Postal Affairs Update, April 15, 2021

April 15, 2021

The Postal Service is eyeing new changes to coincide with mid-year price increases. Bound Printed Matter Parcels might become a Competitive product — even though the USPS doesn’t have any competition for it. Performance continues to improve, though logistics presents challenges. And volume is much higher than this time last year when COVID-19 forced the country into lockdown.

Quad’s Postal Affairs team remains committed to keeping you up to date and informed. As a significant mailing industry partner, we are in a unique position to provide clear and accurate information regarding the state of the USPS and suggest best practices during this time. Please notify the Quad Postal Affairs team if you become aware of any changes, questions or something new related to how the USPS is conducting business. We will investigate and update all. Please send inquiries to the Quad Postal Affairs Distribution list (Postal Affairs – Team) or ask your Quad representative.

Here are key developments since our last update:

More than price increases coming mid-year?

The USPS has started discussing additional changes that could be included with a mid-year price increase.

Postal Service leadership has proposed five new prices for First Class Mail for non-automation letters.

  • Non-automation machinable letters could have two new prices: ADC and Mixed ADC
  • Non-automation non-machinable letters could have three new prices: 5-digit, 3-digit and Mixed ADC

The USPS is also discussing a new price for Marketing Mail High Density Flats that are put onto a 5-digit Pallet. So far they haven’t shared details regarding what the preparation requirements for these prices will be or what actual prices we can plan for. Quad continues to explore all avenues for information, and will work with our clients to find the best total cost to mail.

In addition to these price changes, the USPS could also introduce a new Zone 10. This zone would be limited to competitive products so it will not impact Periodicals or Bound Printed Matter.

Part of this change will include a change to how the zone is calculated for competitive products. Currently all zone calculation is based on a 3-digit entry Zip to a 3-digit destination Zip.

The USPS is proposing to change competitive products from a 3-digit entry to a 5-digit destination. Similar to the new Zone 10, the zoning calculation change does not impact Periodicals or Bound Printed Matter.

There are ongoing efforts in Congress to address the much needed reforms of the Postal Service’s costs and pushing back on efforts by the USPS to lower service standards that will slow mail delivery across the country. Quad is involved with each of these initiatives — in the coming weeks and months there will be a concerted effort with grassroots lobbying to keep raising awareness of the importance of the USPS to our everyday life and economy.

Quad will also host an informational webinar the first week of June, following the expected official announcement of mid-year changes. We’ll help customers understand how new prices and other factors will affect their business, and how they might take advantage of opportunities to lower costs.

Transfer of BPM Parcels to Competitive Product List

The Bound Printed Matter (BPM) Parcels product has been Market Dominant since 2006. USPS leadership argues that there is adequate competition for this product to move to Competitive products. Mailing industry association PostCom disagrees, as do most other Postal Service customers. The USPS has set May 7 as the deadline for comments.

The Postal Service is chasing a small amount of money with this move. So why make it? The pricing is important to address — but crucially, this is another USPS effort to evade accountability and transparency once the product moves to Competitive.

In short, the move would obscure the mailers’ view of true costs and metrics, thwarting needed scrutiny into USPS performance.

Only $289 million in revenue comes from BPM Parcels. There really is no competition for the product, so a price increase hurts customers with no alternative.

USPS leadership is hoping for easy Postal Regulatory Commission approval because the PRC has not yet impeded the Postal Service in moving products out of Market Dominant.

The industry will contest the change in court, so it’s hard to know when the change might take place. This won’t be wrapped up in a few months, though, and likely not until near the end of the year. If the USPS is successful, they only have to provide a 30-day notification for the price increase.

PostCom has already filed a motion to receive information from the PRC relevant to the Postal Service’s request.

Delivery performance

Delivery has been relatively stable for the last month. Letters continue to move well, essentially as they did before the pandemic. Flat Mail is moving well, too, but as usual are slightly slower than Letters. Clients are seeing an average of 90-95% in-home within a four-day target window.

No facilities have been delayed in the processing of Letter mail in the last month. A low number of facilities have been delayed in processing Flat mail. Philadelphia, Baltimore, Richmond VA and St Louis continue to be delayed, though, as they have been for 3-4 months.

Philadelphia FSS mail is a special concern. They appear to be manually sorting much of this mail, but then we also get scans 15-20 days after the USPS received the mail. We’re working to draw the Postal Service’s attention to this issue.

For First Class Mail, the USPS has averaged 80-85% by Day 3 after the drop for the last three weeks. While this is an improvement over the results we had seen from October through February, the current Service Standards of course have us expecting them to hit 90-95% by Day 3. Progress after months of severe delays is good — but the USPS must be vigilant and work to improve performance rather than change the definition of success.

Logistics challenges

There are an estimated 42,000 fewer truck drivers now than there were before the pandemic. Truck capacity throughout the country is expected to be at 100% through the rest of 2021, which likely will create a bottleneck for the Postal Service’s delivery efforts. Additionally, in the next few weeks, the logistics industry will be squeezed even further as the impact of the blocked Suez Canal starts to hit the US.

That event delayed the shipment of products into the US. And it’s now expected to create a large increase in shipments into the country, which will cause delays at east coast ports and rail yards.

As consumers are unable to spend money on vacations, sporting events, concerts, theater and other public events during the pandemic, they are spending their money on products. All of those purchases have to be shipped and moved around the country. This is the basis of the capacity issues, which get worse when unexpected events like the Suez Canal occur — or when stimulus checks go out, increasing spending power and the demand for goods.

These challenges will result in continued volatility in service from Quad’s Carrier-partners. We expect issues to continue throughout the year and will keep managing to the best of our ability to minimize the impact to our clients.

Additionally, we reported in our previous update that the industry might see shortages of foundational chemicals for adhesives, UV coatings, lithographic fountain solutions and silicones. We continue to monitor this situation closely and will follow up with clients as needed.

Postal volume

Mail Volume for the week ending April 3, compared to last year when the country went into lockdown and only essential businesses could operate.

  • Total Mail Volume: Up 11.7%
  • Packages: Up 25.9%
  • Single Piece: Down 2.1%
  • Presort First Class: Down 1.5%
  • Marketing Mail: Up 55%
  • Periodicals: Up 17.2%