[March 7, 2024 Update: Effective April 8, 2024, UPS will add 82 new zip codes to its Delivery Area Surcharge zones, totaling just under 2,950,000 in population. UPS also announced that, on June 17, 2024, “the applicable zone will change for certain origin/destination ZIP code pairs.”]
As expected, UPS and FedEx announced a general rate increase (GRI) effective on December 26, 2023 and January 1, 2024 respectively. Their twin 5.9% increases could be worse, but as we know in shipping, that’s just the most public rate announced. These percentages aren’t all inclusive—a lot depends on the shipper’s negotiated carrier contract, as well as the less visible changes to the rate structure, like surcharges.
In 2024, one of those surcharges is poised to make a bigger impact than usual, but few know about it. We’re talking about the Delivery Area Surcharge (DAS), which adds to the cost of shipping outside of densely populated areas, as identified by ZIP code. As part of the end-of-year price increases, UPS released its list of ZIP codes subject to the DAS, a list that can be difficult for shippers to analyze for cost impact.
What are delivery area surcharges?
Let’s dive into what delivery area surcharges involve. There are actually three types of Delivery Area Surcharges. That includes a standard surcharge, which includes delivery areas in the suburbs, not as far from the urban, high-density areas. These surcharges are the lowest of the DAS fees.
The next level is the Extended Delivery Area Surcharge to areas less dense than suburbs. The costs rise (especially for residential deliveries) as the carrier must travel further to deliver the packages.
Lastly, the Remote Area Surcharge covers some ZIP codes in the noncontiguous states, Alaska and Hawaii, as it takes the carriers even longer to bring the parcels to those locations.
The DAS usually only applies to the delivery location (hence the name), rather than the pick-up location from the primary origin. However, DAS can include pick-ups if UPS is handling returned items.
Why DAS matters
The DAS is applied to certain ZIP codes that the carrier deems to be outside of the densest delivery areas, resulting in a delivery route that takes more time with less packages delivered, meaning lower cost-efficiency. Time is money, so if the ZIP code is in the DAS range, it will also cost shippers more to send on a per package basis.
Changing which ZIP codes qualify for DAS is not new—it happens every year, and some ZIP codes are also taken off that list. Some regional carriers like OnTrac and LSO do this too. In fact, in 2024, UPS removed more ZIP codes from its Delivery Area Surcharge table that it added – meaning less zip codes receive a DAS than last year.
However, in 2024, nearly 3 million more people will be in DAS zones than 2023.
Wait, UPS lowered the number of DAS zip codes, but more people are affected?
That’s right. UPS removed more zip codes than it added, but the zip codes it added to their DAS tables have a much higher population than those removed.
By our calculations, 2.73 million more people will be added to DAS zones in 2024 with only 15,873 people being removed. In total, approximately 29% of the U.S. population will be in a Delivery Area Surcharge zone.
That’s bad news for shippers.
Also, increases in the DAS fee are going up 5.41% to 8.89%, depending on the service level. With more people covered by the DAS, and the DAS rate increases, shippers need to rethink budgets and perhaps rethink the product and shipping pricings they charge customers.
Adding nearly 3 million people to DAS coverage is an example of how the carriers hide additional increases outside the increase in the base surcharge rate. The overall impact comes from the change in the rate itself but also from the frequency with which the charge will apply.
What services are covered by DAS at UPS?
UPS uses delivery area surcharges for these shipment services:
- UPS Next Day Air Early
- UPS Next Day Air
- UPS Next Day Air Saver
- UPS 2nd Day Air
- UPS 3 Day Select
- UPS Ground
- UPS Worldwide Express Plus
- UPS Worldwide Express NAI
- UPS Worldwide Express
- UPS Worldwide Saver
- UPS Worldwide Expedited
- UPS 3 Day Select from Canada
- UPS Standard to/from Canada
- UPS Standard to/from Mexico
The financial impact
All of UPS’s rates are rising overall. The carrier announced an average General Rate Increase of 5.9%. However, that number is only an “average” and accounts for only base service rates, not surcharges. Most surcharges are increasing well beyond that 5.9% demarcation, including Delivery Area Surcharges.
| Delivery Area Surcharge | 2023 Rate | 2024 Rate | Percentage Increase |
| Delivery Area Surcharge, Commercial Air | $3.70 | $3.95 | 6.76% |
| Delivery Area Surcharge, Commercial Air Extended | $4.50 | $4.90 | 8.89% |
| Delivery Area Surcharge, Commercial Ground | $3.70 | $3.95 | 6.76% |
| Delivery Area Surcharge, Commercial Ground Extended | $4.50 | $4.90 | 8.89% |
| Delivery Area Surcharge, Residential Ground | $5.30 | $5.70 | 7.55% |
| Delivery Area Surcharge, Residential Ground Extended | $7.15 | $7.70 | 7.69% |
| Delivery Area Surcharge, Residential Air | $5.55 | $5.85 | 5.41% |
| Delivery Area Surcharge, Residential Air Extended | $7.15 | $7.70 | 7.69% |
Other commonly assessed surcharges, like large package surcharges, are increasing exponentially, upwards of 20.69% over 2023.
Thinking about switching to FedEx to avoid DAS costs? FedEx has the same DAS pricing per category, so switching carriers for that reason alone will not pay off.
What to do about shipping costs
This reworking of DAS ZIP codes is ostensibly a way for carriers to recoup some costs for less efficient delivery locations. But it is also a way for carriers to raise costs in a less visible manner and boost their bottom lines.
This is where shipper vigilance comes in, to analyze the various pricing and service factors involved with their parcel deliveries, and evaluate if their current carrier rates, service usage, and options are ideal. This might mean renegotiating with the current carrier, adding on or diversifying additional carrier options like regional carriers, shifting volume between modes of transportation and services, or switching from one major carrier to another.
This type of evaluation is complex and time-consuming. It also requires a great deal of expertise and current marketplace knowledge to be effective. That’s why some shippers seek the help of experts like Shipware, who can evaluate the overall impact of ZIP code changes like UPS’s, along with an individual company’s shipping characteristics to understand each option’s savings opportunities. An analysis can also holistically consider package sizes, customer locations, delivery timing and any other factors.
Shippers may be able to negotiate a discount on the DAS based on volume and other factors. However, understanding the impact first is key when negotiating with a carrier. If the shipper has other surcharge types that are more influential on the shipper’s costs, they should prioritize those for negotiations. Shipware can help brands determine the best negotiation strategy and guide them through the process for optimal results.
Auditing the shipping invoices is another way to lower costs. This process can automatically flag any incorrect DAS charges—or other inaccurate pricing—to recover funds. Our auditing software combs through the shipping invoices, catching errors and requesting credit from the carriers. There is no direct cost to shippers—Shipware only receives a percentage of the savings.
To learn more about how DAS and the ZIP code changes are affecting your business, and what you can do to lower your shipping costs, contact Shipware online.
