Vol. 144, No. 26 — June 26, 2010

Regulations Amending the Letter Mail Regulations

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

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 incurred 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.

The Corporation benefits from an exclusive privilege on the collection, transmission and delivery of letters to help it meet its service obligations. In recent years, however, the economic value of this privilege has declined, with the growing availability and popularity of electronic means of communication.

Overall, volumes of domestic transaction mail, which includes bills, payments and other letters, decreased by 4% in 2009 compared to the previous year, with a corresponding decrease in revenue.

To meet its service obligations, the Corporation operates 24 000 delivery routes across Canada each business day; demographic growth adds close to 200 000 new addresses each year. Servicing these new addresses adds new costs.

The economic downturn has exacerbated the Corporation’s financial challenges, in particular with respect to its pension. Canada Post has one of the largest pension plans among Crown corporations in Canada. The downturn has had a significant impact on the value of the pension plan, and fluctuations in the market have made it difficult to predict the amount of special payments needed in addition to regular contributions. Money originally earmarked for operations and infrastructure renewal must now be injected into the pension plan to meet federal solvency-funding rules.

Faced with these realities, Canada Post is re-examining all aspects of its business, containing its costs (a multi-pronged approach yielded $450 million in savings in 2009) and renewing its equipment, plants and processes through a $2 billion multi-year infrastructure renewal program known as Postal Transformation (PT). The rate increases will assist in financing this infrastructure renewal program. Initial PT changes include a new mail processing plant in Winnipeg and the replacement of obsolete mail processing equipment in centres across the country. Postal Transformation is designed to save mail processing costs through increased operating efficiencies and to provide a safer and “greener” work environment for employees. All of these changes are aimed at providing the postal services Canadians need in a more efficient, modern environment.

Objectives

The proposed amendments would help Canada Post meet its statutory obligations to conduct its operations on a self-sustaining financial basis and meet its responsibilities to Canadians under the Canadian Postal Service Charter.

The proposed regulated rate increases would ensure that the costs of maintaining postal service for all Canadians continue to be borne by those who use the service. Canada Post is obliged under the Canada Post Corporation Act to ensure that rates are fair and reasonable.

The proposed Regulations would also add specifications for “medium” letters, to ensure consistency with Universal Postal Union (UPU) specifications.

Description

The proposed amendments to the Letter Mail Regulations would establish the rates of postage for domestic letter mail items other than the basic domestic letter rate, effective January 17, 2011.

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 57 to 59 cents on January 17, 2011, and by an additional 2 cents in each of the following three years.

This proposal prescribes rates for all domestic letter mail items other than the basic letter rate, effective January 17, 2011.

The new rates would be as follows:

Product	Current Rate	Rate as of January 17, 2011
Standard domestic letter mail more than 30 g but not more than 50 g	$1.00	$1.03
Medium letter up to 20 g	$1.10	$1.03
Medium letter more than 20 g but not more than 50 g	$1.10	$1.18
Other domestic letter mail 100 g or less	$1.22	$1.25
Other domestic letter mail more than 100 g but not more than 200 g	$2.00	$2.06
Other domestic letter mail more than 200 g but not more than 300 g	$2.75	$2.85
Other domestic letter mail more than 300 g but not more than 400 g	$3.00	$3.25
Other domestic letter mail more than 400 g but not more than 500 g	$3.25	$3.50

The proposed rate increases represent a weighted average increase in 2011 of 3.3%.

The medium letter category was introduced in 2009 for mail weighing up to 50 g that exceeds the width dimension for standard letters. The proposed Regulations add specifications for medium letters, to ensure increased compliance with Universal Postal Union (UPU) specifications. In addition, the medium letter rate would be split into two weight bands to provide better alignment with standard letter mail weight steps. The rate for a 20 g medium letter will be reduced to $1.03, which is the same rate as that charged for a standard letter weighing 50 g. Most medium letters are in this weight band. The rate for a heavier medium letter would rise by 8 cents, to $1.18.

Regulatory and non-regulatory options considered

Under the Canada Post Corporation Act, Canada Post has an exclusive privilege for letter mail. Given that letter mail is a regulated product, any change to letter mail rates and specifications must be done through a regulatory amendment.

Benefits and costs

All Canadian businesses and consumers will be uniformly impacted by the proposal. Larger businesses can also benefit from incentive rates, which are set at lower levels. Even with the new rates, letter mail 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 letter mail service.

