Taken
from the Report of an Investigation by the United States Postal
Service Office of Inspector-General.
Note:
The report by the USPSOIG necessarily focuses on the US perspective
but clearly the issues highlighted affect mail between all postal
administrations and it is therefore relevant at least in part to the
UK and other developed countries. Note that reference to 'shipping
companies' is not exclusively maritime, it also refers to courier
companies. We do not know Royal Mail's views on terminal dues.
Terminal
dues is the system that postal authorities (posts) use to pay one
another for international deliveries of letters and small packages.
The global terminal dues system, updated every four years by the
Universal Postal Union (UPU), does not fully reflect actual domestic
processing and delivery costs.
As
a result the U.S. Postal Service and other operators have lost money
on international postal letters and small packages received from
abroad, especially from emerging countries like China. The explosive
growth in cross-border ecommerce traffic has greatly elevated
concerns about the economic distortions created by the system.
Posts
pay terminal dues to compensate one another for international
deliveries. When someone mails a letter or small package to another
country, the postal administration in the sender’s country receives
the postage and pays terminal dues to the destination post for its
share of processing and delivery. Terminal dues rates are
painstakingly negotiated at the Universal Postal Union (UPU) among
its 192 member countries every 4 years — and
implemented about 18 months after that — using the principle of one
country, one vote. Because of the complexity and length of the UPU
decision-making process, significant changes to the terminal dues
system may take many years to unfold.
Until
1969, terminal dues did not exist; the receiving post bore the entire
cost of sorting, processing, and delivering the foreign customer’s
item. The terminal dues system’s goals were to provide posts with
some compensation for their delivery of inbound international mail
and to support a single worldwide postal network. As a result, it
funded improvements to the postal infrastructure in developing
countries. Terminal dues, therefore, by design, were based upon
setting rates by majority agreement rather than reflecting true
economic costs.
The
explosive growth in ecommerce traffic, especially from China, has
greatly elevated concerns about the system’s unfairness. As
international ecommerce packages experience rapid growth, destination
posts with higher postal rates are protesting that terminal dues do
not cover their costs. U.S. online retailers have argued that
competitors in China can send packages to the United States through
China Post at lower rates than American businesses are required to
pay in their own country. In
segments other than lightweight packets, such as heavier,
higher-value packages requiring additional services, the rate
advantage of low terminal dues posts like China Post decreases.
Additionally, private sector shipping companies maintain that
terminal dues are only available to postal operators, providing an
unfair competitive advantage.
Governments
and some posts started to discuss UPU remuneration reform to improve
the cost coverage for inbound delivery of international mail. In
1999, aligning terminal dues with delivery costs officially became
the UPU’s long-term goal. To allow a smooth transition, a two-tier
structure consisting of developing and industrialized countries (now
called “transition” and “target” countries, respectively)
emerged. Posts located in lower-income countries such as India or
Morocco generally would pay lower terminal dues than posts in
industrialized countries such as the United States or France. In
other words, industrialized countries would continue to subsidize
developing countries. Although the goal was to improve fairness, the
unintended outcome was distortions caused by an artificial
compensation system
As
of 2015, the lower terminal dues transition country category,
established to help developing economies, still includes 140
countries, including the so-called BRICS (Brazil, Russia, India,
China, and South Africa). In this way, the Postal Service will have
subsidized posts for many years that, in some cases, have not
necessarily needed such support. Forty of these countries, including
all of the BRICS except for India, will join the target tier next
year. However, moving these countries to the target category may not
immediately lead to significant terminal dues payment increases. The
UPU Congress will approve new rates, for the period from 2018 to
2021, next year — meaning implementation is 2 to 6 years after a
decision. The new target countries may continue to have an advantage
during this period.
In
the long term, the terminal dues system should reflect the true cost
of inbound delivery. In the interim, the United States should
continue to work with the UPU to support the separation of
competitive small packages containing merchandise from documents and
letters. While letters would continue to fall under terminal dues,
small packages would be subject to self-declared rates that reflect
cost and are available to all — posts, competitors, and shippers
alike.
The
bigger issue is the increasing irrelevancy of the international
terminal dues channel in an age of ecommerce because it fails to meet
customer demands for speed and reliability. Efforts to ensure this
channel’s responsiveness should not only include fixes to terminal
dues remuneration but also, in parallel, measures to improve the
service quality of cross-border packages. The Postal Service should
champion reform to an increasingly anachronistic terminal dues
system. Otherwise, it risks becoming an international ecommerce
provider of last resort for a residual product that does not reflect
associated costs or provide the speed and quality consumers demand.
The
full report of the USPSOIG can be read here: www.uspsoig.gov/document/terminal-dues-age-ecommerce
a bit more info from The U.P.U.
ReplyDeletehttp://www.upu.int/en/activities/terminal-dues-and-transit-charges/2014-2017-cycle.html