Canada Gazette, Part I, Volume 152, Number 25: Regulations Amending the Letter Mail Regulations

June 23, 2018

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

Issues: The Canada Post Corporation Act requires Canada Post Corporation (Canada Post) to provide postal service to all Canadians, and that rates of postage be fair, reasonable and, together with other revenues, sufficient to defray its costs of operation. The importance of financial self-sustainability was also reinforced following the conclusion of the recent government review of Canada Post in which a new vision centred on customer service was shared with Canadians. In sharing its vision, the Government noted that Canada Post must remain financially self-sustainable for the long term by generating revenues that support current and future services and enable ongoing innovation.

Regulated postage rates are an important source of revenue; however, they have not been updated since 2014, while costs associated with providing postal service increase every year.

Description: The proposed amendments would increase the rates of postage for domestic letter mail items, U.S.A., and international letter-post, and domestic registered mail, effective January 14, 2019.

Cost-benefit statement: The proposed rate changes would help Canada Post to continue to fund its operations from its revenues, without relying on taxpayer funding. Canada Post Corporation is committed to providing Canadian consumers and businesses with timely, accessible and affordable postal services while remaining financially self-sustaining, and meeting its obligations to Canadians under the Canada Post Corporation Act.

The proposed amendments would increase the overall annual spending on postage by approximately $26 million, with a corresponding increase in revenue for the Corporation. Letter mail is eroding on account of electronic substitution and recent history has demonstrated that price increases, or lack thereof, have no appreciable impact on its level of use.

Business and consumer impacts: Canada Post estimates that the impact of the proposed rate increases on the average Canadian household would be $0.65 in 2019. The impact on the average small business that uses stamps to pay postage would be approximately $14.21 based on an average annual expenditure of $257.32.

"One-for-One" Rule and small business lens: As the proposed amendments prescribe fees for service and do not impose an administrative burden on any business, neither the small business lens nor the "One-for-One" Rule would apply. Small businesses that pay postage using a postage meter would continue to benefit from commercial rates that are lower than regulated rates.

Domestic and international coordination and cooperation: This proposal is not expected to impact trade, or domestic or international coordination and cooperation.

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. The Corporation provides 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. Since 2006, letter mail volumes have declined by some two billion pieces. In 2017 alone, volumes declined by 5.5%, representing a revenue decrease of $124 million.

While letter mail volumes have been declining, the number of points of delivery to which Canada Post must deliver mail has increased by approximately 170 000 per year over the same time period. The result is that the total number of pieces of mail being delivered to each point of delivery has declined by nearly 48% since 2006.

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 the rates that are currently in place were last increased in March 2014, despite annual increases in the cost incurred in providing postal service.

Objectives

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 universal service commitment, 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 fewer would increase to $1.05. The rate for a stamp purchased in a booklet, coil or pane form would be $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 14, 2019.

Letter Mail Weight 2014 Rate 2019 Proposed Rate
1. Single stamp Up to 30 g $1.00 $1.05
In booklets, coils or panes $0.85 $0.90
2. Standard letter mail Over 30 g up to 50 g $1.20 $1.27
3. Other letter mail Up to 100 g $1.80 $1.90
Over 100 g up to 200 g $2.95 $3.12
Over 200 g up to 300 g $4.10 $4.34
Over 300 g up to 400 g $4.70 $4.98
Over 400 g up to 500 g $5.05 $5.35

The following chart summarizes the rate changes being proposed for international letter-post items to be delivered outside Canada, effective January 14, 2019.

Letter-post Weight 2014 Rate 2019 Proposed Rate
U.S.A. Letter-post
1. Standard mail Up to 30 g $1.20 $1.27
Over 30 g up to 50 g $1.80 $1.90
2. Other Up to 100 g $2.95 $3.12
Letter-post Over 100 g up to 200 g $5.15 $5.45
Over 200 g up to 500 g $10.30 $10.90
International Letter-post
1. Standard mail Up to 30 g $2.50 $2.65
Over 30 g up to 50 g $3.60 $3.80
2. Other Letter-post Up to 100 g Over 100 g up to 200 g Over 200 g up to 500 g $5.90 $10.30 $20.60 $6.25 $10.90 $21.80

The rate charged for domestic registered mail would increase to $9.50 (an increase of $0.50) on January 14, 2019.

