Needed International Mail Reforms Inch Forward

International Postal Update – January 2017

MODEST PROGRESS WITH NEW POSTAGE RATE SYSTEM 

At the 26th Universal Postal Congress (UPU) this fall, member countries voted to institute a new payment system for letters and small packages shipped by international mail. The Congress, which concluded October 7 in Istanbul, approved changes to the system known as Terminal Dues, by which postal operators exchange payment for outgoing international mail according to established schedules that put countries into different groups.

The Congress created a new rate structure governing the shipment of small packages, which will be treated differently than letter mail beginning in 2018. Industrialized countries will be paid a higher-than-inflation rate increase for packages weighing up to 4.4 pounds under the changes.

For small packages sent from China, for instance, the United States will be paid at an annual rate that’s up 13 percent. For comparable packages received from designated industrialized countries, the increase will be smaller, closer to 3 percent.

The U.S. Postal Regulatory Commission, in an opinion issued October 7, found the new system to be a limited improvement for U.S. consumers over the previous terminal dues schedule. The Commission reasserted its prior position that in order to be consistent with requirements in federal law, the U.S. government must pursue a payment system aligned with domestic postal rates and with actual handling and delivery costs, which the new terminal dues system is not.

Chairman Robert Taub issued his own, separate views arguing that the changes remain inconsistent with the Commission’s standards, as U.S. consumers will continue to subsidize incoming international letters under the new rate schedule. Taub cited reports published by the Commission in 2014 and 2015 that observed significant pricing distortions in the terminal dues system. He noted that such distortions, which U.S. law explicitly prohibits, would “not only remain locked in place . . . but, based on past history, likely be exacerbated.”

PUBLIC SAFETY RISKS IN INTERNATIONAL MAIL UNCHANGED

In October, the U.S. Postal Regulatory Commission expressed its position that the UPU’s new small packages classification would improve the security of incoming international mail, even asserting that the change would help deter terrorism by facilitating the future transmission of advance electronic customs data to customs authorities.

An estimated 98 percent of small packages entering the country via commercial carriers are screened using this data, but mail entering through the Postal Service is almost never screened upon entry because most foreign postal operators decline to collect, or provide, the information.  A proposal by the United States to require non-discriminatory customs treatment for all shipments by all UPU members, whether sent internationally by private carriers or national posts, was rejected by the UPU at its Istanbul Congress.

Currently, nine countries – Australia, Canada, China, France, Hong Kong, South Korea, Singapore, Spain and the United Kingdom – transmit some advanced electronic data as part of a voluntary pilot program with the United States.

U.S. Customs and Border Protection officials have asserted that advance electronic data on shipments is necessary for effective screening of packages entering the country by international mail. As noted in the new U.S. Joint Strategic Plan on Intellectual Property Enforcement FY 2017-19, issued in December, “without the ability to conduct a full-risk analysis on shipments arriving through international mail in advance of their arrival, any U.S. border enforcement strategy is incomplete and subject to an unacceptable degree of risk.” The Strategic Plan includes several action items that would improve customs screening for small packages arriving and study various approaches to reducing risks.

As part of a campaign plan announced in October to combat the spread of opioids in the United States, President-elect Donald Trump pledged to, “close the shipping loopholes that China and others are exploiting to send dangerous drugs across our borders in the hands of our own postal service.”

POSTAL OPERATORS WORLDWIDE ANTICIPATE SERVICE CUTS

As traditional letter mail volumes have fallen and consumer buying patterns have shifted, national postal operators have had to rethink their business models and what “universal service” means in the digital era.

In Canada, for instance, the future of door-to-door delivery service is unclear. Last year, Canada Post cut door-to-door delivery service for nearly one-third of residents in favor of community mailboxes in order to compensate for financial shortfalls. A House of Commons committee expressed displeasure with the decision; Prime Minister Justin Trudeau promised on the campaign trail to reverse the proposed end to door-to-door delivery.

The government surveyed Canadians and found that about two-thirds of Canadians supported implementing community mailboxes in both urban and suburban areas as an alternative to door-to-door services. Seventy-three percent were willing to accept “alternate day delivery.”

Swiss Post is downsizing its letter processing capabilities and investing in digital offerings. In October, the operator announced that it would merge three letter processing sites in the Berne area into one location by mid-2018 because of declining mail volumes and increasing costs.

Swiss Post has been among the first national posts to offer digital E-post service, which gives customers the option of receiving physical mail in their mailboxes or getting it electronically. Similar to an email, the E-post emerges via a virtual mailbox as a PDF document.

Australia Post is expected to slash the number of post boxes nationwide by one-third. The Australian Senate recently approved postal reforms that would eliminate 5,000 post boxes. Roughly 1,900 jobs would be cut in the process. Australia Post expects the changes to affect delivery schedules. Residents can expect some mail to arrive roughly two days later than it normally would.

In the United Kingdom, the Post Office is trimming the services offered through its retail outlets as Royal Mail, the legacy postal delivery operator, expands its package delivery services in order to compete against private firms.  As part of the privatization of Royal Mail in 2012, Post Office Limited — the network of retail outlets offering financial services and mail drop-off — was spun off into its own company.

The new Royal Mail Group retained the universal service obligation — delivery six days a week, for one flat price. Royal Mail and the Post Office struck a 10-year commercial agreement in 2012, whereby the latter would continue to handle packages, sell stamps, and generally serve as an entry point into Royal Mail’s distribution network.

The Post Office will close more than one-third of its current cash-handling depots by April of 2017, as well as eliminating some 500 jobs by franchising 39 Crown Post Offices. The organization will no longer transport or distribute cash to businesses outside its branches.

Royal Mail, meanwhile, has begun offering extended delivery hours and tracking notifications. The organization boasts control over more than half the package market in the country. By boosting delivery services, Royal Mail hopes to compete more effectively with private entities, including Amazon, which is ramping up its own British logistics network.