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May 3

May 3, 2006

 

Shaping a More Efficient Future

 

On May 2, 2006, the Postal Service Board of Governors approved filing an omnibus rate case with the Postal Rate Commission to adjust postage rates in spring 2007 to cover increasing operational costs. Our proposal calls for a 3-cent increase in the price of a First-Class stamp and a new “forever stamp” that would be good for any future 1-ounce single-piece First-Class Mail letter, no matter how prices may change beyond 2007.

 

Although postal rates did change in January 2006, that change was the result of a federal law passed in 2003 requiring us to place $3.1 billion in escrow. The 2006 filing is the first time in nearly five years that we proposed to adjust postage rates to cover rising operational costs. We included several improvements in our price relationships and incentives to send the right signals to enhance efficiency, offer more choices, and ensure that all types of mail cover their costs.

 

Price tables showing a side-by-side comparison of today’s prices and those proposed are available on usps.com/ratecase. The complete filing is available on the Postal Rate Commissions Web site, prc.gov.

 

In summary:

  • We plan to change our prices in 2007 to respond to changes in operations and the marketplace.

  • This is the first proposal since 2001 to realign classifications and prices.

  • Today’s competitive marketplace demands efficiency — our new prices will encourage mailers to make adjustments and help us to process their mail more effectively. 

  • Our proposed prices recognize that each shape of mailpiece — letter, flat, and parcel — has different costs that need to be covered.

 

Mailers have More Choices and Savings Opportunities than Ever

 

The proposal includes:

  • Price incentives to create efficient mailpieces compatible with our processing systems.

  • Price incentives for quality addressing.

  • Price incentives to deposit flats and parcels closer to where they are delivered.

  • Opportunities to mitigate the impact of price increases.

  • Options for mailers to choose services and shapes that meet their needs. 

 Highlights of the New Prices

 

    Shape Differentiation—Our current prices do not distinguish between letters, flats, and parcels as much as they could. For example, in First-Class Mail, our current price is 63 cents for a 2-ounce piece regardless of whether it is a letter, flat or parcel. Our proposed prices recognize that each of these shapes has substantially different processing costs and should have different prices. Our new pricing encourages efficiency. For example, if the contents of a flat are folded and placed into a letter-size envelope, the mailer can save as much as 20 cents. If a parcel is reconfigured as a flat, the mailer can save up to 38 cents. In both of these cases, our costs are reduced, leading to greater efficiency. 

 

    Additional Ounce Rate—As we increase the emphasis of shape in our pricing, we can reduce the role of weight. For example, as First-Class Mail pieces become heavier, the proposed price increase declines. In fact, for letters over one ounce, the proposed prices are actually lower than today’s since the proposal includes a 4-cent reduction in the additional ounce rate.  

 

    Priority Mail Flat Rate Box—We propose that the Flat Rate Box, which is currently being tested, become a a permanent Priority Mail product. The new price for the flat-rate box, regardless of weight, contents, or distance traveled, would be $8.80.

 

    Express Mail—Currently, there is a one-half pound price in Express Mail, and anything over that weight (but less than 2-pounds) pays the 2-pound price. Our proposal adds a new one-pound price. This reduces the price increase for pieces weighing less than a pound.

 

    Automation Letter-Size Pieces—Our pricing encourages mailers to prepare letters that support our delivery point sequencing program. Standard Mail destination entry discounts are re-aligned to ensure that the letters are entered at the plant that does the sorting. 

 

    Standard Mail Parcels—A new pricing structure for parcels allows for expanded worksharing options, including a new destination delivery unit incentive. While parcels overall would increase significantly to reflect their higher costs, mailers can mitigate the increase by sorting to 5-digit ZIP Codes, and entering the parcels at the destination delivery unit.

 

    Periodicals—Our pricing includes efficiency incentives for mailers to use pallets rather than sacks, or to fill sacks with more mail. We also enhance dropship incentives, particularly for publishers of high editorial content publications.

 

    Parcel Select—To enhance efficiency, we are building the barcode discount into the base price for Parcel Select-DBMC parcels and requiring that all parcels be barcoded.  This supports our efforts to streamline acceptance and verification. We also propose increases in the dropship discounts for Parcel Select.

 

    Address Change Service (ACS)—To encourage addressing quality and promote efficiency, we are reducing most of the existing ACS fees, and proposing a new, lower-priced OneCode ACS using the four-state barcode. The lowest fees would be available for First-Class Mail letters using OneCode ACS, with the first two changes for an address provided at no charge. We also propose a low-cost ACS solution for Standard Mail letters.