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U.S. Achieves Overhaul of Postal Rates at UPU Congress

Monday, September 30, 2019
Sandler, Travis & Rosenberg Trade Report

Delegates from 192 nations reached a breakthrough agreement on postal rates at the Sept. 24-25 congress of the Universal Postal Union in Geneva. Even though the UPU was founded in 1874 this was only the third congress in the history of this specialized United Nations agency, 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 kilograms 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 U.S. from 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 $1 for every shipment it delivers from 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.

According to press reports, the UPU congress resulted in an agreement by acclamation that will allow high-volume importers of mail and packages to begin imposing “self-declared rates” for distributing foreign mail from January 2021, with a five-year period for phasing in new fees. Countries that meet certain requirements, including in-bound letter-post volumes in excess of 75,000 metric tons based on 2018 data, may self-declare their rates from July 1, 2020.

According to a Reuters article, White House trade adviser Peter Navarro, who led the U.S. delegation, told a Geneva news conference that the U.S. will begin self-declaring its rates “at the end of June next year,” which according to Navarro is “exactly what we wanted and planned for.” Navarro also said that “China is certainly going to pay more for the privilege of shipping to our market” and added that “we’ll buy less Chinese stuff” as a result. UPU Director-General Bishar Hussein noted that “once a country declares their rate, exporting countries will have to factor that cost…the end-customer will definitely have to pay a higher price.”

The U.S. had threatened to withdraw from the UPU effective Oct. 17 and unilaterally self-declare its rates if an acceptable agreement was not reached at the Geneva congress.

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