Easing the Pain
of Fuel-price Surges
Most fuel surcharges establish a DOE fuel price peg, such as $1.20 per gallon, and provide for increased compensation to the carrier of 1 cent per mile for every 5- or 6-cent increase in the DOE weekly average over the fuel peg. When rates are expressed as flat charges or in cents per hundredweight, the increase often is expressed as a percentage of revenue that approximates the effect of escalating fuel prices. Although most shippers are familiar with fuel surcharges that kick in between $1.16 and $1.20 per gallon, in designing and proposing your own fuel surcharge you must take into account the price of fuel when the rates were negotiated.
Now comes the hard part: After you establish your fuel peg and the rate of increase or decrease you want to assess, you must gain the shippers agreement.
Small carriers are often bashful about seeking fuel surcharges and worry that their business will be jeopardized if they seek an increase. Dont be overly timid. Virtually all major carriers have fuel surcharge provisions in their tariffs and negotiated fuel surcharges as schedules in their long-term contracts. Knowledgeable large shippers also expect to pay for the increased fuel cost. Many wont offer you additional money unless you ask for it, but dont be surprised to learn, when you ask, that they have already approved their own uniform fuel surcharge provisions and are willing to extend them to you.
A fuel surcharge becomes a legal accessorial charge in one of two ways. If you include a fuel surcharge in the rules tariff you provide shippers upon request, the surcharge provisions are incorporated into every shipment that does not move under contract. But if a contract excludes application of your rules or accessorial rates, you must get the shipper to agree to a surcharge and include it as a signed addendum.
Be as consistent as possible in applying your fuel surcharge. It is easiest on your rating and billing department to calculate a single fuel surcharge rate or percentage every week and apply the same rate to as many of your loads as possible. This might require some adjustment in your permanent pricing to match the uniform fuel peg, and your rating and billing department must watch for special exceptions. Some of your shippers will have their own fuel surcharge formulas, and it generally is assumed that spot market rates for one-time shipments include fuel surcharges unless otherwise noted.
you dont already have fuel surcharge provisions in place, adjust
your rates to reflect current fuel prices, and establish and enforce
a variable fuel surcharge program. Profit margins as a percentage of
total revenue are too thin for you to ignore a spike in the cost of