Regulations Amending the Letter Mail Regulations: SOR/2018-272
Canada Gazette, Part II, Volume 152, Number 26
Registration
SOR/2018-272 December 7, 2018
CANADA POST CORPORATION ACT
P.C. 2018-1537 December 6, 2018
Whereas, pursuant to subsection 20(1) of the Canada Post Corporation Act 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 June 23, 2018 and a reasonable opportunity was afforded to interested persons to make representations to the Minister of Public Works and Government Services with respect to the proposed Regulations;
Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Public Works and Government Services, pursuant to subsection 19(1) footnote b of the Canada Post Corporation Act footnote a, approves the annexed Regulations Amending the Letter Mail Regulations, made on August 21, 2018 by the 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 |
|---|---|
|
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 |
|---|---|
|
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 |
|---|---|
|
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.
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 amendments 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 rate changes will 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 amendments will 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 rate increases on the average Canadian household will be $0.65 in 2019. The impact on the average small business that uses stamps to pay postage will be approximately $14.21 based on an average annual expenditure of $257.32.
“One-for-One” Rule and small business lens: As the 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 apply. Small businesses that pay postage using a postage meter will continue to benefit from commercial rates that are lower than regulated rates.
Domestic and international coordination and cooperation: The increases are 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, as of the end of 2017, 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 were last increased in March 2014, despite annual increases in the cost incurred in providing postal service.
Objectives
The objective of the changes to the Letter Mail Regulations, the International Letter-post Items Regulations and the Special Services and Fees Regulations (the 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
The price of an individual stamp for a domestic letter weighing 30 g or fewer is increasing to $1.05. The rate for a stamp purchased in a booklet, coil or pane form is increasing to $0.90. Rate increases are also occurring for other domestic weight steps, and U.S.A. and international letter-post items. The rate for domestic registered mail will also increase.
The following chart summarizes the rate changes effective on January 14, 2019.
|
Letter Mail |
Weight |
2014 Rate |
2019 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 for international letter-post items to be delivered outside Canada, effective January 14, 2019.
|
Letter-post |
Weight |
2014 Rate |
2019 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 Over 200 g up to 500 g |
$5.15 $10.30 |
$5.45 $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 |
Up to 100 g |
$5.90 |
$6.25 |
|
Letter-post |
Over 100 g up to 200 g Over 200 g up to 500 g |
$10.30 $20.60 |
$10.90 $21.80 |
The rate charged for domestic registered mail will 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 rates will 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 will increase to $1.05 in 2019, representing an increase of 5%, while the price for a stamp purchased in a booklet, coil or pane will be $0.90, representing an increase of 5.9%. The rate for domestic registered mail will also increase. All other regulated prices will increase by approximately 6%. The impact of these 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 new regulated rates will generate approximately $26 million of additional revenue for Canada Post. Of this amount, $11 million will come from consumers while $15 million will 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 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 amendments do not result in any additional administrative burden costs for business, and the “One-for-One” Rule therefore does not apply.
Small business lens
The amendments prescribe fees for service, and therefore are not considered compliance or administrative costs for the purposes of the small business lens.footnote 2 The small business lens does not apply to these changes.
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.
The proposed Regulations were prepublished in the Canada Gazette, Part I, on June 23, 2018. Only one comment in opposition to the rate increase was received during the consultation period and no changes were made to the regulations following the prepublication.
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 rate increases will 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 will 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 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