US will remain in Universal Postal Union after compromise vote

UPDATE: Sept. 25, 2019: The U.S. will remain in the Universal Postal Union (UPU) after an Extraordinary Congress voted to approve a "compromise proposal" deemed "Option V" wherein countries importing more than 75,000 metric tons of parcels and mail will be able to set their own rates beginning July 2020. A second tier of importing countries may set "self-declared" rates in January 2021, according to Reuters.

"The Union is intact," said Universal Postal Union Secretary-General Bishar A. Hussein at a press conference following the vote. "I think wisdom prevailed at the end of the day."

Dive Brief:

The Universal Postal Union (UPU) voted down one of three proposals before the organization’s 144 present member countries Tuesday at an Extraordinary Congress meeting in Geneva in a 78-57 vote, with nine abstentions. The failed proposal represented the most extreme change to the rates system set by the UPU. The members will vote on two additional proposals, concluding the meeting Thursday morning.
The UPU governs the rules and rates for cross-border postal services. The Trump administration announced its intention to exit the UPU in October if the body did not grant the U.S. the ability to set its own terminal dues. The Trump administration sees the current policy as giving China an unfair advantage in cross-border mail and e-commerce shipments since packages weighing under 4.4 pounds ship at rates that are often lower than domestic shipping rates. China is designated a developing nation by the UPU, giving it the same advantages as much smaller, less-developed economies.
"Over the past year, through countless meetings – including a visit to the White House – we have relentlessly sought to fix a terminal dues system that everyone in this room knows is broken," said Peter Navarro, assistant to the president of the United States for Trade and Manufacturing Policy and representing the U.S. at the meeting, according to a UPU press release. Navarro said in remarks at the assembly that the U.S. is forced to "heavily subsidize" parcel imports adding undue financial burden to the U.S. Postal Service and costing American jobs, the Associated Press reported.

Dive Insight:

Universal Postal Union Secretary-General Bishar A. Hussein called the Extraordinary Congress meeting a "crossroads" for the 145-year-old organization, where decisions made at this meeting will affect the course of the next century.

The proposal voted down Tuesday, known at the Congress as "Option B," would have allowed all countries to self-declare their postal rates beginning in 2020 making it the U.S.' favored plan. "In times like these, where no reasonable person could support the terminal dues system, this is what friends and allies do for each other," Navarro reportedly told the UPU members.

China's envoy was opposed to the proposal.

The Congress resumed Wednesday morning to debate "Option C," which would phase in rate increases while also phasing in the option to self-declare rates between 2021 and 2025. Should "Option C" fail, the congress will vote on "Option A," which is the closest proposal to the status quo, maintaining the current rate structure, but accelerating rate increases and moving countries into a "single rate system" in 2020. Navarro called Option A a "nonstarter" Tuesday. The closing session of the extraordinary congress will take place Thursday morning.

Predictions for what could happen should the U.S. exit the Union range in their level of hysteria — from parcels piling up in postal offices around the world to higher shipping rates. If the U.S. does leave, the Trump administration will rely on bilateral deals to keep parcels flowing. The October announcement of the administration's intentions indicated this work would take place in the time before the October 2019 deadline when the U.S.' one year notice is up.

It is yet unclear whether such deals have been worked out, but Navarro claimed a U.S. exit would be "seamless," with no disruption to military, election or holiday mail, according to the New York Times.

In the meantime, corporations that rely heavily on cross-border parcel flow have cause for anxiety. Whether the U.S. stays or goes, global shipping prices in and out of the U.S. will almost certainly rise. And USPS has already issued warnings to some shippers that pre-negotiated contract shipping rates may not stand after Sept. 30.