UPSUnited Parcel Service

We note that in presenting various non-GAAP measures you have made adjustments to eliminate the effects associated with costs that you have reported as transformation strategy costs, which you characterize as compensation and benefits, or something other than compensation and benefits, on page 131 of your financial statements.

Rest of the question

However, you have not described your initiatives and strategies sufficiently to understand why these would be excluded in compiling your non-GAAP measures. Given that you first associated this category of costs with a "multi-year enterprise-wide transformation strategy" in 2018, and have continued to report such costs for six years with no update on the plan, other than to identify an incremental initiative involving workforce reduction at the end of 2023, it is unclear how these costs would not constitute normal, recurring, cash operating expenses that are necessary to operate the business. Please expand your disclosures to provide information about the transformation strategies undertaken each year, including the associated costs, any qualitative results, and the status of the plans. Please address the guidance specific to MD&A that we have provided in SAB Topic 5:P.4, to the extent directly applicable for restructuring, disposal and exit activities, or by analogy where this would yield meaningful disclosure. Tell us why you believe the transformation strategy costs are appropriately excluded in calculating the non-GAAP measures that you present, considering the extended period over which such costs are recurring, and explain why you believe the adjustments would not be contrary to the guidance in the Answer to Question 100.01 of our Compliance and Disclosure Interpretations for Non-GAAP Measures, if this is your view. In conjunction with the foregoing, provide us with a schedule listing the particular facets of each phase of the plan that were implemented each year since the plan was introduced, including the associated costs, and describe the scope and duration of each phase. Please identify the specific changes that were made to processes and technologies, and explain how you have assessed any resulting modernization, quality enhancement, and efficiency, which were initially set forth as objectives of the plan. We note that you have included various non-GAAP measures along with the earnings releases filed on Form 8-K on January 30, 2024 and April 23, 2024, under the heading “Reconciliation of GAAP and Non-GAAP Income Statement Items” presented in Exhibit 99.1 and the “Reconciliation of GAAP and As Adjusted Income Statement Data” presented in Exhibit 99.2 of those current reports. However, reconciliations provided under those headings each identify an entire column of activity as non-GAAP measures, even though some of the components appear to be 3. unadjusted GAAP measures. We see that you have excluded revenues from these tabulations though have included many line items that generally appear on an income statement, such as operating expenses, operating profit, other income and expenses, income tax expense, and income before and after taxes. Please modify your disclosures as necessary to more clearly identify and differentiate non-GAAP measures from GAAP measures and to adhere to the guidance in the Answer to Question 102.10(c) of our Compliance and Disclosure Interpretations for Non-GAAP Measures, i.e. to avoid giving undue prominence to non-GAAP measures by using an income statement format when presenting non-GAAP measures. Financial Statements Note 18 - Transformation Strategy Costs, page 131 4. We note your disclosure explaining that you are undertaking an enterprise-wide transformation that includes various initiatives that will involve changes to processes and technology, and will impact your global direct and indirect operating costs. You identify a workforce reduction initiative that resulted in a $205 million expense accrual in 2023, though do not address any other activities associated with costs of $435 million for 2023, $178 million for 2022, and $380 million for 2021. We see that you have been reporting transformation strategy costs for six years and had attributed those costs to a plan that was adopted in 2018, until 2022 when that reference was removed from your disclosure. We note that you have reported $1.956 billion in transformation strategy costs since the introduction of your plan. Please revise your disclosure to include further details about your transformation strategy initiatives, to include clarifying the extent to which you regard the associated activities as restructuring, exit or disposal activities subject to the disclosure requirements in FASB ASC 420-10-50-1, which you may consider either directly applicable or by analogy in formulating meaningful disclosures about your transformation strategies. For example, this may entail descriptions of the associated activities, the facts and circumstances leading to the expected activities, expected completion dates, and for the various relevant activities, the total amounts expected to be incurred, amounts incurred during the period, and cumulative amounts incurred to date.

The Company acknowledges the Staff’s comment and respectfully notes that it considers relevant guidance, including the guidance set forth in Question 100.01 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures (“Question 100.01”), in preparing and presenting non-GAAP financial measures.

Rest of the answer

Specifically, in evaluating the appropriateness of adjusting the impact of transformation-related expenses, the Company considers the nature and effects of the non-GAAP adjustments and how they related to the Company’s operations, revenue generating activities, business strategy, industry and regulatory environment as set out in Question 100.01. Acknowledging that the Company incurred, and continues to incur, various expenses over a multi-year period, the Company does not believe that such transformation-related expenses constitute ordinary expenses as contemplated by the Commission. As described in more detail below, the Company has effected its transformation strategy under three distinct programs (Transformation 1.0, Transformation 2.0 and Fit to Serve, each as described in more detail below), each with a series of multiple, discrete projects. As described below, transformation-related expenses were and are not ordinary operating expenses, as many of the expenses and activities constituted separate and distinct components of the transformation strategy, the nature of such activities do not drive incremental revenue, and such activities were not driven by a regulatory change, and such activities were, and remain, such that they could not, and cannot, all be captured in a single period. The scope of the initiatives undertaken by the Company exceeds that of routine, ongoing efforts to enhance profitability and, together with the Company’s global footprint and concurrent timing of the COVID-19 pandemic, necessitated that these activities are carried out over multiple years. The Company believes the exclusion of transformation costs from our non-GAAP adjusted financial results supplements GAAP measures to better enable users of our financial information to assess our ongoing operational performance and compare performance between periods. Consistent therewith, the Company’s continued use of the term “transformation” when describing separate and distinct projects within the transformation strategy has been intended to provide users of the financial information with more consistent information on which to compare our performance between periods during the execution of these distinct strategic initiatives.

In the first quarter of 2018, the Company announced and began implementation of a multi-year, enterprise-wide transformation program. The program contemplated a reduction in non-operations management personnel, investments impacting global direct and indirect operating costs, and changes in processes and technology, which would be undertaken and completed as multiple discrete initiatives (such projects, collectively, “Transformation 1.0”).

In connection with changes in executive leadership during 2020, the Company announced transformation activities to identify and prioritize investments currently being, or expected to be, made by the Company. As a result of these projects, the Company further reduced positions in its workforce and began initiatives to optimize the Company’s business portfolio and enhance its financial reporting and payroll systems (such projects, collectively, “Transformation 2.0”).

Thereafter, in response to a changing competitive landscape, the Company announced its Fit to Serve program on January 30, 2024, focusing on transformation in different areas of our business and right sizing our business for the future in light of current and expected changed economic conditions. These projects are intended to address changes in our competitive landscape that did not exist when we first contemplated our prior transformation efforts.

Transformation 1.0

Transformation 1.0 was a fundamental change in the Company’s operating model, moving certain functions from a decentralized operating model supported by disparate technology to a centralized model, leveraging third-party offshore resources to supplement our internal resources. In September 2018, the Company disclosed certain financial expectations from Transformation 1.0, including an expectation of $1.0 billion of improvements in free cash flow and an incremental increase to adjusted earnings per share in the range of $1.00 to $1.20, each by 2022. While the Company materially completed Transformation 1.0 by 2022, the timing of the individual projects and planned separations therein were, in part, impacted and in certain instances delayed by the COVID-19 pandemic.

