PolitiFact: No, the Postal Service isn't losing a fortune on Amazon

The statement

"Only fools, or worse, are saying that our money losing Post Office makes money with Amazon. THEY LOSE A FORTUNE, and this will be changed."

President Donald Trump,
April 2 in a tweet

The ruling

The post office is losing a fortune, but President Trump is wrong to blame Amazon.

The Postal Service reported a net loss of $2.7 billion for 2017. It has lost $65.1 billion since 2007. Much of the red ink is attributed to a 2006 law mandating that USPS pre-fund future retirees' health benefits.

First-class mail, the USPS' biggest source of revenue, also continued to shrink, seeing a $1.87 billion revenue loss in fiscal year 2017.

Package delivery, however, was one of the few bright spots in its latest financial statement. In 2017, parcels brought in $19.5 billion, or 28 percent of USPS' annual revenue. At $2.1 billion, packages contributed the largest revenue increase.

Deals with private shippers like Amazon accounted for $7 billion of the $19.5 billion in revenue. While we know that Amazon is the biggest e-commerce player, we don't know exactly how much of the $7 billion comes from Amazon, because the details of the Postal Service's deals with private shippers are considered proprietary and not made public.

USPS ships about 40 percent of Amazon's packages. Amazon bulk-delivers packages to a USPS distribution center, and the Postal Service brings it to your door. USPS negotiates the discounted rate for that service with Amazon, as it does all other bulk shippers.

Those rates are kept under wraps. That said, we do know the Amazon deal is at least a break-even venture.

That's because the 2006 Postal Accountability and Enhancement Act made it illegal for USPS to price parcel delivery below its cost.

"By law our competitive package products, including those that we deliver for Amazon, must cover their costs," an August 2017 USPS press release said. "Our regulator, the Postal Regulatory Commission (PRC), looks carefully at this question every year and has determined that they do. The PRC has also noted that competitive products help fund the infrastructure of the Postal Service."

In fact, the Postal Regulatory Commission gave the green light to the USPS-Amazon deal the same day Trump began tweeting about Amazon last week.

Trump might have a point, however, in saying the USPS could be making more money off Amazon. For example, Citigroup found that on average, USPS was charging $1.46 below market rates for parcel delivery (not just to Amazon).

Jim Sauber, chief of staff for the National Association of Letter Carriers, explained the Postal Service can offer lower prices than their private competitors because they already "go to every house, every day."

"We're already going there to deliver mail and bills and advertising, so the marginal cost of delivering an extra package is not high, especially in the low-density areas," Sauber said.