FedEx Rolls Out Average Rate Increase of 4.9% for 2021, Adds a Late Fee

FedEx announced its 2021 rate schedule, including once again an average 4.9% increase for its ground, express and home delivery services starting Jan. 4, lower than some observers had expected, and the addition of a late fee for unpaid invoices, which UPS has had in place for years.

As of Jan. 18, 2021, FedEx will levy an additional handling surcharge of $16 for any ground or express package that measures greater than 48 inches along its longest side, greater than 30 inches along its second-longest side, and weighs more than 50 lbs. (U.S. express) or 70 lbs. (international express and ground). The fee had been $15.

Starting Jan. 1, 2021, a 6% late fee will be assessed on both express and ground customers who fail to pay their invoice within agreed upon terms. UPS levies a 6% fee on invoices that are 14 or more days late; it was first introduced in 2009.

Delivery area surcharges are increasing between 15 cents and 50 cents per package for both commercial and residential deliveries handled by FedEx ground and express services.

Tim Sailor, owner of Navigo Consulting Group, pointed out that while FedEx’s 2021 general rate increase (GRI) is the standard 4.9%, that average varies by weight class. For instance, the average for packages in the 1-5 lb. range — representing the vast majority of ecommerce deliveries — will go up an average of 6.6%, while those weighing 6-10 lbs. will go up 5%. Heavier packages in the 11-20 lb. and 21-30 lb. ranges will see increases closer to the GRI, 4.8% and 4.7%, respectively.

FedEx freight is also instituting a new high cost service area surcharge that applies to shipments to certain ZIP codes, although the list has not yet been made public. It’s also adding an international out-of-delivery-area surcharge or an international out-of-pickup-area surcharge for customers in remote areas using its international express freight services. The list of ZIP codes for the latter services can be found here.

As of Feb. 1, 2021, there will be a change to how fuel surcharges are calculated for domestic FedEx freight services, which will now be assessed per pound of a shipment, based on weekly fuel spot rates.

In August, FedEx added surcharges for an expected blowout peak holiday season, adding up to $2 per package for the SmartPost final mile service and up to $5 per package for the next-day Express service. UPS and the U.S. Postal Service had already announced their peak pricing.

Regarding the new late fee, Sailor advised FedEx shippers to review their payment history and outstanding balances before the end of the year, and to push for a waiver, which may be tough to get. For its part, Sailor said UPS applies any new payments to the oldest outstanding invoice no matter how the payment is designated. It’s not known how FedEx will handling its process.

“Depending how far in arrears you are (with UPS), the 6% get applied to all balances until you are current,” Sailor said. “So, depending on your outstanding balance (with FedEx), you may need to frontload big payments until you’re caught up to avoid the late fee. Historically, FedEx has been much more flexible than UPS, usually offering large shippers extended payment terms, and no collection efforts until one day after 30 days past due.”

Sailor said one fast-growing client using UPS as its primary carrier sees the late fee as a cost of doing business. “They calculated that paying the late fee was was okay and just another way to finance new inventory,” he said.

Jerry Hempstead, principal of Hempstead Consulting, said in addition to the addition of the late fee, the increase in the ground minimum rate from $8.23 to $8.47 per parcel will hurt ecommerce shippers. No matter how much of a discount has been negotiated, shippers can’t be billed below the minimum.

“The ground minimum is a big deal as most shippers have negotiated a flat dollar amount discount, which means they eat all of the increase vs. having a percentage discount which mitigates some of the pain,” Hempstead said.