FedEx & UPS Fuel Surcharge 2024 Update
As we enter the final stretch of 2024, major carriers FedEx and UPS have once again adjusted their fuel surcharges, potentially impacting shipping costs for businesses across the board. While fuel prices have actually been trending downward, these surcharge increases suggest there’s more at play than simply offsetting fuel costs.
FedEx Raises the Bar & UPS Follows Suit
Effective September 2, 2024, FedEx implemented its second fuel surcharge increase of the year:
- FedEx Ground, Home Delivery, and International Ground: 1% increase
- Domestic Express shipments: 0.75% increase
Not to be outdone, UPS rolled out its third fuel surcharge increase of 2024:
- Ground and SurePost shipments: 0.75% increase
- Total year-to-date increase: 1.75%
The Devil in the Details
While these percentages may seem small, their impact can be significant when applied to your total shipping costs. More concerning is a subtle change that many shippers might overlook: UPS has expanded its fuel surcharge to cover Address Correction and Dangerous Goods shipment services.
This expansion is particularly noteworthy because it effectively raises the cost of these accessorial services while bypassing any discounts you may have negotiated on those specific surcharges. It’s a clever way for carriers to boost revenue without touching base rates.
Eroding Your Contract Discounts
Several factors are driving these surcharge hikes as both carriers are recovering concessions from recent contract negotiations, adjusting for past fuel surcharge discounts, and boosting revenue in the face of declining package volumes. As base rates for fuel surcharges climb, previously negotiated discounts lose their effectiveness. A 25% discount secured at the start of 2024 may now only provide a 15% effective benefit, highlighting the importance of regular contract reviews.
What This Means for Shippers
- Scrutinize your invoices by paying close attention to accessorial charges and how fuel surcharges are being applied
- Renegotiate contracts and consider reopening negotiations to address these new surcharge structures
- Optimize shipping strategies by consolidating shipments or exploring alternative carriers for certain routes
- Stay informed by keeping a close eye on carrier announcements and industry trends to anticipate future changes
The Bottom Line
While carriers cite rising operational costs to justify these increases, the disconnect between fuel surcharges and actual fuel prices raises questions. Shippers must remain vigilant and proactive in managing their shipping expenses, especially as we approach the holiday peak season.
By understanding these hidden rate increases and taking strategic action, businesses can better control their shipping costs in an increasingly complex logistics landscape.
Frequently Asked Questions
Why do fuel surcharges increase when fuel prices drop?
Carriers use fuel surcharge indices that lag behind actual fuel prices and are calculated on higher base rates. Even when fuel costs decline, the surcharge formula often results in higher effective charges.
How are parcel fuel surcharges calculated?
FedEx and UPS use a weekly fuel surcharge table based on the DOE national average diesel fuel price. The surcharge is applied as a percentage of the transportation charge, meaning it increases as base rates rise.
Can I negotiate fuel surcharges with carriers?
Yes. Fuel surcharge caps, alternative index formulas, and reduced surcharge percentages are all negotiable elements in carrier contracts, though carriers resist these concessions more than base rate discounts.