You may have heard that the days of cheap Chinese E-Commerce may be ending. Or at least being disrupted. Here’s why.
This summer, I have been stocking up on cheap electronics parts and modules from China, mostly from eBay. What’s the rush, you ask? Well, depending on what happens in September, the United States is threatening to withdraw from the Universal Postal Union.
UPU is essentially the world’s post office. Or rather, a worldwide system of postal systems in more than 190 countries. A U.N. agency, UPU establishes standards and processes through which countries cooperate in sending and receiving international mail. These multi-lateral arrangements have been ongoing since 1874.
Part of the overall regime is a set of terminal dues or rates which a post office charges to other countries to deliver international mail. These rates are lower for certain “developing countries” which includes China. So, if you have ever wondered why you can do cheap Chinese E-Commerce on eBay for electronic parts and modules, UPU is part of the answer.
Recently, online sellers in the United States, Canada and Europe have been complaining that the UPO terminal dues provide unfair advantage to China, as well as Brazil, Russia, Mexico and Thailand. Last year, the United States threatened to withdraw unless it could negotiate better rates this fall. So, either the UPU rates have to increase, or the US will be negotiating bilaterally in order to get higher rates.
No one really knows how exactly what the impact will be for consumers of cheap Chinese E-Commerce. A reasonable guess might be that postage rates could double as a minimum. A few years ago, USPS said that the terminal rates only cover 50% of its costs, at best.
Cheap Chinese E-Commerce – How UPU Works
Until 1969, post offices delivered mail from other countries free. Since then, a series of four year agreements established transfer prices according to whether countries were industrialized or developing. China still falls into the developing or transitional category.
You may have heard that e-commerce shipments have been growing at 25-40% a year recently. While letter mail has declined, these e-commerce shipments have taken their place. Small packets less that 4.4 pounds (2 kilograms) get preferential rates
In the recent past, USPS used to overcharge for outbound mail, which offset its inbound losses. No more.
Yes, President Trump is the driving force for increased postal compensation from China, but to be fair, he was asked to do so by the Post Office.