USPS rolls out its proposed 2021 proposed peak temporary rate adjustments

Earlier this week, the United States Postal Service (USPS) announced it filed notice with the Postal Regulatory Commission (PRC) related to a temporary price adjustment for key package products for the 2021 peak holiday season.

USPS officials said that this temporary price adjustment is in line with what it did in 2020, in anticipation of what it called heightened peak season package and shipping demand that often brings about extra handling costs. And they added that the planned peak season pricing was signed off on the Governors of the USPS on August 5 would focus on pricing for commercial and retail domestic competitive parcels, including: Priority Mail Express (PME), Priority Mail (PM), First-Class Package Service (FCPS), Parcel Select, USPS Retail Ground, and Parcel Return Service, with no impact on International products.

Should the PRC sign off on this temporary rate adjustments, they will take effect from 12 AM CT on October 3, 2021 through 12 AM CT on December 26, 2021.

“This seasonal adjustment will bring prices for the Postal Service’s commercial and retail customers in line with competitive practices,” said USPS. “No structural changes are planned as part of this limited pricing initiative.”

USPS said the planned price increases are composed of the following for Priority Mail, Priority Mail Express, Parcel Select Ground and USPS Retail Ground:

• $0.75 increase for PM and PME Flat Rate Boxes and Envelopes;
• $0.25 increase for Zones 1-4, 0-10 lbs;
• $0.75 increase for Zones 5-9, 0-10 lbs.;
• $1.50 increase for Zones 1-4, 11-20 lbs.;
• $3.00 increase for Zones 5-9, 11-20lbs.;
• $2.50 increase for Zones 1-4, 21-70 lbs.;
• $5.00 increase for Zones 5-9, 21-70 lbs.;
• FCPS Commercial starts at $3.01, with a planned $0.30-cent increase;
• FCPS Retail starts at $4.00, with (DSCF and DNDC), with a planned $0.30-cent increase;
• Parcel Select Lightweight starts at $2.55, with a planned $1.00 increase;
• Parcel Select DSCF starts at $4.84, with a planned $1.00 increase;
• Parcel Select DNDC starts at $6.85, with as planned $1.00 increase; and
• Parcel Return Service starts at $3.21, with a planned $1.00 increase

Rob Martinez, founder and co-CEO of San Diego-based Shipware, an audit and parcel consulting services company, told LM that the proposed USPS increases are in line with expectations, and not too dissimilar from last year’s increases. 

“Given that rivals FedEx and UPS levy additional charges during the peak season, it’s only fair that the Postal Service should likewise be able to cover extra costs as the result of holiday volume surges,” explained Martinez. “Those rate actions led the agency to a small quarterly profit in Q420.

And while the temporary fees range from $0.25 to as much as $5.00 per package, he said that the most common increase will be $0.75 for Priority Mail and Priority Mail Express Flat Rate Boxes and Envelopes, the most common packages shipped through the USPS. The next most common fee of $0.25/package will apply to lighter shipments (less than 10 pounds) to inner Zones (1-4), followed by a $.75 fee to the same weight range for outer Zones (5-9), and he also noted that relatively few packages will incur $5 fees, which will apply to heavier boxes (21-70 pounds) to the outer Zones (5-9).

“For customers with volume increases of more than 25,000 average weekly packages from February 2020, rival UPS is already taking an additional $0.30 on all Ground Residential and UPS SurePost packages (since January 17, 2021 and through October 30, 2021),” said Martinez. “For FedEx enterprise customers, the additional fee is $0.60/package.  While we’re still waiting to learn the details of the 2021 peak surcharges for FedEx, for UPS starting October 31, 2021, Peak Surcharges for UPS Air Residential, Ground Residential and UPS SurePost packages will spike to a range of $1.15 to $6.15 per package, and will extend until January 15, 2022. By contrast, the planned USPS price changes will be added to packages shipped between October 3, 2021 and December 26, 2021.  Moreover, the changes will not apply to Parcel Select nor Parcel Select Lightweight packages inducted at the DDU.”

Relative to forecasting Postal Service Christmas season delivery performance, Martinez said his firm expects the “Delivering for America Plan” infrastructure investments—such as billions towards package processing equipment and facility space upgrades—to have a positive impact on holiday delivery performance and long-term financial stability.

“Moreover, it’s important to note that Shipping and Packages volume declined by 300 million pieces in the most recent 3Q21 earnings report, which likely means the pandemic fueled volume bump has begun to abate,” he said. “Another reason for the volume drop is that parcel consolidators like Amazon, FedEx and UPS continue to insource residential delivery to improve densities, reduce costs, and grow revenues. That frees up additional space in the postal network which informs a greater likelihood of improved service performance. However, capacity limits will be stretched for all carriers this holiday season.  UPS recently put a number on it: the daily demand exceeds the parcel market’s network capacity by 5 million packages per day. FedEx is actively issuing significant off-contract rate increases to some of its largest ecommerce shippers in an effort to both increase revenue as well as free up an excess of 1 million packages/day.

Gordon Glazer, Senior Consultant, USPS Specialist, for Shipware, explained that USPS has structured these peak surcharges to disincentivize full network services like FDPS and PM. 

“Packages inducted deep at the DDU level (local Post office), will avoid these charges,” he said. “This structure favors the larger parcel consolidators that handoff deep into the postal network, thus avoiding gridlock that occurred in some SCFs and NDCs (Largest Postal processing centers) last year during Q4 ‘20 and into Q1’21. Shippers who have added redundancy into the carrier mix will have more options to avoid the highest surcharges and maintain service transit times. Everyone should expect peak related delays and should adapt client guidance so expectations are realistic.”