For decades, an immutable law of business has been that whenever FedEx Corp. (NYSE:FDX) changed its pricing or related terms and conditions, rival UPS Inc. (NYSE:UPS) would soon follow suit. Or vice versa. However, a few changes to peak-season delivery surcharges that the two carriers announced within a week of each other signal that the long-held duopoly bond continues to fray.
There are still similarities: Both carriers will reduce their levies to $3 per package to cover the “additional handling” of shipments that are difficult to manage. UPS will reduce its per-package charge on oversize shipments to $31.45 per piece from $50, not far from FedEx’s revised charge to $30 from $52.50. The effective date of the new UPS levies is Jan. 17, just one day before the revised FedEx surcharges kick in. All the revised charges will stay in effect until further notice, both carriers have said.
But there are differences. For example, UPS, which disclosed its surcharges in a website post yesterday, will maintain its U.S. ground residential surcharge but cut it to 30 cents per piece from surcharge tiers of $1 to $3 per package that expire Jan. 16. FedEx’s residential delivery surcharges, which ranged from $1 to $5 a parcel and were imposed Nov. 2, will disappear entirely on Jan. 17.
UPS wilI reduce surcharges on its SurePost parcel-induction service offered in conjunction with the U.S. Postal Service to 30 cents per package from the $1- to $3-per-piece surcharge thresholds that expire Jan. 16. FedEx, by contrast, will drop a similar surcharge by just 25 cents per parcel to 75 cents from $1.
The revised parcel-induction surcharges indicate a clear divergence between the two. While UPS will cut its levies by at least 70 cents a parcel, UPS is a regular user of the Postal Service and will likely remain so for the foreseeable future. FedEx, by contrast, has nearly finished a multiyear process to move all its former Postal Service traffic into its own residential delivery network. FedEx’s lower surcharge cut may be designed to recoup the costs of migrating and operating the service, or it may be a way to embed profitable surcharges into what is now an in-house offering. FedEx’s objective in moving the volumes in-house is to add more parcel density to its ground-delivery network.
UPS, along with other high-volume providers, dumps massive parcel volumes deep into the Postal Service’s shipping network for last-mile deliveries to residences. UPS remains a heavy user of the Postal Service’s last-mile delivery service.
UPS will set volume thresholds to determine who will get slapped with surcharges. The levy on standard-size parcel shipments will apply only to customers whose combined volume of ground residential and SurePost traffic exceeded 25,000 packages during any week following February 2020. The move is designed to shield small to midsize businesses, a coveted customer segment, from the effects of the surcharges.
UPS’ surcharges on shipments requiring special handling will apply to customers who have shipped more than 1,000 total domestic and U.S. export packages, or more than 10 of the specialized pieces, during any week after the end of February. The special-handling levies are believed to be relatively easy for shippers to exceed.
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