It’s no secret that parcel agreements are complex. The sheer quantity of services and surcharges to which discounts can apply make this mostly unavoidable. With typical agreements ranging between 15 and 30 pages or more, it’s easy to misunderstand or simply miss critical elements, which can greatly diminish the discounts offered. Let’s look at a few of the most commonly encountered.
Service Refund Waivers
With the exception of SmartPost and SurePost packages, as well as system-wide exclusions during peak season (or unique circumstances like COVID-19), every single shipment has an on-time guarantee. If the carrier delivers the package late, the shipper is entitled to a credit of the shipping charges… unless the carrier has inserted language in their agreement prohibiting the shipper from requesting a refund. The carriers’ position is that the discounts offered squeeze their margins too much to honor refunds. Don’t fall for it. Your customers hold you accountable when you fall short of expectations. Hold UPS and FedEx similarly accountable.
FedEx Money Back Guarantee language can be found under the “US Pricing Provisions” sections within their agreements. The language will state either that the shipper “is entitled” or “waives” its ability to request a refund. The language is listed separately in the respective Express and Ground pricing attachments. While most commonly they are the same, it’s possible to have a waiver in one section but not the other.
UPS waivers can be found in varying locations. It might be in the body of the agreement or referenced in a separate addendum. They might instead insert “Performance Threshold” language. This is positioned as a rebate of shipping charges if UPS fails to meet quarterly, on-time performance benchmarks. Make no mistake, this is still a waiver.
Surcharge Discounts Ineligible for Certain Services
It’s one thing to be aware that a specific surcharge (e.g. residential) might apply to ground services but perhaps not for express. It’s another matter to discover that the discount applies to some, but not all, ground shipments. This happens with alarming regularity. In addition to having separate terms for Express and Ground, FedEx agreements similarly categorize surcharge discounts by FedEx Ground (commercial shipments) and Home Delivery. Many shippers see a Residential Charge discount in their contract and presume that it applies regardless of which ground service is used. This is an expensive presumption.
In order to maximize operational efficiency within its commercial ground network, FedEx provides disincentives to shippers who tender residential shipments to it. This is done by charging a higher base rate for the residential surcharge for Ground versus Home Delivery, as well as stipulating that discounts offered apply exclusively to those manifested as Home Delivery. To the unaware, it could mean the difference between a non-discounted residential fee of $4.65 and one that’s $4.00 less a discount. This scenario plays out with other surcharges as well. Rural delivery, additional handling, and other size and weight related fees warrant careful scrutiny. Similar care needs to be paid to UPS agreements with regards to which billing options the discounts apply. A rural surcharge might be discounted for outbound, but perhaps not third party.
Non-Discounted Returns
It’s reasonable to presume that inbound returns are eligible for the same discounts as outbound, but it’s often not the case. Part of the confusion involves understanding the difference between “inbound” (or freight collect) and “returns.” By “returns,” the carriers mean that the receiver is responsible for not only the shipping charges but also for generating the label used by the shipper. “Inbound” would be when a vendor ships something to you and the charges are billed to your account. UPS almost always mirrors the outbound discounts, which are noted as RS or RTP as billing options. For FedEx, look for RMOB and RM3P payer types (‘RM’ referring to Returns Manager). Also be aware that even if return discounts are included in the FedEx agreement, they will likely not be extended to Earned Discounts.
By their very scale, UPS and FedEx contracts require careful scrutiny. Even then, it’s easy to overlook areas that appear fine on the surface. As is often the case, it’s not always what’s contained in the agreement that trips you up, it’s what’s not in it.
James Matthews is a founding partner of ShipRx. For more than a decade, he has helped shippers across the US improve their pricing agreements, eliminate wasted spend, and improve operational efficiencies. Prior to starting ShipRx, James was a 21-year veteran at UPS where his roles included accounting, sales, business planning, and pricing. He can be contacted at james@shiprx.com.
This article originally appeared in the September/October, 2020 issue of PARCEL.
