THE UPU AND YOU: What the changes to the United States’ role in the Universal Postal Union mean for international shippers in 2020 and beyond.
By Krish Iyer
n October of 2018, the United States announced its intention to pull out from the Universal Postal Union (UPU) within one year. As a founding member of this 145-year-old international organization, this development was significant. The UPU sets the terms and conditions for postal operators, so a US withdrawal would impact mailing and shipping relationships among postal entities, as well as commercial shipping carriers worldwide. The impetus behind the pullout announcement was a desire to revamp the terminal dues framework, which refers to the rates that foreign posts pay each other for delivering mail and packet shipments. The United States wanted to move to a self-declared rate system, or a system by which nations set their own prices for delivering inbound packets. The United States posited that inbound delivery costs into the US mirroring domestic shipping
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rates would then create parity between domestic and international businesses, specifically in e-commerce, and reduce some of the market distortions that the terminal dues system had created. Let’s Start with the Basics: What Is the UPU? The UPU is a United Nations organization that sets the rules for global mail delivery, with the formation of a single territory by all signatory nations. The purpose of this single territory is uniformity of postal rates, weights, technology, security, and policies, while streamlining the global delivery of mail and parcels that travel in a postal environment. How Did We Get Here? The terminal dues system was created in the 1960s, when letters were the primary mail moving between countries. The rate structure was based on a classification system that took into account a country’s
development so that developing countries paid less than developed countries. China, despite having the world’s second-largest economy, was still considered a developing country in this classification system. With the explosive growth in e-commerce — much of it coming into the United States from China — this system created market distortions. For many years, the terminal dues framework acted as a sort of subsidy for low-weight shipments into the US. A one-half-pound packet shipment from New York to Beijing, for example, might cost nearly $14 utilizing a postal method, while the same shipment from Beijing into the US might cost only around $4. For an e-commerce merchant who increasingly has to offer free shipping methods to stay competitive, this structure created a distorted cost structure for both the merchant/shipper and buyer. With posts accounting for nearly 70% of cross-border deliveries, according to the International Post Corporation Cross-Border E-Commerce Shopper Survey 2018 (which was released in January 2019), this price distortion could potentially widen as cross-border e-commerce grows. What Would Have Happened if the US Had Pulled Out? It’s difficult to fully comprehend the gravity of a United States pullout. While changes to the remuneration system (as we call the payment system for cross-border delivery) only affects packets, a US withdrawal would have impacted all international mail
PARCEL Fall 2019