FedEx Peak Surcharges – 2022 Holiday Season

What are FedEx peak surcharges?

Peak sur­charges are addi­tion­al fees added to the cost of ship­ping a pack­age applied at par­tic­u­lar times of the year, most com­mon­ly dur­ing the hol­i­day sea­son when the vol­ume of pack­ages shipped goes up sig­nif­i­cant­ly.  These sur­charges are designed to cov­er the high­er costs of sea­son­al labor, over­time, and oth­er expen­di­tures asso­ci­at­ed with a spike in vol­ume.  In prac­tice, these fees may exceed the increase in costs.

FedEx 2022 Holiday Season Peak Surcharge Dates

On August 5, 2022, FedEx announced their peak sur­charges for the com­ing hol­i­day sea­son, set to apply from Sep­tem­ber 5, 2022, through Jan­u­ary 15, 2023. The 2022 start date was one month ear­li­er than in 2021.

What are the FedEx Peak Surcharges for 2022?

FedEx has 5 peak sur­charges for 2022:

• Addi­tion­al Han­dling Surcharge
• Over­size Charge
• Ground Unau­tho­rized Pack­age Charge
• Ground Econ­o­my Peak sur­charge – applies to all ground econ­o­my shipments
• Res­i­den­tial deliv­ery charge

FedEx 2022 Peak Surcharge Calendar

The FedEx prac­tice of vary­ing their sur­charges based on the date, with the empha­sis on the weeks before Christ­mas, makes it hard to under­stand which peak sur­charges apply at a giv­en time.  The table below breaks them down by date, so you can see all the sur­charges as they apply on any par­tic­u­lar date:

Peak — Residential Delivery Charge

While oth­er charges are rel­a­tive­ly straight­for­ward to deter­mine, the res­i­den­tial sur­charge is noto­ri­ous­ly com­pli­cat­ed.  It is also the only sur­charge not equal­ly applied to all cus­tomers, and the amount dif­fers week­ly based on the num­ber of pack­ages shipped.

The FedEx peak deliv­ery charge has two criteria:

• Vol­ume – to trig­ger the sur­charge for an upcom­ing week, the com­pa­ny must ship over 20,000 pack­ages in a week using either res­i­den­tial or ground econ­o­my services
• Growth – to be hit with the peak res­i­den­tial sur­charge, pack­age vol­ume must have increased by at least 5% against his­tor­i­cal vol­ume. This amount of the sur­charge is based on how much growth a com­pa­ny has had

The table below shows how the sur­charge is tied to the growth of the vol­ume of the res­i­den­tial and ground economy:

Three dif­fer­ent date ranges are used to cal­cu­late these surcharges:

• His­tor­i­cal bench­mark – The peri­od out­side the peak sea­son that FedEx uses as a com­par­i­son. For 2022, FedEx is using the aver­age week­ly pack­age count from June 6, 2022, to July 3, 2022.
• Cal­cu­la­tion week – FedEx starts cal­cu­lat­ing “cur­rent vol­ume” a few weeks before the Octo­ber 31 intro­duc­tion of the peak res­i­den­tial sur­charge. The first week this is done is the week begin­ning Octo­ber 10, 2022.
• Appli­ca­tion Week — This is the week that FedEx applies the sur­charge and is three weeks after the cal­cu­la­tion week. The sur­charge amount is deter­mined and then applied based on the growth that occurred between the his­tor­i­cal bench­mark and the cal­cu­la­tion week.

Peak — Residential Delivery Charge Example

Con­sid­er the fol­low­ing case:

• A com­pa­ny ships an aver­age of 30,000 res­i­den­tial and home deliv­ery pack­ages dur­ing the his­tor­i­cal bench­mark peri­od (6/6/2022–7/3/2022).
• Dur­ing the cal­cu­la­tion week of 10/10/2022–10/16/2022, they ship 50,000 of these packages.
• The increase from 30,000 to 50,000 pack­ages is a 166% increase.
• There­fore, dur­ing the appli­ca­tion week of 10/31/2022–11/6/2022, the peak res­i­den­tial sur­charge will be $2.00 for FedEx Ground ship­ments and $3.00 for FedEx Express shipments.

