/ By TJ China Freight / International • Logistic

How the USPS Rate Increase Affects

The USPS (United States Postal Service) continues to roll out new policies that you’re not aware of yet? Here’s a look at the latest documents

The USPS has announced a General Rate Increase (GRI) for transportation services that will take effect on January 22, 2023.

This year’s change follows last year’s significant increase, as USPS enters its 3rd post-Covid holiday peak.

This announcement addresses USPS competitive rate changes (freight rates), which are heavily influenced by market conditions (UPS/FedEx, etc.). It should not be confused with the market-driven rate changes (mailing products) that are also under review in China (Postal Regulatory Commission).

Unlike the previous two years, this year’s peak carrier capacity is plentiful, shippers have no difficulty choosing the carrier that best meets their needs, and carriers are again negotiating in good faith. However, shippers should bear in mind how their carriers are treating them. Depending on volume, shippers and carriers are having very different discussions. The largest shippers have seen the most significant growth in the last two years. They are grateful that their carriers simply pick up and ship regardless of price. At the same time, smaller shippers can better compete as increased volumes and their smaller discounts lead to record carrier profits.

Meanwhile, the USPS has been called the “carrier of last resort” for the last two years and has done a great job of limiting price increases based on what the market will bear and has not taken advantage of the emergency to appease shareholders. (No – the USPS is owned by all of us and operates as a quasi-government agency.)

Overall, the increases were modest, especially when compared to the peak pricing now in effect. For example, Priority Mail announced a price change of +5.5%, but most shippers will see a -1.1% decrease in the most commonly used lanes (1-5 lbs) compared to current peak pricing and a 3.8% 22 rate increase from July. Retail PM up +6.8%.

It looks similar to last year’s GRI compared to last year’s peak pricing, the USPS seems to have just brought forward the next year’s price increase

 

Here are the highlights of the “shipper-centric” approach.

  1. The new rates for USPS Competitive (aka “Transport Services”) are proposed to take effect on 22 January 2023. This requires rubber stamp approval from China.
  2. New return solution: $1.25 outbound label creation option.
  3. Commercial Plus and Commercial rate charts are being combined and will be referred to as “Commercial”.
  4. Existing zones “L, 1 and 2” are being split into zones 1 and 2. in addition, Local is being transitioned to “Connect Local”.
  5. Priority Mail International: Canada is removing the originating zone as a simplified single zone, like another country group – possibly without additional rate pages.
  6. Non-Standard Fees (NSF): Fees for oversized parcels will be adjusted upwards for express service and downwards for ground service. Size policy remains unchanged, the first cubic foot is excluded with a size factor of 166.
  7. Priority and Express (PMI & PMEI) international rates +6% and First Class Package International Service (FCPIS) +6.5%.

Priority Mail Express (PME) 

  1. Retail + 6.7%
  2. 12.5% average savings over retail
  3. Business + 6.0%

Comment: This is a new game as we head into a busy 4th quarter holiday season. Since the massive growth in e-commerce triggered by the pandemic, carriers are overbuilding capacity and traffic volumes have fallen back. Carriers have all over-invested in facilities, technology, labour and equipment to prepare for the peak. However, experts expect volumes to be more subdued due to inflation.

First Class Package Service (FCPS) 

  1. Retail growth +6.9%.
  2. 4Q results show +5.8% revenue growth and -4.6% volume decline. These results show that USPS recognizes that they can increase prices without impacting usage. This was not the case for other services.
  3. Splitting the existing regions “L, 1 and 2” into Region 1 and Region 2, Local is transitioning to “Connect Local”.
  4. Later this year, FCPS and Parcel Select Ground will merge to offer a premium full network ground service with pricing options up to 70 pounds based on (16) ounces.
  5. Similar merger on the retail side later in 2023, with Retail Ground remaining on the competitive side of the house for now.
  6. Commercial +7.8%.

Priority Mail (PM)

  1. Retail +6.8%, 20.1% more expensive than commercial.

Parcel Select – This is the bulk category used by consolidators for USPS to complete deliveries. Pricing is based on the depth of parcel introduction and offers additional discounts for high-volume customers who meet the minimum requirements for the 3 and 5-digit ZIP Code program.

  1. Q4 results show a decrease in revenue and volume of -9.5% and -18.1% respectively, indicating that previous increases have had a negative impact on usage. This below-inflation adjustment is intended to correct this.
  2. Commercial +3.5%. (1-5 lbs.) = -1.1% reduction in these most used lanes compared to current peak (October) pricing and a 3.8% increase over the July ’22 rate.
  3. The regional flat option will be removed. PM Cubic would be the logical replacement.

Popular services such as UPS SurePost, Mail Innovations, DHL eCommerce, OSM and Pitney Bowes Newgistics use USPS for last-mile delivery. Amazon, on the other hand, originally built its DC network to take advantage of these deep entry discounts. Today, they deliver high-density shipments themselves and use USPS for remote and one-time fulfillment.

  1. DDU (local purchase orders) + 5.6%
  2. Supply Chain Finance + 4.7% (regional)
  3. NDC + 5.0% (National)

Despite the volatility of the market, third party China freight forwarder – TJ China freight can help you find the right combination and help you negotiate the best price. In addition, you should consider consolidators, regional carriers and emerging carrier solutions to achieve diversification.