January 14, 2011, 4:49 PM

Postal Service announces rate hikes

Rate hikes set for April 17 include a 11.3% increase on parcels.

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The U.S. Postal Service has filed a new postal rate schedule with the Postal Regulatory Commission that will raise rates by an overall average of 1.74% effective April 17, the Postal Service says. The average increase is limited to the Consumer Price Index as required by the federal Postal Law of 2006.

For standard ground Parcel Post, which concerns online retailers, the cost of shipping to zone one or two would rise to $5.10 for 1-pound package and to $7.23 for a 5-pound package. Zones are based on the distance from the shipper to the final destination. 

Noam Paransky, a senior manager and shipping industry expert at consultants Kurt Salmon, notes that zone 2 rate increases generally have the largest impact on shippers because they increase costs for shipments that combine the shipping services of the Postal Service and either FedEx Corp. or UPS. Many companies use FedEx or UPS to ship to the Postal Service for local zone 2 deliveries.

Paransky adds, however, that most large shippers won’t experience the new rates until their current contracts get renegotiated.

The Postal Service rate hikes do not affect parcels shipped via expedited Express Mail or Priority services.

The rate changes include a 3.8% increase for first-class parcels and 11.3% for standard mail parcels. First-class letters will remain at 44 cents, but additional ounces will increase to 20 cents each. Individual post cards will increase one cent.

It has been nearly two years since the last rate changes, the Postal Service says.

The rate changes are separate from a rate hike proposal that the Postal Service submitted last year to the Postal Regulatory Commission, which rejected a request to raise most of its rates between 4% and 6%—above the permissible increase under the Postal Law of 2006. The Postal Service has appealed the commission’s rejection to the U.S. Court of Appeals for the District of Columbia.

"While changing prices is always a difficult decision, we have made every effort to keep the impact minimal for consumers and customers doing business with us at retail lobbies," says Postmaster General Patrick R. Donahoe. "We will continue to balance our business needs against the needs of our customers."

Average rate hikes of 5.9% went into effect earlier this month for UPS and FedEx, though fuel surcharge reductions drop the average rate to 4.9% at UPS and 3.9% at FedEx. Jack Mitchell, president and CEO of Parcel Appraisal & Negotiations Group, a firm that negotiates shipping contracts on behalf of retailers and other shippers, notes that UPS’ average net increase is higher in an attempt to get its air shipping rates closer to those of FedEx.

Mitchell adds that ground shipping rates for both UPS and FedEx rise between 7.8% and 8.8% for the heaviest concentration of shipments—those from two to five pounds for zones two through five.

 

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