Vol. 145, No. 20 — May 14, 2011

ARCHIVED — Regulations Amending the Letter Mail Regulations

Statutory authority

Canada Post Corporation Act

Sponsoring agency

Canada Post Corporation

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary


Issue: The Canada Post Corporation Act requires the Corporation to offer postal services to all Canadians and to conduct its operations on a financially self-sustaining basis. In addition to higher annual general costs related to inflation, employee wages, benefits and pensions and the terminal dues payable for mail sent outside Canada, Canada Post faces financial pressures resulting from the recent economic downturn, declining letter mail volumes, competition from electronic communications and the need to finance its infrastructure modernization.

Rate increases will help ensure that Canada Post’s costs in maintaining postal service for Canadians continue to be borne by those using postal services, rather than through taxpayer-funded government support.

Description: The proposed amendments would establish the rates of postage for domestic letter mail items (other than the domestic basic letter rate), U.S. and international letter mail, and domestic registered mail, effective January 16, 2012.

Cost-benefit statement:

Costs: The proposed rate increases for domestic letter mail represent a weighted average increase in 2012 of 2.7%. The proposed increases for U.S. letter-post and international letter-post represent a weighted average of 2.2% and 2.8%, respectively, with a combined weighted average increase of 2.4%. The rate for domestic registered mail would increase by 1.9%.

Benefits: The proposed rate changes would assure Canada Post of revenue to meet its mandate of financial self-sufficiency and its responsibilities of providing quality postal services to Canadians under the Canadian Postal Service Charter.

Business and consumer impacts: The proposed increases are modest and reflective of Canada Post’s processing costs. Canada’s domestic letter rates would continue to compare favourably with those of other industrialized countries, despite the country’s vast geography, low population density and harsh climate.

Domestic and international coordination and cooperation: This proposal is not expected to have any significant impact on trade or domestic or international coordination and cooperation.


Issue

The Canada Post Corporation Act requires Canada Post to provide postal service to all Canadians. Rates of postage must be fair, reasonable and, together with other revenues, sufficient to defray the costs the company incurs in its operations. The Canadian Postal Service Charter, announced by the Government in September 2009, further clarifies Canada Post’s responsibilities with respect to delivery, rates and service. As a corporation listed in Schedule III, Part II, of the Financial Administration Act, Canada Post is expected to be profitable, pay dividends and not be dependent on appropriations from its shareholder, the Government of Canada, for its operations.

The Corporation benefits from an exclusive privilege on the collection, transmission and delivery of letters within Canada to help it meet its service obligations. In recent years, however, the economic value of this privilege has declined, as electronic means of communication grow in popularity and are more widely available. The outbound letter market was opened to competition through amendments to the Canada Post Corporation Act that came into force in July 2010. In addition, the Corporation is currently undergoing a $2.1 billion infrastructure renewal to bring its network up to modern standards and provide the platform for new products and services.

Overall, volumes of domestic transaction mail (TM), which includes bills, payments and other letters, have been in steady decline since 2006, largely due to the increasing popularity of electronic transactions and emails. The economic uncertainty associated with the recent recession also led to lower mail volumes. Volume declines represent a significant business risk to Canada Post, as close to half of the Corporation’s unconsolidated revenues derive from domestic letter mail. The decreasing TM volumes in conjunction with network growth — approximately 200 000 new addresses are added each year — result in a decrease in mail density. The Corporation’s operating costs increase as mail volumes per address decrease.

Canada Post also faces annual operating cost increases related to general inflation and employee wages, benefits and pensions, plus increased terminal dues for international mail.

Objectives

The proposed amendments would raise a number of postal rates by a modest percentage in 2012. The increases would help Canada Post meet its statutory obligations to conduct its operations on a self-sustaining financial basis and meet its responsibilities under the Canadian Postal Service Charter to maintain an accessible, affordable and efficient postal service for all Canadians.

Description

The proposed amendments would establish the rates for the following, effective January 16, 2012:

  • domestic letter mail items other than the basic domestic letter rate;
  • letter-post items (letters, cards and postcards) destined for the United States and other international destinations; and
  • domestic registered mail.

A five-year pricing plan for the domestic basic letter rate (standard letters up to 30 g) was approved by the Government in October 2009 (SOR/2009-286). The basic stamp price will rise from 59 to 61 cents on January 16, 2012, and by an additional two cents in both 2013 and 2014.

The current and proposed domestic letter mail rates are as follows:

Domestic Letter Mail

2011
Rate

Proposed
2012
Rate

Standard letter

   

more than 30 g but not more than 50 g

$1.03

$1.05

Medium letter

   

20 g or less

$1.03

$1.05

more than 20 g but not more than 50 g

$1.18

$1.22

Other letter mail

   

100 g or less

$1.25

$1.29

more than 100 g but not more than 200 g

$2.06

$2.10

more than 200 g but not more than 300 g

$2.85

$2.95

more than 300 g but not more than 400 g

$3.25

$3.40

more than 400 g but not more than 500 g

$3.50

$3.65

The current and proposed rates for letter-post items to be delivered outside Canada are as follows:

International Letter-post

2011
Rate

Proposed
2012
Rate

United States

   

30 g or less

$1.03

$1.05

more than 30 g but not more than 50 g

$1.25

$1.29

100 g or less

$2.06

$2.10

more than 100 g but not more than 200 g

$3.60

$3.70

more than 200 g but not more than 500 g

$7.20

$7.40

International

   

30 g or less

$1.75

$1.80

more than 30 g but not more than 50 g

$2.50

$2.58

100 g or less

$4.10

$4.20

more than 100 g but not more than 200 g

$7.20

$7.40

more than 200 g but not more than 500 g

$14.40

$14.80

The proposed rate increases for domestic letter mail represent a weighted average increase in 2012 of 2.7%. The proposed increases for U.S. letter-post and international letter-post represent a weighted average of 2.2 and 2.8%, respectively, with a combined weighted average increase of 2.4%. The weighted average increase represents the average percentage increase across the various rates under consideration, taking into account the volume of mail associated with each particular rate.