Workforce Benchmarking:

As one of the initial components of Transformation 1.0, the Company undertook a review of its organizational structure to better align its staffing to targeted levels developed from peer benchmarks. As a result of such review, during a period between the second quarter of 2018 and the second quarter of 2020, the Company reduced its non-operational workforce by approximately 2,500 positions and incurred costs related to voluntary retirement packages, severance and other compensation and benefits. These reductions in non-operational workforce reduced the Company’s compensation and benefits expenses in subsequent periods.

Also during that time, the Company sought to identify separate corporate support functions that it believed exhibited opportunity to realize cost savings through process scaling, workforce centralization and outsourcing or technology enhancements. Prior to the completion of the initiatives discussed below, these functions operated under disaggregated staffing models often organized by geographic region using, in many cases, older systems unconducive to further integration within the Company’s system environment. These conditions contributed to operating models that were considered to be less efficient and less agile than more centralized structures.

Procurement and Finance:

As another, separate component of Transformation 1.0, the Company undertook a transformation of its procurement and finance functions, with multiple discrete projects described below. Costs associated with these initiatives principally consisted of compensation and benefit costs related to internal resources temporarily assigned to one or more projects, and other costs, which represented expenses associated with external service providers and technology.

The Company transformed its procurement function by scaling its processes, centralizing its workforce and modernizing its technology. During 2019, the Company established a centralized procurement model and realized working capital benefits from implementing standard terms with its vendors. The centralized model also enabled the Company to evaluate its sourcing for key commodities and in many cases, obtain more favorable pricing from vendors. Additionally, the Company began implementing cloud-based software to manage certain purchasing categories within North America, with a goal of enhancing purchasing governance and improving the efficiency of its processes. During 2020, the Company substantially completed these efforts. Costs associated with this transformation project primarily consisted of outside professional services fees incurred predominantly in 2020.

The Company also undertook a finance and accounting process modernization project that involved standardizing operating models through work centralization, incorporating automated processes and systems, and taking other actions to reduce manual work. These actions primarily occurred during 2019 and 2020.

Separately, during 2019 and 2020, the Company undertook a project to outsource a substantial portion of the preparation of its transactional accounting work, with certain Company employees maintaining ultimate responsibility for review of the work product. As a result of this strategic shift, the Company realized benefit through a more flexible structure that leverages economies of scale from an outsourced model. Later in 2020, the Company expanded the scope of this project beyond what was initially contemplated. The newly expanded project outsourced certain additional finance tasks. This project was substantially completed in 2021. Together, these projects also allowed the Company to further reduce the size of its workforce, providing greater flexibility to invest in core operations.

The final project within the Company’s finance transformation project was a modernization of data analysis tools. This project was designed to facilitate increased enhanced data availability to the organization and improve process standardization between various operations. The Company implemented an enterprise-wide tool to analyze data associated with its revenue transactions. This tool enhanced the speed, quality and consistency of reporting, allowing the organization to operate more efficiently. This project was completed during 2020 and 2021.

Human Resources:

During 2019, the Company also began developing a roadmap to modernize its human resources function, including both technology and process enhancements. For example, during this time the Company incurred costs in connection with the consolidation of its human resources function into a centralized model and migration of related data to a single platform. The Company also incurred costs in connection with certain human resources support functions being transitioned to a third-party service provider. These initiatives were substantially completed in 2021. These investments resulted in the Company being able to deploy a more cost effective and efficient hiring process and greater ability for employees to self-serve when completing certain activities.

Marketing:

During 2020 to 2022, the Company completed the material portions of projects to modernize its sales and marketing function. During this time, the Company incurred outside professional services costs to enhance its customer relationship management tool. In addition, the

Company developed simplified and dynamic pricing technologies using advanced analytics to improve legacy pricing processes, which were largely manual.

As a result of efficiencies created by the foregoing initiatives, the Company was able to further reduce the size of its workforce. The timing of the incurrence of such costs was impacted in material part by the progress of other Transformation 1.0 projects and implementation delays arising as a result of the COVID-19 pandemic. While the Company began work on these initiatives during 2018, these activities were, and remain, such that they could not, and cannot, all be captured in a single period.

Approximately 42% of the total costs attributable to Transformation 1.0 were compensation and benefit costs related to reductions in our workforce. An additional 35% of Transformation 1.0 costs were third-party consultant fees. Costs related to internal resources temporarily assigned to transformation projects were approximately 16% of Transformation 1.0 costs and the remaining 7% of costs were represented by other individually immaterial costs related to Transformation 1.0.

Initiatives associated with Transformation 1.0 were substantially completed by 2022. Internal resources that were temporarily assigned to these projects were returned to roles within our ongoing operations at the conclusion of the related transformation projects.

On a cumulative basis and net of amounts reinvested into the business, as of the second quarter of 2020, the Company had substantially achieved previously expected benefits, as Transformation 1.0 had delivered approximately $1 billion in savings which benefited diluted earnings.

Transformation 2.0

Following the appointment of Carol Tomé as the Company’s Chief Executive Officer in June 2020, the Company, with the assistance of a third-party consulting firm, commenced a review of its then-current operating model. As previously disclosed by the Company (initially during its second quarter 2020 earnings call), this comprehensive review was intended to identify and prioritize current and future investments made by the Company, including investments in its workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”). This scope of this review was beyond what was originally contemplated by Transformation 1.0.

Spans and layers

The Company determined that the then-current size of the business and efficiencies gained through transformation initiatives completed to that time enabled a reduction of a further 2,300 positions by reducing spans and layers of management. The Company incurred compensation and benefit costs for related severance. These costs were incurred over periods within 2020, 2021 and 2023, the timing of which was partially delayed due to the impact of the COVID-19 pandemic.

Business portfolio review

Additionally in 2020, the Company began a review of its existing business portfolio and an evaluation of areas for potential future investment. The majority of the costs associated with this review were fees paid to outside professional service providers. Beginning in 2022, the Company expanded the scope of this program based on an evolving strategic focus. The expanded portion of this program is expected to conclude by the end of 2025.

Financial systems

With the assistance of outside professional service providers, the Company also identified opportunities to invest in financial reporting and certain schedule, time and pay systems to reduce its global indirect operating costs, provide better visibility, and reduce reliance on legacy systems and coding languages. Many of the initiatives undertaken within this program involved efforts to simplify and standardize data to better enable migration into cloud-based tools, including transitioning its general ledger, consolidation, and planning tools from older programs.

The Company expects to complete remaining enhancements to its financial reporting and schedule, time and pay systems during 2025. These projects are expected to provide the Company with enhanced quality in its reporting and lower the costs of future investments necessary to maintain its systems. While the Company began work on these initiatives during 2022, these activities were, and remain, such that they could not, and cannot, all be captured in a single period.

Approximately 50% of the total costs attributable to Transformation 2.0 were compensation and benefit costs related to reductions in our workforce. An additional 26% of Transformation 2.0 costs were third-party consultant fees. Costs related to internal resources temporarily assigned to transformation projects were approximately 8% of Transformation 2.0 costs and the remaining 16% of costs were represented by other costs related to Transformation 2.0.

Fit to Serve

Also as disclosed by the Company, during 2023, macroeconomic headwinds, including inflationary pressures, changes in consumer behavior and normalization of volumes post-pandemic, together with volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. small package business. Internationally, the challenging macroeconomic environment, coupled with geopolitical tensions, drove a decline in demand for our small package services in Europe and Asia. Our freight forwarding businesses, including truckload brokerage, were negatively impacted by soft demand and market overcapacity.