Regulatory and non-regulatory options considered

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, Canada Post's strategy to be a leader in the business-to-consumer E-commerce delivery market resulted in increases in revenue of $393 million, or 23.1%, and 47 million pieces, or 24.5%, in its parcels line of business in 2017 compared to 2016. In 2017, for the first time, Canada Post exceeded the $2 billion mark in parcel revenue.

Benefits and costs

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

The price of a single stamp for letter mail weighing 30 g or fewer would increase to $1.05 in 2019, representing an increase of 5%, while the price for a stamp purchased in a booklet, coil or pane would be $0.90, representing an increase of 5.9%. The rate for domestic registered mail would also increase. All other regulated prices would increase by approximately 6%. The impact of these proposed rate increases across all products for the average Canadian household is estimated at $0.65 per year based on a total annual expenditure on postage of $11.19. The total increase in mailing costs for small businesses that use stamps to pay postage is estimated at $14.21 per year, based on an average annual expenditure of $257.32.

In total, the regulated rate proposal would generate approximately $26 million of additional revenue for Canada Post. Of this amount, $11 million would come from consumers while $15 million would come from small and medium-sized businesses.

Letter mail volumes continue to decline on account of electronic substitution and changing behaviour of mailers and consumers. Recent history has shown that price increases, or lack thereof, have no appreciable impact on the use of letter mail. For instance, since 2014, letter mail volumes have declined by 725 million pieces, or 18%, even though there were no increases in postage rates since March 2014.

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 harsh climate.

"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.

Small business lens

The proposed amendments would prescribe fees for service, and would therefore not be considered compliance or administrative costs for the purposes of the small business lens.footnote1 The small business lens would therefore not apply to the proposal.

Consultation

In 2016, the Government undertook a review of Canada Post. During the review, the Task Force for the Canada Post Corporation Review and the Standing Committee on Government Operations and Estimates solicited the views of Canadians through multiple channels and considered the issue of pricing/rates within the larger context of the needs of a national and financially self-sustaining postal service. Their recommendations were reflected in the Government's vision announced in January 2018 that is centred on Canada Post providing high quality postal service at a reasonable price to Canadians.

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 within 30 days after the prepublication of the proposed Regulations. The representations are taken into consideration in the preparation of the final regulatory proposal.

Rationale

Given the current rate at which letter mail volumes are declining and the other financial pressures faced by Canada Post, it may no longer generate sufficient revenue to meet its service obligations in the future without regular changes in its rate structure. The proposed rate increases would help ensure that the costs of running the postal service are paid by those who use it and not the Canadian taxpayer. The new rates would directly contribute to Canada Post's financial integrity and, consequently, its ability to take advantage of opportunities created by new technologies and the evolving expectations of its customers and the communities it serves.

Implementation, 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

Grégoire Crevier
Manager
Regulatory Affairs
Canada Post Corporation
2701 Riverside Drive, Suite N0940
Ottawa, Ontario
K1A 0B1
Email: gregoire.crevier@canadapost.ca
Telephone: 613-734-7316

PROPOSED REGULATORY TEXT

Notice is given, pursuant to subsection 20(1) of the Canada Post Corporation Actfootnotea, that the Canada Post Corporation, pursuant to subsection 19(1)footnoteb 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 Regulationsfootnote2 in column 2 is replaced by the following:

Item

Column 2

Rate

1(1)(a) $1.05
(b) $0.90
(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) $1.27
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) $1.90
(2) $3.12
(3) $4.34
(4) $4.98
(5) $5.35

Coming into Force

3 These Regulations come into force on January 14, 2019.