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What is a FedEx Shipping Exception?

By | FedEx, News, Shipping Knowledge | No Comments

A customer checks the status of a package via FedEx tracking, but instead of viewing the expected shipping details, the customer sees an “exception.” As a result, they get worried, especially if that shipment is time-sensitive, and reaches out to the retailer to ask about the exception code and how it affects the package.

Retailers that ship frequently may experience the occasional exception message. If you haven’t yet experienced this, you might have questions. For example, will the package be late, and if so, can you expect a refund from FedEx?

The good news is that shipping exceptions don’t always translate to late packages. There are many situations that trigger this code, and understanding each potential situation assists with explaining the details to customers and communicating what to expect.

Shipping exceptions: understanding the basics

The majority of FedEx customers receive packages on time. In fact, packages are delivered when promised over 98 percent of the time. As a result, receiving an exception message is rare. Regardless, this message triggers worries about the package and its potential delivery date. The following FedEx explanation provides details about the exception code.

An exception occurs when a package is temporarily delayed while in transit. Every effort is made to deliver every package as soon as possible, so an exception does not necessarily denote a late shipment. The status exception explains the most recent exception in the scan activity section.

The term “PMX” refers to a p.m. exception, when a shipment is returned to a delivery station for the night because it was undeliverable during the courier’s route. Such a delivery exception may occur because the package was incorrectly addressed, a recipient was unavailable, etc. In many cases, delivery is re-attempted the next day.

Exception codes can also be triggered by other situations, some of which are beyond the control of FedEx; for example, a hurricane strikes an area in the path of delivery, temporarily stopping or delaying shipment of a package; a wildfire closes down a major highway, disrupting normal delivery routes and slowing the movement of packages; or a flood occurs in the delivery zone, making it impossible to deliver a package on the date promised.

One person checking the status of a package was surprised to view the exception code online, so the customer checked his email and had received the following message explaining the situation:

Heavy rainfall and flooding are causing hazardous conditions in the areas of Louisiana, Oklahoma and Texas. Our top priority is the safety and well-being of our team members, as well as providing the highest level of service to our customers. Although contingency plans are in place, some service delays and disruptions can be anticipated for inbound and outbound shipments in these areas. FedEx is committed to providing service to the best of our ability in areas that can be safely accessed.

In this instance, the package arrived as soon as delivery could safely resume in the area.

Another possible exception is when the barcode becomes unreadable. For example, one customer dropped off the package as usual, and the bar code and important details were attached to the package. However, somewhere along the route, that barcode became damaged, generating an exception code. When checking the status online, the customer noted the following exception.

Dec 10, 2014 7:31 PM Shipment exception FORT WORTH, TX Barcode label unreadable and replaced.

This type of exception sometimes results in a small delay, depending on the shipping service and details. It’s also possible that the label was quickly replaced, and the package was routed back into the normal delivery route with minimal delay. Regardless, when a customer receives an exception notice, the next question is typically “What do I do now?”

What to do if you notice an exception code

Whether it’s a natural disaster or another unforeseen circumstance that affects package delivery, you might wonder what to do when an exception occurs. After receiving an exception message, check the “shipment” or “package progress” section in Tracking to find specific details about changes in the delivery schedule. For example, if a weather event has occurred, you might find an adjusted delivery date.

You may also find more detailed information about the exception, such as the cause of the event. As mentioned previously, it’s not always something big that triggers an exception; it can be something relatively small. Here are a few additional scenarios that may trigger an exception.

The address is unknown. Sometimes customers make mistakes when entering address details. When this occurs, the carrier might contact the retailer to check the accuracy of the mailing address and make any needed corrections. If the information matches what you have on file, you might have to get in touch with the customer to confirm.

Damage to the shipment. In rare cases, FedEx may note damage to the shipment during transit. FedEx typically covers the first $100 in damages, and provides additional coverage that can be purchased when setting up shipping. Third-party companies also provide insurance options, some of which are less expensive than policies offered directly through the carriers. If you get an exception message that relates to damage, keep all original packing materials once the item is delivered.

If you make a claim for damages, FedEx may need to examine these materials to ensure the item was properly packed. FedEx provides full packing guidelines online, but a few suggestions include:

  • Use double-wall boxes for heavier items.
  • Place small packages inside a larger outer box.
  • Double-box fragile items with 3″ of cushioning in and around the smaller box.
  • Wrap items individually with cushioning material and center them in boxes away from other items and away from the sides, corners, top, and bottom of the box.
  • Place items that might be damaged by normal handling, such as soiling, marking, or application of adhesive labels, in a protective outer box.
  • Position bottles that contain liquids upright. Use an inner seal and perforated breakaway cap. The inner packaging must be able to contain leaks.
  • or odd- or irregular-shaped items, at a minimum you should wrap and tape all sharp edges or protrusions.

If FedEx determines the package wasn’t packed correctly, such as in a box that has flimsy integrity or inadequate packing materials, they might not pay the claim.

Signature was not received. FedEx offers various levels of service for shippers that require a signature. If you purchase the signature required service for $3.75, the person at the receiving address will be required to sign for the package. The carrier also offers a service for $4.75 that requires an adult to sign for the package. An exception is triggered if FedEx cannot obtain a signature.

If you receive an exception, get in touch with FedEx to learn more details. Beyond what is provided on the status tracking, FedEx may share other information, such as what is holding up the package and when you can expect its arrival.

Understanding the FedEx money-back guarantee

In most cases, FedEx packages are delivered on time without exception or delay. But at times, problems do occur, and FedEx has a money-back guarantee. According to FedEx:

We offer a money-back guarantee for every U.S. shipment. You may request a refund or credit of your shipping charges if we miss our published (or quoted, as in the case of FedEx SameDay®) delivery time by even 60 seconds.

However, exceptions might not be covered under the money-back guarantee, depending on the situation. If the exception is the result of the following, a refund may not be provided:

  • Illegible label
  • Improper address
  • Inclement weather
  • Air traffic control problems

Additionally, the refund is not available in several other situations, which are highlighted in the company’s terms of service, including:

  • An incorrect address is provided.
  • FedEx receives a request to redirect a shipment from a delivery address to hold at a FedEx location.
  • There was an unexpected large release of packages from your shipping location.

If you think you qualify for a refund, reach out to FedEx to start the process. Even if the package qualifies, refunds aren’t automatic: You must request the refund directly.

Shipping exceptions aren’t always a major problem

FedEx exceptions aren’t always a reason for concern. For example, let’s say that FedEx has trouble delivering a package. The address is incorrect, so the company issues an exception and gets in touch with the shipper. Once they reach out, you can contact the customer and verify shipping details. You quickly verify those details and get back to FedEx the same day. It’s possible the package will have very little delay.

In some situations, an exception is more like a notification, with no action required on your part. For example, if the label needs to be replaced due to damage, no action is required on your part. And in other cases, the exception can be an opportunity for you to reach out to customers. Maybe many shipments were delayed due to a snowstorm. As a result, you can send out an email to those affected, notifying them of the issue and thanking them for their patience.

An exception is simply information; as a shipper, it is up to you to take that information and figure out the best way to move forward and ensure a positive experience for the customer.  

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, the USPS or regional carriers, our invoice audit and contract optimization services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of combined carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts, and have saved our clients an average of 19 percent on shipping.

 

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What Are FedEx Shipping Rates?

By | FedEx, News, Shipping Knowledge | No Comments

Retailers have many concerns, and among the most pressing are shipping costs. How can you get packages to your customers quickly and more cost-effectively? FedEx is a large carrier moving nearly 14 million shipments each business day. The company has over 675 aircrafts and 175,000 motorized vehicles transporting items, and for the most part, they do so with nearly perfect accuracy, achieving 98 percent on-time delivery.

But as a retailer, when you’re managing costs, the first thing you need to know is how to determine what a package costs to ship, and equally important, whether it’s possible to reduce those costs. Let’s take a look at how to calculate FedEx shipping rates and more accurately forecast these expenses.

Understanding FedEx service options

Many variables play into the shipping costs equation, but one of the largest is speed. How quickly must your package arrive? In most situations, especially in cases of free shipping offers, slower delivery is fine. As a result, a service such as FedEx Ground is acceptable, delivering the package within several business days.

In special circumstances, faster services, such as overnight delivery, are required. For example, maybe there was a mistake internally and the package didn’t go out in time. As a result, the customer won’t have the item for an upcoming special event, and time is essential in ensuring customer satisfaction.

Understanding all available options, and the potential costs, is a good starting point for determining how these costs fit into your shipping strategy. Let’s take a look at FedEx shipping options, and then we’ll dive into exact costs.

FedEx SameDay. This service provides reliable door-to-door delivery within hours and is available seven days a week, 365 days a year. SameDay is available in all states for package weights up to 150 lbs. For packages that exceed 150 lbs., FedEx SameDay Freight can be used.

FedEx SameDay City. This service offers a door-to-door option for delivery within hours. Delivery time varies based on the distance traveled. For example, for 0-15 miles, packages typically arrive within two hours. Packages that must travel longer distances, such as more than 60 miles, can expect a delivery time closer to several hours.

FedEx First Overnight. This service is a good option when a package must be delivered early the next business day. Next-day business delivery is provided by 8:00 a.m., 8:30 a.m., 9:00 a.m. or 9:30 a.m. to most areas. For extended areas, delivery time might be by 10:00 a.m., 11:00 a.m. or 2:00 p.m., depending on the destination ZIP code. FedEx First Overnight is available throughout all 50 states and is available for packages up to 150 lbs.

FedEx Priority Overnight. This service is a good choice if your shipment needs to arrive by 10:30 a.m. the next day. Delivery might be later, however, depending on the delivery ZIP code. FedEx Priority Overnight is available in all 50 states, and for packages up to 150 lbs.

FedEx Standard Overnight. Perhaps you need a package delivered overnight, but you’re looking for a more affordable option. If so, this service provides next-business-day delivery by 3 p.m. to most U.S. addresses in all 50 states, but at a lower cost when compared with faster options.

FedEx 2Day. There are a couple of variations of this service. The first provides delivery by 10:30 a.m. to most U.S. addresses. The second service is standard 2Day but provides delivery by 4:30 p.m. to businesses and 8 p.m. to residences. Urgency will dictate which is right for your situation, but both services cover package weight up to 150 lbs.

FedEx Express Saver. Express Saver provides delivery in three business days, typically by 4:30 p.m. to businesses and 8 p.m. to residences on the third delivery day. This delivery option is available in all states with the exception of Alaska and Hawaii.

FedEx Ground. According to the FedEx website, “FedEx Ground is faster to more locations than UPS Ground.” This service level provides a more affordable option with delivery times of one to five business days within the contiguous United States and three to seven business days to and from Alaska and Hawaii. It’s also important to note that FedEx Ground cannot deliver to P.O. boxes.

FedEx Home Delivery. This service is for residential deliveries and provides arrival within one to seven business days, depending on the destination. Expectations are similar to FedEx Ground with one to five business days within the contiguous United States and three to seven business days to and from Hawaii. Delivery is typically Tuesday-Saturday between 9 a.m. and 8 p.m., and this service is available throughout all 50 states.

FedEx SmartPost. SmartPost is a contracted service that provides 100 percent coverage, including destinations beyond the U.S. border. Additionally, there are no residential or Saturday delivery surcharges. FedEx SmartPost provides an affordable option by leveraging a partnership with the USPS. FedEx transports the package until the “last mile” of delivery. At this point, the package is passed off to the local post office, and they finish the delivery process.

After looking at the service list, you might have a couple of options in mind. For example, perhaps you want to compare 2Day and FedEx Ground services costs. What should you do next? Fortunately, FedEx makes finding shipping costs easy. There are a couple of different options, both of which we’ll cover to get you started with calculating costs.

Determining shipping rates

There are two methods to find FedEx rates. The first is using the FedEx Service Guide, and the second is using a FedEx tool. We’ll cover both methods so you can select the one that is easiest for you, starting with using the Service Guide. Follow these steps to help you easily determine your shipping rate:

  1. Find the zone for your destination. The zone is critical information because it helps determine how far the package must travel. For U.S. shipments, visit the Rate Finder and select the “Rates Tools” table, then enter your origin ZIP code to see which zone your destination ZIP code corresponds to. You can also request zone information by calling FedEx directly at 800-463-3339.
  2. Determine the package weight. Once you have this information in hand, view the “Dimension Weight” section of the Service Guide. Your chargeable weight is the greater of the actual weight and the dimensional weight. View the exact instructions and formula for calculating dimensional weight on page 122 of the Service Guide.
  3. Find your rate. Use the pricing guide in the FedEx Service Guide to find the appropriate table.

For example, let’s say that you’re shipping a 5-lb. package in Zone 2, which is generally 0-150 miles from the origin to destination anywhere within the contiguous United States. Looking at page 30 of the service guide, you can see that if you selected FedEx Priority Overnight, the fee would be $34.58. However, if you selected FedEx 2Day, that cost would drop down to $19.22.

Let’s say that you’re shipping in Zone 3, which is typically 151-300 miles from origin to destination anywhere within the contiguous U.S. The cost to ship a 5-lb. package using FedEx Priority Overnight would be $48.13 for a 5-lb. package. Using FedEx 2Day service, that fee would drop to $20.55 for the same package.

