Global postal changes underway
Effects on the consumer remain to be seen
Hopewell Junction, N.Y.
Do you send letters or packages overseas or purchase from an international business? Recent decisions by the Universal Postal Union (UPU) may soon be affecting you. In September, the UPU, a 192-country United Nations organization, made postal regulation changes, averting a threatened United States withdrawal, which could have caused upheaval in the global postal system.
At issue is how countries are compensated for their delivery of mail sent from other countries. When the UPU was formed in 1874, member countries agreed to deliver incoming mail from other countries for free. This was considered equitable, because they believed the flow of mail to be balanced: for each piece of mail sent from one country to another, a piece of mail would likely be sent in reverse.
In actuality, the flow of mail was not balanced, and for many years the sending country benefitted at the expense of the receiving country. Consider Italy in 1906. A recent article in Pacific Standard states, “Italian representatives noted that they had delivered 325,000 pieces of printed matter—magazines and newsletters—while sending out none to other countries. This meant they were providing a great deal of postal service to fellow UPU members in exchange for … nothing.”
It wasn’t until 1969 that the UPU attempted to rectify the imbalance by setting fees called terminal dues for letters and small packages. Simply put, the sending country pays terminal dues to the receiving country to compensate the receiving country for its handling and delivery of imported mail.
In setting terminal dues in 1969, the UPU considered the economic status of each country, with developing countries, including China, paying lower terminal dues. Also, terminal dues were fixed and not equal to the importer’s actual cost of delivery; therefore, countries with relatively low delivery costs, such as the United States, also benefitted. As recently as 2010, the U.S. Postal Service showed profits from delivering international mail.
However, the proliferation in global e-commerce in recent years has shifted the balance of the terminal dues remuneration system. Consumers and businesses in countries such as the United States are importing more and more goods ordered through the internet and sent via the postal system. Many of these goods are coming into the United States from countries such as China, which the UPU still classifies as a developing country, despite its expanded economy. Importers like the United States handle and deliver the goods while receiving low compensation from favored countries like China. But at the same time, the lower terminal dues paid by such countries have translated into lower costs for the American consumer.
The current U.S. administration argues that the government has been losing as much as $300-$500 million yearly because of this imbalanced system of postal rates. In October 2018, the United States signaled that it would withdraw from the UPU in October 2019 and set its own terminal dues unless the UPU made acceptable changes. A U.S. withdrawal was widely regarded to be a potential nightmare, which could throw the global postal system into chaos.
In September, the United States exit was averted. The UPU, in only its third “Extraordinary Congress” in its 145-year existence, unanimously passed a resolution allowing some high-volume importing countries to self-declare their own terminal dues. In July 2020, the United States can start setting its own terminal dues, while other countries that meet a minimum threshold of imported mail can set their own terminal dues starting in January 2021.
What will be the effect on consumer prices as we order online, especially from overseas? What will be the effect on USPS postal rates for sending a letter or package from the United States or abroad? Terminal dues nominally affect letters and low-weight packages, but will there be an effect on the shipping of larger parcels? What will be the effect on non-UPU regulated delivery services such as FedEx or DHL? Will our spending patterns change?
As the new terminal dues regulations unfold, the answers to these questions and the fate of the many players involved remain to be seen. But there is a hint of things to come. UPU Director General Bishar Hussein made this observation after the recent changes. “Once a country declares their rate, exporting countries will have to factor that cost, so it means that cost will be transferred to the person who is sending that item. When you are in a country and you buy items overseas, the end-customer will definitely have to pay a higher price.”
To read more about the changes at UPU, visit: www.psmag.com/economics/the-international-postal-system-is-profoundly-brokenand-nobody-is-paying-attention and time.com/5687134/trump-universal-postal-union-deal.
Visit the website of the Universal Postal Union at www.upu.int/en.html.
This article originally appeared in the November 15, 2019, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.