Will USPS Postal Rates Increase This Holiday Season if the U.S. Leaves the UPU?

Will U.S. international postal rates skyrocket before the holidays?

As the holiday season grows nearer and shoppers start making their lists and checking them twice, there are murmurs of increases in USPS rates.  Why, you ask?  It seems as if we are living in somewhat uncertain times right now when it comes to USPS postal rates, especially for international mail letters and small packages. 

The holiday season is still a month or so away, yet an international priority exists to resolve the issue of worldwide cooperation in dealing with postal rates, especially in this age of ecommerce shipping.  Worried about postal rates to Canada?  Concerned about UK postal rates for that teacup you are getting ready to send Aunt Martha?  You have good reason to be concerned.

Yes, the post office is still standing.  USPS rates, however, may change, based on whether the U.S. leaves the UPU. 

What is the Universal Postal Union and How Does It Impact Postal Rates?

Established by the Treaty of Bern in 1874, the Universal Postal Union (UPU) is a special agency within the United Nations designed to coordinate postal policies between member nations and the worldwide postal system.  The UPU establishes rules and postal rates for international mail and package delivery.  Back in 1969, the developed nation members of the UPU altered policies so that poorer nations could be charged a discounted fee to process small packages weighing less than 4.4 pounds.

One of these poorer nations was China, now a mighty force in exports, manufacturing and e-commerce shipping.  The Chinese e-commerce businesses ship approximately $354 billion worth of goods worldwide, much of it using mail service in significant volume to America.  While there have been some reforms recently, the Chinese postal system is still benefitting from the 1969 agreement, making it cheaper in some cases to ship a small package from China to an end destination in the U.S. than to ship the same package from one location in the U.S. to another.

The 1969 arrangement costs the United States Postal Service (USPS) an estimated $300 million annually.  It also undercuts American companies and may be aiding in bringing the deadly drug fentanyl, a synthetic opioid to American shores.

How Can the Imbalance in International Postal Rates Be Remedied?

The internal decision-making process at the UPU is tiresome and unwieldy as it requires agreement of a majority of the 192 countries represented.  Even after a decision has been received, change can take up to 18 months to implement.

A year ago, President Trump revealed his intention to withdraw the United States  from the Universal Postal Union.  As the United States processes nearly half of the world’s mail, the Trump administration provided one year’s notice of U.S. plans to withdraw from UPU, hoping to use this fact to its advantage in garnering a UPU meeting and decision in its favor.

In response, the UPU promised to fast-track their review of the pact.  The special gathering of UPU member nations will occur on September 24-25th in Geneva, Switzerland. During that meeting, the U.S. will try to convince UPU member nations that each country should establish its own international postal rates for delivering small packages, the bulk of global e-commerce.  If the U.S. argument is not persuasive enough to win the vote, it is likely that the United States will withdraw from the UPU in October. 

Of primary concern is the issue of terminal dues.  Terminal dues are the highly subsidized rate established by the UPU for delivery of lightweight packages mailed by other countries, including China.  The subsidized rate is significantly less than the domestic delivery rate charged by the United States Postal Service (USPS).  This automatically puts U.S. e-commerce businesses at a distinct disadvantage.

As it stands now, the USPS can only recover a fraction of its costs under the UPU terminal dues rate.  This also undercuts private carriers including FedEx and UPS that are unable to deliver to home and business destinations in the United States for the same price.  The volume involved is huge. Industry experts estimate that the U.S., UK, Germany, France and China send out over half of all mail and the postal operators of 30 countries account for over 92 percent of all outbound mail.

In April, UPU working committees were unable to advance the U.S. State Department’s proposal to enable the country to establish its own rates for inbound delivery of small packages and bulky letters.  This was the only option that would be acceptable to the White House.  UPU member countries were asked to convene an Extraordinary Congress, an unusual request.    The Third Extraordinary Congress of the UPU will convene in order to decide on a possible revision of small packet renumeration rates.

How Will This Impact U.S. Businesses and Consumers?

