Nov. 20 2009 01:19 PM

Here, from Doug Kahl, DLP, Vice President Strategic Initiatives at Tranzact, is a quick look at today's 2010 UPS rate increase announcement. PARCEL will have a more in-depth analysis early next week.
UPS issued its 2010 Rate Change Information this morning. Part of the announcement off its website reads:

UPS continues to deliver you added value and improvements in service while aggressively cutting our costs to the extent it does not impact service. After careful evaluation of customers' needs and the rising costs that affect all businesses, UPS has set 2010 rates. These rates go into effect January 4, 2010. 
We realize that you are seeking ways to reduce costs and be more efficient. We can do far more than just deliver packages. We have proven experience in implementing logistics solutions and technology that add real value to your business.
UPS small package Daily and Retail rates will change as follows*:
• UPS Ground service will increase 4.9%.
• UPS Air and International Services will increase a net 4.9% through a combination of a 6.9% increase in the base rate and a 2% reduction in the Air and International Services fuel surcharge. 
Visit this UPS website starting December 18, 2009 to download the 2010 UPS Rate and Service Guide.
*The impact of these changes on your shipping costs will vary according to your shipping characteristics and the terms of your agreement with UPS, if applicable.
Comparing this year's changes against recent history, we see a rather temperate increase.

Announced Changes                 2008              2009                  2010
Announcement Date        November 9th  October 17th   November 20th
Air & International Increase        4.9%           4.9%                     4.9%
Ground Increase                           4.9%           5.9%                     4.9%
Zone 2, 1 lb. Ground                     5.0%           8.8%                      5.9%

Looking past rates and into the surcharges and accessorials, there is some restructuring going on, starting with the Fuel Surcharge (FSC) where UPS announces:

Beginning January 4, 2010, a number of changes are being made to our Air and International Services and Ground Services fuel surcharges. These changes are designed to better align UPS Air Services and Ground Services fuel surcharges, and decrease fuel surcharge volatility when fuel prices fluctuate. The threshold for the application of the UPS Air Services and International Services Fuel Surcharge will be increased to apply at a higher cost per gallon of jet fuel, resulting in a 2% reduction of this fuel surcharge. Additionally, the Air and International Services Fuel Surcharge index will rise more slowly than the current index if applicable fuel prices increase.

The threshold for the application of the UPS Ground Services fuel surcharge will be increased to apply at a higher cost per gallon of diesel — $1.75 compared to $1.50 in 2009. If the cost per gallon of diesel falls below $1.75, no Ground Service fuel surcharge will be applied. Additionally, the Ground Service fuel surcharge will be changed, resulting in the fuel surcharge rising slightly faster than the current table if applicable fuel prices rise.

In brief, the peg rates at which FSCs kick in for both Air/International and Ground have been raised, and index increment levels have widened, both of which will help remove volatility. For Ground, the applicable surcharge will change at a rate of 0.5% instead of 0.25%; thus, the FSC will rise faster next year than it does today.

Notable changes in accessorials include the following:

• Address Correction for Ground increases $2.00, a 25% increase over the 2009 charge of $8.00.

• Extended Area Surcharge for Daily Rate customers will increase $2.00 per shipment or $0.02 per pound, whichever is greater. In 2009 the Extended Area Surcharge is $1.60 Commercial and $2.65 Residential. As published, this surcharge is increasing 75-125%.

• The unlimited weight Express Envelope (letter) looks like it will be changed. Begin in 2010, shipments weighing more than 8 oz. will be rated at weight.

UPS has made changes to its Weekly Service Charge, which had been set at three different weekly spend tier levels ( $0 to $14.99, $15.00 to $59.99, and $60.00 or more) and will now be based on two tiers (less than $75.00 or more than $75.00.)

In addition, UPS will be offering an expanded menu of flexible pickup options. The infrequent shippers should benefit most and are encouraged to take a look at the new UPS Smart, Day-Specific and Daily On-Route pickup options.

A more comprehensive review of the rate increase details, further explanation of the fuel surcharge impact and more accessorial comparisons will be available to you early next week.