ground unauthorized package charge, which applies to packages heavier than 150 pounds, will jump by 125 percent.

FedEx is also increasing its fuel surcharge, which is a percentage fee based on jet and diesel fuel prices. The increases may look slight, but the bigger the shipment, the more they’ll impact shippers.

Large and heavy packages have been targeted for rate increases in recent years. Carriers justify these rate increases by saying these packages simply have higher shipping costs to transport them— they require more fuel, they take up more space on trucks or in cargo bays, and team members have to work much harder to move them.

But Americans aren’t just buying books online anymore. We’re ordering mattresses, appliances and furniture. Shipments are getting heavier, which means shippers are paying for additional handling more and more often. That’s a boon to carriers.

“FedEx continues to experience strong demand for transportation of larger and heavier packages,” the company explained in its announcement of the September rate increases. “This 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.”

The Additional Handling Surcharge

FedEx’s additional handling surcharge applies to all packages that have an actual weight of more than 70 pounds, it is not based off their dimensional weight.

FedEx has steadily increased this charge in recent years, in line with UPS and other industry competitors.

• It rose from $11 in 2017
• In January of 2018 it rose to $12
• In September of 2018, it will jump to $20

UPS currently charges $19 for packages requiring additional handling.

This rate increase takes effect on Sept. 3, just after Labor Day.

The Ground Unauthorized Package Charge

Shippers encounter the ground unauthorized package charge much less frequently than the additional handling surcharge. Packages that incur this charge are those that FedEx considers “unauthorized” — they do not meet the carrier’s parameters, and so FedEx Ground gets to decide whether to complete the delivery or return them to the sender.

Ground Unauthorized Package Charges Apply To Packages With:

• Length greater than 108 inches
• Length and girth combined greater than 165 inches
• Weight greater than 150 pounds

This surcharge, too, has spiked in recent years.

• In 2015, it was just $57.50
• In 2017, it was $115
• In 2018, it jumped to $300.

This rate hike will shoot the ground unauthorized package charge up to $675 per package.

UPS calls these packages “over maximum limits” and charges $650 per parcel.

This rate increase takes effect on Sept. 10, a week after the previous change.

FedEx Express and FedEx Ground Fuel Surcharge Increase

FedEx is also increasing its fuel surcharges. These fees are pegged to the fuel prices of jet and diesel gas, and apply to all packages shipped using either Express or Ground — so, most packages FedEx moves carry these charges.

The Express surcharge used to start at 6.25 percent for U.S. domestic service. These shipping rates applied when jet fuel was between $1.87 and $1.91 per gallon. Now, that surcharge starts at 6.50 percent.

And instead of peaking at 9 percent when jet fuel reaches $2.47 per gallon, it tops out at 9.5 percent when fuel surpasses $2.35 per gallon.

For FedEx Ground, surcharges now range from 5.75 percent when diesel is between $2.65 and $2.74. The former lower limit was 4.74 percent when diesel was below $2.74.

At the upper end, fuel surcharges are now 8.75 percent when diesel climbs above $3.73. That’s up from 7.75 percent at $3.82.

Fuels surcharge increases also take effect Sept. 10.

What Does This Rate Hike Mean For Shippers?

Surcharge increases can impact shippers in dramatically different ways, depending on what they ship. If most of your parcels are small, you may only be concerned with the fuel surcharge; but if you move larger products, that 67 percent increase in additional handling fees could significantly eat into your bottom line.

To understand how rate increases will impact your business, it’s essential that you know your shipping profile in detail. Your supply chain management team should know exactly how big your standard parcels are, how far they travel, and how much they usually cost. Robust data can show you exactly how much you spent on ground unauthorized packages last year or what proportion of your parcels require additional handling. With that information on hand, you can simply plug in these increased rates and see how your shipping costs might change.

Remember, 35 percent of the average shipping spend is dedicated to surcharges. These might be called accessorial fees, but they’re core to company budgets.

The good news is that carriers are often more willing to negotiate surcharges than base shipping rates or across-the-board fees. If the additional handling surcharge, for example, affects your company’s flagship product, you may be able to target it in your next negotiation.

If you could benefit from help preparing for that negotiation, reach out to Reveel. Our expert consultants specialize in identifying inefficiencies and finding new opportunities to save on shipping. Start with a free invoice audit today to see how we could help you.