A surge in parcel delivery fees is causing shipping costs to rise

Parcel Shipping Surcharges Push Rates Higher, More Increases Expected in 2026

According to a recent quarterly analysis from AFS Logistics and TD Cowen investment bank, extra charges for parcel shipments were the primary reason shipping rates exceeded expectations in the final quarter of last year. The report also forecasts another round of rate hikes in 2026.

During the peak delivery season, ground parcel shipping costs per package soared to 34% above 2018 levels. This unprecedented surge was fueled by both a rise in package volumes and a jump in accessorial fees, with the average surcharge imposed by carriers climbing 13% from the third to the fourth quarter, as detailed in the TD Cowen/AFS Freight Index.

Several factors contributed to these higher costs, including a significant uptick in residential deliveries, which led to increased residential surcharges. Major carriers such as FedEx and UPS also introduced broad-based demand surcharges for the peak season, despite predictions of only modest growth in demand. ShipMatrix data indicated that the combined parcel volume for the top three carriers, including the U.S. Postal Service, rose by just 5% year-over-year during December’s peak period.

This blanket surcharge approach marks a departure from previous strategies, which more specifically targeted costs related to volume spikes, oversized packages, or extra handling needs.

Accessorial fees are generally used to offset the expenses of providing additional services that require more labor, special equipment, or go beyond standard delivery operations. Despite increased competition from emerging carriers, no single courier experienced overwhelming shipment volumes that strained their networks.

Industry analysts note that major parcel carriers are relying on surcharges to compensate for slower revenue growth, particularly as they shift focus away from less profitable segments like residential e-commerce deliveries. However, the widespread use of these fees could prompt retailers to seek out more affordable shipping alternatives.

For instance, ground carriers raised fuel surcharges by about 1% even as national diesel prices fell by roughly 1.5% quarter over quarter. On an annual basis, fuel surcharges jumped 26%, while diesel prices increased just 4.7%. After holding fuel surcharges steady for five months, carriers have now made adjustments for the new year, according to the TD Cowen/AFS report.

Looking Ahead: Rate Increases and New Pricing Structures

Ground parcel shipping rates are expected to climb further this year, driven by general rate increases (GRI) that include both higher base rates and surcharges, as well as new pricing methods for certain package sizes. Both FedEx and UPS have announced a 5.9% GRI for 2026, and their pricing structures remain closely matched. While FedEx tends to offer slightly lower surcharges in some categories, such as specific delivery zones, the difference is typically less than 1%, according to the TD Cowen/AFS Freight Index.

Projected Index Growth and Carrier Concessions

The index is projected to reach 38.9% above the baseline in the first quarter—an increase of 5.4% year-over-year and 3.6% from the previous quarter. However, the report suggests that the pace of growth may slow as seasonal effects stabilize.

“Record-high rates are challenging for shippers, but there are still opportunities for price negotiations if shippers know where to focus,” said Mingshu Bates, chief analytics officer and president of parcel at AFS Logistics. “After a pause in the previous two quarters, discounting began to rise again at the end of 2025. While this doesn’t signal a return to the looser market conditions of a few years ago, it does show that carriers are open to making deals to secure valuable business.”

Express Parcel Trends and Surcharge Impacts

In the express parcel segment, higher fourth-quarter rates were attributed to increased average billed weights, along with demand surcharges and more residential deliveries.

The notable rise in average billed weight in 2025 is linked to carriers enforcing a 40-pound minimum billable weight for packages subject to the Additional Handling – Dimension surcharge. For example, a package weighing only 10 pounds but requiring extra handling would be billed at 40 pounds. Express shipping rates are also expected to rise due to general rate increases, reaching 7.6% above the January 2018 baseline—up from 5% in the fourth quarter of 2025.

About the TD Cowen/AFS Freight Index

The TD Cowen/AFS Freight Index compiles freight data from over 1,800 clients, representing a combined annual transportation spend of $39 billion.