On January 6, United Parcel Service (UPS) implemented a general rate increase that is expected to remain in effect for a year, barring any unforeseen circumstances.

This year's increases are slightly higher than last year's, largely because they follow the signing of a new, six-year contract with the International Brotherhood of Teamsters that provides for higher wages and retirement benefits than are now in effect. For example, rates for UPS Commercial Ground Service, which includes domestic shipments to points in the continental United States, rose by an average of 3.9 percent. Last year, the average increase was 3.5 percent.

As I explained in my November 2002, column, when carriers announce "average" rate increases, shippers should carefully analyze them to determine which rates are higher than the average and which are lower, and by how much they vary from the announced average.

In making a comparison of this year's UPS rates with those previously in effect, we found that per-package rates for packages weighing 5 pounds or less generally were hit with increases above the 3.9-percent average. (See Figure 1.)

In addition to the scheduled rate increase, UPS customers now are paying a fuel surcharge of 1.25 percent. No fuel surcharge was in effect when last year's increases were implemented in January of 2002. The package carrier came in with a 0.75-percent surcharge on May 6 and upped it to 1.00 percent on October 7.

In most cases, per-package rates for packages weighing from 6 to 70 pounds increased by less than 3.9 percent, although some were close to the announced average. The smallest increase we saw for that category was 3.42 percent for 70-pound packages shipped to points in Zone 3.

Press reports had UPS Hundredweight rates, which are assessed per 100 pounds, going up by an average of 5.5 percent. That's less than the percentage increases we computed, which were based on rates shown on the carrier's Web site at UPS.com/rates. (See Figure 2.)

The per-shipment minimum charge for Hundredweight service that was in effect last year, which was based on an average weight of 15 pounds per package or $59.50 per shipment, whichever was greater, went up this year to an average weight of 15 pounds per package or $62.50 per shipment, whichever is greater.

The new rates create a strong incentive for those who are shipping under per-package rates to ship several smaller, lightweight packages inside a master carton. In many cases, the additional cost of the master carton itself and any freight cost for the additional weight will still be less than the cost of shipping many lighter packages individually.