Understanding Residential Surcharges — and How to Limit Them
Residential surcharges are an annoying extra expense, but there are ways to minimize their impact. Learn how they work and how shippers can best deal with them.
Residential surcharges — added expenses to a carrier’s base rate — continue to rise every other year and can slowly erode your bottom line. Why do these charges exist? It’s because your parcel carrier considers it to be more difficult to deliver to a residential address than to a commercial one.
Commercial addresses are typically in commercial zones or at least areas with lots of other businesses around. This means the carrier can drop off a greater number of packages in a shorter period. There is also a better chance the parcel will be received at a commercial location since they often keep regular business hours and have personnel on hand.
If your carrier must go out of its way (strange term for a carrier company!) to deliver to a residential location, that’s not only an expensive detour, it also increases the chance the package will go unreceived and have to be redelivered. The residential surcharge exists to compensate the carrier for this added trouble.
How UPS applies the fee
UPS adds this surcharge for collections or deliveries to a home (including businesses operating out of a home) that does not have an entrance that’s open to the public. This is a general attitude held by many of the big carriers. UPS residential surcharges are currently:
- $4 for UPS Domestic and International Air Services, UPS 3 Day Select® and UPS 3 Day Select® from Canada,
- $3.40 for UPS Ground and UPS® Standard services: $3.40,
- $32.90 per shipment for UPS Ground with Freight Pricing,
- $130.00 for UPS Worldwide Express Freight.
The UPS Worldship service lets users know when and where residential charges will be applied, but be sure to read the small print: Forwarding costs, return transportation charges, duties, taxes and a return surcharge all apply to any returned packages — at the shipper’s expense— if UPS can’t deliver.
How FedEx applies this fee
FedEx applies the surcharge to any “home or private residence, including locations where a business is operated from a home, or to any shipment in which the shipper has designated the delivery address as a residence.” Their 2019 residential delivery surcharges are:
- $4.40 per package for U.S. Express Package Services, U.S. Ground Services and International Ground Service, rising to $4.65 on Jan. 6, 2020,
- $4.40 per shipment for International Express Package Services (to Canada, and U.S. import-rated shipments from all origins), rising to $4.65 in 2020,
- $39.60 per shipment for Maximum charge with FedEx Express Multiweight or FedEx Ground Multiweight Pricing, rising to $41. 85 in 2020,
- $3.80 per package for FedEx Home Delivery, rising to $4.00 in 2020, and
- $140 per shipment for U.S. Express Freight Services and International Express Freight Services (to Canada, and U.S. import-rated shipments from all origins), rising to $150 in 2020.
Further FedEx residential surcharges are added if freight is being picked up from a home, private residence or a business operated one of those. On top of the delivery charges, the freight pickup charge will be $140, rising to $150 in 2020.
Another FedEx price guide states that freight in the 750-2 category — Pickup or delivery services, Private Residences – will be $144 both this year and next.
It all depends on the ZIP Code, which isn’t a perfect system because some businesses in urban areas share a ZIP Code with residential areas and suffer surcharges as a result. Businesses can check if the 2020 price updates will affect a package’s destination’s ZIP Code via the FedEx preview PDF.
Further costs often attached to residential surcharges
Couriers who can’t enter a residential property to successfully deliver a package will try again another day. This redelivery can cost extra money and residential businesses waiting for important goods could lose productive time and profits. Worse, such service delays may lead to disappointed or deserting customers and the bad reviews that follow.
Carriers may not apply this surcharge if there is easy access to a door or a well-labeled place to safely deposit packages, but we don’t recommend counting on it. It’s more likely that residential surcharges will be bundled with delivery area/extended delivery area surcharges, making them doubly expensive. Shippers should review FedEx’s current fees for delivery area surcharges for more information.
Are there any ways to reduce these surcharges?
There are some ways shippers may be able to lower surcharge costs with FedEx or UPS. However, they don’t go out of their way to advertise them. FedEx offers the SmartPost option while UPS has SurePost. Both of those options use the United States Postal Service for last-mile delivery. As a result, neither SurePost nor SmartPost are currently subject to residential surcharges.
Those options are good methods for shippers to keep in mind, but remember that UPS and FedEx guarantees stop applying once the package is passed to USPS for final delivery. It’s also worth a shipper’s time to find out if their carrier allows them to ship packages to business-related locations, like a pre-arranged locker storage or other amenable building.
Let 71lbs help with shipping costs
A close analysis of your carrier’s rules plus a thorough review of current shipping invoices is a great way to start cutting costs and find out if residential surcharges are an expense you can reduce. 71lbs does both, helping our clients find ways to save money at every possible point in the shipping process and negotiating the fairest fee structures with their carriers.
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At 71lbs, we focus on two things: a) helping customers save money on shipping, and b) helping customers understand their shipping costs. We provide you refunds, savings in shipping insurance, freight, and imports, among others. Our automated dashboard displays easy-to-understand shipping costs and insights so you can make better business decisions. Drop by the contact page to get in touch!
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