If you only pay attention to the headline number, you’re missing the most important part of the story. The announced 5.9% FedEx 2025 general rate increase is just the tip of the iceberg. The real threat to your shipping budget lies in the surcharges, where some fees are jumping by more than 25%. From Additional Handling to Delivery Area Surcharges, these fees are designed to penalize anything outside of a perfectly streamlined shipment. For high-volume shippers, these seemingly small charges accumulate into significant costs. We’ll decode the fine print, showing you which surcharges will hit the hardest and what you can do about them.
FedEx has announced a 5.9% 2025 General Rate Increase (GRI) that will take effect on January 6, 2025. UPS has not yet announced its General Rate Increase, but you can be sure that it will be coming soon and that there is a good chance they will mimic FedEx since, well, that’s what happens every year. While the 5.9% is the same as last year, the first thing to keep in mind is that the General Rate Increase is an average. Depending on the service or services you use and other factors within that service (weight of the package and distance traveled), that rate increase can be above or below the average. For example, we are seeing increases above 5.9% for both Ground Commercial and Home Delivery starting at zone 5 and above. Same thing on 2nd Day air. The shipments above zone 5 are getting hit hard. FedEx is going to charge you more for the distance your packages travel on these services. There is a lot to digest, and the impact to any one shipper will differ significantly based on factors like whether your shipping is air or ground, commercial or residential, or large or small packages. Keeping that in mind, below are several items that stand out:
Why Annual Rate Increases Happen
If you’ve been in the shipping game for a while, you know that General Rate Increases (GRIs) from carriers like FedEx and UPS are as predictable as the changing seasons. But just because they happen every year doesn’t make them any less painful for your bottom line. Understanding why carriers roll out these increases is the first step toward building a strategy to minimize their impact. It’s not just a simple price hike; there are a few layers to peel back to see what’s really going on with your shipping spend and how you can get ahead of it.
Covering Rising Operational Costs
At the most basic level, carriers justify GRIs as a way to keep up with their own rising expenses. Just like any other business, they face increasing operational costs that they need to cover. According to Pitney Bowes, “these yearly increases help FedEx cover higher costs for things like fuel, labor, and general inflation.” Beyond that, these rate adjustments are also highly strategic. Carriers use GRIs to influence shipper behavior and guide customers toward services that are more efficient and profitable for them. By making certain services, zones, or package characteristics more expensive, they can subtly encourage you to change your shipping patterns. This is why a deep understanding of your own shipping data is so critical. When you can benchmark discounts and incentives against what’s possible, you’re better positioned to negotiate a contract that protects you from these targeted hikes.
The Mid-Year Surprise: A New Trend
One of the most important shifts in recent years is that the annual GRI is no longer the only rate change you need to watch for. In the past, shippers could budget for a single rate increase in January and plan accordingly. Now, that’s changing. As one industry report notes, “both carriers are now making important changes and adding new fees in the middle of the year, not just at the start.” This trend of mid-year adjustments means that staying on top of your shipping costs requires constant vigilance. The announced “average” increase, like this year’s 5.9%, rarely reflects the true impact on your budget because the real story is often hidden in the surcharges. These accessorial fees can quickly inflate your costs far beyond the advertised average. The only way to catch these discrepancies and protect your budget is through a consistent invoice audit and recovery process that ensures you’re only paying what you should.
FedEx Announces Rates First—What’s Next?
Like last year, FedEx has announced their rate increase before UPS. Traditionally, while there is some variance within their rate increases (typically as it relates to certain surcharges and when and how they apply), overall, both carriers tend to match the other. FedEx throwing down the gauntlet first, sets the tone, but we don’t want to read too much into this. Someone had to be first. If FedEx is your primary carrier their announcing first is obviously more relevant to you. If you are splitting volume or primarily with UPS, you’ll still want to pay attention to what FedEx has announced regarding how you may want to proceed in the future. Either way, we can expect UPS to announce soon based on precedent.
UPS Matches the 5.9% Increase: What You Need to Know
Just as we predicted, UPS has followed FedEx’s lead, announcing an average rate increase of 5.9% for 2025. While the number seems straightforward, the real story is always in the fine print. This “average” increase doesn’t tell you how your specific shipping profile will be affected. The true impact lies within the complex web of surcharges and accessorial fees, which are seeing much steeper hikes. These extra charges, for everything from fuel to residential deliveries, can easily add 30% to 40% to your total shipping costs if you’re not paying close attention. Understanding these nuances is the first step to protecting your budget from unexpected inflation.
