Your Essential Guide to the 2023 FedEx and UPS Rate Increases
12/06/2022 — Leah Palnik
FedEx and UPS will be increasing their rates by an average of 6.9% in 2023. That’s a heavy statement for a couple of reasons. First, this is the highest General Rate Increase (GRI) the carriers have taken in recent years. And second, your actual shipping costs will likely go up more than 6.9% in the new year. Oof. Unpacking the new changes is complicated, but essential if you want to understand how your costs will be affected and what you can do about it.
Here's your guide to the FedEx and UPS rate increases for 2023. Jump to:
- A look back at the FedEx and UPS GRIs
- Important changes
- How the FedEx and UPS rate changes will affect your costs in 2023
- What you can do to mitigate the effects of the FedEx and UPS rate increases
For 2023, both FedEx and UPS are pointing fingers at inflation as a contributing factor to the higher-than-usual rate increase. 2022 already saw an uptick with a 5.9% GRI, thanks to all of the supply chain disruptions and surges in demand that resulted from the pandemic. For several years prior to that, both carriers had been raising their rates annually by an average of 4.9%.
Some important quick facts about the new FedEx and UPS rates:
- The new FedEx rates take effect on January 3, 2023, while the UPS rates take effect a week earlier on December 27, 2022.
- The 6.9% average doesn’t take surcharges into account - many of which are increasing by more than 6.9%.
- How much your costs actually go up in 2023 will depend on several different factors. The services you use, your shipment dimensions and weight, and how far your shipments are traveling all have an effect.
If all of those tables and numbers are making your head spin, you're not alone. But there are some key takeaways. Let’s take a look at a few of the general observations from the base rate changes:
- Across all services and weight breaks, longer zones are getting hit with higher increases than shorter zones. Many of those increases are higher than the announced average.
- For Ground services, many of the rates for shorter zones are lower than the 6.9% average increase.
- For each service, the rate increases are similar across most weight breaks. Zones are the biggest difference-makers this year.
- For the 3 Day services, you'll see a higher increase from FedEx than UPS. However, the actual rates are comparable. That is because UPS took a larger increase with this service the previous year.
- Both FedEx and UPS have increased their Ground Minimum charge to $10.10
When you are reviewing your shipping costs, you can’t look at the base rates alone. Surcharge fees often make up a significant chunk of the amount you end up paying. Here are a few noteworthy surcharge updates:
- Fees for larger, more difficult to move packages continue to rise to hefty prices. You could be paying an extra $1,150 for a shipment that qualifies for the Unauthorized Packages fee by FedEx or the Over Maximum Limits fee by UPS.
- Both carriers are increasing the late payment fee from 6% to 8%.
- FedEx created a Remote Delivery Surcharge. Almost 4,000 zips will now incur a $13.25 fee. UPS originally introduced a fee for this in January 2022.
- Many common surcharges are increasing, with a significant amount increasing by more than 6.9%.
There are also a couple of other changes that are important to be aware of:
- UPS announced that it will be renaming “peak surcharges” to “demand surcharges”. Several years ago FedEx and UPS started implementing these fees to address the increased demand the holiday season brings. Then, the pandemic hit. Both carriers have struggled to meet the surge in demand amid all of the supply chain disruptions and decided to use peak surcharges in response. The decision by UPS to rebrand these surcharges signals that it is viewing them slightly differently. Instead of implementing fees based on seasonal predictability, “demand surcharges” suggests usage anytime there is an uptick in demand. In short, they’re likely here to stay.
- The list of zip codes for zones is changing. Depending on where you’re shipping, you may have to pay based on a longer zone than before. It’s changes like these that make budgeting for your annual cost increase very challenging.
Many shippers will see their costs go up over the announced 6.9% average. With that in mind, let’s look a few factors that could put you at risk for higher-than-average cost increases:
- If you’re shipping larger packages or your packages require special handling. For the past several years, FedEx and UPS have been raising these fees at an alarming rate. Any shipment they can’t run through their normal systems costs them more time and money, and these fees are a way to discourage those types of shipments from entering their networks.
- If you ship a higher percentage of residential shipments. Residential shipments cost the carriers more because they require more stops and are a less efficient use of their driver’s time. Residential fees continue to climb because of this.
- If you ship a lot of low density packages. The pricing structure that FedEx and UPS have put in place punishes lighter shipments that take up a lot of space. The carriers prefer denser packages that take up less space because they’re able to fit more packages on their delivery vehicles.
- If a high percentage of your shipments go to longer zones. It’s always been true that the further your package travels, the more expensive the rate. This year that’s especially true. Longer zones are seeing more increases above the announced average than shorter zones.
- Right-size your packaging. While FedEx and UPS rates are based on weight, that’s not actually the whole story. If your dimensional weight is higher than the actual weight, your package will be rated using the dimensional weight - meaning you’ll be paying more. This makes any excess space within your package extra costly. Focus on packaging that allows space for the items you’re shipping and the necessary cushioning and nothing more.
- Consider opening or using a new distribution center. Shipments with the longest distance to travel cost you the most every year. But in 2023, this will be even more important as the longest zones are seeing the highest increases. Getting closer to your customers could be a great strategy for keeping those costs down.
- Take advantage of discounts available to you. Many trade associations and chambers of commerce will offer FedEx or UPS discounts to their members. Oftentimes the annual cost savings from those discounts more than make up for the cost of joining. PartnerShip works with over 130 groups to provide their members with discounts on FedEx services. Contact our team to find out if you qualify.
Wrapping your head around all of the changes for 2023 FedEx and UPS rates can be challenging. But, using this guide to understand what's behind the announced average and published service guides is a good first step. Use this information to properly budget for the new year and set up any mitigation tactics that work best for your business.