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.
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.
FedEx has 5 peak surcharges for 2022:
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:
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:
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:
Consider the following case:
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.
Peak surcharges impact three areas:
Some industries that may be impacted:
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.
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.
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