On December 16, FedEx announced the continuation of select peak surcharges into 2021:
Peak — Oversize Charge | U.S. Express Package Services, U.S. Ground Services, International Ground Service | $30.00 per package | Jan. 18, 2021 until further notice |
Peak — Additional Handling Surcharge | U.S. Express Package Services, U.S. Ground Services, International Ground Service | $3.00 per package | Jan. 18, 2021 until further notice |
Peak Surcharge | FedEx SmartPostPackage Services | $0.75 per package | Jan. 18, 2021 until further notice |
These three surcharges build upon similar ones introduced in early June when many US states implemented Covid-19 restrictions. FedEx further increased these charges in November and created additional charge qualifications for specific periods of time.
As with other peak surcharges, these are additive to any corresponding “normal” surcharges.As an example, on FedEx Ground, both the normal oversize charge of $105 AND the Peak Oversize charge of $30, a total of $135/package, will apply to oversize packages on and after Jan. 18.
One important note is that these charges do not have a definite end date.They are simply “until further notice.”For the time being, this makes FedEx SmartPost 19 cents more expensive than UPS SurePost on published rates, with the peak surcharge included (for under 10lbs.). Without the peak surcharge, UPS SurePost is 56 cents more expensive than FedEx SmartPost under 10lbs. This is subject to change if UPS creates similar charges, or if FedEx decides to stop charging these peak rates sometime in 2021.
The 2020 history of a SmartPost Zone 2, 1 lb. package:
In addition to FedEx’s previous announced increases to its SmartPost rates for 2021, every zone/weight combination will be bumped up by $0.75.In case you are keeping score, here is the rate progression since the announcement of the FedEx 2020 rates.For this example, rates are on a zone 2, 1 lb. SmartPost package:
Base Rate | Surcharge | New Rate | %D from Original | |
Jan. 6, 2020 – June 7, 2020 | $8.23 | $- | $- | |
June 8, 2020–Nov. 1, 2020 | $0.40 | $8.63 | 4.86% | |
Nov. 2, 2020–Nov. 29, 2020 | $1.00 | $9.23 | 12.15% | |
Nov. 30, 2020–Dec 6. 2020 | $2.00 | $10.23 | 24.30% | |
Dec. 7, 2020–Jan. 3, 2021 | $1.00 | $9.23 | 12.15% | |
Jan. 4, 2020–Jan. 17, 2022 | $8.76 | $1.00 | $9.76 | 18.59% |
Jan. 18, 2021 - Indefinite | $0.75 | $9.51 | 15.55% |
As we can see, the published list rate along with temporary surcharges will have increased over 15.5% over the course of 12 months.For such a popular, “cost-reducing” service, this is extraordinary, especially when you consider the fact that FedEx has consistently announced average annual increases of 4.9%.
FedEx is using these charges to reconcile the costs to their operations for four years of growth, YOY >20%, compressed into the one year of 2020.To control costs going forward, it’s recommended to engage with your carrier representative and with industry advisors to stay alert to changes, analyze any impacts, and mitigate them as much as possible.
Mark Taylor is Transportation Consulting Manager, enVista. With 20 years of experience in transportation — most of which have been in the parcel industry — he works with clients to guide them through contract analysis and negotiation processes.
