FedEx Raises Peak Season Surcharges, 2024 Shipping Rates
FedEx is raising surcharges for the 2023 peak season and also unveiled its general rate increase (GRI) for 2024 as the package delivery giant seeks to increase profitability and slash $4 billion in costs by the end of its 2025 financial year.
Formerly known as “peak” surcharges, FedEx recently rebranded the surcharges as “demand” surcharges, in that they will not just be implemented during the holiday season, but in any additional time of elevated demand volume.
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The primary fees go into effect from October to January. Small businesses that use FedEx Ground Economy will see surcharges jump to $1.60 in Oct. 30 to Nov. 26 period, as well as through the Dec. 11 to Jan. 14 time frame, an increase from $1.50 in the comparable periods last year. The surcharges will escalate to $2.60 in the more hectic periods of the season, from Nov. 27 to Dec. 10, up from $2.50 in the comparable period last year.
The demand surcharges also apply to packages that are large, oversized or require additional handling via U.S. Ground and U.S. Express.
The “additional handling” surcharges were increased to $6.95 from $6.55 per package, while oversize charges jumped from $68.75 to $73. Ground unauthorized package charges—fees for packages that are so big that FedEx Ground has the discretion to refuse, return to the shipper or dispose of them—are now $410, up from $385 in the year prior.
FedEx is also implementing surcharges that target larger shippers’ volume spikes during the holidays to mitigate strain on its network. Starting Oct. 30, enterprise-level customers shipping more than 20,000 residential and FedEx Ground Economy packages will be subject to the company’s “residential delivery charge.”
This charge can range from $1.35 to $6.35 per FedEx Ground package, and $2.40 to $7.40 per FedEx Express package. The amount depends on how much more the customer is shipping compared to their weekly average residential and FedEx Ground Economy volume from June 5 to July 2. FedEx calls that increase a shipper’s “peaking factor.”
FedEx will calculate the peaking factor each week from Oct. 9-15 to Dec. 18-24, with a week’s charge being applied three weeks later. This means that a customer that ships 20 percent more volume the week starting Nov. 6 than they did from June 5 to July 2 will see an added $1.35 charge for each applicable FedEx Ground package shipped the week starting Nov. 27.
Tommy Storch, a transportation procurement expert at Insight Sourcing Group, said FedEx and UPS have both gotten increasingly creative in their residential delivery surcharges as they have expanded their networks.
“Outside metro areas, costs get more expensive because the density of delivery is not as prevalent,” Storch previously told Sourcing Journal. “FedEx and UPS are very good at always creating new charges…It’s so complex, and they only make it more complex every single year. It’s really something that if a shipper is not managing on a monthly basis, you can all of a sudden have your costs explode on you.”
As of Jan. 1, 2024, FedEx will raise shipping rates 5.9 percent on average across its FedEx Express, FedEx Ground and FedEx Home Delivery services. FedEx Ground Economy shipping rates will also increase an undisclosed amount.
The average annual rate increases are one percentage point lower than last year’s general rate increase (GRI) of 6.9 percent. But the higher rates came when the Consumer Price Index (CPI) was 6.5 percent, well above the July 2023 inflation number of 3.2 percent.
According to FedEx, the price adjustments reflect incremental costs associated with the current operating environment, while also accounting for the investments the company has made in service enhancement, fleet maintenance, technology innovations “and other areas to serve customers more effectively and efficiently.”
UPS has yet to unveil its 2024 GRI, but it has traditionally hiked rates directly in line with FedEx, which raised its rates 6.9 percent for 2023. Both companies raised GRI 5.9 percent in 2022, and 4.9 percent each year from 2012-2021.
The only reason this year could be different is based on speculation that UPS could decide to pass on the higher costs to customers after 340,000 unionized employees secured a new contract worth “$30 billion in new money” over five years.
FedEx Freight shipping rates will increase by an average of 5.9 percent to 6.9 percent dependent on the customer’s transportation rate scale. This change applies to shipments within the U.S. (including Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands) and between the contiguous U.S. and Canada.
Details of all changes to rates, surcharges, and fees will be available on Sept. 7, the package delivery company says.
Also effective Jan. 1, FedEx will be increasing customs clearance service fees on imports.
