📦 New surcharge on international imports
Starting Sept. 15, 2024, UPS will implement a new "Surge Fee" on U.S. imports from 12 countries and territories. Shipments from China, Hong Kong, and Macau will incur a $0.50 per-pound fee, while 10 other countries, including Japan, Australia, and Vietnam, will face a $0.25 per-pound fee. The surcharge is based on billable weight and is part of UPS’ effort to maintain reliable service amid rising costs.
✈️ Impact on shipping volumes
The new fee is expected to affect the growing volume of shipments coming from Asia-based e-commerce marketplaces such as Temu and Shein. In Q2 2024, UPS saw a 20.6% rise in China-to-U.S. export volume, despite an overall decline in its daily export volume. CFO Brian Dykes noted that strong e-commerce demand from China has boosted UPS' international air freight revenue, which contributed to the fee's introduction.
💡 UPS' strategy to improve profitability
UPS and other delivery companies, like FedEx, have struggled with low profitability from high-volume, low-margin e-commerce packages. The new "Surge Fee" is a strategy to mitigate these low yields, particularly from popular platforms like Shein. Mingshu Bates, chief analytics officer at AFS Logistics, explained that the fee helps UPS cover the additional costs of handling such packages.
📉 FedEx likely to follow
FedEx, which introduced its own surcharge on Aug. 5, 2024, is expected to announce a fee similar to UPS’ new charge soon. Experts like Matt Bohn and Paul Yaussy from Shipware predict that FedEx will align its strategy with UPS to manage growing demand for low-margin international shipments. The rising competition between the two shipping giants reflects the broader challenges in managing e-commerce-driven logistics.
Will higher fees slow down online shopping from Asia?
