True or false: The U.S. Postal Service’s proposed rate changes, scheduled to take effect May 14, will change the way catalogers prepare, sort, and drop their books into the nation’s postal stream. True, assuming you want to receive the best postal rates.
Rate Case 2006-1 changes some key requirements for receiving automation rates and other discounts. Some discounts, in fact, will be eliminated, though additional discounts will be introduced.
Sorting through the 700 pages of rate charts, mailing standards, and minutiae of the recommended changes to determine their impact on your business is no easy task. “This is the most complicated rate case in the history of the Postal Service,” says Anita Pursley, vice president of postal affairs for Montreal-based printer Quebecor World.
“Some of the more recent rate cases were simple by comparison in that they were primarily across-the-board, general rate increases with few classification or rule changes,” adds Bob McLean, executive director of the Arlington, VA-based Mailers Council. “This rate case has dozens of rule and classification changes.”
Indeed, unlike past rate cases, this one changes the way that the agency calculates postage. The USPS is trying to drive more mail through its automation equipment. Because this equipment has restrictions in terms of the dimensions of the mail it can handle, the new rate structure is based more on the shape of mail and less on its weight.
“The Postal Service is putting very, very heavy emphasis on automation and automatability,” notes Gene Del Polito, president of the Arlington, VA-based Association for Postal Commerce (PostCom). “Those who give the Postal Service automation-compatible pieces, which are pieces that can be run on their machines and carry barcodes, get the best rates.”
Additional certification required
Basically, the more efficiently the USPS can process your mail, the less you’ll have to pay for postage. The steepest — some say most punitive — increases are for mail that won’t be able to run on USPS machines. That includes some mail pieces that had qualified as automation flats.
Currently there are three classifications to determine postage discounts:
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nonmachinable — mail that cannot be sorted on automation equipment
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machinable — pieces that can be sorted on USPS automation equipment
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automation — flat-size or letter-size pieces that are not only machinable but also carry the correct barcode.
As for what defines a “correct barcode,” the USPS Website states: “To receive the automation rates for cards and letters, all of the pieces in your mailing must have a delivery point barcode. Automation rate flats must have a delivery point barcode or a zip+4 barcode. All barcodes must meet placement, size, and legibility standards.”
The vast majority of catalogs currently qualify as automation flats. They fit within the allowable dimensions and carry correct barcodes, and the addresses are Coding Accuracy Support System (CASS) certified. A requirement for automation discounts, CASS certification verifies that an address falls within the stated zip+4 range.
If the rate case is passed as is, the addresses will also have to comply with the Postal Service’s Delivery Point Validation (DPV) system, which verifies that an address actually exists. Each piece of mail with an address that can’t be validated will no longer qualify for automation discounts.
To facilitate mail delivery by carriers on the streets, the rate proposal also encourages catalogers to put the delivery addresses in specified areas on the top or bottom of the back cover, depending on the placement of the spine. Catalogs that don’t will not qualify for automation rates.
This new rule is tied to the Postal Service’s deployment of a new flats sequencing system (FSS). “This is the new-generation flat-sorting equipment that sorts flats into the sequence a carrier walks,” Quebecor’s Pursley explains. “The Postal Service is going to begin deployment of this new machine in June 2008. The way it works, flats come off the machine into a tray standing on end as opposed to laying flat. When the tray is handed to the carrier who’s going to deliver the mail, it’ll already be in the sequence that he or she walks, and they’ll just have to finger the mail to see where one stop ends and the next one begins.”
A class of its own: not flat-machinable
In the new rate case, the nonmachinable classification is replaced by the not flat-machinable (NFM) classification. While NFM covers standard mail pieces that can’t be run on USPS flat machines and therefore don’t qualify for automation discounts, it is not simply a new name for the nonmachinable classification. While it includes mail that previously fell into the nonmachinable category, NFM also includes items that used to qualify for automation discounts but no longer will under the new regulations. Anything that ran on the upgraded flat-sorting machine (UFSM) 1000, for example, qualified as an automation flat before but will now be classified as NFM or, in some cases, as a parcel.