For high-volume shippers, these details are more than just minor adjustments; they represent significant operational costs that can eat into your profit margins. It’s crucial to look beyond the headline number and analyze how the changes to specific surcharges will affect your bottom line. This is where a deep dive into your carrier agreement and shipping data becomes essential. A thorough invoice audit can reveal exactly where these new fees are hitting you the hardest, giving you the insights needed to build a smarter shipping strategy for the year ahead.
Key UPS Surcharge Hikes for 2025
While the 5.9% GRI gets all the attention, the most significant cost increases for 2025 are buried in the surcharge tables. UPS is implementing substantial price hikes on several key accessorial fees that affect a wide range of shippers. These aren’t just small tweaks; some of these increases are well into the double digits. For businesses that frequently ship large items, have minor address errors, or deliver to residential areas, these changes will be felt immediately. It’s a clear signal from the carrier that operational efficiency and accuracy are more important than ever, and shippers will pay a premium for anything that falls outside of standard, streamlined delivery.
Over Maximum Limits and Large Package Surcharges
If your business ships large or oversized products, get ready for a major cost adjustment. The Large Package Surcharge is seeing one of the most dramatic increases for 2025. For commercial deliveries, the fee is jumping 27%, from $205 to $260. For residential deliveries, it’s rising 24%, from $240 to $297.50. These are not minor increases; they are substantial enough to completely alter the profitability of selling bulky items. This change makes it critical to re-evaluate your packaging and potentially explore carrier diversification to find more cost-effective options for your larger shipments.
Address Correction and Delivery Area Surcharges
Small mistakes can now lead to bigger costs. The fee for an address correction is increasing to $23.50. While that might not sound like much, for a company shipping thousands of packages a month, even a 1% error rate can add up to thousands of dollars in preventable fees over the year. This highlights the growing importance of address validation software and clean customer data. Similarly, Delivery Area Surcharges for residential and remote locations continue to be a significant factor, adding to the final cost of each applicable shipment and making it harder to predict your total spend.
A New Rule for Large Packages: The Cubic Volume Calculation
Starting January 27, 2025, UPS is introducing a new calculation that will have a major impact on how large packages are priced. The carrier will begin applying a cubic volume calculation, which means the amount of space your package occupies will be a more significant factor in its cost. This move directly targets inefficient packaging. If you’re shipping items in boxes that are too large or have a lot of empty space, you can expect to see your costs go up. This change makes optimizing your packaging not just a good idea for sustainability, but a financial necessity to control your shipping expenses.
Got Big Packages? Why Your FedEx Bill is About to Jump
Additional Handling and Oversize fees will increase by more than 26%. That continues a trend. In the past, even if these fees went up, they were the same across all zones. Not anymore. The rates have increased significantly AND increase the farther your package travels. If you have big packages, you are going to be penalized, while those with smaller stuff will not. FedEx sees an opportunity to make money and improve these packages’ margins. They know shippers have fewer options when it comes to bigger packages, and they are going to make you pay for it. That said, you are not without options. By doing this, FedEx is also sending you a signal to start a conversation with other carriers.
Table 1. Click to Zoom.
3. Increases higher on 2nd Day air services
As you can see in Chart 1, the rate increase for the next-day air services, Priority, and Standard Overnight, hews closely to the 5.9% average rate increase. Jump ahead to the 2nd Day Air AM and 2nd Day Air services and you see an average rate increase well above the line at all weights. With greater emphasis on meeting a two-day delivery commitment that has been commonplace in the market, it seems FedEx thinks they can get shippers to pay more to get things delivered before the third day. While many shippers will choose cheaper ground options for both commercial and residential deliveries, that is only available on shipments nearer to home, which can deliver within two days. After that, you need an air option. The Ground commercial rates at the lighter weights have increased LESS than the 5.9% average rate increase, though at 11 lbs.+, they exceed that average. There is more of an increase on Home Delivery, impacting residential shipments even more.
