This Week in Logistics: A Cost Rule Peak — Canada's Tariffs Go Live, FedEx Guarantees Your Duties, and Peak Season Surcharges Land

Shaun Hagen: A hidden surcharge, a guaranteed price, a trade round still deadlocked, and three carriers with three very different weeks and all of it lands on your Q4. Hey everyone, I'm Shaun Hagen, CEO of CartonCloud, and this is This Week in Logistics. Javi great to have you back at the desk mate.

Javier Hernandez: Yeah, good to be back. Feels like a lot has happened since last time we talked, especially with peak season right around the corner.

Shaun Hagen: Certainly certainly does feel like we've had a lot of water under the bridge. And you know, it's where I swear it sneaks up on us every year and it becomes earlier and earlier. And I think a lot of what's in the headlines this week is peak season starting to show up in the numbers. you know, carriers are moving on cost in different directions. The trade picture, as I think everyone knows, is still very unsettled underneath all of it. And, you know, a bit of quick housekeeping before we start. When we record episode one, Canada's tariff response was a watchless item and it's now live. So we'll cover what actually landed. So

Let's get into it.

Javier Hernandez: Yeah, so first up on Canada. So retaliation that we flagged in episode one, kind of Shaun mentioned, went live September 8th. So tariffs of fifteen, twenty five, and fifty percent dollar for dollar are roughly twenty seven point six billion dollars of US goods. So steel and aluminum doubled to fifty percent, and then goods already in transit before September eighth were actually exempt from the new rate. but more on that on Deep Dive One.

Shaun Hagen: And it's not just the northern border for our US friends. A fourth round of US-Mexico bilateral talks opened up in Washington this week, and no surprises, they're still deadlocked, this time on automotive content rules and still tariffs. There's a real risk this runs into 2027. So b both North American trade tracks are unresolved at the same time.

Javier Hernandez: Yep. And then in Carrier News, FedEx launched Global Trade Navigator on September 9th. So the headline featured a ninety nine dollar a month Shopify add on tool that shows a guaranteed duty and tax amount at checkout. So with FedEx covering the gap if anything is underestimated. So carrier is really putting its own money behind the customs rates, and that's more on deep dive number two.

Shaun Hagen: And peak season surcharges are starting to get locked in. So UPS's first surcharges land on September the twenty seventh, FedEx is on September the twenty eighth, and both are up double digits year on year. The FedEx demand surcharge goes from sixty five to eighty cents, a twenty three percent jump, and UPS additional handling moves from ten dollars eighty to eleven dollars ninety.

Javier Hernandez: Yep, and then kind of continue on the carriers here. USPS is doing a little something different compared to some of its competitors. So instead of a separate surcharge, it's actually just folded in a six percent peak straight into the label price. So not a new line item, it's just going to be all bundled into that main carrier label and right onto the invoice. So we'll unpack why that matters more on deep dive number three.

Shaun Hagen: So five stories, and every one of them is a cost or promise changing shape this week. Some are transparent, some are hidden, and some are still being negotiated. So the discipline is the same every time. Name what's moving, watch it, and don't assume this week's numbers hold into next month. Now, before we move on to the deep dives, our logistics fun fact of the week. Uber Eats has teamed up with a drone delivery company that's already made more than two and a half million deliveries. This one came together last month, so it's a touch outside our usual news window, but it's worth flagging.

Uber's partnering with this company called Zipline for autonomous drone delivery through Uber Eats. First deployments started late later this year and Uber is investing directly into the company. And Zipline has already delivered over twenty million items. Their co founder called it teleportation. Now, Javi are we really teleporting yet or is that just a really quick drone?

Javier Hernandez: Yeah, it's teleportation, but really quick drone. So if you can get something delivered in minutes instead of hours, you know, that really resets kind of that customer's expectation. Kind of like when Amazon did, you two day delivery anywhere with Prime. It's kind of unfolded from that, but still, right, once people get used to this, it just shows up and then the bar's not going to come back down. So if anything, at least I know my ice cream is gonna come still frozen and not melted, so that's at least good for me.

