Amazon Lists First-Time FBA Peak Surcharge

Amazon FBA FC exterior feature

Amazon is jumping on the peak surcharge bandwagon for the first time, announcing in an email this week to sellers using its Fulfillment By Amazon service they will pay 35 cents more per item for goods sold in the U.S. and Canada, running from Oct. 15 to Jan. 14, according to CNBC.

This follows peak fee announcements from both FedEx and the U.S. Postal Service as carriers and delivery providers struggle with rapid rises in fuel, personnel and supply chain costs. The USPS, in fact, said it’s looking at a $1 billion inflationary hit on operating costs in 2022.

In April, Amazon instituted a 5% fuel and inflation surcharge on FBA sellers, with the peak fee now compounding the pain.

The email to FBA sellers said the peak surcharge is being initiated as “expenses are reaching new heights,” according to CNBC. Amazon has posted net losses of $2 billion and $3.8 billion in the past two quarters, reversing years of profit gains, with operations a major contributor. It also announced plans to shed 100,000 workers. “Our selling partners are incredibly important to us, and this is not a decision we made lightly,” the email read.

FedEx, for its part, announced a cadenced peak surcharge schedule, including rates for Ground Economy increasing $1.50 per package from Oct. 31-Nov. 27, then rising to $2.50 from Nov. 28-Dec. 11 and back down to $1.50 from Dec. 12-Jan. 15.

On residential delivery surcharges on Ground and Express services, FedEx has devised a complex calculation system requiring a green eyeshade and a sharp no. 2 pencil. It divides the total number of residential and Ground Economy packages shipped during a “calculation week” by a weekly average of those packages shipped between June 6, 2022-July 3, 2022, then multiplies the result by 100 to determine a “peaking factor” percentage.

For example, FedEx Ground residential delivery surcharges will range between $1.25 for a peaking factor of 105%-125%, maxing out at $6 per package if the factor is over 400%. On Express deliveries, they will range from $2.25 to $7 using the same calculation.

As usual, additional handling and oversize charges are more onerous, as both FedEx and UPS dis-incent shippers from putting them into the network. Additional handling surcharges for Express, Ground and International Ground will be $3.45 per package from Sept. 5-Oct. 2, increasing to $6.55 from Oct. 3-Jan. 15. Oversize charges for those services during those periods will be $39.50 and $68.75, respectively.

MCM musings: It will be interesting to see how domestic Q4 volume plays out for carriers. Experts are saying there should be more than enough capacity in their networks to handle expected lighter volumes based on inflationary pressures. FedEx in particular did not hit projected volumes last peak season, leading to complaints from Ground contractors that had invested in extra personnel and vehicles. A number of them have now banded together to seek financial relief, followed shortly by a suspension of Sunday deliveries in some less-dense markets and an inquiry from an activist investor. FedEx for its part has thus far refused to recognize or meet with them, saying their organizing actions could represent a breach of contract. UPS meanwhile is bracing for its own set of labor issues as new Teamster president Sean O’Brien plans to play hardball in 2023 contract negotiations.