The US had threatened to leave the UPU over concerns about low shipping costs of Chinese imports, but a compromise was reached on Wednesday.
The US will remain in the Universal Postal Union (UPU) after member countries reach unanimous agreement on postal remuneration rates (terminal dues) on Wednesday.
Many organizations breathed a sigh of relief, since leaving the UPU was a drastic step that would mean the US would have to negotiate separately with each country on what to charge each other for delivering packages to each other’s citizens. Many US exporters had also been concerned about the possibility of higher costs if the US withdrew from the international postal organization.
However, uncertainty about shipping costs remains. CNBC took a deep look at the possible ramifications of the UPU vote for what was called Option V – a compromise that allows the US to remain in the UPU and to set its own inbound postage rates beginning next summer. “Other countries can also adjust prices on US inbound packages next July and on packages from elsewhere by set amounts each year,” it wrote.
The bulk of the changes apply to letters and packages, under 4.4 lbs., sent internationally, as CNBC explained, which went on to state, “As a result, both US importers and domestic businesses reaching non-US customers could see costs rise, says Merry Law, president of WorldVu.”
According to the UPU, member countries that meet certain requirements – including inbound letter-post volumes in excess of 75,000 metric tons based on 2018 data – would be able to opt-in to self-declare their rates starting July 1, 2020.
The decision also includes thresholds to protect low-volume, developing countries from the impact of the swift reform.
According to ShipStation, under the new proposal, member countries will be able to set a rate for inbound shipments to be at a threshold of approximately 70% of domestic rates. “Many believe this will alleviate a legacy pricing structure that puts domestic businesses and shippers at a disadvantage,” it said.
Attention to Terminal Dues has been the result of outrage that Chinese merchants are able to ship small items to the US and Europe for less than it costs domestic sellers.
Amazon’s Paul Misener had told members of a House subcommittee in 2015 that US sellers suffered from what he called a “frustrating” and “completely unnecessary and illogical” system whereby Chinese firms can ship low-weight orders to American buyers at significantly cheaper rates than are available to domestic sellers.
The USPS said Wednesday’s compromise agreement would “essentially eliminate the economic distortions that result from the current payment system for the international exchange of small packets. The agreement will also enable the United States to remain in the UPU, with the Postal Service as its designated operator.”