Consultant Insight: USPS hikes international rates amid capacity struggle

[caption id="attachment_76185" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] The frequently maligned U.S. Postal Service has endured domestic political criticism alongside domestic service disruptions due to COVID-19 and the protests around the country. USPS controversy has even spilled into the international arena, most notably last year when the U.S. threatened to pull out of the Universal Postal Union ( UPU ), a United Nations agency that coordinates postal policies among member nations in the worldwide postal system. The perceived threat and cause for criticism stemmed from the UPU’s practice of granting lower rates for cross-border mail and parcels to countries designated as "developing," such as China. An eleventh-hour compromise was reached to keep the U.S. in the agency. UPU members are now permitted to self-declare the rates that foreign postal services charge when mail or parcels crosses their borders. The U.S. was the first nation granted this permission. Beginning July 1, we will see this change take place when the U.S. quietly implements a price increase for inbound letter post, small packets and bulky letters. However, according to Kate Muth, executive director of the International Mailers Advisory Group (IMAG), many consolidators, postage sellers and other cross-border service providers have yet to alert shippers of the change. The increase to shippers will vary, but IMAG members have estimated the average USPS inbound rate from China will increase 100% or more from the existing rate. The shipping cost from the U.S. to Canada meanwhile, will increase around 50%, with increases being steepest for light, low-density items. As other countries follow suit to increase cross-border rates in 2021,the question is how these rate hikes impact the demand for cross-border e-commerce. In its 2019 Global E-Commerce Logistics Outlook report, Cargo Facts Consulting noted that UPU terminal dues may become less relevant as cross border e-commerce moves toward a more controlled logistics chain. This involves cross border movements taking place under a standard — rather than CN38 postal — waybill, and with post-clearance onforwarding taking place under bilateral agreements between postal companies. We’ve already seen a decline in postal volumes, according to a recent UPU report . Cross-border postal exchanges have fallen 21% between Jan. 23 and May 14, compared to the same period last year. Constraints on the airline industry, worker shortages, force majeure cases, disruptions and full suspensions are among the reasons for volume declines, according to the report. Indeed, the USPS has not only chartered aircraft to such destinations as Australia, Europe and Brazil, but is also utilizing ocean transport. Earlier this month, the USPS’ fourth air-to-sea diversion set off from the U.S. with volumes from its Chicago (ORD), New York (JFK, and Miami (MIA) service centers, with the ship expected to arrive in Rotterdam on June 15. The vessel is carrying an estimated 6,300 receptacles in six containers weighing roughly 37,000 kg, according to the USPS. In addition to the 15-day transit time, it could take a further seven to 12 days for parcels to be delivered. While the outlook for the USPS in its existing model remains questionable, it did report a 38% increase in package revenue for April. However, there was an 8% decrease in revenue for first-class mail, its most profitable product. Despite the package revenue increase, the agency recorded a $1.2 billion net loss in April, compared to a $338 million loss for the same period last year. Postmaster General Megan J. Brennan retires June 12, leaving behind an agency that witnessed growth in revenue and parcel volumes despite mounting losses. Louis DeJoy will take over as the 75th postmaster general beginning June 15. DeJoy previously served as CEO of New Breed Logistics. Perhaps DeJoy will help usher in significant changes to the agency, which in turn may alter postal contributions to international cross-border parcel movements and increase opportunities for UPS, FedEx, DHL and others.

Consultant Insight: USPS hikes international rates amid capacity struggle

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