UPS is increasing rates and delivery area surcharges for its SurePost services on Jan. 13, the parcel carrier announced on its website. Rate increases vary by package weight and shipping distance. For example, the base rate will jump by nearly 10% for a one-pound zone 2 parcel, while a 25-pound zone 8 parcel will see a roughly 6.7% increase. That outpaces last year’s 5.9% increase for those shipping types. SurePost is typically used as a cost-effective shipping method for non-urgent, lightweight home deliveries. Higher SurePost demand from e-commerce shippers drove a 15.4% year-over-year increase in Q3 for UPS’ ground residential volume, according to the company’s quarterly report.

For SurePost packages, UPS either makes the delivery itself or hands them off to the U.S. Postal Service for final-mile delivery. In the latter case, packages are transferred to local Postal Service facilities closest to the recipient’s address, known as delivery units.

But dropping off packages at the Postal Service’s delivery units — something other logistics providers also leverage for cost-effective shipping — is getting more expensive. Next year, the Postal Service will no longer offer contracted rate discounts for delivery unit entry and plans to hike rates by 10.3% for Parcel Select shipments entered at those facilities.

Through those changes, the Postal Service is incentivizing shipping partner to bring their packages further upstream in the agency’s network. The aim is to increase utilization of the agency’s entire network and help grow its end-to-end Ground Advantage delivery service.

UPS hasn’t provided specifics on how it is navigating those changes, but EVP and Chief Commercial and Strategy Officer Matt Guffey said in an October earnings call that the company is working “to find a mutually agreeable agreement for both USPS and UPS.”

No matter how the agreement shakes out, UPS is already poised to lean less on the Postal Service for SurePost deliveries in the coming years. As detailed in the company’s current contract agreement with the Teamsters union, UPS-employed drivers will gradually deliver a larger share of SurePost volume over time, reaching 50% for the contract year ending Aug. 1, 2028.

Additionally, UPS has improved its “proximity matching algorithm,” helping it redirect more SurePost packages into its own network and reduce delivery costs, per it's Q3 report. That helped UPS partially offset higher levels of third-party delivery spending in the quarter, which was needed to move increased SurePost volume.

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