In addition to the Service Guide, FedEx provides a rate and transit time tool that allows you to get customized details on rates. Enter your shipping details, including the ship from and ship to locations, the number of packages, and the weight of the package(s), and get a quote that provides pricing information. This is the easier method of the two to determine shipping costs, but it’s good to have a backup option, which is where the Service Guide is useful.

Understanding extra services

FedEx provides a variety of value-added services and surcharges. Depending on what type of package you’re sending and your individual needs, those charges may affect your total price. As a result, it’s important to understand which options are available and might apply to your shipment.

FedEx provides a complete list of options online, but one of the most common options is the delivery signature option. For example, you may use this if you’re shipping an item to an unhappy customer, and you want to ensure that it arrives. Let’s take a look at the different service levels.

No signature required. FedEx will attempt to get a signature at the delivery address, but if no one is available, FedEx will deliver the package to a safe place without obtaining a signature. This level of service is available upon request at no cost.

Indirect signature required. FedEx obtains a signature from somebody at the delivery address, whether it’s a neighbor or a building manager. If no one is available to sign, FedEx will attempt to redeliver the package. This service is available upon request on residential shipments to the United States and Canada with a declared value below $500.

Direct signature required. If you want a person to sign for the package at a specific address, you can purchase this service for $5.00 per package. FedEx obtains a signature from someone at the delivery address only. If no one is available, they will attempt to redeliver the package.

Adult signature required. FedEx obtains a signature from any person of legal age at the address, subject to their providing a valid ID. If no one qualified is available to sign, FedEx will attempt to redeliver the package. Bear in mind that the legal age varies, depending on the destination country. The cost for this service is $6.05 per package.

An additional service that is commonly purchased is declared value coverage. FedEx automatically covers liability up to $100 for damages or losses at no additional cost. But FedEx allows you to purchase extended coverage at an additional charge. Keep in mind, however, that third-party providers also provide this service. In some cases, it can be less expensive than purchasing directly through the carrier, so weigh the costs and benefits of all options.

Additionally, it’s important to note that FedEx charges a residential surcharge of $3.85 that is added to all FedEx home delivery shipments. Companies can bypass this charge by using FedEx SmartPost. Since SmartPost uses USPS for the last leg of delivery, this fee is waived, and the overall cost is much less. Additionally, Saturday delivery is available at no extra charge.

Moving forward with greater efficiency

The majority of consumers prefer to shop online. In fact, 95 percent of Americans shop online at least yearly, and 80 percent shop monthly. As a result, e-commerce is booming, and that growth isn’t expected to slow down anytime soon. But the challenge for retailers is balancing shipping costs with the pressure of providing additional services, such as faster delivery and free shipping. This leaves them asking: How can we figure out shipping costs and then work to reduce them?

Understanding costs is the first step, but after that you can play with comparing various options, such as FedEx Ground vs. FedEx SmartPost to determine which can provide the greatest savings. Striking the right balance will allow you to serve customers with greater experience and position your business to thrive in the future.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, the USPS or regional carriers, our invoice audit and contract optimization services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption of current operations. Our team of experts has over 200 years of combined carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts, and have saved our clients an average of 19 percent on shipping.

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The State of Shipping in 2019

By | News, Parcel Market Trends, Shipping Knowledge | No Comments

A Look Back: 2018 in Review for UPS & FedEx

Last year was busy for the national parcel carriers, not only in terms of packages delivered, but in terms of changes to pricing and their respective service guides as well.

After warning shippers with the announcement of their 2018 General Rate Increase (GRI), UPS instituted mid-year increases to select surcharges related to size and weight.  However, if shippers expected the annual announcement to cover the scope of the carrier’s pricing plans for the year, they’d have been surprised by the multiple, additional rate changes throughout the year, outside of the GRI:

  • In April, UPS changed their fuel surcharge tables, separating the international export table from the domestic air table and effectively raising the fuel surcharge for export.
  • In June, UPS introduced a Shipping Charge Correction Audit fee and increased the Over Max Limits charge by $150.
  • In July, UPS implemented the Additional Handling fee and the Large Package Surcharge increases they had forewarned shippers about in their GRI announcement.

Of course, with the national carriers often moving in lockstep, it wasn’t long before FedEx joined UPS in changing rates midyear. In September, FedEx increased their Additional Handling fee for heavy packages, increased the Unauthorized Charge and, like UPS, changed the construct of their fuel tables by separating the import and export tables from the domestic express table and updating both the domestic ground and express tables.

As in 2017, when the busy-season pricing was first introduced to customers, both carriers instituted “peak” surcharges related to size, additional handling requirements, and other incremental increases during the peak shipping season between Thanksgiving and Christmas.  Also mirroring 2017, UPS instituted a peak surcharge for residential shipping while FedEx did not. However, shippers can expect this disparity come to an end in 2019 and for FedEx to follow suit and implement the peak residential surcharge.

Both national carriers continued to place a premium on efficiency in 2018, in terms of space utilization and network efficiency, a that trend will continue going forward.  While neither made changes to their dimensional weight pricing criteria, UPS did institute a shipping charge correction audit fee which penalizes shippers for incurring what UPS believes is an unacceptable number of shipping charge corrections in a given week, most of which are triggered by dimensional weight. In fact, UPS doubled down on the fee late in the year, making it easier for much shippers to incur the penalty.  The audit fee is now assessed when the average shipping correction during an invoice week is more than $2.00.  When they first introduced the fee, the trigger amount was $5.00.

Regarding the sheer number of total packages delivered, 2018 was a huge year for the national carriers.  There’s little doubt that volumes were at a record high.  Heading into Q4 2018, UPS indicated their expectation to deliver more than 800 million packages during the peak holiday season compared to roughly 762 million in 2017.  Likewise, FedEx expected their peak volume to surpass their previous record number of packages, 400 million, also set in 2017.  Not to be outdone, USPS predicted delivery of 900 million packages during 2018’s peak season.

season, internal Shipware data indicates that both carriers, as they have in past years, experienced delays during the critical peak holiday shipping weeks.  A more thorough evaluation will be necessary once all of the data is in.

The 2019 FedEx & UPS General Rate Increases:

An exercise in elevating complexity to drive revenue

The close of each year is marked by both national carriers announcing their general rate increases for the new year. In November, FedEx Express and FedEx Ground announced a 4.9% average general rate increase while FedEx Freight announced a 5.9% average increase, both of which went into effect January 7, 2019. UPS’s announcement came almost a month later, on December 5th. Not only was the announcement atypically late in the year, but with a declared effective date of December 26, 2018, UPS gave shippers only three weeks’ notice of their average4.9% increase to UPS Ground, Air, International services, and Air Freight rates.

Outside of the actual percentage increases, the most important takeaway from each carriers’ announcement might be use of the word, “average.” Historically, there has been very little correlation between the carriers’ announced average increase and the actual increases by service level, zone, and weight. This year’s announcements are no different.The impact to each shipper’s parcel budget will deviate significantly from the announced average increase depending on their shipper profile. The majority of small shippers are taking the full increase, while large shippers typically negotiate terms that mitigate the general rate increase year over year.

Consistent with more recent rate increases, the days of FedEx and UPS mirroring each other are fading. Reviewing the increase by service and weight shows that the biggest impact to FedEx customers will be the 6% to 8% increases to 31+ pound Express services. Similarly, UPS customers are facing increases between 7.5% and 8% to 31+ pound 2-day rates. However, the largest impact, and disparity from the 4.9% average, is seen in SurePost, with rate increases of 5% to 9.3%.

rate increases

Dissecting the data reveals that the announced increases are indeed an average and will vary, along with their impact on shippers, by service and zone.  With FedEx, we are seeing hikes across the board, above the average 4.9%, for all Express services while Ground Commercial, Home Delivery, and SmartPost hover between 4.7 and 5.2%. Conversely, UPS is mainly increasing its SurePost <1 lb. service by 8.9% to 9.8% while keeping SurePost 1+ lb., Ground Commercial, Residential, and 3-day shipments closer to the 4.9% marker. Like FedEx, 2-day and 3-day shipment increases vary by zone, from 5.4% to 8.1%.

service rate increases

In addition to transportation rate increases, FedEx will increase surcharges and minimums in 2019. Notable changes are seen in the following two tables which show the zone 2, 1 lb. rate for each service:

fedex minimum net charge

This list rate is reduced by a specified dollar amount predetermined by the carrier to arrive at the minimum net charge. FedEx minimums increases range from 3.56% on Ground/Home Delivery and SmartPost to 5.4% on Priority Overnight Letters while UPS increases move anywhere between the 3.7% on Ground to the 10.08% on SurePost greater than 1lb.

ups minimum net charge

The table below highlights dollar and percentage increases to some of the more common surcharges. Note the outright number of surcharge increases, the variance in their amounts and, as noted before, the continuing trends of UPS and FedEx pricing moving farther apart, year after year, and the largest increases being reserved for those surcharges related to package size and dimensions.

fedex surcharge

If you examined last year’s GRIs, you’ll recognize that many of the same surcharges increased last year are once again being increased in 2019, such as FedEx’s Print Return Label Fee which has doubled, and UPS’s Third-Party Billing Fee, up 80% from last year. Take a closer look at the Additional Handling, Large Package, and Over Maximum Limits surcharges. Both carriers increased these accessorials in their 2018 general rate increases, again between June and September, and all three are receiving further increases in 2019. Additional Handling Weight has increased over 91% in 12 months!

ups surcharge

This information not only illustrates the many facets of the 2019 general rate increase but, on the broader level, the continuing efforts of UPS and FedEx to create an increasingly complex pricing environment year after year with varying increases.

When Shipware surveyed shippers, from small to large, at the 2018 PARCEL Forum, 63% of respondents felt that it’s harder to negotiate with the carriers today than it was a few years ago.Among those, 73% felt the difficulty is owed to increased pricing and agreement complexity. It’s also not lost on shippers that the carriers are focused on revenue: keeping margins high and capturing added costs to serve. Of those who believe today’s negotiating landscape is tougher, 82% also feel it’s partly due to this revenue-focused approach that we find in reoccurrences like large packages being assessed multiple increases. With many moving parts to every rate increase; with rates, minimums, and surcharges that no longer match, today’s environment is very confusing for many shippers. It is essential they stay informed and educated if they want to remain in control of their transportation costs.

Expectations for 2019 Mid-Year Increases:

Are Once-Per-Year Increases a Thing of the Past?

If 2018 introduced the new norm, shippers could see mid-year surcharge increases being assessed by both UPS and FedEx once again. Shipware expects increases in the same areas: Large/Oversize packages and Additional Handling. Essentially, the carriers are increasing these fees as a deterrent, forcing shippers to either optimize packaging or move large packages out of the small package network.

Last year, we saw the following UPS surcharges impacted: FuelShipping Charge Corrections, Additional Handling (>70lbs),Large Package Surcharge, andOver Maximum Limits. Regarding fuel, UPS split the fuel surcharge for domestic and international air so that we currently different fuel surcharges for export, import and domestic air. In June, they introduced an audit fee for shipping charge corrections which is the greater of $1 per adjusted package or 6% of the adjusted revenue for an invoice week. As mentioned before, this is now applied when the average shipping charge correction in an invoice week is more than $5, increased from $2 within the same calendar year. Again, the key word here is, “average.” We expect this audit fee to be fair game for an annual increase, similar to the Third-Party Billing Fee which has seen a YOY increases.

In addition, UPS changes for 2019 include applying fuel surcharges to more surcharges than ever before, including: Additional Handling, Over Maximum Limits, Signature, and Adult Signature Required. They are also instituting new fees. They will also charge a processing fee when Package Level Detail (PLD) is not provided to them prior to delivery.

FedEx followed suit with their own mid-year hikes to larger packages, increasing their Additional Handling Charge Weight, Oversize Fee, and Unauthorized Package surcharges. Furthermore, the FedEx Express and FedEx Ground fuel surcharge tables were updated in September, translating into increases for most shippers and effectively eliminating the fuel cost advantage that they’ve held over UPS for years in what was a 75% addition to the Express fuel surcharge table and 1% to the Ground fuel surcharge table.  Like UPS, FedEx now has separate tables for export, import and domestic express.

The tables below illustrate the mid-year surcharge increases, ranging from 12.5% to 125%, and overall impact to shippers:

UPS

ups mid-year increase

FedEx

fedex mid-year increases

Going forward, it will be harder to pinpoint when increases will occur and how much they will demand of shippers. The days of surcharges increasing once a year as part of the general rate increase may be a thing of the past. Shippers need to be diligent and keep abreast of carrier updates regularly. Transportation spend will continue to increase year over year. The question now is: how many times per year?

When and How to Use SurePost and SmartPost in 2019:

aka Everybody Wants Free Shipping

With free shipping becoming more and more of a required checkout option for internet shoppers, companies are constantly looking to cut their transportation costs and minimize the loss incurred by making it available.  FedEx and UPS have adapted by partnering with the US Postal Service (USPS) to handle last mile deliveries on their behalf, thereby reducing their costs and allowing them to offer a less expensive service to their customers.  These services are called SmartPost and SurePost, respectively.

