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U.S. to Push for Overhaul of Postal Rates at Universal Postal Union Congress

Delegates from 192 nations will gather for a congress of the Universal Postal Union in Geneva on 24-25 September. Even though the UPU was founded in 1874 this is only the third congress in the history of the organisation, held primarily in response to U.S. demands for an overhaul of postal rates for delivery of packages from other countries to their final U.S. destination.

When the UPU was established, most international postal shipments consisted of flat letters and most such mail took place between developed countries. For the first 100 years UPU members delivered mail within their borders for no additional charge to the sending country. An increase in international shipments led UPU member countries to establish a “terminal dues” system in 1969 to compensate one another for deliveries within their borders. The members agreed that developed countries would charge lower dues while developing countries could charge higher dues for incoming shipments.

The terminal dues system provides particularly low rates for packages of two kilogrammes or less and today such package deliveries have skyrocketed, including for high-value items like mobile phones and pharmaceuticals. More than half of business-to-consumer international parcel traffic enters the United States from mainland China, an UPU developing country member. The UPU increased the original terminal dues formula by 20 percent in 2016 under pressure from the Obama administration. However, the U.S. Postal Service estimates that it is still losing US$1 for every shipment it delivers from mainland China and that China Post still pays USPS only about 35 percent of what it costs USPS to process a postal shipment within its borders.

Peter Navarro, known as the Trump administration’s trade hawk on mainland China trade issues, wrote in an op-ed piece published in the Financial Times on 11 September that “manufacturers in countries as small as Cambodia and as large as China pay less to send small parcels from their countries to New York than U.S. manufacturers do to ship packages from Los Angeles to the Big Apple.” He noted that other countries, including Canada, Norway and Brazil, are also losing money as a result of the UPU’s “distorted system.” The U.S. Chamber of Commerce wrote a letter to the Trump administration praising this approach, observing that the United States is “on the brink of accepting the most meaningful reform to inter-postal compensation arrangements in 50 years.” A USPS spokesperson noted that USPS “fully supports the objectives of the administration to secure a more balanced and fair remuneration system for small packets containing goods.”

Navarro has proposed that the United States be allowed to self-declare delivery rates on incoming foreign mail so that USPS would no longer lose money on delivery of those packages and U.S. firms would no longer face unfair competition from foreign shippers. He has declared that if the status quo remains the United States will leave the UPU on 17 October, following the formal notice provided by the U.S. State Department one year ago.

USPS states that it plans to continue international deliveries in any event, although experts note that if the United States were to leave the UPU it could lose access to the legal, regulatory and technical framework that underpins global mail delivery, possibly leading to uncertainty in shipping prices. U.S. consumers making e-commerce purchases could face chaotic shipping conditions right before the holiday season unless some compromise can be agreed at the UPU congress.

Content provided by Picture: HKTDC Research
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