The Trump Administration, International E-commerce, And Reform Of The UPUJanuary 17, 2019
The Trump Administration has acted forcefully to address serious flaws in the legal framework for international postal services. With these initiatives, the United States can lay the groundwork for an international postal system suited to the twenty-first century . . . if it follows through.
At the core of the problem lies the Universal Postal Union (UPU). The UPU was founded in 1875 by 21 countries including the United States. For more than a century the UPU’s main function was to facilitate the exchange of letters and personal packages between governmental postal administrations.
In the last several decades, the nature of postal services, the global economy and role of the UPU have all changed radically. Most major national post offices are no longer government administrations. They have become highly commercialized and diversified businesses, often with private shareholders. The volume of international letters has plummeted, while e-commerce packages are surging. The international postal system is increasingly an e-commerce distribution service, yet the UPU continues to exercise the privileges of an intergovernmental organization.
A commercialized UPU distorts international commerce in ways that are both unfair and dangerous for Americans. There are three major issues.
First, under the rules of the UPU, the Postal Service delivers foreign packages (up to 4.4 pounds) for 50 percent or less of what it charges American mailers for similar services. The largest source of e-commerce goods, China, gets discounts of up to 65 percent or more. As many U.S. businesses from Amazon to one-person specialty merchants have pointed out, this puts American merchants at a serious competitive disadvantage. Worse, undercharges for delivery of foreign mail add up to hundreds of millions of dollars annually, a shortfall made up by raising rates for domestic first-class mailers.
Second, the UPU prescribes simplified customs procedures for postal packages and exempts post offices from liability under national customs laws. As a result, inbound postal packages largely escape customs controls designed to restrict importation of terrorist bombs, synthetic opioids, counterfeit goods, and other illegal shipments. The international postal system has become the conduit of choice for foreign terrorists and drug dealers.
Third, a UPU committee composed of 40 postal officials is authorized to adopt regulations binding on the US government. This is not only unreasonable and unfair, but probably violates the U.S. Constitution.
On October 17th, the Trump Administration announced two major reform initiatives. First, the President directed the Postal Service to adopt new “self-declared” package delivery rates that eliminate preferences for foreign mailers “as soon as practical, and no later than January 1, 2020.” Second, the U.S. formally notified the UPU of its withdrawal in one year. The U.S. left open the possibility that it will rescind withdrawal if negotiations resolve the fundamental problems posed by the UPU.
The U.S. Chamber of Commerce, National Association of Manufacturers, International Housewares Association, and a chorus of American businesses have condemned the UPU’s preferences for foreign mailers. Economic studies prepared for the Postal Regulatory Commission detail the resulting economic distortions. Several government reports describe the security and public health threats posed by UPU customs rules. The European Union and many foreign governments agree that the UPU needs fundamental reform.
The Trump Administration has made a great start towards addressing a long neglected and increasingly important policy area. Yet the future is cloudy. The Postal Service has not yet proposed non-preferential rates to the Postal Regulatory Commission as directed by the President.
The State Department, which has consistently opposed every presidential step towards reform, has failed to even define what reforms the US is seeking from the UPU as necessary for continued US participation. Instead, the State Department appears to be negotiating with the UPU over what conditions the Postal Service’s “self-declared” package delivery rates will have to meet in order to be acceptable to the UPU.
We the People, in order to fix an imperfect postal union, need to push for these sensible, fair, and long-overdue changes.
About the Author: Jim Campbell is an attorney and postal policy consultant who has extensively studied the Universal Postal Union, including attending many of its meetings. For additional information visit www.jcampbell.com.