UPU looks to solve e-commerce postal rules dispute

UPU Director General Bishar A. Hussein

The Universal Postal Union (UPU) has proposed three options it hopes will solve the current dispute over postal rules that mean Chinese e-commerce companies pay less than their rivals in some other countries.

The dispute centres around UPU rules allowing the shipping costs for small packages sent from developing countries to developed ones to be subsidised by the postal services of the destination countries.

The rules are more than 100 years old and were originally designed to ensure that post from developing nations could be delivered all over the world.

However, the US, along with certain other countries, are unhappy that China is still classed as a developing nation. They argue that the rules effectively  subside Chinese e-commerce companies, such as Alibaba, at the expense of their western rivals.

The US State Department has announced it will leave the UPU and set its own rates from 2020. Around 30 other countries are reported to support the US position but no one else has announced plans to leave the UPU.

To get around the issue the UPU yesterday proposed three alternatives which its members will vote on in September: 1) To allow member countries to self-declare postal rates; 2) To accelerate rate increases already approved by the UPU; and 3) A convergence option that also adopts self-declared rates as its basis, but with elements aimed at mitigating undue price impacts. 

The impact of a rule change on air cargo and express are at this stage difficult to predict, but express firms and Amazon support the US position and expect to benefit from any change.

Shortly after the US announcement last year, UPS chairman and chief executive David Abney said: “We do believe the administration took the right step to address the UPU terminal due system of inequities. Foreign postal operators should not have any kind of government-approved advantages in a competitive market.

“It’s one of the reasons we’ve been advocating for the administration to impose self-declared rates. And self-declared rates would mean that the foreign shippers would have to pay the same rates once the package entered into the US that domestic small and mid-sized shippers have to pay. And we really believe that’s leveling the playing field for them and we think it’s a step in the right direction.”

The US Postal Regulatory Commission’s estimated that the US Postal Service lost $170m in fiscal year 2017 as a result of the terminal dues.

Meanwhile, a recent study by Copenhagen Economics found that in Finland the cost of subsidising foreign mail is €10m, a figure comparable to 22% of the country’s postal service’s annual profit. In Sweden, the cost is also €10m, 19% of Postnord’s annual profit for Sweden.

However, higher postal charges would make it more expensive for consumers to purchase products from China and could result in a decline in cross border volumes from small- and medium-sized companies that rely on the UPU system.

The director general of the UPU Bishar Hussein said, “Today’s decision is the outcome of a wide ranging discussion that began in October last year involving every possible UPU stakeholder, including member countries. Every voice has been heard, and every possible view discussed.

“This decision will allow all member countries to vote on this essential matter at either an Extraordinary Congress or a vote by postal ballot. I look forward to working with every member country as we go forward to ensure that we do what is best for the Union, the consumer, and the international postal system.”

In total, the organisation has 192 members, although not all are able to vote, meaning the 30 that are unhappy with the system face an uphill struggle to get their preferred solution implemented.

A ballot of member countries on whether these options will be adopted on will take place at a meeting to be held on 24-25 September, or by postal vote.