A rule change in the rate case approved by the Postal Rate Commission last month has at least one marketer concerned, though mailers seem to be begrudgingly pleased with the settlement overall.
The increase is expected to generate $4.16 billion in additional revenue for the U.S. Postal Service. Approval is still needed from the USPS Board of Governors, but that is likely to come at the board's monthly meeting April 8-9. The increases proposed by the USPS last fall have stayed the same, though the PRC calls the increase 7.7 percent while the postal service calls it 8.7 percent.
At issue is a rule change that would require all letter-size mail sent First-Class or Standard Mail to meet automation requirements — even if it doesn't claim automation rates — or incur a surcharge of 4 cents per piece on top of normal postage. A million-piece campaign, for example, could cost a mailer an additional $40,000.
The change spells trouble for certain types of mailers, such as saturation mailers or retailers sending mail pieces on behalf of cosmetic or fragrance manufacturers, said Charley Howard, vice president of postal affairs and special projects at Harte-Hanks Inc.
Automation requirements include weight limits, shapes and design of mail pieces and tabbing requirements.
“Mailers will have to think about things they've never thought about before, such as making sure that copy is in the right place,” Howard said. “A line has been drawn in the sand. The postal service reserves the right to put this piece of mail on a machine — and if you make it so they can't, they are going to charge you more.”
Harte-Hanks is looking at what it has mailed for clients over the past two years and noting what would not meet the automation requirements.
“Mailers don't have a lot of time to change mail pieces they are doing today that are going to be mailed July 1,” Howard said.
If approved by the Board of Governors, regular Standard Mail rates would rise an average of 7.8 percent; Nonprofit Standard, 6.6 percent; Commercial Enhanced Carrier Route Standard Mail, 6.2 percent; and Nonprofit Enhanced Carrier Route Standard Mail, 6.5 percent. This would be the third round of increases in 18 months, after increases in January and July 2001.
“This decision will allow the postal service an immediate influx of revenue while holding rate increases to a reasonable percentage for postal customers,” PRC chairman George Omas said.
The PRC also approved increases of 3 cents on the price of a First-Class stamp; Parcel Post, 6.4 percent; periodicals sent outside counties, 10.3 percent; Priority Mail, 13.5 percent; Express Mail, 9.4 percent; and Bound Printed Matter, 9 percent.
This is the first rate case resolved through settlement. Normally, the conflicting interests engage in complex litigation to determine whether rate increases are justified.
“While we are never pleased when rates increase, we are gratified that the mailing community, the postal service and the Postal Rate Commission could work together to reach this agreement,” H. Robert Wientzen, president/CEO of the Direct Marketing Association, said in a statement. “It is also my hope that this round of increases will buy us time to achieve needed legislative reforms.”
Other notable proposals in the Standard Mail category include:
• Greater discounts would provide incentives for mailers to use their own or third-party transportation to move Standard Mail closer to the point of delivery.
• Two new presort options would replace the Basic Automation Rate — Automated Area Distribution Center and mixed-AADC. These options encourage finer sortation by mailers when the necessary volume exists.
• Automation-compatible letters weighing up to 3.5 ounces receive an automation letter discount, as in the last case.
• The residual-shape surcharge would increase 5 cents for items prepared as parcels.
• The 3-cent barcode discount for regular and nonprofit parcels would be retained.