Is shipping from China about to get a lot more expensive?

By Synnove Vandal

President Trump plans to withdraw from the Universal Postal Union treaty, a 144-year-old agreement that sets national postal service fees for worldwide delivery of small parcels.

Under the treaty, the U.S. subsidizes international shipping for small parcels sent from China to the U.S. This has made it cheap for Chinese manufacturers to ship direct to U.S. consumers.

But American manufacturers don’t receive the same benefits. And many believe this discrepancy gives Chinese sellers an unfair advantage over their American counterparts.

While U.S. merchants and shippers stand to benefit greatly from a leveled playing field, exiting the agreement could provoke retaliation from China.

And some are wondering if the announcement is just another attempt by President Trump to punish China for unfair trading practices.

Subsidized shipping benefits Chinese manufacturers

The White House released a statement on October 17 outlining plans to set its own rates for incoming parcels and exit the Universal Postal Union (UPU).

The UN classifies China as a developing country. Under the UPU agreement, poor and developing countries receive lower shipping rate benefits than developed countries.

Because of the UPU treaty, Chinese companies can avoid shipping markups and flood the U.S. market with low priced goods.

Chinese companies now make up about 60 percent of packages shipped into the U.S. And many websites offer free shipping from China due to the low rates.

But increasing rates would force some to reexamine supply chains. According to Forbes, if shipping rates from China increase, Chinese manufacturers will likely do one of two things:

• Charge more: Increasing product prices would cover additional fees.
• Build U.S. logistics warehouses: Local warehouses would allow Chinese manufacturers to charge the same rate as U.S. competitors.

Leaving UPU could hurt U.S. consumers

Withdrawing from the UPU is a year-long process. During that time, the U.S. Department of State and UPU can attempt to re-negotiate treaty terms.

If negotiations are favorable, the U.S. can choose to withdraw its notice and stay in the treaty. But after a year, the withdrawal becomes permanent.

Many experts see this move from the U.S. as an attempt to pressure China and negotiate better terms, rather than an actual attempt to leave the treaty.

Leaving the UPU could make international shipping nearly impossible from the U.S.

Any U.S. company, including private mail carriers, would lose access to codes required to send and receive international mail.

But issues of a departure go beyond logistics.

Pascal Clivaz, deputy director-general of the Universal Postal Union, said failing to reach an agreement could have detrimental effects on U.S. consumers.

Speaking to the Associated Press, Cilvas emphasized consequences of leaving the UPU:

It will cost them enormously. They will be all alone against all the countries of the world.

Renegotiating the treaty would require a majority vote from UPU council members. But the threat of an imminent departure is too great to ignore.

Follow the link below to read more about President Trump’s battle with the UPU.

Trump Opens New Front in His Battle with China: International Shipping – Glenn Thrush, New York Times

Synnove Vandal is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in Asia for clients in the US, EU and Australia.