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Commentary & Analysis

In The Mail: November 2018—What You Need to Know About Postal Issues

PRC approves 2019 price increases…USPS reports $3.9 Billion loss…The Universal Postal Union reacts to U.S. withdrawal…Mailers less satisfied with USPS overall…Marketing Mail controversy continues…Next steps for Regulatory Review?

By Idealliance
Published: November 27, 2018

It’s Official: Postage Going Up.On November 13, the Postal Regulatory Commission approved the U.S. Postal Service’s planned rate adjustments for both Market Dominant and Competitive products. Among the increases that will take effect on January 27, 2019: First-Class Forever Stamps will rise 10% from 50 cents to 55 cents and Metered Letters will rise from 47 cents to 50 cents, although the cost of each additional ounce will fall from 21 cents to 15 cents.

Select Competitive Product rates also affected by the rate adjustment include:

 Product: Priority Mail

Old Rate

New Rate

 Retail Small Flat Rate Box

$7.20

$7.90

 Retail Medium Retail Flat Rate Box

$13.65

$14.35

 Retail Large Flat Rate Box

$18.90

$19.95

 Retail Large Flat Rate Box APO/FPO/DPO

$17.40

$18.45

 Retail Regular Flat Rate Envelope

$6.70

$7.35

 Retail Legal Size Flat Rate Envelopes

$7.00

$7.65

 Retail Padded Flat Rate Envelopes

$7.25

$8.00

The PRC’s complete analyses of the Postal Service’s Market Dominant and Competitive rate adjustments for calendar year 2019 are located at www.prc.gov in Docket Nos. R2019-1 and CP2019-3, respectively.

New DIM Weighting Provisions Delayed. On November 15, the Postal Service notified the PRC of its intent to defer the implementation of the new DIM weighting provisions for Retail and Commercial Priority Mail and Priority Mail Express, and Commercial Parcel Select, for all Zones and Entries. Subject to PRC approval, these DIM weighting provisions will be delayed until June 23, 2019.

Further, effective January 27, 2019, the balloon pricing currently applying to Retail and Commercial Priority Mail Zones 1–4 and to Commercial Parcel Select all Zones and Entries will be eliminated, and the current DIM weighting provisions for Retail and Commercial Priority Mail Zones 5–9 will be retained.

Revised redline postage statements, an updated Release Overview, and applicable publications are posted to PostalPro:  https://postalpro.usps.com/releases/jan2019Release/overview. Industry webinars are being scheduled to discuss updated information. Please direct any inquiries or concerns to the PostalOne! Help Desk at postalone@usps.gov or 800-522-9085.

USPS Reports $3.9 Billion Loss. The USPS has reported a net loss of $3.9 billion for fiscal year 2018 (October 1, 2017–September 30, 2018), an increase in net loss of $1.2 billion compared to FY 2017. Controllable loss for the year was $2.0 billion, an increase of $1.1 billion.

Operating revenue for the year was $70.6 billion, an increase of $1.0 billion over FY 2017. Revenue increased $2.0 billion, or 10.1%, in the Shipping and Packages business, where volumes grew by 394 million pieces, or 6.8% while First-Class Mail volumes declined by approximately 2.1 billion pieces, or 3.6%.Overall volume for the year fell by 3.2 billion pieces.

Operating expenses for FY 2018 were $74.4 billion, an increase of $2.2 billion, or 3.1% over the prior year, driven by an increase in compensation and benefits due to contractual wage increases and increased transportation expenses. Expenses for workers compensation and retiree health benefits increased by $801 million and $221 million, respectively, partially offset by a $260 million reduction in expenses for the amortization of unfunded retirement benefits. 

The Postal Service said it was unable to make the $6.9 billion in payments due to the federal government at the end of fiscal year 2018 to pre-fund pension and health benefits for postal retirees without putting its ability to fulfill its primary mission at undue risk.

The UPU Blinks. The Universal Postal Union (UPU), an international United Nations agency that sets global cross-border mail and parcel rates, now plans to fast-track review of rate changes following President Trump’s announcement in mid-October that it intended to withdraw from the agency by January 2020 to address what it sees as below-market parcel shipping rates for certain countries, notably China, putting U.S. shippers at a disadvantage.

“If we work fast enough, and the member countries are all in consensus on these issues and decisions are made, by April next year I think it is a possibility,” UPU Director General Bishar Hussein is reported as having told The Wall Street Journal.

The Administration, which had asked the UPU to revise its rate structure and reduce discounts for foreign shippers earlier this year to no avail, had indicated that during the year-long withdrawal process the State Department would negotiate separate agreements with other countries to address what it sees as global shipping rate inequities. 

Mailers Less Satisfied with the USPS. There was an overall decline in satisfaction with the USPS in 2018 according to the Idealliance 2018 Annual Mail Industry Survey Report. The report, released last month, was based on a survey of 149 participants, 59.7% of whom were primarily mail service providers who shipped anywhere from 91,000 to 95 million pieces weekly. 

Regarding “Overall Experience with the USPS,” respondents who were “Very” and “Mostly” satisfied, dropped from 45.6% in 2017 to 40.7% this year. Those who were “Somewhat” satisfied rose from 25.7% to 29.6%, while those who were “Neither Satisfied nor Dissatisfied” or “Very” dissatisfied rose from 28.7% to 29.7%.

The report also listed usage and satisfaction rates for 10 USPS functions, 22 program systems and seven steps in mail and shipment processing. Obtain a copy of the 2018 Mail Industry Survey Report at www.idealliance.org/annual-mail-industry-survey.

New House Chair, Lame-Duck Session. With the 2018 mid-term elections making the Democrats the majority party in the House of Representatives, the House Committee on Oversight and Government Reform will now be chaired by Rep. Elijah Cummings (D-Md.).  Cummings has been an advocate of HR 6076, the postal reform legislation whose main component is reducing retiree health benefit obligations while raising all postage rates by 2.15%. One of the key questions is whether a lame duck session of the Senate will confirm two USPS Board of Governor nominees, Ron Bloom and Roman Martinez, IV—both were confirmed by the Senate in August—and Postal Regulatory commissioner nominee Michael Kubayanda.

Marketing Mail Controversy Continues. In August 2018 the USPS released a proposed rulemaking process in the Federal Register to potentially ban all merchandise and goods from all marketing mail. The proposal—with a second clarification outlining a proposed date for implementation—caused a firestorm in the mailing industry. Postmaster General Meghan Brennan and her marketing team received recommendations to pull the proposed rulemaking process; however, the USPS continued with the comment period which generated 4,700 comments. PMG Brennan announced at last month’s Postmaster General’s Mailers Technical Advisory Committee (MTAC) meeting the formation of an MTAC task team to work on this issue.

Next Moves on Ten-Year Regulatory Review? Nearly two years ago, on December 6, 2016, the Postal Regulatory Commission began a 10-year review of the USPS’s pricing framework as mandated by the 2006 Postal Accountability and Enhancement Act (PAEA). A key component of PAEA was a price cap mechanism tied to inflation. The PRC released its review and proposal in 2018 to widespread criticism by granting the USPS significant latitude to increase prices without imposing cost controls. The PRC may have delayed further action as a result of the formation of the President’s Task force on the U.S. Postal System and its possible findings.

Idealliance is a global industry association representing the visual communications industry, comprised of content and media creators, and their print and digital service providers, material suppliers and technology partners.

 

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