Chart 1. Click to Zoom
Chart 2. Click to Zoom
Decoding the Fine Print: Key FedEx Surcharge Increases
Beyond the headline rate increase, the real story is often in the surcharges. These fees can feel like they come out of nowhere, quickly inflating your shipping invoices if you’re not paying close attention. FedEx has adjusted several key surcharges for 2025, and understanding these changes is the first step to mitigating their impact. It’s not just about the big packages or long distances; seemingly minor fees for administrative tasks and fuel can accumulate into significant costs over time. Let’s break down a few of the most important surcharge updates so you can see where your budget might be most affected and start planning your response.
Address Correction and Late Payment Fees
A simple typo can be more costly than you think. FedEx is increasing its address correction fee to $24, a jump from $22.50. While that might not sound like much, for a high-volume shipper, these fees can add up to thousands of dollars over a year. This charge is applied anytime FedEx has to fix an incorrect or incomplete address to complete a delivery. On top of that, they are implementing an 8% late payment penalty on unpaid balances. Both of these fees highlight the importance of operational precision. Ensuring your address data is clean before packages go out and that your payment processes are timely are crucial. Regularly performing an invoice audit can help you catch and recover erroneous fees while also identifying patterns that lead to these preventable charges.
Understanding Fuel and Demand Surcharges
The fuel surcharge remains one of the most significant and variable costs in shipping. It changes weekly and is applied to the total shipping cost, which—and this is a key detail—includes most other surcharges. This means you’re paying a surcharge on top of other surcharges, a compounding effect that can dramatically inflate your final bill. For domestic shipments, this fee can easily exceed 15% of the total cost. Because it fluctuates, it makes forecasting your shipping spend a real challenge. Gaining visibility into how these variable fees impact your overall costs is essential for accurate budgeting and identifying opportunities for savings. Having robust reporting and KPIs can help you track these trends and make more informed decisions about your shipping strategy.
The New Dimensional Weight Rule
FedEx is also updating its dimensional (DIM) weight calculation, a change that directly impacts shippers with large but lightweight products. DIM weight is a pricing technique that uses a formula based on a package’s length, width, and height to determine its billable weight. Essentially, you’re charged for the space your package occupies on a truck, not just its actual weight. This update means that if you ship bulky items—like pillows, apparel, or certain electronics—you could see a significant cost increase even if the actual weight of your packages hasn’t changed. This move underscores the growing importance of packaging optimization. Taking steps to reduce distribution and fulfillment costs by minimizing package size can directly counteract the impact of this new rule.
Why Are FedEx 2-Day Air Rates Spiking?
We all understand what a rate increase means. One of the things that often gets lost in the shuffle is understanding the minimum price for FedEx services. Both FedEx and UPS put a floor price in place. So, even if you have great discounts, FedEx makes sure you will not pay less than the rates listed below in Table 2 for each of their services. Only the Priority Letter rate exceeds the 5.9% GRI. Most of the rest are close, are either just a hair below, or well below it in the case of the Express Saver service. If you are trying to get better rates from FedEx and only ask for discounts, you may end up short-changing yourself. A 100% discount on Priority Overnight Letters still means you’ll be paying $34.71 for that service in 2025. And, of course, that doesn’t even include what you’ll be paying in the way of surcharges.
Table 2. Click to zoom
Beyond 2-Day Air: Increases for Express and International Services
The focus on 2-Day Air is significant, but it’s not the only expedited service getting a steeper-than-average price hike. FedEx is applying similar logic across its portfolio, with services like Express Saver and International Priority also seeing rates climb above the 5.9% average. This pattern points to a clear strategy: if you need speed and reliability for domestic or international shipments, you’re going to pay a premium. For businesses that rely on these services to meet customer expectations, these increases will directly impact the bottom line. This is where a close look at your shipping data becomes essential. Understanding your specific shipping profile is the first step to identifying opportunities to optimize your carrier contract and ensure you aren’t overpaying for the services you need most.
Understanding the FedEx Minimum Charge: Are Your Discounts Working?
