USPS ‘postage reselling’ program scrutinized

Washington Postal Scene — By Bill McAllister

The cheapest place to purchase United States postage is not always your local post office.

It could be a personal-computer (PC) postage firm that has signed up for a little-known U.S. Postal Service program that offers sharply discounted postage rates under a promise to help the USPS generate greater mail volume.

Some are offering these postage discounts to small mailers and postal customers who can’t generate enough volume to secure the deep discounts on their own.

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One researcher claims the discounts can be as much as 31 percent below the Postal Service’s published postal rates.

This practice, called “postage reselling,” is legal. It dates from 1992, according to a postal spokesman.

It is credited by the USPS as an important factor in the USPS’s recent strong surge in package mail.

The program has changed over the years, but a Sept. 11, 2009, announcement hailed it as giving the Postal Service “inroads into many new markets” and creating “partnerships with businesses that offer logistics-service support to small package shippers.”

Price was a key factor. It was promised to be less expensive “than they could get on their own,” said the USPS in a Newslink item on its website.

The discounted prices were to be “somewhere between the Postal Service’s published retail prices and Commercial Plus Pricing.” CPP represents sharply discounted rates the USPS had offered to large mailers.

Stamps.com, a major PC postage firm, says on its website that it can offer customers a range of prices including “access to commercial base, commercial plus, cubic pricing and Negotiated Service Agreements.”

Negotiated Service Agreements, which must be approved by both the USPS and the Postal Regulatory Commission, offer some of the deepest discounts of all and are dependent on the customer shipping high volumes.

Stamps.com describes its savings as up to 13 percent on Priority Express Mail shipments, up to 40 percent on Priority mail shipments, up to 18 percent on first-class packages, up to 5 percent on international shipments, and up 40 percent on package insurance.

But Capitol Forum, a self-described Washington, D.C., investigative and legal analysis firm, says the discounts are only deepening USPS’s financial woes because many unqualified shippers are paying less for postage.

How much money the USPS is losing is not clear. Capitol Forum, which has been complaining about postage reselling since December 2016, says only that the losses could be “significant.”

David Partenheimer, a Postal Service spokesman, told Linn’s the USPS is pleased with the program.

“This channel helped the Postal Service [raise] nearly $7 billion in revenue in fiscal 2016 and we are on pace to do even better this year,” he said an email statement.

The Postal Regulatory Commission, which has to approve the Postal Service’s rate structure, also appears to be supportive of the program and the Negotiated Service Agreements, which allow the deepest discounts to mailers.

“I don’t think it’s a matter of whether the PRC is happy with the postage reselling program,” said PRC spokeswoman Gail Adams.

“The PRC’s only concern with the postage reselling program is whether it is operating within the law.”

So far, the PRC has approved requests for 1,158 Negotiated Service Agreements, rejecting only one application.

Adams told Linn’s she knew of no firm that had been removed from the program.

Capitol Forum charged in a Dec. 12, 2016, report that a source told the firm the program “has morphed from one designed to provide new package business for the USPS to one that simply increases the profitability of the PC postage industry.”

The PC postage firms have become major resellers of the cheaper postage because they produce the stamp imprints (indicia) required for discounted postage.

Capitol Forum says that “inherent design flaws in the program make it such that it was easier for some postage resellers to offer discounted shipping rates to existing USPS customers in order to satisfy volume requirements and to maximize their profit margins.”

The Washington firm asserts its studies show that by shipping through a PC postage provider, it was able to secure Commercial Plus Pricing (CPP) that should be available only to firms that ship 50,000 pieces of mail a year.

Using special barcode scanning software, Capitol Forum was able to detect how much was being paid to the USPS for each of the printed mailing labels it purchased.

The differences between the selling price and what the USPS received were “significant” — between 56¢ to $7.82 a parcel, it said.

By using a postage reseller, Capitol Forum said it “received CPP prices even though we did not satisfy the USPS volume requirements.”

In one case, it secured a Priority Mail shipping label from a third party for a 3-pound package going to El Segundo, Calif., from Washington, which should have cost $14.45.

USPS was paid only $10.26 for the postage, creating a “postage spread” of $4.19, or 29 percent, Capitol Forum said.

Without naming any specific media, the Postal Service statement said: “Unfortunately, some coverage in the media regarding the reseller program has been both inaccurate and misleading. Whether this flawed coverage emanates from a particular bias or a fundamental misunderstanding [of the] program itself, we cannot be sure.”

The statement continued that the reselling program today is different from the 1992 version and reflects changes needed to protect “the best interest of the Postal Service.”

Stamps.com declined to comment on the issue.