July 25, 2022

Understanding and Combatting Industry-wide Carrier Surcharges

There are 100s of possible surcharges carriers can apply to your shipment, adding an additional layer of complexity to the already complex business of international shipping. It would be impossible to list all potential charges, but being aware of some key surcharges can be helpful in managing shipping options.

Boiled down, surcharges reflect the carriers’ cost to deliver a package. In a shipping environment intensified by the COVID-19 pandemic, war, supply chain constraints, and amplified ecommerce growth—carriers have experienced significant increases in demand and power. Add to that rising fuel costs, awareness of critical surcharges is vital to place merchants in the best position to win as they prepare for peak.

With FlavorCloud, you can guarantee the best international shipping services and rates when you tap into our world’s largest Global Carrier Network with negotiated shipping and surcharge rates. Our technology considers everything to present your customer with the lowest shipping cost at checkout to drive international growth for you. Our model is transparent with no out-of-pocket expenses post-shipment.

Fuel

With fuel price increases making international headlines, it’s unlikely you are unaware of the problem. Increasing supply and demand constraints related to global political issues, including the Ukrainian war and sanctions, have seen the cost of fuel skyrocket month over month during 2022. Simply put, the current landscape is filled with more complications and competition for resources—meaning fuel surcharges are more relevant than ever.

Even without the considerations mentioned above, fuel surcharges are common and can significantly impact your shipping costs, as they apply to every shipment. Additionally, fuel surcharges can be applied to multiple other surcharges. Read more about major carrier surcharges and those subject to additional fuel fees here. For instance, a percentage will be applied to the total of transportation and remote area surcharges if your shipment is subject to both.

Express carriers use the cost of fuel to determine the fuel surcharge percentage. The price of fuel changes frequently, and therefore these are constantly being updated.

Although we can’t predict fuel prices, it’s likely that the increases we’ve seen are here to stay for a while, although they will fluctuate due to seasonality. Mitigating global supply chain issues for fuel will require increased infrastructure—which takes time to build.

FlavorCloud negotiates the lowest rates through our largest Global Carrier Network, so even though we can’t control external factors impacting fuel prices, we will always keep shipping costs as low as possible. Fuel surcharges are always relevant, but it is particularly important to keep an eye given current events.

DDP fees

Shipments sent Delivery Duties Paid (DDP) create a significantly better customer experience than Delivery Duties Unpaid (DDU). This is because DDP reduces/eliminates cross-border clearance issues. With DDP shipments, the merchant has elected to take on the responsibility of paying the duties, taxes, and clearance fees assessed by the import country’s customs. With FlavorCloud, we take on this responsibility on behalf of the merchant with a full landed cost guarantee unlike any other in the industry. Carriers facilitate the DDP process and clear shipments on behalf of the shipper. Carriers within the FlavorCloud network facilitate the DDP process and usually charge the higher of a percentage of the customs charges or a flat fee. FlavorCloud offers significantly discounted fees or eliminates them for merchants leveraging our network.

Remote Area

Remote area surcharges are typically applied by Express carriers when a shipment is picked up or delivered to a location deemed to be “remote”. For instance, if you are shipping to the northwest territory of Canada, it will cost a lot more to deliver your package! Rural areas are by nature challenging to reach. The surcharge is applied to the shipments to account for the additional transportation costs associated with picking up or delivering to an out-of-the-way location. This surcharge is also subject to an additional fuel fee (mentioned above). Understanding and verifying address information are critical to account for remote area surcharges. The FlavorCloud network dynamically determines these at time of checkout, so it is only applied when relevant.

Emergency/Covid

Carriers implemented the emergency surcharge in response to the COVID-19 pandemic and its disruption to the global supply chain. This surcharge has existed since early 2020 and remains in place today. Carriers continue to feel the impact of the disruption to the global supply chain and export and import processes and add fees to account for additional costs for which the pandemic is responsible.

Accounting for these surcharges and understanding their impact on your transportation cost is essential. These fluctuate depending on the route, market conditions, and supply chain disruptions associated with COVID. These charges vary by carrier, depending on country/region of origin and destination, and are based on operational efficiency in each country.

Currently, parts of Asia and Australia are experiencing the highest surcharges as they continue to experience supply chain disruptions. This is due at least in part to flights to Australia and New Zealand having not rebounded to pre-pandemic frequency and the continuation of lockdowns in areas of Asia.

Peak Season

Peak Season surcharges were a temporary measure during periods when carriers needed to account for higher demand. However, carriers have kept Peak Season or Demand surcharges in place for multiple years now, and they are not only present during higher demand periods such as during holidays. Carriers have effectively increased shipping rates for their client base without negotiating.

As you prepare for peak, it’s more important than ever to brush up on your surcharge knowledge. FlavorCloud negotiates the best rates, including surcharges. Our technology takes everything into account to deliver accurate and lowest real-time shipping rates by tapping into our vast network of carriers. FlavorCloud provides full guaranteed landed cost, including all carrier and customs fees for your customers at checkout—taking the stress out of international shipping.

Conclusion

With peak season planning around the corner and upcoming increases in volumes, it’s essential to be educated and prepared.

If you would like to understand the impact of various shipping options for your account and explore alternate options in anticipation of holiday sales, reach out to your FlavorCloud account rep or contacts us at contact@flavorcloud.com.

If you want to dive further into surcharges, here are reference guides from a few major carriers.

DHL

UPS

FedEx

FlavorCloud offers dynamic pricing, dynamic routing, and data-rich, AI-optimized international shipping. We offer the lowest shipping costs through our Global Carrier Network with guaranteed Delivery Duties Paid.

Arthur Copell

Arthur Copell serves as Head of Carrier Network at FlavorCloud. With more than ten years in ecommerce and logistics, he brings extensive knowledge and enthusiasm to the FlavorCloud team while championing the FlavorCloud product for our customers and driving organizational growth. Results-driven and strategic, Arthur manages FlavorCloud’s Global Carrier Network optimization to provide best in class cross-border solutions for FlavorCloud clients.

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FlavorCloud Team

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