Supreme Court declines to hear appeal challenging USPS parcel cost structure

In 2006, competitive products were assigned a 5.5-percent allocable share. That percentage has essentially remained the same, even though parcel and shipping – the fastest-growing segment of USPS business – accounts for nearly 30 percent of total revenue. In 2015, USPS told the PRC that competitive products accounted for 24.6 percent of the agency’s overall costs. Parcel costs, relative to first-class mail, are significantly higher because of the increased labor expense in handling and delivering parcels. First-class mail, by contrast, is far more automated.

UPS has argued for years that USPS’ parcel operations are being unfairly subsidized by first-class and another monopoly product, marketing mail. If parcel costs and the revenue it generates were more closely aligned, USPS’ parcel costs, and by extension parcel rates, should rise substantially, to offset those escalations.

In April 2017, Christian Wetherbee, an analyst for Citigroup Inc., (NYSE:C), concluded that the USPS would have to raise its artificially low parcel rates by as much as 50 percent in order to break even on its fast-growing parcel offerings.

In a statement Monday, Kara Ross, a UPS spokeswoman, said the company was “disappointed that the Supreme Court decided not to hear this case. We will continue to work with the Postal Regulatory Commission to advocate for transparent cost accounting at the USPS.”