UPS is hitting cargo owners with multiple surcharges in the run-up to the peak season – with the biggest hit on imports from China and its territories. Starting on 15 September, the integrator is to impose a ‘surge fee’ on US imports arriving by air from China and 12 Australasian countries or territories.
Key points
- UPS will introduce a surge fee on US imports from China and 12 Australasian countries starting 15 September.
- The fee for parcels from China, Hong Kong, and Macau will be 50 cents per pound, while for other countries, it will be 25 cents per pound.
- Fuel surcharges also rise significantly, impacting overall shipping costs.
- Observers suggest the surcharges target volumes from e-commerce giants like Temu and Shein.
UPS Imposes Surge Fee
Starting 15 September, UPS will introduce a new ‘surge fee’ on US imports coming from China and 12 other Australasian nations. For parcels originating from China, Hong Kong, and Macau, this fee will be 50 cents per pound, while parcels from the remaining countries will face a 25 cents per pound charge. The surcharge is based on billable weight, which allows UPS to choose between dimensional or physical weight, depending on which is greater. John Haber, chief strategy officer of Transportation Insights, noted that the new surcharge does not have a specified end date and will apply to all types of services.
Revenue Implications for UPS
The increased charge on parcels from China and its related territories is likely to generate substantial revenue for UPS. In the second quarter alone, UPS saw a 20.6% year-on-year increase in volumes from China to the US. Observers quickly identified that these additional charges are primarily aimed at huge volumes from Chinese e-commerce giants Temu and Shein. Despite their significant volumes, the yield on these de minimis shipments has been quite low. By adding 50 cents per pound, UPS aims to address these yield issues.
Further Surcharges and Impact on Shippers
In addition to the surge fee, UPS is also attempting to boost its income via fuel surcharges. Effective from 19 August, these surcharges have already seen increases. For domestic ground service, the surcharge rose from 16% to 16.75% within a week. Similarly, fuel surcharges for air shipments climbed from 15.75% to 16.75% on 26 August, while international air exports and imports saw increases to 20.75% and 24.5%, respectively. UPS has also expanded its fuel surcharge to cover more products, including various ‘value-added services’. A notable change is the $20 fuel surcharge for address corrections, even though 90% of these adjustments are made before package delivery.
John Haber estimates that these combined charges could significantly impact shippers, with some large shippers potentially seeing an additional $100,000 added to their annual shipping bills solely from fuel surcharges.
Future Prospects and Alternatives
According to John Haber, FedEx is likely to match UPS’s new charges, as the two companies usually align their pricing strategies. While FedEx has not announced a surge fee yet, it has implemented an ‘import demand surcharge’ of 25 cents per pound on shipments to the US from China, Hong Kong, and the Philippines. Haber believes that additional countries may be added to the ‘surge fee’ list, and that UPS might further adjust fuel surcharges throughout the year. Shippers will need to diligently scrutinize their transport invoices to manage costs effectively and may explore less expensive alternatives as they navigate these rising surcharges.
“They’re rolling the dice,” Haber commented regarding UPS management’s strategy. “Will they lose some volume? Yes,” he added. UPS’s aggressive surcharge strategy appears to be a calculated risk aimed at increasing its revenue amid growing operational challenges.