What are SurePost and SmartPost?

UPS defines SurePost as an economical ground service that delivers primarily to residences while FedEx defines SmartPost as efficient residential shipping for low-weight packages for both delivery and returns.

Getting a package to its final destination is the most expensive part of its journey and both services were created to help drive down the costs of this “last mile” of delivery.The USPS visits nearly every address in the United States on a daily basis. SurePost and SmartPost leverage this fact by using them for them for the final delivery, allowing UPS and FedEx to avoid delivering a package to a place already visited by the USPS.  One thing to note is that SurePost and SmartPost are contracted services, meaning they’re not available to shippers who have not addressed them in their UPS and FedEx agreements.

Services, Surcharges and Shipment Flows

With both SurePost and SmartPost calling on the USPS to execute final deliveries, both offer similar services with matching dimensional, weight and material restrictions, with SmartPost Returns being the differentiator, having no SurePost counterpart.

SurePost is broken down into four services:

  • SurePost 1 lb. or Greater (Might be referred to as Parcel Select, the USPS term)
  • SurePost less than 1 lb. (Parcel Select Lightweight)
  • SurePost Bound Printed Matter
  • SurePost Media

While SmartPost is broken down into five services:

  • SmartPost 1 lb. or Greater (Might be referred to as Parcel Select)
  • SmartPost less than 1 lb. (Parcel Select Lightweight)
  • SmartPost Bound Printed Matter
  • SmartPost Media
  • SmartPost Returns

SurePost 1 lb. or Greaterand SmartPost 1lb. or Greater are the most common services, respectively, for both UPS and FedEx. They allow packages as heavy as 70 pounds with combined length + girth (2*height + 2*width) of 130” or less as long as no dimension is longer than 60”.  SurePost less than 1 lb.and SmartPost less than 1lb. both have the same dimensional restriction as their analogous 1 lb. or Greater services, but the shipment must weigh less than 16 ounces.

SurePost Bound Printed Matter (BPM) and SmartPost BPM apply to books and other permanently-bound materials that weigh up to 15 pounds.  Both services have a 108” length + girth limit and a 60” maximum for any single dimension.  In order to use a BPM service, it must be specifically included in a SurePost or SmartPost agreement.

SurePost Mediaand SmartPost Media are for most forms of media (CDs, DVDs, etc.) and have a 70 pound maximum and a 108” length + girth limit.  Like BPM, Media is only available to shippers who specifically include it in their respective SurePost or SmartPost agreement.

As mentioned before, and noted in their definition of SmartPost, FedEx offers one additional service, SmartPost Returns. This is a solution that offers consumers a way to return packages through the USPS using the same restrictions as 1lb or Greater.  The caveat is that a shipper must have at least 20 returns per day in order to qualify for this service and it must be specifically included on an agreement. Returns packages may also be dropped off at any FedEx retail location.

When it comes to surcharges:

SurePost has a smaller set of surcharges than UPS Ground that can be added to a shipment:

  • Non-Machinable: A package with a dimension between 34” and 48”, any two dimensions between 17” and 30”, or weighing over 35 lbs.
  • Delivery Area Surcharge
  • Additional Handling: Package with its longest side greater than 48”, second-longest side greater than 30”, encased in metal or wood, or a cylindrical item not fully encased in corrugated
  • Peak Surcharge: An extra fee added to Additional Handling during UPS’s busiest time (between mid-November and Christmas)

SmartPost has a smaller set of surcharges than FedEx Home Delivery:

  • Non-Machinable: Package with a dimension between greater than 27”, any two dimensions greater than 17”, weighing over 35 lbs., or packaged in a cylindrical tube
  • Delivery Area Surcharge
  • Balloon: Item that weighs less than 20 lbs. but measures between 84” and 108” in length + girth
  • Oversize: Item measuring between 108” and 130” in length + girth
  • Package Relabel: Packages that require overlabel or hand keying will be assessed this fee
  • Third Party Billing Surcharge: Shipments billed to an account unrelated to the shipper

We know what SurePost and SmartPost are, their similar offerings, why they were created, and what surcharges can be applied. But, what does the flow of a shipment look like in practice?

A SurePost shipment typically goes as follows:

  1. UPS picks up the shipment as part of their regular pickup.
  2. UPS consolidates the SurePost shipments and delivers them via their ground network to a USPS Destination Delivery Unit (DDU).
  3. USPS then sorts the packages to their carrier routes and handle the delivery to the customer.

A SmartPost shipment typically goes as follows:

  1. FedEx picks up the shipment as part of their regular ground pickup.
  2. FedEx consolidates the SmartPost shipments and delivers them to one of their 25 SmartPost Hubs.
  3. The hubs sort the packages to the USPS destination close to the delivery point, not necessarily a DDU.
  4. USPS then sorts the packages to their carrier routes and handle the delivery to the customer.

Both SurePost and SmartPost use dimensional rating for their packages just like they do for their other services. This takes the volume of the package (L * W * H) and divides it by a DIM divisor (the standard is 139).  This dimensional weight is compared to the actual weight and the greater value is used for rating purposes.

As you can see, SurePost and SmartPost are very similar.  The package requirements are the same and the service offerings are almost identical, the distinction there being that FedEx offers a SmartPost Returns product that UPS does not.  There are a few more differences though.   FedEx uses separate SmartPost hubs instead of the regular ground network that UPS uses and, while every SmartPost package will be delivered by the USPS, UPS will deliver SurePost packages if it they are already delivering a regular ground package in the customer’s immediate area. As a result of these differences, the transit time for a SurePost shipment is generally about a day faster than SmartPost.

Additionally, the list rates are different between FedEx and UPS.  The 2019 list rates for SurePost and SmartPost are shown below.  FedEx’s rates match their ground rates for 1 to 9 pounds in most zones (with a slight difference in the 4 thru 9 pounds rates on zone 4, and 9 pounds rate on zone 3) whereas UPS’s rates are an average of 5.9% higher than their ground rates.  Both carriers’ rates increase by almost 30% at the 10 pound mark.  Shippers of heavier packages need to calculate if these rates are still beneficial.  With the lack of a residential surcharge, they typically will be despite the rate jump, but the savings opportunity is greatly reduced.

surepost smartpost rates

Just like all other services, SurePost and SmartPost have a minimum charge.  For UPS, it is the zone 2, 1 lb. rate or the zone 2, 1 lb. ounce rate. For FedEx, it is the zone 2, 1 lb. rate less $2.00 (less $3.00 for ounces).  Shippers should factor these minimum charges into their SurePost and SmartPost rate negotiations.  UPS is at a much higher starting point than FedEx, so an aggressive concession will be needed.

Now that we’ve defined what SurePost and SmartPost are, let’s look at why shippers should use these services and what to be aware of when considering SurePost or SmartPost.

For both carriers, the advantages include:

  • No residential surcharges. This saves $3.95 with both UPS and FedEx, assuming no reductions have been negotiated.
  • Lower delivery area surcharges that save up to $2.50 with UPS and $2.75 with FedEx (see the chart below).

surcharges

  • The ability to deliver to PO Boxes, which neither UPS nor FedEx can.
  • The ability to deliver to Military APO/FPO/DPO destinations.
  • The ability to deliver to US territories.
  • Full tracking and visibility just like regular UPS and FedEx shipments.
  • Delivery Monday through Saturday everywhere. Currently, FedEx Home Delivery is Tuesday through Saturday and UPS only delivers on Saturday to some locations.

Disadvantages include:

  • Slower transit time compared to the carriers’ ground service
  • Tracking confusion owed to the package switches carriers (sometimes UPS or FedEx will show the package as “delivered” when it has been handed off to the USPS)
  • Collect on delivery is not available
  • Package value is capped at $100 and no additional declared value is possible
  • Money-back guarantee does not apply because transit times are not defined
  • Hazardous materials cannot be shipped
  • Signature proof of delivery is not available
  • Appointment deliveries are not available

Having said all of that, shippers use SurePost and SmartPost as their “Free Shipping” option most of the time. The lack of residential surcharges, the lower delivery area surcharges and the ability to deliver to just about every location in the country allow them to minimize their losses on transportation. The trade-off of a slower transit time is acceptable for most customers.

Shippers that are interested in using these services need to ensure that their UPS and/or FedEx agreements have SurePost and/or SmartPost pricing on them. Discounts can and should be negotiated as well.  Once the services are included, the packages will be picked up as part of the normal process.

The USPS Announces Significant Changes:

A Brief Overview of the 2019 GRI

The 2019 USPS General Rate increase will take effect on January 27, 2019. The reported 5.9% average increase for Priority Mailis understated, as most shippers are using “Commercial Plus” pricing (which is being effectively eliminated) and will take an additional 3% increase.  Some lanes, including flat rate envelopes will see a 9% increase.

New Priority Mail dimensional policies will be implemented on June 23rdwherein the Post is dropping the balloon surcharge and decreasing the Dim divisor to 166 from 194.

The First Class Package Service (FCPS)will no longer be a flat rate and is instead switching to zone-based pricing. Inner zones will see a smaller 6.7% increase while outer zone shippers will see a 15% increase.  Where pricing used to have just 16 levels based upon the ounce, it will now rise incrementally every 4 ounces.

Parcel Selectis the core USPS class used by consolidators like UPS SurePost and FedEx SmartPost examined in the previous section.  There are many ways consolidators use the USPS for final mile delivery, with most using the DDU entry discount.  Rates for > 1 LB are going up 10% with the new 166 Dim, while the under-a-pound is increasing an average of 11.5% and willnotbe switching to zone-based pricing like the FCPS.

This is a major rate increase that was carefully planned by the USPS to minimize loss of volume, with the greatest increases being applied to shipping lanes with the least competition.  Zone 8 lightweight shippers would be well served to consider fulfilment or adding asecond distribution center to mitigate costs, as will > 1 lb. shippers with higher cubic volume (> 1728 cubic inches) since the Post will grandfather in the Dim exemption for zones 1-4.

How to Compete with Amazon:

Contending with Free Shipping, Shopping Cart Abandonment

Regardless of how we define the “Amazon Effect,” one thing is clear: there’s no denying the digitization of the marketplace has disrupted traditional business models and consumer expectations.  Consumers expect an almost entirely frictionless buying experience with near immediate results, including delivery.  With immediate access to virtually any product or service via their smart phone, tablet or computer, consumers no longer need to set aside time to run errands at brick and mortar stores.

How can the average shipper compete in this environment?  It’s difficult but they should begin by pursuing means to lower their parcel shipping costs(which allows them, theoretically, to charge less for shipping) or decrease transit times. Ideally, both.  There are many ways for shippers to accomplish these goals, some dependent on volume and spend and therefore within reach of only the largest shippers, and some not.

Two great ways to reduce cost and shorten delivery time are to increase the number of origin points or to move the origin point as close to the end user as possible.  A shorter delivery distance carries a lower rate (usually) and enables faster transit.  The largest shippers can open new, strategically placed distribution centers while smaller shippers can consider a direct-to-consumer strategy by having the manufacturer or wholesaler handle shipping or by fulfilling from stores rather than from a primary DC.  An omnichannel strategy, which includes shipping from all of the above, can be a great option for many shippers.

Carrier diversification is another strategy that can both reduce cost and decrease transit time. Shippers should consider using multiple carriers where it makes sense.  Understanding which carriers are a good fit and which are not is critical to this strategy. Many shippers can benefit from increased usage of USPS as Priority Mail can offer lower costs and faster transit times with 2-day delivery to most of the country. It’s also very important for shippers to understand the impact this strategy will have on the pricing they receive from their primary national carrier as a result of moving volume away from them.

Regional carriers should not be overlooked when trying to hit this lower cost/shorter transit goal. They can be a great option for certain shippers. Regional carriers such as OnTrac on the west coast, LaserShip in the east, UDS in the Midwest and LSO in the southwest can help large shippers offer one- and two-day transit to most population centers in these geographic regions.  The ROI on introducing regional carriers will vary, however, from shipper to shipper.  The largest shippers, who have favorable delivery density within the footprint of a certain regional carrier, should absolutely be exploring this option.

Packaging optimization can be a key cost-reduction strategy and can help shippers avoid significant, and often unexpected, dimensional weight fees.  A shipper’s ability to “right-size” their packaging is critical to reduce the amount of air they’re shipping.

All of the above should include an aggressive rate negotiation strategy with the national carriers. Every aspect of their pricing agreements are negotiable. Discounts, minimum charges, accessorial charges, dimensional weight pricing, etc. can all be negotiated in order to help lower costs.  Even the degree of impact the carriers’ annual GRIs have on a given shipper can be mitigated through contract negotiation.  Education and data are key here.  Shippers must be intimately familiar with their own shipping and package characteristics and should know how to use that information to their advantage during carrier negotiations. Shippers who have taken action to lower the carrier’s cost to serve them, such as adding additional origin points or optimizing their packaging, shouldn’t be afraid to ask for concessions in exchange.

