FedEx Corp. (NYSE: FDX) said Tuesday that it will raise its tariff, or noncontractual, rates on most of its U.S. services by 5.9% in 2024, a decline from the 6.9% increase in 2023 and a potential attempt to take market share from rival UPS Inc. (NYSE: UPS), which is facing significantly higher labor costs during the first year of its five-year contract with the Teamsters union.
The specific increases will apply to FedEx Ground and FedEx Express service. The latter increase will impact domestic and international air services to and from the U.S. FedEx announced rate increases of 5.9% to 6.9% on its FedEx Freight less-than-truckload service within the U.S. and between the U.S. and Canada. Specific rate increases will depend on a customer’s rate scale, FedEx said.
Rates for FedEx Economy, the company’s low-priced deferred delivery service, will also increase, FedEx said. It did not provide a specific percentage, however.
The increases, which take effect Jan. 1, were announced earlier than usual. Known as general rate increases (GRI), they serve as the jumping-off point for contract rate negotiations, which are predominant in the parcel-delivery industry. GRIs typically understate what many shippers end up paying after rate adjustments and fuel and other delivery surcharges are factored in.
That the increase didn’t at least match the 2023 hike came as a shock to Paul Yaussy, a senior consultant of professional services at Shipware LLC who negotiated with FedEx for many years on behalf of his shipper employers when he worked in the industry. The FedEx action is “very likely a pre-emptive strike by FedEx to put pressure on UPS as it comes off a costly Teamsters negotiations. Now, let’s see how UPS responds,” Yaussy said in an email.
Tom Nightingale, CEO of AFS Logistics Inc., a non-asset-based provider that negotiates, audits and pays about $4 billion in annual parcel spend, said FedEx has “clearly sent a shot across the bow of UPS.” The move seems to be FedEx’s attempt to “leverage the relationships” they built with anxious shippers during the high-decibel noise of the UPS-Teamsters contract negotiations, Nightingale said.
Unionized UPS workers received a $2.75-an-hour wage increase in the first year of the contract, which was implemented retroactive to Aug. 1 after eligible rank-and-file members voted to ratify the contract on Aug. 22. Experts have pegged the first year’s wage and benefit increase at about 9%. The increases drop dramatically in years two through four and rise again in year five, though not as dramatically as in the first year.
For years, the carriers have moved in near lockstep on their GRIs. UPS will likely need to find ways to offset the contract’s first-year cost increase in order to match FedEx’s move.
Separately, FedEx also announced its surcharges for peak season services. Again, residential delivery surcharges will be assessed depending on a shipper’s weekly volumes starting Oct. 9. From Oct. 9 through Jan. 14, the surcharges will apply with a three-week lag after volumes are calculated. Surcharges will apply to enterprise customers that ship more than 20,000 residential and Ground Economy packages per week during any of the “calculation weeks” beginning Oct. 9.
For very high-volume customers shipping with FedEx Express, the per-package surcharge could be as high as $7.40. For shippers with very high volumes shipping FedEx Ground, the per-package levy could be as high as $6.35.
For FedEx Ground Economy alone, the per-package surcharge will be $1.60 from Oct. 30 through Nov. 26. It will rise to $2.60 per package from Nov. 27 through Dec. 10 and drop back to $1.60 from Dec. 11 through Jan. 14. Each fee represents a 10-cent-per-package increase over the 2022-2023 peak levies.
FedEx will also assess a $6.95 surcharge for additional handling, a $73-per-package surcharge for oversize shipments and a $410 “unauthorized” package surcharge for ground deliveries, the latter being for shipments that are not designed to be conveyed by package delivery and that FedEx would rather not accept. All of those fees, which are higher than last year’s charges, run from Oct. 2 through Jan. 14.
NOVEMBER 7-9, 2023 • CHATTANOOGA, TN • IN-PERSON EVENT
The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.