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Parcel Service Fee Negotiation: What you should know

By Last updated on: April 1, 2021

In our previous blog articles, we’ve discussed why you should negotiate rates with your shipping carrier, even tips on preparing for negotiations. Now, we’ll discuss WHAT to negotiate. Parcel service fee negotiation is important. You may hear some say fee XYZ can be negotiated or fee ABC cannot be negotiated. But the bottom line is this – you won’t know if you don’t ask. This is not a full list of all negotiable FedEx and UPS value-added services, just a few that will make the largest impact on your transportation costs.

Estimated reading time: 5 minutes

DIMENSIONAL WEIGHT PRICING

Dimensional Weight Pricing (DIM weight) is applied to every package shipped. Ground, express, and international packages are included. What is DIM?

For example, send a package that measures 25” long x 26” wide x 18” tall, but it only weighs 20 pounds. The dimensional weight would produce a billed weight of 85 pounds! But, what if you negotiated a 166 DIM divisor and not the 139 current standard?

Based on the DIM weight calculation – (25 x 26 x 18) / 166, you would be charged for 71 pounds (70.48 would be rounded to 71lbs). That reduces the amount of billed weight down by 14 pounds.

2021 FedEx Dimensional Weight 139

But suppose you negotiated this DIM divisor to 250. Your 25 x 28 x 18 package would now have a DIM weight of (25x28x18)/250 = 44.8 pounds. This higher DIM divisor lowered the weight from 85lbs to 71lbs and not down to 45lbs.

RESIDENTIAL SURCHARGE

FedEx and UPS apply a residential delivery charge to ANY delivery to or pick-up request from a home location. Even if you are a business but operate out of your home. One of our clients negotiated this surcharge down from the normal $4.95 express and $4.35 for ground to a 35% reduction. This may not seem like a significant amount, but this particular client was charged a residential surcharge over 1500 times in one week, which turned out to be over 5% of their total shipping cost.

FedEx 2021 Residential Surcharge Fee

Read more about UPS residential surcharges here.

DECLARED VALUE (Insurance)

Insurance is an area that has several aspects to negotiate. Let’s look at the following example:

Suppose you’re shipping $1,000 worth of training equipment for Jimmy Joe’s new bird dog puppy. Per UPS, the first $100 worth of the product is covered free of charge. So that means you still need to cover the remaining $900. The remaining $900 will be charged at $ 1.15 for a total of $10.35.

Here, you have a minimum amount fee and a set fee for declared value over $100 that can be negotiated. If you don’t like what your carrier is charging, or if they will not negotiate these terms, there’s always a third-party insurance company. Take U-Pic, for example. U-Pic claims to save you up to 85% on shipping insurance all while shipping with the same carrier. Let me repeat that: you ship with the same carrier for a fraction of the price.

LARGE PACKAGE SURCHARGE

A Large Package Surcharge will be applied when its length plus girth [(2 x width) + (2 x height)] combined exceeds 130 inches. Large Packages are subject to a minimum billable weight of 90 pounds. The set fee for a large package surcharge is $105 to $130, but again, we have seen this negotiated down by 50%.

Large Package Surcharge UPS 2021 Refund Retriever

COLLECT ON DELIVERY (C.O.D)

FedEx 2021 COD

Obviously, your negotiating leverage will depend on your shipping volume and frequency details. You may get a better quote on some fees than others simply because of your shipping requirements. Some of these rates change frequently (Fuel Surcharge, for example). Talk to your carrier. Talk to other carriers. They can offer you delivery guarantees and price guarantees, but the only true guarantee is that you won’t get any discount if you don’t ask.

NEED HELP WITH CONTRACT NEGOTIATION?

Parcel service fee negotiation is important. All companies should negotiate new rates at least every two years or anytime there is a change in shipping volume. The experts at Refund Retriever are here to help, learn more.

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 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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