UPS for the first time is extending its peak surcharges for residential delivery beyond the usual mid-January cutoff, referring to them as by the new designation of “demand surcharges” which will be in place until further notice, while FedEx is not following suit but letting them lapse.
The surcharges will be reduced from their peak levels, the period from Oct. 20 to Jan. 14, but remain in place after that date. They are assessed on shippers with more than 20,000 packages during any week subsequent to October 2021.
The rate increases work off a formula using a shipper’s average weekly volume during July 2022 as the baseline. If the number of packages tendered in a given week is less than 80% of that baseline, then average weekly volume from Sept. 4-Oct. 2, 2022 is used as the new baseline.
For instance, a shipper with weekly volume at 105% to 125% of the baseline, sending a package via UPS Ground, any residential air service or SurePost, will now pay a 40-cent surcharge, down from $1.25 during the peak ending Jan. 14, 2022.
The surcharge for additional handling will drop from $6.50 per package to $3.50 per package on Jan. 15, and from $70 to $40 per package for large items. The over-maximum surcharge of $400 during peak season is being eliminated.
In mid-December, FedEx announced it is also extending its additional handling and oversized surcharges indefinitely, as of Jan. 16 for all U.S. Express, U.S. Ground and International Ground service.
“Our surcharges help protect our network and ensure UPS receives appropriate compensation for additional costs to maintain our high-quality service against the backdrop of dynamic market conditions,” said company spokesman Brian Hughes.
Both major carriers are seeking new and creative ways to improve revenue quality and fight against margin erosion in the face of declining volumes during an economic slump. FedEx has set a goal of $4 billion in cost reductions over the next three years as part of its effort. And in Q3, UPS eliminated 1,000 trailer loads per day in the U.S., while rolling out an RFID-driven smart package system at 101 domestic facilities. Also, both major carriers instituted historically high general rate increases of 6.9% for 2023.