Canada Gazette, Part I, Volume 153, Number 24: Regulations Amending the Letter Mail Regulations

June 15, 2019

Statutory authority
Canada Post Corporation Act

Sponsoring agency
Canada Post Corporation

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issues

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 its costs of operation.

Canada Post’s domestic and international rates for letters are an important source of revenue for the Corporation and are reviewed on a regular basis. The last series of increases to come into effect was on January 14, 2019.

Background

Pursuant to the Canada Post Corporation Act, Canada Post has a mandate to provide a standard of postal service that meets the needs of Canadians. Canada Post is to provide quality postal services to all Canadians — rural and urban, individuals and businesses — in a secure and financially self-sustaining manner. Canada Post’s universal service obligation (USO) is set out in the Canadian Postal Service Charter. Rates of postage must be fair, reasonable and, together with other revenues, sufficient to defray its costs of operation.

Under the Canada Post Corporation Act, Canada Post has an exclusive privilege on the collection, transmission and delivery of letters within Canada to help it meet its service obligations. However, the exclusive privilege is rapidly losing its value on account of digital technologies.

In 2018, Canada Post delivered about 3 billion pieces of mail, 2.4 billion pieces (or 44%) less than in the peak year of 2006. Meanwhile, Canadian addresses have also increased by an average of 174 000 per year, resulting in a reduction of about 52% in the annual number of pieces of mail delivered per address. Less mail delivered to fewer addresses year after year imposes a financial burden. Total domestic and international letter post (including inbound and outbound) revenue decreased in 2018 by $151 million or 5.5% compared to 2017, and volumes declined by 187 million pieces, or 6.2%, compared to 2017. In 2018, the mail volume decline per address was 7.2%.

Declining mail volumes have contributed to the challenging year that Canada Post experienced in 2018 for which it reported a loss before tax of $270 million, compared to a profit before tax of $76 million in 2017. Other factors that contributed to the results include the costs associated with the pay equity ruling for members of the Canadian Union of Postal Workers – Rural and Suburban Mail Carriers (CUPW–RSMC). The cumulative costs associated with the ruling were approximately $550 million by the end of 2018, of which $420 million were recorded in the 2018 fiscal year. The annualized impact for future years is estimated to be $140 million of cost increases per year. Results were also negatively affected by the labour disruption, which contributed an estimated $135 million to the 2018 loss before tax. Partly offsetting these impacts was the growth in the parcels business, as well as a gain of $48 million recorded as a result of an update to the actuarial assumption used to calculate the administration costs of Canada Post’s workers’ compensation benefits plan.

Objective

The objective of the proposed changes to the Letter Mail Regulations, the International Letter-post Items Regulations and the Special Services and Fees Regulations (the proposed amendments) made under the Canada Post Corporation Act is to help Canada Post continue to meet its USO, to offer an accessible, affordable and cost-effective postal service for all Canadians no matter where they live and to operate on a self-sustaining financial basis.

Description

Under the proposal, the price of an individual stamp for a domestic letter weighing 30 g or less would increase to $1.07 (up from $1.05). The rate for a stamp purchased in a booklet, coil or pane form would be $0.92 (up from $0.90). Rate increases are also being proposed for other domestic weight steps and U.S.A. and international letter-post items. The rate for domestic registered mail would also increase.

The following chart summarizes the rate changes for letter mail contained in the current regulatory proposal, effective on January 13, 2020.

Letter Mail

Weight

2019 Rate

2020 Proposed Rate

1. Single stamp

Up to 30 g

$1.05

$1.07

In booklets, coils or panes

 

$0.90

$0.92

2. Standard letter mail

Over 30 g up to 50 g

$1.27

$1.30

3. Other letter mail

Up to 100 g

$1.90

$1.94

 

Over 100 g up to 200 g

$3.12

$3.19

 

Over 200 g up to 300 g

$4.34

$4.44

 

Over 300 g up to 400 g

$4.98

$5.09

 

Over 400 g up to 500 g

$5.35

$5.47

The following chart summarizes the rate changes being proposed for international letter-post items to be delivered outside Canada, effective January 13, 2020.

U.S.A. Letter-post

Weight

2019 Rate

2020 Proposed Rate

1. Standard mail

Up to 30 g

$1.27

$1.30

 

Over 30 g up to 50 g

$1.90

$1.94

2. Other

Up to 100 g

$3.12

$3.19

Letter-post

Over 100 g up to 200 g

$5.45

$5.57

 

Over 200 g up to 500 g

$10.90

$11.14

International Letter-post

Weight

2019 Rate

2020 Proposed Rate

1. Standard mail

Up to 30 g

$2.65

$2.71

 

Over 30 g up to 50 g

$3.80

$3.88

2. Other

Up to 100 g

$6.25

$6.39

Letter-post

Over 100 g up to 200 g

$10.90

$11.14

 

Over 200 g up to 500 g

$21.80

$22.28

The rate charged for domestic registered mail would increase to $9.75 (an increase of $0.25) on January 13, 2020.

