International small packages (4.4 lbs or below), including Express Mail Service (“EMS”) that has been utilized by many Chinese e-commerce hair companies, will face a steep rate hike on upcoming July 1.

When the increased postage rate applies to mails from China, those who rely on ordering, shipping, and reselling items shipped in small packages directly from Chinese manufacturers would be significantly impacted. Many hair salon beauticians are using this business-to-customer e-commerce approach to order goods to be shipped through cheap international mail service and resell them to customers. However, these transactions will be significantly hindered by the international postage hike coming this year. The price competitiveness of beauty supply hair products will be boosted significantly.

Current International Postage Rates Favor China

According to the USPS, “it costs $20 to ship a 4.4 lbs package from a state to another within the states, but it cost only $5 to ship the same from China to the U.S.”It is hard to believe, but this is a fact. 

This is due to the “terminal dues” system of the Universal Postal Union (“UPU”) that was established to promote international shipping. Terminal dues are the fees paid by the outbound postal office to the inbound postal office as to shipment of small packages of 4.4 lbs or less. Under the system, UPU categorizes membership countries into different groups, namely Group 1: developed countries, Group 2: semi-developed countries, Group 3: developing countries, and Group 4: low-income countries, to apply different rates for each group. The less developed countries will end up paying lower rates of terminal dues. The U.S. is in Group 1 while China in Group 3. The U.S. government claims that the current system costs the U.S. 300 to 500 millions of dollars a year. Especially, U.S. retailers are blaming the system for primarily benefiting Chinese e-commerce companies who ship products using international small package mail services. 

U.S. Demand for Reform with a Threat to Exit the UPU

As such, Peter Navarro, a White House trade adviser, attended the Extraordinary Congress of the UPU to strongly appeal for reform of the unfair system. He declared the U.S. would pull out from the UPU and immediately self-declare rates to fix the terminal dues system which favors China against the U.S.

In September 2019, the Extraordinary Congress of the UPU Approved a Compromised Proposal.

Facing the threat of the U.S. to exit from the UPU, the UPU proceeded with a concern for disruption of the international mail services and negotiated with the U.S. for a year. Finally, the measure for reform of international mail rates was passed on September 25, 2019 by the Extraordinary Congress in Geneva, Switzerland. According to the plan, countries that import more than 75,000 tons of parcels and mails, which include the U.S., can set a self-declared rate for terminal dues starting July 1, 2020. 

How Much More International Mails Would Cost?

According to the UPU’s reform plan, the self-declared rates for international mail service can be up to 70% of the domestic mail service rates and raised up to 1% a year with 80% cap. As of today, the USPS has not confirmed the rate, so nothing is certain, but the postage rate imposed on small packages from China should be at least on par with domestic mail postage rates. The USPS will set forth an international mail rate plan on March 1, 2020 and impose the rate on July 1.

What is the Universal Postal Union (“UPU”)?

It is a United Nations body which is headquartered in Bern, Switzerland. It was established in 1874 for the coordination of the international mail delivery. Member countries impose international mail rates based on their consensus. As of 2020, 192 countries have joined the union as members