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Shipping Tips & Solutions

What Are Shipping Surcharges (and How Can I Avoid Them)?

With the increasing volume of eCommerce parcels, carriers often use surcharge tools to manage their delivery volumes. Learn more about them here.
What Are Shipping Surcharges (and How Can I Avoid Them)?
Jules

By Jules

 

April 7, 2020

Key Points:

  • A shipping surcharge describes any fee for extra services that are added to the base cost of transporting an item
  • UPS, FedEx, and USPS all impose shipping surcharges
  • Couriers impose surcharges to cover the costs of performing certain services outside the basics of getting a parcel from point A to point B

eCommerce businesses are, by their nature, required to ship packages and, sometimes these packages may incur shipping surcharges. These are additional fees that may be imposed by shipping couriers to deliver packages.

The growth in the eCommerce sector has made it important for businesses to understand these extra shipping fees. A recent study noted that shipping fees significantly affect customer acquisition, retention, and quantities purchased. As such, businesses must understand these surcharges in detail and identify various tips for avoiding them to maintain their profit margins.

Table of Contents

What Are Shipping Surcharges?

Simply put, a shipping surcharge describes any fee for extra services that are added to the base cost of transporting an item. They can appear on the invoice as different things but are often categorized as handling charges or service fees. Regardless of how they are quoted, any fees added to a shipping invoice on top of the base rate are shipping surcharges.

Sometimes, you may opt to pay these surcharges to access certain services, such as weekend deliveries. In other cases, the courier will impose these and you don’t have a choice about them, as is the case with fuel surcharges.

The plethora of shipping surcharges make it confusing for merchants to assess what might be added to their base transportation costs. However, most private couriers, such as UPS and FedEx, apply different surcharges to ordered shipments to offset transport and additional handling costs. Common surcharges imposed by couriers include:

  • Fuel surcharges
  • Congestion surcharges
  • Winter surcharges
  • Packaging surcharges
  • Signature-on-delivery surcharges
  • Weekend deliveries surcharges
  • Peak season surcharge shipping
  • Insurance surcharges
  • Weekly service surcharges
  • Residential surcharge

Right now, many couriers are also imposing a temporary emergency surcharge in order to maintain operations during the coronavirus pandemic. These charges vary by courier, but if you’re planning to ship packages at the moment, you should check if your carrier is imposing these charges and how much they are.

By signing up for a free Easyship account, you’ll be able to get a better gauge on which surcharges you may need to pay for each of your shipments. For example, when you enter all the information for your shipment, you’ll be able to declare your package weight and volume, the destination address, whether you’re shipping to a residential address, and what type of insurance you want to levy on your shipment. This will then be reflected in your estimated cost so that, as far as possible, you can avoid any surcharge surprises later.

How Do Surcharges Work?

Couriers impose surcharges to cover the costs of performing certain services outside the basics of getting a parcel from point A to point B. With the increasing volume of eCommerce parcels, carriers often use surcharge tools to manage their delivery volumes. The charges are a constant ebb and flow that predicts demand to avoid parcel congestion. This explains why surcharges vary from one courier to another and change with time. For example, you'll certainly see peak season surcharge shipping around Christmas. Common private couriers' surcharges are as follows.

USPS

USPS imposes the following shipping surcharges:

  • Non-machinable mailpiece fee: This surcharge is imposed on mail that has to be sorted out of the standard and automated mail process. The extra fee is charged since it is expensive to process these mailpieces.
  • Fuel surcharge: As with other couriers, the fuel surcharge is applied to cover fuel costs, which fluctuate with the prevailing cost of fuel. It is applied as a percentage of the base shipping rate.

FedEx

FedEx is an established private courier with clearly outlined shipping surcharges. Some of the surcharges imposed by this courier include:

  • International fuel surcharge: The fuel surcharge percentage for this courier is subject to weekly adjustments depending on the price of fuel per gallon of jet fuel. The surcharge is applied to all FedEx Express services, excluding FedEx International Express Freight and International Airport to Airport services.
  • Delivery/pick-up surcharge: International shipments delivered or picked up from less accessible areas are charged an out-of-pick-up or out-of-delivery area surcharge.
  • Handling surcharge: FedEx applies additional handling surcharges to packages measuring more than 121 x 76 centimeters.
  • Oversize charge: This applies to shipment packages with more than 243cm long or 330cm combined length and width. These dimensions may vary during transit, thus affecting the package’s surcharge eligibility.
  • Third-party billing surcharge: This applies to all shipments billed to third parties.