During December 2023 and in response to the factors listed above, the Company commenced a program to reduce the size of its workforce. The Company publicly announced its “Fit to Serve” program on January 30, 2024 with the intent to right-size its business through a workforce reduction of approximately 12,000 positions throughout 2024 and create a more efficient operating model to enhance responsiveness to changing market dynamics. The Company is evaluating the scope of Fit to Serve. This program is intended to address changes in competitive landscape that did not exist when the Company first announced Transformation 1.0 or Transformation 2.0. These activities were, and remain, such that they could not, and cannot, all be captured in a single period.

In connection therewith, the Company incurred compensation and benefit expenses primarily related to severance during the fourth quarter of 2023. The Company expects to recognize additional compensation and benefits expenses for severance throughout the remainder of 2024 and 2025. These projects are expected to result in approximately $1.0 billion of cost savings during 2024.

The following table provides additional information about the costs associated with, and timing, of various projects comprising the three distinct phases of our transformation strategy (dollars in millions). In total, severance costs represented approximately 52% of the total costs associated with transformation between 2018 and 2023. An additional 28% of the total costs associated with transformation between 2018 and 2023 were represented by outside professional services fees. An additional 11% of the total transformation costs are associated with internal resources temporarily assigned to transformation projects and the remaining 9% of transformation costs are associated with other costs that are individually immaterial.

Years ended December 31,

(In millions) 2018 2019 2020 2021 2022 2023

Workforce benchmarking $ 321 $ 150 $ 91 $ — $ — $ —

Procurement and finance

Human resources

Marketing

Other initiatives

— —

Total Transformation 1.0

$ 360 $ 255 $ 224 $ 126 $ 50 $ 13

Spans and layers $ — $ — $ 95 $ 177 $ 4 $ 86

Business portfolio review — —

Financial systems — —

Other initiatives — — — —

Total Transformation 2.0

$ — $ — $ 124 $ 254 $ 128 $ 210

Fit to Serve $ — $ — $ — $ — $ — $ 212

Total Fit to Serve

$ — $ — $ — $ — $ — $ 212

Total $ 360 $ 255 $ 348 $ 380 $ 178 $ 435

The Company undertakes, in future filings, in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere, to provide additional detail on initiatives and strategies that have costs excluded from the Company’s non-GAAP adjusted measures to better allow a reader to understand why any such costs would be excluded in compiling non-GAAP adjusted measures. Such disclosures will include, as appropriate, information regarding costs, scope, duration and status of various projects consistent with the nature of the Company’s responses herein.

The Company acknowledges the Staff’s comment and respectfully notes that it considers relevant guidance, including the guidance set forth in SAB Topic 5:P.4. The Company’s severance liabilities were primarily accounted for under ASC Topic 712 "Compensation—

Nonretirement Postemployment Benefits" as the Company’s primary separation plan provided impacted employees with a contractual termination benefit. These liabilities were accrued as the recognition criteria under Topic 712 were met and the nature of these separation programs has been such that a limited portion of the liability carries forward between periods and prior to the Company’s disclosure within its December 31, 2023 Form 10-K, liabilities arising from restructuring, exit or disposal activities at period end were not considered to be material. Substantially all of the remaining transformation activities discussed above that are not severance do not constitute restructuring or exit programs and such activities were generally expensed as incurred.

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We note your response to prior comment two indicating that transformation strategy costs excluded in calculating your non-GAAP measures over the last six years relate to various initiatives that were undertaken to adjust the number of employees to align with the needs of the business, to develop or refine business processes, and to upgrade or enhance technology utilized in fulfilling the needs of the business.

Rest of the question

You mention various circumstances precipitating these initiatives such as changing competitive landscapes, inflationary pressures, changes in consumer behaviors, normalization of volumes, and volume diversions which you attribute to labor negotiations. You indicate that you do not consider the related costs to be ordinary because each plan involved separate and distinct activities that would span multiple periods 1. and were not expected to drive incremental revenue, and because the scope of the initiatives exceeded that of routine, ongoing efforts to enhance profitability; although it appears that your initiatives were nevertheless intended to maintain or enhance performance by addressing functional needs and by reducing costs. We understand from your response that you propose to include additional details about these initiatives in future disclosures, such as the costs, scope, duration and status of the projects, and further explanation about why you exclude the costs in compiling the various non-GAAP measures. We believe that such disclosures should also clearly articulate the rationale and objectives, include expected and actual costs, as applicable, and describe any measurable results in relation to the goals. For example, the disclosure on page 26, explaining that you do not consider transformation strategy costs when evaluating the operating performance of the business units, or in making resource allocation decisions, should be expanded to clarify how you view the importance of the initiatives in adapting personnel levels and systems to the evolving business environment, and to explain how assessments of operating performance, and of the effectiveness and utility of business processes, precipitated the allocation of resources to these transformation initiatives. The extent to which the initiatives have been successful in meeting the transformation objectives, as to modernization, quality enhancement, and efficiencies, and in relation to maintaining or enhancing operating performance, should be addressed. Please submit the revisions that you propose to address prior comment two, and the additional concerns outlined above, within the disclosures on pages 26, 31, 34, 36, and 40, under Items Affecting Comparability, and pertaining to the effects on operating and other expenses of the business segments and consolidated entity.

The Company acknowledges the Staff’s comment and, in response, undertakes in future filings and other disclosures, beginning in its Form 10-Q for the quarter ended September 30, 2024 and its Form 10-K for thew year ending December 31, 2024, to include further details about our transformation strategy initiatives of the types described above to the extent known and material.

For purposes of example only, and as discussed with the Staff, the following reflects how the Company intends to include relevant disclosures in its Form 10-Q for the quarter ended September 30, 2024:

Item 2.Management's

Rest of the answer

Discussion and Analysis of Financial Condition and Results of Operations

Overview

….

During both the three and nine month periods of 2024, we continued to execute on various initiatives under our previously disclosed transformation strategy programs, Transformation 2.0 and Fit to Serve, which are contributing to fundamental changes to our back-office technologies and organizational structure. We realized benefits from our Fit to Serve initiative during the three and nine months ended September 30, 2024, which contributed to improvements in operating profit for the quarter, and year to date, helped offset declines in operating profit.

Items Affecting Comparability

We supplement the reporting of our financial information determined under generally accepted accounting principles in the United States ("GAAP") with certain non-GAAP adjusted financial measures. Management views and evaluates business performance on both a GAAP basis and by excluding costs and benefits associated with these non-GAAP adjusted financial measures. As a result, we believe the presentation and discussion of these non-GAAP adjusted financial measures better enables users of our financial information to view and evaluate underlying business performance from the same perspective as management.

