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Vol. 143, No. 26 — June 27, 2009
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 conduct its operations on a financially self-sustaining basis and offer postal services to all Canadians, both rural and urban. Canada Post is facing a number of pressures that are threatening its ability to remain self-sustaining. An increase in regulated letter mail rates will help to ensure that Canada Post’s costs in meeting these pressures continue to be borne by those using the postal system, rather than through any form of government support or subsidy.
Description: This proposal to amend the Letter Mail Regulations would establish the rates of postage for domestic letter mail items other than the domestic basic letter rate effective January 2010. The Regulations would also introduce amendments designed to provide commercial mailers with greater design flexibility in the preparation of their mailings.
Cost-benefit statement
Costs: The proposal sets domestic letter mail rates, not including the domestic basic letter rate, effective January 2010. The rate for a standard letter weighing between 30 and 50 g and medium letter up to 50 g would rise by 2 cents, from $0.98 to $1.00 and from $1.08 to $1.10. Oversized letters up to 100 g and letters weighing between 100 and 200 g would see a 4 cent increase, from $1.18 to $1.22 and from $1.96 to $2.00. Given the higher costs associated with processing heavier items, the rates for letters weighing 300 to 400 g and 400 to 500 g would rise by 25 and 50 cents, from $2.75 to $3.00 and from $2.75 to $3.25.
Benefits: The rate changes would assure Canada Post of revenue to meet its mandate of financial self-sufficiency while continuing to provide excellent postal services to Canadians. The increases are modest and reflective of the cost of processing. There would be no rate increase in 2010 for letters weighing between 200 and 300 g.
Business and consumer impacts: As all businesses in Canada will be uniformly impacted by the rate increases, the amendments are likely to have little effect on the overall competitiveness of Canadian business. Even with the modest increases, Canadians will continue to enjoy some of the lowest postal rates in the world. Larger businesses can also benefit from incentive rates, which are set at lower levels.
The technical amendments pertaining to business envelopes would benefit businesses by allowing lighter weight and more flexible items to be sent and by being less restrictive on the placement of graphics and auxiliary windows.
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 universal postal service while establishing rates of postage that are fair, reasonable and sufficient to defray the costs incurred in the conduct of its operations. In doing so, Canada Post delivers mail five days a week to all Canadians in accordance with specific service standards. To help it meet this universal service obligation, the Corporation benefits from an exclusive privilege on the collection, transmission and delivery of letters.
The economic value of the exclusive privilege, however, has declined significantly in recent years. Email and text messaging are an increasingly popular substitute for traditional letters. Bills can be sent electronically and paid online; large companies are consolidating their invoices and combining separate billings into a single envelope. The amount of letter mail that each household receives has declined by close to 6% over the past five years. Overall, volumes of Transaction Mail, which includes bills, statements, invoices, payments and other letters, decreased by 2% in 2008 from the previous year, while letter-related revenue, which represents close to two thirds of Canada Post’s revenue overall, decreased by 0.8%.
While Transaction Mail volumes are decreasing, the Corporation’s cost base continues to rise each year, with the addition of approximately 200 000 new addresses that it must service. This represents about a 1% increase in total points of call each year, adding to the Corporation’s annual cost of operations. In 2008, Canada Post’s overall costs rose by 2.7%, due largely to higher labour and transportation costs. Operating costs are expected to increase by 3.5% for labour and 4.1% for non-labour elements in 2010.
The Corporation has established a significant multi-year infrastructure renewal program to bring its network up to modern standards. Although Canada Post spends about $200 million a year to maintain existing buildings and equipment, more is needed to replace antiquated mail processing equipment, plants and processes, improve employee health and safety, and ensure that Canadian households and businesses benefit from the best possible modern postal service. Addressing only the most critical needs will cost an estimated $750 million. This includes the cost of the new Winnipeg mail processing plant, which will be operational in 2010.
The current economic downturn has exacerbated Canada Post’s financial challenges. Mail volumes are seeing further declines, companies looking to reduce their discretionary spending are cutting down on mailing advertising material, and businesses are looking for ways to further reduce the number and weight of their mailings. The downturn has also had a significant impact on the value of the company’s pension plan. Money originally earmarked for operations and infrastructure renewal must now be injected into the pension plan to meet federal solvency-funding rules.
The amendments will help Canada Post meet its statutory obligation to conduct its operations on a self-sustaining financial basis and continue to provide an excellent postal service for all Canadians.
Objectives
These amendments to the Letter Mail Regulations would establish the rates of postage for domestic letter mail items other than the basic domestic letter rate, effective January 11, 2010.
These regulated rate increases would ensure that the costs of maintaining postal service for all Canadians continue to be borne by the persons using the service. Canada Post is obliged under the Canada Post Corporation Act to ensure that rates are fair and reasonable.
Description
This proposal would prescribe rates for all domestic letter mail items, other than the basic letter rate, effective January 2010. This would ensure that postal costs remain transparent and predictable for Canadians and Canadian businesses and would provide Canada Post with the financial means it needs to meet its service obligations.
One change of note for 2010 is the Corporation’s proposal to further segment the oversize letter mail category based on weight. Heavier letters cannot be processed as quickly as smaller ones, often must be processed manually, and cost more to transport. The current weight category of 200 to 500 g would be split into three different weight steps in 100 g increments, with the higher weight bands priced to take into account the higher associated processing costs. The proposed rates would continue to be lower than parcel rates for these weights.
