FedEx rolls out 2019 rate increases

Global logistics and transportation services provider FedEx announced rate increased for various service offerings that are set to take effect on January 7, 2019.

FedEx said that rates for FedEx Express are heading up by an average of 4.9% for U.S. domestic, U.S. export, and U.S. import services. And FedEx Ground and FedEx Home Delivery rates are each going up by an average of 4.9%, with FedEx SmartPost rates also rising.

Rates for FedEx Freight, the company’s less-than-truckload unit, are pegged to increase by an average of 5.9%, with FedEx noting that this rate change applies to eligible FedEx Freight shipments within the United States (including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands), between the contiguous U.S. and Canada, within Canada, between the contiguous U.S. and Mexico, and within Mexico.

While these announced average rate change came in at 4.9%, it is remarkable in that last year the announced average increase was 3.5%, while coming on the heels of a fairly substantial increase in the fuel surcharge that went into effect in September nearly in tandem with the beginning of holiday shipping, explained Jerry Hempstead, president of Hempstead Consulting.

“The increases, as in the past, are non linear,” he said. “For example a 1-pound, zone 3 ground shipment will see a decrease In of 1.5%, yet an 8 pound zone 2 shipment increases 5.4%. For the shipper to fully understand the impact of the new tariff, they should ask their sales rep for an impact analysis on their particular book of business. It will vary by a shipper’s mix of usage by service type, weight and zone.” 

Rob Martinez, president of San Diego-based parcel consultancy Shipware LLC, said that these increases are of the “run of the mill variety,” with no major hidden or hard to understand increases as in recent years from both FedEx and UPS (and more recently intra-year increases from UPS), while the accessorial charges are much higher than the announced 4.9% general rate increase.

In a letter to customers at San Diego-based parcel consultancy Shipware LLC, the company explained that the most impactful news with this announcement if that these are not just across the board increases, in that it is an “average” increase, with an announced 4.9% increase, in some cases, being the equivalent of as much as 8% or more.

As an example, Shipware noted how an oversize charge surcharge of $80 in 2018 will be $90 in 2019m a 12.5% increase, with a delivery area surcharge (DAS) for FedEx SmartPost of $1.30 in 2018 heading up to $1.40 in 2019 for a 7.69% increase.

Like Hempstead, Shipware said that FedEx shippers should conduct a thorough analysis to detail the financial impact of the rate increases and work with FedEx to push back and minimize their effect.

With an average announced increase of 4.9%, the question is where this average comes from, as it has been the average announced increase since around 2010, said John Haber, CEO of Atlanta-based Spend Management Experts.

“Every FedEx surcharge we have looked at is going up by 5% or more, additional handling and oversize package are up 12.5%, address corrections are up 6.7%, and DAS increases are going up between 5-5.8%,” he said. “Ground residential surcharges are going up 5.8% and air residential surcharges are going up 6%. There is not a surcharge increase we have looked at that is going up less than 5%.”

When looking at FedEx and UPS collectively, Haber said that in 2018 there have been only two months in which one of them has not announced some sort of rate increase, whereas they used to all be announced at the end of the calendar year, Haber observed.