When it comes to small parcel shipping companies like FedEx and UPS, you may have noticed a fuel surcharge. The cost of fuel and transportation impact delivery companies greatly. The surcharge was designed to help protect carriers during times of high gasoline, diesel, and airplane fuel prices. However, the price of fuel dropped by almost a third in last year to levels not seen in a while. Despite the drop in the cost of fuel, the surcharge still exists although the percentage has gone down.
Why Does the Fuel Surcharge Exist?
Fuel surcharges allow for UPS and FedEx to keep its base shipping rate while making the necessary changes to cover any increase in fuel price. In other words, instead of having to make changes to the standard shipping rate every month instead of once a year as the current policy is set, they can instead add or decrease the fuel surcharge rate.
In addition to the fuel surcharge, there are other fees that UPS and FedEx use to keep their base shipping price the same. From residential, extended area surcharges, to pickup charges, adding fees has become the preferred method for shipping companies to cover their revenue while not changing the base price.
Fuel Surcharge Percentage Increase
Both UPS and FedEx add a fuel surcharge percentage to import and export shipments which raise the overall price. The percentage is based on the average monthly fuel price increase or decrease over the course of the year. Since fuel prices normally rise in the spring and early summer, this can add a noticeable charge to your shipments.
The published fuel surcharge is 4.25% for UPS ground services and 2.25% for UPS air services, UPS 3 day select, and international services in April 2016.
In April 2016, FedEx saw a surcharge of 2.75% on ground and home delivery but 0% surcharge on Express and international services. On May 2, 2016 shippers were hit with a 0.5% Express surcharge and 3.0% Ground and Home Delivery. DHL now has a 0.5% fuel surcharge across the board.
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Charges like these creep into your invoices and make them less predictable for businesses that rely on FedEx and UPS.
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