Beset with Financial and Political Pressures, USPS Prepares to Implement Previously Announced Rate Increases

May 14, 2019


Despite just a slight decline in total revenues, the United States Postal Service (USPS) continued its quarterly, escalating pace of financial losses to the tune of $2.1 billion. Citing market dominant products as a cause of these losses, the postal service remains in a political and financial dilemma.

As defined by the USPS, market dominant products which make up 67% of the USPS revenue are “postal products and services over which USPS exercises sufficient market power that it can effectively set their price with limited competition”. This category of products was established under the Postal Accountability and Enhancement Act of 2006. Pricing changes for these products occur annually and are tied to the Consumer Price Index, with a price cap applied to each mail class. This category includes First-Class Mail service, Standard Mail service, Periodicals, single-piece Standard Post service, Media Mail service, Bound Printed Matter, Library Mail, most Special Services, and certain international mail products.”

Despite raising the price of a first-class stamp to 55 cents in January, the largest increase in its history, the Postal Service has urged the Postal Regulatory Commission to remove a price cap that limits product increases to the Consumer Price Index.

In addition, the USPS has also called on Congress to eliminate a requirement since 2006 to pre-fund health benefits for future postal retirees. The White House postal task force estimated that USPS has defaulted on $43 billion in pre-funding payments to the Postal Service Retiree Health Benefits Fund. The Post Master General warned lawmakers at last month’s committee hearing that the USPS would run out of money by 2024 if it made all of its legally mandated payments.

And let’s not forget the Universal Postal Union (UPU). As noted by Freightwaves, The treaty, agreed to in 1874, sets fees for international shipping of mail and small parcels (under 4.4 pounds) around the world. Since 1969, the treaty has assigned lower shipping rates to developing countries, including China, in an effort to boost their competitiveness globally. In other words, on average, it’s cheaper to ship an item from China to the U.S. versus shipping a similar item from Atlanta to Chicago. Last year, the USPS announced plans to withdraw from the UPU.

Beset with growing debt and pressure from all sides, the USPS is preparing to implement another round of rate hikes announced late last year. Effective June 23, the list is long. However, one particular thing to note is that the USPS plans to change its divisor for dimensional weight calculations. The changes will apply to all domestic Priority Mail, Priority Mail Express, and non-Lightweight Parcel Select packages over one cubic foot. The USPS’ updated divisor will be set at 166 compared to FedEx and UPS’ divisor of 139.

To find out more on how the USPS next round of rate hikes could impact your bottom line, contact us at solutions@spendmgmt.com

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Beset with Financial and Political Pressures, USPS Prepares to Implement Previously Announced Rate Increases

May 14, 2019


Despite just a slight decline in total revenues, the United States Postal Service (USPS) continued its quarterly, escalating pace of financial losses to the tune of $2.1 billion. Citing market dominant products as a cause of these losses, the postal service remains in a political and financial dilemma. As defined by the USPS, market dominant products which make up 67% of the USPS revenue are “postal products and services over which USPS exercises sufficient market power that it can effectively set their price with limited competition”. This category of products was established under the Postal Accountability and Enhancement Act of 2006. Pricing changes for these products occur annually and are tied to the Consumer Price Index, with a price cap applied to each mail class. This category includes First-Class Mail service, Standard Mail service, Periodicals, single-piece Standard Post service, Media Mail service, Bound Printed Matter, Library Mail, most Special Services, and certain international mail products.” Despite raising the price of a first-class stamp to 55 cents in January, the largest increase in its history, the Postal Service has urged the Postal Regulatory Commission to remove a price cap that limits product increases to the Consumer Price Index. In addition, the USPS has also called on Congress to eliminate a requirement since 2006 to pre-fund health benefits for future postal retirees. The White House postal task force estimated that USPS has defaulted on $43 billion in pre-funding payments to the Postal Service Retiree Health Benefits Fund. The Post Master General warned lawmakers at last month’s committee hearing that the USPS would run out of money by 2024 if it made all of its legally mandated payments. And let’s not forget the Universal Postal Union (UPU). As noted by Freightwaves, The treaty, agreed to in 1874, sets fees for international shipping of mail and small parcels (under 4.4 pounds) around the world. Since 1969, the treaty has assigned lower shipping rates to developing countries, including China, in an effort to boost their competitiveness globally. In other words, on average, it’s cheaper to ship an item from China to the U.S. versus shipping a similar item from Atlanta to Chicago. Last year, the USPS announced plans to withdraw from the UPU. Beset with growing debt and pressure from all sides, the USPS is preparing to implement another round of rate hikes announced late last year. Effective June 23, the list is long. However, one particular thing to note is that the USPS plans to change its divisor for dimensional weight calculations. The changes will apply to all domestic Priority Mail, Priority Mail Express, and non-Lightweight Parcel Select packages over one cubic foot. The USPS’ updated divisor will be set at 166 compared to FedEx and UPS’ divisor of 139. To find out more on how the USPS next round of rate hikes could impact your bottom line, contact us at solutions@spendmgmt.com

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