Vol. 145, No. 26 — December 21, 2011

Registration

SOR/2011-296 December 8, 2011

CANADA POST CORPORATION ACT

Regulations Amending the Letter Mail Regulations

P.C. 2011-1532 December 8, 2011

Whereas, pursuant to subsection 20(1) of the Canada Post Corporation Act (see footnote a), a copy of the proposed Regulations Amending the Letter Mail Regulations, in the annexed form, was published in the Canada Gazette, Part Ⅰ, on May 14, 2011 and a reasonable opportunity was afforded to interested persons to make representations to the Minister of Transport with respect to the proposed Regulations;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 19(1) (see footnote b) of the Canada Post Corporation Act (see footnote c), hereby approves the annexed Regulations Amending the Letter Mail Regulations, made on August 23, 2011 by the 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.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

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 amendments will raise a number of postal rates by a modest percentage in 2012. The increases will 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 amendments will 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 new domestic letter mail rates are as follows:

Domestic Letter Mail	2011 Rate	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 than100 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 new rates for letter-post items to be delivered outside Canada are as follows:

International Letter-post	2011 Rate	2012 Rate
U.S.
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 rate increases for domestic letter mail represent a weighted average increase in 2012 of 2.7%. The 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 will 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 2.8% 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 U.S. 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 will 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. 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 increases will 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 will 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) can 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 will 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.

The proposed regulations were pre-published in Part Ⅰ of the Canada Gazette on May 14, 2011. No comments were received during the 60-day consultation period, and no changes were made to the regulations following the pre-publication.

Implementation and enforcement

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.

The amendments come into force on January 16, 2012.

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

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

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

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

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