Non-GAAP adjusted financial measures should be considered in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. Our non-GAAP adjusted financial measures do not represent a comprehensive basis of accounting and therefore may not be comparable to similarly titled measures reported by other companies. Non-GAAP adjusted amounts reflect the following (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

Non-GAAP Adjustments 2024 2023 2024 2023

Operating Expenses:

Transformation Strategy Costs:

Transformation 1.0 $ — $ (3) $ — $ (10)

Transformation 2.0

Spans and Layers — — — (86)

Business Portfolio Review (34) (2) (29) (31)

Financial Systems (12) (12) (41) (30)

Other Initiatives — (1) — (3)

Transformation 2.0 Total (46) (15) (70) (150)

Fit to Serve (108) (76) (157) (76)

Total Transformation Strategy Costs (154) (94) (227) (236)

Gain on Divestiture of Coyote 156 — 156 —

One-Time Payment for International Regulatory Matter — — (88) —

Goodwill and Asset Impairment Charges — (117) (48) (125)

One-Time Compensation Payment — (61) — (61)

Expense for Regulatory Matter — — (45) —

Total Adjustments to Non-GAAP Operating Expenses $ 2 $ (272) $ (252) $ (422)

Other Income and (Expense): 2024 2023 2024 2023

Interest Expense Associated with One-Time Payment for International Regulatory Matter — — 6 —

Total Adjustments to Non-GAAP Other Income and (Expense) $ — $ — $ 6 $ —

Total Adjustments to Non-GAAP Income Before Income Taxes $ (2) $ 272 $ 258 $ 422

Income Tax (Benefit) Expense:

Transformation 1.0 $ — $ 1 $ — $ 2

Spans and Layers — — — 21

Business Portfolio Review 8 1 7 7

Financial Systems 3 3 10 8

Other Initiatives — — — —

Transformation 2.0 Total 11 4 17 36

Fit to Serve 27 19 38 19

Total Transformation Strategy Costs 38 24 55 57

Gain on Divestiture of Coyote (4) — (4) —

One-Time Payment for International Regulatory Matter — — — —

Goodwill and Asset Impairment Charges — 14 13 16

One-Time Compensation Payment — 15 — 15

Expense for Regulatory Matter — — — —

Total Adjustments to Non-GAAP Income Tax (Benefit) Expense $ 34 $ 53 $ 64 $ 88

Total Adjustments to Non-GAAP Net Income $ (36) $ 219 $ 194 $ 334

Transformation Strategy Costs

We supplement the presentation of operating profit, operating margin, income before income taxes, net income and earnings per share with non-GAAP measures that exclude the impact of charges related to activities within our transformation strategy. Programs within our transformation strategy have been designed to fundamentally change our organization structure, processes, technologies and the composition of our business portfolio. Various circumstances have precipitated the projects and initiatives under these programs, including identification and reprioritization of investments as a result of executive leadership changes, developments and changes in competitive landscapes, inflationary pressures, consumer behaviors, and other factors including post-COVID normalization and volume diversions attributed to our 2023 labor negotiations. We do not consider the related costs to be ordinary because each program and its initiatives and projects involve separate and distinct activities that may span multiple periods and are strategic in nature as opposed to operational efforts to drive incremental profitability. These initiatives are in addition to ordinary, ongoing efforts to enhance business performance.

Our transformation strategy has included the following programs and initiatives:

Transformation 1.0: In the first quarter of 2018, we announced and began implementation of a multi-year, enterprise-wide program contemplating a reduction in non-operations management personnel, investments impacting global direct and indirect operating costs, and changes in processes and technology, which were undertaken and completed as multiple discrete initiatives (such projects, collectively, “Transformation 1.0”). In 2018, we announced that we expected to achieve approximately $1.0 billion in savings, which would benefit earnings, from Transformation 1.0. On a cumulative basis and net of amounts reinvested into the business, we had substantially achieved the expected benefits associated with Transformation 1.0 as of the second quarter of 2020. Transformation 1.0 was substantially completed in 2022.

Transformation 2.0: Based on a number of factors including evaluating efficiencies gained as a part of Transformation 1.0, and in connection with changes in our executive leadership in 2020, we identified and reprioritized certain then-current and future investments, including additional investments in our workforce, portfolio of businesses and technology (such projects, collectively, “Transformation 2.0”). Specifically, we undertook an organizational structure review designed to identify opportunities to reduce spans and layers of management, began a review of our business portfolio and identified opportunities to invest in certain technologies, including financial reporting and certain schedule, time and pay systems to reduce global indirect operating costs, provide better visibility, and reduce reliance on legacy systems and coding languages. Our organizational structure review indicated an opportunity to realize initial savings of approximately $400 million with potential opportunities to save up to an additional $240 million through the reduction of spans and layers of management with an anticipation that these savings would be recurring. The business portfolio review was expanded in 2022. As a result thereof, we determined to exit certain businesses that were not aligned with our corporate strategy and determined to make new investments into certain businesses, including healthcare-focused businesses, better aligned to our strategic targets. In connection therewith, we incurred costs primarily consisting of outside professional fees related to these reviews and other costs associated with these transactions. Lastly, our review of our systems and technologies identified certain areas of our business that were reliant on outdated technologies. Our reviews determined that continued use of these legacy technologies would likely increase maintenance costs and that investments into new technologies would enhance our ability to leverage our data and allow us to establish a more flexible system architecture. As of December 31, 2023, we substantially completed our initiatives to reduce spans and layers of management and achieved savings in line with our anticipated benefits. Our ongoing efforts under Transformation 2.0 include initiatives related to our financial systems and our business portfolio review. As of September 30, 2024, we have incurred $785 million of costs as part of Transformation 2.0. Transformation 2.0 initiatives are expected to conclude during 2025 with anticipated remaining costs of approximately $115 million primarily related to completion of our technology initiatives. Costs associated with Transformation 2.0 have primarily consisted of compensation and benefit costs related to reductions in our workforce and fees paid to third-party consultants. Additional detail relating to the projects, initiatives and timing of costs as a part of Transformation 2.0 are contained in the table above. Investments in technology are expected to provide enhanced quality of reporting for both internal and external purposes in part through simplification and standardization of data to better enable migration into cloud-based tools and automation of manual activities, including transitioning its general ledger, consolidation, and planning tools along with U.S. payroll from older programs and software supporting our freight forwarding business. These efforts to enhance our technology are expected to reduce the need for future investments; we expect to begin to realize benefits therefrom in 2025. Investments in our business portfolio review are expected to lead to better alignment of our businesses in support of our corporate strategy. We are realigning businesses within Supply Chain Solutions to better execute our strategy; the operational performance of these businesses is included in our GAAP and non-GAAP adjusted results.

Fit to Serve: In 2023, a number of factors, including macroeconomic headwinds and volume diversion resulting from our labor negotiations with the International Brotherhood of Teamsters, contributed to volume declines in our U.S. Domestic Package business. In addition, our International Package and Supply Chain Solutions businesses were also negatively impacted by a number of challenging macroeconomic conditions during 2023. In response to these factors, we announced and began to undertake our Fit to Serve initiative with the intent to right-size our business to create a more efficient operating model that was more responsive to market dynamics through a workforce reduction of approximately 12,000 positions throughout 2024. We have incurred total costs of approximately $370 million under Fit to Serve, which primarily consist of compensation and benefit costs related to reductions in our workforce. We expect to complete this initiative during 2025 with expected remaining costs of approximately $100 million to be incurred primarily during the fourth quarter of 2024 and first quarter of 2025. We have achieved savings of $625 million under Fit to Serve for the nine months ended September 30, 2024, and expect to realize savings of approximately $1.0 billion for the full year 2024 through reductions in our compensations and benefit expense. Incremental savings of approximately $100 million are expected when Fit to Serve is completed.

