USPS Proposes Rate Hikes of Up to 6.3% for Parcel Shipping in 2020

The U.S. Postal Service has announced its proposed rate changes for 2020, including increases which have been approved by its board of governors but still need approval by the Postal Regulatory Commission (PRC). They would go into effect on Jan. 26, 2020.

The proposed increases for parcel products range from 4.9% for medium flat-rate boxes, from $14.35 to $15.05, to a 6.3% increase in APO/FPO large flat-rate boxes, from $18.45 to $19.60. Letter rates are remaining largely unchanged, except for outbound international letters, increasing from $1.15 to $1.20.

The proposed rate changes come at a critical time for the USPS, as it is facing major reductions in parcel volume from pullouts by its largest three customers, Amazon, UPS and FedEx, all of which are diverting volume into their own built-out networks to gain efficiency and cost savings. This is on top of ongoing declines in letter volume, which is why USPS parcel growth had been a particular bright spot.

For the first time in years, the USPS reported an overall parcel volume decline of 3.2% in August, which observers attributed to these shifts. Still, revenue was up 4.8%, thanks to price increases that went into effect in January. The new rate increases if approved will somewhat offset the volume declines, but may also cause some shippers to consider other options.

Overall, the USPS reported a quarterly loss of nearly $2.3 billion in August. The so-called controllable loss, less obligations like mandatory pre-funding of retiree health benefits, was $1.1 billion, up from $889 million in 2018.

The proposed USPS parcel increases for 2020 are as follows:

Product                                            Current                 Proposed           Change 

Small Flat-Rate Box                          $7.90                      $8.30                 +5.1%

Medium Flat-Rate Box                      $14.35                    $15.05               +4.9%

Large Flat-Rate Box                         $19.95                    $21.10                +5.8%

APO/FPO Large Flat-Rate Box        $18.45                     $19.60               +6.3%

Regular Flat-Rate Envelope             $7.35                       $7.75                 +5.5%

Legal Flat-Rate Envelope                 $7.65                       $8.05                 +5.3%

Padded Flat-Rate Envelope             $8                            $8.40                 +5.1%