The proposed rates are as follows:
|
Product |
Current Rate |
Proposed Rate as of |
|---|---|---|
|
Standard domestic letter mail more than 30 g but not more than 50 g |
$0.98 |
$1.00 |
|
“Medium” letter mail up to |
$1.08 |
$1.10 |
|
Other domestic letter mail |
$1.18 |
$1.22 |
|
Other domestic letter mail more than 100 g but not more than |
$1.96 |
$2.00 |
|
Other domestic letter mail more than 200 g but not more than |
$2.75 |
n/a (this weight step would be split into three different steps) |
|
Other domestic letter mail more than 200 g but not more than |
$2.75 |
$2.75 (no increase) |
|
Other domestic letter mail more than 300 g but not more than |
$2.75 |
$3.00 |
|
Other domestic letter mail more than 400 g but not more than |
$2.75 |
$3.25 |
The proposed rate increases for oversize items represent a weighted average increase of 3.9% effective January 2010. The weighted average rate increase of the proposed price changes with the segmented 200 to 500 g weight steps is 7.1%, given the higher proportional costs of processing heavier letters. Canada Post anticipates that the higher costs may encourage some customers to repackage their items to take advantage of the lower rates at the lower weight steps.
The proposal also contains amendments of a technical nature that relax certain restrictions on commercial envelopes designed for mailing. More space will be available for graphics, the auxiliary window can be closer to the top or bottom of the envelope and the letter can be flimsier. Advances in mail processing equipment have made it possible to process lighter weight and more flexible pieces and the restrictions on window placement are no longer needed to ensure effective processing.
Regulatory and non-regulatory options considered
Under the Canada Post Corporation Act, Canada Post has an exclusive privilege for letter mail. Letter mail is a regulated product. There is thus no alternative to a regulatory amendment to change letter mail rates.
Benefits and costs
The proposed rate increases, detailed above, are designed to ensure that the Corporation is able to continue to provide an efficient postal service while at the same time meet the objective of the Canada Post Corporation Act to be financially self-sustaining. As a corporation listed in Schedule III, Part II, of the Financial Administration Act, Canada Post is expected to be profitable and not to be dependent on appropriations from its shareholder, the Government of Canada, for its operations. Through the proposal, the Corporation is ensuring that the responsibility of sustaining postal services in Canada continues to be borne by the users of the postal system and not by taxpayers in general.
The new rates, which would be in effect on January 11, 2010, would provide Canada Post with revenue in 2010 to offset the increases in its operating costs, placing the Corporation in a better position to continue its infrastructure modernization and meet the challenges of the current economic downturn.
All Canadian businesses and consumers will be uniformly impacted by the proposal. Larger businesses can also benefit from incentive rates, which are set at lower levels. Even with the new rates, letter mail 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 letter mail service.
The technical amendments pertaining to business envelopes will benefit businesses by allowing them greater flexibility in the design of their mailings and enabling them to send lighter weight and more flexible items, at the associated lower costs.
Consultation
The Canada Post Corporation Act requires a consultation period through publication of the regulatory proposal in the Canada Gazette. All representations must be sent to the Minister of Transport. In addition, Canada Post is currently consulting with its contracted and meter customers on the proposal to further segment oversize letter mail.
The representations will be taken into consideration in the preparation of the final regulatory proposal.
Implementation and enforcement
The Letter Mail 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.
The proposed amendments would come into force on January 11, 2010.
Georgette Mueller
Director
Regulatory Affairs
Canada Post Corporation
2701 Riverside Drive, Suite N0980C
Ottawa, Ontario
K1A 0B1
Telephone: 613-734-7576
Fax: 613-734-8245
Email: georgette.mueller@canadapost.ca
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.
Ottawa, June 27, 2009
CANADA POST CORPORATION
REGULATIONS AMENDING THE LETTER MAIL REGULATIONS
AMENDMENTS
1. Section 10 of the Letter Mail Regulations (see footnote 1) is replaced by the following:
10. An item of standard mail, when supported by two level supports located 10 mm from the left and right edges of the item, shall not sag more than 22 mm from its horizontal plane.
2. (1) Subsection 12(1) of the Regulations is amended by adding “and” at the end of paragraph (b) and by repealing paragraph (c).
(2) Paragraph 12(3)(b) of the Regulations is replaced by the following:
(b) where it is located on the back of the envelope, shall be located not less than 15 mm from the top and bottom edges and 15 mm from the left and right edges.
3. Subsection 14(3) of the Regulations is replaced by the following:
(3) On an item of standard mail, graphics or other printing shall not be
(a) below and to the right of an address or address window;
(b) less than 19 mm from the bottom of the front of the item; and
(c) in the area prescribed by section 13 for the postage.
4. Section 34 of the Regulations is replaced by the following:
34. The minimum weight for an item of standard mail in the form of a self-mailer is 3 g.
5. The portion of paragraph 1(1)(b) of the schedule to the Regulations in column II is replaced by the following:
|
Item |
Column II |
|---|---|
|
1.(1)(b) |
$1.00 |
6. Item 2 of the schedule to the Regulations is replaced by the following:
|
Item |
Column I |
Column II |
|---|---|---|
|
2. |
Letter mail other than letter mail referred to in |
|
|
(1) 100 g or less |
$1.22 |
|
|
(2) more than 100 g but not more than 200 g |
$2.00 |
|
|
(3) more than 200 g but not more than 300 g |
$2.75 |
|
|
(4) more than 300 g but not more than 400 g |
$3.00 |
|
|
(5) more than 400 g but not more than 500 g |
$3.25 |
7. The portion of item 3 of the schedule to the Regulations in column II is replaced by the following:
|
Item |
Column II |
|---|---|
|
3. |
$1.10 |
COMING INTO FORCE
8. These Regulations come into force on January 11, 2010.
[26-1-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
NOTICE:
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