Regulatory development

Consultations

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 Public Services and Procurement and Accessibility within 30 days after the prepublication of the proposed regulations. The representations are taken into consideration in the preparation of the final regulatory proposal.

Instrument choice

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

Increasing regulated rates is only one of several means employed by Canada Post to enhance its long-term financial self-sustainability. Rate changes to its non-regulated rates, i.e. commercial rates, are also factored into the planning process, as is seeking growth opportunities where they exist. For instance, as a result of Canada Post’s strategy to be a leader in the business-to-consumer e-commerce delivery market, total 2018 parcel revenue increased by $308 million, or 13.6% and volumes increased by 54 million pieces, or 21.7% compared to 2017.

Regulatory analysis

Benefits and costs

A. Quantified impacts (in millions of Can$, 2019)
 

Base Year
(2020)

Other Relevant Years (2021–2028)

Final Year
(2029)

Total
(Present Value)

Annualized Average

Benefits

Canada Post

$9.0

$70.2

$8.6

$61.9 table 4 note 1

$8.8

Costs

Canadians

−$9.0

−$70.2

−$8.6

−$61.9

−$8.8

Net benefits

$0

$0

$0

$0

$0

Table 4 note

Table 4 note 1

10-year time period (20202029); discount rate of 7% as per the "Canadian Cost-Benefit Analysis Guide: Regulatory Proposals," January 2019.

Return to table 4 note 1 referrer

B. Qualitative costs and benefits

Positive impacts

Canada Post

Contribute towards the provision of postal services to all Canadians, enable ongoing innovation and the long-term financial sustainability of Canada Post.

Negative impacts

Canadians

Very minimal annual impact: $0.26 for consumers and $6.09 for small businesses.

The revenue generated from the proposed rates would contribute towards the provision of postal services to all Canadians, enable ongoing innovation and help the long-term financial sustainability of Canada Post.

The price of a single stamp for letter mail weighing 30 g or less would increase to $1.07 (up from $1.05) in 2020, representing an increase of 1.9%, while the price for a stamp purchased in a booklet, coil or pane would be $0.92 (up from $0.90), representing an increase of 2.2%. The rate for domestic registered mail would also increase. All other regulated prices would increase by approximately 2.2%. The impact of these proposed rate increases across all products for the average Canadian household is estimated at $0.26 per year based on an average annual expenditure on postage of $11.73.

In total, the regulated rate proposal would generate approximately $9 million of additional gross revenue for Canada Post.

Letter mail volumes continue to decline on account of electronic substitution and changing behaviour of mailers and consumers.

Despite these proposed increases, Canadians will continue to enjoy postage rates that are comparable to those of other industrialized countries even with Canada’s vast geography, low population density and challenging weather.

Small business lens

The total increase in mailing costs for small businesses that use stamps to pay postage is estimated at $6.09 per year, based on an average annual expenditure of $270.73.

One-for-one rule

The proposed amendments would not result in any additional administrative burden costs for business, and the one-for-one rule would therefore not apply.

Regulatory cooperation and alignment

The proposal is not related to a work plan or commitment under a formal regulatory cooperation forum.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

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

Contact

Alain Boudreau
Director
Regulatory Affairs
Canada Post Corporation
2701 Riverside Drive, Suite N0960D
Ottawa, Ontario
K1A 0B1

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 20(1) of the Canada Post Corporation Act footnote a, that the Canada Post Corporation, pursuant to subsection 19(1) 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 30 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 Public Works and Government Services, House of Commons, Ottawa, Ontario K1A 0A6.

CANADA POST CORPORATION

Regulations Amending the Letter Mail Regulations

Amendments

1 (1) The portion of paragraphs 1(1)(a) and (b) of the schedule to the Letter Mail Regulations footnote 1 in column 2 is replaced by the following:

Item

Column 2

Rate

1(1)(a)

$1.07

(b)

$0.92

(2) The portion of subitem 1(2) of the schedule to the Regulations in column 2 is replaced by the following:

Item

Column 2

Rate

1(2)

$1.30

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

Item

Column 2

Rate

2(1)

$1.94

(2)

$3.19

(3)

$4.44

(4)

$5.09

(5)

$5.47

Coming into Force

3 These Regulations come into force on January 13, 2020.