What to Know About Fuel Surcharges on Parcel Shipments

by | Apr 27, 2017 | Parcel

Fuel surcharges are just one of the many ways that business owners lose money each year on parcel shipments. Expensive, inflexible, and constantly changing, it’s hard to determine how much it will be, let alone figure out how much it was before. This can make bookkeeping, cost tracking, and even charges for your customers a huge hassle. But there is an easier way to deal with shipping costs.

Fuel Surcharge on Parcel Shipments

First, What’s a Fuel Surcharge & Why Do I Pay It?

Fuel surcharges are a way for parcel carrier companies to mitigate the regular fluctuation in fuel costs. Most commonly, the charge is based on the National U.S. Average On Highway Diesel Fuel Price, which is reported each week by the U.S. Energy Information Administration (EIA). International fuel surcharges are similarly estimated by the U.S. Gulf Coast (USGC) price for kerosene-type fuel jet, which is also reported by the EIA.

It makes sense that a big shipping company would charge such a fee, since it’s the only way that they can pad their bottom line. But why should your business have to pay a different price each week when the difference could just be a couple of cents? And wouldn’t it be easier if you could just pay a flat fee for these costs and be done with it? The fact is: you can!

Mitigating the Cost of Fuel Surcharges with a Parcel Carrier Contract

There are quite a few things you can negotiate in your parcel carrier contract, from base incentive discounts and beyond. But you may not know that you can also negotiate for a flat rate fuel cost instead of staying at the mercy of the oil industry. In fact, having a flat fuel rate is the best way to mitigate the cost of fuel surcharges when negotiating a parcel carrier contract.

As a small/medium business owner, it may seem like you’re always a David standing up against all of the Goliaths. But you may have a little more sway in your business negotiations than you assume. According to the U.S. Small Business Administration’s Office of Advocacy, 99.7% of all U.S. employers are small businesses. That means that the majority of small package freight in the United States is moving because of small business owners like you, and you have a lot more sway than you think.

Negotiating For a Better Parcel Carrier Contract

The first step to getting a more affordable parcel carrier contract is to have a file of facts. You need to know (a) what you’re paying per package now, (b) what your total shipping costs are supposed to be, and (c) what your total shipping costs actually are. If you don;t currently have a parcel carrier agreement in place, the professionals at Amware can help.

If you have an existing parcel carrier agreement and aren’t sure if your parcel carrier are meeting their commitments, Amware offers ParcelRate; a software that can sift through all of your parcel expenses and let you know exactly how much you’re paying. The software can also let you know how much you could be paying. By breaking down your parcel contract, Amware can help you find out where you can save. Then, you can take that information to your carrier and negotiate a better parcel carrier contract and save your business tens of thousands per year. For a complete overview of Parcelrate, click below and download the FREE ParcelRate guide today!

ParcelRate Guide

About Dan Ramella

About Dan Ramella

Dan Ramella is a member of Amware's executive team, helping drive growth and manage key relationships. With over 20-years experience in the transportation and logistics industry, Dan has helped Amware become one of Northeast Ohio's premier 3PLs