USPS rate increases to take effect in April

On the heels of a recently announced $329 million loss for the fiscal first quarter, the United States Postal Service (USPS) recently announced that it has received approval from the Postal Regulatory Commission for rate increases that will take effect on April 17.

The USPS said that the 1.7 percent average price increase is at or below the rate of inflation as measured by the Consumer Price Index, with actual percentage price increases for specific products and services varying.

“Postal Service products and services offer a great value to the American public,” said Postmaster General Patrick R. Donahoe in a statement. “For a very affordable price, you can send letters, bill payments, packages, and other mail across town or across the nation.”

Many of the price changes center around consumer-based USPS offerings, including: First-Class Mail additional ounces increase to 20 cents; Postcards will cost 29 cents, and letters to Canada or Mexico (1 oz.) increase to 80 cents.

But there are also price changes that will raise expenses for shippers, too. Most notably is the 11.3 percent increase for Standard Mail Parcels and 3.8 percent for First Class Parcels.

USPS officials said the cumulatively all of these new prices increases are expected to generate $340 million for the balance of the fiscal year and $720 million if implemented for a 12-month period.

“There are two things that stand out with these increases,” said Doug Caldwell, president of ParcelResearch. “One is the really high increase in Standard Mail Parcel rates, with the average being 11.3 percent and some rate cells going up by as much as 34 percent. This will have a significant impact on shippers shipping under 1-pound parcels that are entered as Standard Mail by the USPS.”

For shippers using FedEx SmartPost or DHL Global Mail or UPS Mail Innovations—which are all geared for parcels weighing less than 1 pound, they can all expect to see significant postal increases, according to Caldwell.

These price increases were not viewed as welcome news by the Parcel Shippers Association (PSA). In comments filed with the Postal Regulatory Commission, PSA officials blasted the what they described as the “exorbitant price increases for Standard Mail parcels, which are far in excess of the overall class increase allowed by the cap of 1.7 percent.”

The PSA added that the sheer magnitude of the increases proposed for Standard Mail parcels, compared to the price cap and the increases proposed for other products, establishes that the proposed prices are beyond the realm of reason” explaining that that while the USPS says the“average increase” for parcels and NFMs is 11.3 this average increase…is actually many multiples of the price cap.

“But, examination of the individual prices for Standard Mail parcels shows increases which are better deemed outrageous for a market dominant product,” the PSA said.

And while the PRC signed off on the USPS price increases, its Chairman Ruth Y. Goldway issued a dissenting opinion in the increases, saying that the USPS has the cap authority to raise rates, but pointing out that the PRC does not agree with the costing methodology the USPS is using.

“I am troubled by the Postal Service’s disregard for the regulatory procedures established and often reiterated by the Commission, particularly with regard to the reliance on an unapproved costing methodology in this case,” stated Goldway in the PRC’s Order Revising Postal Service Market Dominant Price Adjustments. “I believe the workshare discounts that the Postal Service has proposed continue to allow for inefficiencies in mail processing. However, I concur with my colleagues that meeting the price cap requirements is of primary importance.”

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