USPS Seeks Pricing Surcharge on Packages for the Holiday Season
Postal Service has seen package business soar during the novel coronavirus pandemic.
The U.S. Postal Service is seeking authority to temporarily raise prices on its commercial package offerings, looking to boost revenue during its busiest season of the year.
The increases, which will go to the Postal Regulatory Commission for review, would last from Oct. 18 to Dec. 27 and institute a rate surge of around 8%, depending on the product. The changes will not affect retail customers directly, USPS said, focusing instead on commercial products in its competitive space. Pricing for Priority Mail Express, Priority Mail, First-Class Package Service, Parcel Select and Parcel Return Service would go up. A Priority Mail package currently starting at $7.02 to deliver, for example, would increase by $0.40.
Because USPS package services are part of its competitive business—as opposed to regular mail, on which the agency maintains a government-protected monopoly—the mailing agency does not have a price cap and the regulatory commission's review is less intensive. The Postal Service has seen a dramatic spike in package volume since the start of the novel coronavirus pandemic, with revenue from that sector up 54% in the third quarter of fiscal 2020 compared to the same period last year. The increases have partially offset the agency’s significant losses in other parts of its business, but package delivery is more labor intensive and less profitable than regular mail.
“The Postal Service is protecting the retail consumer during a vulnerable economic period while increasing prices on commercial volume during heightened volume levels,” USPS said in a statement. Its board of governors “believe these temporary rates will keep the Postal Service competitive while providing the agency with much needed revenue.”
USPS’ direct competitors in the package space, such as FedEx and UPS, have already instituted temporary surcharges, citing the ongoing pandemic. President Trump has for years implored USPS to charge more for package delivery, often repeating a debunked claim that USPS is improperly taking a loss on its deliveries for large-scale shippers like Amazon. New Postmaster General Louis DeJoy, who has raised millions of dollars for Trump and the Republican Party, has faced criticism for his close ties to the president. The pricing announcement comes as USPS is mired in controversy over DeJoy's structural and operational changes and its handling of mailed-in ballots in the upcoming election.
Mike Plunkett, a former USPS vice president for pricing and classification and current president of PostCom, an association of large-scale private sector mailers like Amazon, said he previously warned his members to expect a pricing surge. While it is not a big surprise, he said, there is some anxiety about what it will mean for the holiday season.
The companies “are not going to be happy, because their prices just went up,” Plunkett said.
John McHugh, chairman of the Package Coalition, which also represents large-scale mailers, said his group recognized the demands the sudden influx of package volume is having on the Postal Service."The temporary price increases announced today are relatively moderate when compared to proposals by some politicians to quadruple prices for delivery services, a suggestion that would be devastating to businesses and consumers if authorized," McHugh said. "Forcing the Postal Service to set prices above competitive levels would do nothing but harm the Postal Service and, with it, the American businesses and consumers who rely on its delivery services."