Some shippers have decided that, if you can’t beat them you may as well join them.  These shippers, in order to get their product in front of more consumers and offer faster delivery (and, therefore, to compete with Amazon) believe that Fulfillment by Amazon (FBA) is worth the extra cost. How does FBA work?  Retailers send their product to Amazon to store it. Orders are placed either through Amazon, directly with the retailer, or through some other eCommerce platform.  Amazon picks, packs and ships the item then provides tracking, customer service and returns management.  But, all of this comes at a cost to the shipper.

In the coming years, what we think of as the “Amazon Effect” will likely include the impact of Amazon rolling out their own national delivery network, Amazon Shipping, in effort to compete directly with the national carriers.  At the time of writing of this article, Amazon had announced a plan to eliminate many of the fees associated with residential deliveries carried out by UPS and FedEx.  Although conventional wisdom says that Amazon Shipping is, at minimum, 5 to 7 years away from competing on a large scale, the national carriers stand up and take notice when announcements like this are made, and so should shippers.  Stay tuned for more on this topic.

Shipping in 2019: The Big Picture

2018 was another huge year for UPS, FedEx and the USPS.  Package volumes continue to rise, and the carriers are racing to keep up with the increased demand. Both UPS and FedEx instituted mid-year increases to surcharges related to size and weight, making it clear that large packages are not welcome in their network without collecting significant fees in turn. Both also changed their fuel surcharge tables, separating domestic express, import, export and ground into separate tables while increasing the surcharge percentage.  Peak surcharges were once again implemented in 2018 and we expect to see them in 2019 as well. FedEx and UPS differ in their peak surcharge strategies, so any changes for 2019’s peak season merit attention.

The 2019 rate increases were announced at 4.9% by both carriers.  Further analysis reveals that FedEx stayed close to 4.9% on their ground, home delivery and SmartPost rates whereas Express saw significantly higher increases, particularly in the higher zones.  UPS’s increase was a little higher for their ground residential and SurePost services while, like FedEx, Express saw significant increases in the higher zones. Remember, that 4.9% does not include accessorials! Both carriers increased their most assessed accessorials, ranging from 5% to 12%, so that needs to be considered in any rate increase calculation.

As we move into 2019, the specter of Amazon looms over everyone. Shippers are looking for ways to lower their transportation costs as customers expect free shipping with every online order.  Carrier diversification, regional carriers, package optimization and minimizing delivery distance are different ways shippers can lower their costs to appease expectations. Amazon is building out a delivery network and has already announced a plan to eliminate many of the fees associated with residential deliveries.  It remains to be seen how long their plan will take to scale but shippers and carriers will be closely following any developments.

shipping-glossary_shipware

Glossary of Shipping Terms

By | News, Shipping Knowledge

Accessorial

Additional service charges typically charged by the National Carriers during the billing process. Common examples are “Residential Surcharge”, “Delivery Area Surcharge”, “Fuel Surcharge”, and “Additional Handling Surcharges.”

Actual Weight

Carrier determined weight before rounding up to the nearest whole integer, once rounded up it is referred to as “Billed Weight” Also determined by the carrier calculating Dimensional Weight and rounding up to the nearest whole integer. The carrier will invoice at the greater of the rounded up actual weight and the Dimensional Weight.

Additional Handling

A common accessorial surcharge. UPS and FedEx have 3 different categories based upon Packaging, Dimensions or Weight. Common triggers are: 1) Packages with a single side longer than 48 inches, or a second side that measures greater than 30 inches; 2) Packages with an actual weight of greater than 70 lbs; 3) Packages not fully encased in an outer shipping container made of corrugated materials (cardboard), and/or the outer shipping container is covered in shrink wrap; 4) Packages encased in a soft-sided pack (courier packs, poly bags and bubble mailers) of certain dimensions; 5) Packages that are cylindrical; 6) Packages bound with metal, plastic, cloth bands or other strapping; 7) Packages that could become entangled in or cause damage to other packages or the carrier sortation system. For example, a 36″ x 36″ x 12″ will be charged this fee because of rule #2. Packages that meet more than one of the triggers are only charged one surcharge. For example, rolled carpet that’s 55″ long and wrapped in plastic would be charged because of rules 1, 3, 5 and 7.

Address Correction

An Accessorial Surcharge by the National Carriers. Charges vary depending on service chosen. With USPS, there is no charge for correcting the address of packages, but for letters and Flats there charges may be applied depending on how old the Address Change is and if there is any “Ancillary Endorsement” included.

Air Freight

Cargo that travels via Air.

Air Waybill

A document specific to Air Freight that identifies the consignee, the consignor, destination, estimated weight, Tariff and other ancillary services.

Airport to Airport

Service for Express only covering the transportation from one airport to another. It is the consignor’s responsibility to transport packages to the origin airport and the consignee’s to retrieve them from the destination airport.

Automation

The National Carriers generally include an “Automation” discount in their contract rates. Manually written labels are excluded from receiving this built in discount.

Billable Weight

Also known as “Billed Weight,” it is the actual weight rounded up to the next whole integer (number).

Bill of Lading (BOL)

A general weigh bill for ground freight that identifies who the consignee, the consignor, destination, estimated weight, Tariff and other ancillary services.

Bonded Warehouse

A distribution warehouse that includes insurance against theft and damage.

Box Truck

A smaller delivery truck sometimes required due to height or length restrictions. Very common in downtown destinations and high-rise buildings.

Break Bulk

Transporting cargo in separate pieces instead of a container.

Break Bulk Cargo (see break bulk)

Bulk Cargo

Commodity cargo – such as coal, grain, etc. – transported unpackaged in large quantities.

Cargo

Aka Freight, can be any form of boxes, large items or palletized shipments.

Cargo Insurance

Specific insurance that protects against loss while in transit.

Cash in Advance

An ancillary service whereby the consignor requires full payment “in cash” for goods prior to shipping.

Cash on Delivery

An ancillary service whereby the consignor requires full payment for goods “in cash” at time of final delivery.

Certificate of Insurance

Proof from an Insurance Carrier that indicates what insurance is in place, limits of coverage and the name of who is insured.

Certificate of Origin

International trade document that certifies goods in a shipment are obtained, produced, manufactured, or processed in a country.

Chargeback

Ancillary charges that are billed after the point of shipping. Examples of common charges include: dimensional charges, incorrect manifested weight, address correction, return fees, and additional handling surcharges.

Claim

Refers to the process of recovering costs of either the freight or insured cost of goods relating to a loss or damaged shipment.

Cold Chain

Special freight requirements for food transportation that dictates that all steps in the transportation process will include refrigeration.

Collect Shipment

Indicates the charge for shipping to be billed back to the consignee. Often used for inbound freight of goods where the merchant wishes to pay for the freight using their negotiated contract rates.

Commercial Invoice

A specific invoice used to document cost and type of goods for international shipments.

Common Carrier

Trucking company used for the transportation of Cargo

Consign

To send goods by public carrier; deliver something to a receiver’s custody.

Consignee

The receiver of goods; the entity who is financially responsible for the receipt of a shipment.

Container Yard

Carrier designated location at port areas for receiving, storing and delivering loaded containers as well as for empty container pick up.

Contract Carrier

A business that works with a select group of shippers to goods between locations serviced by the contract carriers.

Country of Origin

The country from which a shipment originates or is shipped.

Cross Docking or Cross Dock

The practice of unloading shipments from an inbound trailer or car and loading same shipments on outbound trailers with little or no storage in between.

Customs

Place where officials check goods entering a country

Customs Broker

Private entities that are licensed and empowered to help importers and exporters meet a country’s import and export requirements.

CWT (Hundredweight)

A pricing mechanism used by UPS for rating multi-piece shipments destined for the same address. Pricing is by weight rather than by piece. Ideal for multi-piece shipments weighing between 100 and 500 lbs.

Damage

Harm to a shipment – it can either be visible upon receipt or concealed (not realized until the item is out of its packaging).

Dangerous Goods

A substance or material which has been determined to be capable of posing a risk to health, safety and property when shipped and that may require special handling or shipping requirements.

Declared Value

The value of the shipment “declared” at the point of shipping that is in excess of the carrier’s limit of liability.

Dedicated Contract Carriage

Having a third party manage operational activities of trucks on your behalf.

Delivery Area Surcharge

An ancillary surcharge (aka “DAS”) for deliveries outside higher density areas (i.e. industrial park) and major metropolitan areas.

Demurrage

Fees paid for delays in loading or unloading cargo.

Density

General term to describe a package’s weight to volume characteristics.

Dimensional Weight

The actual “Billed Weight” determined by multiplying the length times the height times the depth and divided by the Dimensional (Dim) factor. The result is then rounded up to the next whole integer. For example, a box that measures 20 x 12 x 6 has a volume of 1440 cubic inches. The dimensional factor is 139 so the dimensional weight is 1440/139 = 11 lbs (10.35 is rounded up to 11). If the actual weight of the box is less than 11 pounds, this dimensional weight will be used for billing purposes.

Dimensions

Include the Length (L), Width (W), and Depth (D) that are used in determining dimensional based charges.

Distribution Center

Large warehouse equipped to distribute goods for one or many merchants.

Domestic Shipping

Is where the origination and destination country are the same.

Door to Door

Full service transportation from origination point to destination that may include many stops, transfers, customs etc.

Door to Airport

Service for Express that covers the transportation from the consignor to the destination Airport. It is the consignee’s responsibility to retrieve packages from the destination airport.

Drop Shipping

A service performed by one vendor for another, when the merchant does not have the item(s) in stock and has them shipped to the consignee, typically with the freight prepaid.

Duty

Is an item specific charge imposed by a country for goods during the Customs Brokerage process.

Early Termination

An event triggered by cancelling a contract prior to its negotiated term. It usually triggers a potential fee that can be imposed by the carrier. Early termination fees are one of the “Gotchas” to look out for in carrier negotiation.

Earned Discount

This is a discount percentage that the customer will earn at a specified gross revenue amount. The revenue amount is a rolling average of transportation charges exclusive of service fees and surcharges. Earned discounts apply to the base rate specified for each service in effect on the date of shipment.

Electronic Data Interchange (EDI)

A form of data transfer that has a detailed file format structure to facilitate communications between parties of a transaction.

Export License

Permission to conduct a certain type of export

Extended Area Surcharge

An ancillary surcharge (DAS Ext) for deliveries outside major metropolitan areas.

Exports

Goods that are prepared and transported outside the country of origin

Freight-All-Kinds

A specialized (tariff) class that is customized to accommodate the typical mix of freight and classes that exist within a single shipment. Aka “FAK”

Flat Rate

A pre-negotiated rate that includes all charges

Freight Class

A standardized classification system for commodities transported via LTL carrier. NMFC is the standardized, accepted classification system. Freight class is based on four characteristics: Stowability, Liability, Ease of handling and Density.

Freight Collect

Freight shiments that require the consignee to pay for the cost of transportation.

Freight Forwarder

A broker that arranges all legs of a shipment between multiple carriers.

Fuel Surcharge

An ancillary charge to compensate the carrier for the fluctuations in the cost of fuel.

Girth

A dimensional measurement around the middle of a package. The shortest measurement possible is used. It is commonly added to the “Length” to determine L+G (length plus girth) to determine if a shipment is oversized.

Gross Weight

The total rounded up weight of all items in a shipment

Guaranteed Service Refund

Contractual guarantee of service performance based upon the specific class of service and the Carrier’s stated delivery day and time threshold. Aka “GSR”.

Grace Period

New contracts that have volume based discounts often include a “Grace Period” whereby the volume used to determine the bonus discount portion is waived for a stated period of time.

Hazardous Materials

Goods that are restricted from normal transportation. Aka “Hazmat”, these goods must be specially documented prior to shipment and identified with special labels that indicate what type of hazardous materials are included.

Height

The height of a shipment is determined by measuring the vertical distance with the largest side of the package on the bottom.

Hub and Spoke

The type of carrier distribution model where freight does not move point to point but rather to a “hub” whereby the freight is sorted prior to the next leg of its journey.

Import

Goods that are prepared and shipped from a country that is different from the country of origin.

Interline

Using more than one carrier on a shipment

Intermodal

Using more than one type of transportation on a shipment, like loading trailers onto a railroad car.

Kitting

Grouping separate but related items into a single shipment.

Label

Documentation on a package that has shipper and consignee information along with a tracking number and delivery instructions.

Lading

Loading a trailer or container (or other shippign vessel) with cargo.

Large Package Surcharge (Oversize)

Surcharge assessed for packages that exceed 96 inches in length or 130 inches in length plus girth. FedEx calls this an Oversize charge.

Last Mile

Another name for delivery to the end user.

Length

The largest dimension of a package is the length.

Less Than Truckload (LTL)

Common Carrier where the Consignee can ship a single large box or pallet without contracting the entire volume of the Truck (Truckload – aka TL.)

Loading Dock

Allows for the easy loading and unloading of freight. A surcharge is commonly added to shipments that do not include a dock at both origin and destination.

Manifest

List of all goods, typically ordered by Bill of Lading, that are loaded into a container.

Minimum Charge

The lowest amount one can be charged on a shipment. This varies by service.

Minimum Commitment

Language inserted into an agreement that states an acceptable amount of shipments. Falling below that number can give the carrier the right to fine you.

Money Back Guarantee

Contractual guarantee that states that a shipper may file for refunds in the event of a service failure. A service failure occurs when a package is delivered 60 seconds or more after the published delivery commitment time for the selected service and destination.

