UPS rolls out 2016 rate increases

UPS announced yesterday that it has rolled out its 2016 rate increases.

Big Brown said that effective December 28, UPS Ground rates and accessorial charges will head up by an average of 4.9 percent, and UPS Air and International services and accessorials, including UPSAir Freight rates within and between the United States and Canada will increase by an average net of 5.2 percent. And rates for UPS Freight, the company’s less-than-truckload (LTL) segment, will increase 4.9 percent and take effect on October 26.

UPS also said that surcharges for Over Maximum packages and tables for Ground Air and International fuel surcharges will increase on November 2, and on January 4, 2016, it said there will be a charge for the company’s Third-Party Billing Service. For the Third-Party Billing Service, UPS bills shipping charges to a party other than the shipper or receiver, with the third party required to have a valid UPS account number and must have agreed to accept the charges.

Company officials said that rate and surcharge tables are geared to address the impact of increased costs and changing demand for select UPS products and other market factors.

This announcement follows a similar one by UPS’s biggest competitor, FedEx, which the Memphis-based company announced in September.

Rate increases will take effect for FedEx Express U.S. domestic, U.S. export, and U.S. import services, effective January 4, 2016. FedEx Express will increase shipping rates by an average of 4.9 percent for U.S. domestic, U.S. export and U.S. import services, and FedEx Ground and FedEx Home Delivery will increase shipping rates by an average of 4.9 percent. FedEx SmartPost rates will also change. And FedEx Freight will increase shipping rates by an average of 4.9 percent.

FedEx will also be updating certain fuel surcharge tables at FedEx Express and FedEx Ground, effective November 2. These changes are being made due to what FedEx described as changing industry dynamics, including, increases in average package size and weight, and increased residential deliveries. The company also noted that it is upping surcharges for shipments that exceed published maximum dimensions, or unauthorized packages, in its FedEx Ground network. It explained that unauthorized packages that exceed length or weight limitations of FedEx Ground “are handled at the option of FedEx Ground.

Rob Martinez, president & CEO, Shipware LLC, a San Diego-based parcel consultancy, said that the gains in UPS Air and International at 5.2 percent slightly edge FedEx 4.9 percent average, with that increase expected for two reasons: UPS daily rates in 2015 were less expensive than the FedEx published rates and it follows a historical trend in that UPS has increased air rates slightly above FedEx in each of the past several GRI (general rate increases). And he added that Ground pricing seems to match FedEx exactly, as do many accessorial increases including an increase of $52.50 to the “Over Maximum Limits” fee (the new rate will be $110.00).

“What’s surprising is that UPS is again increasing its fuel surcharge effective Nov 2, 2015,” said Martinez. “Where FedEx’s latest announcement to increase fuel surcharges on 11/2/15 brought it more in line with what UPS charges today, the new UPS fuel pricing will again be higher than FedEx. It’s also important to note that UPS will implement the 2016 pricing on Dec 28, 2015, a full week ahead of FedEx.  Finally, UPS Freight pricing is also increasing an average of 4.9 percent effective Oct 26, 2015. To date, FedEx has not announced increases at FedEx Freight.”

One other finding cited by Martinez is that it appears UPS will abandon its “Standard” published rates with its 2016 GRI, as UPS standard rates match FedEx’ pricing. He said this is likely due to UPS feeling it no longer needs to match FedEx since the 2016 “Daily” rates will so closely resemble those of FedEx. 

Jerry Hempstead, president of Hempstead Consulting, said that the biggest story with this announcement is the new surcharge for the UPS Third-Party Billing Service.

“Many companies bill third party because they have contractors do the pull/pack/ and ship for them, in particular in this time of virtual inventory and drop shipping,” he said. “This is a whopping 2.5 percent of the total invoice on top of the other announced increases for transport and accessories.
If a shipper was not adept to include in their contract language that precluded introduction of new fees and have in their agreement language that the shipper agrees to the terms and conditions in the carrier service guide at the time of tender then the shipper may be faced with this additional cost.”

This charge, said Hempstead, is going to eat up a lot of margin for many e-tailers, especially those that offer free shipping.

“There appears to be no end to the creativity of the parcel carriers to come up with new and improved methods and means to enhance yields,” added Hempstead.