For FedEx, Annual Rate Hikes Are Business as Usual

Shippers are still grappling with FedEx’s 2025 peak-season surcharges, announced in July. Effective January 5, 2026, FedEx parcel and FedEx Freight LTL shipping rates will increase by an average of 5.9%. Details can be found here.  

During the carrier’s fiscal Q1 2026 earnings call last week, FedEx leadership discussed the demand surcharges and their annual GRI. This rate increase reflects FedEx's focus on maintaining profitability while navigating the challenges of the current operating environment, including higher costs and changing demand patterns. The adjustments are intended to help sustain FedEx margins and ensure continued service quality, especially during peak seasons.

If 5.9% sounds familiar, it’s the same annual general rate increase (GRI) announced by both FedEx and UPS in 2023 and 2024.

Some of these surcharge increases don’t seem as drastic as previous years, but it’s important for shippers to remember that they already experienced several rate increases from FedEx over the summer. Just to provide some context for the announcement, here are some key takeaways from Redwood’s Parcel Advisory team:

• FedEx is clearly increasing the cadence of its rate hikes. For example, the Additional Handling and Oversize Charge already increased on July 14th. This charge is tiered, based on shipping zone.
• The International Inbound Processing Fee was implemented on August 18, and will be increasing to $2.65 in January, a 6% increase.
• With the de minimis changes, effective September 22nd, international shippers will be facing new duty fees for all shipments, even those $800 and under. These are tiered fees that will also be increasing with the GRI.
• The fee for Domestic Address Correction will increase by 6.25%.
• With the 2025 GRI, FedEx increased the Ground Unauthorized Package Charge to $1,325. However, FedEx increased this surcharge by 33.96%, to $1775, on July 14th. The carrier will again increase this charge, to $1,875 (reflecting a 5.63% uptick), with the 2026 GRI.

What’s Happening? The Big Carriers Are Flexing Their Muscle 

Plenty of good financial news for FedEx was revealed during the call. The carrier’s quarterly net income rose to $820 million, compared to $790 million last year. Average daily volumes in the U.S. grew by 6%. The company projected revenue growth to be in the range of 4% to 6% in 2026. FedEx share prices climbed by more than 5% in the hours following the announcement.

So, if FedEx is having such a great year, why is the carrier defaulting to the same old annual GRI for the third year in a row? And increasing the scale and frequency of its surcharge increases? 

The short answer is that this industry giant—which moves over 17 million packages daily, according to the earnings call—has a lot of power. As we discussed in a previous blog post, FedEx is strategically reshaping its business to increase efficiency and cut costs. For example, its new parcel pickup pricing structure, which went into effect on August 18th, is aimed at charging customers more if they schedule frequent pickups versus less frequent stops, which is more efficient for fleet and driver resources.

It’s Time to Flex Your Own Muscle and Rethink Your Carrier Mix 

While we all understand the power that comes with industry leadership, it’s critical to also understand that you have many options when it comes to parcel shipping. You also have power.  

Maybe FedEx simply isn’t the best fit for your business, as it focuses on higher margins and greater operational efficiency. There are plenty of smaller regional carriers who might be hungrier for your business.  

As you rethink your carrier mix, here are the factors that come into play:

• Your shipping patterns. What are your typical parcel sizes, weights, destinations, delivery timelines, and volumes? What FedEx services do you use most often? What are your customers’ delivery expectations? Based on your shipping needs and behaviors, figure out what carriers make the most sense, from both a cost and service standpoint. Look beyond the big names.
• Your actual contracted rates and discounts. Every carrier has a list of published standard rates. But most shippers negotiate their own contracts and rate schedules, based on their volumes. Use your buying power, and competitor rates, to flex your muscle and push back on the big carriers’ constant rate increases.
• Your use of innovative cost-savings practices. The majority of the order management, packaging, and parcel shipping process is under your direct control. You should be driving time and costs out of your internal workflows to counter higher carrier rates. Process automation, new packaging materials and strategies, network redesign, zone skipping, and other best practices can create huge internal efficiencies and cost savings. 
• Your use of carrier financial and performance data. Are your carriers, including FedEx, invoicing accurately? Are they meeting your service and delivery expectations? Knowledge is power. You have enormous volumes of data related to parcel shipping. Analyze that data to make sure your transportation partners are serving you well and charging you fairly. Redwood has found that, every year, 75% of parcel audit refunds go unclaimed. 

Redwood Delivers 23% Annual Parcel Savings on Average 

If you’re lacking the internal resources to analyze and optimize your shipping behaviors, Redwood can help. By providing business and financial analysis, contract negotiation coaching, execution support, and other services, we save shippers an average of 23% on their annual parcel spend.  

In light of bigger, more frequent cost increases from the major carriers, it’s time to empower yourself and achieve a more profitable 2026. Contact Redwood today and mitigate the costs associated with parcel carriers’ annual rate increases.