The hidden costs of shipping: Insurance, handling, and more

Table of Contents

Why is Shipping So Expensive?

Hidden Shipping Costs Defined

Calculating Actual Shipping Costs

Reduce Shipping Costs with Shippo

For many small to medium-sized businesses, shipping can be expensive. Besides the obvious costs, hidden expenses such as insurance and handling fees can blow up your shipping budget. Understanding these hidden costs can make a huge difference in how you manage your shipping costs effectively—not to mention save you money.

Why is Shipping So Expensive?

Most people understand the basics that determine shipping expenses: distance, weight, dimension, and delivery speed. However, many less obvious and often unexpected charges, such as shipping insurance, handling fees, fuel surcharges, customs duties, special packaging, and delivery zones, also contribute to shipping fees.

How? The cost of shipping is directly affected by a combination of socioeconomic, environmental, and geopolitical factors. These factors can result in fluctuating fuel prices, high labor costs, and investments in infrastructure and equipment. 

Other contributing factors include:

• Compliance with regulations, insurance, and security measures;
• Disruptions from natural disasters and global events;
• Container shortages and high demand for shipping services;
• Additional expenses for greener practices;
• Inflation, currency exchange rates, and trade policy changes.

Hidden Shipping Costs Defined

Shipping Insurance

Shipping insurance offers shippers peace of mind and financial protection against lost, damaged, or stolen packages and covers replacement and reshipping costs when necessary.

FACT: Private insurance covers the total value, unlike carrier liability, which may only go up to $100 for a $1500 gold chain as mandated by legal statutes like the Carmack Amendment.

Handling Fees

Different product types require various levels of care, resulting in differing costs tied to labor and resources used when preparing them for shipment—a.k.a. handling fees—for example, a customer orders delicate artwork from an online store. To ensure the artwork arrives intact, the company may charge a handling fee to cover the cost of professional packaging materials and skilled labor required to wrap it securely, place it in a sturdy crate, and label it appropriately for shipment.

Additional Charges

The total shipping cost can increase quickly with additional charges for remote area delivery fees, customs duties, or fuel surcharges.

• Fuel Surcharges: A fuel surcharge may be added to the shipping cost to cover fluctuating fuel costs. Most major carriers calculate this charge as a percentage of the base fuel rate or, in the case of DHL, as a flat fee. 

FACT: When fuel prices rise significantly, surcharges may escalate from 5% to 10%.

• Remote Area Delivery Fees: Additional labor and resources are necessary to deliver goods to rural or remote areas, increasing delivery service costs. 

FACT: Shipping outside standard delivery zones, typically in less populated areas, might include a $20 fee.

• Customs Duties: Goods shipped internationally are assessed duties and taxes, which are additional fees determined by the commodity, quantity, value, country of manufacture, and other factors. For example, if a U.S. business exports $5,000 worth of jewelry to Italy, the Italian importer may pay $200 in customs duty and $1,144 in VAT, totaling $1,344 in addition to the shipment value. 

TIP: To get an idea of how much your shipment's customs fees could be, consult the U.S. Customs and Border Protection customs duty information.

Packaging Costs

While standard packaging expenses, such as boxes and packing materials, may already be accounted for in your shipping budget, custom boxes, branded packaging, and specialty materials can significantly increase costs. For example, custom-made boxes for uniquely shaped or oversized products; special packaging for easily breakable or damageable goods; or special containers suitable for delivering frozen items can all add to expenses.

FACT: Custom-branded boxes and padded packaging used to ship electronics could increase costs by as much as $10 per package.

Calculating Actual Shipping Costs

To calculate the shipping cost accurately, start with the base rate and add hidden shipping costs, handling fees, packaging costs, and any additional fees like fuel surcharges, remote delivery fees, and customs duties. For example, the cost to ship a $1500 gold chain between two major metropolitan cities in the United States may look something like this:

Reduce Shipping Costs with Shippo

Understanding hidden shipping costs and surcharges helps manage expenses and control profitability. By accounting for insurance, handling fees, additional charges, and packaging fees, you can better estimate actual shipping costs. One way to manage these expenses is by choosing the right shipping solution.

Shippo is a cost-effective option with the best discounted shipping rates allowing you to save up to 90% off retail rates from top carriers. Additionally, Shippo offers affordable shipping insurance. For as little as 1.25% of the order's total value, Shippo’s shipping insurance keeps costs down for both you and your customers, protecting your bottom line. Shippo also integrates seamlessly with major e-commerce platforms like WooCommerce and Shopify and provides advanced tools like tracking updates and automations, simplifying your logistics process. Plus, their top-notch customer service team is always ready to help you navigate any shipping challenge. Get started for discounted shipping today.

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