Shaun Hagen: Absolutely. I don't know. Do they pre-shake the milkshakes or they get done on the way? But I think for me the interesting one is if we can then see this bridge into being able to have a little more control over when those deliveries come as well. So starting to get into time slotting, but we'll see where they get there. But I think the part the operator should actually be paying attention to is again not about the drone, it's about what this does to deliver time expectations, because everyone else is gonna have to compete with this. And for me

This is kind of the latest iteration of what you know I think we've we've talked about or I've sort of mentioned is like the domino effect where you're getting photos and GPS tracking for a you know ten dollar pizza, that expectation very quickly bleeds into B2B fulfillment. So into deep dive number one though. If your customers touch the US Canada border or you're sourcing anything from Mexico, treat trade compliance as a standing watch this quarter, not a one-off check. And you know, I think here's what's actually happened so far.

Canada's response tariffs took effect at one minute past midnight on September the eighth. Fifteen, twenty-five, and fifty percent dollar for dollar on about twenty-seven point six billion dollars of US goods. Still in aluminum doubled to fifty percent. If your goods are already in transit before September eighth, you're exempt from the new rate, which is worth confirming with your broker rather than assuming. I think the background matters too. The USMCA passed its mandatory six year review deadline back on July the first without a confirmed extension. We covered that at the time.

It's really been running on annual reviews ever since. Now the fourth US Mexico viable round is on in Washington and it's stuck on the same two issues: automotive content and steel tariffs. And nobody, I think, is confident that this resolves before 2027.

Javier Hernandez: Yeah, and Shaun, for customers moving goods both directions across the border right now, you know, what's the actual homework this week? Because the question isn't gonna come up, you know, what's the actual policies, what's the specifics? It's like, hey, what do I actually need to do about this?

Shaun Hagen: Yeah, and I think it's, you know, similar themes to what we've been talking about in a year of a lot of uncertainty. But, you know, three things from our perspective. You know, first, recheck with SKUs are actually exposed on each side of the border. And as I said, now you've got both sides. But the tariff the Canadian list is different to the US list. Second, confirm your contracts already actually assign tariff responsibility, as a lot of them don't, and that becomes an argument at invoice time. And third, build a multi year sourcing decision on USMCA holding its current shape, but plan for the review process to keep running and don't rely exclusively on that assumption. It doesn't feel like it's going to be getting resolved anytime soon.

Javier Hernandez: Yeah, and then, you know, that obviously getting that recheck done now. So being proactive instead of reactive definitely beats finding out on the invoice later. especially as we're getting into some of those peak seasons, right? There's a hundred other things you got going on, so might as well get ahead of it right now.

Shaun Hagen: Yeah, a hundred percent, Javi. And, you it's the same lesson we'd be repeating last season in episode one. You know, policy is now a line item operating requirement, not just a background assumption. And makes it really hard for operators, as you said, especially when you've got, you know, peak order volumes as well. But as always, name what's exposed, watch it and update it before it costs you.

Javier Hernandez: And rolling into deep dive number two. So this one's aimed at every operator competing for cross-border e-commerce sellers. So FedEx launched their global trade navigator on September 9th. It does three things really. So it suggests the correct HS code, the classification that says the duty rate, and then it estimates the duty and tax before the shipment even moves. And it handles the customs paperwork all through API. So it's a little bit more real-time, not those manual CSV imports. And then that gives you know, the seller's visibility in their systems that they can call on automatically. So the piece that changes the competitive picture, you know, is that Shopify app. So for ninety nine dollars a month, a seller can now guarantee their duties and taxes right at checkout. So no more hidden bills, no more surprises. So FedEx can estimate, you know, these real bills, if it's under, FedEx is gonna cover, you know, anything that it missed. So a major carrier is now willing to put its own money behind a customer's estimate.

