With the 2013 postal rate increase around the corner on January 27th, Hamilton Davison of the ACMA provides a clear summary below of the proposed rates and the discussion surrounding the increase.
USPS Announces Postal Rate Increases for 2013
Dear Catalog Industry Executive:
Today, the US Postal Service filed for its 2013 rate increases with the Postal Regulatory Commission. The amount of the increase (2.57% overall) was in line with ACMA projections previously communicated to members only. Rate increases in the two key catalog categories were 2.57% for Standard Flats and 3.133% for Carrier Route. The new rates are scheduled to take effect on January 27, 2013, at 12:01 am, pending approval by the Postal Regulatory Commission (PRC).
The averages by product type are listed below, but note that averages can be misleading and it is necessary to examine your individual rate cells as your increase can vary from the average significantly.
- Standard Mail Flats 2.570%
- Carrier Route Flats 3.133%
- High Density Saturation Flats 2.275%
- High Density Saturation Parcels 2.275%
- Bound Printed Matter Flats 0.002%
- Bound Printed Matter Parcels 3.424%
USPS Explains Pricing Gaps
In its filing, the USPS also proposed a 2.722% increase for Standard Mail Letters, which is 0.152% greater than Standard Mail Flats. In the filing, the USPS says it believes that above-average price increases for Flats would impair its ability to enhance its revenue/contribution under the price cap. The USPS maintains that the proposed prices for Flats and Letters represent a measured approach that will not only help capture additional revenue and contribution, but will also, over time, move flats to 100 percent cost coverage.
In the FY 2010 Annual Compliance Determination (ACD), the PRC directed the Postal Service to increase the cost coverage of Standard Mail Flats product through a combination of above-average price adjustments, consistent with the price cap requirements, and cost reductions until such time that the revenues for this product exceed attributable costs. But last year, USPS filed an appeal with the U.S. Court of Appeals, which ACMA backed with a support brief, challenging, among other things, the Commission’s authority to issue the ACD order. The Court remanded the case to the Commission for a definition of the circumstances that trigger failsafe protection, and for an explanation of how the ACD demand would be constructive.
In this new filing, however, the Postal Service demonstrates that price increases would be counterproductive under the statutory price cap, striking a balance through the following factors:
- the PRC’s finding of noncompliance for Standard Mail Flats in the ACD;
- the USPS’s ongoing concern about the long-term health of the catalog industry;
- the USPS’s belief that above-average price increases for Flats (at the expense of letters) will impair its ability to enhance revenue and contribution under the statutory price cap.
In addition to the concerns mentioned above, the Postal Service’s pricing decision for Flats was also influenced by the need to manage the price gap between Standard 5-Digit automation flats and Carrier Route flats. Had the Postal Service given a larger price increase to Standard Mail Flats, it would have been forced to increase Carrier Route prices (which are already increasing by 3.133%) even further. To avoid such and increase, which would have negatively impacted Carrier Route volumes, the Postal Service allowed the gap between these two products to grow from 8.2 cents to 8.3 cents.
ACMA will distribute further guidance and interpretation to members as things develop. Members are also encouraged to pose any questions of concerns to myself or Paul Miller (914-669-8391 firstname.lastname@example.org). For now, you can review the full USPS filing by clicking here.
President & Executive Director
American Catalog Mailers Association