UPS and USPS: A Contractual Crossroads

The United Parcel Service (UPS) and the United States Postal Service (USPS) have been in negotiations over the future of their SurePost service, with the expiration of their Negotiated Service Agreement (NSA) on December 31, 2024. According to a recent report by JPMorgan analyst Brian P. Ossenbeck, the two parties have not reached an agreement, potentially leading to significant changes in the parcel delivery landscape.



The SurePost service, which leverages the USPS's final-mile network for cost-effective shipping, has been a crucial component of UPS's operations. However, the expiration of the NSA has raised questions about the future of this partnership. Ossenbeck views the situation as a long-term positive for UPS, as it could lead to improved parcel pricing and increased efficiency. However, he also raises concerns about how well UPS can handle the transition of SurePost volume immediately after the peak season, given that FedEx estimated a similar transition would take about a year.



UPS has been taking steps to prepare for this potential change, with the company's "Network of the Future" initiative aimed at modernizing its operations through automation, consolidation, and advanced technology. This $9 billion multi-year plan could help UPS offset the loss of USPS's final-mile network for SurePost deliveries by improving efficiency and reducing costs.

However, the expiration of the NSA has also led to unexpected consequences for shippers. Starting on January 2, 2025, shippers noticed that SurePost labels for P.O. Boxes and APO/FPO addresses began to be rejected without prior warning. This left many shippers scrambling to find a solution, as USPS is the only carrier authorized to deliver to these specific addresses. With the expiration of the NSA, the only remaining delivery options for these specific addresses are direct USPS shipping or using workshare partners still relying on USPS for final delivery.

UPS has not yet made an official statement about the future of SurePost, but updates to the SurePost product page indicate that the company is moving volume in-house after the USPS contract expired last week. This move is part of UPS's "Network of the Future" initiative, which aims to streamline the company's operations and improve cost-effectiveness.

In conclusion, the expiration of the UPS/USPS NSA has led to a contractual crossroads for the two companies, with potential implications for parcel pricing, delivery efficiency, and the broader shipping landscape. As negotiations continue, shippers and industry observers alike will be watching closely to see how this situation unfolds and what changes it brings to the parcel delivery market.