When the U.S. Postal service transfers commercial Standard Mail parcels to the “competitive” product list, it could spell trouble for many parcel shippers, says freight expert Gerard Hempstead, president of Hempstead Consulting. “It’s going to mean higher prices for sure,” he says.
The Postal Regulatory Commission on March 2 conditionally granted the USPS request to transfer commercial Standard Mail parcels to the competitive product list. But there are two conditions: the USPS must file a notice of competitive price adjustment for Parcel Select rates, including Lightweight Parcel Select parcels that demonstrate that the rates cover costs; and the PRC must issue an order finding that the Parcel Select rates actually do cover costs.
The transfer is not immediate, “but the USPS now has an excuse to file for additional price increases for Parcel Select, including the transferred Standard parcels,” Hempstead says.
PRC spokesperson Norman Scherstrom says that the ball is now in the USPS’s court. “It’s up to the Postal Service to decide if or when to do that. If the Postal Service does file, the PRC would then rule on that filing.”
For its part, the Postal Service says it will move the commercial Standard Mail parcels to the competitive product side—and that there will be a price increase. “The PRC is asking us for documentation that the increase will be reasonable and that we will move the price closer to actually covering the costs we incur for the product,” says USPS spokesperson Joanne Veto.
After the transfer, Hempstead believes pricing for those products could double without losing any volume “because there is no competitor that prices at their levels.”
Indeed, by moving the product to “competitive” classification it would allow mailers to negotiate an agreement with the USPS. But, Hempstead says, historically the USPS has proved that it doesn’t have much practice at negotiating discounts, “nor have they been generous in their process.”
What does this mean? “Any mailer that thinks, due to size or package characteristics, they’ll get a better deal than they have now, or a deal that will significantly save their firm from a substantial increase, may be whistling in the dark.”
And given the Postal Service’s ongoing financial difficulties, Hempstead believes the USPS won’t waste any time finalizing its filing with the PRC. “For sure in time to be effective prior to the busy shipping season that begins after Labor Day,” he adds.