FedEx Third Party Surcharge

FedEx targets shippers who bill to third parties

Carriers are not shy about implementing charges and fees to increase their revenues. Effective January 22, 2018, a 2.5% surcharge will apply to FedEx shipments that are billed to a third party. FedEx, who once set themselves apart in the third-party billing surcharge area, has replicated the 2.5% third-party surcharge used by UPS to capitalize on drop shippers.

Who’s impacted?

FedEx accepts shipments for third-party billing as long as the receiver or third party has a valid FedEx account number and has agreed to incur charges. This new fee will be a challenge for various businesses. Let’s take a look at a possible scenario of business impact. A customer orders sunglasses from a website, but Kevin who owns the website selling sunglasses doesn’t manufacture the sunglasses or house any of the products. After the customer confirms their order, Kevin then places the order with his product manufacturer or distributor and has the product shipped directly to the customer. In this practice called drop shipping, Kevin never takes possession of the product but has the FedEx shipping fees charged directly to his business in part because his account has a better discount attached to it. To stay competitive, Kevin gives his customers free shipping when they purchase $40 or more of sunglasses or accessories. This means the additional 2.5% fee will likely come directly out of Kevin’s profits with no extra revenue from his customers to offset the extra expense. Kevin is now absorbing the 2.5% charge and the additional 4.9% average rate increase for 2018.

What will be charged exactly?

For all FedEx Express and FedEx Ground U.S. and international shipments, the 2.5% is applied to the entire shipping charge which includes transportation charges, surcharges, and additional fees. This does not include duties, taxes and ancillary clearance service fees. The surcharge will be charged to the third-party payer. The surcharge applies when the shipper account number and the third-party billing account number are not part of the same company, as determined by FedEx.

How to save money on shipping

FedEx can hike their prices when they know customers are limited in choosing between carriers, but there are a few ways to mitigate this new financial burden. Seek to address these rate changes and fees in your contractual agreement with FedEx. With Share a Refund carrier agreement optimization, you can save 10-20% on shipping bringing profits back to your business. Another option is to diversify your shipping profile with regional carriers. Often regional carriers can offer a better price point and customer service compared to national carriers. Through our carrier agreement optimization service, Share a Refund negotiates the shipping rates that your business deserves. For more details on the analysis Share a Refund performs and the cost-reducing results, please contact Share a Refund by pressing here.

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