On December 31, 2024, the UPS/USPS Negotiated Service Agreement (NSA) officially expired, marking the end of a long, mostly silent period of negotiations. Unfortunately, these talks failed to produce a resolution, leaving shippers with unexpected consequences. Starting on January 2, 2025, shippers noticed an immediate problem: SurePost labels for P.O. Boxes and APO/FPO addresses began to be rejected without prior warning. For many, this left them scrambling to find a solution, as USPS is the only carrier authorized to deliver to P.O. Boxes and APO/FPO destinations. With the expiration of the NSA, the only remaining delivery options for these specific addresses is direct USPS shipping or using workshare partners still relying on USPS for final delivery.
The USPS under Louis DeJoy has been pushing their workshare partners out of their network since mid-2024 by effectively removing DDU injections, by removing incentives for these injections, increasing Parcel Select rates, and aggressively negotiating NSA renewals. While many believed that UPS would receive special preference due to the massive USPS Parcel Select volumes they represented, in the end it wasn’t enough.
Logic suggests that UPS is planning to move these deliveries in-house, largely mirroring FedEx’s Ground Economy model. This theory is supported by the recent SurePost rate increases and DAS/EAS changes, which would provide revenue offsets for the increased cost of direct delivery. This would still leave the P.O. Box and APO/FPO deliveries without a solution. But those are a fairly small subset of current SurePost volumes.
In mid-December UPS announced rate and surcharge increases beginning January 13, 2025. These increases included a roughly 9.9% increase on 1-10 lb. SurePost packages and around 6% on SurePost packages above 10 lbs. But what has been largely overlooked is a massive increase on DAS (61.8%) and EAS (69.4%) surcharges, bringing the gross surcharges in line with the Ground surcharges. Combined we have seen shippers taking as much as a 30% effective rate increase. Moreover, the surcharges will change the financial model for rural deliveries for many shippers, making options other than SurePost more competitive. In essence, it appears that UPS is trying to retain competitiveness for high-density metro deliveries, but push low-density, rural deliveries upstream to Ground service levels, or out to USPS and other carriers.
The industry has known for months that things were going to change. The expiration date of the UPS/USPS NSA was known. The USPS’s push to limit workshare partners’ presence in their network was known. But what seemed to irk most online commenters was the abrupt nature of the change. Shippers awakening in the new year with labels rejecting, with no notice, and seemingly no contingencies, has left many shippers fuming.
As of now, this remains a developing story. The expiration of the UPS/USPS NSA is just the beginning of a larger shift in the shipping landscape. As more information becomes available, shippers will need to adapt to these changes and reevaluate their strategies for handling time-flexible, e-commerce deliveries.
Stay tuned for updates as this situation unfolds.
Joe Wilkinson is VP, Professional Services (Transportation Consulting) at Intelligent Audit. He can be reached at joeywilkinson@intelligentaudit.com
