Understanding Fuel Surcharges in Logistics

Let’s delve into a hot topic buzzing around the shipping industry—fuel surcharges. These little add-ons to fuel rates can really throw a wrench in your shipping costs, especially for ecommerce businesses. But fear not, understanding how these charges operate can be your ace in the hole for managing these expenses. So, let’s take a closer look at fuel surcharges, how they function, and some savvy strategies to keep these costs in check for your business.

Understanding Fuel Surcharges

First off, what exactly are fuel surcharges? They’re extra fees carriers tack onto their base rates. Picture them as the bonus feature in your shipping cost breakdown, derived from the carrier’s base fuel rate and selectively applied across various shipping services. Big players like UPS, FedEx, and DHL are known for these surcharges, but keep in mind, each carrier has its own approach.

FedEx fuel surcharges change weekly for FedEx Express services depending on the  U.S. Gulf Coast (USGC) spot price for a gallon of kerosene-type jet fuel. FedEx Ground fuel surcharges change weekly depending on the national U.S. on-highway average price for a gallon of diesel fuel. FedEx Freight fuel surcharges depend on the on-highway average price for a gallon of diesel fuel. 

These FedEx fuel surcharges can we found here: https://www.fedex.com/en-us/shipping/fuel-surcharge.html

UPS Fuel surcharges also change weekly and are determined by the on-highway diesel fuel price. 

You can see the UPS fuel surcharges here: https://www.ups.com/us/en/support/shipping-support/shipping-costs-rates/fuel-surcharges.page

Deciphering the Numbers

So, how do they crunch those numbers? Most often, fuel surcharges are a percentage of the base fuel rate, though there can be exceptions with flat fees. Untangling these charges on your bill requires a bit of a calculation session.

Carriers use their own systems for these calculations. The calculation of fuel surcharges involves two main elements:

  • The “At Least” and “But Less Than” values create a range triggering the surcharge percentage based on fuel costs.
  • The Surcharge Percentage fluctuates when carriers announce “fuel surcharge increases.” And yes, international shipments and different freight rates come with their own unique surcharge percentages. For example, LTL and FTL often have different surcharge percentages.   

For example, this is the current FedEx Ground Fuel surcharge table effective December 11, 2023 (price per gallon diesel fuel):

At LeastBut Less ThanSurcharge
$3.37$3.4614.00%
$3.46$3.5514.25%
$3.55$3.6414.50%
$3.64$3.7314.75%
$3.73$3.8215.00%
$3.82$3.9115.25%
$3.91$4.0015.50%
$4.00$4.0915.75%
$4.09$4.1816.00%
$4.18$4.2716.25%
$4.27$4.3616.50%
$4.36$4.4516.75%
$4.45$4.5417.00%
FedEx Ground Fuel Surcharge Table effective December 11, 2023

The trick? When your base fuel rate falls within that range, voila! The corresponding surcharge percentage gets applied. For example, if your fuel base rate is $2.82 and the surcharge rate is 10.25%, you’re looking at a $0.29 surcharge per shipment.

Each Carrier’s Playbook

Carriers play by their own rules. They tweak their base fuel rates and surcharge percentages, aiming to stay competitive. DHL opts for a monthly update of its base fuel rate, while FedEx and UPS tinker with theirs more frequently—weekly or biweekly.

How They Apply Those Surcharges

These surcharges aren’t randomly thrown about. They’re strategically placed on specific shipping services, and when they pile up—for instance, combining remote area deliveries like DAS residential charges with peak surcharges—those costs really add up.

The surcharge duration varies. Sometimes they stick around for a while (like an annual rate increase), or they might pop up due to sudden fuel rate hikes, or simply during brief periods like peak seasons.

Which Services Are in the Spotlight?

Take a peek at some of  each carrier’s services that get slapped with fuel surcharges:

  • FedEx: Saturday Services, Residential Delivery Surcharge (RESI), Additional Handling Surcharge, Oversize Charge, Signature Surcharge, Non-Stackable Surcharge
  • UPS: Remote Area Surcharge, Residential Surcharge, Saturday Services, Signature Required Services, Additional Handling, Large Package, Over Maximum Limits, Oversize Pallet Handling Surcharge, Peak Surcharges
  • DHL: Non-Stackable Pallet, Remote Area, Saturday Services, Overweight / Oversize, Elevated Risk

Cracking the Surcharge Code

Now, onto the big question: Can we dodge these charges? Well, not always, unfortunately. But there are ways to chip away at these expenses:

  • Negotiate that base fuel rate before signing any contracts. It’s not so easy, but negotiating beforehand can sometimes yield positive results.
  • Partner up with an experienced 3PL. These fulfillment experts have strong ties with carriers, profound industry knowledge, and can guide you toward services that won’t hit you with as many surcharges.

How 3PL Center Can Help with Fuel Surcharges

And hey, if you’re scouting for a top-notch 3PL fulfillment provider to streamline your shipping fees, 3PL Center might just be the ticket. We’re all about offering tailored services for growing ecommerce businesses.

At 3PL Center, we use our relationships with carriers to get great discounts on shipping for our clients. These deals often include lower or canceled extra fees, which really helps cut down on costs.

When you work with us, you get a dedicated team that not only gets better rates but also looks for ways to reduce or get rid of those extra charges. We’re not just about saving money; we focus on making your shipping efficient, reliable, and cost-effective.

Choosing 3PL Center as your logistics partner means we handle the tricky task of dealing with extra fees. We’re constantly working to lower these fees or even remove them, which helps optimize your shipping and improves your profits.

Remember, teaming up with us isn’t just about saving money on shipping rates. We’re dedicated to finding smart solutions to decrease those additional costs and make shipping easier for your business. Contact us today.

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Related Reading:

Shipping Surcharges: An In-Depth Look at Additional Fees from FedEx, UPS, and USPS

Delivery Area Surcharge

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