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Rate Increase Effective May 12th, 2008:
The velocity of change at the United States Postal Service (USPS) is ever increasing. With the passage of the Postal Accountability and Enhancement Act (PAEA) in late 2006, a number of changes were initiated that dramatically affect the way we do business with the USPS. As announced in the Federal Register on February 11th, and subsequently announced by the USPS on February13th, the mailing industry experienced the first rate increase under PAEA. It is being processed very differently that the rate cases "of old". Under PAEA, the USPS can raise rates annually as long as the increase, by Class, does not exceed the Consumer Price Index (CPI). Within a Class, the increase may vary, but for each class the increase must be at or below the CPI.
Class averages can be somewhat misleading. RR Donnelley has never found a mailing that is "average". While the average increase can be used for estimating, we encourage all mailers to process their particular mailing through a rate calculator to determine exactly how much that mailing may be affected. RR Donnelley has updated the rate calculators on our website to reflect the May 12th increases.
The CPI used in this rate increase was 2.9%. After reviewing the proposed increases, these are the average increases, by Class:
| First-Class | 2.880% |
| Standard Mail | 2.875% |
| Bound Printed Matter Flats | 0.42% |
| Bound Printed Matter Parcels | 2.10% |
No average is provided for Periodicals, because the container charge applied to Periodicals ties the increase to the profile and sortation level of the mailing. RR Donnelley suggests using a 2.9% average as a rule of thumb, but recommends having the actual calculation performed to be certain of the exact increase for a particular mailing.
Where are the differences in the average increases? A couple of examples will demonstrate why RR Donnelley recommends that everyone use the rate calculators, and reads the USPS rate tables.
- In Standard Mail, flats received a very significant increase last year; the flats increase is smaller this year. This year's letter increase is above the CPI.
- The USPS also reduced the pound rate for flats to help catalog mailers.
- The newly created classification of "Non-Flat Machinable" (NFM) was particularly affected, with the average increase in the 9% range. These are pieces that meet the dimension requirements of a flat, but cannot be run on the USPS automation platform. From RR Donnelley's perspective, the USPS is clearly trying to reduce the numbers of NFM's.
- For First-Class pre-sorted letters, the additional ounce will decrease 4.5 cents, while overall pre-sorted letters will receive a 3.55% increase.
Also, RR Donnelley encourages everyone to visit the USPS website to review the USPS rate tables. Why? There are some exceptions in the rate tables that may affect your postage. Use this link to reach the official proposed rate tables: www.usps.com/prices 
Conclusions from the February 11th Announcement:
The two conclusions from the announcement last week are:
- This increase will go into effect on May12th as stated
- It would be reasonable to budget for another increase in May 2009
Rate Increase Process:
Some questions have been raised about this new process of rate increases. First, this is not like the old process that saw rate cases. A rate case required litigation and a very prescribed process. Under PAEA, the rate setting process needs only a simple recommendation by the USPS and approval by the Postal Regulatory Commission (PRC). This streamlined process holds as long as the USPS keeps the increase to once a year, and to an average by Class of no more than the CPI. The PRC is not in the rate setting business under PAEA. Their role if to confirm that the USPS's math is correct, and that the recommendation has complied with the law. In addition, there is no approval by the Board of Governors (BOG).
Postal Rule Making:
Beyond the rate increase, there will be many upcoming rules issued by the USPS around addressing, mail preparation, and other requirements that may affect companies that prepare mail, and mail owners. One such proposed rule concerns the Intelligent Mail Barcode (IMB). Intelligent Mail is a concept that is fully supported by the mailing industry, but represents a major change to the entire process of tracking mail, identifying mail pieces, and requesting special services. Following more than two years of cooperative testing of the barcode that will be the basis of Intelligent Mail, the USPS has issued a proposed rule to solicit input from the mailing community. The proposed rule was published in the Federal Register on January 7th and comments were requested by February 21st. Many associations submitted comments, as did individual companies. There were many concerned comments regarding the technical specifications for imaging the Intelligent Mail Barcode (IMB) and many concerned comments regarding the definition of the content of the barcode.
This IMB and its associated requirements will be a significant change to the mailing process, with plenty of discussion and debate in 2008. RR Donnelley will be very active in these discussions, and will keep you, our customers, informed. We also encourage you to review all of the comment that have been submitted to the USPS. These comments are available for review at the USPS Headquarters Library at 475 L'Enfant Plaza, SW, Room 3436, or you can submit questions to imb@usps.gov.
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