UPS Peak Surcharges Will Hit Big Shippers Hardest
UPS Inc. disclosed its peak-season surcharge schedule for U.S. residential deliveries, and, as expected, high-volume shippers will get hit the hardest.
The surcharges take effect Oct. 30 and run until Jan. 14, UPS (NYSE: UPS) said on Friday. The levies will apply to customers that are billed for more than 20,000 weekly packages during any week after October 2021. Any customer using one or more of four different services will be hit with surcharges as long as their combined weekly peak volume exceeds that threshold, UPS said.
The four services are Ground Residential, Next-Day Air Residential, All other Air Residential and SurePost, which UPS manages in conjunction with the U.S. Postal Service. Under SurePost, bulk volumes are inducted deep into the Postal Service network for last-mile deliveries to residences.
Based on shipper volumes and the specific service levels, the 2022 peak surcharges will range from $1.25 per package to $7 per package. For example, a shipper who uses UPS’ Ground Residential service and who tenders 300% to 400% more weekly peak volumes to the service than it does during a predetermined nonpeak period will pay a $4.25-per-package surcharge.
By contrast, a shipper using the carrier’s Next-day Air Residential service will pay a $2.75-per-package surcharge if its weekly peak volumes are between 125% and 150% higher than the volumes tendered for that service during nonpeak periods.
All shippers who tender 105% more weekly volumes during peak than during the redesignated nonpeak period will be subject to some form of surcharge.
Not surprisingly, the 2022 surcharges are higher than the 2021 levels. Last year’s peak surcharge amounts ranged from $1.15 to $5.15 per parcel for Ground Residential and SurePost, and between $2.15 and $6.15 for UPS Next Day Air and other Air Residential. Last year’s peak surcharges didn’t kick in until a shipper’s combined weekly volumes exceeded 25,000 parcels.
Separately, UPS said that surcharges for various special-handling services will increase, effective Oct. 2. Levies for “additional handling,” which applies to shipments that don’t conform to UPS’ processing profile and must be handled differently than others, will nearly double to $6.50 per package. Surcharges on shipments that exceed UPS’ dimensional requirements will rise to $70 per package from $40.
Levies for handling so-called over-maximum shipments — shipments that are not designed to be moved by a parcel-delivery carrier, will be $400. Since mid-January, UPS had not charged a fee for “overmax” shipments. All of the new levies will expire on Jan. 14.
For its standard package columns, UPS (NYSE: UPS) calculates peak surcharges by choosing a nonpeak baseline month and then comparing weekly volumes during that month with the volumes tendered weekly during the peak period. The surcharge amounts will climb the further that a shipper’s peak volumes exceed the weekly levels that were tendered during the nonpeak period.
During the 2021 peak, UPS chose February 2020, the last month of normal volumes before the pandemic hit, as the baseline month. This effectively allowed the carrier to capture more volumes that would be subject to the 2021 surcharges.
This year, UPS has set June as the default baseline month. However, should weekly volumes during September not exceed 80% of the traffic tendered during June, then September becomes the new baseline month. UPS said those calculations will be conducted at its “sole and unlimited discretion.”
Nate Skiver, founder and president of parcel consultancy LPF Spend Management, said on Monday that many shippers could benefit because their June 2022 volume levels were much higher than they were before the pandemic.
By: Mark Solomon / FreightWaves