UPS rolls out 2022 rate increases

Late last week, Atlanta-based global freight transportation and logistics services bellwether UPS announced general rate increases (GRI) for 2022, which are set to take effect December 26, 2021.

UPS said that these rate increases help to support “ongoing expansion and capability enhancements as we strive to maintain the high service levels you expect from UPS.”

The top-level rate increases include:

• an average net increase of 5.9% for UPS Ground, UPS Air, and International services; and
• an average net increase of 5.2% for UPS Air Freight within and between the U.S., Canada, and Puerto Rico

UPS also said that effective January 9, 2022, its Peak Surcharges will be renamed Peak/Demand surcharges.

On the company’s third quarter earnings call last week, UPS CEO Carol Tomé said that the rate increases reflect the value of services UPS offers, as well as cost inflation pressure, adding that UPS is “laser-focused on revenue quality.”

And UPS CEO Brian Newman added on the call that the global economy continued its strong growth in the third quarter, despite the dampening effects of COVID-19 and inflation, as well as shortages in inventory and labor.

“Within this backdrop, demand for our services remained high and the pricing environment in the industry was firm,” he said. “We expect similar dynamics in the fourth quarter, and as we demonstrated in the third quarter, we will continue to execute our strategy and capture profitable growth opportunities in the market.

Matt Bohn, Senior Consultant for San Diego-based Shipware, an audit and parcel consulting services company, explained that UPS is continuing to punish large package shippers, with its pricing efforts.

“They have taken this stance for a couple of years now, but the message is clear:  if you want to ship large packages at UPS, you will pay a premium to do so,” he said. “The large package surcharge will increase within the 8%-16.7% range and the additional handling weight/dimensions will increase from 5.2%-13.9% depending on zone…and the majority are increasing by more than the announced 5.9%.”

Bohn also observed that UPS is continuing to penalize lightweight shippers, with ground minimum charges will increase 6.9%, from $8.76 to $9.36, with 1 pound-to-5 pound packages to increase by almost 8%, with most of the largest percentage changes in the lower weights and fairly consistent across zones.

UPS is also increasing its fuel surcharge for all of its domestic services by 1%, effective, November 15, which Bohn observed marked the second fuel surcharge increase in the last three months, with a 0.75% increase on August 16 and a pending 1% increase on November 15. He said that these fuel increases as separate from GRI increases and happen throughout the year and “buried” on the UPS website, leaving shippers with what he called unpleasant surprises and apply to various surcharges (not base charges), including: Delivery Charges; Pickup Charges

Remote/Extended Delivery and Pickup Charges; Residential Surcharge; Return Services w/ Pickup; Saturday Delivery and Pickup; Signature Required Services; Additional Handling, Large Package and Over Maximum Limits; Oversize Pallet Handling Surcharge; and Peak Surcharges.

“UPS’s recent announcement and earnings call have verified what most of the marketplace has already concluded, that UPS is focused on driving profits first and is far less focused on maintaining relationships with their customers,” said Bohn. “Increases for 2022 will be larger than those in the past and “Peak” is highly unlikely to end anytime soon. Shippers should determine how the announced increases will affect their bottom line and look to negotiate if the increase are deemed too detrimental to their bottom line. There is a silver lining in the shipping marketplace, however, which is the likely entry of Lasership/OnTrac into the national marketplace (note that this is speculation on our part but seems likely) as well as the also likely entry of Amazon.  If these new entrants are able to disrupt the longstanding duopoly, perhaps the incumbents will return to their focus on relationships and less on the current quarters’ profit margin.”