In May of 2021, FedEx announced that it will be updating its fuel surcharge rate tables effective June 21, 2021. This change increases the associated rates of trigger points for FedEx Express (domestic package and freight services, export, and import) as well as FedEx Ground. The tables have not been adjusted since March of 2020, and based on the increases in the tables, it will likely mean higher costs for fuel surcharges.
The tables that are changing outline the thresholds of what percentage of the shipment is charged for fuel. While FedEx updates its fuel surcharge percentage weekly based on the weekly published U.S. Gulf Coast (USGC) spot price and US highway average price for a gallon of ultra-low sulfur diesel fuel, this update changes only the threshold bands that the surcharge is based on.
For FedEx Ground, Express package and International, each level is increasing 1% compared to the current fuel table. As for FedEx Express Freight, each rate level is increasing $0.016. For FedEx Ground, this means that at the current price of fuel at the threshold of $3.19 to $3.28, it would increase the fuel surcharge charged from 8% to 9% per package with the new table.
The details of the announcement and tables associated can be found here.
Not only will shippers need to account for the 1% increase, but fuel prices compared to 2020 are significantly higher. From April – June 2020, fuel surcharges for Ground shipments hovered around 6%-6.5% and Express surcharges were at 2%. Year-over-year increases for Ground will remain at 2-3% and Express packages will see a rise of over 5% for fuel surcharges. This, along with a great many changes in rates, accessorials, surcharges, and rating logic from carriers like UPS and FedEx, has negatively impacted shippers' spend.
While FedEx did not provide any context due to the change, an interesting case for the reasoning could be that the overall increase in miles/delivery stops due to capacity constraints is causing FedEx to shift more of the burden to shippers. As transportation costs continue to rise, shippers will once again need to heighten their focus on the impact of increasing fuels surcharges to their overall costs.
Will Roundtree is an Account Analyst for enVista, where he manages a variety of accounts and provides world class support and cost savings through proactive analytics. Utilizing business intelligence and industry expertise, Will assists clients in understanding and optimizing their supply chain to drive cost savings.