FedEx Announces 2016 General Rate Increase & Other Changes: Shipware Analysis

By September 17, 2015 News
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FedEx Express, FedEx Ground and FedEx Freight, subsidiaries of FedEx Corp. (NYSE: FDX), will increase shipping rates effective January 4, 2016 as follows:

  • FedEx Express will increase shipping rates by an average of 4.9% for U.S. domestic, U.S. export and U.S. import services.
  • FedEx Ground and FedEx Home Delivery will increase shipping rates by an average of 4.9%. FedEx SmartPost rates will also change.
  • FedEx Freight will increase shipping rates by an average of 4.9%. This rate change applies to eligible FedEx Freight shipments within the U.S. (including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands), between the contiguous U.S. and Canada, within Canada, between the contiguous U.S. and Mexico, and within Mexico.

Average increases can be misleading. Actual 2016 rate increases for most Express products exceed 4.9%.

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Similarly, taking an “average” increase for Ground products is misleading as rates for lightweight Ground packages will increase much more significantly than heavier packages.

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The majority of FedEx Ground packages weigh less than 20 pounds, and those packages will incur significantly higher increases than the stated average of 4.9%.

That said, the 2016 Ground increase takes a slightly more even approach to increases at all weights. In 2015, the Ground increases were significantly more pronounced at the lighter weights.

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The 2016 Ground minimum charge is $6.94, a 5% increase. The following table demonstrates the 11-year history of the minimum charge, both stated as well as actual increase, which has had an 82.6% cumulative increase during the period.

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FedEx surcharges and other special handling fees are also increasing in 2016. Some fees like Additional Handling Service, Ground Weekly Pickup Fee, and Indirect Signature will experience double digit increases.

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FedEx is also increasing surcharges for shipments that exceed the published maximum dimensions (“unauthorized packages”) in the FedEx Ground network and updating certain fuel surcharge tables at FedEx Express and FedEx Ground effective November 2, 2015. The charge for unauthorized packages will increase from $57.50 per package to $110 per package. These packages are unauthorized, may be refused or returned to the shipper and will be delivered at the option of FedEx Ground. The charge is assessed for the following conditions:

  • Any package measuring more than 108 inches in length. 
  • Any package measuring more than 165 inches in length and girth combined.
  • Any package weighing more than 150 lbs.

Let me clarify the distinction between “oversize” and “unauthorized” packages. The oversize fee is changing from $57.50 to $67.50 effective January 4, 2016. The unauthorized package fee is a new fee effective November 2, 2015 and refers to packages that exceed the maximum limits.

Oversize = Packages that weigh 150 lbs. or less and exceed 108 inches in length or 130 inches in length and girth are considered “oversize” packages. Oversize packages are rated based on the greater of the package’s actual rounded weight or dimensional weight. In addition, a charge of $67.50 per oversize package applies.

Unauthorized = The maximum limits for FedEx Ground U.S. packages are 150 lbs., and 119 inches in length and 165 inches in length and girth. We may refuse packages that exceed 119 inches in length or 165 inches in length and girth, or if we find them in our network, we may consider them for shipping at our sole discretion. These packages also are rated based on the greater of the package’s actual rounded weight or dimensional weight, and a $110 charge per unauthorized package applies.

Further details of these changes will be available on fedex.com by September 23, 2015. FedEx has said the changes related to fuel and unauthorized surcharges are in response to changing industry demand dynamics, including increases in average package size and weight and increased residential deliveries.

It will be interesting to see what FedEx is planning in terms of fuel surcharge changes. In February 2015, FedEx changed its fuel surcharge tables resulting in as high as 4% increases. Still, today FedEx holds an advantage over rival UPS.

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FedEx SmartPost rates for 2016 have not yet been published. FedEx International and FedEx Freight increases will be analyzed in a separate article.

Preview of FedEx 2016 Express/Ground pricing is available at:

http://images.fedex.com/us/services/pdf/FedEx_StandardListRates_2016.pdf

Preview of FedEx 2016 surcharges and fees is available at:

http://www.fedex.com/us/2016rates/surcharges-and-fees.html

Shippers that need help understanding the impact of these rate increases for budgeting or other purposes are invited to contact me at rob@shipware.com. Shipware can perform a custom impact analysis of the 2016 pricing using your actual shipping data for a “to-the-penny” assessment.

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