The decision by the Trump administration to withdraw from the Universal Postal Union (UPU) in October 2018, pending negotiations with the other members to form new bilateral and multilateral agreements, will end 144 years of U.S. involvement in the international body that governs the exchange of mail and postal parcels between countries. Major price hikes for parcels bound to the USA and sent from there to international destinations are expected to follow the UPU withdrawal as of mid-October.
A vote on the move will be the main item on the agenda of the third extraordinary UPU congress which will take place on September 25 and 26 in Geneva, Switzerland.
Reports say that the U.S. State Department, which is the lead negotiator for the U.S. in UPU, has submitted a proposal that would allow the U.S. to “self-declare” international postage pricing and to decide on subsidy levels, if any.
Unless the UPU agrees to the proposal by a September 30 deadline, the U.S. will leave the Union 17 days later and start a framework of bilateral negotiations with individual postal authorities.
The U. S. feels to have become the victim of foul play
Although the Trump administration raised concerns with two UPU practices in an August 2018 memorandum including one that highlighted the inability of foreign postal services to furnish advance electronic shipment data, the main reason for the U.S. to withdraw from the UPU is the 50-year-old “terminal dues” structure, which governs the cross-border delivery of packages and letters up to a certain weight.
The UPU in 1969 established a “country classification” system factoring in the member states’ economic development and the differences in the mail volumes, tariffs and cost levels. In its memorandum, the Trump administration argued that the terminal dues regime has led to significant price distortions which have left the U.S. at a competitive disadvantage for decades.
Non-transparent terminal dues structures
Although the memorandum did not specifically target China, a 2015 report from the U.S. Postal Service (USPS) noted that the low terminal dues for China “benefit China Post and Chinese online retailers in the lightweight, low-value package segment at the expense of (USPS) and American retailers.”
The USPS report also estimated that the terminal dues structure had cost USPS approximately US$300 million from 2010 to 2014, while another agency, the independent Postal Regulatory Commission, calculated that the loss to USPS attributable to terminal dues reached US$134.5 million in fiscal year 2016 and US$170 million in fiscal year 2017.
Meanwhile, analysts predict that if the USPS withdraws from the UPU, the industry can expect rate increases of at least 300% on postal parcel traffic to the U.S., while U.S.-based international shippers will also pay more, because USPS will cancel negotiated service agreements (NSA) covering international shipments.
Nol van Fenema