Sellers in China will pay 13 percent more when mailing small packets to US shoppers beginning January 1st, according to a US government official.
The US State Department responded to a Congressman's concerns about the financial impact of UPU Terminal Dues that allow for companies in some countries to mail small packets to US shoppers for extremely low rates, giving them an advantage over domestic sellers.
Congressman Kenny Marchant had written a letter to Secretary Rex Tillerson in June stating he was "greatly concerned regarding the significant financial losses incurred by the USPS" as a result of the UPU conventions. He took a swipe at the former Administration, stating the US shouldn't be locked in to agreements that "undoubtedly are bad for US postal ratepayers and shippers."
Charles Faulkner of the Bureau of Legislative Affairs at the State Department responded in a letter in July. Readers may recall
that the nearly 200 member countries of the UPU establish new terminal dues every four years, with the next rates taking effect in 2018. The purpose of the UPU Terminal Dues (TD) system is to compensate destination countries for the cost of handling, transporting and delivering letter-post items from abroad - so of course the US also pays other postal services for mail sent to those countries.
Faulkner explained that the 2012 convention had improved USPS compensation for inbound delivery of international mail compared to the former methodology, but did not result in the expected improvements in cost coverage because of the ecommerce-driven surge in the volume of small packets - especially from China and other rapidly industrializing economies.
Faulkner said that the new 2016 convention accounts for the growing prominence of small packets in international letter cost, and he said it compensates postal operators at significantly higher rates for small packets than for small letters or flats.
Without mentioning China by name, he said countries that account for the highest volumes of small packets mailed to the US will see a 13% year-on-year increase in charges beginning January 1st.
"The Department and USPS worked intensively over the course of four years to achieve this outcome" and believes the new convention will have a dramatic positive impact on USPS's compensation. "We note USPS's own assessment that the Convention will provide it with full cost coverage," he added.
Faulkner also noted that regardless of whether the United States is a party to a particular UPU Convention, "there is, as a practical matter, no viable alternative framework under which the U.S. could exchange mail with other UPU member countries."
The letter from Faulkner is the only document we've seen that pegged the impact of the 2016 UPU convention - experts said it was very difficult to quantify the impact of the changes. But even a 13% increase in costs is unlikely to make the inbound rates for small packets from countries like China on par with the costs of domestic US shippers.
(As we've noted previously
, ePacket rates are different from but are influenced by UPU Terminal Dues since the latter give the USPS little leverage in negotiations; sellers generally refer to ePacket when discussing international postal cost inequities.)