Can UPU agree a last-minute terminal dues deal to satisfy the USA?
UPU members will have to find a last-minute compromise agreement for fairer cross-border parcel delivery rates at an emergency conference in Geneva this week to keep the USA in the world’s postal system.
Delegates from 192 member countries will have a choice of three options to reform the much-criticised terminal dues payment system for cross-border small packets at the three-day UPU Extraordinary Congress, which CEP-Research will be reporting live from.
In brief, the three alternative proposals, which could be amended during the Congress, are:
- Increase existing rates and move to a single rate system
- Allow countries to set their own self-declared rates
- Increase existing rates and move to a single rate system, but with optional self-declared rates
Showdown after US pullout move
This ‘showdown’ event is the last chance for a deal to keep the USA in the 145-year-old world postal system after President Trump last October decided to pull the country out in response to “unfair” rates for import parcels, particularly from China, that makes them cheaper to deliver than domestic US parcels. This effectively gives Chinese exporters a competitive advantage over US companies, he alleged.
The USA would leave the UPU in October 2019, after a 12-month period of notice, unless a satisfactory compromise deal could be agreed, the President declared. Thereafter the US Postal Service would set ‘self-declared’ rates for inbound parcels instead, sparking fears of sizeable cost increases.
The US decision came after a UPU Extraordinary Congress in September 2018 which failed to agree on reform measures. Instead, members could only agree to decide on reform proposals at the scheduled Congress in August 2020 which would into effect in January 2022.
But, in response to the US move, the UPU’s Council of Administration fast-tracked reform proposals ready for a special conference in April this year. UPU members then voted to decide on the proposals at an Extraordinary Congress in Geneva from September 24 - 26.
How does the remuneration system work?
The UPU explained that the remuneration system for letters and small packets – also known as the “terminal dues” system – ensures that Posts are compensated for the cost of handling, transporting and delivering items across borders. This multilateral agreement facilitates the movement of postal items across borders, ensuring that anyone, anywhere within the UPU’s 192 countries can send and receive international post.
The current system was decided by the 2016 Congress and entered into force in January 2018. It places countries into tiered groups applying different rates based on postal development indexes, with the goal of moving all countries into a single rate system as the quality of postal networks improve. It also applies rates based on item format, setting a different rate structure for small and large letters versus bulky letters containing documents and small packets containing goods. This helps account for different operational requirements to process each type of item.
What will the Extraordinary Congress decide?
Member countries attending the Extraordinary Congress will decide between three proposals submitted by the UPU Council of Administration:
- Option A: Continuation of the rate structure decided at the 2016 Congress, but bringing scheduled rate increases for bulky letters and small packets forward from 2021 to 2020 and moving all countries into a single rate system by 2020.
- Option B: Introduce optional self-declared rates for bulky letters and small packets from 2020. The UPU would apply country-specific ceilings based on domestic tariffs to prevent excessively high rates.
- Option C: Bring forward scheduled rate increases, at higher levels, and move all countries into a single rate system by 2020. This option proposes phasing in optional self-declared rates between 2021 and 2025 with country-specific ceilings based on domestic tariffs to prevent excessively high rates.
The Extraordinary Congress may also examine amendments to these proposals submitted by member countries.
In terms of voting rights, half of member countries represented at Congress having the right to vote would need to be present and a simple majority of those (50% + 1) would need to vote in favour of a proposal to pass it.