When you first hear that the GRI is 5.9%, most folks would assume that it applies across the board. As mentioned, when applied to the service charges, it’s just an average. Things get worse when it dawns on you that SURCHARGES increase at a rate that is almost always above the announced GRI. We can see how aggressively that is the case with Additional Handling (AHS) and Oversize fees. These are all closer to 30% than they were to the 20% increases of last year. A real blow to the bottom line. But, not to be lost in the discussion is the fact that most other surcharges also have increased above the 5.9% General Rate Increase. The most important of these surcharges are the Residential surcharge and the Delivery Area Surcharge (DAS). The Express Residential surcharge will go up 6.5% and the Ground Commercial and Home Delivery Residential fee tops 7.2%. The DAS increases are between 6% – 9%. No bueno. Certain fees, many of them for Ground Economy, took no increase. That’s a small consolation when it comes to the overall increases seen below.
Table 3. Click to zoom
How to Handle the 2025 FedEx Rate Increase
First, keep in mind that UPS hasn’t announced yet, although they should very soon. Once we know what their rate increases are like, we’d recommend reviewing the items listed below. Know your shipping profile. Understanding what you ship, where you ship, and what requirements are expected of you by your recipients, is key to understanding how the 2025 rate increase will impact you.
Explore Your Shipping Alternatives
FedEx and UPS very much want you to think they are the only game in town. That has never been more wrong than it is now. There are regional carriers who now compete with our duopolistic friends. It’s been over two years since OnTrac and Lasership merged under the OnTrac name to become a transcontinental provider. There are other regionals, like GLS, and Amazon continues to expand its offerings to not only deliver packages but also to pick them up.
How to Negotiate Your FedEx Rates
Make sure that you actually negotiate with them. You’ll be surprised at how well you can do if you are willing to hold firm. Related to that, make sure you are willing to do the tough work that would involve moving away from your primary carrier. In summary, the 5.9% rate increase is not as good as the 4.9% we’ve seen in the not-too-distant past, but it’s definitely better than the 6.9% rate increase we saw as recently as 2023. The market is softer, and FedEx understands that. That is a win, and we’ll take it. That said, these increases are not something a lot of companies can get away with. Can you give an across-the-board rate increase to your customers every January? Probably not. That’s why it’s imperative you understand the impact the 2025 rate increase will have on your bottom line. Just as importantly, make sure to have a conversation with your carrier reps as well as the reps from their regional competitors. Whether you request help from a consultancy or do it on your own, know that you have options! Interested in a complimentary FedEx GRI Impact Analysis? Contact us here.
Optimize Your Packaging to Reduce Dimensional Weight
With hefty increases on Additional Handling and Oversize fees, your box size matters more than ever. Carriers use a formula called dimensional (DIM) weight to charge for a package’s volume, not just its actual weight. If you’re shipping lightweight but bulky items, you could be paying a premium. Take a hard look at your packaging strategy. Can you use a smaller box? Is there a way to repackage items to make them more compact? Reducing empty space with custom-fit boxes or poly mailers can help you avoid triggering those higher DIM weight calculations and costly oversized surcharges. This isn’t just about saving on materials; it’s a direct strategy to reduce your fulfillment costs and fight back against these targeted fee hikes.
Use Address Verification Tools
An incorrect address might seem like a small mistake, but it’s an expensive one. FedEx charges a significant fee for every address correction, and that fee is also increasing. These charges are completely avoidable and represent pure profit for the carrier. For high-volume shippers, these fees can add up to thousands of dollars over a year. The best defense is a good offense: implement an address verification service (AVS) tool into your checkout or order management system. These tools automatically check and correct addresses before a label is even printed, ensuring accuracy and eliminating the risk of this unnecessary surcharge. It’s a simple, tech-forward solution that protects your bottom line from easily preventable errors.
Audit Your Invoices Regularly
Don’t assume your carrier invoices are always correct. With millions of packages being processed daily, billing errors are surprisingly common—and the complexity of the new rate structures only increases the chances of mistakes. Regularly checking your shipping bills is crucial to make sure you aren’t being overcharged for incorrect fees, failed service guarantees, or misapplied surcharges. A thorough audit can uncover discrepancies that directly impact your shipping spend. For businesses shipping at scale, manually reviewing every line item is nearly impossible. That’s why a systematic approach to invoice audit and recovery is essential for ensuring you only pay for the services you actually receive, at the rates you agreed upon.
Finding and Recovering Billing Errors
Manually sifting through dense carrier invoices is a time-consuming and error-prone process. You’re likely to miss more than you find. This is where technology becomes your best ally. Automated auditing software can scan every single invoice against dozens of potential error points, from invalid address correction fees to late deliveries that should have been refunded. These systems can identify discrepancies in seconds and automatically file claims on your behalf to recover the funds you’re owed. This not only makes the process more accurate but also frees up your team to focus on other critical business operations while ensuring no money is left on the table.