Shaun Hagen: It's really interesting. It reminds me a lot of when we started getting, you know, cap ten dollar shipping, where, you know, I think people realize that certainty was more important than potentially full cost recovery in terms of giving consumers that confidence to click the buy button. And what it also does is it pulls that trade decision upstream. You know, FedEx is competing for the seller at the point of sale, not after pickup. And if you're a 3PL service in cross-border e-commerce and you can't offer that same certainty, you're now competing against a promise from a bigger player that they just made standard. Now it's only one, but it's still an important data point.

Javier Hernandez: Yeah, so the big question is, right, is if FedEx can guarantee the duties and taxes before a customer even checks out, like what's stopping smaller 3PLs from offering the same level of transparency? So those APIs are there, you know, Shopify uses it, but can the 3PLs also pull it in? Is it a technology limitation or is it just, you know, the operators haven't made it a priority just yet?

Shaun Hagen: Look, you know, obviously it's a it's a little bit of column A, a little bit of column B, but I think, you what we see and what we hear is it's more the the latter, more the second option. You you don't need FedEx's balance sheet to compete here or and as you mentioned, the you know, the technology is available. It's just about the underlying discipline, both from 3PLs and their customers. So accurate HS codes that are up to date, reliable landed cost calculations, you know, custom data that's clean enough that doesn't create exceptions after the fact.

None of that is exotic technology or expensive, it's data hygiene and discipline that most operators have been putting off or or falls, you know, falls behind other priorities.

Javier Hernandez: Yeah, so I would say kinda if you're taking notes right from deep dive number two, I'd say make sure you audit your classification codes right now. So if it's an estimate, it's probably gonna look a lot weaker sitting next to the guaranteed numbers. So just make sure, you know, how Shaun said, everything's up to date. You know what the actual HS codes are, and that way, you know, you can move through it, you know, pretty quickly.

Shaun Hagen: Yeah, I'm starting to feel like a broken record, but I will say it again, you know, temp technology amplifies good operations, it doesn't fix bad ones. And a guarantee like this only works because of the data behind it, classification, valuation, documentation, it's all already solid. So FedEx didn't build the guarantee first, they built the data first. And finally, moving on to deep dive number three, you know, peak season surcharges are landing in three different ways this year, and one of them won't show up as a new line item at all. I think it's really interesting just to unpack what that means. So going through the visible ones first. UPS's first peak surcharges land on September twenty-seven, FedEx's land on twenty September twenty-eighth. And as I mentioned at the start, both of them are up double digits on this year on year. And that's an easy one that you know, in a sense, you already know what they are, you know how to catch the new line item. Then there's the USPS approach. So instead of running a separate surcharge, USPS is folding in a six percent peak increase straight into the label price from October fourth. No surcharge line, no new fee code.

If you audit surcharges by reconciling invoices against last year's line items, this one's going to walk straight past you.

Javier Hernandez: Yeah. And kinda sneaky, right? They're kind of bringing those right in at quarter end. So yeah, it kind of as Shaun said, if you're used to auditing those surcharges just line by line by line, maybe it's an Excel sheet and you're filtering it out. You know, it's gonna make it a lot harder to capture those USPS charges, you know, once they're already baked into every single label you've already purchased.

Shaun Hagen: Yeah, and I think really the only thing that does catch it is comparing the underlying rate card month on month and not just reconciling invoices against last year. And that's a different habit and it presents obviously a different challenge to try and sort of get that visibility. and most surcharges audit are are built around items that, you know, that's how they've done it all, abandoned items, because that's how it's always been done before. You know, my hope for shippers, 3PLs in the logistics industry is that this isn't, you know, an example where that price charge comes in and it's very hard to tell if and when it drops back out.

Javier Hernandez: Yeah. And then obviously like on the customer side, right? Your end user. So do you just pass these straight through or is there a smarter way to handle, you know, tacking on that new fee, especially rolling into peak season?

Shaun Hagen: I think it's it's it's the same thing again we talked about before where it's about that communication and sort of you know making sure there's that visibility. So however you handle it internally, I don't think the most important thing is that just like you would not want it to, make sure your customers don't find out on an invoice, you know, a couple of weeks or months down the track in their busy period. You know, the USPS S1 is definitely different because there is no line under point two. You know, so you know, if landed costs went up by six percent on everything that moves USPS.