MWT (Multiweight)

A program that groups shipments going to the same destination together to get a better rate for the shipper.

Net Weight

Actual weight of a product without its packaging and or container.

Overage, Short and Damaged (O, S & D)

A report listing items that were over delivered (too many items delivered,) short delivered (not enough of an item delivered) and damaged on a shipment.

Oversize (Large Package Surcharge)

Surcharge assessed for packages that exceed 96 inches in length or 130 inches in length plus girth. UPS calls this a Large Package Surcharge.

Packaging

The materials that surround the item being shipped.

Packing List

Documentation of the contents of a shipment.

Pallet

Flat structure with top and bottom decks used to support goods that can be lifted by a forklift, pallet jack or other lifting devices.

Parcel (small package)

Another name for a package shipped via UPS, USPS, FedEx or other similar carriers.

Payment Terms

Most common are Prepaid, Collect, or Third Party. They determine who is paying for a given shipment.

Peak Season

Period of time typically starting on Black Friday and continuing through Christmas where carriers are at their busiest.

Peak Surcharges

Fees applied to shipments that occur during peak season. These are in addition to the regular accessorials that the shipment receives and include the following: Additional Handling, Unauthorized Package (Over Maximum Limits), and Oversize (Large Package) surcharges (FedEx and UPS). UPS has a peak residential surcharge as well.

Pickup Fee

Surcharge assessed for regularly scheduled pickup services – typically reduced if a certain weekly revenue threshold is met.

Portfolio Tier Incentive

This is a discount percentage that the customer will earn at a specified gross revenue amount to be applied to the base transportation rate specified for each service in effect on the date of shipment. The revenue amount is a rolling average of transportation charges exclusive of service fees and surcharges.

Prepaid Shipping

The shipper pays for the transportation of a shipment.

Proof of Delivery

Documentation that a shipment arrived at its destination.

Residential Surcharge

A fee applied to any shipments that are delivered to a residence, including a business operating out of a home that does not have a public entrance.

Returns (See reverse logistics)

Reverse Logistics

Process of moving goods from their final point to the point of origin either for reuse or disposal.

Service Guide

A book that contains an overview of services along with list rates plus descriptions and details on accessorials. It can also have terms and conditions.

Signature Options

FedEx has three types of signatures: Indirect – anyone near the address can sign (neighbors, building managers, etc.) Direct – Someone at the delivery address must sign. Adult – Someone over 21 at the delivery address must sign. UPS only has Direct and Adult.

Shipper

The entity where a shipment starts its path.

Shipping Charge Correction

Billing adjustments made by UPS after a shipment’s original bill. It corrects any errors found – in the shipper’s or the carrier’s favor.

Shipment Types

Ways to transport your freight.

Skid

A subset of pallets that is cheaper and easier to drag and does not have a bottom deck. Often used as foundation for heavy machinery.

SmartPost

FedEx-branded service where FedEx picks up a package and injects it into the postal system. The USPS handles the final mile of delivery. Slower and less expensive than ground.

Supply Chain

All processes and resources that are needed to make and deliver a product to the end user.

Surcharge (in shipping)

Any fee added beyond the base transportation costs. Most common types are for fuel and for delivery to a residence.

SurePost

UPS-branded service where UPS picks up the package and injects it into the postal system. The USPS handles the final mile of delivery. Slower and less expensive than ground.

Tariff

Tax applied to import or export shipments.

Terminal

Processing point for carriers. Shipments are sorted and prepared for delivery or transferred to another carrier location.

Term

A length of time, usually 12 months, that all or part of any contract is valid.

Termination

Formally ending an agreement

Third Party Billing

The company responsible for paying is neither the shipper nor the consignee.

Third Party Billing Surcharge

A surcharge applied to shipments where the bill-to account is neither the shipper nor the consignee. It is typically a percentage of the shipment cost (excluding duties/taxes/clearance costs).

Third Party Logistics Provider (3PL)

An outside party that companies hire to outsource distribution and fulfillment operations.

Tracking Number

Unique number assigned to a shipment and used primarily to follow its location between origin and destination.

Transportation Charge 

The cost of a shipment from point A to point B after discounts. It does not include a fuel surcharge or any other accessorials.

Truckload

A shipment where the entire load is contracted to a single customer. The truck does not have to be filled to capacity.

Value Added Services

Extra services offered by the carriers outside of their normal transportation work. Some examples include packaging, kitting, and order fulfillment.

Value Added Tax (VAT)

Consumption tax levied as value is added in each stage of the supply chain.

Waybill

Document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods.

Weight

Weight (either in lbs. or kgs depending on country.)

Width

Side-to-side measurement.

Zone

For domestic – a distance-based way to determine the base rate for shipment. They are zip code specific and the lower the zone, the closer the zip codes are and the lower the base rate. For international, countries are grouped into zones, typically by region. It allows the carriers to offer the same base rate instead of creating different rates for each country. Domestic zone differences can vary by service but, generally speaking, the distance in miles from origin to destination for each zone is as follows: Zone 2: 0-150 miles; Zone 3: 151-300 miles; Zone 4: 301-600 miles; Zone 5: 601-1000 miles; Zone 6: 1,001-1,400 miles; Zone 7: 1,401-1,800 miles; Zone 8: 1,801 and above.

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Should You Use a Private Parcel Insurance Plan?

By | News, Parcel Market Trends, Shipping Knowledge

A customer purchases a product, eagerly awaits its arrival — and then this happens: The package arrives late, in a damaged box, which is not what the customer expected when ordering the product. At this point, you have a frustrated customer on your hands, and how you handle this situation could have a ripple effect on your business.

These types of situations don’t happen frequently, but when they do, the costs add up fast for businesses. First, you must pay to send the customer an undamaged product, pay additional shipping, and manage the internal cost of getting it all done. Situations such as this result in companies asking whether they should invest in a parcel insurance plan.

Many considerations factor into this decision, including the cost of the items being shipped, the carrier used, and the risk of loss. Understanding the details of parcel insurance and how it can protect your business allows you to make a more informed decision.

Why Buy Private Shipping Insurance?

The number reason is reduced cost!  There are many different providers of private insurance, and Shipware is happy to set up clients and prospective clients with what we have determined to be the best program in the industry.

In a perfect scenario, packages wouldn’t get lost, stolen, or disappear in transit. And while these situations are the exceptions and not the rule, they do happen. Insurance offsets the cost associated with these situations.

What’s more, customer expectations are constantly rising, which makes it important to put shipping insurance on your radar. The decision to purchase insurance is pretty straightforward for high-value items, but when the product value is lower, that’s when the decision gets more difficult.

Gathering information is a good starting point; then you can decide whether to purchase insurance and put together policies for collecting the required information if filing a claim becomes necessary.

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Understanding Potential Insurance Options

If you decide to purchase insurance for parcels, it’s good to know all of the available options. Most carriers, such as FedEx, UPS, and USPS, offer insurance, but they are not the only option. There are a few different options for purchasing insurance on parcels.

Carrier insurance. This is usually the first option that shippers consider when purchasing insurance. The major carriers offer insurance based on the “declared value” of the package. The declared value is simply a stated value, what you say the parcel is worth. If you file a claim, proof of that value is required.

Third-party insurance. (aka Private Parcel Insurance) In addition to the major carriers, third-party companies offer parcel insurance. These companies have their own shipping rules and regulations, so it’s wise to check those out before purchasing insurance. Some companies shipping a large number of parcels elect to use a third party for shipping because it drives down the overall cost of insurance and the claims process is expedited.

Self-insurance. Larger-parcel shippers might decide to self-insure, which means that they understand what is lost on shipping claims and elect to handle those claims internally with a preset budget. Most parcel shippers elect to use one of the other options, such as purchasing additional carrier insurance or third-party insurance instead.

How Much Does Parcel Insurance Cost?

An important consideration of parcel insurance is the cost. If you expect a certain number of claims each year, how much will you pay for insurance, and will that cost pay off?

If you’re using one of the major carriers, such as FedEx, UPS or USPS, for insurance, you know that each has their own set of pricing. And in many cases, the first $100 of coverage is free. But if you are shipping a higher-value item, it’s good to understand the cost of insurance and any potential exclusions and value caps. Here is a quick guide.

USPS Shipping Insurance Costs

USPS charges an incremental cost based on each $100 of insurance that you purchase. Rates increase occasionally, but here is an example of what to expect:

  • $100.01 – $200: $3.35
  • $200.01 – $300: $4.35
  • $300.01-$400: $5.50
  • $400.01 – $500: $6.65
  • $500.01 – $600: $9.05.
  • $600.01 – $5,000: $1.25 per $100 of incremental value.

If you plan to use international services, the cost varies by service. Check out additional details here.  

UPS Shipping Insurance Costs

The pricing below is for UPS service options that do not offer that first $100 of insurance for free, so you’re footing the entire cost. Here is a quick summary of what to expect for pricing based on the stated value of the package:

  • Value up to $50 is $1.65
  • $50.01 to $100 is $2.05
  • $100.01 to $200 is $2.45
  • $200.01 to $300 is $4.60
  • The price per additional $100 of insurance for items valued over $300 and up to $5,000 is $4.60 plus 90 cents for each $100 increment or fraction thereof.

Some UPS services, such as Express Mail, include the first $100 of coverage at no cost. Pricing for additional insurance includes the following:

  • The first $100 of value is still covered for free.
  • Value over $100 up to $200 is 75 cents.
  • $200.01 to $500 is $2.10.
  • $500.01 to $5,000 is $2.10 plus $1.35 per each $100 or fraction thereof.

FedEx Insurance Cost

FedEx shipping insurance costs vary based on the service level and various other factors. For comparison purposes, here is what you can expect:

FedEx SameDay: The maximum declared value is $2,000, and the cost for declared value is $2.70 for shipments valued up to $300 and 90 cents per $100 of declared value of shipments that exceed this amount.

FedEx SameDay City: Maximum declared value is $2,000, and the cost for declared value is $3 for shipments valued up to $300. One dollar per $100 is the charge for declared values over $300.

U.S. Express package service, U.S. Ground service and International Ground services. The cost is $3 for shipments valued up to $300. After this amount, it is $1 per $100 of declared value for shipments over $300.

As a general rule, third parties may provide options that the major carriers don’t, such as faster claims processing or covering all your parcels across various carriers. Additionally, the cost may be lower, depending on the third-party vendor. But regardless of which parcel insurance you chose, it’s important to understand any potential exclusions.

Understanding Parcel Insurance Limitations

Reading and understanding the fine print is critical when investing in parcel insurance. Some items aren’t covered, and others are covered; however, there are exclusions based on the type of protection. Understanding the fine print with each carrier or third-party vendor helps you determine which is best based on the type of parcels you ship.

For example, FedEx has limitations on the declared value limits on items such as art, photos, jewelry, antiques, and musical instruments. They permit a maximum declared value of $1,000, so even if the item is worth more, the insurance coverage won’t extend beyond that amount.

USPS limits coverage on fragile items, and, according to USPS DMM 609 “Filing Indemnity Claims for Loss or Damage,” USPS is exempt from paying insurance claims if the “fragile nature of article prevented its safe carriage in the mail, regardless of packaging.”

UPS has limitations on the type of commodity that is shipped, which are outlined in the Liability Limits section of the UPS tariff terms and conditions. A few of these items include checks, gift cards, phone cards, and some types of media.

Start by taking inventory of the types of products that your company ships. Check with the carriers that you frequently use to see whether those items are covered or have limitations. Knowing this up front can save money and time and prevent a situation where you think parcels are insured but they actually are not due to specific limitations and exclusions.

Understanding the Claims Process

The moment a customer calls and notifies you that a package arrived damaged or didn’t arrive at all, the claims process should be set in motion. Start collecting information you might need and get in touch with the carrier right away. The customer service team should know exactly how to take care of the customer and what information to collect, and they should pull together the items required to minimize risk of claim denial.

Depending on the carrier, there may be multiple ways to file a claim, including online or by email, fax, or phone. Decide on the process that you prefer and ensure that customer service team members use a consistent process for filing claims in order to minimize confusion.

It’s also important to note that some carriers have waiting periods before you can file a claim. This waiting period gives the carrier time to try to find the package before moving forward. For example, a carrier might require you to wait seven days before filing a claim, during which time the carrier will conduct a search for the package. If that package is not found, then you are free to move forward and file an insurance claim. For international shipping, the waiting period may be longer, so check with your carrier on the process.

Also, pay careful attention to parcel insurance rules for packaging items. A carrier or third-party insurance company may ask to view the packaging material involved with damage claims. Ask the customer to keep all packing material and damaged goods in the original form in which they were received. Packing and damaged goods shouldn’t be disposed of or given to the carrier prior to taking photos and documenting them.

The Importance of Acting Quickly During the Claims Process

Once you find out that a customer’s package is missing or damaged, move quickly to file a claim. There are two reasons why it’s important to act fast. First, the carrier requires specific items to support the claim. You will need to prove the value of the item, show documentation of how the item was packed, and provide other relevant information if it’s requested. The sooner you file, the easier it is to collect these items.

