what is a residential surcharge?

What is a residential surcharge?

If you’ve shipped with UPS or FedEx, you’ve likely encountered the rising residential delivery surcharge. Shippers incur this charge when they ship to a commercial location that carriers deem as residential. UPS and FedEx intentionally make these surcharges complex. Let’s take a deeper look at residential surcharges applied by each carrier.

UPS residential surcharge

UPS refers to a residential surcharge as “a residential delivery is one made to a home, including a business operating out of a home. For each residential delivery, an additional charge per shipment applies.” You’ll get hit with this fee if either the delivery address entered into the UPS shipping system or the actual delivery address is deemed residential by the carrier.

If your friend operates a salon out of her home, any shipments sent to her will be charged as residential. The UPS address validation tool doesn’t define what shipments will be considered residential or commercial. Your UPS invoice will have an adjustment for the difference between residential and commercial delivery. It can give shippers a shock when opening their bill.

The residential surcharge for U.S. UPS Ground Service shipments increased $0.20 on December 24, 2017.

FedEx Ground commercial and residential surcharge

When it comes to residential shipments, FedEx has three options for shippers to choose from based on their preferences. You can select FedEx Express, FedEx Home Delivery or FedEx SmartPost. FedEx SmartPost has no residential or Saturday surcharges but has its own set of disadvantages customers have shared their concerns about. FedEx Home Delivery can only be used for shipments under 70 pounds and will not incur a Saturday delivery surcharge.

The different shipping methods mean FedEx has a few fees to be aware of. FedEx Express Ground residential, FedEx Home Delivery and FedEx Ground commercial are as follows:

  • FedEx Home Delivery® (residential) increased from $3.35 per package in 2017 to $3.45 per package in 2018.
  • U.S. express package services, FedEx Ground (residential) increased from $3.90 per package in 2017 to $4 per package in 2018.
  • FedEx Ground (commercial, extended commercial) increased from $2.45 per package in 2017 to $2.55 per package in 2018.

It’s easy to see FedEx Ground commercial has a lower rate than FedEx Home Delivery. When some shippers see this they place everything in the Ground commercial network and allow FedEx to determine the charges. This can lead to unwanted and unexpected surcharges that wind up exceeding FedEx Home Delivery rates.

On the other hand, if you send a FedEx Ground residential package, they will add a residential delivery charge of $3.90 to the standard ground package cost. If that same shipment was placed in the FedEx Home Delivery network to begin with, FedEx would apply a Home Delivery surcharge of $3.35 per package. A side-by-side comparison shows a few cents being added, but if you are a high-volume shipper those surcharges will siphon your profits. Within residential shipping options, FedEx Ground is 15% more than FedEx Home Delivery.

Reducing residential delivery surcharges

Carriers charge a higher rate for residential addresses, due to the inconvenience of delivering one shipment to a single location in comparison to multiple shipments to a commercial address. The further you make them drive outside the network, the more they will ask you to pay. If you are an individual shipping, options exist to deliver your packages to brick-and-mortar stores or convenient parcel lockers. If you are a consistent shipper, optimizing your carrier contract with a Share a Refund industry expert is one way to reduce residential delivery surcharges. Contract optimization experts can identify areas where you could be saving more money. Most customers find themselves saving 10-20% more when involving Share a Refund in the process.

Curious how much money you’re leaving on the table?

Sign up to speak with a contract optimization expert today. Click the button below to get started.

Share this Post