In the January issue of PARCEL, we discussed the topic of late payment penalties. There we gave an example of an LTL carrier whose tariff contained a provision for a loss of discount when an invoice was paid later than 30 days plus a onetime penalty of 125%. (A New Year’s Resolution: No Late Payment Penalties!) For many PARCEL readers, this has no doubt begged the question “Do UPS and FedEx have late payment penalties?”

For UPS, the starting point is its Tariff/Terms and Conditions of Service, which may be found on the UPS website. As of January 5, 2009, Section V (Rates and Payment) has a Subsection M (Payment of Charges), which contains the following two provisions:

8. For [certain specified payment plans] a late payment fee will be assessed if the shipper’s payment is not received by UPS within fourteen (14) days of the invoice due date…, the late payment fee will equal six percent (6%) of the total past due balance of the shipper’s invoice (including, without limitation, any previously assessed but unpaid late payment fees) that is fourteen (14) days past due or the maximum amount permitted by applicable law, whichever is less.
11. A late payment fee will be assessed only once on each invoice that is fourteen (14) days past due. Each late payment fee will be due and payable within seven (7) days following the shipper’s receipt of the invoice that first reflects the assessment of the late payment fee. The late payment fee is in addition to any collection costs that may be incurred by UPS in the final collection of Charges owed by the shipper…

Keeping in mind that in actual practice one must read the entire tariff --- not just portions of two isolated sections --- and, further keeping in mind, that these tariffs are subject to change, the salient feature of the tariff is that “late” means payment “not received by UPS within fourteen (14) days of the invoice due date”. If late, there is a one time penalty of 6% “in addition to any collection costs”.

With respect to FedEx, there are at least three possible governing tariffs --- one for air, one for ground and one for home delivery services. Pursuant to the “Credit Terms” section, the invoice date begins the credit term cycle and payment is due within 15 days of the invoice date. These sections also provide for attorneys’ fees, collection fees, interest and court costs in the event of non-payment. So far as I could determine, there is no specific reference to a late payment penalty in these published tariffs.

However, a review of the tariffs is only the first step. In addition to the tariffs, shippers able to negotiate a discount from the standard rates enter into a bilateral pricing agreement. As a general principle, such pricing agreements are confidential and unique to each shipper, so it is not possible to know what any particular pricing agreement says with regard to the payment terms negotiated or the consequences for paying an invoice later than the due date. 

With that disclaimer, it is my understanding that a typical UPS pricing agreement would incorporate the UPS tariffs, including those above, and do not contain a provision for a retroactive loss of discount. However, there probably would be a provision for a prospective loss of discount.

With the same disclaimer, it is my understanding that a FedEx pricing agreement will typically have a provision specifying the payment term and call for “removal of applicable pricing” if paid late, i.e., a loss of the discount. What is not clear to me is whether this loss of discount would be applied prospectively or retroactively. 

To conclude, when negotiating a pricing agreement with either UPS or FedEx, one must very carefully analyze the exact words of the agreement AND ensure that both parties are interpreting the words in the same way. As discussed in detail last month, it is the retroactive application with which a shipper should be most concerned.
All for now!

Brent Wm. Primus, J.D., currently serves as the General Counsel for the Freight Transportation Consultants Association and is the CEO of transportlawtexts, inc. and Primus Law Office, P.A. Your questions are welcome at brent@transportlawtexts.com.
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