For more information regarding transformation strategy costs, see note 17 to the unaudited, consolidated financial statements.

U.S. Domestic Package

Operating Expenses

Our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs which were $76 million for the quarter ($93 million year to date) for U.S. Domestic Package. Transformation strategy costs reflected within U.S. Domestic during these periods are related to our Fit to Serve and Transformation 2.0 programs. Within both programs, we incurred compensation and benefits costs related to workforce reductions as we right-size our business. Within Transformation 2.0, we incurred fees paid to outside professional service providers. See Supplemental Information - Items Affecting Comparability for additional discussion of items excluded from our non-GAAP financial measures.

International Package

Our non-GAAP adjusted operating expenses exclude the impact of activities associated with our transformation strategy, which were immaterial for the quarter (year to date $36 million). Transformation strategy activities reflected within International Package during these periods are primarily comprised of compensation and benefits related to workforce reductions under our Fit to Serve program. See Supplemental Information - Items Affecting Comparability for additional discussion.

Supply Chain Solutions

As discussed above, our non-GAAP adjusted operating expenses exclude the impact of transformation strategy costs which were $84 million for the quarter ($98 million year to date) for Supply Chain Solutions. Transformation strategy costs reflected within Supply Chain Solutions during these periods are related to our Fit to Serve and Transformation 2.0 programs. Within Transformation 2.0, we incurred impairment costs resulting from our business portfolio review and costs related to financial system investments in Forwarding. Within Fit to Serve, we incurred severance costs as we right-size our business.

Consolidated Operating Expenses

Compensation and Benefits

Non-GAAP adjusted operating expenses exclude the impact of costs incurred under our transformation strategy programs, Fit to Serve and Transformation 2.0, and primarily impacted other employee benefits expense and related payroll tax expense as discussed above. Compensation and benefit expenses under these programs during the third quarter of 2024 were $110 million ($161 million year to date). These costs increased by $30 million (down $17 million year to date) as compared to the same periods of 2023. During 2023, non-GAAP adjusted operating expenses excluded a one-time compensation payment. See Supplemental Information - Items Affecting Comparability for additional discussion.

.….

Other Expenses

Non-GAAP adjusted operating expenses exclude the impact of costs incurred under our transformation strategy programs. Other expenses under our Fit to Serve and Transformation 2.0 programs during the third quarter of 2024 were $44 million ($66 million year to date). These costs increased by $30 million (up $8 million year to date) as compared to the same periods of 2023. We expect to incur additional other expenses under our Fit to Serve and Transformation 2.0 programs during 2024 and 2025 as we complete these programs. Other expenses incurred under these programs are primarily related to fees paid to outside professional service providers and impairment charges resulting from our business portfolio review. See Supplemental Information - Items Affecting Comparability for additional discussion.

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We note that you have included Adjusted Operating Profit, a non-GAAP measure, as your Company-Selected Measure pursuant to Regulation S-K Item 402(v)(2)(vi). Please provide disclosure showing how this number is calculated from your audited financial statements, as required by Regulation S-K Item 402(v)(2)(vi). Incorporation by reference to a separate filing will not satisfy this disclosure requirement.

The Company undertakes, in future filings, to provide disclosure showing how a non-GAAP Company-Selected Measure pursuant to Regulation S-K Item 402(v)(2)(vi) is calculated from the Company’s financial statements. Read in the reply ↗

Refer to the tables titled "CEO Equity Component of CAP" and "Average Other NEOs Equity Component of CAP." In is unclear what amounts are reflected in the columns titled "Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year." Specifically, equity awards granted in prior years that vest during the relevant year should be valued as the difference between the fair value as

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of the end of the prior fiscal year and the vesting date, and not a "year over year" change in value. Please ensure that your table headings reflect accurately the amounts used to calculate compensation actually paid. Refer to Item 402(v)(2)(iii)(C)(1)(iv) of Regulation S-K.

The Company undertakes, in future filings, to ensure that table headings reflect accurately the amounts used to calculate compensation actually paid in accordance with Item 402(v)(2)(iii)(C)(1)(iv) of Regulation S-K. Read in the reply ↗

You refer to the adverse impact on your business due to geopolitical uncertainties and conflicts in the Russian Federation and Ukraine. Please describe the adverse impact of Russia’s invasion of the Ukraine on your business, including the impact on your operations and potential asset impairments.

The Company does not have any material business, operations or assets in Russia, Belarus or Ukraine, and has not been materially impacted by the actions of the Russian government. The Company’s total revenue from these three countries constitutes less than 1.0% of consolidated revenue.

As has been disclosed by the Company on its corporate website, www.ups.com, as a result of Russia's invasion of Ukraine, the Company has temporarily suspended all shipping services to, from and within Ukraine, Belarus and Russia, until further notice.

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In addition, the Company has halted overflights of Russia, with no material impact on the Company’s costs.

If and when the actions of the Russian government are reasonably likely to materially impact the Company or its operations, the Company undertakes to include appropriate disclosures in its public filings.

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Please discuss and analyze the results of operations for your business as a whole, including the impact of changes in accounting estimates on your results of operations. Your three changes in accounting estimates in 2019 increased earnings per share by $0.98 per share and your primary and diluted earnings by over 24%.

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Your change in accounting estimate in 2018 increased earnings per share by $0.26 per share and your primary and diluted earnings by 5%. Please refer to Item 303(a) of Regulation S-K.

The Company acknowledges the Staff’s comment and, in response, the Company has taken disclosures contained elsewhere in Management’s Discussion and Analysis in the Company’s Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”) and integrated them in the Overview in the following format to reflect how the Overview would have appeared if this content were addressed there as well.

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The Company respectfully advises the Staff that it will add disclosure and analysis in its future filings, including in the Overview, regarding the impact of changes in accounting estimates on its results of operations, to the extent material.

The following reflects the modified format of the Overview disclosed in the 2019 Form 10-K, with additions noted in underlined bold italics, and deletions shown with a strikethrough:

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

During the year, we continued to successfully execute on our strategies and deliver on our commitments, including of improved network efficiency and continuous transformation to stay ahead of market changes. We believe our multi-year investment strategy is positioning us well for the future, including allowing us to support the needs of our customers, create opportunities for our employees and reward our shareowners.

Highlights of our annual results, which are discussed in more detail in the sections that follow, include the following:

Year Ended December 31, $ Change % Change

2019 2018 2019/2018 2019/2018

Revenue (in millions) $ 74,094 $ 71,861 $ 2,233 3.1%

Operating Expenses (in millions) 66,296 64,837 1,459 2.3%

Operating Profit (in millions) $ 7,798 $ 7,024 $ 774 11.0%

Operating Margin 10.5% 9.8%

Net Income (in millions) $ 4,440 $ 4,791 $ (351) (7.3)%

Basic Earnings Per Share $ 5.14 $ 5.53 $ (0.39) (7.1)%

Diluted Earnings Per Share $ 5.11 $ 5.51 $ (0.40) (7.3)%

Average Daily Package Volume (in thousands) 21,880 20,677 5.8%

Average Revenue Per Piece $ 10.87 $ 10.98 $ (0.11) (1.0)%

•Consolidated revenue increased 3.1%.

•Average daily package volume increased 5.8% primarily driven by our U.S. Domestic Package segment, which experienced growth from SMBs as well as several large customers, led by our largest customer, Amazon.

