They are who we thought they were: UPS Announces Massive Rate Changes in Q2 2025
UPS is at it again, announcing a broad set of changes to rates and fees beginning in Q2 2025. The Q2 announcements featured extensive updates / changes to a number of UPS’s services, which will have a significant impact on shippers’ margins at a critically important time in the business cycle – while they’re trying to navigate an increasingly uncertain and volatile environment.
A high-level overview is outlined below, with supplemental detail – and some added context / perspective to follow.
Rate Update Overview:
Surge Fees: Updated Surge Fee rates now apply to certain international shipments (predominantly Canada), effective May 18, 2025. A specific surcharge of $0.29 per pound on all shipments from China, Hong Kong, and Macau entering the U.S. was reinstated on April 13, 2025.
Additional Fuel Surcharge Adjustments will be in effect beginning May 26, 2025 for U.S. Air, U.S. Ground Domestic and UPS Ground Saver®. These Fuel Surcharges are generally routine (as they change every week) though have significant impact on shipping costs, especially as most surcharges range between 17% - 28% of applicable fuel price per gallon.
Area Surcharge ZIP Code Changes: Certain ZIP codes subject to Area Surcharges will change effective June 1, 2025, reflecting updates to account for higher operating costs in less populated or accessible areas.
June 2nd Broad Rate Updates: In one of the most aggressive mid-year rate updates we have ever seen, UPS announced a set of sweeping changes to many services:
Zone Designation (based on Zip origin / destination changes); Remote Zip Codes will also receive a surcharge for Ground Saver packages
Significant changes to Additional Handling costs (Weight $55, Dimension $38, Packaging $31.50)
Large Packaging fees changed to $260 (Commercial) and $305 (Residential)
The Shipping Charge Correction Audit Fee will be the greater of $1.65 per package (subject to a shipping charge correction during the applicable invoice period) or 12% of the total amount of shipping charge corrections (during the applicable invoice period).
The Over Maximum Limits fee for packages will be changed to $1,775 and will be billed to the U.S. Consignee for international shipments
As if these changes were not already enough, UPS announced recently additional updates to Large Package Surcharge (LPS) and Additional Handling fees, effective August 17, 2025:
LPS Calculation will no longer be applied based on length plus girth. Instead, it will be determined using revised calculations based on: having cubic size greater than 17,280 cubic inches or weight over 110 lbs for Domestic Packages. Other existing factors for LPS applicability remain unchanged.
Why is UPS making these changes? Because they can. Again, they are who we thought they were.
Scattered throughout these announcements, UPS makes repeated claims that these “rate updates help to support ongoing expansion and capability enhancements as we strive to maintain the high service levels you expect from UPS.”
In reality, UPS is reaping what they sow… and using it to preserve (READ: grow) profit margins. They are the clear industry leader in terms of market share, which has grown in the last 12 months from 36.7% to 37.8% (primarily resulting from international market growth). FedEx sits immediately behind them, at ~36. Between the two shipping giants, they command nearly 75% of the small parcel industry.
Armed with the knowledge that your largest competitor is likely to follow your lead, you can comfortably become more aggressive to help insulate profit margins against the volume uncertainty brought on by economic instability.
Perhaps more interestingly, UPS’ profits are already growing through the first quarter of 2025. UPS’s Q1 Earnings release reflected a $146M increase in Operating Profit from Q1’24 to Q1’25, a whopping 17.% growth YoY. See chart below:
UPS, Q1 2025 Earnings Release
Revenues were also up YoY, growing at 1.4% from first quarter ’24 to first quarter ’25. This is the result of a 4.5% increase in revenue-per-piece, which reflects the decline in volume. While the broader economy continues to try to find solid footing to help anchor their mid-term growth, UPS is strengthening its positioning and it’s balance sheet through strategic use of rate adjustments.
Clearly, it’s time to push back. We continue to help our clients to be more rigorous in the management of their small parcel spend – and empower them to be much more aggressive in the negotiations.