FedEx, UPS Adding Delivery Fees In Parts Of New York, Los Angeles, Chicago

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by Tyler Durden
Thursday, Apr 04, 2024 - 11:00 PM

By Max Garland of Supply Chain Dive

  • FedEx and UPS will add surcharges for deliveries in 82 ZIP codes this month, many of which cover parts of major urban areas, according to updates from both companies.
  • The delivery area surcharge, or DAS, for the new ZIP codes will take effect on April 8 for UPS and April 15 for FedEx. The additions will impact areas in Boston, Chicago, New York, Los Angeles and San Francisco.
  • The DAS ranges between $3.95 and $5.85 for FedEx and UPS, but that can climb higher in areas with ZIP codes categorized as “extended” or “remote.” The surcharge amount is influenced by the package being shipped via ground or air transportation and if it’s a commercial or residential delivery.

New ZIP codes UPS and FedEx will add a Delivery Area Surcharge in

FedEx and UPS already have a DAS in place in numerous ZIP codes across the country, but the additions will particularly sting shippers, given the dense urban areas they cover. The 82 ZIP codes impact almost 1% of the U.S. population, according to Mingshu Bates, Chief Analytics Officer at AFS Logistics.

The emphasis on urban ZIP codes is especially apparent in California’s Bay Area, with both carriers adding a DAS to ZIP codes in the heart of San Francisco.

The additional ZIP codes could help the carriers cover added expenses for serving densely populated areas, like tolls to cross bridges or tunnels. However, the delivery giants could also be using the surcharges to bolster their bottom lines in a soft demand environment, according to Shippingwise Managing Director Nicholas Fanelli.

“These surcharges are huge profit centers for carriers,” he said. “It’s not surprising when volume is down that they’re trying to find new opportunities to increase profits and increase margins.”

UPS said in an emailed statement to Supply Chain Dive that the company regularly reviews its DAS to balance evolving market dynamics with meeting customer needs. Similarly, FedEx evaluates and updates its ZIP code list “to reflect market and cost factors,” it said in a statement.

The timing of the additions, outside of FedEx and UPS’ annual rate and surcharge adjustments, complicates shippers’ ability to mitigate the impact of the fees, said Micheal McDonagh, AFS Logistics’ president of parcel.

“For a shipper, it’s not just affecting the shipments — it’s affecting the outlook and health of the financial statements,” McDonagh said. “You have not prepared for an off-cycle increase.”

However, shippers do have options to minimize the surcharge’s impact, according to Fanelli. This includes consolidating packages destined for the same address into one shipment or incentivizing customers to pick up packages at less-expensive commercial destinations. The surcharge price can also be reduced in contract negotiations.

“It’s definitely something that can be heavily discounted, especially if you have high density and high volume,” Fanelli said.