Since the start of the COVID-19 pandemic, both UPS and FedEx have announced a series of updates to their international surcharges and have suspended their service guarantees.  However, the latest update from UPS (effective May 31, 2020) marks the first time that additional surcharges will be applied to domestic shipments.

These surcharges will have painful and immediate repercussions on e-commerce shippers dealing with increased order volumes during the pandemic, amounting to thousands of dollars per week in additional fees.

Although FedEx and UPS tend to increase surcharges in lockstep, UPS has shot out ahead of FedEx in extending surcharges beyond international shipments.  Domestic last-mile residential delivery is typically low-margin and has been highly stressed with COVID-19 rerouting demand from commercial to residential shipments as many office employees have transitioned to work from home. At the end of march, residential delivery represented 70% of UPS’s volume based on data from its April earnings call.

Josh Dunham, co-Founder of Reveel Group, warned high volume shipping organizations to take action. “Clearly, this is a pivot by UPS to recover lost profits.  Shippers should push back and renegotiate contract terms and pricing bands.  It may be worth seriously evaluating other carrier options to preserve your own cash flow and profit margins.”

As these surcharges are reminiscent of peak holiday surcharges that are typically seen in November and December, it will be interesting to see if FedEx will follow UPS’s lead or pursue a competitive pricing advantage over UPS in the coming months.

Surcharges Overview:

  • UPS announces domestic peak surcharges on shipments in the U.S. beginning May 31, 2020.
  • The surcharge will apply to domestic Ground Residential and SurePost packages for customers whose combined volume of Ground Residential and SurePost packages during the week prior to the invoicing period exceeded the customer’s average weekly volume from February by more than 25,000 packages.
  • A large parcel surcharge of $31.45 per package will also be imposed. UPS defines large package as the length plus girth exceeding 130 inches or length more than 96 inches.

Service level

Effective date

Surcharge

UPS Ground Residential

May 31, until further notice

$0.30 per package

UPS SurePost

May 31, until further notice

$0.30 per package

Large packages (all service levels)

May 31 until further notice

$31.45 per package

 

Source: https://www.ups.com/assets/resources/media/en_US/2020_UPS_Peak_Surcharges.pdf

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