President Trump ratcheted up pressure on the Universal Postal Union (UPU) which sets rates - known as "terminal dues" - for cross-border deliveries among its 192 member countries, which includes the US. In a memorandum on Thursday, he issued what could be seen as an ultimatum for the UPU to change the system soon, or else.
UPU terminal dues have come under fire as sellers and manufacturers in some countries, such as China, can mail small packets to US shoppers for extremely low rates, giving them a cost advantage over domestic sellers.
As we explained in this 2015 article
, UPU classified China as a "transitional" country, meaning less industrialized, and therefore it paid lower terminal dues than "target" nations such as the US.
The President's directive to the Secretary of State on Thursday included statements that will likely appeal to online sellers as well as large shipping carriers UPS and FedEx, such as telling the Secretary to seek terminal dues rates that "avoid a preference for inbound foreign small packages containing goods that favors postal operators over private-sector entities providing transportation services."
The State Department, which is responsible for negotiating UPU terminal dues, had indicated that the latest UPU terminal dues rate change that took effect on January 1, 2018, saw sellers in China paying 13 percent more when mailing small packets to US shoppers, but the process of moving toward what the US sees as more equitable rates has been slow.
However, the UPU, which meets every four years, has recognized that it must move more quickly. It is meeting next month at an Extraordinary Congress - only its second ever - where reform will be high on the agenda, "with a view to improving and speeding up decision-making processes within the organization and ensuring its financial sustainability." Included on the agenda: whether to meet every two years instead of every four.
In his August 23 memorandum
, President Trump told his Secretary of State to notify the Director General of the UPU of the policies and intentions of the United States outlined in the memorandum and to submit a report by November 1st containing recommendations for future action if sufficient progress on reforms was not being achieved.
Those recommendations, President Trump said, should include the possibility of adopting self‑declared rates, an unprecedented move.
One postal expert told us that if the US adopts self-declared rates, "it would hardly spell the end of the international postal service into or out of the US."
But there are many who would like to see the privatization of the US Postal Service, and it seems possible that disrupting USPS agreements with other countries might further that agenda.
The President himself created a task force in the spring to recommend whether the USPS should be converted into a privately-held corporation. The Task Force report was due on August 10th but has yet to be revealed to the public.
The State Department responded to the Presidential Memorandum on Friday saying the US delegation to the UPU Second Extraordinary Congress next month would "follow through on the President's directive to make clear that UPU rates of postal reimbursement are unfair to United States merchants, mailers, and businesses. The delegation will also take steps to update unfair rates of reimbursement and ensure that all UPU member nations take action to furnish advance electronic customs data to facilitate the detection of shipments of opioids and other illicit materials. The United States looks forward to working with other UPU members to accomplish these goals."
Impact on eBay and Amazon
eBay has taken advantage of terminal dues to enter into multi-lateral agreements with US and foreign postal services to create ePacket rates favorable to sellers in multiple Asian countries exporting to the US. eBay's latest service to move Chinese goods to the US and Europe is called SpeedPAK
, a joint venture with Orange Connex Holding, though we're not clear on whether that service relies on postal services for any part of delivery.
Amazon has spoken out against cheap ePacket rates and is also is advocating for a strong postal service, joining the recently created group called The Package Coalition whose goal is to “work proactively with policymakers and the public to highlight the importance of the postal package delivery services to American businesses and consumers."
Online and marketplace sellers may not be happy with cheap rates for international sellers stemming from the UPU terminal dues system, but if that system is disrupted too much, we see no guarantee it won't eventually lead to their own costs of receiving inventory from abroad or sending orders overseas skyrocketing. And as they know all too well, larger merchants have more negotiating power than smaller sellers.