USPS Governors Protest but Approve Rate Case

Catalogers are getting whacked — hard — with the new postal rate hike. The U.S. Postal Service Board of Governors (BOG) on March 19 approved the majority of the recommendations issued by the Postal Regulatory Commission (PRC) regarding Rate Case 2006-1. Except for periodical rates, the new pricing structure is scheduled to go into effect on May 14.

Granted, the BOG did leave open the possibility of price revisions for Standard Mail flats, the category affecting most catalogers, before the May 14 implementation date. In its decision, the BOG stated that “the Governors are concerned that price increases recommended by the PRC may impose an unnecessary degree of ‘rate shock’ on the catalog industry, particularly small businesses. The recommended increase for some catalog mailers is as much as 40%, which is more than double what the Postal Service had proposed.”

But though the BOG approved the proposals for Standard flats “under protest,” it approved them nonetheless. Two other recommendations that were approved under protest are the nonmachinable surcharge for First Class letters and the Priority Mail flat-rate box rates.

In approving the rates under protest, the BOG has asked the PRC to reconsider its recommendations. “It’s not over,” says Jerry Cerasale, senior vice president for government affairs for the DMA. There’s still a small chance that the PRC will moderate its recommendations, he says, or that the BOG will at least delay implementation for technical reasons, as it did for the periodical rates.

Implementation of the new rates for periodicals has been pushed back to July 15. Many of the PRC’s recommendations for periodicals “came right out of left field,” prompting a variety of time-consuming software upgrades, says Don Landis, vice president of postal affairs for Menomonee Falls, WI-based printer Arandell Corp. “That’s why the periodicals get the extra two months,” he says.

A stay of execution?

But catalogers and their vendors feel that they need additional time as well, given the complexity of the rate case. Not only are prices increasing, but the criteria for determining pricing are changing as well, and a new class, not-flat machinables (NFM), has been introduced. Says Landis, “May 14 for Standard mailers is pushing it.”

The Mailers Council, an Arlington, VA-based trade group, requested that the Postal Service implement a standard implementation period of 120 days after a rate case decision is published in the Federal Register. The current lead time of less than two months, says executive director Bob McLean, “is not enough time for us.”

That the implementation date for the Standard Mail price hikes remains May 14, the same date as implementation of the noncontested First Class rates, suggests that the chances of the PRC altering its recommendation are slim. “It’s hard to believe that they’d just up and change it all,” says Landis. “There is hoping and wishing, but… I don’t see anything drastic happening.”

“If you’re in the catalog business, this is very serious,” says McLean. “I think what will happen is a lot of catalogers will look at alternative media and cutting mail volume. Historically this tends to show right after a rate case. But the increase is so substantial for catalogers that many people will rethink their business models.”

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