Amazon.com Inc. (AMZN  ) and the U.S. Postal Service (USPS) have reportedly come to a tentative agreement concerning package handling, thereby preventing a significant decrease in package volume. The two parties have agreed to a deal that will lead to a 20% reduction in the number of packages Amazon sends through USPS. This is a significant change from Amazon's initial threat to reduce its package volume by two-thirds, the Wall Street Journal reported on Monday.

The Postal Regulatory Commission, which oversees USPS, is now tasked with reviewing and approving the agreement.

Amazon.com and USPS did not immediately respond to Benzinga's request for comments.

Amazon-USPS Tie-Up Key To Parcel Flow

Last year, USPS handled more than 1 billion Amazon packages, accounting for about 15% of its total U.S. parcel volume and about $6 billion in annual revenue, thus playing a crucial role in supporting its network amid ongoing financial losses.

A 20% reduction could dent USPS revenue, given how heavily the agency depends on Amazon's guaranteed shipping volumes. At the same time, a steeper, two-thirds cut would likely have created operational challenges for Amazon, particularly in rural areas where it relies significantly on USPS for last-mile delivery, handling 30% to 40% of its shipments.

The Postal Service introduced a new bidding process in December to determine the true market value of its last-mile delivery service, according to Postmaster General David Steiner. During this process, Amazon proposed reducing its delivery volume with USPS by two-thirds. However, after other bidders failed to meet expected volume and revenue targets, the agency has shifted back to engaging more directly with Amazon, reported WSJ.

In another development, Amazon reportedly imposed a 3.5% "fuel and logistics-related surcharge" on third-party sellers using its fulfilment services amid rising fuel prices. This move, along with the new USPS deal, reflects Amazon's efforts to manage its logistics costs amid industry-wide challenges.