Rationale

The proposed rate increases are designed to help the Corporation continue to meet its obligations under the Canada Post Corporation Act to be financially self-sustaining while providing Canadians with the postal services detailed in the Act and the Canadian Postal Service Charter. As a corporation listed in Schedule III, Part II, of the Financial Administration Act, Canada Post is expected to be profitable and not to be dependent on appropriations from its shareholder, the Government of Canada, for its operations. Through the proposal, the Corporation is ensuring that the responsibility of sustaining postal services in Canada continues to be borne by the users of the postal system and not by taxpayers in general.

The new rates, which would be in effect on January 17, 2011, would provide Canada Post with revenue in 2011 to offset the increases in its operating costs, placing the Corporation in a better position to continue its infrastructure modernization and meet the challenges resulting from the economic downturn.

Consultation

The Canada Post Corporation Act requires a consultation period through publication of the 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.

Implementation, enforcement and service standards

The Letter Mail 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 would come into force on January 17, 2011.

Contact

Georgette Mueller
Director
Regulatory Affairs
Canada Post Corporation
2701 Riverside Drive, Suite N0980C
Ottawa, Ontario
K1A 0B1
Telephone: 613-734-7576
Fax: 613-734-8245
Email: georgette.mueller@canadapost.ca

PROPOSED REGULATORY TEXT

Notice is hereby given, pursuant to subsection 20(1) of the Canada Post Corporation Act (see footnote a), that the Canada Post Corporation, pursuant to subsection 19(1) (see footnote b) 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 60 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 Transport, House of Commons, Ottawa, Ontario K1A 0A6.

Ottawa, June 26, 2010

CANADA POST CORPORATION

REGULATIONS AMENDING THE LETTER MAIL REGULATIONS

AMENDMENTS

1. The Letter Mail Regulations (see footnote 1) are amended by adding the following after section 6:

7. (1) Every item of letter mail referred to in subsection 3(8) must meet the following conditions:

(a) it must be rectangular in shape and have a minimum length to width ratio of 1.4:1;

(b) the address of the addressee must appear on the front of the item and be located

(i) not less than 40 mm from the top edge,

(ii) not less than 15 mm from the bottom edge,

(iii) not less than 15 mm from the left and right edges, and

(iv) not more than 140 mm from the right edge;

(c) if the envelope of the item has an address window,

(i) the address window must be rectangular in shape and the greatest dimension of the window must be parallel to the length of the envelope,

(ii) the address window must be covered with transparent material that is firmly glued down around the inside perimeter of the address window and that allows the address to be easily read by a person or an optical character reader,

(iii) the address window must be located on the side of the envelope that does not have a closing flap,

(iv) the address window must be located not less than 40 mm from the top edge and not less than 15 mm from the bottom, left and right edges,

(v) the complete address of the addressee must be clearly visible through the address window at all times, and

(vi) the address window must not be bordered by a coloured band or frame;

(d) the postage stamp must be located on the front of the item in the upper right corner not more than 40 mm from the top edge and not more than 74 mm from the right edge;

(e) if a return address, service indications or delivery instructions are marked on the item, they must be located on the front of the item in the upper left corner not less than 45 mm from the bottom edge; and

(f) any graphics or other printing must not be located below the address or address window or in the area to the left or right of the address or address window running from, as the case may be, the top of the address window or first line of the address to the bottom edge of the item.

(2) An item of letter mail referred to in subsection 3(8) must not be accepted for transmission by post if

(a) it consists of a punched card, folded card or folded item that is not enclosed in an envelope;

(b) it is closed by means of staples, metal eyelets or hook fastenings; or

(c) it is enclosed in material other than paper.

2. (1) The portion of item 1 of the schedule to the Regulations before subitem (1) in column I is replaced by the following:

Item	Column I Description
1.	Letter mail not more than 245 mm in length, 156 mm in width or 5 mm in thickness

(2) The portion of paragraph 1(1)(b) of the schedule to the Regulations in column II is replaced by the following:

Item	Column II Rate
1. (1)(b)	$1.03

3. 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)	$1.25
(2)	$2.06
(3)	$2.85
(4)	$3.25
(5)	$3.50

4. Item 3 of the schedule to the Regulations is replaced by the following:

Item	Column 1 Description	Column II Rate
3.	Letter mail referred to in subsection 3(8) of these Regulations that is not more than 235 mm in length, 165 mm in width or 5 mm in thickness
	(1) 20 g or less	$1.03
	(2) more than 20 g but not more than 50 g	$1.18

COMING INTO FORCE

5. These Regulations come into force on January 17, 2011.

[26-1-o]

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

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

Footnote 1
SOR/88-430

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with extensible hypertext markup language (XHTML 1.0 Strict).