FedEx rolls out new Peak Season surcharges

Memphis-based global freight transportation and logistics services provider FedEx recently announced new peak surcharges and fees for its U.S. Express and Ground services and Ground International.

The increased peak surcharges and fees include the following:

• a Peak Additional Handling Surcharge, for U.S. Express Package Services, U.S. Ground Services, and International Ground Service, of $5.95 per package, will take effect from October 4, 2021 to January 16, 2022;
• a Peak Oversize Charge, for U.S. Express Package Services, U.S. Ground Services, and International Ground Service, of $62.50 per package, will take effect from October 4, 2021 to January 16, 2022;
• a Peak Ground Unauthorized Package Charge, for U.S. Ground Services, International Ground Service, of $350.00 per package, from October 4, 2021 to January 16, 2022;
• a Peak Surcharge, for FedEx Ground Economy Package Services, of $1.50 per package (from November 1, 2021 to November 28, 2021), $3.00 per package (from November 29, 2021 to December 12, 2021), and $1.50 per package (from December 13, 2021 to January 16, 2022);
• a Residential Delivery Charge, for FedEx Express and FedEx Ground U.S. domestic residential packages (excluding FedEx Ground Economy and FedEx One Rate packages), of an additional $0.60 per package, beginning January 17, 2022

“FedEx has kept commerce moving and delivered critical shipments throughout the COVID-19 pandemic,” the company said. “We are entering another holiday peak season during which we expect continued high demand for capacity and increased operating costs across our network. We again anticipate the surge in residential volume to carry over into the new year. To continue providing our customers with the best possible service during this challenging time, we are implementing or making changes to the [above] peak surcharges and fees.”

And, for customers shipping more than 25,000 weekly shipments (on average) on a weekly basis, FedEx said there will be a charge for packages that are shipped between November 1 to January 16, 2022, with the amount charged per package based on what FedEx called a peaking factor calculated as weekly average residential and FedEx Ground Economy packages shipped between October 4, 2021 to October 17, 2021 and divided by weekly average residential and FedEx Ground Economy packages shipped between February 3, 2020 and March 1, 2020.

“All the carriers are now emboldened by the increasing number of e-commerce transactions,” said Jerry Hempstead, president of Orlando-based Hempstead Consulting. “As a result, the forecasts are the peak volumes will be in excess of available capacity. The laws of supply and demand kick in and the carriers are driving serious rate and surcharge increases to increase their profits. FedEx is relatively late in announcing as we have already seen UPS and USPS rate cards.”

On its fiscal year 2022 earnings call in June, Brie Carrere, FedEx EVP, Chief Marketing and Communications Officer, explained that within the FedEx pricing strategy, the company continues to prioritize capacity for commercial, and small and medium customer segments, adding that to support the network amid ongoing capacity constraints, FedEx increased its peak surcharges as of June 21, and will monitor and adjust its strategy as capacity and demand warrant.

“We will continue to confidently renegotiate our large customer segment contracts to increase profitability,” she said. “This means balancing product, day of week and lane mix at the customer level while ensuring appropriate surcharges and rate increases cover rising labor costs. Most large customer contracts in the U.S. are three years. Almost half of our total large segment volume had pricing agreement implementations in the past 12 months, leaving upside for fiscal year ‘22.”

What’s more, from a structural pricing perspective, Carrere said that FedEx believes that peak surcharges are kind of a new normal and that it has to align its pricing to its costs.

“We do anticipate every peak that there will be e-commerce surcharges,” she said. “We already have peak surcharges in market, and we continue to evaluate changes that we need to make based on demand and capacity. We implemented some changes, and we continue to monitor the environment.”