Brands are getting creative as fuel costs raise shipping fees

Effective last week, UPS now has surge emergency fees for goods coming from India, China and Hong Kong to the United States. There’s also a $0.32-per-pound fee for goods shipped internationally from the United States and a $1.50-per-pound fee for those going to Israel or the United Arab Emirates. The fees are in effect until further notice. In late April, the U.S. Postal Service implemented a temporary 8% fuel surcharge that will stay in place until at least January 2027.

Josh Steinitz, chief strategy officer at shipping and logistics company Auctane, said fuel surcharges are a way carriers can adjust for their own higher costs of doing business without affecting base rates. It’s particularly common at USPS, where there are legal regulations on what kinds of price hikes can be made.

To help mitigate costs, Steinitz said e-commerce companies are shopping around more before selecting a carrier. They’re taking into account not only rates but also delivery speed, as well as the bulk requirements that may be necessary for larger-volume orders.

“This has really made logistics a strategic choice and point of differentiation, as opposed to a commoditized function you plug in at checkout,” he said.

Steinitz said ShipStation, a shipping software company for brands owned by Auctane, is also seeing increased usage of AI-powered tools to help automate fulfillment more efficiently. Some brands may be willing to subsidize faster shipping for higher-priced items, for example, while choosing slower speeds and user-paid shipping for lower-value orders.

Higher fuel costs also mean that companies are shipping more inventory to the United States ahead of forecast demand, Steinitz said. It’s a strategy that’s become more common since the end of the de minimis exemption, which let packages up to $800 be sent into the United States duty-free.

But with no clear end in sight to higher fuel costs due to the ongoing conflict in the Middle East, Steinitz said there could be further impacts to brands beyond the latest surcharges. Carriers operate with around 15% margins, he said, which could get quickly eaten away if fuel costs continue to spike.

“It’s no longer the kind of thing where you can set it and forget it, and just do one deal with my one carrier,” he said. “It’s really forcing merchants of all types and sizes to think strategically about how they optimize this.”