Postal Rates Won't Go Up Until Jan. 10

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After much anticipation, the U.S. Postal Service's Board of Governors last week approved new postal rates, but the increases won't go into effect until Jan. 10, after the holiday mailing season is over.


The governors voted unanimously to accept most of the Postal Rate Commission's recommendations but moved to implement the increases next year. Insiders say the overwhelming opposition from the House of Representatives, which voted 393-12 to urge the governors to deny the rate increases entirely -- in light of the postal service's $1.44 billion surplus over the last year, may have contributed to the decision.


"This was done after careful consideration of customer and congressional input, management's financial forecasts and what we believe to be in the best interest of our customers and the postal service," said board chairman Sam Winters.


Direct mailers were pleased with the delay.


"The governors acted responsibly. By avoiding implementation of rate adjustments this year and waiting until after the holiday '98 mailing season, the governors have assured that the U.S. economy will not be disrupted by an untimely hike," said Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association.


David Weaver, president of the Mail Advertising Service Association, Alexandria, VA, echoed Cerasale's views: "We are delighted that good management and a favorable business climate have given the postal service flexibility over the implementation of new rates. This decision is good for everyone."


Effective Jan. 10, rates will increase 2.9 percent across the board. These are some of the most notable increases:


* 1 penny increase, to 33 cents, for a First-Class letter.


* 1.2 percent average increase for Standard A-regular mail.


* 3.1 percent increase for First-Class bulk mailers who mail 1-ounce bills.


* 9.2 percent to 12.3 percent increase for Standard-B mailers.


* 10 percent minimum increase for nonprofit mailers.


* As much as a 27 percent increase for large-parcel shipments to destination bulk-mailing centers.


Worksharing discount programs, package discounts, a delivery confirmation service program and bulk-shipping insurance also will go into effect.


Winters said the increase will provide a continuing investment in America's future.


"We need to continue investing in those things that will improve consistency in home delivery and improve and innovate services for American business," he said. "We need to continue to invest in automation and other infrastructure improvement to keep the postal service efficient and to hold down rates."


The board agreed to return to the PRC for clarification on recommended changes affecting three subclasses: Parcel Post drop-shipped at destination delivery units (in the 2-pound rate), within county periodicals and library rates. But these rates probably will be implemented as planned. In regard to the DDU drop-shipped parcel post category, John Ward, vice president of marketing systems at USPS, said, "the record does not have sufficient explanation of how the commission arrived at that rate, so we've simply returned it and asked the commission to clarify it."


In addition, the Prepaid Reply Mail and the Courtesy Envelope Mail programs, which would let consumers return bills without paying postage and give postage discounts to participating business customers, was rejected by the governors, saying more study is required to refine the concept.


Mailers were generally positive about the rate decision. Catalogers, for example, are happy to avoid the financial and operational problems that would have resulted from an increase this year.


"We mail very heavily in the fall, which is our best season, and we also mail very heavily for the new year right after Christmas," said David Hochberg, a spokesman for Lillian Vernon, Rye, NY. "The fact that the rates are delayed from the possible fall date and from Jan. 10 vs. Jan. 1 is very good news."


While Hochberg said his company has no plans to change its mailing schedules as a result of the date, the USPS expects many catalog companies to step up their efforts to get their spring catalog mailed before Jan. 10.


Postal software vendors -- who must update software to conform with the increases -- also were pleased with the implementation date. Some vendors are concerned that the USPS, which has to rewrite its Presort Accuracy and Evaluation (PAVE) tests to accommodate the new regulations and then send them to software vendors, may not be ready in time. Ward said software vendors shouldn't fear. The USPS brought in software consultants who helped evaluate whether software vendors and the USPS itself was ready for the changes. In addition, the postal service is preparing its PAVE system in the Memphis Customer Service Center.


For some groups, the delay only softens the blow. Nonprofits, for example, will see double-digit increases, regardless of when the rates are implemented.


"Based on the case the USPS presented, there should be no increase at all," said Mark Silbergeld, president of the Alliance of Nonprofit Mailers, Washington. "The delay will give nonprofit mailers some breathing room to prepare, but the rates they will eventually have to swallow remain unjustified. The standards for rate-making need to be reviewed in light of these staggering increases facing nonprofits."


Joseph Ball, executive vice president of Florida Gift Fruit Shippers Association, Orlando, FL, also expressed concerned. His members ship, on average, 26-pound packages nationally -- and they will see a 27 percent increase because of the new rates.


"More members will have to charge shipping costs now," Ball said. "It's going to cost them their businesses."


He said the impact on his industry will be $1.1 million a year. Since 50 percent of the industry's volume is shipped before the holidays, however, the USPS reduced the impact by half a million dollars by delaying the increase.


"I'm happy it's happening after the Christmas season," Ball said.
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