Didn’t USPS rates just increase in January?
Yes, they did. But that was for a different group of products, and for a different reason.
The USPS has two groups of products – Market Dominant and Competitive:
Market Dominant Products are those offered exclusively by the USPS. No competitors offer equivalent products, so the USPS effectively has a monopoly on them. To prevent this monopoly from leading to exorbitant prices, specific guidelines were created to govern the rate increases for them. The primary guideline is that the average percent increase can be no greater than the Consumer Price Index (CPI) for that year. To ensure that is the case, the Postal Regulatory Commission (PRC) must review and approve all changes before they occur. This often results in drafts being volleyed back and forth between the USPS and the PRC over a period of time.
Market Dominant Products consist of First-Class Mail, Standard Mail, Periodicals, Bound Printed Matter, Media Mail, Library Mail, First Class Mail International and Domestic Business Mailing Fees.
Competitive Products are those for which the USPS has competition in the private market (FedEx and UPS). The market itself keeps rates in check, so there is no maximum increase set on those.
Competitive Products consist of First-Class Package Services, Priority Mail, Priority Mail Express, Standard Post, Parcel Select, First Class Package International, Global Express Guaranteed, Priority Mail International, Priority Mail Express International, International Priority Airmail, International Surface Airlift, Address Management Systems, Extra Services, Return Services and Recipient Services.
It was only the Competitive Products that were affected by the January 2016 rate increase.
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So, the April changes must be about Market Dominant prices, but why would prices go down?
The USPS announced in November of 2015 that, because the CPI rate had not changed significantly enough in the last year, they would not be seeking a rate increase for market dominant products in 2016.
Ok, they said prices wouldn’t go up, but that still doesn’t explain why they would go down.
The decrease doesn’t actually have anything to do with the CPI. Within the laws about the CPI controlling the allowable percentage of rate increase is a clause regarding exceptional circumstances.
Back in 2010, the USPS began making requests for an additional increase to help recoup some of the loss they incurred from the economic recession. It took several years for that Exigent Price Increase to get approved, but the approximately 4.3% increase went into effect in January of 2014.
The Exigent Rate Increase was only supposed to stay around until the $2.8 billion it was calculated they lost was recouped. The Increase should have gone away already, but in 2015 it was decided that the original calculations of the amount lost were not done correctly, so the increase was extended. The USPS should reach the revised dollar amount by April.
So, rates on market dominant products will go down approximately 4.3% in April?
Yes, they are supposed to. However, the USPS is still fighting. There is legislation pending to try and make the Exigent Rate Increase a permanent rate increase.
My advice is to make a list of things you’d like to do with the money you will be saving on postage starting in April, but don’t spend that money just yet.
Robin Jenkins – Postal Affairs Specialist – AM Solutions