Back in October 2018, the President Trump’s administration announced plans to withdraw from a 144-year old postal international organization treaty established by the Universal Postal Union (UPU), unless UPU members agreed to revisions within a year.
In September 2019, UPU members agreed to rate changes and, as a result, the United States agreed to remain in the UPU — a positive outcome for international shippers.
International shipping policies are not always top of mind but worth keeping an eye on, as they can significantly impact your business. In this article, you’ll learn more about the UPU and how changes to policies set by the UPU affects ecommerce.
What is the Universal Postal Union?
Established in 1874, The UPU is one of the United Nations’ specialized agencies and consists of four bodies: Congress, Council of Administration, Postal Operations Council, and the International Bureau.
The rise of an international mail postal system with lower rates and faster turn around times was urgently needed. Prior to its establishment, mailing letters and small packages internationally was expensive and difficult since every country had its own postal agreements. This led to issues such as the need to add multiple stamps to a letter for each country it passes through.
The UPU’s purpose is to encourage global postal growth by coordinating policies amongst its 192 member countries. They set technical and security standards across postal operators for international delivery and bring unity to the process of sending letters and small packages across borders within the member states.
Why did the US threaten to withdraw from the Universal Postal Union?
Back in 1969, developing countries were given special shipping rates (also known as ‘terminal due’). Along with other developing countries, China can ship small packages to the United States at a low cost based on rates established by the UPU. In some cases, it’s cheaper to ship an order from China to the United States than New York to California.
The rates China and some other developing countries are currently paying don’t meet the actual costs of delivering certain goods to the US, since the UPU provides lower terminal fee rates to a list of developing countries, including China. Because of this, the US ends up subsidizing shipping from these countries to the US, specifically for packages up to 4.4 pounds. This makes it hard for small US-based businesses to compete.
As such, the Trump administration threatened to withdraw from the UPU, unless a deal was made. In September 2019, the UPU and the Trump administration reached a deal and has agreed to let the US determine its own rates for small packages. You can get more insights on this topic here.
How terminal dues (fees) are set by the UPU
Terminal dues, which are fees that countries pay for the international delivery of letters and small packages (weighing up to 4.4 pounds), are set every four years by the UPU. They constitute for about 80-90% of international postal packages.
The UPU divides countries into two tiers, where developing countries are classified as ‘transition’ countries and industrialized nations as ‘target’ countries. As per UPU policies, transition countries pay lower terminal dues to target countries.
A different delivery fee applies for a small portion of international postal packages transmitted by other international postal services, such as parcel post and express mail services. Note: Post offices can agree on different rates between themselves.
How does the UPU affect ecommerce business owners?
The purpose of the UPU is to make it easier and more affordable to ship products worldwide with standards set by UPU members, rather than individual shipping agreements. Had the US administration left the UPU, with the current system the US stamps would no longer have been valid abroad, and the USPS and other carriers would have been severely disrupted since mail would only be able to be sent to those that enter bilateral agreements (which currently is only Canada).
The U.S. postal service relies on mutual understandings and agreements between member states to deliver small parcels worldwide.
Here are some of the ways the recent agreement has impacted ecommerce businesses and how the US withdrawal from the UPU would have affected international shipping.
1. Higher shipping costs
In July 2020, countries were free to raise the rates for incoming parcels shipped from the United States. This means the US and and 30 other countries have seen increases in international shipping rates. But if the US had left the UPU, there’s a chance that rates would have been much higher, depending on bilateral agreements.
2. Changes in transit times
Since transit times would depend on individual agreements between the US and different countries, rather than through the UPU, changes in transit times in certain countries might have occurred. It’s hard to say how much it would impact international transit times but shifts in average transit times between countries would make it challenging for ecommerce businesses to communicate delivery dates.
3. Shipping disruptions
The USPS, along with other major shipping carriers such as FedEx, UPS, and DHL would have seen major disruptions until the US and individual countries came to an agreement on international shipping rates. Access to tracking services would also depend on bilateral agreements.
Choosing an international fulfillment partner
Partnering with a third-party logistics (3PL) company that provides best-in-class fulfillment services can help support your ecommerce business and expand your customer reach internationally. ShipBob is an international fulfillment provider that offers the infrastructure, technology, resources, and support you need to stay competitive and ship to consumers around the world.
Outsourcing fulfillment to a 3PL like ShipBob can help you navigate the complexities of international shipping, including the ever-changing policies that impact cross-border commerce.
1. Reliable supply chain management
By partnering with ShipBob, ecommerce businesses can simplify supply chain management. A lot goes into managing your ecommerce supply chain all on your own, including labor, training, certifications, resources, safety measures, and other costs. ShipBob can help find ways to optimize operations and keep you up-to-date on the latest supply chain news and trend. That way, you can optimize your supply chain without taking on manufacturing, inventory control, warehousing, and shipping on your own.
“A lot of entrepreneurs and companies underestimate the cost-savings and power of choosing your entire supply chain and partner network wisely. These choices will make or break your business.”
Courtney Lee, founder of Prymal
3. International fulfillment centers
ShipBob has multiple fulfillment centers located in the United States, Canada, and Europe. By using one or more of our fulfillment centers, you can split inventory to expand your customer reach while reducing shipping costs and last-mile delivery times. For international orders, you can bulk ship inventory to our Canada or Europe locations and have orders fulfilled and shipped within the country, or ship to these countries from our US locations.
“When I found out ShipBob was expanding into both Canada and Europe, I knew we wanted to expand our physical footprint with them. This would offer us the ability to reduce taxes and tariffs that come with international shipping. Now, Canadian-based orders will see a large reduction in shipping costs.”
Nikolai Paloni, Co-Founder of Ombraz Sunglasses
2. Carrier partners and discounted rates
ShipBob partners with major carriers including USPS, FedEx, UPS, and DHL who have direct relationships with the UPU. ShipBob negotiates rates with our carrier partners to provide you and your customers the best shipping rates possible. When international rates change, we make sure to inform you right away.
“ShipBob has been a great partner as Ample has grown. ShipBob helps us offer new products to our customers with hardly any extra effort on our part. Our focus is to grow our business, and that will not be achieved by packing up orders, sending out boxes, and dealing with enormous carriers like FedEx and UPS ourselves. That’s what ShipBob has mastered.”
Pablo Gabatto, Business Operations Manager at Ample Foods
International shipping policies change often, and it’s important to stay informed. If you’re looking to launch into international markets or are in need of a global fulfillment provider, ShipBob might be able to help.
To learn more about ShipBob, click the button below to request pricing and more information on how ShipBob works.
Universal Postal Union FAQs
Here are some of the most frequently asked questions that ecommerce businesses have about the UPU.
What is the Universal Postal Union?
How does Universal Postal Union work?
The Universal Post Union works with its 192 country members. Together, they form international shipping policies that make it easy and affordable to ship worldwide. Countries are divided into two tiers, where developing countries are classified as ‘transition’ countries and industrialized nations are called ‘target’ countries. Terminal dues are the fees that countries pay for the international delivery of letters and small packages (weighing up to 4.4 pounds) and are set every four years by the UPU. Transition countries pay lower terminal dues to target countries.
How does the Universal Postal Union affect ecommerce?
The UPU sets the standards for international shipping. Changes made to the UPU policies can impact cross-border shipping, overseas manufacturing, and international shipping rates.