Second, most carriers have rules about when you can file a claim. As mentioned, there is usually a waiting period, mostly to give the carrier time to search for the package. Once that period has expired, there is a limited amount of time to open a claim. For example, for USPS Insured mail, you have up to 60 days. For UPS, it’s nine months for shipments within the U.S. and 60 days for shipments outside the U.S. And FedEx requires claims to be filed within 60 days from the insurance purchase date.

Once the claim is filed, you will need to wait for it to be processed. Typical processing time can range from seven to 10 business days. Some carriers will send a letter of authorization allowing you to file the claim, and once you provide supporting documentation, the claim will be processed for payment.

Moving Forward with Greater Peace of Mind

The decision to purchase insurance is an important one for businesses that want to minimize potential loss. There are many considerations, including the value of the items that you’re shipping and what carrier is being used to ship them.

However, if loss prevention is a concern for your business or you notice a high percentage of items having issues — either being damaged during transit or going missing — it helps to put some safeguards in place to minimize those losses. Parcel insurance plans can provide that peace of mind at a small cost per package to offset potential costs and keep your business running smoothly and better able to serve customers.

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About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract negotiation and invoice audit services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption to current operations. Our team of experts has over 200 combined years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent of their annual shipping spend.

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Presidential Task Force Report Released: A Call for Shipping to Subsidize Mailing

By | News, Parcel Market Trends, Shipping Knowledge

The shelved Presidential Commission report on the United States Postal System was on December 4, 2018, surprising many of us who thought it would never see the light of day.  The Commission was initiated by Trump to potentially privatize the USPS and dynamically change how the Post Office prices its services, specifically targeting Amazon’s alleged sweetheart deal.  Trump tweeted, calling the USPS Amazon’s “Delivery Boy” and stating it was being subsidized unfairly.

The scope of the study was intensive, with virtually every major organization and stakeholder involved.  Fortunately, there was no recommendation from the Commission to privatize. In addition, there was consensus in the report advocating legislative reform to strengthen oversight by both the Board of Governors and the PRC, adjust and amortize the prefunding healthcare requirement, reform the contributions into the Federal Retirement System, and eliminate the right of collective bargaining from compensation by aligning employees’ rights with other federal employees.

Many findings were consistent with expectations, such as aligning pricing by class to cover both actual and operational costs; sustaining the monopoly on mail and package delivery, including exclusive access to the mailbox; maintaining the Universal Service Obligation (USO), opening the door for revised delivery standards (i.e. eliminate Saturday mail delivery); and to pursue new revenue streams.

Surprising was the lack of mention on the reported abuse of the Reseller programs.  While the OIG was heavily consulted, somehow, the OIG findings of $1B in annual savings from fixing this program was not covered.

The report also showed the disconnect in Washington between reason and reality.  Instead of reforms that would allow the USPS to align healthcare costs like other government agencies, the Commission recommended keeping the prefunding of the healthcare mandate in place and provide relief by restructuring the payment schedule.  No other company or Government organization has this requirement. This is, and will continue to be, a dirty money grab by Washington politicians to Tax and Spend, but in this case, the tax is hidden in the form of increased postage. Let me explain.

If you follow the money, when the PAEA was passed in 2006, the USPS could forgo future overpayments into the Federal Retirement System for employees where the USPS was their 2nd Government career.  At the time, the OIG reported the USPS had overpaid $75B and was continuing to overpay.  In return for stopping these overpayments, Congress required the prefunding of their future retiree healthcare requirements to keep the cash flowing.  For a while, it was sustainable, until the 2008 recession hit the USPS especially hard.

This position clearly shows the bias in the report, where the goal is to protect the national budget and not to do what is right for the USPS and the American public.

The other disturbing finding was the recommendation on how to pay for the estimated $4.4B cost of the USO, by crossing a line separating the Market Dominant and Competitive businesses.  They want to increase prices on Shipping to pay for USO and took a page from UPS’ playbook, and their relentless attempts to get the PRC to change the “Operational Cost Coverage” methodology to pay a larger share by raising prices for Shipping services.  

While the Commission was in favor of creating new revenue streams by licensing the right to the mailbox from 3rd party providers and selling fishing and hunting licenses, they came out against allowing an expansion into banking services, citing an unnecessary risk to the balance sheet.  Another example of the Commission being influenced by industry. Studies have shown great support for USPS banking with little risk. It would open universal services to many rural areas with limited access to banks.

The frosting on the cake was this statement: “Many of the Task Force’s proposed reforms to pricing, costing, and services are designed to create such a transfer of value from commercially oriented products to socially oriented essential services.”  

The Commission is clearly crossing a line it shouldn’t.  Competitive products are priced based upon costs and market conditions.  Adding a Social Service fee would be punitive in nature. USO changes should be limited to market dominant services and continue to fulfill the original, grand design of our Postal System as put forth by Benjamin Franklin.

While I am glad privatization is off the table, it looks like it is going to be a tough road ahead for legislative postal reform.  The biggest problems facing the Post Office were created by Congress and need to be fixed by Congress. Unfortunately, politics will likely forestall unbiased reform.   I remain hopeful that we end up with a better deal than the last one. The American public deserves to keep a viable and competitive Postal Service.

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 32 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-724-0457 or gordon@shipware.com.

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How Much Does Freight Insurance Cost?

By | News, Shipping Knowledge

Protection from financial loss is a key consideration for businesses working to safeguard their assets and future. Loss of cargo due to theft is estimated at $22.6 billion annually, according to the BSI Group’s Global Supply Chain Intelligencereport. Depending on where that freight is traveling, the risk may be higher. According to the Transportation Assets Protection Association, in November 2016 alone, 231 freight thefts occurred in the Europe, the Middle East, and African regions, with losses that topped $64,000.

Freight insurance, also known as cargo insurance, helps protect against this type of loss, covering a variety of transportation means, everything from ocean to trucking to air, depending on the policy.

If you’re shipping goods that are valuable, it’s a good idea to look into freight insurance to protect those goods during transport. Carriers provide some coverage, but that coverage is limited and does not cover all situations. The first step in understanding freight costs is knowing what type of insurance is available and what factors play into that cost.

What is Freight Insurance?

Freight insurance provides additional protection that extends beyond what is offered by most standard carriers. This type of insurance typically includes coverage during the transport of goods and is purchased from a carrier or third-party insurance company.

Businesses can ship cargo without insurance, but if an unexpected event occurs during transport, the shipper  absorbs all the costs. If the carrier were at fault, you might be able to recover some of the loss, and legal action is available, but it could be complicated and time-consuming — especially when dealing with international shipments.

Additionally, some carriers limit liability when an event is out of their control. For example, flooding, hurricanes, lightning strikes, and earthquakes are considered “acts of God” and therefore may be excluded. At this point, having an insurance policy in place is the best way to recover the loss.

Understanding Freight Insurance Categories

The potential cost of insurance is tied to the type of insurance that you purchase. There are two major categories: open coverage and single coverage.

Open Coverage

Do you import and export items frequently? If so, open coverage might be a good option. With this option, you pay premiums annually, and the coverage extends to several shipments traveling at one time, depending on the policy details. Open coverage policies provide coverage until the plan is terminated, with most companies reviewing them annually. This is a good option for large-volume shippers that find purchasing single-coverage policies inefficient and need a more cost-effective option.

Single Coverage

Do you ship freight infrequently? If so, single coverage might be the best option. For example, if you’re a small-business owner who ships occasionally and needs coverage from departure to arrival, single coverage is a good choice.

Once you understand the two general categories of freight insurance, you can take a deeper dive into the various types of insurance and what to expect in terms of premium costs.

The Cost of Freight Insurance: What to Expect

Freight insurance costs take into account a variety of factors, including the value of goods, origin and destination points, and even the carrier’s loss history. The mode of transportation is also a factor. For example, insurance on ocean shipments may be more expensive than on air shipments, since goods are exposed to various risks for an extended amount of time.

Items that are considered “high risk for theft” are more expensive to insure. For example, let’s say that you’re shipping electronics — mobile phones or laptops. These items are high-risk due to the potential for loss and theft. On the flip side, if you’re shipping plastic tables or inexpensive toys, the theft risk is low, which drives down insurance premiums.

The way in which goods are packed also affects pricing. For example, items that are packed in crates or containers may be priced more reasonably than goods that are shrink-wrapped and thus more vulnerable to both damage and theft.

Calculating the cost of insurance requires knowing all the variables involved, but to give you a sense of potential pricing, let’s look at an example. First, here are the most common variables that you’ll need to consider to better understand freight insurance pricing:

  • Value of goods
  • The insurance rate (provided by the insurer)
  • Freight (the shipping cost)

For example, let’s say that the commercial value of the goods is $5,000 and the insurance rate is 0.6%. Multiply these numbers and you’ll get $30. Let’s assume that the freight (which is the shipping cost) is $1,200. Add these numbers together and you get $6,230 ($5,000 + $30 + $1,200). This gives you the “total insured value,” which you multiply by 110 percent (the extra 10 percent goes to unexpected costs) — which gives you $6,853. Multiply that number by 0.06, which gives you $41.12, the cost of insurance.

This is just one example, and the cost will vary based on the factors above, but the important thing to remember is that the cost will vary based on the value of goods; potential risk, which affects the insurance rate; and the shipping costs. You can also elect to purchase insurance that does not include the shipping cost, and we’ll discuss this in greater depth shortly. But first, where should you purchase freight insurance?

Understanding Where to Purchase Freight Insurance

When shipping freight, some businesses use “freight forwarders” that offer insurance packages from an insurance broker. This is an easy method for securing insurance, since they can complete the transaction quickly. Also, when filing a claim, resolution may be more streamlined, since the freight forwarder has an established relationship with insurance brokers.

The second option is to work directly with a broker, which is a good option if you frequently ship high volumes and need a long-term solution for insurance. Gather pricing for both options to determine which is more cost-effective for your business.

Additional Cost Considerations

There are a few more factors that affect cost when determining pricing. For example, let’s say that you want to insure your goods. One option is that you can use the carrier’s insurance, which is very limited and may not cover you fully. A second option is that you insure the cost of goods only. If a loss occurs, you will be reimbursed for the cost of goods but not the freight charges you paid. And the last option is that you insure the cost of goods and the money you spent shipping them. Below we walk through each of these options:

Legal Liability

Legal liability coverage is what most carriers offer. With this option, the goods are automatically covered under the liability standard for the transportation industry. You don’t pay for this option, and the coverage is very limited. For example, domestic shipments may extend coverage equal to 50 cents per pound with a $100 minimum. This insurance is typically available if the carrier is found responsible for the event that damaged or lost the cargo.

Insurance of Cost of Goods Only

This type of insurance covers situations of a total or partial loss of the damaged items, and it pays the replacement value of the goods. For example, let’s say that the commercial invoice value is $10,000 and the insurance company charges 60 cents per $100 of insured value. The total cost for insurance would be $60. If a loss occurs, you would be covered for the cost of goods but not for any additional costs, such as freight.

Insurance of Goods and Shipping Charges

If you want the cost of shipping the goods to be covered, this option is your best choice. It will cover the cost of goods and the cost of shipping those goods. The calculation for this example was used above, and it is typically more expensive than the other two options.

Reading the Fine Print

Freight policies have limitations, and fully understanding those limitations before purchasing a policy helps protect you from unexpected losses. For example, some insurers may require that fragile goods — such as glass, marble or tiles — must be professionally packed in order to qualify for coverage. What’s more, you’ll need to keep receipts to prove that you complied with this rule in case loss or damage occurs.

Additionally, some items may not be insurable at all, depending on what type of products you ship, so keep this in mind. For example, cellphones or other specific items might not be insurable with some policies, so ask questions about the types of products you plan to ship.

Insurers also have rules about packing guidelines for cargo. For example, if the items arrive damaged, one of the first questions that may be asked is about the packing of the items. If cargo is damaged due to poor or improper packing, the cargo insurance is unlikely to pay a claim for these damages.

Weighing Cost with the Risk of Under- or Over-Insuring

Weighing the cost of insurance with potential loss is a difficult balance to strike. Consistently over-insuring items results in wasted resources. On the flip side, under-insuring can result in serious financial losses if an unexpected event occurs.

Find the right balance by studying your risk over time. As you ship more items and purchase insurance, you will start to see patterns. How many losses do you see annually? What’s more, how much are you paying annually for insurance? Does it make sense to pay extra premiums to cover shipping costs, or could you pay to insure the freight only and put the money saved in reserve to cover extra shipping in case a loss occurs? Weigh the potential risk with savings, and figure out the right strategy for your company.

Additionally, put together a process for keeping documents in the event of loss. For example, keep current paid premium bills that show you’re up-to-date on payment and copies of all insurance contracts. If you’re required to have fragile items professionally packed, keep receipts organized so you can quickly furnish those in the event of a loss. Also, read the fine print about how much time you have to file a claim. For example, if damage is noted on the bill of lading at the time of delivery, you might need to submit the claim within a specified number of days.

Moving Forward with Greater Safety

Protection from unexpected loss is an important safeguard for businesses. One important factor in calculating that risk isprice. How much will you pay for insurance, and what is the right amount of insurance for your company? Does coverage extend to all items in a shipment, and if so, what does that coverage include?

