Everything to know about FedEx 2023 shipping rate increases

FedEx 2023 shipping rate increases

The FedEx 2023 General Rate Increase, or GRI, went into effect on January 2, 2023, impacting rates, surcharges and fees for Express, Ground, Home Delivery and Freight shipments. Read a brief summary of changes to the FedEx 2023 shipping rates.

In this article we will take a deep dive into the FedEx price increases, compare them with past increases, and discuss practical strategies you can implement to mitigate the impact of the FedEx rate increase on your bottom line.

What is a general rate increase (GRI)?

The general rate increase, or GRI, is an adjustment that shipping carriers make on an annual basis to ensure their ability to operate efficiently and profitably. The updated calculations take a broad range of factors into account, such as fuel and labor costs, inflation as well as other non-economic factors that may include the impact of new regulations or corporate initiatives such as sustainability. Companies may also use rate changes strategically to capture a larger share of the most profitable shipments and reduce the number of shipments that are not profitable, such as “ugly freight.”

The 2023 FedEx GRI, the largest year-over-year increase in the company’s history, was announced in September 2022 and became effective as of January 2, 2023. The FedEx 2023 GRI increased the average cost of shipments by approximately 6.9 percent, although the increase for some services, surcharges, shipping zones and larger or heavier packages could be several percentage points higher.

2023 FedEx shipping rate change highlights

Although the FedEx rate increase was 6.9 percent, many shippers may see a much higher increase because of the way FedEx 2023 rates are structured. In general, costs will increase more with longer distances, larger and heavier packages.

If FedEx is your primary carrier, you may be inclined to regard the FedEx rate increase as just another cost of doing business. But if you pay attention to the details and notice HOW the increases could impact your business, it may be possible to minimize the effect on your bottom line. Here are a few of the increases that are likely to have the most widespread impact on shipping costs.

• The FedEx package minimum charge, the lowest cost to ship a package via a specific service, now exceeds $10 for the first time ever. This cost will vary because each service has its own minimum charge, which may be higher than $10. If you are a high-volume shipper, it may be possible to negotiate a lower minimum charge, especially on express shipments.
  
• The cost for address corrections is up from $19.50 to $21.00, a 7.69 percent increase. You can avoid address correction fees altogether by using address validation software.
  
• FedEx increased the delivery area surcharge from $6.50 to $7.15 for its US Express Residential, Ground Residential and Home Delivery services. That raises costs by 10 percent for companies that make a lot of shipments to residential addresses.
  
• The additional handling surcharge for Zone 3 (the area within 151 to 300 miles from the point of origination) rose from $16 to $19, close to a 19 percent increase.
  
• The Oversize Package charge for Home Delivery went up $25 for Zones 2 through 4, and $30 for Zones 5 through 8. Zone 2 is hit with the largest percentage increase at 18 percent.
  
• Long-distance shippers will be feeling some serious pain, with a 16.4 percent average increase across the board for shipments going to Zone 7 or higher. FedEx 2023 rates also include a new Remote Area surcharge of $13.25. Because this is a new charge, it is not included in current contracts and cannot be avoided.

Rate increases are only part of the story. FedEx is also taking actions internally to rein in costs and grow profits. In April 2023, the company announced that it will be combining its various operating companies into a single organization under Federal Express Corporation. This consolidation will help the company achieve its long-term goal of saving $4 billion by 2025.

2023 FedEx surcharges compared to previous years

Most shippers pay close attention to rates, but may not be aware of the other ways that carriers charge for their services. Many of the lesser-known charges are collectively known as surcharges or accessorial charges, and they are imposed when a package or shipment involves extra costs (for example, handling or fuel consumption) that aren’t covered by the general rates.

Surcharges are generally easy to understand. Heavy packages are difficult to handle, require more fuel to transport and have a greater potential for injury than small packages. Automated equipment that sorts packages is designed to handle packages within certain size and weight ranges. Any package that exceeds those parameters must be sorted manually. Likewise, any non-standard package shape (such a large tube or cylinder) requires manual processing. These are just a few of the reasons for surcharges.

