Trade Guide

Shipping Surcharges

Shipping costs

Are you struggling to maintain your profit margins due to rising shipping costs? You’re not alone! Shipping surcharges are a leading contributor to increasing shipping expenses, making it challenging for merchants to keep their costs down.

So, what exactly are shipping surcharges? They’re additional fees on top of standard shipping charges that customers get billed for as "service charges" or "handling fees." These surcharges can vary from temporary charges like holiday surcharges to permanent ones like fuel surcharges and oversized package surcharges.

But here’s the kicker: each carrier imposes different surcharges, making it essential to understand the breadth and specifics of each one. And that’s not all; freighting companies’ shipping contracts contain intricate and frequently overlooked fees that impact costs, lead time, and pickup locations.

To help you navigate through these complex surcharges, this blog post will focus on everything you need to know about shipping surcharges. From understanding how they affect your shipping costs to learning how to avoid or save money on such surcharges, we’ve got you covered. So, let’s dive in!

Understanding Shipping Surcharges

Shipping surcharges can be a source of confusion and frustration for online retailers and supply chain managers. With vague and different fees added to base transportation expenses, it’s no surprise that keeping track of these surcharges can be a real pain. Private carriers like FedEx and UPS impose additional fees to cover for specialized handling or delivery requirements. From residential and signature delivery fees to charges for deliveries outside of typical service regions, weekend shipments, and more, these surcharges can add up quickly, resulting in rising shipping costs.

But what are the causes of these surcharges? One of the leading drivers for these extra fees is the shortage of skilled drivers and trucks to meet the current level of demand. As more professional drivers retire, age out, or change occupations, there are simply not enough workers to replace them. Forbes reports that "there is one qualified driver for every 9 job postings," leaving a gap in the trucking industry. Consequently, private carriers frequently update their shipping surcharge prices to reflect the current situation, such as changing fuel surcharges, which can significantly increase retailers’ shipping costs.

Keeping track of shipping surcharges and their influence on shipping costs can be overwhelming. From considering the weight of goods and the delivery location to specialized handling requirements, there’s a lot to keep in mind. Supply chain managers and online merchants need to have a solid understanding of shipping surcharges and transportation spend management to prepare better for budgeting costs and expenses. With proper knowledge, retailers can make informed decisions about the pros and cons of using a private carrier and avoid paying more than required on their shipping surcharges.

The Four Most Common Types of Shipping Surcharges You Should Know About

Shipping surcharges can be a significant contributor to rising shipping costs. With various types of fees added to packages, it can be challenging for retailers to determine how to manage costs while still ensuring timely deliveries. Knowledge of the different forms of shipping surcharges can help merchants avoid unexpected costs and make better business decisions regarding their shipments.

Fuel Surcharges

Fuel surcharges are one of the most commonly imposed shipping surcharges. The cost of fuel is not only volatile, but it’s also a significant expense for carriers. These surcharges help carriers offset the fluctuating cost of fuel and ensure they stay profitable regardless of world trends.

When carriers add fuel surcharges to a shipment’s total cost, they calculate the fee as a percentage of the base rate. This rate can vary depending on fuel prices at the time of shipping, and carriers usually update these rates on a weekly or monthly basis.

Fuel surcharges may seem like just another additional fee, but they serve a critical purpose. These surcharges help ensure that carriers can stay in business by covering the cost of fuel. Without fuel surcharges, carriers would have to absorb the cost of fluctuating fuel prices, which could lead to massive financial losses.

Shippers can stay informed about fuel surcharges by checking carrier websites or contacting their carrier directly. Carriers that calculate fuel surcharges based on the national average fuel cost typically include a fuel surcharge index on their website, which shippers can use to estimate their surcharge costs.

Fuel surcharges are a necessary expense in the shipping world. While they may increase shipping costs, they ultimately help carriers stay in business by covering the unpredictable cost of fuel. Knowing about fuel surcharges can help shippers budget for these fees, leading to better decision-making when it comes to choosing a carrier for their shipments.

