Postal rate increase and product changes effective May 14, 2007

Posted Tuesday, April 10, 2007

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Washington, DC - The Postal Service Governors approved an increase in the price of a First-Class stamp to 41 cents, authorized the issuance of the Forever Stamp, approved shape-based pricing and set a May 14 implementation date for these changes. However, they delayed implementation of periodicals and requested reconsideration for some mail classes.

“We praise the PRC for its early and thoughtful recommended decision,” said Board of Governors Chairman James C. Miller III, “and appreciate the comprehensive analysis the Postal Service staff provided in its rate proposal.”

Forever stamp
The Governors approved the Forever Stamp, which will sell at the new 41-cent First-Class Mail one-ounce letter rate. The value on these stamps will always be the one-ounce letter rate and can be used for any future one-ounce letter mailing without extra postage.

The stamp, which carries an image of the Liberty Bell, will sell for 41 cents and will remain valid for first-class postage regardless of future rate increases.

The stamps will be sold in booklets of 20 and postal officials said there is no limit on purchases.

When postal rates go up in the future, the cost for the forever stamp will also rise, but old ones will still be valid for mailing a letter.

“The Forever Stamp is a consumer innovation that delivers convenience and value and will help ease the transition for mailing letters when prices change,” said Chairman Miller.

Shape-based pricing
The new prices also reflect differences in the costs of handling letters, large envelopes (flats), and packages. Instead of using an item’s weight as the primary factor to establish shipping costs, a size, thickness and weight combination will now become the standard. Essentially, mail items that are easier for the USPS to process will be rated lower than items that are not. Because of their shape differences, letters, flats and parcels will now all be priced differently because each is handled and processed differently. The proposed Shape-Based Pricing structure will significantly increase postage costs for various types of mailing applications. It also means there are going to be changes to how mail is processed.

Shape-Based Pricing is a form of dimensional weight. It promotes the use of easily sorted postal flats as well as high-density packages. On the other hand, it penalizes shippers of larger, lightweight packages.

The effects of Shape-Based Pricing will impact all mailers to one degree or another. Just how much will be determined by the type and volume of mail pieces sent. Small volume mailers will need to manually measure the size and thickness of their letters and flats to ensure proper postage is applied. Mid- to high-volume mailers will need to utilize some form of automation to help apply proper postage and keep the mail stream efficiently flowing. The bottom line is that all mailers will now need to be conscious of the size, thickness and weight of their mail pieces if they expect to save money and maintain productivity under the new structure.

Mailers are encouraged to consider options available to reduce postage costs. For example, if the contents of a First-Class large envelope are folded and placed in a letter-sized envelope, mailers can reduce postage by as much as 39 cents per piece.

Request for reconsideration
The Governors, however, requested reconsideration of the PRC’s rate recommendations for Standard Mail flats (catalogs), the non-machinable surcharge for First-Class Mail letters and the Priority Mail Flat-Rate Box.

• Standard Mail flats – The Governors are concerned that price increases recommended by the PRC may impose an unnecessary degree of “rate shock” on the catalog industry, particularly small businesses. The recommended increase for some catalog mailers is as much as 40%, which is more than double what the Postal Service had proposed.
• Non-machinable surcharge –The PRC decision on First-Class Mail two-ounce and three-ounce letters does not differentiate between machinable and non-machinable. The Governors believe this warrants further analysis to ensure there are incentives for mailers to provide letters that can be processed at lower cost on efficient sorting equipment.
• Priority Mail Flat Rate Box – The PRC recommended a rate of $9.15 for the Priority Mail Flat-Rate Box, which is $1.05 above the current rate and 35 cents higher than the Postal Service proposal of $8.80. The Governors believe a rate below $9 would be more appropriate for this popular consumer and business product and would be cost-justified.

Delayed implementation
The Board of Governors has also delayed implementation of the new prices for Periodicals (magazines and newspapers) until July 15, 2007, to allow time for the publishing industry to update computer software and adjust to the complexity of the PRC-recommended rate structure for periodicals. USPS had proposed a single container charge for periodicals to encourage efficiency, but the PRC recommended 55 different prices based on container type, entry point and level of sortation.

When the rates become effective May 14, 2007, you will see:

• A rate increase in almost every class of mail.
• In addition to weight, the rate structure places a greater emphasis on size and shape.
• A reduction in the cost of an "additional ounce" for First-Class Mail®.
• More affordable address update solutions.
• Worksharing (presorting) remains key to lowering your expenses.
• Permanent flat-rate pricing for Priority Mail® envelopes and boxes.
• New opportunities in barcoding and low-cost delivery confirmation services.

What is the USPS trying to accomplish?

The USPS is looking to better align postal rates with the actual costs to process and deliver mail on a piece-by-piece basis. In basic terms, you will be given incentives to:

• Create mailpieces that are compatible with the USPS processing systems
• Improve address quality
• Deposit letters, flats and parcels closer to their destinations

Current New
SELECT RATES FOR FIRST-CLASS MAIL®

Single-piece Letter – First ounce
$0.39 $0.41

Single-piece Flat – First ounce
$0.52 $0.80

Single-piece Parcel – First ounce
$0.52 $1.13

Each additional ounce
$0.24 $0.17

Nonmachinable surcharge*
$0.13 $0.13

Presorted Letter – First ounce
$0.371 $0.373

Presorted Flat – First ounce
$0.429 $0.699

Automation Letter – 5-digit – First ounce
$0.293 $0.312

Automation Flat – 5-digit – First ounce
$0.376 $0.383

Postcards
$0.24 $0.26
 

History of First-Class Stamp Rates
Date† Rate‡
July 1, 1885 - Nov. 1, 1917 .02
Nov. 2, 1917 - June 30, 1919 .03
War Years July 1, 1919 .02 Dropped back by Congress
July 6, 1932 .03
August 1, 1958 .04
January 7, 1963 .05
January 7, 1968 .06
May 16, 1971 .08
March 2, 1974 .10
December 31, 1975 .13
May 29, 1978 .15 "A" Stamp used
March 22, 1981 .18 "B" Stamp used
November 1, 1981 .20 "C" Stamp used
February 17, 1985 .22 "D" Stamp used
April 3, 1988 .25 "E" Stamp used
February 3, 1991 .29 "F" Stamp used
January 1, 1995 .32 "G" Stamp used
January 10, 1999 .33 "H" Stamp used
January 7, 2001 .34 Nondenominated Stamps used
June 30, 2002 .37 Flag and Antique Toy Stamps used
January 8, 2006 .39 Love True Blue and Lady Liberty Flag Stamps used
May 14, 2007 .41 Forever Stamp used
† The date specified is the first day on which the rate became applicable. In some instances, the rate introduced was temporary.
‡ The rate for the first ounce of a First-Class letter. Beginning September 14, 1975, additional ounces have been charged lower than the applicable first-ounce rate.