The United States Postal Service has already notified organizations that have negotiated service agreements with them to warn that the international postal shipping rates specified in their agreements may be null after September 30th, 2019.

Some shippers indicated that they expected rate increases but were very surprised to receive notification of cancellation for existing negotiated rates.  Small shippers that sell online may experience service disruptions and increased costs for shipping through the USPS-right before the holiday season.  U.S. shippers may be left on their own to a certain extent, to locate the best price for international postal service in the marketplace.

Although it may be relatively simple to negotiate with European allies, that is unlikely to be the case with China, due to ongoing trade tensions and unresolved issues with the tit-for-tat trade war.

Why This Is Happening

The Trump administration finds the 1969 agreement outdated and too much in favor of developing nations including China.  The objection is that this treaty makes it inexpensive to ship goods into the U.S., creating a disadvantage for American shippers.  In addition, the administration theorizes that the arrangement contributes significantly to the volume of counterfeit goods and illegal drugs entering the United States from China. 

American county officials sent out nearly one million absentee ballots to UOCAVA voters in the 2016 presidential election.  Most election ballots are sent back to their respective counties through postal mail.  From mid-September through November, counties will be mailing UOCAVA ballots out in preparation for state and local elections that will be held in November 2019.  If there is any disruption to the mail service, military members and their spouses as well as overseas American citizens may suffer a negative impact if they are unable to participate in the election process. U.S. withdrawal from the UPU may even hold broader implications for the 2020 primary elections and possibly for the presidential election in November 2020.

Impact on Military and Overseas Voters

According to the Federal Voting Assistance Program (FVAP), approximately 75 percent of the 1.3 million active duty service members and three million other American citizens across 170 countries are covered by the Uniformed Overseas Citizen Absentee Voting Act (UOCAVA).  This allows citizens to vote on an absentee basis while away from their voting jurisdiction.

The transit time to receive and return a ballot can vary based upon the ballot deliver method, submission options permitted by state law, duty location and internet connectivity.  Counties are the main administrators of American elections.  As such, each county is responsible for transmitting and processing military and overseas ballots.  Federal law requires that ballots must be transmitted no later than 45 days before federal elections as this allows adequate time to mitigate possible delivery issues.

POTENTIAL OUTCOMES OF A U.S. WITHDRAWAL FROM THE UPU

Here is what would happen if:

  • The UPU concedes, letting America establish its own postal rates: In this instance, the U.S. would withdraw its notice to leave the UPU and would remain a party to the treaty. Postal rates, especially on small parcels for nations that had previously been benefitting from discounts may be increased.  In this instance, it would not be necessary for the U.S. to make changes to how international mail is sent in the U.S. and would not necessitate the need to negotiate and finalize new postal treaties
  • The UPU does not concede. America could then negotiate with international postal operators via treaties outside the UPU.  This may mean that the United States would likely leave the UPU and be able to negotiate international mail issues, potentially adding them onto existing treaties with other countries including trade agreements.  This may become problematic as the State Department has limited capacity to negotiate and the Senate does not have adequate time to deliberate and vote on a series of new treaties.  Negotiations could prove costly and time consuming, cutting into gains from the international postal order.
  • The U.S. leaves the UPU: The United States could choose to establish its own rates for each individual country, based upon its own standards. This would mean that other countries could either reject or accept these rates and each country would need to establish postal rates for Americans to access the postal systems in their respective countries.
  • The USPS leaves the UPU: The USPS could choose to relinquish the market to foreign post offices or the private sector, making all international mail behave like the express mail market.  The express mail market operates outside of the established terminal dues infrastructure. Making this change would likely mean that the cost of sending both standard letters both inbound and outbound and small packages into the United States would escalate.  In addition, this would probably end the USPS obligation to the UPU.

Conclusion

Stay tuned.  We will soon find out if the longstanding relationship between the United States and the worldwide coordinators of postal order across the world, the Universal Postal Union will hold fast.  If the U.S. fails to achieve the desired decision, it is likely to leave the UPU, upending over 100 years of successful global cooperation.

As for the holiday season, we are hoping for the best in these uncertain times.

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