Why does FedEx have these particular peak surcharges?

As not­ed above, at cer­tain times (most com­mon­ly dur­ing the hol­i­days) the car­ries see a spike in vol­ume which they need to ser­vice.  FedEx focus­es sur­charges are areas that make han­dling the increased vol­ume more difficult.

Three peak sur­charges (addi­tion­al han­dling, over­sized and ground unau­tho­rized) are tied to large pack­ages that require man­u­al han­dling and reduce effi­cien­cies in the net­work.  Ground Econ­o­my is FedEx’s low­est-cost ground option, and the com­pa­ny wants to ensure their strained capac­i­ty is not being uti­lized for the low­est-cost ship­ments with­out a pre­mi­um being paid in the form of a sur­charge.  The res­i­den­tial charge like­ly reflects the increase in res­i­den­tial ship­ments, which take more time and are there­fore more expen­sive to deliv­er than com­mer­cial ones.

In 2022, FedEx began their hol­i­day sur­charges a month ear­li­er than in 2021.This may be to com­pen­sate for increased costs tied to the vol­ume that comes before the hol­i­day sea­son. Com­pa­nies such as those who man­u­fac­ture prod­ucts need to have their prod­ucts shipped to dis­trib­u­tors and retail­ers in time for the retail­ers to sell them to con­sumers, which requires ear­li­er ship­ping.  A sim­pler expla­na­tion from an indus­try insid­er, ref­er­enced in a recent arti­cle on the top­ic here, is that the rev­enue from peak sur­charges has played an increas­ing role in com­pa­ny per­for­mance.  It seems rea­son­able that the car­ri­ers are look­ing to find any avenue to increase rev­enues and prof­its, and cus­tomers seem to have (begrudg­ing­ly) accept­ed peak sea­son surcharges.

Who is impacted by FedEx Peak Surcharges?

Peak sur­charges impact three areas:

• Large and heavy pack­ages – Addi­tion­al Han­dling, Over­size, and Ground Unau­tho­rized sur­charges all focus on large and heavy packages.
• Ground Econ­o­my Ship­pers – The ground econ­o­my peak sur­charge is applied exclu­sive­ly to the ground econ­o­my service.
• Large res­i­den­tial and ground econ­o­my ship­pers – The res­i­den­tial peak sur­charge applies to com­pa­nies ship­ping large quan­ti­ties of res­i­den­tial and ground ship­ments (20,000 per week) whose vol­ume has increased.

Some indus­tries that may be impacted:

• Large and heavy pack­ages – Fur­ni­ture, home goods, auto­mo­tive and indus­tri­al parts companies.
• Ground econ­o­my ship­pers – Com­pa­nies using ground econ­o­my (gen­er­al­ly low cost, light ship­ments) such as appar­el, eCom­merce, etc.
• Peak Res­i­den­tial Sur­charge – Large retail, eCom­merce, and direct-to-con­sumer com­pa­nies. Appar­el, skin care, sub­scrip­tion-box com­pa­nies, etc.

Negotiating Discounts

Com­pa­nies can nego­ti­ate peak sur­charge dis­counts.  Note that the dis­counts on stan­dard sur­charges are not applied to peak sur­charges, so even if you have an addi­tion­al han­dling sur­charge dis­count, you will need to nego­ti­ate a sep­a­rate dis­count for peak addi­tion­al handling.

Conclusion

Peak sur­charges have con­sti­tut­ed an increas­ing com­po­nent of the carrier’s rev­enue, and FedEx has expand­ed its appli­ca­tion this year by extend­ing the dates they apply.  Under­stand­ing whether your ship­ments are like­ly to be impact­ed by peak sur­charges and deter­min­ing the scale of the impact is impor­tant for ensur­ing that your sales remain prof­itable dur­ing the hol­i­day season.