Residential Delivery Surcharge

A Residential Delivery Surcharge is a fee that carriers impose on shippers for deliveries made to a residential address. It applies to all types of residential addresses, including homes where businesses operate and locations that carriers typically consider residential property, such as farms.

This surcharge is applied because residential deliveries often require additional manpower and resources compared to commercial deliveries. For example, package handlers may need to carry heavy packages upstairs or perform additional duties to get the shipment to its final destination. The Residential Delivery Surcharge is a way for carriers to recoup the additional expenses associated with residential deliveries.

The Residential Delivery Surcharge is usually added directly to the base shipping fee. The surcharge fee per shipment varies between carriers, but it’s typically around $4 to $5 per shipment. Shippers can expect to see this additional fee on their carrier’s invoice for each residential delivery.

One way to potentially avoid the Residential Delivery Surcharge is by providing a commercial delivery address; however, this may not always be feasible since many businesses operate from residential addresses, especially in the era of remote work.

Shipping carriers usually explain their residential delivery surcharge policy on their website or when contacted by phone, so it’s essential to check with the carrier to see how they define a residential address and what the additional surcharges will be. Staying informed about residential delivery surcharges can help shippers make more informed decisions, budget for additional expenses and avoid unexpected costs associated with residential deliveries.

Oversize Package Surcharge

An Oversize Package Surcharge is a shipping surcharge that is typically applied to packages that exceed weight or size restrictions set by the carrier. The surcharge compensates for the additional time and resources required by the carriers to handle larger and heavier packages.

Depending on the carrier, the Oversize Package Surcharge amount can vary based on factors such as the package’s dimensions, weight, and final destination. Typically, these surcharges range from $10 to $50 per package, making them a significant expense for carriers that most will eventually pass on to their customers.

The Oversize Package Surcharge can sometimes be avoided by splitting the package into multiple shipments or by choosing an alternative carrier with higher weight and size limits. However, these options may not always be feasible or cost-effective, especially for larger shipments.

It’s also essential to note the carrier’s definition of an oversize package, which may differ from carrier to carrier. UPS, for example, considers packages to be oversized if they exceed a length of 96 inches or a girth (length plus width plus height) of 130 inches. In contrast, FedEx has a lower length threshold of 96 inches and a lower girth threshold of 165 inches.

Shippers can avoid surprise surcharges by ensuring their packages meet the carrier’s size and weight restrictions before shipping. It’s essential to check weight and size restrictions carefully and consider how these restrictions can ultimately affect shipping costs. Some carriers may have additional handling or processing fees if that package is a unique or awkward shape.

Saturday Surcharges

Saturday Surcharges are an additional expense that carriers impose for shipments that go beyond typical workdays (i.e., Monday to Friday). These surcharges are examples of expedited delivery fees for time-sensitive situations, such as weekend deliveries, overnight shipping, and one-day shipping options.

The Saturday Surcharge rate can vary based on the carrier and package weight, shipping speed, and destination. For example, UPS charges a base rate of $16.00 per package for Saturday delivery, whereas FedEx may charge an additional $20-25 per package for Saturday deliveries as of 2022.

It’s crucial to note that some carriers may not offer Saturday delivery in all areas, while others may restrict the weight and size for Saturday deliveries. With these restrictions in mind, shippers should check their carrier’s shipping policies before scheduling a Saturday delivery.

Businesses that require regular Saturday delivery should examine whether it’s the most cost-effective shipping option available and if the extra expense is worthwhile for their operations.

Shippers can benefit from knowing their carrier’s Saturday Surcharge rate, understanding their geographic range for Saturday delivery, and considering these delivery options’ impact on their total shipping costs. Additionally, they may find it beneficial to consider alternative delivery options that may be less expensive, such as standard shipping or alternative shipping carriers.

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