While many students are preparing to hit the books again, one of the country’s largest parcel carriers is preparing to hit you with higher costs.
In early July, UPS posted the latest updates to its Demand Surcharges – and let’s just say they’re not exactly shipper friendly.
In addition to revealing UPS’s planned increases to its existing peak-related Demand Surcharges, the updates feature a pesky (and potentially potent) new surcharge as well as a costly peak-within-peak period.
To learn more, check out this list of not-so-fun facts. It comes complete with key takeaways about what these changes might mean for your company and its bottom line once the “most wonderful time of year” gets under way.
Expect UPS’s peak season Additional Handling Surcharge to be anywhere from 12-44% higher and Large Package Surcharge to be anywhere from 13-32% higher than they were in 2023.
If it wasn’t already crystal clear that UPS doesn’t want to handle your heavy or oversize packages, it should be now. UPS’s new adjustments to this shipping category include:
- Increasing the $3.50 per package charge for Additional Handling to $7.75 per package from September 29-November 23 and December 29-January 18
- Increasing the $40.00 per package charge for Large Packages to $84.75 per package during those same time periods
- Bumping the Additional Handling charge up to $9.95 per package from November 24-December 28 (“peak-within-peak”)
- And bumping the Large Package charge up to $99.00 per package during that same time period
Besides being higher than last year’s peak season Additional Handling and Large Package Surcharges, these changes represent the first time that UPS has decided to bump prices up twice within a peak season – and to really hit customers where it hurts the second time around.
Companies that ship average-sized packages don’t get a bye.
Now we know what you’re thinking: “UPS and FedEx implement these kinds of temporary peak season increases all the time – but they don’t usually apply to our company because we ship fairly light, average-sized packages.”
Think again. Later this fall, UPS will also start extracting its pound of flesh from shippers like you thanks to the following new peak season-related Demand Surcharges.
- A $0.25-cent per package extra fee from October 27-November 23 and from December 29 -January 18 for SurePost and Ground Residential packages
- A $1.00 per package extra fee for UPS Air packages during those same time periods
- A $0.50-cent per package extra fee for SurePost and Ground Residential packages from November 24-December 28
- A $2.00-per-package extra fee for UPS Air packages during that same time period
While these charges may not seem substantial (after all, what’s an extra quarter or two among friends?), they have the potential to add hundreds or thousands of dollars to your invoices per week if your company is a high-volume shipper. And here’s the kicker: Because these surcharges are new, your company will be billed the full amount for them; any surcharge discounts you’ve negotiated for your other surcharges don’t apply.
Look for peak season to last even longer.
Apparently that lady who starts putting up her Christmas tree in October isn’t the only one who likes to make the holidays last as long as possible. Last year, UPS’s peak season was 104 days. This year, it will clock in at 111, which means you’ll be paying the higher charges listed above for an extra week. And next year you’ll probably be paying them for even longer than that, at least if each carrier’s tradition of extending peak by a little bit more each year continues.
FYI: Your Fuel Surcharges are increasing, too – by up to 2.25%.
Finally, as if these changes weren’t distressing enough, UPS just announced another Fuel Surcharge increase – its fifth since December 2023.
AFS has repeatedly expressed our concern about this trend because:
- UPS’s and FedEx’s Fuel Surcharges have routinely exceeded the diesel and jet fuel price increases they’re supposed to be tied to
- If UPS’s and FedEx’s Fuel Surcharges actually followed fuel price market dynamics, your company should be seeing occasional reductions rather than steady increases – 5.5% lower in the case of Ground since 2022
- Although Fuel Surcharges were once a temporary measure meant to help carriers cover rising fuel costs until the next round of General Rate Increases were announced, they’ve now become permanent fixtures
Essentially we see both carriers’ Fuel Surcharges practices – and many of the other surcharges mentioned in this story – for the obvious revenue grabs they are. And we’re not big fans!
The jury is still out on FedEx’s Demand Surcharge updates.
This story clearly is still developing, because we have yet to see how FedEx will be adjusting its own Demand Surcharge for this year’s peak.
The good news is that unlike UPS, FedEx doesn’t have to figure out how to fund a five-year, multibillion dollar labor agreement. As a result, it should have some leeway to give shippers at least a modicum of break in terms of extra peak surcharges if it wants to. But the operative term is “if it wants to.”
Because of that we wouldn’t recommend that you get too hopeful, especially when you recall that FedEx is in the same boat as UPS when it comes to looking for easy ways to offset the heavy discounts that it’s been handing out to shippers lately.
We’ll continue to provide you with updates about this “Demanding” situation via our blog, newsletter or your AFS sales team, so keep your eyes peeled. In the meantime, don’t hesitate to reach out if we can be of help.
