What’s the news?
Just when you thought the trade war was painful enough, you may see international postage rates skyrocket and international shipments slow or stop in transit, just in time for the holiday season.
It is not time to panic yet, but if you ship internationally via the US Postal Service (USPS), you should be aware the United States, under the direction of The Secretary of State, is drawing nearer to a complete withdrawal from the 144 year old Universal Postal Union (UPU).
A decision will be made by September 30th, 2019 and the withdrawal will possibly go into effect on October 17th, 2019.
The existing UPU agreement enables practically every postal system in the world to seamlessly pass mail to each other. For example, if you ship a box to your customer in France, the French postal system provides the last mile delivery of the package. The UPU is the central facilitator of the international mail system we enjoy today.
If the withdrawal occurs, some USPS exports and imports may grind to a halt in transit and USPS rates to many countries may increase drastically.
Why is the US doing this?
There is some reading in between the lines here, but a couple pretty obvious motivations are playing a role.
Politics aside, this is a decision made by the US Secretary of State, presumably under the guidance of the Trump administration, based on two arguments:
- The payer of the postage for a shipment between two countries is dictated by the UPU, wherein the origin country pays for the postage. The UPU designates each country’s stage of economic development, which thus determines how much or how little each originating postal system pays for a given international shipment. For example, China Post pays relatively little to the USPS when shipping a small package to a US consumer. In comparison, USPS pays considerably more to ship to a consumer in China. It has not been said out loud, but this certainly feels like yet another extension of the US-China trade war. There are similar disparities with other countries around the world as well, which apparently the US executive branch is not happy about.
- The US Secretary of State wants all mail shipments inbound to the US to be forced to comply with electronic customs filing procedures. The presumed argument here is this lack of customs enforcement renders USPS and US Customs incapable of stopping the alleged large volumes of illegal drugs and other illicit items inbound from China and other countries. Presumably, increased revenue from US export shipments via USPS will help fund better screening and enforcement.
What should you do about the potential UPU withdrawal?
First, it is possible this situation will be diffused. Perhaps the US will reach a new agreement with the UPU before the end of September. In fact, the UPU is holding an emergency meeting, called a “Special Congress, on September 24th – 25th. No one knows for sure what the outcome of this meeting and any negotiations will be.
One possible outcome is a full US withdrawal from the UPU agreement at the end of September, with the effects felt on October 17th. The effects would almost certainly include skyrocketing costs for USPS shipments inbound to the US and outbound from the US by as much as 3x, as some have reported.
It is also possible that operational issues for shipments to or from some countries could arise. In the event of a withdrawal, it is presumed that the US would negotiate bilateral agreements with individual countries one at a time through the course of 2020 and possibly beyond.
Impacts would likely be felt for all international USPS shipments, as well as other “hybrid” international solutions like FedEx FIMS, DHL Ecommerce, and UPS Mail Innovations. These other solutions rely on the USPS and postal systems around the world for international last mile delivery.
So, this gives you a few options:
- Stop shipping internationally if your margins cannot absorb higher shipping costs and your customers are unwilling to absorb a higher shipping and handling charge. This is the worst of all possible outcomes, of course.
- Start looking into options with other carriers including DHL, FedEx, and UPS. If USPS International suddenly becomes 3x more expensive, other carriers may offer discounted international rates that start to look relatively attractive.
- Consider shipping domestically in more locations around the world. This is why Rush Order offers fulfillment facilities in Canada, Europe, Asia and Australia.
For more questions or to discuss your options in the event of a US withdrawal from the UPU, please contact us.
For further reading and opinions:
- Financial Times Opinion Piece
- Trump Administration Trade Advisor on Fox News
- Perspective from Multichannel Merchant
- Perspective from Freight Waves