
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:
Start Date | End Date | Peak surcharge | ||||
Additional Handing | Oversize Charge | Ground Unauthorized Package Charge | Ground Economy Peak Surcharge | Residential Delivery Charge | ||
9/5/2022 | 10/2/2022 | $3.45 | $39.50 | 0 | 0 | 0 |
10/3/2022 | 10/30/2022 | $6.55 | $68.75 | $385 | 0 | 0 |
10/31/2022 | 11/27/2022 | $6.55 | $68.75 | $385 | $1.50 | Based on volume |
11/28/2022 | 12/11/2022 | $6.55 | $68.75 | $385 | $2.50 | Based on volume |
12/12/2022 | 1/15/2022 | $6.55 | $68.75 | $385 | $1.50 | Based on volume |
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:
Peak — Residential Delivery Charge per Package by Peaking Factor | ||||||
Service | >105%–125% | >125%–150% | >150%–200% | >200%–300% | >300%–400% | >400% |
FedEx Ground | $1.25 | $1.75 | $2.00 | $2.50 | $4.25 | $6.00 |
FedEx Express | $2.25 | $2.75 | $3.00 | $3.50 | $5.25 | $7.00 |
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.