Whenever the USPS announces a rate increase, the first reaction inevitably is furor. How dare they!? It seems like every time we turn around they are increasing postage rates. Once the furor settles, our rational brains can understand that the beleaguered post office is dealing with increasing costs and decreasing revenue which may or may not be within their control.
This one seems like a big one, even though it’s a one cent increase, as it breaks a psychological barrier crossing over to 50 cents for a first class Forever stamp. There are also increases in metered letters, postcards, and packages.
The USPS has a number of things to point to as reasons for the rate hike. Increases in vehicle energy costs, decreases in first class usage, and increases in health care costs are some of the issues.
Interestingly, China, with one of the lowest postage rates in the world (18 cents in 2011), may hold some responsibility for the USPS woes and thus the rate hike. If you’ve ever wondered how sellers in China can be selling items on eBay and Amazon for 88 cents with free shipping, it starts with a quirk in an international treaty.
There is an international treaty overseen by an agency of the United Nations that allows for countries to be compensated for their leg of an international letter or package’s journey. For example, an individual in Morocco will pay their post office to send a package from Casablanca to Cleveland. The Moroccan postal authority gets it to the US and then the USPS takes over and gets the item to Cleveland.
Countries used to do this ‘forwarding’ for free, until 1969 when a treaty was put in place calling for small fees to be charged to the originating postal authority. These fees are less than what US postal customers are being charged (in 2014, the USPS was charging about $1.50 for a one pound package which costs a US postal customer a minimum of $7).
In 2010, the USPS entered into a deal with China’s postal service to increase their presence in Asia and get in on the e-commerce train. The service is called ePacket and offers tracking (required for e-commerce) at a reduced rate as well as the already reduced postage. US businesses involved in e-commerce simply can’t compete with these prices. Between 2011 and 2012, China nearly tripled the number of packages sent to the US, from 9.5 million to 26.8 million.
According to a 2014 report by the Postal Service’s Inspector General’s office, the USPS lost $29.4 million in 2012 alone due to the cost of delivering ePacket mail at these reduced rates. And the kicker is that it doesn’t work in the opposite direction, which is part of how Chinese businesses are benefiting. In order to get a refund on that malfunctioning item you received for $2.99 or $7.99 or $14.99 with free shipping, you’d have to pay $30 or more to send it back.
Of course, we could be living in Norway where a first class domestic stamp cost $1.46 in 2011.