Answering these questions during the shopping phase is important in selecting the right option for your freight. Reading the fine print and understanding exclusions and how much a policy will pay will help ensure that you’re buying the right amount of coverage, neither too much nor too little. As a result, you’ll have greater peace of mind when shipping freight, and you can be certain that your goods are covered in the event of an unexpected loss.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract negotiation and invoice audit services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption to current operations. Our team of experts has over 200 combined years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent of their annual shipping spend.

FedEx Shipping Insurance: A Comprehensive Guide

By | FedEx, News, Shipping Knowledge

When serving customers, companies have many considerations, including shipping and its impact on the customer experience. And when evaluating shipping options, there are a number of variables, including cost, value, and dependability that must be taken into account. But companies also must plan for what happens when something goes wrong.

A customer calls and complains that a package didn’t arrive on time, or equally as serious, the package arrives broken or in poor condition. The first priority is finding a resolution for that customer, but what amount, if any, can you recover for the loss?

FedEx is a popular carrier choice, shipping 14 million packages to 220 countries and territories daily. The company offers insurance to handle these types of situations, but how much does it cover, and what is the cost? Understanding the pros and cons of FedEx shipping insurance can help you decide what role, if any, this option should play in your business operations.

What is FedEx Shipping Insurance?

FedEx offers insurance to help offset the cost if a package is lost, stolen, or damaged. The first $100 of insurance doesn’t cost anything, but if the value of the package is higher, you can purchase additional insurance to cover potential losses.

There is a small risk of package loss during transit, but damage is more common. One study found that up to 11 percent of packages are damaged during transit. Damage results by carrier vary, but the study found the following percentage of damaged packages by carrier:

  • UPS: 11 percent
  • USPS: 10 percent
  • FedEx:7 percent

FedEx had the smallest percentage of damage in this study, but in these events, shipping insurance helps offset the cost. Purchasing the right amount of insurance is key and involves stating a “declared value.”

Understanding FedEx Declared Value

Purchasing insurance requires you to tell the carrier the value of the shipped items. Upfront proof or receipts are not required at this stage; however, if you make a claim, these will be required to confirm the value of the package.

The first $100 of insurance is free for most services; however, you can purchase insurance for more than this value (more on this shortly).

Adding more insurance to a package can be accomplished online or in person.

Also note that with FedEx insurance, the carrier will not automatically replace the item if it’s broken and can be repaired. Additionally, FedEx has a maximum declared value, which varies based on the service you select.

How Much Does FedEx Insurance Cost?

The cost of insurance varies based on the type of service that you select and the items you plan to ship. Here are a few samples of what to expect:

FedEx SameDay & SameDay City:Maximum declared value is $2,000, and the additional cost for declared value is $3 for shipments up to $300. One dollar per $100 is charged for declared values over $300.

U.S. Express package service, U.S. Ground service, and International Ground services.The additional cost is $3 for shipments valued up to $300. After this amount, it’s $1 per $100 of declared value over $300.

Direct Signature Confirmation service is available at no cost if you state the value is in excess of $500. As a result, FedEx will require a signature from the package recipient when delivering the package. If nobody is available to receive the package, the carrier will attempt delivery again. Shippers sending multiple items should also carefully consider whether shipping multiple items together makes sense. Insurance covers the entire package, regardless of the value of each item shipped.

For example, let’s say that you plan to use FedEx SameDay City, which has a maximum declared value of $2,000. You are shipping two items, each worth $1,500. In this case, it might make sense to ship the items separately to ensure you achieve full coverage.

Understanding Insurance Limitations

When using any carrier, including FedEx, it’s a good idea to verify which items are not covered or have limitations on coverage. For example, the Declared Value and Limits of Liability sections of the FedEx Service Guide explain that items of extraordinary value and those items with a value that is difficult to ascertain may not be declared. According to the FedEx site, limitations include the following:

For Shipments containing the following items of extraordinary value the Declared Value for Carriage is also limited and depends on the contents and destination of the Shipment:

  • Artwork, including any work created or developed by the application of skill, taste or creative talent for sale, display or collection. This includes without limitation, items such as paintings, drawings, vases, tapestries, limited-edition prints, fine art, statues, sculptures, collector’s items, customized or personalized musical instruments or similar items.
  • Antiques or collectable items, or any commodity that exhibits the style or fashion of a past era and whose history, age or rarity contributes to its value. These items include but are not limited to, furniture, tableware, porcelains, ceramics and glassware. Collectable items may be contemporaneous or relating to a past era.
  • Film, photographic images, including photographic negatives, photographic chromes and photographic slides.
  • Any commodity that by its inherent nature is particularly susceptible to damage, or the market value of which is particularly variable or difficult to ascertain.
  • Jewelry, including but not limited to, costume jewelry, watches and their parts, mount gems or stones (precious or semiprecious, cut or uncut), industrial diamonds and jewelry made of precious metal.
  • Precious metals, including but not limited to, gold and silver, silver bullion or dust, precipitates or platinum (except as an integral part of electronic machinery).
  • Furs, including, but not limited to, fur clothing, fur-trimmed clothing and fur pelts.

FedEx might not exclude insurance on the above items outright, but may limit the amount you can declare. For example, FedEx permits a maximum declared value up to $1,000 for the following items:

  • Artwork
  • Photos
  • Glassware
  • Jewelry
  • Furs
  • Precious metals
  • Plasma screens
  • Antiques
  • Stocks, bonds, and cash equivalents
  • Collectibles, such as coins or stamps
  • Some musical instruments
  • Models, such as dollhouses

If you state a value that exceeds the amount allowed, you simply won’t be able to recover more than what is set forth in the FedEx rules and regulations.

How to Insure Your FedEx Package

Taking advantage of FedEx insurance is easy. When you drop off the package to be packed and shipped, simply fill out the value section of the shipping form. If the package includes items worth less than $100, don’t worry about purchasing additional insurance; coverage is already provided.

Additionally, you can pack your own item and have it picked up at your location, which is ideal for businesses shipping large numbers of packages. Ensure that you follow FedEx packing requirements, which is important if you file a damage claim. Packages that exceed $100 in value require a declared value. And all you need to do is state the value, knowing that you’ll need to have documentation if a claim is required.

Packing Details and Considerations

FedEx has guidelines about packing items, and if you file an insurance claim, these guidelines become important. In the case of damage, FedEx wants to make sure that the package was packed properly so they can determine who was at fault for the damage. If the package was not packed according to their guidelines, they may deny the claim. The carrier makes a few suggestions for packaging, including the following:

  • You may use your own packaging if the boxes are sturdy and undamaged with all flaps intact.
  • Chipboard boxes, including gift or shoe boxes, must be packed into a corrugated outer box.
  • If items are heavy, use double-wall boxes.
  • Place small packages inside a larger outer box.
  • All fragile items should be double-boxed with 3 inches of cushioning in and around the smaller box.
  • Wrap items individually with cushioning material and center them in boxes away from other items and not near the sides, corners, top or bottom of the box.
  • Bottles that contain liquids should be upright. The inner packaging should be able to contain any potential leaks.

Full guidelines can be reviewed here, which include guidelines for unique items, such as those with insurance limitations, including artwork, photos, and musical instruments.

Understanding the FedEx Claims Process

Purchasing insurance is a safeguard that most hope they won’t need. But if a customer’s package goes missing or arrives with damage, you’ll need to cash in on that insurance you purchased. But how? FedEx provides a few different methods for filing a claim, including online or by email or fax to the FedEx claims department. Filing a claim online allows you to get updates on your claim easily via email. Fax or mail must be used when filing an international claim.

After submitting your claim, contact FedEx customer service to get a case number so you can reference it if you need to check on the claim in the future. If you’re making a claim for damage, ensure that all packing materials, including the box and packing contents, are kept handy as FedEx might ask to inspect the items.

Additionally, keep your eye on the calendar. FedEx Express requires that damaged or lost package claims be made within 60 days after the shipment is sent. For international packages, claims must be made within 21 days. FedEx Ground claims have a nine-month window from the delivery date; however, if the item is lost or missing, it must be reportedwithin 60 days. If you make the claim outside the designated time frame, FedEx won’t investigate the claim.

After you make a claim, resolution is fairly quick and usually completed within a week. Once a claim is approved, reimbursement for the declared value is sent.

Shipping with Greater Confidence

Most companies ship a large number of packages each year, and the majority of those packages will arrive on time and without damage. But in a small number of cases, something goes wrong during the shipping process — a package gets damaged or appears to simply vanish, leaving the customer unhappy and looking for resolution.

Taking care of the customer is the first goal, but afterward, a company needs to recover their financial loss. FedEx insurance is one tool that can help minimize these losses. Understanding what this type of insurance coverage offers and developing internal policies for handling these situations will create smoother experiences and minimize potential loss.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract negotiation and invoice audit services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption to current operations. Our team of experts has over 200 combined years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent of their annual shipping spend.

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Getting Started With UPS Shipping Insurance

By | News, Shipping Knowledge, UPS

Shipping is a critical link to customer satisfaction. Once a customer purchases a product, they expect it to arrive on time and in good condition. And if a package goes missing or arrives damaged, the customer expects a fast resolution. The first step is calling the carrier and attempting to track down the package, but when that fails, making it right with the customer becomes the central focus, often leading to replacing the product and shipping it quickly.

After ensuring that the customer is happy, the company is left with the bill, and it’s at this point that shipping insurance comes into play.

The majority of carriers, including UPS, offer shipping insurance to bridge the gap when an unexpected event occurs. And with 5.1 billion packages circling the globe annually, shipping mishaps do occur, although they are rare. Understanding how to get started with UPS shipping insurance helps minimize loss and ensure that the process moves more smoothly. But what is UPS shipping insurance, and how does it work?

Shipping Insurance: Understanding the Basics

Shipping insurance is a service that offers financial reimbursement if a package is lost, stolen, or damaged during the transit process. Most carriers, including UPS, provide a basic level of insurance. However, if you’re shipping a high-value item, you may want to consider purchasing additional insurance.

UPS automatically covers most packages up to $100 for both domestic and international shipments. Additionally, UPS provides declared value coverage for an additional fee for packages that exceed this amount. There are limits on the amount of insurance that can be purchased, which is currently set at $50,000 per package or $100,000 per pallet.

Some types of domestic packages have higher limits, such as a maximum declared value of $70,000, depending on the contents of the package. There are also limitations on what qualifies for coverage, and we’ll discuss those shortly. The cost of the insurance has risen slightly each year, and current rates can be found on the UPS rate and service guide page.

Shipping insurance is a good option if you’re sending valuable goods or a one-of-a-kind item with UPS. Even if the cost of goods is minimal, the no-cost insurance that UPS provides can help with replacing the item in the event of loss.

Understanding Declared Value

When filling out a UPS shipping form, you’ll see a spot for the declared value of the item. Additionally, a UPS worker might ask you about the value of the item when you’re purchasing additional insurance for a package. So what is this referring to?

The declared value is the amount of money that you state the package is worth. This doesn’t take into account the packaging materials or the cost of shipping, but simply accounts for the value of the item. During the claims process, this is the amount that is considered when determining the payment for the claim. Supporting documentation may be required during the claims process, but when purchasing insurance, you simply need to state the value. According to UPS, the declared value is the lowest of the following amounts:

  • The cost of repairing or replacing the merchandise up to $100 if there is no value declared in excess of $100
  • The cost of repairing or replacing the merchandise up to the declared amount if the package had a declared value

The cost paid is the actual cost of the damaged or lost property, and the replacement cost includes the amount charged for repairing or replacing the item. Repair quotes are UPS’ responsibility; however, you may provide a third-party repair evaluation. If the third party says the item can’t be repaired, the actual or replacement value will be paid up to UPS’ maximum liability.

The Fine Print of Shipping Insurance

Shipping a product to the customer includes many expenses, including the employees’ time, the packing materials, and the cost of shipping. Additionally, there is the actual cost of the product. UPS only pays the actual cost of the product should an unexpected shiping event occur. The cost of these other items are not included.

That’s why it’s a good idea to read the fine print to fully understand what’s covered and what isn’t when purchasing shipping insurance. For example, if you have purchased additional insurance, you don’t want to later learn that an item is excluded when making a claim. A number of items are excluded from the company’s insurance, such as coins, cash, or precious stones. Other carriers, such as Federal Express and the United States Postal Service, have similar exclusions.

UPS has other limitations based on the type of commodity that is shipped, which are outlined in the “liability limits” section of the UPS/Tariff Terms and Conditions. According to UPS’ website, common items and applicable restrictions include the following:

Checks: If a package containing a check is lost or damaged, UPS will not pay for the face value of the check. UPS’ liability for a package containing a check or checks is limited to the cost of stopping payment on and reissuing the check(s), not to exceed US$100 per package.

Phone Cards, Tickets, Gift Cards and Similar Cards: UPS’ liability for a package containing a phone card, ticket (such as an event or airplane ticket), gift certificate, gift card, coupon or other similar printed matter with an exchange value is limited to the cost of replacing the physical card(s), certificate(s) or printed matter, not to exceed US$100 per package. As with checks, UPS is not liable for the face value of any phone card, gift certificate, gift card, coupon or similar printed matter.

