News / Surcharges add up for parcel shippers – and there may be more to come

UPS is hitting cargo owners with multiple surcharges in the run-up to the peak season – with the biggest hit on imports from China and its territories.

Starting on 15 September, the integrator is to impose a ‘surge fee’ on US imports arriving by air from China and 12 Australasian countries or territories.

For parcels from China, Hong Kong and Macau, the charge will be 50 cents per pound and, for those from the other countries, 25 cents per pound.

The charge is based on billable weight, which gives UPS the option to go by dimensional or physical weight, whichever is greater, noted John Haber, chief strategy officer of Transportation Insights. Unlike some surcharges, there is no end date to the new price regime, which appears to apply to all types of service.

The higher charge on parcels from China and the related territories of Hong Kong and Macau could bring a lot of additional revenue for the integrator. In the second quarter, UPS volumes moving from China to the US was up 20.6%, year on year.

Observers were quick to point out that the charges were aimed squarely at the volumes from Chinese e-commerce giants Temu and Shein.

While they generate huge volumes, the yield on these de minimis shipments is quite low, as UPS top brass lamented in the earnings call on the company’s second-quarter results. Adding 50 cents per pound to these shipments, plus further surcharges, seems to go some way to address the yield issues.

“UPS is not growing its business, it looks to grow revenues. It sold off the brokerage and LTL businesses and is in shrink mode,” commented Mr Haber.

On top of the surge fee, the integrator is also trying to boost income from fuel surcharges. These, which came into effect on 19 August, heap more cost on shippers, and have already risen.

For domestic ground service, the surcharge on 19 August was 16%; it rose to 16.75% a week later. Likewise, fuel surcharges for air climbed from 15.75% to 16.75% on 26 August and, for international air exports and imports, rose from 18.5% to 20.75% and 22% to 24.5%, respectively.

At the same time, UPS has spread its fuel surcharge over more products than before. Mr Haber noted “a bunch of additional value-added services” had been hit by it.

In the event of an address correction, the fuel surcharge is going to be $20, he said. “That’s the most egregious one. And 90% of these changes are made before the package is delivered,” he added.

Taken together, these charges amount to a serious hit on customers’ expenditure, he said. For some large shippers, the fuel surcharge alone could add more than $100,000 to their annual shipping bill, he reckoned.

And FedEx will likely match these charges, Mr Haber added, pointing out that the pair usually moved in tandem with pricing. FedEx recently announced surcharges for the upcoming peak season which were largely in line with surcharges announced by UPS a few weeks earlier.

So far, FedEx has not announced a surge fee, but did implement an ‘import demand surcharge’ of 25 cents per pound on shipments reaching the US from China, Hong Kong and the Philippines.

And Mr Haber is convinced that the integrators are not done with surcharges this year. He said he would not be surprised to see other countries added to the ‘surge fee’ list. So far, no European countries or Mexico are on it, he noted.

Neither would he be surprised by some more “monkeying around” with fuel surcharges. Shippers will have to scrutinise their transport invoices thoroughly, Mr Haber advised.

But some will look for less pricey alternatives.

“They’re rolling the dice,” he said of the UPS management. “Will they lose some volume? Yes,” he said.

(Out last week on Loadstar Premium: “Integrators gone nuts? From DHL’s ‘demand fee’ to UPS’s ‘surge fee’… “)