Shippers need to monitor and negotiate more than just the base price of their FedEx shipping.
Just as airline or car rental fees increase the ticket or rental base price, FedEx surcharges substantially increase shipping prices. In fact, a comprehensive benchmark report we recently published showed that FedEx shipping surcharges were 28% of the total shipping charges, from a sample size which included more than 4.6 million shipments.
It’s easy to say that a shipper could just negotiate these charges out of the gate, or proactively adjust their packaging or carrier choice parcel by parcel.
However, shippers don’t always know about the charges until they appear on the bill, and they may be described as service fees, transportation charges, or handling charges, adding to the confusion. One must dig into the billing, preferably with a software platform that tracks and analyzes their overall shipping data and reviewed by someone with expertise, to better understand all the accessorial charges and what’s being paid.
As a definition, any shipping charges or fees applied to packages that are additional to the carrier’s base rates are surcharges. Recent history shows that FedEx surcharges and fees change at least twice yearly, with surcharges like fuel adjusting on a weekly basis. FedEx posts a menu of surcharges, and there can be individual fees assessed, or an assortment of fees for each parcel, depending on how many conditions apply to that delivery, and the FedEx Service Guide has additional information.
Here’s what you need to know about FedEx surcharges in 2019.
Fuel
A fuel surcharge is one of the most common FedEx surcharges assessed, and it’s calculated as a percentage of package shipping costs, including other surcharges. It’s assessed to help FedEx offset fluctuating, and often rising, fuel costs.
The charge is not calculated the same way as other surcharges. Our study of more than 2.5 million shipments showed an $0.88 average fuel surcharge per package, resulting in $2.2 million in additional costs for those packages. This is a significant fee to add on to a single parcel, and it adds up quickly.
The FedEx shipping fuel surcharges are not a simple across-the-board percentage. FedEx’s fuel surcharge tables are broken down into domestic FedEx Express, import, export, and FedEx Ground services, and they rely on different fuel type pricing indices. For example, the US FedEx fuel surcharge changes weekly and is based on the US Gulf Coast (USGC) spot market price for kerosene-type jet fuel. FedEx Ground services and same-day shipment rely on national highway average prices for diesel fuel and changes weekly.
FedEx Freight service relies on national average diesel fuel and changes each Monday. The surcharges on the bill might be assessed at a previous week’s rates. Since the percentage is applied to the total shipping price, higher surcharges in other areas mean a higher fuel surcharge per parcel.
Delivery Area and Extended Area Surcharges
FedEx applies surcharges for shipping destinations outside of the FedEx network’s delivery area, with a $2.58 surcharge for commercial US Express package services, and a $4.20 surcharge for residential services in 2019 (for both US FedEx Express and FedEx Ground services).
The out-of-network area would be determined by FedEx based on ZIP Code and is meant to account for rural areas and out-of-the-way deliveries. On the invoice, it might appear as delivery area surcharge (DAS) or extended delivery area surcharge (EDAS).
Unfortunately, using a ZIP Code to determine these surcharges means that shippers will pay more for areas that are sometimes urban but share a ZIP Code with a rural area. Just like fuel surcharges, DAS charges are not uniform among FedEx shipping services.
It may be cheaper to send an item through FedEx Home versus FedEx Ground services for delivery to a residential address with a DAS ZIP Code.
Pick-up Charges and Residential Delivery
If FedEx is coming to your business (or your customer’s home) for a pick-up and you are paying the bill, you may pay a pick-up charge. That fee is based on the pick-up location (e.g. commercial, residential, extended delivery area), and weekly charges are assessed for regular pick-ups at your location as well.
As for delivery, FedEx charges fees to deliver to residential addresses, even if a business is operated from that address or it’s a former residential area that’s been rezoned to commercial status. Using the FedEx Home Delivery network would result in a lower surcharge than using FedEx Ground, and using FedEx SmartPost can eliminate residential delivery fees altogether.
Saturday or Sunday Surcharge
FedEx shipping clients sometimes pay for delivery or pick-ups outside of the traditional Monday to Friday business days. For FedEx Same-Day City pick-up on Saturday or Sunday, FedEx charges $20, while delivery is $40 per shipment. For a $16 per package FedEx surcharge, they’ll pick up US FedEx Express packages and FedEx International packages on Saturdays. Saturday deliveries are also a $16 surcharge.
