The coming week could bring big changes for U.S. shippers – for better or for worse, depending on who you are.
First, a quick background: The Universal Postal Union (UPU) is the UN organization that governs international mail and its terminal dues (rates). Originally designed to help developing nations participate in the global marketplace by giving them lower international shipping costs, the UPU’s rates now put U.S. domestic shippers at a disadvantage.
The UPU’s low rates often make it cheaper for a foreign company to ship a small packet (a package under 4.4 pounds) to the United States than it is for a U.S. company to ship the same package within our borders.
Naturally, the USPS has some thoughts on this, and the Trump administration has announced that the U.S. will drop out of the UPU next month. In just days, the parties involved will give negotiations one last shot at an Extraordinary Congress (think emergency meeting) of the UPU. If the United States’ decision to leave the UPU stands, U.S. businesses will be in for some big changes.
What does the United States leaving the UPU mean for you?
If you’re a business that depends on goods coming from other countries, you’ll see your costs rise sharply as the USPS sets its own rates for international shipments. It will also be quite chaotic for some time, as the USPS will need to negotiate shipping rates individually with each country.
If you’re a business that ships mostly domestic, you could see an uptick in business as you become more competitively priced with international goods. However, if your shipping is more balanced between international and domestic rates, you might need to tighten up your domestic shipping lines to make up for increased international costs.
Certainly, the USPS would benefit from leaving the UPU – the economic disparity between international and domestic rates has meant lost business for decades. With the ability to set its own rates, the USPS can realize new revenues. UPS and FedEx would be able to play a bigger role in international shipping with the change because their rates would be more competitive with the USPS than in the past.
Companies that depend on low-cost international shipments, especially those from China, will have some serious strategizing to do to keep costs down and profits up. Businesses that ship internationally, even to Canada, will need new strategies as well if the USPS doesn’t negotiate timely, cost-effective agreements with the countries they ship to.
What to do next
Don’t wait for your carrier to contact you about these changes. Thoughtful action now will save you time, money and frustration later.
- Contact your carrier to find out what might be changing with your rates and discounts.
- Examine your contract for opportunities to re-negotiate the most important components to your business given these changes.
- Do some predictive modeling to find the best scenarios for your unique shipping profile.
Depending on your business, these changes won’t just affect your shipping costs – you might need to make adjustments to product packaging and pricing or address other operational issues. Roll up your sleeves and start researching so you aren’t taken by surprise down the line.
Do all these potential changes have your head spinning? The VeriShip Intelligence Platform helps you sort it all out. Request a demo to see how, plus get a free audit to start saving.