If you’ve been paying attention to shipping news recently, you’ve probably been noticing a lot of chatter around the Universal Postal Union (or UPU, for short). This is because about a year into his presidential term, President Trump made a threat to withdraw the United States from the UPU…and he listed October 17, 2019 as the deadline. So, as that date rapidly approaches, we must face the reality that international shipping is about to change. The thing is, we don’t exactly know how it will change. All we know is that it will be different than anything we’ve ever seen before.
Why President Trump is Threatening to Withdraw the US from the UPU in the First Place
If you’re asking why, look no further than the US-China trade war that continues to rage on. President Trump isn’t just threatening to slap tariffs on Chinese goods. The UPU is also one of the pawns on the chess board. In summary, Trump and his administration also cite that China is enjoying unfair terminal dues while the United States continues to pay unfavorable rates. However, although most countries have proposed amending terminal due regulations within the UPU, President Trump’s solution is to go against the grain of recent history and withdraw the US altogether.
Here’s a fun fact: the United States has been a part of the UPU since 1875, when Ulysses S. Grant was president!
What are Terminal Dues?
Terminal Dues are what different countries’ postal systems pay each other to deliver cross-border mail. Think of them like the cost of doing business. For example, let’s say someone in the United States orders a shirt from Japan. Japan’s postal operator flies the package to the US, where they hand it over to the United States. The Terminal Dues are supposed to cover the cost of transporting that shirt from the border to its final destination.
Why Does China Pay Less?
In the 1960’s, the UPU granted shipping discounts to a number of developing countries to help foster the global economy. China was one of those countries. However, despite its current position as an emerging global power, China is still on that list. As a result, the terminal dues China pays are significantly lower than other countries like the United States. Basically, the US and other developed nations currently pay for China’s ability to ship cheaply overseas. This is especially true when it comes to parcels weighing 4.4 pounds or lighter—in essence, the majority of eCommerce packages.
How International Shipping Is About to Change
Obviously, the future of international shipping entirely rests on whether or not the United States actually withdraws from the UPU. So, depending on what happens, we’ve outlined two potential scenarios of how international shipping may shift from here.
Scenario #1: The US Remains in the UPU
Objectively speaking, this scenario is the best option. If the US backs down and decides to remain in the UPU, it won’t result in any immediate changes. However, it will open the door to negotiations within the UPU to amend the Terminal Dues system and create a more level playing field with China. In addition, staying in the UPU would allow for international service to continue undisrupted. For small business owners who rely on international shipping, this is obviously the best scenario.
If the United States does stay in the UPU, it’s because some variation of what the UPU calls Option C has passed (with amendments). Option C buys shippers some more time, calling for the United States to move to self-declared rates in July 2020. It also calls for U.S. outbound shipments going to other countries getting reciprocated self-declared rates.
In the meantime, it’s true that staying in the UPU will leave question marks around the prices international shippers will pay. However, at the end of the day, this option allows USPS to remain in the international mail business. As a result, the Postal Service won’t lose access to the UPU network and its documentation, and small business owners will be able to continue shipping internationally.
Scenario #2: The US Officially Withdraws, Resulting in Chaos
Scenario #2 is what is currently scheduled to happen on October 17th if the US doesn’t achieve its desired outcome at the UPU. It’s the option small businesses should hope we avoid, because withdrawing from the UPU will potentially result in chaos. Without the UPU, the Postal Service would no longer have access the UPU network, documentation, or payment systems. If the US officially withdraws, USPS would have to enter into more than 191 contracts (one with every country) to ship packages internationally.
As these negotiations take place, there will undoubtedly be gaps in coverage, and international shipping service could be suspended between the United States and countless other countries. Since so much of our economy relies on global trade now more than ever, the negative effects of this on the economy could be significant.
The worst case scenario here is that we wake up on October 17th and realize we have limited ways to ship packages internationally with USPS. While this idea may seem like an isolationist nightmare, as the date approaches the possibility is becoming more and more real.
What We Can Do
If you think your voice doesn’t matter, think again. This decision will affect every single small eCommerce business owner who ships internationally…including you. As small business owners, we are the ones who will be hit the hardest if international shipping prices skyrocket. Therefore, we need to speak up and add our voice. If small eCommerce business owners in the United States band together to make enough noise, the decision-makers will have no choice but to listen.
In our humble opinion, the least disruptive option is for the United States to remain in the UPU and to renegotiate self-declared rates. Whichever scenario you wish to see play out, you can send a letter to Congress on eBay’s website and make your voice heard.