Inflation Triggers 1-Cent Postal Rate Increase in Canada

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Canada Post Corp. will increase its domestic basic letter rate1-cent, or 2 percent, and also will propose increases for U.S. and international letter rates for implementation Jan. 15, 2007.

The announcement was made June 28 in the Canada Gazette, which is similar to the Federal Register in the United States.

Even at the new rate of 52 cents (Canadian), Ottawa-based Canada Post said Canadians have one of the lowest domestic basic letter rates among industrialized nations. One Canadian dollar is 90 U.S. cents.

Canada Post said rate increases are necessary to keep pace with inflation, direct operating costs and the need to reinvest in network infrastructure to meet customer demands.

Fuel costs, for example, have risen 18 percent since 2005 with another increase of 5 percent expected in 2007, Canada Post said.

Another source of increased cost is terminal dues, a pricing mechanism that allows the postal administration receiving mail for delivery to collect for the cost of delivery from the postal administration sending the mail (in this case Canada Post).

It is expected that terminal dues to the United States will increase a minimum of 3 percent in 2006, while dues to other international destinations will increase between 5 percent and 8 percent.

According to the Canadian postal service's pricing policy, the domestic increase is automatic, while the international ones must still go to the Canadian parliament for approval.

As a result, Canada Post proposed other changes, including:
-- 4-cent (Canadian) increase to 93 cents (Canadian) for letters, cards and postcards up to 30 grams destined for the United States;

-- 6-cent increase to $1.55 (Canadian) for letters, cards and postcards up to 30 g rams to foreign destinations.

Last year, the domestic basic letter rate increased 1 cent, and 4 cents was added to the price of letters destined for the United States. But last year, the price of sending a letter, card or postcard to a foreign destination increased by 4 cents, as opposed to this year's 6-cent increase.

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