In the 2023 GRI, FedEx surcharges increased much more than shipping rates. More than half of these increases were in the double-digit range. The Oversize Package surcharges went up the most with an increase as much as 23 percent, with Additional Handling surcharges close behind.It’s clear that FedEx is using surcharge increases strategically to maximize revenue for their available cargo space and reduce the amount of manual handling. Shippers who want to keep costs low will need to pay careful attention to the package restrictions for each service; these are described in detail in the FedEx Service Guide.

There’s another reason to make every effort to minimize surcharges: the fuel surcharge. Unlike the surcharges listed in the chart above, the fuel surcharge is adjusted weekly based on the price of fuel and is calculated as a percentage of your transportation-related shipping cost, including the package rate and any transport-related surcharges such as oversized packages or remote area delivery. The surcharges for Express and Ground services are different: the first is based on the cost of jet fuel and the second is based on cheaper diesel. Surcharges can easily reach into the 15 percent range for domestic shipments, and are higher for import and export shipments.

2023 FedEx Express, Home Delivery and Ground rates

Shipping costs in general have risen significantly over the past few years. FedEx shipping rates went up by an average of 4.9 percent in 2021, and last year’s FedEx rate increase was a full percentage point higher at 5.9 percent. The FedEx rate increase for 2023 was higher still, with an average of 6.9 percent across all services.

However, the impact of the rate increases is not the same across all FedEx services. The low 6.37 percent increase indicates that FedEx wants to keep rates for its highly profitable FedEx First Overnight service as competitive as possible. Notably, the highest rate increases are on the two- and three-day services that shippers may choose as lower cost alternatives to FedEx First Overnight. The rate increases for most services, including Standard Overnight and Home Delivery, were just above 7 percent, making them economical choices for ecommerce shippers. FedEx Ground rates had the smallest increase of all, at just 7.04 percent.

* Includes residential delivery charge, delivery area surcharge (residential), delivery area surcharge (commercial) and fuel surcharge.

**One pound package shipped to Zone 2

Other 2023 FedEx rate increase changes

The FedEx 2023 rate increase also affects the fees for the many value-added services that shippers or their customers may require, such as third-party payment or signature confirmation, as well as avoidable charges for things such as late payment of invoices. In 2023, FedEx will tack on an additional 8 percent to any invoice that is not paid on time—that’s a whopping 33 percent increase over the previous year. The residential surcharge for FedEx Home Delivery went up to $5.15 per package: this charge is included in the shipping cost. 

If you need to collect a signature from the package recipient, the maximum cost rose from $7.15 in 2022 to $7.65 in 2023. C.O.D. charges increased from $17.50 per package to $19.00, and on-demand care (such as dry ice replenishment) for Express package services rose 7 percent to $90 per package or $2.45 per pound.

FedEx prices increased in other, less obvious ways. First, by designating more ZIP Codes as remote. In 2023, FedEx moved almost 4,000 ZIP Codes in the contiguous 48 states to the remote category: each package delivered to those areas will be subject to a $13.25 delivery area surcharge. In addition, the residential surcharge for FedEx Home Delivery went up to $5.15 per package: this charge may not be obvious as is included in the retail shipping rate. Last but not least, oversized packages will be subject to an additional charge of $135 – $200.

How can you prepare to save on shipping and mailing costs going forward?

The best way to save money on shipping and mailing is to fully understand both your needs and the rates that carriers will charge. But carriers don’t make that easy: their rate cards are very complex, and you can waste a lot of valuable time and effort trying to identify the most cost-effective way to ship.

That’s why more and more savvy shippers rely on Pitney Bowes shipping software. Simply enter your package weight, dimensions and destination to compare rates, see any additional charges and make the smart decision every time.

You also get access to discounted rates on every package, First Class^® letter or Priority Mail^® shipment you send. Built-in address verification eliminates the cost of redeliveries. Plus, you have full visibility into all shipping and mailing activity across your business, so you can analyze trends and set rules to prevent overspending.