The Postal Service uses two flat-sorting machines: the automated flat-sorting machine (AFSM) 100 and the UFSM 1000. “The AFSM 100 is considered to be the workhorse,” Pursley says. “It’s a very efficient piece of equipment, but it has some restrictions [in terms of what it can handle]. The UFSM 1000 is an older piece of equipment, but it can handle a wider range of product sizes.”
Currently mail pieces that are a little too big or too small, too thin or too thick, or too rigid or too droopy to run on the AFSM 100 are usually run on the UFSM 1000. “The Postal Service doesn’t want to do that anymore, because the UFSM 1000 will not be in every location across the country,” Pursley says. “So they’re not going to allow automation discounts for pieces that run on that flat-sorting machine.” Those mail pieces, which will include rigid pieces such as CD jewel cases and DVDs, will be reclassified as NFM.
The majority of catalogs today are expected to continue to be classified as automation flats, says Pursley: “If the catalog is an AFSM 100-compatible flat, the changes are not drastic. If your mail piece qualified under UFSM 1000 regulations, then you have something to be very fearful of.”
Within the NFM grouping, says PostCom’s Del Polito, the rate increases on a piece weighing 3.3 oz. or less could range from 83% to 202%. “Not flat-machinables weighing more than 3.3 oz. can go up anywhere from 133% to 363%,” he adds.
Then again, rates for AFSM 100-compatible flats may increase by double digits. For flats weighing less than 3.3 oz., the Postal Regulatory Commission (PRC) in March recommended an increase of roughly 20%, instead of the 9%-12% increase sought in the original rate case.
Escondido, CA-based Dana Dubbs has written for Commercial Property News and Today’s Facility Manager, among other publications.
SORTING THE PRESORT LEVELS
Another significant turn of events for catalogers with this rate case is in the level of your presort. Currently catalogers who qualify for discount postage rates by sorting their mailings into five-digit and three-digit zip codes before dropping them into the postal stream pay a single rate for that two-level sort.
“Today the rate is $275 per 1,000 pieces for both a three-digit and five-digit sort,” says Chris Pierce, president of Lisbon, ME-based commercial printer Dingley Press. “Tomorrow there will be one rate for a three-digit sort, a different rate for a five-digit sort, and both rates will be higher than what you’ve been paying.” The proposed five-digit rate rises 9%, to $300/M, and the three-digit rate jumps 19%, to $328/M, he says. — DD
CREATING DROP-SHIPPING VOLUME
To further encourage mailers to take more of the work of handling the mail off its hands, the Postal Service plans to increase destination entry discounts for drops at bulk mail centers (BMCs) from $0.022 to $0.033, and discounts for drops at sectional center facilities (SCFs) from $0.027 to $0.042. And while the destination delivery unit (DDU) discount for Standard Mail Enhanced Carrier Route (ECR) letters will be eliminated because the USPS now sequences this mail for delivery at the SCFs, the DDU discount for ECR flats will increase from $0.033 to $0.051.
Not all catalogers have sufficient volume to qualify for the greater discounts offered by drop-shipping to a BMC, an SCF, or a DDU. Given the additional savings that can be achieved, however, it may be worth their while to check out shipping consolidators, who combine pieces from multiple mailers.
“As a work-share partner with USPS, we take on the front-end processing of our customers’ mail and then use our transportation network to drive it deeper into the Postal Service’s supply chain than customers could do on their own,” says Michael Gilbert, DHL Global Mail’s vice president of northeast sales.
“As we aggregate more volume from catalog companies, we can leverage deeper discounts by taking that volume and driving it all the way downstream to the DDU,” adds Paul Tessy, DHL Global Mail’s vice president of domestic products. “The closer we can get the mail to the DDU, the lower our postal rates become, and the more we can mitigate some of the postage increases for our customers.” — DD