Agreement Keeps U.S. in the UPU, Rolls Out Self-Declared Postal Rates

The Universal Postal Union on Wednesday approved a compromise plan that will let countries set their own inbound postal rates, avoiding a threatened pullout by the U.S. that would have caused shipping chaos ahead of the peak holiday season.

Under terms of the agreement, the U.S. can begin imposing self-declared rates by July 1, 2020, while countries with more than 75,000 metric tons of inbound mail per year can begin doing so on Jan. 1, 2021, with a five-year phase-in period. The agreement affects parcels weighing 4.4 lbs. or less, representing the vast majority of ecommerce shipments.

The now-defunct, outdated UPU system had China and other countries such as Cambodia still classified as developing, letting shippers there enjoy much lower outbound postal rates that undercut U.S.-based sellers. The new agreement will benefit merchants here, who often found themselves paying more for shipping an item domestically than it cost for a competing product to arrive from China.

“We will begin our self-declared rates at the end of June next year,” U.S. Trade Representative Peter Navarro, who led the US delegation, told reporters at the extraordinary UPU congress in Geneva. “This is exactly what we wanted and planned for. … We’ll buy less Chinese stuff, buy more from other countries, we will make more in America and the market will be free of distortions.”

Carriers, shippers and consolidators would have been impacted in a major way had the U.S. opted out of the UPU. There would have been massive uncertainty over postal rates, and the need to strike dozens or even hundreds of bilateral agreements. Many had been scrambling to set up contingency plans in the event of a pullout.

“By remaining in the UPU, the United States retains its important leadership role in the global postal system,” Kate Muth, executive director of International Mailers Advisory Group, which includes Amazon and eBay, told CNBC. “Mailers and shippers will see no interruption in service through the critical holiday season and beyond.”

FedEx, UPS and the U.S. Postal Service all applauded the UPU agreement.

“The compromise reached at the UPU is a good step forward to addressing the issues that precipitated the convening of the UPU 2019 Extraordinary Congress and all UPU members should be congratulated for reaching an agreement,” said FedEx in a statement. “We encourage all UPU member countries to continue reform efforts as the organization prepares for its 2020 Congress.”

“This vote by the UPU is a win for American small businesses who are competing against foreign shippers in the fast-growing e-commerce market,” UPS said in its statement. “The Trump Administration should be commended for pressing the UPU to pass reforms that will benefit American businesses and help to secure the global postal system against dangerous drugs, illicit goods and counterfeits. We look forward to reviewing the details of the agreement and assessing their impact on our customers.”

Postmaster General Megan Brennan also thanked President Trump “for his leadership in helping us to negotiate the resolution of an intractable problem with the payment system for the international exchange of small packets that has persisted over many years, and that has been extremely difficult to resolve.”

Brennan added the agreement “is aimed at eliminating economic distortions for the distribution of goods, by establishing parity with comparable domestic services for inbound packet volumes.”

Hamilton Davison, president and executive director of the ACMA, said its shipper members were glad to see the distortion in international shipping rates addressed, especially without the major disruption of a U.S. pullout from the UPU.

“American companies have long suffered a competitive disadvantage only made possible by the disparity in shipping of 4.4-lb. packages or lighter from China that will now be corrected,” Davison said. “We applaud the Administration’s aggressive approach to this longstanding problem.”

David French, SVP for Government Relations at the National Retail Federation, said the NRF was also behind the agreement as a boon for its members.

“We applaud the agreement that the U.S. was able to reach in the UPU,” French said. “Keeping the U.S. in while agreeing to allow updates to pricing not only provides continued certainty for international mailing, but will provide a level playing field for more competitive mailing.”