Ecommerce shippers often rely on surcharges to cover the cost of shipping in specific circumstances. Some retailers even use them as a revenue driver. Keep reading to understand when surcharges make sense and how much they should be.
Shipping surcharge costs are common in the ecommerce world. They’re a reliable way to minimize monetary losses due to shipping, particularly if free or low-cost shipping is a part of your strategy. The financial burden is passed on to the customer too, and not just the retailer. So, what does shipping surcharge mean?
In this article, we’ll be exploring key aspects of shipping surcharges, including common surcharges and fees, types of shipping surcharges, specific surcharges imposed by major carriers like UPS, FedEx, and USPS, and some do’s and don’ts of shipping surcharges strategy. We’ll also be discussing ways to reduce shipping surcharges.
What Is a Shipping Surcharge?
A shipping surcharge is an extra fee added on top of the base shipping cost. Retailers and carriers use surcharges to cover costs that do not fit neatly into a standard shipping rate, like residential delivery, oversized items, special handling, remote delivery areas, fuel, weekend delivery, or signature requirements.
For ecommerce retailers, the trick is not just knowing that surcharges exist. It’s deciding when to absorb the cost, when to build it into product pricing, and when to show the fee clearly at checkout.
Surcharges are added for a variety of reasons, but they are commonly used to offset the cost of:
- Residential address delivery
- Weekend or overnight delivery
- Signature requirements
- Handling oversized or bulky items
- Special packaging requirements
Consider this example: a popular creamery sells its ice creams, toppings, and t-shirts online. Because the t-shirts and toppings it sells, think sprinkles, nuts, and candies, are not perishable, they can be shipped using any method.
The ice creams, however, need to be shipped either overnight or with a two-day service, and require extra packaging.
To make up for this expense, the creamery decides to add a surcharge on all orders that include ice cream. This helps cover the cost for the dry ice and foam packaging, as well as the cost to ship items overnight.
Common Shipping Surcharges and Fees
Retailers can apply surcharges to cover virtually any expense. But typically, these fees are added because a carrier has billed them to the retailer. The most common surcharges carriers use include:
Service to Remote Areas
If a carrier needs to deliver outside its usual delivery range, they’ll likely charge a fee to do so. These areas tend to be very remote and not easily accessible, so delivery takes a lot longer than average. The exception here are government entities, like USPS, which are required to serve all areas, even the most remote, without a surcharge.
Delivery Area Surcharges
A delivery surcharge, sometimes called a delivery area surcharge, is a fee carriers add when a package is going to a residential, remote, rural, or harder-to-serve location. These fees help carriers cover the extra time, fuel, and route complexity involved in getting the package to the customer’s door.
Ground Fuel or Air Fuel Surcharges
These fees are tacked on to shipments to cover a carrier’s fuel cost. These prices are typically adjusted weekly based on the current cost of fuel.
Accessorial Surcharges
If a shipment requires the use of additional services or machinery, you will be charged an accessorial fee. An accessorial might be charged for things like liftgate service, re-delivery or address correction.
Expedited Delivery Surcharges
Any shipping method that’s time-sensitive will incur a surcharge for the service. Weekend delivery surcharges, express service surcharges, and overnight shipping surcharges are the most common. Saturday delivery fees are especially common with carriers that deliver on weekends.
Learn more about weekend delivery from USPS, UPS and FedEx.
Additional Handling Surcharge
If you’re shipping large, bulky, or fragile items, they’ll require special handling. Of course, this will also come at a cost. Beyond needing to pay for the actual delivery service, these surcharges specifically cover the special treatment these packages require.
Signature-on-Delivery Surcharge
If you need the security of a required signature at pickup, popular for items like medication and electronics, carriers will charge a fee to perform the service.
Residential Surcharges
Packages delivered to residential areas typically come with a fee. Because commercial areas are more highly concentrated, they’re naturally more efficient delivery hubs. The extra time required to find, park, and deliver to a home comes at the cost of a residential delivery fee.
Declared Value Surcharges
If you’re shipping high-value goods, you may be charged a surcharge for the liability. This is usually a separate fee from any insurance surcharges.
Print Return Label Surcharges
If retailers include a return shipping label in their packages, they’ll be charged a print return label surcharge if a customer ends up using it. If they never use the label, the retailer will never be charged.
OS Extra Surcharge
These charges cover just about anything else. OS, or other shipping, surcharges might cover an international shipping fee, a carton neutral fee, freight fees, or something else entirely. These extra charges can come as a surprise, so it’s important to have a system in place to monitor each shipping invoice.
Understanding Different Types of Shipping Surcharges
There are several types of shipping surcharges that a retailer can encounter. These include weight-based surcharges for heavier items, size-based surcharges for oversized items, and fuel surcharges that fluctuate with market fuel prices. Special handling or hazardous material surcharges may be applied for delicate or dangerous goods. You may also come across freight surcharges and carrier surcharges.
Freight surcharges work the same way, but they usually apply to larger shipments like LTL, full truckload, air freight, or ocean freight. These can include fuel, liftgate, residential delivery, accessorial, security, or oversized freight fees.
Time-based surcharges could be added for expedited shipping or delivery during peak periods like holidays. Understanding these different types can help retailers strategize shipping costs effectively.
What Surcharges Do UPS, FedEx and USPS Charge?