Media: UPS’ liability for loss or damage to a package containing documents, film, photographs (including negatives), slides, transparencies, videotapes, compact discs, laser discs, computer tapes and media of a similar nature is limited to the replacement cost of the media on which the content is recorded.

Pairs, Parts: In the event of loss or damage to a pair or set of articles, UPS’ liability is limited to the value of that part of the pair or set that is lost or damaged, and UPS shall not be liable for the value of the whole pair or set. In the event of loss or damage to any part of the property (including any part of a machine) that, when complete for sale or use, consists of several parts, UPS shall be liable only for the value of the part lost or damaged, not to exceed the declared value of the part lost or damaged. In no event shall UPS be liable for the value of the complete item.

Insurance limitations may also apply to the shipping location. Check with UPS to ensure that if you purchase additional shipping insurance, the area where you are  shipping to is covered, especially when shipping items internationally.

Packing Rules and Restrictions

One more thing to consider is insurance packaging. For example, let’s say that an employee improperly packages an item. When the item arrives at the customer’s address, it’s damaged. You replace the item and then open a claim with UPS. The carrier will likely request to see the shipping packaging, and upon review, may determine that you did not follow their requirements for packing the item, and are therefore not protected under the insurance program.

UPS uses a third-party vendor to manage this process for insurance claims that exceed $100, and the vendor adheres to the small package carrier standards, known as the ISTA 3-A packaging guidelines, to analyze the integrity of the packaging job.

For example, one requirement is that you “always use new or like-new packaging.” That means that if a low-quality box is used, damages might be excluded and not covered in the event of damage during transit.

What to Expect When Filing a Claim With UPS

A customer calls your business, angry because a package is late or has never arrived. A quick investigation with UPS determines that the package cannot be located. This is a rare event, but one that requires quick action. A replacement product is sent to the customer with an apology to ensure that they aren’t dissatisfied. But at this point, you’re left dealing with recovering the loss.

As soon as you suspect a package is lost or stolen, file a claim with UPS right away. UPS gives shippers up to nine months to file a claim; however, filing a claim quickly will ensure that you have all the documentation the carrier might request. For example, supporting documentation may be required, such as photos of the item, or information about the value and packing material in the case of damaged products.

The first step that occurs when filing a claim is the search for the package. If the package is not located, UPS sends a letter that authorizes the claim. At this point, documents are sent to the third-party company UPS uses to process claims. Once the carrier has the documentation, the process unfolds quickly. On average, UPS says the process is typically completed within five to 10 business days. For domestic shipments, claims must be filed within nine months after the delivery date of the package, and for international shipments, claims must be filed within 60 days.

It’s also important to note that replacement of a product may not be provided when an item can be repaired. For example, let’s say that you’re shipping a computer. The computer arrives damaged and not working, but upon further examination, it’s determined that the video card is broken. In this situation, the carrier wouldn’t pay to replace the entire computer, but instead to replace and repair the video card.

Shipping with Greater Peace of Mind

Although billions of packages are circling the globe each year, your chances of losing a package with UPS are rare. But when it does occur, the process is frustrating. First, the company must deal with the frustrated customer, making things right on their end. Then they must invest time in recovering what they can of the loss. It’s not an ideal situation, but by planning for a small number of packages to have this problem, processing the issues will be easier, and having the right insurance in place is key.  

Setting internal policies for handling lost packages is critical to making the process smoother. If a customer calls and says a package is lost, missing, or damaged, what will your company do? Making sure that everyone is following the same policy will streamline the process and mitigate the risk for additional customer aggravation.

Taking into account the value of the item that you’re shipping and UPS’ insurance maximums will help create better decisions and policies. Additionally, when you understand the fine print of UPS insurance coverage, such as the exclusion of coins and other items, you’ll know what to expect in these situations.

Many different factors play a role when you decide to purchase shipping insurance, but by keeping all these details in mind, you can mitigate risk and ensure that your item arrives at its destination with greater security.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract negotiation and invoice audit services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption to current operations. Our team of experts has over 200 combined years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent of their annual shipping spend.

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USPS Shipping Insurance: What Shippers Need to Know

By | News, Shipping Knowledge, USPS

There are many questions that come up when deciding which carrier to use for your company’s shipping needs. Which is the most cost-effective? How quickly will the customer receive their package? And how dependable is the carrier? USPS is a popular option, with the carrier shipping 5.7 billion packages in 2017. The carrier has also become a popular option for other leading carriers, such as FedEx and UPS, to handle their “last leg” of delivery with greater efficiency.

One important consideration when shipping, however, is insurance. Should you purchase insurance, and if so, how much will it cost? Most packages that ship will arrive at their destination as expected, but when a package doesn’t arrive or arrives damaged, it’s helpful to have insurance in place. Here is a guide to understanding USPS shipping insurance, what you need to know, and what to expect if a package goes missing.

Why Purchase Shipping Insurance?

Shipping mishaps occur, even with the best carriers. According to one study, up to 11 percent of major-carrier packages are damaged in transit, with USPS having a damage rate of 10 percent.

Shipping is a key component of the customer experience, and if something goes awry, such as a missing package or damaged item, the first priority is always to take care of the customer. Doing this well positively affects reputation, ratings, and repeat orders. But after the dust settles, it’s critical to recover some of those costs. Shipping insurance is a tool that helps you accomplish this task.

Every carrier has a set of rules, processes and procedures, and by understanding those factors before purchasing insurance, you can better plan for these situations. A good starting point is understanding what type of insurance comes with your package and what you may need to pay extra for when shipping.

Understanding Shipping Insurance

USPS allows you to purchase shipping insurance up to $5,000 to protect against potential loss. The fee for purchasing insurance varies, based on the declared value of the package (more on this shortly). Some USPS services already have insurance included in the product pricing, so you don’t need to pay extra.

For example, USPS Priority Mail Express offers up to $100 of insurance, and priority mail shipments include up to $50. If the value exceeds this amount, you may want to purchase additional insurance. An insurance comparison guide is available at USPS’s site to help guide that decision.

Insurance is also available on some items sent internationally. For example, Global Express Guaranteed Insurance automatically covers up to $100 in loss or damage. If the value of the package exceeds this amount, USPS will allow you to purchase up to $2,499 in additional insurance.

The carrier also offers Priority Express International insurance, which includes up to $200 for merchandise at no cost for lost, damaged, or missing contents. Additional coverage may be available, but there may be restrictions for some countries.

When purchasing insurance, there are a few additional safeguards available that provide added protection, such as the following:

  • Signature confirmation. Adding signature confirmation allows you to track when an item was delivered and when an attempt was made to deliver it. This delivery method is available via USPS electronically or by email upon request.
  • Collect on delivery. COD allows customers to pay for the package upon receiving it. You also get insurance coverage up to $1,000 with this option based on the amount collected or the selected insurance coverage (whichever is higher).
  • Return receipt. This option allows you to get an electronic or hardcopy delivery record that shows the recipient’s signature.

Some USPS services do not offer insurance in the label price, including first-class mail, media mail, and parcel select. Additionally, when using a service that does include insurance, there are some limitations on what is covered.

Pricing for USPS Insurance

Pricing is an important consideration for purchasing insurance. The fee to purchase additional insurance is minimal; however, it’s important to consider the risks and costs when shipping large volumes of packages.

Pricing is based on the “declared value” of the package. This is basically what you state the contents are worth; if you need to file a claim, USPS will require proof of that value. Here is a quick summary of what to expect for pricing based on the stated value of the package. The pricing below is for service options that don’t offer no-cost insurance, so you’re footing the entire bill.

  • Value up to $50 is $1.65
  • $50.01 to $100 is $2.05
  • $100.01 to $200 is $2.45
  • $200.01 to $300 is $4.60
  • The price per additional $100 of insurance, valued over $300 up to $5,000, is $4.60 plus $0.90 per each $100 or fraction thereof

Some of USPS’s services, such as Express Mail, include the first $100 of coverage at no cost. Pricing for additional insurance includes the following:

  • The first $100 of value is included
  • Value over $100 up to $200 is $0.75
  • $200.01 to $500 is $2.10
  • $500.01 to $5,000 is $2.10 plus $1.35 per each $100 or fraction thereof

Purchasing insurance is a step in the right direction to protect your company from loss, and in most cases, you won’t need to use it. But in the rare case that you do need to use the insurance, it’s important to know what to expect and what documentation is required.

Filing a Claim With USPS

Filing a claim with USPS is easy and can be accomplished online. The online claim process allows you to upload files with any supporting documentation and includes the following steps:

  1. Visit the USPS website. Once there, sign into the online claims site using your USPS username and password. If you don’t have an account, you can create it online.
  2. Enter details about the package. The site will request details, such as the tracking label, number, shipping date, address information, and other claim details.
  3. Select the reason for filing a claim. For example, is the package missing or stolen, or are the contents of the package missing upon arrival? Clarify what happened to the package and the reason for the claim.
  4. Upload a proof of value. When you purchase insurance, you declare the value, but when you file a claim, you’ll need to show proof, such as a relevant receipt or invoice.
  5. Upload evidence of insurance. Make sure to keep your receipt that shows the purchase of insurance, because you may be required to upload the purchase evidence. It’s also important to note that USPS does not keep a record of who purchases insurance, so they have no way to look this information up.

Additionally, if the item was damaged, it’s important to keep the damaged item, packaging and any other package contents until the claim is resolved. USPS says the following:

“If a claim is filed because some or all of the contents are missing or damaged, the addressees must retain the mailing container, including any damaged articles, all packaging and any contents receipted. Upon written request by the USPS, the addressee must make this proof available to the local post office for inspection, retention and disposition in accordance with the claims decision. Failure to do so will result in denial of the claim.”

Once a decision is made on the claim, getting payment is quick. Typically, payment is sent within seven to 10 business days from a claim decision.

Additional Considerations

On a package basis, the cost of insurance is minimal, but when you’re a company sending a large volume of packages, the costs add up fast. As a result, it’s important to know any special considerations for insurance so you can prepare for those ahead of time. Here are a few factors to consider when deciding if purchasing extra insurance is right for your situation.

The payout may be subject to depreciation. USPS will only pay out on the depreciated value of the item. “If your lost or damaged items were purchased used, or you no longer have the purchase receipt, your claim may be denied.”

Photos of damaged items may be required. If the item was damaged, photos may be required during the claims process. Ask the customer to take photos of the item right away to ensure that you can recover from the loss.

Packing items are important. As highlighted before, packing matters. If USPS determines the item was improperly packed and that contributed to the damage, this may affect payment of the claim. Ask the customer to keep packing materials and take photos until the claim is resolved.

Claims should be made quickly. Unlike UPS, which gives you nine months to make a claim, USPS gives you 60 days. Additionally, you can’t file sooner than a predetermined number of days. For example, for Priority Mail Express, you can’t file sooner than seven days after the item is lost, damaged or stolen. If the customer has a problem, start collecting the required information and documents immediately and file once the claim period opens.

Fragile items may be excluded. According to USPS DMM 609, “Filing Indemnity Claims for Loss or Damage,” USPS is exempt from paying insurance claims if the “fragile nature of the article prevented its safe carriage into the mail, regardless of packaging.” If you’re shipping fragile items, check if they are excluded from coverage.

Once a customer signs for a package, they have officially accepted it as being in satisfactory condition. If the package requires a signature, ask the customer to inspect it carefully for damage before signing. Once the customer has signed for the package, it makes recovery more difficult because the customer is essentially accepting the package in its current condition.

Keep the original insurance slip. USPS doesn’t keep computer records of post-office-purchased insurance, so if the slip is lost, it’s challenging to prove that coverage was purchased.

Shipping multiple items is efficient, but this has implications. A customer might purchase several items from your company, and to maximize efficiency, you might ship those items together. But keep in mind that if you’re getting $100 in coverage, it will include the entire package, so the insurance may not go as far. You may want to purchase additional insurance or break up shipments for insurance purposes.

Moving Forward with Greater Security

The most important consideration in any transaction is the customer experience. How can you keep the customer happy? If an item is lost or stolen, you might have a basic process for getting that item replaced, but on the back end, you must recover a portion of those expenses.

Insurance is a valuable tool for filling the gap. And in many situations, the no-cost USPS insurance is enough to offset any potential losses. But it’s important to have a process in place to handle any issues that come up. For example, do team members know what to request from customers so you have everything that is required to file a claim?

Establishing policies helps create consistency, not only in the customer experience, but also when gathering the proper documentation to ensure maximum recovery. As a result, you’ll leave the customer happy, while ensuring that your company continues to thrive and minimize loss in the future.

About Shipware

Shipware delivers volume parcel and less-than-truckload shippers intelligent and innovative distribution solutions and strategies. Whether you ship with FedEx, UPS, USPS or regional carriers, our contract negotiation and invoice audit services are guaranteed to reduce your parcel and LTL shipping costs by 10 to 30 percent, with no disruption to current operations. Our team of experts has over 200 combined years of carrier pricing experience. We have negotiated thousands of FedEx, UPS and LTL contracts – saving our clients an average of 19 percent of their annual shipping spend.

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