•Average revenue per piece is dependent upon base rates, customer and product mix, average billable weight per piece, fuel surcharge rates and currency. Average revenue per piece decreased as a result of changes in customer and product mix, and lower average billable weight per piece in our U.S. Domestic Package segment. Currency movements negatively impacted revenue per piece in our International Package segment.

•Operating profit and operating margin increased with growth and margin expansion in all segments. Consolidated operating profit included the impact of a reduction in depreciation expense of $212 million due to changes in the estimated useful lives of certain of our property, plant and equipment and a reduction in expense of $94 million due to adjustments to our self-insurance reserves, each as described below.

•We reported net income of $4.440 billion and diluted earnings per share of $5.11, which included a positive impact of $855 million or $0.98 per share from the changes in estimates set out above and a refinement in the calculation of the discount rate used to measure our U.S. pension and postretirement benefit plans discussed below. Adjusted diluted earnings per share was $7.53 after adjusting for the after-tax impacts of the following:

◦Transformation strategy costs of $196 million or $0.23 per share;

◦Legal contingencies and expenses of $91 million or $0.10 per share; and

◦Pension mark-to-market losses recognized outside of a 10% corridor of $1.816 billion or $2.09 per share.

Revenue growth was attributable to our U.S. Domestic segment, slightly offset by declines in our International segment as well as lower revenue in our Supply Chain & Freight segment. In the U.S. Domestic segment, both volume and revenue growth were strongest in our Next Day Air product, driven by a structural shift to next day delivery within e-commerce. We expect this shift to continue. Our residential volume grew 11.3%, while commercial volume increased 2.2%. This growth was enabled by our on-going investment in automated facilities and other transformation initiatives, and we experienced growth from a number of large customers and smalland medium-sized businesses. Growth was led by our largest customer, Amazon, substantially all of which was in the U.S. Domestic segment.

In our International segment, we continued to experience a trend toward our non-premium products, with volume strongest in our Transborder Standard product. Overall volume declined slightly due to weak demand from several industry sectors and a 2018 postal strike in Canada that drove additional domestic volume which did not repeat in 2019. Currency fluctuations caused a reduction in average revenue per piece for both our Domestic and Export products. Additionally, the segment recorded a $40 million pre-tax gain in 2019 from the sale of surplus property in Canada.

Revenue in our Supply Chain & Freight segment decreased, driven by our Forwarding businesses. This decrease was due to declines in market rates and lower demand as a result of global trade uncertainties. Our Logistics businesses experienced growth, driven by healthcare and mail services. UPS Freight revenue increased slightly, as declines in volume were offset by yield management initiatives. While we have seen some positive developments in this segment in recent periods, our business may continue to be negatively impacted if global trade uncertainties persist.

Our capacity expansion projects, together with the overall increase in volume, drove U.S. average daily union labor hours up 4.7%. The increase in Next Day Air volume drove a 10.3% increase in domestic aircraft block hours, and the growth in U.S. residential deliveries led to increases in average daily delivery stops and daily delivery miles of 10.9% and 7.9%, respectively. Average cost per piece decreased slightly for the year due to our continuing investments in automation and global network efficiency. We anticipate incurring additional costs to improve our time-in-transit during 2020 that may exceed the associated revenue for the year, with a consequential impact on 2020 operating margins.

The preparation of our consolidated financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingencies. We continually evaluate our estimates and make updates as appropriate. In 2019, consolidated net income was impacted by the following changes in estimates:

• As disclosed in Note 4 “Property, Plant and Equipment”, in 2018, we made prospective revisions to our estimates of useful lives for building improvements, vehicles and plant equipment, which in general had the effect of lengthening the useful lives of these assets. As a result, 2019 depreciation expense decreased $212 million and net income increased $167 million.

• Based on our historical experience of claims and settlements, in 2019 we adjusted our self-insurance reserves from the mid-point to the low end of the actuarial projected range of losses as discussed within “Critical Accounting Policies and Estimates”. This had the effect of reducing operating expenses for the year by $94 million and increasing net income for the year by $72 million.

• In 2019, in consultation with an external actuarial adviser, we refined the bond matching approach used to determine the discount rates for our U.S. pension and postretirement benefit plans. This refined approach considered the increased availability of longer duration high-quality corporate bonds, changes in the content and sources of available data and improvements in computational capabilities. As disclosed in Note 5 “Company Sponsored Employee Benefit Plans”, these refinements resulted in an increase of approximately 10 basis points in the discount rates used to measure our plans, decreasing the total projected benefit obligation at the December 31, 2019 measurement date by approximately $900 million and the resulting mark-to-market charge within other income and expense by $810 million, and increasing net income by $616 million.

In total, these changes in estimates increased net income for 2019 by $855 million or $0.98 per share on a basic and diluted basis.

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You disclose that you refined the bond matching approach used to select the discount rate on your pension plans by implementing advances in technology and modeling techniques. This change in accounting estimate increased net income by $0.71 per share and your fully diluted earnings per share by 16% in 2019.

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Expand your disclosure to provide a robust discussion of the advances in technology and modeling techniques used to select the discount rate implemented in 2019. Separately, describe for us, in reasonable detail, the differences between the prior and current methodologies, and explain why you believe the current methodology provides a better estimate under your circumstances. Additionally, tell us what the discount rate would have been under the prior approach and the internal controls over financial reporting implemented along with the advanced technology and modeling techniques.

The Company acknowledges the Staff’s comment and, in response, the Company respectfully advises the Staff as follows:

ASC 715 Compensation – Retirement Benefits (“ASC 715”), requires a plan sponsor to measure plan obligations utilizing discount rates that reflect the rate at which plan benefits could effectively be settled. In estimating those rates, ASC 715 permits plan sponsors to look to rates of return on high-quality fixed income investments currently available whose cash flows match the timing and amount of expected benefit payments.

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The objective of this method is to measure the single amount that, if invested at the measurement date, would provide the required future cash flows to pay benefits when due.

Consistent with ASC 715, we determine the discount rate for each of our U.S. pension and postretirement benefit plans by constructing a hypothetical portfolio of high-quality bonds that would satisfy the plan’s projected benefit obligation at the measurement date. We have worked for a number of years with a third-party actuarial consultant, Willis Towers Watson, who maintains a bond matching model to support this process.

In 2019, Willis Towers Watson completed a comprehensive periodic review of their bond matching model. The review validated maintaining the fundamental conceptual approach as well as other key aspects of the model, including the use of parameters that can be adjusted to establish the criteria for selecting an appropriate bond portfolio. Certain refinements were also made. These refinements were implemented in their model for use after October 31, 2019.

