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Last MileNewsParcel

Postal Service gets favorable borrowing terms in stimulus bill

Lawmakers agree to convert agency’s $10 billion loan to grant

The combined COVID-19 stimulus and government funding bill passed by Congress Monday night effectively forgives a $10 billion loan made to the United States Postal Service under the CARES Act signed into law in late March, according to a person familiar with the matter.

Lawmakers agreed to language in the Consolidated Appropriations Act of 2021 that would convert the loan from the Treasury Department to a grant. This means the Postal Service would not need to repay the loan and still keep the money. It is unclear if that is the only provision in the bill that affects the Postal Service. It is believed that the Postal Service, which is sitting on approximately $15 billion in cash, has never tapped the credit line. Agency officials did not respond to requests for comment.

The bill, which runs more than 5,000 pages, combines $892 billion in COVID relief with $1.4 trillion in additional spending to fund federal agency budgets through next September and avoid an end-of-year government shutdown. President Donald Trump has attacked the legislation because it fails to provide qualifying adult Americans with a larger one-time payment than the $600 approved by lawmakers.

Trump has not said he would veto the bill. However, its huge margin of support in both chambers makes it likely Congress would have the two-thirds votes needed to override any veto.

Kevin Kosar, who follows the Postal Service as a resident scholar at the American Enterprise Institute, a public policy think tank, said in an email Wednesday that the grant money would be deployed quickly to pay down most of the Postal Service’s $14 billion debt load. Paul Steidler, a senior fellow at the Lexington Institute, another think tank, wrote in a Dec. 4 op-ed that the Postal Service is so flush with cash that it doesn’t need to tap any additional borrowing authority for at least a year.

Steidler’s piece was highly critical of efforts to provide direct relief funding to the Postal Service. Steidler said the agency would be best served to focus on its “severe and chronic financial problems than need fixing.” He cited necessary steps for the Postal Service to improve how it costs and prices its services.

The Postal Service has endured perhaps the most trying year in its long history. Mail volumes collapsed once the pandemic hit, with parcel deliveries tied to a surge in e-commerce orders being the lone bright spot. Costs spiked as the agency spent huge sums to protect the hundreds of thousands of workers processing and delivering letters and parcels during the crisis. New Postmaster General Louis DeJoy came under massive fire for making operational changes months before the Postal Service was scheduled to handle tens of millions of mail-in ballots for the Nov. 3 general election. 

The Postal Service became a political football during 2020. House Democrats in August proposed an emergency $25 billion cash infusion to keep the agency alive and ensure a smooth mail-in voting process. Meanwhile, Trump repeatedly threatened to veto any relief bill that contained direct funding unless the Postal Service quadrupled its shipping rates. Trump argued that big postal customers like Amazon.com Inc. (NASDAQ:AMZN) benefited from rock-bottom rates. Trump’s demands, which never gained headway, were seen as an attempt to hit back at Amazon founder Jeff Bezos for allegedly unfavorable coverage that Trump has received from The Washington Post, which Bezos owns. 

Though the Postal Service has largely fallen off the political radar, it remains very visible in the lives of Americans awaiting their holiday deliveries. Millions of parcels may not reach their destinations by Christmas Eve as the agency grapples with massive volumes and an understaffed workforce either due to thousands of employees  being sidelined after testing positive for the coronavirus or associates being quarantined because they came in contact with affected workers.

Parcel traffic has spiked because of the holiday season, the impact of COVID-19 on e-commerce demand, and new demands from large shippers who had been cut off by FedEx Corp. (NYSE:FDX) and UPS Inc. (NYSE:UPS) because their volumes had exceeded limits previously agreed to. An early winter storm that hit the Northeast, mid-Atlantic and New England didn’t help matters. Every private parcel carrier has been running full-out for weeks, leaving the Postal Service as the last viable option for many shippers and retailers.

The Postal Service delivered 93.6% of parcels on time during the week ending last Saturday, according to data published Wednesday by consultancy ShipMatrix. The agency’s Parcel Select service, in which it accepts tenders of bulk parcels as deep into its shipping network as possible for last-mile deliveries to residences, clocked in at a 98.7% on-time rate, ShipMatrix said.

The lower overall figure indicates that the Postal Service fell behind in delivering parcels that it handles from start to finish. Analysts had expected that end-to-end deliveries would be the weak spot because of the surges in demand and the staffing issues affecting its entire network. Priority Mail, the Postal Service’s familiar two- to three-day delivery product, and First Class Package Service, in which parcels weighing less than 1 pound are delivered in one to three days, are the two main products in its door-to-door delivery portfolio.

ShipMatrix President and CEO Satish Jindel said that more than 1 million online orders may not arrive by Christmas Day, but that most of those orders contain COVID-19-related household products and not holiday gifts.

A survey by last-mile IT provider Convey paints a less favorable picture. The average transit time for Postal Service-shipped parcels rose to 8.15 days for the week ending last Thursday, up from an average of 3.58 days during the week before the Black Friday online shopping day, Convey said. The agency’s on-time performance fell to 55% last week from 89% in the same week last year, Convey said.

The drastic increase in volumes was the main culprit, according to Convey data. The Postal Service’s share of e-commerce parcel shipments rose to 24% as of last Thursday from 9% during the week of Oct. 9.

Austin, Texas-based Convey said its data is “based on tens of millions of packages shipped from more than 500,000 U.S. locations across the company’s client base.” 

(An earlier version said that Trump threatened to veto the bill. Despite voicing serious objections to the bill, he has not explicitly said he would veto it.)

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.

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