No clear sign on next increase in international postage

It’s been two years since the Postal Service increased the international postage stamp and more than a year since it raised international postage of any kind, which has global shippers and mailers wondering when to expect an increase in international postal rates.

“The timing of any international rate increase has not been determined,” said Jim Wade, vice president of international business for the Postal Service. And with that, mailers are left wondering.

Wade said the Postal Service will look closely at its international costs as the Cost and Revenue Analysis data for 2002 are being updated. International rates are not tied to the same process as domestic rates. The USPS does not need to bring a proposal before the Postal Rate Commission for its recommendation. It can raise rates on its own accord. Still, many mailers have pressed the Postal Service to time its international rate increases with its domestic rate hikes so that mailers only need to update their equipment and automation software one time.

This time around, however, most international mailers understand that if the domestic rates are held in place until 2006, international postage probably can’t follow suit. They would have to go up before 2006.

For one thing, the terminal dues fees the USPS pays to foreign posts have gone up. Wade notes that terminal dues — the administrative and delivery costs that postal administrations charge each other for moving crossborder letter mail — are the material costs in international products. But, he says, the Postal Service’s January 2001 rate increase covered the terminal dues increases set by the Universal Postal Union (UPU) for industrialized countries. Still, some of the high-cost countries continue to put the new terminal dues structure in place, resulting in an increase in rates of 15% in early 2003.

The 1999 Congress of the UPU changed the way terminals dues are set, tying them to costs. Industrialized countries now set terminal dues at 60% of their nondiscounted first class letter mail rate. The countries have phased in the terminal dues over three years. The new cost-based structure did not have a dramatic effect on low-cost industrialized countries, such as the U.S. But in
high-cost countries, such as Germany, the new costbased structure means other countries are paying higher terminal dues fees to Germany.

Some Western European countries were not at the 60% cap, so effectively raised terminal dues rates 15% in 2003, says Larry Chaido with TransGlobal Consultants
Inc., an international postal and logistical consultant. For the USPS, expenditures to these countries will increase this year. Chaido cites this as one reason the USPS will need to raise rates in the next year.

Chaido also notes that in the USPS’ report to Congress on the 2004 budget, the Postal Service says it expects a revenue increase of 10.9% in 2004, as well as
an increase in volume of 14.3%.He’s not convinced of the volume growth. So to get the revenue, they’d need a rate increase, he suggests.

However, the USPS might be able to hold off a rate increase in international rates in 2004 if retail mail is strong and growth in parcels continues, he added.

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