January 21, 2015

Aside from the unexpected timing of the rate increase filing, the main curve ball in it is a new set of rates and requirements for FSS preparation and processing of flats which include Standard Mail, Periodicals and Bound Printed Matter. Mail service providers like Alliance sponsors Quad Graphics and R.R. Donnelley are still assessing what the net impact on customers will be, based on more specific requirements to be provided by USPS.

FSS was introduced several years ago as the primary USPS solution to their excessive costs in processing flats which led to so-called “under-water” products that the PRC deemed were not covering their costs. It will be a shame if the new pricing and requirements lead to well-above CPI all-in cost increases for customers who already are facing above-inflation increases in postal pricing designed to close the cost coverage gap. Standard Mail Flats postage rates are going up by an average of CPI x 1.254 according to the filing.

On the subject of the new FSS pricing proposal, here is an excerpt from the latest blog by Joe Schick, Vice President of Postal Affairs at Alliance Corporate Sponsor Quad/Graphics:

“Unlike previous CPI increases that only included price increases for established rate categories, this price proposal includes new FSS pricing – now including Bound Printed Matter flats – as well as incentives for Carrier Route 5-digit pallets, which can only contain carrier route bundles.

As such, comparing current prices for flats – Standard Mail, Periodicals and Bound Printed Matters – with what has been proposed, is not easy to do. Without the preparation requirements, which the USPS has yet to provide, we can only make assumptions on what can be accomplished and whether there will be cost added to our process to meet the requirements and take advantage of new incentives, like the Carrier Route 5-digit pallets.

Likewise, we don’t know what will be required in the FSS pricing structure or whether there will be options in preparation. At first glance, it looks like current carrier route-qualified mail in FSS zips will not be impacted negatively. However, High Density and High Density Plus in FSS zips may now have to be FSS prepped which would eliminate DDU entry opportunities and require that all mail pieces meet machinability requirements. It could also result in higher-than-CPI increases for those categories.”

Similarly, Anita Pursley, Vice President of Postal Affairs for Alliance Corporate Sponsor R.R. Donnelley said:

“We are encouraged that the Postal Service has heard our request for more robust FSS pricing.  Given the complexity of this filing, we plan to fully evaluate the impact of the rate changes for both Standard mail and Periodicals and will be sharing our assessment directly with our customers.”

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