Postal Service can proceed with 8% parcel surcharge, regulator says

2 hours ago 0 1

The Postal Regulatory Commission on Monday approved the U.S. Postal Service’s request to add an 8% surge for transportation-related expenses on parcel products. The change will be effective April 26 through Jan. 17, 2007.

The Postal Service has previously raised prices to cover the costs associated with increased volumes during peak season, but last month requested permission for the first time to apply a time-limited price adjustment to deal with rapidly changing market conditions — most notably the spike in fuel costs since the start of the Iran war on Feb. 28. The price of gasoline, which powers most of delivery vans, is up 38% over the past five weeks.

The agency has said the surcharge is intended to help offset a variety of transportation costs besides fuel, including trucking rates, vehicle maintenance, and pass-through costs, such as insurance, from contract motor carriers.

The Postal Service also said that the temporary surcharge would help it transition to a permanent mechanism for imposing surcharges on competitive products to support its universal service obligation in a more financially sustainable way. Last fiscal year, the USPS lost $9 billion, with an operating loss of about $2.7 billion.

Big commercial parcel carriers have standard fuel surcharge mechanisms that automatically update each week as the price of fuel changes. Instead of constantly adjusting base transportation rates, the carriers use fuel surcharges as a flexible pricing mechanism tied to external fuel indexes. Their fuel surcharges currently range from about 21% to 34% of the base transportation rate, depending on mode and import/export status.

The Postal Service says its fee is less than one-third of what its competitors charge for fuel alone.

Click here for more FreightWaves/American Shipper stories by Eric Kulisch.

Write to Eric Kulisch at ekulisch@freightwaves.com.