Trump administration recommends postal reforms that could raise rates, setting up fight with Amazon

The Trump administration on Tuesday called on the U.S. Postal Service (USPS) to make sweeping reforms that could raise shipping rates for certain packages, a move that could inflame tensions with online retailers like Amazon, a frequent punching bag for President Trump. 

The administration’s USPS task force said in a new report that the changes are needed to bring in more revenue for the cash-strapped Postal Service, which reported $3.9 billion in losses in fiscal 2018. 

“Although the USPS does have pricing flexibility within its package delivery segment, packages have not been priced with profitability in mind,” reads an executive summary of the report. 

{mosads}The Treasury Department-led task force said the Postal Service should be able to charge higher rates for e-commerce goods and other packages deemed “nonessential,” which are a fast-growing part of the USPS’s business. 

The proposed changes were the result of a process Trump initiated in April, after he accused Amazon of ripping off the Postal Service with what he called a sweetheart shipping deal that turned the USPS into its “Delivery Boy.”

“I think Amazon has the bargain of the century with the U.S. Post Office, which is losing a fortune,” Trump said last month in an interview with the conservative Daily Caller.

Trump’s frustration with the agreement appears spurred on by his animosity toward Amazon founder Jeff Bezos, who also owns The Washington Post. The president has bashed the paper’s coverage of him and accused Bezos of using it as a lobbying arm for Amazon, a claim both deny. 

“Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!” Trump tweeted in March, days before assembling the task force. “That does not include the Fake Washington Post, which is used as a ‘lobbyist ’ and should so REGISTER.” 

Amazon on Tuesday did not respond to a request for comment. 

Trump administration officials pushed back on the notion the proposal was aimed at Amazon.

“None of our findings or recommendations relate to any one customer or competitor of the Postal Service,” said one senior administration official, who requested anonymity to discuss the report before its release. 

The official added that “all companies” dealing in e-commerce, “including Amazon,” would “be impacted by those suggested reforms.”

{mossecondads}The report recommends mail and package shipments be divided into essential and commercial service categories. Many online retail shipments would fall into the latter category, which would not be protected by existing price caps and thus be subject to rate increases.  

It also calls on the USPS to redefine what should be covered by the universal service obligation, which requires the Postal Service to deliver everywhere in the U.S. Under the administration’s proposal, most commercial packages would not be covered by that obligation.

The existing system, the report says, does not correctly assess the cost of delivering packages for retailers such as Amazon. 

“The USPS’s current cost allocation methodology is outdated, leading to distortions in investment and product pricing decisions,” it reads, adding that the structure does not “capture the cost implications that the rapid decline in mail volume and the rapid rise of package volume have had on the USPS’s cost structure.”

Senior administration officials say the Postal Service and Postal Regulatory Commission (PRC) would be able to change package rates without an act of Congress. But such a move would likely require reworking negotiated service agreements with Amazon and other companies, which could be a contentious process. 

A coalition of major U.S. shippers, including Amazon, said the recommendations, if adopted, would drive up package prices and leave service gaps in remote areas. 

“By raising prices and depriving Americans of affordable delivery services, the Postal Task Force’s package delivery recommendations would harm consumers, large and small businesses, and especially rural communities,” said former Rep. John McHugh (R-N.Y.), the coalition’s chairman. 

Art Sackler, head of the Coalition for a 21st Century Postal Service, argued the changes could hurt the Postal Service’s shipping business by driving online retailers to private competitors such as FedEx and UPS. 

“Driving up prices on packages will make USPS less competitive and incentivize competitors and customers to more rapidly divert USPS volume out of the system,” he said in an email. 

The report was not limited to package policies and covered several other areas where the task force believes the USPS could shore up its finances. 

It called on the Postal Service to restructure massive prepayments of employee retirement and health benefits, which business groups say is the main driver of its fiscal woes. But it stopped short of endorsing bipartisan legislation that would dramatically scale back the prepayments, saying that doing so would place too much of a burden on taxpayers. 

The task force is also recommending that the USPS strengthen its internal management, giving more power to the board of governors to set fiscal targets and allowing the PRC to enforce stricter rules if the goals are not met.

It declined to endorse privatizing the Postal Service, a proposal that was initially floated by the administration earlier this year as part of a broader plan to reorganize the federal government. 

The Postal Service has lost money for more than a decade, as the rise of email has significantly cut the volume of traditional, first-class mail. The task force said the USPS currently has a net deficit of $62 billion. 

The task force initially wrapped up the bulk of its work in August, submitting preliminary findings to the president. But the public release was delayed several months until Tuesday. 

—Updated at 5:27 p.m.