On Friday, October 6, 2017, the U.S. Postal Service (USPS) filed the rate case for Market Dominant products with the Postal Regulatory Commission (PRC). Set to go into effect on January 21, 2018, the new rates represent about a 1.9% increase over the current prices for mailing, or “Market Dominant” products and 3.9% increases for shipping, or “competitive” products.
Interestingly, this price increase comes in the absence of both a Board of Governors (Board) and the anticipated PRC review of the ratemaking process. The PRC review was expected to be released in September. Every week, industry sources would state that the reported would be released “soon”. While the USPS couldn’t wait for the PRC report, they believe the PRC will recommend changes, as the rate case states, “this is likely the last market-dominant price adjustment case that will be reviewed under the current system.”
With foresight, in November 2016, while James Bilbray, the last presidentially-appointed Governor was still serving, the Board passed “Resolution 16-18: New Prices and Product Descriptions for Market Dominant Categories of Mail”. In most years, the USPS may increase postage prices at the rate of inflation as determined by the Consumer Price Index (CPI) – 1.98% for the last 12 months. Under the resolution, the USPS can raise rates in 2018, under certain conditions, including using 95% of the newly accrued and previously unused CPI authority.
As of the rate filing, President Trump has yet to nominate anyone to the Board. This means that the USPS can’t offer a promotional program as in previous years, as those weren’t covered in any resolution. It also means that the countdown has started for the 2019 postage rates. If there’s no civilian members of the Board by next October, there could be legal challenges if the USPS attempts to file a rate case.
For First-Class Mail, the largest increases are with Stamped and Metered Single-Piece letters. First-Class Single-Piece stamps must be sold in whole cents, so adding a penny causes the difference. Metered, Single-Piece rates are set $0.03 below stamped pieces, so a penny had to be added there as well. The very low - $0.001 – increase for Mixed AADC letters was a surprise, as it decreases the savings for the AADC and 5-digit sorts.
In good news for most commercial mailers, the USPS is retaining the $0.003 per piece discount for using the Full-Service Intelligent Mail Barcode (IMb). However, the rate case also takes into account the new Move Update assessments that go into effect on January 21, 2018. Under the new rule, the USPS will add $0.08 per assessed piece that fail Move Update verification under the Address Quality Census Measurement and Assessment Process with more than 0.5 percent for mailpieces submitted by mailer in a calendar month having COA errors, and which cannot demonstrate compliance with the Move Update requirements. Yet another reason for mailers to get their address management programs updated.
There’s mixed news for USPS Marketing Mail (formerly “Standard Mail”). While the overall increase for letters is only 1.97%, the increases for flats and parcels are higher. These additional increases are due to the mandate in the November 2016 Resolution to adjust the workshare discount passthrough. In laymen’s terms, this means the USPS is lowering their losses on these products.
This modest increase in postage rates will be acceptable to most mailers. No one wants an increase in any category, but mailers can’t expect the USPS to stay solvent and not raise rates. Critics of the USPS, especially proponents of privatizing, will use the rate case to bolster their arguments. Of course, they’ll ignore the higher percentage increases by private carriers like FedEx and UPS.
It’s also worth noting that even with the increase, USPS rates remain significantly lower than most foreign posts. Here are the prices for a First-Class letter, in US Dollars:
- $0.50 - US
- $0.68 - Canada
- $0.73 - Japan
- $0.78 - Australia
- $0.82 - Germany
- $0.85 - Great Britain
- $0.86 - France