The refinements to the Willis Towers Watson model and the rationale for such refinements are as follows:

Prior Version Refined Version Rationale

Bond Universe

•Primary data source: Bloomberg Generic Composite (BGN); Secondary: Bloomberg Valuation Service (BVAL)

•Bonds with maturity greater than 37.5 years are excluded; any bonds with maturity greater than 30 years are treated as 30-year bonds

•Minimum size: $500M outstanding for bonds with maturity less than ten years; $50M outstanding for bonds with maturity ten years or more

•Data source: BVAL

•Bonds with BVAL score below a selected level may be excluded, or limits can be placed on the maximum percentage of the market value that can be below a selected level

•No explicit limit on maturity and actual maturity is reflected

•No minimum dollar amounts

•Based on discussions with Bloomberg, Willis Towers Watson determined BVAL is the most appropriate data source with broader fixed income coverage; has expanded significantly since introduction in 2008

•BVAL allows for exclusion of bonds for which additional support of pricing would be considered appropriate without the use of maturity and size limits

•Selecting bonds without regard to outstanding issuance size, while ensuring that observable pricing data exists, better reflects how our obligations would be settled

Portfolio Construction

•Select bonds sequentially from longest to shortest maturities

•Parameters determine allowable maturity difference between bond payment and targeted benefit payment

•Reinvested cash is not explicitly bounded

•Simultaneously select entire portfolio to minimize cost of the portfolio

•Parameters restrict amount of cash flow that can be carried forward to the next year; excess cash flow is not applied to settle obligations

•Surplus cash carried forward is explicitly bounded

•Enhanced computational capability has enabled this approach, which results in a more optimized portfolio

•This portfolio better reflects the cost of bonds at relevant maturities that match the duration of our estimated benefit cash flows, resulting in a more precise estimate of the cost to settle the obligations

Long Maturity Payments

•Discounted value of benefit payments beyond 30 years is settled rather than matching payments themselves to the portfolio payments

•Yield curve reflected only to Year 30 with constant spot rates thereafter

•Threshold maturity is a parameter that can be adjusted if/when bond issuances are sufficient to match longer maturities

•Full yield curve used for corporates, Treasury curve has constant spot rates after 30 years

•Provides flexibility to accommodate evolution of bond market and accommodate yield curves as input

•Provides a better match of bonds to the plans’ projected cash flows

In evaluating the appropriateness of using the refined bond matching model, we prepared information as of October 31, 2019 using both versions of the model to estimate the impact of the refinements on the discount rate.

We reviewed guidance provided by Bloomberg on their BVAL scoring, and noted that a score of six or higher implies that there are recent, direct observations on the target instrument which may be either trades, executable or indicative data. We determined this would indicate sufficient relevant and reliable data for a bond to be included in our hypothetical portfolio and set the model parameter to include bonds with a score of six or higher.

We also reviewed scenarios prepared by Willis Towers Watson that first included, and then excluded, bonds according to the outstanding issuance threshold noted in the table above. We determined that, while these bonds did not significantly impact the discount rate, inclusion of such smaller issuances with an appropriate BVAL score would better reflect how we would settle our pension obligation.

We believe the improved computational capabilities reflected in the updated model, which permit the selection of bonds simultaneously rather than sequentially, reduce the risk of management bias as the bond selection process minimizes the judgment applied in the discount rate assumption. We therefore determined this enhancement improved the reliability of our estimate.

Finally, we reviewed the selected bond portfolio for each plan to independently validate:

•A rating of AA or higher by at least one of Standard & Poors and Moody’s;

•No callable, putable, perpetual, refundable, extendable, sinkable or convertible bonds;

•No structured notes, hybrid securities or securitization instruments;

•No sovereign or government agency bonds;

•No collateralized bonds; and

•No negative ratings outlook for any bond issuer.

As a result of performing this review, we adjusted the selection of bonds within each portfolio. Upon examination of the revised listing, we concluded that the selected bonds conformed to the requirements of ASC 715 and that the associated cash flows appropriately matched the amount and timing of the Company’s expected benefit payments.

From the execution of these controls, we concluded that the refinements to the model, both individually and in the aggregate, resulted in a better estimate of the cost to settle our pension obligations. The refinements enhanced the relevance and reliability of the data and provided a more precise estimate of the discount rates we use to measure our plans.

The evaluation of the model was overseen by our corporate actuary. Both our corporate actuary and our external actuarial consultant are familiar with the shortand long-term aspects of defined benefit plan valuations and collectively meet the Qualification Standards of the American Academy of Actuaries to render actuarial opinions. The refinements to the bond matching model are consistent with current Actuarial Standards of Practice governing model development and validation.

In aggregate, we estimate that the refinements to the bond model had the effect of increasing the discount rates for our U.S. pension and postretirement benefit plans by ten basis points. This is less than the 25 basis point discount rate sensitivity analysis that we include within our “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K.

Adopting the refinements at this time was appropriate, since this was the first time Willis Towers Watson had made the refinements available and they reflect the significant evolution of markets, data and computational capability since the prior refinements to the model. We believe this model continues to provide appropriate support for our discount rate selection process and the measurement of our plans’ obligations.

For the convenience of the Staff, expanded disclosure proposed to be included but based upon the facts and circumstances present at February 20, 2020 has been set forth below compared to that disclosed in the Company’s 2019 Form 10-K. This disclosure is included within Note 5 Company-Sponsored Employee Benefit Plans, page 78, under the heading Actuarial Assumptions. In this regard, please note that the proposed disclosures which have been added in response to the Staff’s Comment have been noted in underlined bold italics, and proposed deletions are shown with a strikethrough:

In October 2019, we refined our the bond matching approach by implementing advances in technology and modeling techniques used to determine the discount rates for our U.S. pension and postretirement plans. Following a routine, periodic review of their standard bond matching tool which we reference to support discount rates, our external consultants refined their model to reflect the increased availability of longer duration high-quality corporate bonds, changes in the content and sources of available data and improvements in computational capabilities. We believe these refinements enhance the simulation of bond portfolios that match the plans’ expected cash flows and result in a better estimate of the plan discount rates. This refinement These refinements resulted in an increase of approximately 10 basis points in the discount rates used to measure our plans, decreased decreasing the total projected benefit obligation on our consolidated balance sheet for our U.S. pension and postretirement plans at the December 31, 2019 measurement date by approximately $900 million as of December 31, 2019. Additionally, we estimate that this refinement in method decreased our and the resulting pre-tax mark-to-market charge within other income and expense by approximately $810 million, and increased increasing net income by $616 million, or $0.71 per share on a basic and diluted basis.

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In your letter to us dated January 17, 2014, you discussed contacts with Syria and Sudan. As you are aware, Syria and Sudan are designated by the State Department as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls.

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Please describe to us the nature and extent of your past, current, and anticipated contacts with Syria and Sudan since your 2014 letter, whether through subsidiaries, affiliates, freight forwarders, or other direct or indirect arrangements. In this regard, we note that your website continues to list Thebe Company in Damascus, Syria as an authorized service contractor for UPS, and the Resources page of UPS Supply Chain Solutions’ website lists Sudan in the Common Market for Eastern and Southern Africa section. You should describe any products, services or technology you have provided to Syria and Sudan, directly or indirectly, and any agreements, commercial arrangements, or other contacts with the governments of those countries or entities they control.

Contacts with Syria and Sudan and Company Policy

As stated in the Company’s letter dated January 17, 2014 to the Staff (“2014 Letter”), UPS is a global package delivery company and a provider of supply chain solutions, which include specialized transportation and logistics services. The Company does not have direct or indirect

Ms. Cecilia D. Blye

Securities and Exchange Commission

Page business ties with the Government of Syria or the Government of Sudan. Moreover, UPS does not have any subsidiaries, offices, facilities, employees or other assets located in Syria or Sudan.

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UPS permits the provision of services for Syria and Sudan only to the extent that such activities comport with U.S. law and Company policy. The Company does not anticipate any changes to its policies and practices regarding these countries unless there are relevant changes to U.S. sanctions laws.