UPS

Shipping surcharges by UPS include:

  • Fuel surcharge: The courier uses index-based prices to adjust their charges. These charges are based on US Gulf Coast kerosene-type jet fuel prices.
  • UPS Carbon neutral fee: This is an option for shippers who care about their climate impact and want to do something about it.
  • Freight collect refusal fee: This is charged if an account number is invalid or if the third-party consignee fails to pay the shipping charges.
  • Address correction: Billed to the shipper for failed delivery due to incorrect address.
  • Over maximum limits fee: Billed on packages weighing more than 70kgs or more than 274cm in length.

How Much Do They Cost?

Shipping surcharges can have a significant impact on your total shipping costs. However, they can lead to some confusion, especially when merchants try to calculate the total shipment costs. As mentioned, different couriers charge different surcharges based on various factors. Below is a breakdown of how common private couriers bill for surcharges.

USPS

The United States Postal Service offers various services, including Priority Mail Express, First-class Mail, Media Mail, Retail Ground, and Priority Mail. As with other couriers, basic shipping prices are calculated based on the weight and the number of zones that your package will pass through. However, USPS will impose extra surcharges under certain circumstances.

The USPS non-machinable surcharge, for instance, is applied to First-Class envelopes and parcels that cannot be automatically processed. These include odd-sized envelopes, and anything too rigid or containing parts that might get tangled with other mail. Customers are charged for the use of specific machines that aid in sorting and separating their parcels.

Currently, non-machinable surcharges range between $0.15-$.021. Additional insurance (if not included in the service you use) will cost $2.25 for basic add-ons and goes up to over $9.55 for more coverage; signature-on-delivery can cost between $2.65 and $8.45. You can see a full list of surcharge rates for more information.

FedEx

Your shipment through FedEx may incur additional fees on top of the base rate. Just like other couriers, FedEx fees vary depending on the country of origin and nature of the parcel. However, you may need to pay extra charges if your shipment has special requirements. Additional handling surcharge, for instance, applies to express or ground packages that measure more than 48 inches in length and 30 inches in width.

It also applies for parcels that weigh more than 50lbs for U.S. ground services or more than 70lbs for international services. Fees for this are quite expensive - they charge an additional $230 per shipment for both domestic and international freight services.

Other conditions, such as packaging methods, also influence what shipping surcharges may be imposed. Address surcharges may also apply. For example, FedEx charges $16 for address correction, $4.40 residential for deliveries, and a $4.20 surcharge for deliveries outside of their normal operating area.

UPS

UPS imposes several shipping surcharges for their services. The fuel surcharge, for instance, is index-based and adjusted weekly. Like other shipping companies, the rates are based on the Gulf Coast price for fuel, as published by the EIA. UPS also charges delivery and remote area surcharges, and an international extended area surcharge. As an example, the company charges $16.40 for address correction, $5 for residential delivery, and a $3.80 outside delivery area surcharge.  

6 Tips for Avoiding Surcharges

Most couriers calculate their rates based on certain factors, such as business growth projections and profit margins. Surcharges are one manifestation of this. While some can be avoided, certain surcharges - including fuel or peak season surcharge shipping - cannot be avoided. In some cases, you may be able to negotiate your courier contracts to help you minimize the surcharges you pay. Otherwise, below, you’ll find a few other ways to avoid or lessen your surcharges.

  1. To avoid address-related surcharges, double-check your address or use shipping software that automatically checks and corrects the delivery address.

2. Talk to your courier representative for a reduced additional handling rate

3. Explore regional courier options if you regularly ship to specific rural areas

4. Be aware of what the courier classifies as “oversized” packages

5. For residential delivery surcharges, see if it’s possible to deliver items to a business address instead, or budget the charges in your calculations and pass this onto the customer

6. Consider the prevailing fuel market price and negotiate for a reduced fuel surcharge

Reduce Your Shipping Costs and Ship Better with These Surcharges Hacks

To avoid overpaying for your shipping surcharges, you should have a clear understanding of what shipping surcharges are. With this, you can easily identify the various types and associated fees. This will help you make prudent choices about how your package will be shipped. Employing various shipping tactics - such as renegotiating contracts with carriers - can also help you reduce these surcharges and your overall shipping costs.

You can also opt for third-party couriers, such as Easyship, that allow you to factor in certain surcharges into your shipping rate calculations so that you have a more accurate idea of your costs. This means you’re less likely to have to deal with surprise surcharges. Easyship also provides accurate delivery times to avoid incurring rush surcharges.