FedEx adds war surcharge as Ukraine crisis ratchets up shipping costs

Date: Tuesday, March 8, 2022
Source: Freightwaves

FedEx Express notified customers on Thursday that it will hike its peak surcharge for many international  parcel and freight shipments, beginning next week, because of the latest supply chain disruptions caused by the Russian invasion of Ukraine.

The express delivery company is increasing the surcharge by 20 to 30 cents per kilogram for most of Asia-Pacific, effective Monday, with price increases starting March 21 in other areas. European exports and imports are rising a tenth of a euro, or 11 cents, per kilogram. Increases also apply in the Indian subcontinent, Africa and Latin America, according to the tariff schedule.

“Due to continued disruptions in the global supply chain, air cargo capacity remains limited. We are incurring incremental costs as we continue to adjust our international networks and operate in this constrained environment,” FedEx (NYSE: FDX) said a customer update.

The extra fee will also apply to shipments moving through FedEx’s intra-European network formerly known as TNT Express.

Memphis, Tennessee-based FedEx didn’t use the terms war surcharge or Ukraine, but news of the fee came nearly a week after the outbreak of hostilities roiled ocean, air and ground freight transportation in Europe and Russia.

“The increase is “perhaps warranted given global supply chain pressures on the transportation and logistics industry’s operating costs, but we’re sure stretching the meaning of the term ‘peak’ these days,” said John Costanzo, founder of LDK Global Logistics and the former president of Purolator International, on LinkedIn.

Since the COVID pandemic, what were peak season surcharges have been applied year-round with so many logistics systems still under pressure because of inadequate infrastructure, equipment and labor resources to meet growing trade flows.

FedEx has suspended all service to Ukraine, Russia and Belarus out of concern for the safety of its employees and because of sanctions imposed on Russia by the European Union, Canada, the U.K. and the U.S.

Lufthansa Cargo’s top executive on Friday said the air cargo market will suffer a 10% loss in capacity because freighters now have to fly around Russia to reach Asia from Europe after Russia, in a retaliatory move, banned European airlines from its airspace.

Logistics industry professionals say some all-cargo airlines are contemplating, or begun, to apply a war surcharge to their shipping invoices, but many say most carriers will cover their costs through increased rates, which are already rising because of the limited availability of aircraft.

 

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