As noted in our prior correspondence to the Staff, UPS ceased offering small package delivery services to or from Syria on August 18, 2011, the effective date of Executive Order 13582 prohibiting U.S. persons from exporting services to Syria or facilitating such services by non-U.S. persons, unless it was determined that such delivery services complied with U.S. law and Company policy. UPS subsequently terminated its package delivery contract with Thebe Company, an independent, private company in Syria, effective April 25, 2012, consistent with General License No. 7 issued by the Office of Foreign Assets Control authorizing the winding down of contracts involving Syria. The inadvertent and outdated reference to Thebe Company on our website has been removed.

With respect to authorized freight services involving Syria since the date of our 2014 Letter, transportation in connection with authorized freight services was provided by third party freight forwarders. In order to ensure its compliance with U.S. law with respect to such services, UPS requires its customers seeking to export items to Syria to certify their compliance with all applicable export control and sanctions laws and regulations, including U.S. export controls and sanctions against Syria.1

With respect to Sudan, in order to ensure compliance with U.S. export control and sanctions laws applicable to its activities involving Sudan, UPS implemented a policy in January, 2011 that generally prohibits the Company, including all of its non-U.S. subsidiaries, from providing services to, from or involving Sudan, even with respect to many transactions that are not prohibited or restricted by U.S.

sanctions and export controls.2 However, in certain limited circumstances when it is lawful for customers to undertake activities in or involving Sudan (e.g., delivery of packages to a Sudanese embassy located in a third country), Company policy and procedures permit the Company to support these customers by providing shipping services for these transactions. The reference to Sudan on the Resources page of UPS Supply Chain Solutions’ website merely lists the country as one among others in the Eastern and Southern Africa region of the world. That reference is not intended to market any Company services to Sudan.

UPS’ “Written Certification for Shipments to Syria Via UPS” form may be found here: http://www.ups.com/media/en/gb/certification_Syria.pdf.

A summary of UPS’ service ban is provided on its website, and may be found here: http://www.ups.com/ga/CountryRegs?loc=en_US.

Activities Involving Syria and Sudan

The Company has no agreements, commercial arrangements, or other contacts with the governments of Syria or Sudan, or entities controlled by these governments.

The Company overflies Sudan, and does not overfly Syria. Payments for any overflight permits related to Sudan are made to a third party that secures these permits. Overflight payments are not made directly by the Company to the Government of Sudan or any entities it controls.

Since the date of our 2014 Letter, the Company has:

• approved approximately 11 shipments destined for Syria and 14 shipments destined for Sudan that were deemed to be authorized under U.S. law and Company policy; and rejected approximately 1 shipment destined for Syria and 9 shipments destined for Sudan because they were determined to be impermissible under U.S. export controls or Company policy.

The Company is committed to maintaining strict compliance with its policy and with all applicable U.S. export control and sanctions laws and regulations restricting dealing in or with Syria and Sudan. To that end, the Company has allocated significant resources to develop, implement and maintain a robust export compliance program, which includes written policies and procedures, dedicated personnel, automated screening, training and outreach, audits and recordkeeping. In any high-volume business, however, there may be instances in which compliance issues arise. Upon discovery, the Company investigates such issues and reports its findings to the authorities as needed. For example, the Company voluntarily disclosed in a report to the Office of Foreign Assets Control (“OFAC”) dated September 24, 2015 (“Report”) that, in connection with renewing trademark registrations in Syria in September 2011, the Company indirectly paid certain fees to the Government of Syria and potentially indirectly exported services to Syria without first obtaining an OFAC specific license that was required at that time. The Report also notes that five months after the Company renewed its trademark registration in Syria, OFAC issued a general license prospectively authorizing the previously proscribed activity. The Company responded to OFAC’s request for Supplemental

Information pertaining to the Report in a letter dated November 13, 2015 (“Response”). The Report and Response are currently pending OFAC review.

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Please discuss the materiality of any contacts with Syria and Sudan you describe in response to the comment above, and whether those contacts constitute a material investment risk for your security holders. You should address materiality in quantitative terms, including the approximate dollar amounts of any associated revenues, assets, and liabilities for the last three fiscal years and the subsequent interim

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period. Also, address materiality in terms of qualitative factors that a reasonable investor would deem important in making an investment decision, including the potential impact of corporate activities upon a company’s reputation and share value. As you know, various state and municipal governments, universities, and other investors have proposed or adopted divestment or similar initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. Your materiality analysis should address the potential impact of the investor sentiment evidenced by such actions directed toward companies that have operations associated with Syria and Sudan.

For each of the years ending

December 31, 2013, 2014, and 2015, and for the interim period through March 31, 2016, aggregate revenues to the Company from all business activities related to Syria were less than $1,000, $0, less than $1,000, and $0 respectively, representing approximately 0.000002%, 0%, 0.0000017%, and 0% of our consolidated revenues for 2013, 2014, 2015, and the interim period, respectively.

For each of the years ending December 31, 2013, 2014, and 2015, and for the interim period through March 31, 2016, aggregate revenues to the Company from all business activities related

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to Sudan were less than $5,000, $10,000, $2,000, and $0, respectively, representing approximately 0.000009%, 0.00002%, 0.000003% and 0% of our consolidated revenues for 2013, 2014, 2015, and the interim period, respectively.

The revenues from business activities related to Syria and Sudan as a percentage of the Company’s revenues are well below any reasonably accepted threshold of quantitative materiality.

Qualitative Materiality

The Company does not have any subsidiaries, offices, facilities, employees or other assets in Syria or Sudan. Company policy generally prohibits the Company and its foreign subsidiaries from supporting customer activities in these countries (except in limited situations as explained above where the customer’s transaction is permitted under U.S. law), even in certain cases that are permissible under

U.S. law. The Company does not believe that these limited activities are harmful to the Company’s reputation or share value because the Company’s activities in these countries are undertaken only when the U.S. Government has determined that those activities should be permitted despite the otherwise broad sanctions imposed against these countries.

UPS is an international shipping company that is expected to be capable of providing global services to its customers. The Company does not believe that providing its customers with services that allow them to ship goods to Syria and Sudan when permitted by the U.S. Government would be deemed important (or qualitatively material) to a reasonable investor in making an investment decision. This is particularly so given that the Company holds its non-U.S. subsidiaries to the same standard even though that is not required by U.S. law and it has implemented systems designed to detect shipments that contravene U.S. laws and thereby help to ensure that its customers comply with U.S. Government sanctions against state sponsors of terrorism.

The Company is aware that certain state and municipal governments, universities and other investors have proposed or adopted divestment or other initiatives regarding investment in companies that do business with U.S.-designated state sponsors of terrorism. However, to our knowledge, we have not received any inquiries or questions from investors or analysts regarding our activities, nor have we received any communications from any of our major shareowners questioning our activities or indicating that they are considering divestment initiatives.

Accordingly, the Company believes that none of its contacts with Syria or Sudan are qualitatively or quantitatively material to the Company, its financial condition or its results of operations, and do not warrant any changes in the Company’s prior filings with the Commission.

UPS acknowledges that it is responsible for the adequacy and accuracy of the disclosure in its filings with the Commission. The Company acknowledges that Staff comments or changes made in response to Staff comments do not foreclose the Commission from taking any action regarding the filings. The Company also acknowledges that it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

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