What Is a Carrier Contract?
A carrier contract — formally called a pricing agreement or transportation agreement — is a document between your business and UPS or FedEx that defines your negotiated rates, discounts, and terms. Without one, you pay full published rates.
Contracts typically run for 1–3 years and are renegotiated at expiration (or earlier, if your volume changes significantly).
Key Sections of a Carrier Contract
1. Base Rate Discounts
The most visible component — percentage discounts off published rates by service:
| Service | Typical Discount Range |
|---|---|
| Ground | 30–60% |
| Next Day Air | 25–55% |
| 2nd Day Air | 25–55% |
| 3 Day Select / Express Saver | 25–50% |
| International | 20–50% |
Discounts are applied to the carrier’s published rate for each service level. A 50% Ground discount means you pay half the list price.
2. Minimum Charges
The minimum amount billed per package, regardless of weight or zone. Even with deep discounts, the per-package minimum ensures the carrier covers basic handling costs:
| Carrier | Typical Contract Minimum |
|---|---|
| UPS | $6.00–$9.00 per package |
| FedEx | $6.00–$9.00 per package |
Published minimums are higher (~$11.49 for UPS Ground in 2026).
3. Surcharge Adjustments
Surcharges can be discounted or modified in the contract:
| Surcharge | Negotiable? | Typical Adjustment |
|---|---|---|
| Residential delivery | Yes | 10–40% reduction |
| DAS (all tiers) | Yes | 10–35% reduction |
| Additional Handling | Yes | 10–30% reduction or waiver |
| Address correction | Somewhat | Waiver caps, reduced rate |
| Fuel surcharge | Rarely | Usually published rates apply |
4. Earned Discount Programs
Performance-based discounts that increase as your weekly revenue or package count grows:
Example Earned Discount Tiers
| Weekly Revenue | Additional Discount |
|---|---|
| $0–$999 | Base discount only |
| $1,000–$4,999 | +2% |
| $5,000–$14,999 | +4% |
| $15,000–$49,999 | +6% |
| $50,000+ | +8% |
5. Volume Commitments
Some contracts include minimum volume commitments — a guaranteed package count or revenue amount the shipper must maintain. Missing these commitments can trigger:
- Discount reductions
- Contract renegotiation
- In extreme cases, return to published rates
6. Contract Term and Renewal
| Element | Typical Terms |
|---|---|
| Duration | 1–3 years |
| Auto-renewal | Common (30–90 day opt-out notice) |
| Rate increase language | Annual GRI (General Rate Increase) applies unless prohibited |
| Early termination | Usually no penalty, but discounts may be lost |
What’s NOT in the Contract
Contracts typically don’t cover:
- Fuel surcharge rates: These follow the published weekly scale
- Peak surcharge rates: Applied per carrier announcement
- Service guarantees: Governed by the carrier’s standard terms of service
- Liability limits: Standard terms unless explicitly modified
The Bottom Line
Your carrier contract is one of your most valuable business documents. Understanding its components — base discounts, minimums, surcharge modifications, and earned discount tiers — is essential to knowing whether you’re getting fair pricing and where to focus your next negotiation.
Not sure if your contract rates are competitive? Upload one invoice to ShipMint’s Instant Analysis for a rate benchmark — free.