FedEx will not apply peak season parcel surcharges, saves the pain for the outsized stuff

Rival UPS Inc. (NYSE:UPS) recently announced that, for the first time, it would not impose peak surcharges on parcel traffic. However, UPS will also apply surcharges on outsized shipments that are costly and inefficient to handle. Both companies would rather avoid transporting larger, outsized items because it occupies trailer space that can easily be filled by dozens of packages. Larger shipments are difficult if not impossible to run on the companies’ conveyor belts, thus requiring special handling that comes with a cost.

Separately, FedEx Express said that it will raise tariff rates, on average, by 4.9% on all U.S. express, ground and home delivery services. Rates for FedEx Freight services will rise, on average, by 5.9%, the company said. FedEx Freight is the company’s less-than-truckload (LTL) unit. Rates for the company’s SmartPost service, where it tenders shipments to the U.S. Postal Service (USPS) for final-mile delivery, will also rise, the company said. It did not specify the amount. The new rates take effect January 6.

Few FedEx customers pay tariff or general rate increases (GRI). However, contract rate negotiations which cover the bulk of FedEx’s business typically start from the list price baseline.

As with all GRIs imposed by parcel carriers, appearances are sometimes not what they seem. For example, starting Jan. 20 additional handling surcharges will apply starting at 50-pound shipment weights, instead of the current 70-pound baseline.on shipments that weigh 50 pounds, according to Matthew White, strategist for iDrive Logistics, a consultancy that works with many FedEx shippers. In addition, fuel surcharges will apply to the additional-handling charge as well as to the base rate, White said. There are also “substantial hikes” on nearly all surcharges, White said in an e-mail Sept. 16.

After all the costs are toted up, a company shipping a 55-pound parcel in commercial ground service between 1,001 and 1,400 miles will pay 58.6% more than in 2019, according to White. The biggest hit will be a $24 additional-handling charge, compared to zero currently, he said.

Known in the trade as “accessorials,” these charges are designed to compensate providers for the cost of service beyond the basic line-haul move. Over the past 20 years or so, however, surcharges have proliferated in volume and in cost.

(Note: An earlier version incorrectly used the word “pounds” instead of “miles.”)