Industry

At Post Office, Amazon Isn't the Only Big Shipper Getting Discounts

At Post Office, Amazon Isn't the Only Big Shipper Getting Discounts

President Donald Trump issued a surprise executive order late on Thursday to request an audit of the U.S. Postal Service's finances, adding some administrative force to his recent fiery and unfounded claims that the service was losing money by acting as "delivery boy" for Amazon. Although the executive order doesn't mention Amazon by name, Trump has been firing shots at the tech giant on Twitter for months, alleging the company is ripping off USPS. Amazon is owned by Jeff Bezos, who also owns the Washington Post.

So when this executive order comes after a particularly intense week of Amazon bashing from @realDonaldTrump, and when the first item on the task force's evaluation list is "the expansion and pricing of the package delivery market and the USPS's role in competitive markets", you have to wonder. The task force will be chaired by Treasury Secretary Steven Mnuchin or his designee, according to the order.

It's a decision that came after the president's renewed attack on Amazon on March 31 when he tweeted: "It is reported that the U.S. Post Office will lose $1.50 on average for each package it delivers for Amazon".

The Postal Service has many financial woes, but the health of its package delivery service is not one of them.

Trump's Twitter attacks against Amazon said the company is costing USA taxpayers billions of dollars through cheaper postal rates, but the USPS said it does not receive money from the federal government to operate.

Professor Rick Geddes, a postal service expert and Director of the Cornell Program in Infrastructure Policy at Cornell University, said the "Amazon flap" is exacerbated because the agreements the USPS makes with large mailers are "secret" and not open to review outside the Postal Regulatory Commission. Revenue from packages grew by more than $2 billion from the prior year, by far the most of any service category.

The Postal Service says it makes money on the Amazon deal, and it's legally prohibited from charging shippers less than its delivery costs.

The executive order might open to door to more privatization: "Some parts of the order appear to hint at further privatization of the Postal Service, indicating that members of the task force should examine 'the U.S.P.S. role in the US economy and in rural areas, communities, and small towns, '" writes Michael D. Shear in The New York Times. Credit Suisse estimates this could amount to a hit of $1 billion to $1.8 billion to Amazon's bottom line.

Still, the demand hasn't been enough to offset its growing costs.

The agency is also drowning in "higher than normal" costs of retiree benefits, including pensions and health care.


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