05 Mar What Is a UPS Third-Party Billing Fee?
UPS Third-Party Billing Services
Before we can discuss a third-party billing fee, we should quickly cover third-party billing services. In some cases, UPS can bill a party who is neither the shipper nor the receiver. Sounds crazy perhaps, but it’s actually quite common, particularly with larger shippers.
UPS accepts shipments for third-party billing as long as the receiver or third party has a valid UPS account number and has agreed to accept the charges. Unless otherwise specified at the time of shipping, shipping charges are billed to the shipper. In the event of non-payment by the receiver or third party, the charges are billed back to the shipper.
Why would someone bill a shipment to a third party?
There are many different reasons, but the most common one is drop-shipping. Here is an example:
Company A owns a website that sells goods. However, they do not manufacture or house any of the products. When Company A sells a product, an order is placed with the manufacturer or distributor and the product is shipped directly to the consumer. Companies with steep discounts would prefer that their fulfillment houses and vendors use their third-party billing account number when their discounts are much higher than those available to the actual shipper. This is very common with big online retailers that may ship large volumes of products but want certain smaller brands to operate under this model. This common business model is called drop-shipping.
The risk of fraud is much higher with the use of third-party billing. A supplier could mistakenly (or purposefully) ship packages on behalf of its customer that don’t belong to its customer. The third party would then receive their normal weekly bill with unauthorized charges on it. They can certainly look at their bill and determine that it is a shipment they did not authorize. However, for a company that ships more than 100 packages a day, combing through the shipments weekly may not be an option.
This is just one of the many issues the carriers face when dealing with third-party billing. To combat some of these issues, UPS has issued a brand new fee as of January 4, 2016. UPS began charging a third-party billing fee of 2.5% of the total shipment charge. This is an entirely new fee that was set in place to target shippers who bill to third parties. FedEx has not released any information regarding a change in its third-party service. However, these two companies tend to make similar changes when it comes to pricing.