News / New hefty UPS 'peak surcharges' deliver a bitter sense of deja vu to shippers

Copyright, Claudiodivizia Dreamstime.

Unsurprisingly, large shippers again find themselves on the receiving end of hefty surcharges from one of the large integrators as they prepare for peak season.

UPS has unveiled several tariffs squarely aimed at shippers with high parcel volumes and outsize shipments.

This latest round of surcharges affects customers that have shipped over 25,000 packages during any week since February 2020 – before the pandemic impacted traffic in the US.

How much more the firms will have to fork out hinges on the number of parcels they send out on average per week in the coming peak season: if their traffic is over 500% of their February 2020 levels, they face as much as $6.15 more per package.

Those charges are set to come into effect on 31 October, but clients with outsized shipments are in for two rounds of surcharges. If a shipment requires additional handling, the surcharge rises to $3.50 on 4 July and on to $6 on 3 October.

The surcharge on shipments in excess of 96 inches in length or 130 inches in girth climbs, on 4 July, by $8.55 to $40 and on to $60 on 3 October. Shipments beyond the integrator’s maximum limits will be hit with a $250 surcharge per package from 3 October.

And John Haber, CEO of parcel shipping consultancy Spend Management Experts, does’t think these increases, although hefty, shocked any shippers, given previous rounds of rate increases and higher surcharges. But he and others question the extent, as well as the timing, of higher parcel charges.

Some observers have argued that the rises are well in excess of the increased costs to cope with the elevated volumes in their networks that UPS and FedEx have cited, given their elevated margins. Mr Haber also takes issue with the designation of the latest increases as “peak surcharges”.

“Some of the increase starts on 4 July – whose peak season is that? Certainly not sellers’,” he said.

And peak surcharges have been in place for over a year already, he added, “they never stop”.

Essentially, the integrators have moved to dynamic pricing, Mr Haber argued, where charges are modified frequently and customers are advised to check regularly for pricing updates.

He believes FedEx and UPS are controlling capacity and seeking to raise the share of their parcel business tendered by small and mid-sized shippers, as these generate higher margins, thanks to these clients’ inability to leverage volumes for discounts.

“It’s supply and demand, and in UPS’s case you’ve got a financial wizard in charge looking to boost shareholder return,” said Mr Haber.

The integrators can raise charges more or less at will, because they have no cause for fear that their networks might not be full in the coming peak, Mr Haber added. According to one estimate, FedEx, UPS and the US Postal Service account for more than 90% of US parcel volumes.

Shippers have been trying to find alternatives: many are looking to regional parcel carriers, like LaserShip and Lone Star Overnight, that have recently expanded their reach, but they do not have the infrastructure to add large volumes to their operations at this point, according to Mr Haber.

“Retailers are trying to forecast their shipping costs, but pricing is constantly changing, and not for the better,” he said.

The integrators are not invulnerable, though. FedEx recently had to row back after its LTL arm, FedEx Freight, abruptly notified some 1,400 customers it was stopping pick-up of their traffic from the following business day. According to reports, some affected firms were suppliers to large FedEx customers on the parcel side, who were not pleased with this development, which forced FedEx Freight to resume business with those companies.

For the most part, though, shippers that had been cut off found themselves out in the cold.