Each carrier has a complex system for determining when surcharges apply and how much they cost. These fees change often, sometimes annually or even weekly in the case of fuel surcharges. Instead of relying on static dollar amounts, use the examples below as a guide to the types of fees retailers should watch for, then check each carrier’s current fee schedule before making pricing decisions.
UPS: UPS has a complex set of factors that determine when surcharges are applied. Common UPS shipping surcharges include:
| Residential delivery surcharge |
| Fuel surcharge |
| Delivery area or remote area surcharge |
| Peak or demand surcharge |
| Address correction |
| Additional handling or large package surcharge |
| Signature required or adult signature required |
| Saturday delivery or pickup charges, depending on service |
FedEx: FedEx also calculates surcharges using many factors. Common FedEx shipping surcharges include:
| Residential delivery charge |
| Additional handling surcharge |
| Fuel surcharge |
| Delivery area or remote area surcharge |
| Address correction |
| Oversize charge |
| Direct, indirect, or adult signature required |
| Freight, pickup, delivery, or special service fees, depending on shipment type |
USPS: Because USPS is not a private company, it typically has fewer added surcharges than private carriers. Of course, that also means its services are somewhat limited in comparison. However, some extra services and fees still apply:
| Signature Confirmation |
| Adult Signature Required or Adult Signature Restricted Delivery |
| Oversized or nonstandard package fees |
| Nonmachinable or irregular package fees |
| Live animal or perishable handling fees, when applicable |
Carrier surcharge amounts change often. Always check each carrier’s current rate guide before using surcharge pricing to update your checkout, product pricing, or shipping policy.
The Do’s and Don’ts of Shipping Surcharges
There’s a lot to take in when it comes to understanding all these fees. But above all, it’s most important for retailers to be aware of what carriers are charging them, so that they can pass the correct amount on to customers. Here are some helpful tips for developing a surcharge strategy:
The Do’s:
Verify a Customer’s Address Type
Avoid unnecessary delays, residential delivery surcharges, and address correction fees by double checking customer addresses before they’re even submitted. ShipperHQ’s Address Validation can automate this process for you, and determine that customers have entered addresses and address types correctly.
If a shipment is going to a residential address, it’s a good idea to add on a residential surcharge.
Explore Local and Regional Carrier Options
Before committing to one, or a few, carriers, understand what options you have. Some carriers have larger footprints than others in certain areas of the country. If you’re able to work with carriers that have great coverage on certain areas, you may be able to bypass the remote area surcharges you’d get with other carriers.
If a customer is in a remote area not covered by any available carriers, it’s a good idea to add on a surcharge for their delivery.
Tack on Surcharges to Product Costs
If you’re constantly struggling to remain revenue-neutral on shipping, or if you want to make pricing a revenue-driver itself, consider adding a shipping surcharge to the cost of products themselves. This keeps the surcharge transparent, which is more appealing to most customers. It also gives you flexibility in shipping costs, allowing you to easily cover the unexpected fees that will inevitably arise.
To turn shipping into a revenue-driver, or to cover the cost of all surcharges via a blanket fee, rolling surcharges into product costs may be a good idea.
The Don’ts
Assume Customers Understand Shipping Costs
Virtually none of your customers have the insight into shipping costs and processes that you do. Be sure that whatever costs you’re adding at checkout are clear and reasonable. If you add a surcharge, be sure to identify it by name and keep it at a fair price to avoid losing customers over the fee.
No matter what the surcharge is for, if it shows up in the checkout process, be sure it’s clear, consistent and fair.
Charge Fees Without Explaining Why
To minimize frustrations from customers on surcharges, be sure to clearly and explicitly explain what the fees are for and why you are charging them. If surcharges are common in your shipping strategy, consider creating a shipping policy or FAQ page that breaks down all extra fees.
If you apply surcharges often, consider how you can let your customers know about them to avoid surprising them at checkout.
Don’t Stick with Manual Processes, Especially for B2B Shipments
ShipperHQ’s Shipping Rate Management Platform lets retailers automate their shipping processes so operations are more efficient and less costly. With Multi-Origin Shipping, you can ship items from the closest warehouse location. With Dimensional Packing, you can establish packing rules. And ShipperHQ’s Shipping Rules lets you design custom rules of all kinds to optimize your shipping experience at checkout.
Methods to Reduce Shipping Surcharges
There are several strategies to help reduce shipping surcharges. You can negotiate with carriers for better rates, streamline your packaging to reduce weight and size, consolidate shipments, improve delivery accuracy to avoid additional handling or re-delivery surcharges, and keep a close eye on fluctuating fuel surcharges.
FAQs
When should shipping surcharges be implemented?
Shipping surcharges should be implemented when the cost of shipping exceeds standard rates due to certain factors like size, weight, location, delivery time, etc.
Are there alternatives to shipping surcharges?
Yes, retailers can absorb the extra shipping costs themselves or they can increase their product prices to cover these costs.
Are shipping surcharges refundable?
Shipping surcharges are typically non-refundable unless there was an error in charging them.
How do I include surcharges in pricing?
Surcharges can be included in pricing either by adding them to the cost of the product or by listing them separately during the checkout process.
Are shipping surcharges tax deductible?
Yes, as business expenses, shipping costs including surcharges are typically tax-deductible.
