USPS files proposed 2021 rate increases with Parcel Regulatory Commission

Price hikes are coming for customers of the United States Postal Service (USPS), with the organization recently announcing it has filed notice with the Postal Regulatory Commission (PRC), independent Federal agency that provides transparency and accountability of all USPS operations, for increased rates set to take effect on January 24, 2021.

USPS officials said that should the PRC’s Postal Service Governors sign off on these proposed rate increases, the percentage increases, for certain USPS product segments would increase to varying degrees, including Shipping Services product prices up roughly 3.5% for Priority Mail service and 1.2% for Priority Mail Express service.

USPS officials said that price increases for Shipping Services vary by product and are primarily adjusted according to market conditions, whereas Mailing Services price increases are based on the consumer price index. And they added that the Postal Service Governors “believe these new rates will keep the Postal Service competitive while providing the agency with needed revenue.”

The need for increased USPS revenue has been apparent for years, with the USPS seeing a fiscal year 2020 $9.2 billion net loss, up $363 million annually, and a controllable loss of $3.8 billion, marking a $334 million increase. Despite these losses, though, its Shipping and Packages group seeing a $5.8 billion increase in revenue, which was up an impressive 25.3%, to $28.537 billion. What’s more, USPS noted that package volume, for the fiscal year, headed up by almost 1.2 billion pieces, or 18.8%, annually, to 7.323 billion citing an e-commerce surge as the growth driver.

In an analysis provided to LM, Gordon Glazer, Senior Consultant, USPS Specialist, for San Diego-based parcel consultancy Shipware LLC, explained that these proposed pricing changes are being fueled by pandemic-fueled increases in e-commerce that most believe are forever changing buying habits.

“Consumers will be paying much more for lightweight e-commerce parcels (+19%) but will enjoy mile YoY increases on the packages they mail using the full Postal network,” wrote Glazer.

Some of the key “Shipper-Focused takeaways of the USPS’s proposed 2021 rate increases highlighted by Glazer included:

• Commercial Plus Pricing (CPP) and Commercial Base Pricing (CBP) retain identical rate tables for all services;
• For Priority Mail Express, Priority Mail, Parcel Select, Parcel Return Service, USPS Retail Ground, and First-Class Package Service customers, a $100 fee will be assessed on parcels found in the mailstream that exceed the maximum mailable size limit (combined length and girth greater than 130 inches);
• Priority Mail (PM) 1-5 Lbs. +3%, > 6 Lbs. avg +8.2%, Cubic +7.2% and Regional Flat Rate +3.3%;
• First Class Package Services (FCPS) +6.0%;
• Economy “Parcel Select” (PS) 1-10 Lbs. increase 5.9% for DDU induction and 7.2% for SCF. Oversize increase is 10%; 
• Economy “Parcel Select Lightweight” (PSL) less than a pound +18.8% (DDU induct) compare to last year’s +4.5%; and
• First Class Package Services (FCPS) +6.0%, 1-4 ounces taking a much higher increase, while higher weights and shorter zones are seeing less.

“Shippers will need the patience of Job this holiday season,” said Glazer. “Shop early and expect to pay more will be the norm. The new year provides time and opportunity to fine tune your shipping program. When comparing programs in the new year, don’t blame ’20 Q4 service delays on the Postal Service.  Going forward, it is always smart to look for savings by examining routing logic, review carrier contracts and network with industry peers.  Savvy shippers understand their distribution profile is unique to them and that rate changes impact each differently.  We recommend Shippers analyze future impact of all carrier rate increases to get out in front of the changes and mitigate cost increases by shopping.  Those that had a diverse carrier mix in place will enjoy the flexibility to minimize holiday surcharges and select the best performing carriers to insure timely delivery.” 

Morgan Stanley analyst Ravi Shanker wrote in a research note that in all cases, the announced price USPS increases are offset by discounts of up to 50-60%.

“We also note that over half of the increase is driven by Parcel Select (attributable for nearly 5% of the increase),” he wrote. “Parcel Select is used by large and medium sized parcel shippers and private parcel companies (likely including UPS, AMZN, and DHL) who are outsourcing their volumes to the USPS, usually for the last-mile shipments and in rural/non-metropolitan areas. The net result is that this USPS price increase could raise UPS’s Surepost product service cost.”