Small Parcels Get Slammed in Exigent Rate Case Filing

Catalogs have good reason to be upset with 5.1% hike proposed in the exigent rate case the U.S. Postal Service filed July 6. But it’s the small parcels that are really getting hammered once again: In the filing with the Postal Regulatory Commission, the USPS proposed an average price increase of 23% for Standard parcels (those weighing less than 16 oz.).

In the 2009 postal rate hike, standard rate parcels increased an average of 16%, vs. a 2.3% increase for catalog mail.

According to the proposed rate case, which would take effect Jan. 2, first-class mail parcels weighing 1 oz. to 3 oz. will pay the same rate: $1.71 for single-piece parcels. “This is a substantial rate increase, particularly for one-ounce and two-ounce first-class mail parcels,” says Gerard Hempstead, president of Hempstead Consulting and a former vice president for DHL.

The USPS also wants to make changes in Standard Mail parcel workshare discounts. It aims to increase many, such as price breaks for using destination delivery unit (DDU) and destination sectional center facilities (DSCF), and presort discounts for nonmachinable/irregular parcels, but reduce others, including presort discounts for machinable parcels.

“This causes the proposed rate increases to vary substantially based upon mail preparation and entry practices,” Hempstead explains.

What’s more, the USPS introduced new titles of fulfillment parcels (shipments generated due to an order from a customer) vs. marketing parcels that can be addressed to a recipient or to the current occupant of the address.

For a machinable fulfillment parcel weighing 4 oz., with network distribution center (NDC) entry point, carrying a five-digit presort level, there would be no price increase. But parcels weighing 6 oz., 8 oz., and 10 oz. would see a 31% increase.

A machinable fulfillment parcel with a DDU entry point carrying a five-digit presort level would see no increase if it weighs less than 4 oz. But for packages weighing 6 oz., 8 oz., or 10 oz., the increases would be 25%, 24%, and 23%, respectively.

“Mailers are going to have to raise their prices,” Hempstead says. “They just can’t absorb these increases.”

He advises mailers to band together in creative ways to figure out how to get mail down to the Destination Delivery Unit (DDU) instead of the NDC level to mitigate some of the effects of the increase. “I would suggest that shippers look into joining the Parcel Shippers Association to take up the fight with the Postal Regulatory Commission to moderate the amount of increase that has been proposed,” Hempstead says.

“If you are not already in conversations with a parcel consolidator, you have six months until the proposal hits your P&L,” he notes. “The amount of this increase is substantial and significant to shippers, and you need to plan now on how you are going to deal with the increased cost come the new year.”

It would make sense for UPS and/or Federal Express to find an effective way to aggregate these parcels into bags and deliver them to the USPS at the DDU level, Hempstead says. “I’m sure most shippers would be willing to abdicate some transit time for lower cost in mailing. And the USPS would get the piece inducted where they appear to be incenting mailers the most with discounts.”

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