Exception Rates
Special rates published to provide prices lower than the prevailing class rates are called exception rates. The original purpose of the exception rate was to provide a special rate for a specific area, origin/destination, or commodity when justified by either competitive or high-volume movements. Rather than publish a new tariff, an exception to the classification or class rate was established. Just as the name implies, when an exception rate is published, the classification that normally applies to the product is changed. Such changes may involve assignment of a new class or may be based on percentage of the original class. Technically, exceptions may be higher or lower, although most are less than original class rates. Unless otherwise noted, all services provided under the class rate remain under an exception rate.
Since deregulation, several new types of exception rates have gained popularity. For example, an aggregate tender rate is utilized when a shipper agrees to provide multiple shipments to a carrier in exchange for discount or exception from the prevailing class rate. The primary objective is to reduce carrier cost by permitting multiple shipment pick up during one stop at a shipper’s facility or to reduce the rate for the shipper because of the carrier’s reduced cost. To illustrate, UPS offers customers that tender multiple small package shipments at one time a discount based on aggregate weight and/or cubic volume.