GLAZER: Finally Sanity Over US Postage Subsidies To Foreign Shippers

(Editor’s Note: The letter from Congressmen exposing the extreme postage subsidies enjoyed by foreign shippers is the subject of this commentary from Gordon Glazer of Shipware.)

Finally some sanity out of Washington! This is welcomed news to our industry. There is going to be a reckoning and it is somewhat ironic that the State Department’s own report is the source of this letter from Congress to the Department of State and the PMG.

“U.S, Department of State, dated July 27, 2017, confirms that “[t]he United States has not formally approved the 2012 UPU Convention.” Moreover, it confirms that the United States has not formally approved a UPU Convention since the 2008 Convention, which ceased to be in force on December 31, 2013. It appears, therefore, that as a matter of international law, neither the United States nor the Postal Service is under an obligation to deliver foreign postal shipments at rates that are less that the Postal Service would charge domestic mailers for comparable services.”

I am glad this group of Congressmen have stepped up and exposed this imbalance. In some small way it will help right the wrongs from the 2006 PAEA, the partially failed framework that the USPS is constrained to work within. Thank you for bringing this news into the light, now keep at it and pass meaningful Postal Reform, fix the mistakes. Allow our Postal Service to thrive on a level playing field.

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Related: Canada Post Phases Out Chinese Postage Subsidy

Getting back to this breaking news: Domestic shippers and merchants will be very happy, as this news could well be the spark and legal authority to fundamentally change the UPU, more specifically, how the United States and the rest of the world’s postal systems deal with “Emerging” economies. The system was designed to foster these economically disadvantaged countries. China has emerged as one of the world’s economic leaders and they should not be prospering off the labors of hard working Americans. We all end up paying for this, as the losses are baked into the prices we pay for other USPS services.

I am sure there were many good reasons why this policy is in place, I’m sure our State Department received some quid pro quo out of it. A bigger question is why the USPS, Office of Inspector General, did not get to the bottom of this earlier, or maybe they did?

This is the stuff of spy novels and intrigue. We as a nation should stand and fight for a level playing field for Americans merchants. Besides, China can stand shoulder to shoulder with us without this subsidy. However, it is going to hurt some folks that are addicted to the insanely cheap supply chain from China to their mailbox (yeah, me included).

So who is going to benefit most from this change?

Employment via all the players in our domestic supply chain will. The USPS stands to benefit the most, in one form or another. The Private Carriers (UPS & FedEx) will also benefit with both small parcel and large shipments via their Trade Networks. For small parcel, the biggest opportunity will be consolidating and inducting deep into the USPS network for the final mile. (These low profit packages are inducted under the Parcel Select (PS) and Parcel Select Lightweight (PSL) class.) Other Parcel Consolidators like DHL eCommerce, OMS, and Newgistics along with the Regional Carriers will also feed on this new volume.

This massive volume is already being delivered by the USPS, how it gets to them, how much they earn, and where it is inducted will change. Note:The USPS collectively accounted for 62%*of all residential deliveries according to a 2016 Stifel Study.

3PL fulfillment operations will become the next logical best bet for eager Chinese merchants to keep their products competitive, and these firms will fight tooth and nail to get the best carrier programs in place to remain competitive. Fulfillment by Amazon (FBA) is sure to grow because of this. Amazon’s enormous capacity and network will remain tough to compete against forcing competing marketplaces and shippers to get creative. Alternatively some 3PLs may set up shop overseas and prepare these small shipments in bulk and drop ship directly via local 3PLs for ultimate USPS induction. Finally, I think I am going to get a whole lot busier. Wishing you great shipping success.

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 31 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-724-0457 or gordon@shipware.com.