Although, the average rate increase would be 7.6%, many industry watchers say that number is deceptive.
Rather than a straightforward hike, the proposed changes are so complicated this time around that in some cases rates could be raised as high as 40%, according to some in the catalog industry.
David Straus, partner at Thompson Coburn and American Business Media’s Washington, D.C., counsel, likened some of the changes and new requirements for business periodicals to a Rubik’s cube.
“Right now, you pay rates on pieces and pounds,” he said. “There are different rates for pieces that are at different levels of presort. To calculate your postage, you need to know how many pieces and pounds, but [now] you also need to know how many pallets you have and how many sacks and bundles you have, and where each of those is going.” Those who use pallets will see fewer increases than those who use sacks.
Straus said that based on conversations with two ABM members, it looks like the impact of the recommended rates on a typical ABM member publication on pallets could be an increase of about 16% to 17%, compared with a 20% to 21% increase for one in sacks.
ABM President-CEO Gordon T. Hughes II agreed that the increases for some could be very steep.
“The people that will be hit hardest will be the smallest companies that can't co-palletize or co-mail,” he said. “There are some people that are going to get hurt.”
Joyce McGarvy, VP-distribution at Media Business parent Crain Communications Inc., testified in December to the Postal Rate Commission on behalf of ABM regarding rate restructuring. As part of her testimony, McGarvy talked about the challenges in co-palletizing or co-mailing 19 of Crain’s weekly and biweekly publications.
Crain can only co-palletize to a limited extent based on several factors, including magazine size and method of distribution, McGarvy said. “Crain has two separate co-palletization operations at two different printers every Friday night,” she said. “Because our publications are time-sensitive, we are able to co-palletize only to destinations that are close enough for us to reach using ground transportation.” For destinations that can only be reached by air, Crain must use sacks.
Another issue is the need for publishers, fulfillment houses and printers to modify their systems to comply with the new and uniquely complex rate structure. Implementation will take time, but the new rates, if approved, could take effect as early as May. There is some indication that the Postal Service could delay that implementation, especially for periodicals.
“There’s no way anyone can be ready,” McGarvy said.
The Direct Marketing Association is also concerned about the possible quick implementation of the new rates.
“Our concern is that the Postal Service may be moving too far and too fast, leaving mailers to struggle with higher rates and lengthy and complex new rules that may be imposed too quickly for mailers to adjust their own systems and plan for new and more efficient mailing pieces,” said Jerry Cerasale, DMA senior VP-government affairs, in a statement.
“We think it would be better to do things right rather than to do them fast, to help avoid many operational problems and costly errors for both mailers and the USPS.”
The rate case now shifts back to the Postal Service, which will decide whether to accept or reject the commission’s recommendations. The Postal Service’s board of governors will be accepting comments on the proposed rates until Thursday.
Both ABM and the DMA are urging their respective members to file comments to the board by the deadline, protesting the proposed hikes and changes to the rate structure.