This holiday season could be a particularly challenging one for e-commerce and subscription box companies that ship internationally. This October, the United States and the United States Postal Service has plans to withdraw from the Universal Postal Union (UPU) if an agreement cannot be reached between them. This article will briefly explain what the UPU is, the impact the USPS withdrawal could have on subscription box and e-commerce companies, and how to effectively prepare for it.
What is the UPU?
The Universal Postal Union (UPU) originated in 1874 when 22 countries agreed to set standards for international postal services of letters and small packages up to 4.4 pounds. Every four years this specialized UN agency, currently composed of 192 countries, sets policies of how countries recognize each other's postage, and they set the fees or "terminal dues" that countries pay each other in their mail exchange. The idea for the fees is to provide feasible postal services to less developed countries and to fund infrastructure improvements to those countries.
How has the UPU Impacted the U.S. and Current Rates?
The current fee structure set in 1969 still gives countries like China and Brazil large discounts when they ship products into the United States. These countries no longer fit the need and description of a less developed country requiring financial assistance. These fees cause the United States to pay more than actual shipping costs. Because of these fees, a customer who orders a product weighing less than 4.4 pounds from the United States pays a higher shipping rate than they pay if they order that same product from China.
As a result of the current fee structure, the estimated annual losses for USPS are around $300 million. American domestic postal rates have been raised to compensate for their losses.
How has the U.S. Responded?
President Trump's administration has taken bold steps to equalize competition and to stop abusive practices that result in higher costs for Americans. Any member can legally withdraw from the UPU with a one-year notification. In October 2018, President Trump gave notification that the United States would withdraw from the UPU unless they can renegotiate the current fee structure.
What Happens if the U.S. and USPS Withdraws From the UPU?
If the US withdraws from the UPU, the only countries the USPS can send mail to are those they enter into bilateral agreements with, which currently is only Canada. The USPS and each individual country (or countries under a multi-lateral agreement) would have to negotiate rates amongst each other using a ‘self-declared’ rate formula.
What Will be the Impact?
According to Michael Carolan at Asendia USA, a leader in cross-border e-Commerce and mail services, countries currently sending mail and parcels to the US at a very low rate will pay a higher rate and it’s fully expected that countries receiving mail from the US will increase their rates as well. Additionally:
Payment to each other would have to be outside of the UPU terminal dues process because they would no longer be members.
Transit times would depend on the individual agreements that are set between the U.S. and other countries. The hope is that current international transit times would not be affected.
Available systems such as tracking services would depend on which countries the USPS negotiates agreements with. If the US is not part of the UPU, the USPS will have to ask for an exception from the UPU to use any of their systems.
There will certainly be a disruption with FedEx, UPS, USPS, DHL, FBA, and all carriers as new agreements are negotiated with all countries.
How Can You Prepare for The Withdrawal?
Communicate, Communicate, Communicate - Those who ship internationally (especially through USPS) should communicate to their current and future customers that international shipping rates may change dramatically as early as October. Communication should be done though both e-mail and a notice should be listed on the site for customers to see.
Look at alternatives to USPS – International Consolidators like Asendia USA have relationships with multiple carriers. If you ship internationally, it may be a good time to look at alternatives to USPS and start having conversations.
Consider Partnering with a Fulfillment Company – Fulfillment companies such a Fusion Fulfillment have the volume and the relationships with multiple carriers to ensure that you obtain the best service and rates possible. Fusion Fulfillment has worked with its numerous international carrier partners to prepare for the worst-case scenario, ensuring that any negative impacts their existing and future subscription box and e-commerce partners is absolutely minimized.
While the withdrawal from the UPU is not guaranteed, it is better to be as prepared as possible in order to avoid any issues that may have a negative impact on your international customers.
Fusion Fulfillment is available to answer any questions and provide assistance. Feel free to reach out to us via e-mail at firstname.lastname@example.org or by phone at 732-903-6652 for rate information or with any questions.