This article has been updated to reflect the 2018 shipping rate changes.
General rate hikes now in effect from UPS & FedEx
UPS & FedEx rate changes are typically very similar: the increases to their rates and surcharges are nearly identical and are typically made live within days of each other (Dec 24, 2017 and January 1, 2018 respectively). The USPS annual rate change is unique and is usually initiated later, this year taking place on January 21, 2018.
We’ve summarized all of the major changes in a recent article to help you navigate them easily. In this article, we will talk more specifically about UPS and FedEx, dimensional weight (DIM weight), surcharges, and more.
Residential Surcharges went up
The infamous residential surcharge, a fee which UPS & FedEx add to their shipping services when a shipment’s final destination is a residential address – this is in addition to any postage and surcharges you’re already paying. If you’re an e-commerce seller, it’s likely that nearly all of your orders will be delivered to residential addresses, meaning that if you’re shipping these orders with UPS or FedEx, the shipment will include this surcharge.
The “last mile” a package has to travel is actually a huge deal in the shipping industry, and gives delivery companies like UPS and FedEx a massive headache because making it into every neighborhood requires more trucks. To make sure they aren’t constantly losing money on every shipment due to last mile delivery, they add a surcharge to every shipment that goes to a residential address.
Both UPS & FedEx will increase their rates on various charges, including the residential surcharge. The rate for residential surcharge is increasing by $0.15 for UPS residential air and $0.20 for UPS residential ground. The FedEx residential surcharge will increase $0.20. This brings the UPS Ground Residential Surcharge to $3.60 and FedEx Ground Residential Surcharge to $3.60.
It’s worth noting that USPS can avoid adding a residential fee because their postal workers visit practically every residence in the US on a daily basis anyway to deliver the mail. Adding an e-commerce package or two to their delivery load isn’t a huge burden, therefore they are able to completely eliminate the need for a residential surcharge fee.
Changes to dimensional weight from FedEx & UPS
Dimensional weight can be confusing and generally means you’re paying more for postage than you expected. For these reasons, it’s understandable that e-commerce sellers don’t want to deal with it. If you’re not familiar with how dimensional weight works, once your box gets over 1 cubic foot (length x width x height = over 1728), you’re essentially charged for the size of the box regardless of the weight. This means that you pay a higher rate than if you were allowed to calculate the cost by the actual weight of the contents alone. Confusing, huh? For example, a 10” x 10” x 10” box has a minimum dimensional weight of 8 lbs, and even if your shipment is 3 lbs, you’ll be charged a 8 lb rate based on the package size.
FedEx Ground will be maintaining their formula for calculating dimensional weight from 2017. The divisor for this calculation is 139. This applies to domestic shipments as well as as international shipments. Referring back to our 10”x10”x10” box example, you can see how we get a dimensional weight of 8 lbs (10x10x10 = 1000, 1000/139 = 7.19, rounded up to 8).
UPS also maintained their formula for dimensional weight, and it’s the same as FedEx. Domestic services packages that are greater than 1,728 cubic inches will use a 139 divisor across the board, including UPS Standard from Canada import shipments.
Dimensional weight emphasizes why it is important to package your products properly. Added size and filling could end up costing you much more than you may have anticipated if you’re estimating your costs based on weight.
Another year, another set of rate increases. The increase to the cost of residential delivery will potentially mean major shipping cost increases for e-commerce sellers. In turn, this may affect USPS package shipping efforts that don’t yet consider Dimensional Weight in their Priority Mail service. For now, it’s good to know your options. If all of your shipments require residential delivery, it could be worth looking into one that doesn’t charge more for it. Oh, and if you can fit your lighter products in smaller boxes, it could be worth the packaging change.