Last September my comrade-in-arms and I were asked to share our predictions on the 2018 UPS and FedEx surcharge increases at Parcel Forum 2017. One such prediction? With an already existing $35 gap between their respective excess size / weight charges ($115 and $150 for FedEx and UPS respectively), we figured that UPS would increase theirs by 10% and FedEx would close the disparity. Our rationale was that a $150 penalty was already a sufficient deterrent to moving those packages through their parcel networks and any noteworthy escalation wasn’t warranted.

We were so wrong.

If you have such packages that you tender to UPS or FedEx, you’re already aware that FedEx increased theirs to $300 and UPS to $500. Surely this was enough of a discouragement for such shippers.

Apparently not.

What’s Changing?

Beginning June 4th packages exceeding 150 lbs. (scale weight), 108 inches (9 feet) in length, or 165 inches in length plus girth will now be subject to an Over Maximum Limits charge of $650.00 on top of the regular freight charge (I’ll let that sink in while you climb back into your chair).

Is this a money-grab? Perhaps… but not directly. The reality is that large and heavy packages don’t play nice with their truly small parcel brethren on carriers’ conveyance systems (or with the conveyance systems themselves for that matter) so they are manually lugged through the hubs and operating centers. For networks that are designed for speed and reliability, such shipments can result in collateral damage such as delayed truck pulls and damaged packages. Bottom line: They’d prefer that you hand it off to their freight division. So now you get the choice of an expensive LTL option or a really expensive parcel option. I suspect many of these shipments are being tendered to parcel as a matter of convenience (a convenience driven in part by the present trucking shortage), but UPS seems to be looking for a price point at which cost becomes the greater concern.

And Now For Something Completely Different…

If the increased Over Maximum Limits fee can be viewed as a less-than-subtle nudge to take your business elsewhere, the new (also being implemented June 4th) Shipping Charge Audit Fee (let’s just call it Audit Fee to save some ink) is a righteous whack-on-the-knuckles with a ruler. This will be interesting to see how it’s actually rolled out, but an Audit Fee “will be assessed if the average shipping charge correction in an invoice week is more than $5.00. The Audit Fee will be the greater of $1.00 per package subject to a shipping charge correction or 6% of the total amount of shipping charge corrections during the applicable invoicing period.”

Come again?

UPS’ press release doesn’t provide much more to go on other than a suggestion to review their service guide when it’s updated on the date the change goes into effect, but let’s try to break it down. If we take it at face value, UPS will tally a customer’s Shipping Charge Corrections (SCC) for the week and divide that dollar amount by the number of SCCs. If this amount exceeds $5.00, the Audit Fee kicks in. In my experience most SCCs range from a few cents to a few dollars, so most shippers will fall below the $5.00 average. For those that don’t, the $1.00 fee will be most commonly assessed, since the 6% option wouldn’t kick in unless an invoice’s average SCC exceeded $16.67. In short, this is a penalty for not inputting package dimensions into your manifest system.

As with the 3rd Party Billing Fee this new charge is a bit like distilling money out of thin air. UPS will claim that it’s a matter of cost-to-serve, but their incremental costs associated with identifying and billing the corrections are negligible. The systems in place to measure and weigh the corrected shipments are highly automated and already earn their keep.

This one is a money grab.

Last but Not Least…

Don’t have extra large parcels and your SCCs are negligible? Never fear. A week after the above changes go into effect, UPS is modifying its ground fuel surcharge index so that each threshold will reflect an additional 0.50%. Wouldn’t want you feeling left out, now would they?
The good news? These will be the last increases we see until the first of the year.

…Then again, maybe not.

For a complimentary assessment of how the above changes will affect your company, feel free to reach out to us by visiting our Contact page.

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James Founding Partner