FedEx implements surcharges on international movements, APAC hit hardest

FedEx (NYSE: FDX) and its subsidiary TNT International are placing surcharges on all international parcel and freight shipments. The changes go into effect April 6.

The changes were described as temporary.

In its announcement of the changes, FedEx said it was still operating under various states of emergency and shelter-in-place rules around the world. “Air cargo capacity is limited, and we’ve had to make adjustments so that our international networks can best deliver much-needed goods and services in this constrained environment,” the company said in its statement. 

The surcharges are per pound or per kilo. On the per pound shipments, for freight or parcels originating from China, the surcharge will be $0.45 per pound to all countries. From other countries in the APAC region, it will be $0.45 to China and the rest of APAC, and $0.10 to the rest of the world. For non-APAC countries, the fee is $0.10 to all other locations.

In its morning note, the transportation research team at Deutsche Bank, led by Amit Mehrotra, said the international segment impacted by the changes were 22% of all FedEx sales in fiscal 2019. 

“The surcharge is in response to the COVID-19 crisis…delivering under state-of-emergency/ shelter-in-place restrictions, global supply chain disruptions, limited air cargo capacity, and, most likely, capacity constraints within FedEx’s global network,” Deutsche said in the note. “We believe this surcharge is indicative of the demand FDX is currently seeing for the aforementioned services and should provide some relief from a freight selection and margin perspective.”

The report also said similar announcements from UPS and other carriers might follow. 

FedEx put through rate increases in early January on most of its services. For FedEx Freight, which provides less-than-truckload service, the average increase at that time was 5.9%.