What is a third-party billing surcharge?

UPS and FedEx third party billing surcharge for drop shippers

It’s possible for carriers to bill to someone who is not the shipper or the receiver. Carriers accept shipments for third-party billing as long as the receiver or third party has a valid FedEx or UPS account number and has agreed to incur the charges. Here’s what you need to know if you’ve been hit with a third-party billing surcharge.

Third-party billing and dropshipping

Dropshipping is a process where a retailer doesn’t keep the products it sells in stock. Instead, when a store sells a product, the inventory comes from a third party and is shipped directly to the customer. The retailer doesn’t house the inventory or handle product fulfillment. In this situation, the shipper will bill back to the retailer. Normally, the retailer will have a better discount agreed upon with the carrier. Instead of the shipper or receiver being billed, the charge hits the retailer’s account.

UPS and FedEx third-party billing fee

The new year brings new carrier surcharges and fees. FedEx and UPS both noticed the steady increase in third-party billing and implemented a steep fee to target these shippers. 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. This charge is applied to the entire shipping cost, which includes the base rate and accessorial fees.

Not all carrier fees are set in stone

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