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Carrier Package Minimums: What You Need To Know 

By October 24, 2018

Many shippers really have no clue on how FedEx and UPS minimum package charges affect their overall shipping spend. Most companies do not realize there is a minimum charge that basically overrides a large percentage of the negotiated discount rates.

So what is a Minimum Net Charge?

The carriers apply a minimum net charge to all packages, this is the lowest amount a shipper will pay to send any package.  For each shipment, you will pay the greater of the (a) net shipment charge based on the negotiated incentives or (b) the minimum net shipment charge. The general default minimum net charge is a Zone 2 one pound package.  Here are the standard minimums for FedEx and UPS.

UPS Minimum Net Charge

FedEx Minimum Package Charge

Ground

$ 7.57

$ 7.58

3 Day Air

$ 10.63

$ 15.45

2nd Day

$ 17.69

$ 17.52

Next Day Air

$ 25.91

$ 25.79

Where to find the minimum net charge in your agreements.

Each carrier uses different language to specify minimum charge information. FedEx calls this ” Minimum Package Charge” or “United States Minimums:” and each service level will have the Minimum Package Charge detailed.  UPS makes this much easier to find, one section with all services listed labeled ” Minimum Net Charge” 

How Does a Minimum Net Charge Effect a Shipper?

Below is an example of a UPS ground shipper with a 30% discount. Remember, the company will pay the greater of the negotiated rate or the minimum charge of $7.57. All one pound packages going to any zone will receive a discount under the negotiated 30% rate.

Here are the UPS ground published package rates for all zones, one to 10 pounds. The chart to the right shows the cost of each package with the shipper’s negotiated 30% discount off published rates.


These charts indicate all the zones and weights that are affected by the net minimum charge. The effective discount for a zone 2 one pound packing is zero percent, no discount at all. The effective discount with the net minimum charge will have a huge impact on shippers with low weight shipments.


This chart shows the dollar impact per package with the minimum net charge in place. A shipper will lose $1.40 in discounts for a 4-pound package send to any location in zone 2.

Negotiating Better Carrier Package Minimum Charges

Package minimums are negotiable, even if your carrier representative insists they aren’t. The biggest questions are how many of your packages are being hit with the minimum net charge? Then, how large a reduction needs to be allowed to maximize your negotiated discounts?

Refund Retriever can help identify your packages being affected by the minimum net charges. Our contract consultants can help lower your shipping costs by understanding the overly complicated carrier agreements, then figure out how to make it work for your company. We are always happy to help shippers, give us a call anytime.

Minimums in a nutshell

The vast majority of shippers are affected by minimum charges each day. The minimum charge effectively robs a company of those hard-fought shipping discounts. Since the carriers raise rates each year, this means the minimum charge also raises and will continue to rise.  A complete understanding of your company’s shipping costs requires you to identify carrier package minimums and the full loss of discount rates.

 

Brian Gibbs

Author Brian Gibbs

More posts by Brian Gibbs

Brian Gibbs | President of Refund Retriever

Brian Gibbs founded Refund Retriever in 2006 while running his first eBay based business and seeing the shortcomings of other shipment auditing companies. Refund Retriever's primary focus is FedEx and UPS parcel invoice auditing. After graduating from Texas A&M University in 2001, he then graduated from the University of Houston in 2004 with a JD and MBA. Gibbs has been featured in Forbes, Entrepreneur and other publications discussing parcel auditing, shipping, e-commerce and more. Learn more at www.refundretriever.com or call (800) 441-8085 for more information.

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