FedEx Freight Saturday pickup or delivery has a higher $210 surcharge each. If the package can be delivered via SmartPost, that can help shippers eliminate this Saturday pickup or delivery fee.
Additional Handling
The FedEx additional handling fee has been in play since 2016, and the carrier charges extra depending on weight, dimensions, or packaging type, depending on the FedEx shipping service. For dimensions, FedEx requires that the package be no greater than 48 inches on the longest side, and no more than 30 inches on the next-longest side, to avoid the fee.
The fee is in place for packages weighing more than 70 pounds as well. FedEx also charges handling fees for some packaging types, like if the item is not fully encased in an outer shipping container; the shipment is covered in plastic wrap; or it has wheels, straps, or handles. Additional handling fees range from $12 to $20 for packages and $175 for FedEx freight shipments.
Other Types of FedEx Surcharges
The surcharges already described only cover a portion of FedEx surcharges. Here are some others to know about.
Oversize charge: If a parcel doesn’t fit into FedEx’s defined package maximum size, it qualifies
for the oversize package surcharge, which is $90 in 2019. The FedEx threshold is 96 inches in
length, or 130 inches in dimensional girth (length plus girth) and no more than 70 pounds.
Anything larger, and the package is assessed for the oversize charge. If the package is smaller
than the maximum number of inches, but weighs more than 70 pounds, it also will be assessed
the $90 surcharge.
Peak season: FedEx charges “peak” season increases starting before Thanksgiving and ending just before Christmas. Dates have not yet been announced for 2019. These surcharges apply to domestic FedEx Express and domestic and International FedEx Ground shipments. In 2018, the peak season fees were an additional:
FedEx additional handling: $3.20
FedEx Ground unauthorized package surcharge: $150 per package
FedEx oversize charge: $27.50
Address correction: FedEx charges more for address corrections if the parcel has an incomplete or incorrect address requiring FedEx correction. The published rate for a FedEx surcharge for address correction in 2019 is $16 for non-freight services.
Declared value: FedEx includes a $100 declared value on shipments. Shippers who want a
higher value will pay $3 for values that are $100-300, and $1 per $100 of declared value above
$300 for US services and International Ground services.
Signatures: If the shipper wants a signature on delivery, the price runs $5 to $6.05 depending on signature type.
These are only some of the surcharges FedEx can apply to shipments. Others include cash on delivery, hazardous or dangerous materials, unauthorized packages (those going outside of the weight or size rules), delivery reattempts, non-machinable packages, and third-party billing.
How to Plan for FedEx Surcharges
FedEx changes its surcharge fees at least yearly or, more recently, even twice a year. Costs continue to rise, as can be seen in this year-over-year chart. We updated our list to compare 2018 and 2019 FedEx surcharge rates.
Fortunately, shippers have some ability to lower the rates. First, shippers must understand what they’re paying in surcharges and the types of packages they’re sending, to better understand what discounts would be most helpful. It’s also necessary to understand alternative shipping options, within the FedEx brand and outside of it.
For example, a shipper can use the United States Postal Service (USPS) for some parcels, as they don’t charge a residential delivery fee or Saturday pickup or delivery fees. FedEx SmartPost includes the best of FedEx and the USPS, with the the latter delivering the final leg of the journey, while still using FedEx’s tracking and billing system.
FedEx shipping surcharges are a real pain point for shippers and many don’t have the in-house expertise to understand the minutia of their own shipping practices, let alone how best to negotiate with shippers for the most effective discounts. Yet our benchmark report shows that 69% of respondents want fewer surcharges in their pricing agreement. A full 41% said it was hard to negotiate these agreements, but a majority of respondents realized they needed to rely on reporting and benchmark data to drive their negotiations.
The shipping business is exceedingly complicated and constantly changing, making analytical software and an eagle eye expert helpful in navigating the landscape and implementing the best-individualized shipping program. A cost-effective way to access a company’s shipping information across channels, and then analyze it, is to work with a third-party logistics provider.
But whether you partner with an expert or keep this task in-house, remember: with 28% of shipping costs made up of surcharges, this is an area shippers can’t afford to ignore or be ignorant about.
Rob Martinez, DLP is President & CEO of Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Rob offers 25 years’ experience negotiating parcel contracts – on both sides of the negotiating table – for some of the most recognizable brands in the world, and is a sought after speaker and industry thought leader. He welcomes questions and comments, and can be reached at 858.879.2020 Ext 114 or rob@shipware.com. You can also contact Shipware for a free audit recovery assessment.