The rate charged for domestic registered mail would increase by 15 cents to $8.25, an increase of 1.9%.

Regulatory and non-regulatory options considered

Given that letter mail, international letter-post and domestic registered mail are regulated, any change to the rates must be done through a regulatory amendment.

Benefits and costs

The revenue from regulated letter mail will help ensure the viability of Canada’s postal service.

Canada Post Corporation’s consolidated cost of operations continues to rise, despite significant cost containment activities across the Canada Post Group. Prices as measured by the Consumer Price Index are expected to rise by 2.3% in 2011 and a further 2.1% in 2012.

Terminal dues account for approximately 60% of Canada Post’s expenses related to U.S. and international mail. Terminal dues are a pricing mechanism set by the Universal Postal Union (UPU) that allows the postal administration of the country where the mail is to be delivered to collect for the cost of delivery from the postal administration of the country from which the mail was sent (in this case, from Canada Post). The terminal dues that Canada Post must pay to the United States and other postal administrations are increasing by close to 4% in 2011.

In addition to assuring Canada Post of revenue to meet its costs of operations, the rate increases in the proposed regulations would assist in financing the Corporation’s $2.1 billion multi-year infrastructure renewal program known as Postal Transformation (PT). A new mail processing plant opened in Winnipeg in 2010 and outdated and obsolete mail processing equipment is being replaced in centres across the country. The PT is designed to save mail processing costs through increased operating efficiencies, to provide a safer and “greener” work environment for employees and to provide the platform for new products and services to meet the needs of Canadian consumers and businesses.

The proposed increases would have a minimal impact on Canadian households: less than 10 cents per year for domestic letter mail, 7 cents for letter-post and 2 cents for domestic registered mail. The increase in mailing costs for a small or medium-sized business would be less than $3.50 per year for domestic letter mail, 94 cents for letter-post and 39 cents for domestic registered mail. Large Canadian businesses (those who mail millions of pieces annually) could expect their mailing costs to rise by close to $1,500 per year for letter-mail, $215 for letter-post and $120 for domestic registered mail.

Rationale

The new rates would directly contribute to Canada Post’s financial integrity and consequently, its ability to make investments to maintain an accessible, affordable and efficient postal service. Canada Post is a pillar of the Canadian economy and plays an essential role in keeping Canadians connected and helping businesses thrive. The Canada Post Group of Companies directly employs close to 70 000 people and supports an additional 30 000 jobs in the transportation and related industries across the country.

Even with the new rates, letter rates in Canada will continue to compare very favourably with those in other industrialized countries, despite the country’s vast geography, low population density, harsh climate and other factors that impact significantly on the costs associated with providing postal service.

Consultation

The Canada Post Corporation Act requires a consultation period through publication of each regulatory proposal in the Canada Gazette. All representations must be sent to the Minister of Transport. The representations are taken into consideration in the preparation of the final regulatory proposal.

Canada Post is committed to ensuring that an open and transparent consultation process takes place for all regulatory price increases. Customers are consulted on an ongoing basis throughout the year and the input is taken into consideration when setting rates for the following year. Consultation continues during the regulatory process and during this time meetings are held with customers and industry stakeholders to gather feedback and input for proposed and future changes.

Implementation, enforcement and service standards

The regulations are enforced by Canada Post under the Canada Post Corporation Act. No increase in the cost of enforcement is expected as a result of the proposed changes.

Contact

Georgette Mueller
Director
Regulatory Affairs
Canada Post Corporation
2701 Riverside Drive
Ottawa, Ontario
K1A 0B1
Telephone: 613-734-7576
Email: Georgette.Mueller@canadapost.ca

PROPOSED REGULATORY TEXT

Notice is hereby given, pursuant to subsection 20(1) of the Canada Post Corporation Act (see footnote a), that the Canada Post Corporation, pursuant to subsection 19(1) (see footnote b) of that Act, proposes to make the annexed Regulations Amending the Letter Mail Regulations.

Interested persons may make representations with respect to the proposed Regulations within 60 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Minister of Transport, House of Commons, Ottawa, Ontario K1A 0A6.

CANADA POST CORPORATION

REGULATIONS AMENDING THE LETTER MAIL REGULATIONS

AMENDMENTS

1. The portion of paragraph 1(1)(b) of the schedule to the Letter Mail Regulations (see footnote 1) in column II is replaced by the following:


Item

Column II
Rate

1. (1)(b)

$1.05

2. The portion of subitems 2(1) to (5) of the schedule to the Regulations in column II is replaced by the following:


Item

Column II
Rate

2. (1)

$1.29

(2)

$2.10

(3)

$2.95

(4)

$3.40

(5)

$3.65

3. The portion of subitems 3(1) and (2) of the schedule to the Regulations in column II is replaced by the following:


Item

Column II
Rate

3. (1)

$1.05

(2)

$1.22

COMING INTO FORCE

4. These Regulations come into force on January 16, 2012.

[20-1-o]

Footnote a
R.S., c. C-10

Footnote b
S.C. 1992, c. 1, s. 34

Footnote 1
SOR/88-430; SOR/90-801; SOR/2003-382