That's a heads up conversation this week, not a surprise next month. And that's probably a conversation that you know, you want to make sure you're talking about, you know, shipper selection and then carrier preferences at that point as well.

Javier Hernandez: Yeah, honestly and it's just stuff that it builds trust, right? You'd rather you kinda give a heads up than you're arguing about an invoice at the end of the month or a couple of months later. So I think customers are really gonna remember who told them first instead of having to come back and dispute it later on.

Shaun Hagen: Yeah, and I think that that's, you know, that that's really the key, the key part here is, you know, and we've seen that time and time again with the changes that we've already seen so far this year and and and going back into last year. And I think that, you know, that that customer value and that customer conversation is really the most important part. You know, especially with customers moving in different sorry, carriers moving in different directions on transparency, and two trade tracks unresolved at once, this isn't a normal peak period. Like this isn't it just a demand peak.

It's a cost rule peak. In normalpeak you have a little bit more certainty around what to plan for. You the surcharges are coming, roughly when. You also know what they're gonna look like. This is already starting to change that. You roll out on top of obviously, you know, uncertainty around straight up Hormuz, both north and south borders in the US with sort of trade uncertainty. I think again just highlights that you can't make that cost model assumption too far into the habit. into the future, sorry. And you need to really turn that into a habit. So, you know, re-reviewing it.

monthly, if not fortnightly. and I think what will be really interesting is the USPS move a pattern that we'll see play out elsewhere or is it just going to be an exception? Because I yeah, like I said, I get a little bit nervous about yeah, buried six percent rate increases and and and how easily and how clearly they then drop back out the other side of peak season.

Javier Hernandez: Yeah, and I feel like if it's just kind of baked in and people do definitely forget about it, right? Those line items obviously give someone something to check out. So yeah, I would say careful.

Shaun Hagen: Be careful, audit every surcharge, audit all all your charges as well. And yeah, yeah, make sure you stay close to your customers. All right, wrapping up, we'll move on to the operator playbook. So I think from our perspective, you know, three main things to do this week.

Javier Hernandez: Yeah, so one, rerun the Q4 shipping cost model this week. Not November, you know, right now. So UPS lands September twenty seventh, FedEx lands September twenty eighth, and then USPS, you know, increase won't show up as a line item. So just check the underlying rate card, not just the invoice, and make sure you tell your customers ahead of time.

Shaun Hagen: Number two, as we said, audit your own landed cost accuracy this month. Big carriers are starting to guarantee the number at checkout and shipper trust is shifting towards whoever gets HS codes and duty estimates right first. Start with your highest volume SKUs that are exposed to cross border volume, and you know, start to audit how close you are and start to improve those systems with your customers.

Javier Hernandez: Yeah, and three, recheck the SKUs that are exposed to both the Canada and Mexico sides. So confirm your contract's actually assigned tariff responsibility. And don't lock in a multi year sourcing decision on USMCA holding its shape, just while it's kinda going back and forth in Washington right now.

Shaun Hagen: Absolutely. I think that's really top of the watch list looking forward. You know, the fourth round in Washington, an interim agreement probably changed that sourcing changes that sourcing maths, but obviously a further slip to to2027, you know, I think that really just highlights that need to continue to plan for uncertainty.

Javier Hernandez: Yeah, whether FedEx guaranteed checkout model actually moves volume or stays at about ninety nine dollars, you know, a month. and it's just a tools that larger sellers can start justifying.

Shaun Hagen: And then last on the watch list is whether other carriers follow the USPS lead and fold increases into the base price instead of a visible surcharge. If they do, I think that changes what you need to audit for for good. Now I'm Shaun Hagen, he's Javier Hernandez, and this has been This Week in Logistics. Whatever's moving this quarter, don't wait to react. Check it, price it, and tell your customers before they have to ask. We'll see you in a couple of weeks.