As we get ready to move into 2025, shipping costs continue to rise, making it essential for businesses to negotiate with carriers like FedEx and UPS. In recent years, the unpredictability of surcharges and fees has placed a heavier burden on parcel shippers. To stay competitive, securing Fedex and UPS negotiated rates is crucial. 

 Here are three key areas to focus on when preparing to negotiate your new parcel contract..

1. Guaranteed Service Refund (GSR) Waivers

One of the most important terms to negotiate in your UPS or FedEx contract is the GSR waiver. A GSR waiver removes your ability to claim refunds for late deliveries. This may seem harmless, but without the leverage of guaranteed refunds, you could be losing out on significant savings. You should not sign your carrier agreement without understanding the impact of these GSR’s on both your pricing and your service delivery to your customers. 

UPS and FedEx offer a Money Back Guarantee for late deliveries, but agreeing to waive this protection could cost you 3% to 5% of your shipping expenses. Negotiating to retain GSR rights ensures that your business can recover costs when deliveries fall short of the promised service levels. Always aim to keep this clause in your favor when securing Fedex and UPS negotiated rates.

2. Weight-Based Surcharges

Weight surcharges are another area where shippers can face unexpected costs. Both UPS and FedEx have lowered the weight threshold for additional surcharges from 70 pounds to 50 pounds, with charges as high as $24 per instance. These changes can significantly inflate shipping costs, especially for businesses that regularly ship heavy items.

To combat this, negotiate discounted surcharges or exemptions based on your shipping volume and package profiles. If your current carrier refuses to accommodate your needs, you must have a coordinated plan to ensure you protect your costs and your service levels. This may require an RFI or support from a consultant. 

3. Rate Caps

Rate caps are crucial in protecting your business from annual price hikes. While UPS and FedEx typically apply rate caps to transportation costs, these caps can be negotiated to cover a broader range of fees. With Fedex and UPS negotiated rates, businesses can set limits on how much their rates increase each year, offering protection against unpredictable surcharges.

For example, many companies see surcharges for services like residential deliveries, fuel, and accessorial charges increase regularly. Negotiating caps or fixed-rate surcharges on these services can help you keep control of your costs going into 2025 and beyond. Be sure to negotiate specific rate caps depending on your shipping patterns and projected growth.

Conclusion

By focusing on Fedex and UPS negotiated rates, GSR waivers, weight surcharges, and rate caps, your business can save significantly in 2025 and beyond. As shipping costs continue to rise, leveraging these negotiation points will give you the edge you need to maintain profitability.

Frequently Asked Questions (FAQ)

1. Why should I negotiate GSR waivers with UPS?
   Retaining your GSR rights allows you to claim refunds for late deliveries, ensuring you don’t lose money on delayed shipments.
2. How do weight surcharges affect my shipping costs?
   With weight surcharges applying at 50 pounds instead of 70 pounds, your shipping costs can increase significantly. Negotiating discounted rates or exemptions is key to reducing these costs.
3. What is a rate cap and why is it important?
   A rate cap limits the percentage increase in shipping costs each year. Negotiating rate caps helps protect your business from unexpected price hikes.

Looking for expert help in parcel contract negotiation?
Negotiating favorable UPS and FedEx contracts can be complicated. AFMS specializes in parcel shipping contract optimization and can help you secure the best rates in 2025 and into future years. Contact AFMS today for expert support and a No Cost evaluation before you negotiate your next agreement.