18 Dec UPS Announces 2019 GRI With Short Notice
Finally—UPS Announces Its Rate Increases
With 2019 upon us, UPS has announced its GRI for the New Year, leaving shippers with little time to plan. In fact, the increases will hit before 2019 even starts. Effective December 26, 2018, UPS will increase rates an average of 4.9%. The announcement has been expected for some time, with the USPS and FedEx making their announcements weeks ago. The company did not offer an explanation for this year’s late timing.
This rate increase has increased the rate gap between carriers, as FedEx now as a better cost advantage on many accessorials and surcharges, as well as when comparing the carriers’ postal solutions. As always, the overall increase is meaningless to shippers as each individual service is impacted differently. The following chart details the increase by service level for packages up to 99 lb.
The following is what UPS released regarding the increases: Effective December 26, 2018, the published rates for our services will increase. This supports ongoing expansion and capability enhancements as we strive to maintain the high service levels you expect from UPS. Below is an overview of our 2019 Rates.
The following changes will be effective December 26, 2018:
- The rates for UPS® Ground, UPS Air and International services will increase an average net 4.9%.
- Fuel surcharges will apply to Additional Handling, Over Maximum Limits, Signature Required and Adult Signature Required accessorials.
- A processing fee will be charged when Package Level Detail (PLD) is not provided to UPS prior to delivery.
- The rates for certain value-added services and other charges will increase.
The following is additional information that was included in the GRI limited release:
- Domestic services are increasing at a higher percentage, at higher weights, compared to past GRIs
- SurePost and related Accessorials are among the largest increases
- Residential Surcharges are increasing by almost 10%
- Additional Handling and Large Package Surcharges are increasing almost 19%
- OverMax Surcharge is increasing 31%
- 3rd Party Billing Surcharge is increasing 4.5%
- Declared Value increases $0.15 per $100, with the Declared Value Minimum increasing 16.7%
- Domestic Air FSC index will change on Dec 26th
UPS did not release a full-service guide with the GRI announcement. Similar to the FedEx announcement, this does not include all of the details of rate changes for 2019. More details will be coming from both carriers, but the largest changes have been announced.
What about Shippers?
FedEx’s increases do not take effect until January 7, 2019, which is after the holiday rush. UPS’s increases, however, hit right at the start of the holiday returns period. This was done to capture additional revenue from this busy shipping time.
Many within the shipping industry were frustrated at the timing of UPS’s announcement, which did not come in October or November, as it had in past years. Now shippers must scramble to make sense of the GRI and make any changes that are needed to help offset the additional costs. As if shippers are not busy enough the weeks leading to Christmas.
Although many shipping contracts do require a 30-day notice for pricing changes, most customers will most likely not be saying anything about the short notice. The majority of UPS customers were expecting this rate increase but were surprised that it was not announced sooner.
As in years’ past, the B2C shippers will be feeling the effects of the rate hike more than any other shippers. This may be in part to the labor, ecommerce, and operating costs that carriers are still trying to figure out. It could also be the reason why the GRI announcement came so late.
The UPS rate increases are in line with those for FedEx, and the same as last year. While the average is 4.9%, there are certain types of shipments that will increase more than the average, as mentioned in the chart above.
Both UPS and FedEx are now concentrating their rate increases on domestic services. Historically, both carriers have placed an emphasis on increasing lower weighted packages more aggressively than heavier packages. But the opposite is true for 2019. Packages above 50 lb. will experience rate increases in the range of 6% to 7% (compared to 3.5% to 4.5% in 2018).
Those shippers who often send heavy or oddly-shaped packages should monitor their shipments for mid-year dimensional pricing announcements. It is possible that the focus on domestic services will lead to an increase in the DIM factor as well. Carriers seem to be pushing more packages into more costly tiers, either based on actual weight or DIM. The shippers have already negotiated their DIM factor for the year will not be subject to a change in the DIM factor, but those who must go through the market rate for DIM might be in for a shock.
UPS SurePost, a postal product in which the USPS completes the final mile of delivery, is going up more than other services. SurePost is a very ecommerce-friendly postal solution and has benefited from the growth in online retail. However, the USPS and FedEx have also raised their rates for these types of shipments, making it less of an economical choice for shippers.
For UPS, the base rate for packages under 1 lb. is increasing by 9.9% to $8.46, and 10.1% (to $8.52) for parcels over 1 lb. This is much more aggressive than the net average of 4.9%.
The substantial UPS increases for SurePost could be the result of a new pricing agreement with the USPS and/or a result of the Teamsters’ negotiation from this past summer. SurePost is most likely taking volume from the UPS Ground network (and by extension from the Teamsters), so these higher rates may be partially to cover concessions made in the new Teamsters contract. Under the new rate structure, the SurePost 1 lb. minimum will be 8.5% more expensive than the Ground 1 lb. minimum ($8.52 vs. $7.85).
SurePost shippers will also be subject to the Delivery Area Surcharge increases of 32% and to the Non-Machinable Surcharge of 18%. These increases are on top of the large base rate increases on this service.
Additional Handling/Large Package/OverMax
The handling of oversized packages, which has now become common in the ecommerce market, has been a focus of the major carriers. UPS is increasing the Additional Handling and Large Package Surcharge by 19% while the OverMax Surcharge is going up by 31%. In an attempt to retain margin on these types of packages, carriers will continue to increase the rates for shipping these type of packages.
The Additional Handling Surcharge applies to any U.S. domestic package over 70 lb. in weight, over 48 inches in length or 30 inches in width or not shipped in a corrugated box. It will now cost an additional $4.00, while the Additional Handling Surcharge for other packages will go up by $2.25.
At the same time, the OverMax Surcharge is going up $200 (or 31%) to $850. This large increase is on the heels of the mid-year increase from $500 to $650. UPS is making more money on packages that have weights or dimensions outside the norm.
The cost to insure a shipment via UPS will increase by 16.7% with this GRI. This is the first time the declared value has gone up in ten years. Those shippers that use shipment insurance will need to remember that this is now a change, as it has remained the same for so many years.
Previously the rate for Declared Value was $0.90 per $100 of total value declared, with a minimum rate of $2.70 per shipment. This rate is going up $0.15 per $100 in 2019 with an increase in the shipment minimum rate of $0.45. The 2019 Declared Value for Carriage will be $1.05 per $100, with a minimum rate of $3.15.
Manual Manifest Penalties
While most carrier agreements include language that states that shippers lose 10% of their discounts for packages that do not contain electronic PLD, UPS is taking this even further. To cover the time spent manually inputting the information from manifest labels, UPS will now be charging $2 per package for any shipper that does not provide electronic PLD with each manifest. Most large shippers do this electronically, but smaller ones usually do not. UPS is passing on the cost of the extra time spent inputting the data and correcting any mistakes.
Drop shippers who use another company to ship parcels on their behalf will also be subject to increases. UPS will be charging more for third-party billing, raising the surcharge from 2.5% to 4.5% of the shipment price.
This fee attempts to recoup the additional cost of delivering to a shipping location that may not have been planned for when a contract was negotiated. Some shippers bill third-party to take advantage of better shipping rates through another company, but this fee makes sure that UPS does not lose out on any of this potential shipping revenue.
For more information on the UPS 2019 rate increase, visit the carrier’s website.