USPS reportedly warns of end of discounted rates if US quits UPU

USPS has written to shippers warning them that they will no longer be eligible for discounted rates if the US leaves the Universal Postal Union (UPU), according to a US media report.

The US postal utility declined to comment on the claims when contacted by CEP-Research.

A UN agency, whose activities are underpinned by a treaty that sets shipping rates from country to country, the UPU will hold an Extraordinary Congress in Geneva on September 24-25 to decide how to reform the terminal dues payment system for cross-border postal deliveries, just weeks before the US could quit the world’s postal governing body.

Last October, the Trump administration announced the US would quit the UPU-led world postal system after a 12-month period of notice, criticising cheap delivery rates for imported parcels, especially from China, that put American domestic shippers at a competitive disadvantage. But it left open a back door to remain in the UPU treaty if acceptable new terms enabling USPS to set higher rates could be negotiated.

Industry news website, Supply Chain Dive said USPS had sent notices to organizations with negotiated service agreements (NSA) with the postal operator, warning that the international rates in their contracts may be null after September 30 this year.

It quoted an email from a USPS official that had been sent to to an NSA holder at the end of last month which read: "We are making every effort to try to minimize any disruption that may be occasioned by this change (the US leaving the UPU in October) and are working to devise solutions that promote continuity of operations, as well as alternative solutions for the future."

The email went on to say USPS is "giving notice of termination of the Agreement," a reference to the receiving organization's service agreement, out of an "abundance of caution."

"Please note that your entity will no longer be eligible for discounted rates under the Agreement beginning on October 1, 2019, unless the Postal Service provides further notice regarding this matter to you," the email concludes.

Supply Chain Dive said industry sources had confirmed several other organizations with USPS service agreements had received similar messages.

Contacted by CEP-Research, USPS declined to comment on the claims that it had warned shippers that they will no longer be eligible for discounted rates' if the US quits the UPU.

A spokesperson said that the following statement was the only information USPS was providing at this stage.

“Universal Postal Union members have voted to hold an Extraordinary Congress in late September to discuss the current terminal dues system. This will provide a new opportunity for UPU members to collaborate and develop solutions to end the distortionary effects associated with excessively low rates for certain foreign origin mail, as compared to domestic postage rates.”

The statement continued: “The Postal Service fully supports the objectives of the Administration to secure a more balanced and fair remuneration system for small packets containing goods. The Postal Service is working closely with the State Department, the Postal Regulatory Commission and other stakeholders to implement self-declared rates.”

The statement noted that while the United States is preparing to leave the UPU in October, if a solution can be found that eliminates the economic distortion caused by the current terminal dues system on US businesses, then the United States will continue its participation in the UPU.

“Because the U.S. may no longer be a member of the UPU by mid-October 2019, the Postal Service is undertaking parallel efforts to ensure the continued exchange of international mail items even if the negotiations to remain in the UPU are unsuccessful. No matter the outcome with the UPU, the Postal Service is committed to remaining in the international mailing business,” it concluded.

Supply Chain Dive quoted the president of iDrive Logistics, Glenn Gooding, president of iDrive Logistics, which has an NSA with USPS, who said he expected changes to come from the US' withdrawal from the UPU but the canceling out of existing negotiated rates was a surprise. NSAs are generally negotiated yearly and often in January after the holiday shopping season has ended. These abrupt changes could hit shippers right at the start of peak season for e-commerce.

Speaking at the Leaders in Logistics Post & Parcel Europe conference in Madrid earlier this year, Botond Szebeny, secretary general of PostEurop, which represents European postal operators, warned that a US withdrawal from the UPU would be a kind of “postal Brexit” with dramatic consequences.

Speaking at the same conference, Kate Muth, director of the US-based International Mailers Advisory Group (IMAG), described a possible “rates shock” if the US Postal Service introduced much higher prices for final-mile delivery of imported parcels, and other postal operators then retaliated with higher rates for US export parcels.

“If the US leaves, then there will be a dramatic impact,” she warned. “Posts are trying to make contingency plans. It will be a kind of Brexit.” She urged negotiators to agree on “some kind of transition period, not a hard exit”.

Muth said any future self-declared rates for import parcels “should not be higher than domestic rates”, adding: “We should not have a situation where international mailers are discriminated against by paying more than domestic companies.”

The IMAG director went on to warn that a US exit from the UPU could “kill USPS international business”, forcing it to do separate deals with international organisations such as IPC and the Asia Pacific-focused Kahala Group.