Catalog postal rates in U.S. could rise 22% this year or next year to cover USPS expense of Standard Mail flats not covered by current postal rates, based on findings of Postal Regulatory Commission

Bdebbie Garcia

LOS ANGELES , April 4, 2011 (Industry Intelligence) – Postal rates for catalog mailers could rise by 22% in 2011 or 2012 because of findings released this week by the Postal Regulator Commission (PRC), said the American Catalog Mailers Association (ACMA), reported Multichannel Merchant Magazine on April 1.

The PRC found that rates for Standard Mail flats--the category affecting most catalogers--are not in compliance with a section of the Postal Accountability and Enhancement Act of 2006 that requires the U.S. Postal Service (USPS) to apportion a “fair and equitable” amount of the cost of its operations.

In its Annual Compliance Determination (ACD) for fiscal year 2010, the PRC stated that the attributable cost of Standard Mail flats during fiscal 2010 exceeded revenue by US$577 million, resulting in a cost coverage of 82%, for a loss of $0.82 per piece, the magazine reported.

It was the first time an ACD, which assesses the financial and service performance of the USPS, found such rates to be in noncompliance. The ACD ordered the USPS to devise a plan to improve the cost coverage of Standard Mail flats.

The Standard Mail intra-class cross subsidy has been growing, but the USPS has “repeated failed” to address it via existing pricing options, according to the ACD, reported the magazine.

The USPS was directed to implement “above average price increases for the deficient products” in order to close the cost gap, said PRC spokesperson Norman Scherstrom.

The USPS has been provided with pricing flexibility, without a strict timetable, in order to “avoid or minimize the possible rate shock for affected customers” as rates increase to comply with the order, Scherstrom said, the magazine reported.

The products not covering costs include the mixed area distribution center, automated area distribution center, and 3-digit and 5-digit Standard Mail flats.

It is not certain whether the large hike in rates will be implemented this year or next year, said Hamilton Davison, ACMA’s executive director, reported the magazine.

ACMA estimates it would take an increase of 22.3% to bring flats to full cost coverage, although this figure could be higher as it doesn’t account for the inevitable volume loss.

USPS officials could not be reached for comment.

The primary source of this article is Multichannel Merchant Magazine, Stamford, Connecticut, on April 1, 2011.

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