Consolidate Shipments When Possible
If you frequently send multiple packages to the same customer around the same time, you have a prime opportunity to save. Consolidating those items into a single, larger shipment can significantly lower your overall costs. Instead of paying the base rate and applicable surcharges (like residential or delivery area fees) on two or three separate boxes, you pay them only once. While you need to be mindful of DIM weight and oversized package limits, a smart consolidation strategy can be very effective. Review your order fulfillment process to identify opportunities to group shipments, which can lead to substantial savings, especially for B2B customers or subscribers who receive regular deliveries.
Frequently Asked Questions
Why is the 5.9% rate increase number so misleading? Think of the 5.9% figure as a national weather forecast. It gives you a general idea, but it doesn’t tell you if it’s going to rain on your specific street. Your company’s actual rate increase depends entirely on your shipping profile—what you ship, how big it is, and where it’s going. The real cost increases are hidden in the surcharges for things like large packages, residential deliveries, and fuel, many of which are rising by over 25%. Your final cost increase will be a unique blend of these factors, and it’s almost guaranteed not to be a simple 5.9%.
My company mostly ships small, lightweight items. Will these surcharge hikes still impact us? Yes, you’ll definitely feel the impact, just in different areas. While you might dodge the massive hikes on oversized packages, you’re still exposed to other significant increases. Fees for residential deliveries, delivery area surcharges for remote locations, and address corrections are all going up. For a high-volume shipper, even a small percentage of packages incurring these fees can add up to thousands of dollars in extra costs over the year. Precision in your data and understanding your delivery zones are more critical than ever.
With carriers raising rates so aggressively on large packages, what are my options? You have more leverage than you might think. The first step is to look inward at your packaging. If you can reduce the size of your boxes to avoid triggering dimensional weight pricing or oversized fees, you can immediately cut costs. Beyond that, this is a clear signal from the carriers that it’s time to shop around. Regional carriers are becoming increasingly competitive and may offer better rates for the lanes you serve. Don’t assume you’re stuck; use this as an opportunity to explore a more diversified carrier strategy.
Is it actually possible to negotiate these rates and surcharges with FedEx or UPS? Absolutely. Your carrier agreement is not set in stone, and nearly every aspect of it can be negotiated, from base discounts to surcharge caps. The key is to come to the table prepared. This means having a deep understanding of your own shipping data, knowing exactly how these rate changes will affect your budget, and having benchmark data on what rates are achievable in the current market. Strong data turns a hopeful request into a business case your carrier representative can’t ignore.
Besides the annual January increase, what other rate changes should I be watching for? The annual General Rate Increase is no longer the only event to plan for. Carriers have started a trend of introducing new fees and adjusting surcharges mid-year. This means that managing your shipping budget has become a year-round activity, not just a fourth-quarter planning session. The best way to stay ahead is to implement a consistent invoice auditing process. This not only catches billing errors but also gives you real-time insight into how these unexpected changes are affecting your costs, so you can react quickly instead of being surprised months later.
Key Takeaways
- The Real Cost Is in the Surcharges: Don’t be misled by the 5.9% average increase. The most significant price hikes are hidden in accessorial fees, with some surcharges for large or improperly handled packages increasing by over 25%.
- Large Packages and Long-Haul Shipments Face the Steepest Hikes: Carriers are strategically increasing rates for specific services and package types. Expect to pay a significant premium for oversized items, 2-Day Air services, and shipments traveling to farther zones.
- Proactive Adjustments Can Offset the Increases: You have more control than you think. Simple operational changes like optimizing your packaging to reduce dimensional weight, verifying addresses before shipping, and consistently auditing invoices are your most effective tools for protecting your budget.
Related Articles
- How to Negotiate Better Shipping Rates with FedEx and UPS
- FedEx vs. UPS: Understanding Surcharges and Hidden Fees
- The True Cost of Shipping: Why Surcharges Matter More Than Base Rates
- Dimensional Weight Pricing: How to Avoid Paying More Than You Should
- Invoice Auditing: How to Catch and Recover Shipping Overcharges
