Universal Postal Union and mail-order opiates — interview with James Campbell | VIEWPOINT

Universal Postal Union and mail-order opiates — interview with James Campbell | VIEWPOINT


Jim: Customs and security scrutiny of inbound
postal packages is much less than is applied to all other packages. The international drug dealers are very well
aware of the situation. Richard: Jim Campbell, you’re an internationally
recognized postal policy expert and an attorney who’s done a lot of work for Federal Express. And you’re also an expert on international
postal policy issues like the Universal Postal Union. So could you tell us a little bit about it? What is the Universal Postal Union? Jim: Well, the Universal Postal Union, or
UPU as they say, is an intergovernmental organization that was founded in 1874. It’s actually the second oldest intergovernmental
organization. And it was organized to facilitate the exchange
of mail between countries. In 1874, there were only 21 countries involved. It was very small. It has since grown to 192 countries, and includes
virtually every country in the world. And it organizes the exchange of mail between
the various national post offices. Richard: I understand that one of the main
policy issues that’s come up, there’s a number of them, with regard to the Universal Postal
Union is it’s setting of these things called terminal dues. So can you tell me what are terminal dues
and why are they important? Why do we care? Jim: Sure. Terminal dues are charges that the post offices
pay each other for the delivery of inbound letter post, what they call letter post. Now, the letter post is not only letters,
but it’s all sorts of documents and small packages up to two kilos or four and a half
pounds. So terminal dues are a problem because the
post offices or the UPU has fixed these charges at rates that do not correspond to domestic
postage. So, for example, the United States charges
Germany or China for the delivery of an inbound package a rate for delivery that’s significantly
less than what the Postal Service charges an American merchant for the same service. Richard: So, Jim, the Universal Postal Union
and terminal dues is a pretty complicated structure. I understand there’s four different groups
of countries, and the countries are categorized that way for different terminal dues rates. Can you talk a little bit about that and how
that might benefit or hurt the United States? Jim: Sure. So what happens is, as you say, there are
four different groups of countries. And the UPU has established different terminal
dues rates for the four countries depending on whether they were sending or receiving
documents and packages from these four countries. When the United States sends a package to,
for example, Germany which is in Group 1, the Germans charge us a certain terminal dues
rate. Richard: And is it in Group 1 because it’s
a developed country? Jim: Because it’s an industrialized country. Richard: Industrialized, okay. Jim: It’s just the way Group 1 is defined
as all the industrialized countries. Richard: Right. Jim: The post service sends a package to the
German post office and the post service pays the German post office a certain charge for
delivery of the package, terminal dudes. The German post office also sends packages
to the United States, and the German post office pays us the Postal Service terminal
dues for the delivery of inbound packages. The distortions come about because of two
things. First, German postage is in fact a lot higher
than American postage. So when we pay the Germans terminal dues,
we are underpaying them by a significant amount for the delivery of a German package. We’re paying them a lot less than German citizens
would have to pay. Richard: Right. So that benefits us. Jim: The same thing works the other way around. When the package comes to the United States,
the German post office is paying us less than American mailers would pay. But American mailers would normally pay a
lower rate. The rates in, general, in the United States
are lower than in Germany. Now, on that simple exchange, the Postal Service
is benefiting, because if we each send each other one package, we’ve basically got a bigger
discount than the Germans did. If we send the Germans many more packages
than they send us, the Postal Service benefits even more. Richard: On net, right. Jim: And that’s the historically…and this
was mostly used to be a document situation. But historically, the U.S. Postal Service
benefited because they were a net exporter of mail. Richard: Right. We were exporters on net. Jim: And historically, the United States has
supported this system. It was distortionary, it was anti-competitive,
but it was beneficial to the Postal Service. So the U.S. has supported it. All right, the tables have turned in the last
10 or 15 years because of the great increase in e-commerce. And it’s not so much coming from Germany,
which pays us a certain level of terminal dues, but from countries like China and Singapore,
which pay us a lower level of terminal dues. Richard: So China and Singapore, they’re in
a different group, right? Jim: They’re in a different group. China is in Group 3, Singapore is in Group
2. Richard: Okay. Jim: All right. And their terminal dues are, at least right
now, lower for the same package, okay? So what’s happening now is the United States
has turned from a net exporter into a net importer. Richard: Because of e-commerce. Jim: Because of e-commerce. And the United States is now being, and so
is Europe, being flooded with e-commerce delivered by post from Asia, in particular from Asia,
but also from other countries. And so the United States right now seems to
be…the Postal Service seems to be a net loser. Although the Postal Service keeps very confidential
all their accounts, it looks like they would be much better off if they charged foreign
mailers the same as they charge American mailers for the same service. Richard: So just have a level playing field
in terms of postage. Jim: Right. So one number that does come out of the accounts
of the Postal Service is that in 2017, the Postal Service lost $170 million on the import
of letter post items, that is both documents and packages, that were delivered at UPU rates. Richard: Wow. And is that $170 million because of this distortion
in terminal dues? Jim: Yeah. Now, the $170 million is the loss below out-of-pocket
cost. All right. The undercharge, the difference between what
the Postal Service charged the foreign post offices and what they charged Americans for
the same service, the undercharge was substantially more than $170 million. Richard: Really? Jim: So maybe twice as much. So that’s the kind of negative impact that
you see on the Postal Service. But as they say, the accounts are generally
confidential. So it’s hard to get into the details of how
this affects Postal Service. Richard: It’s not really that transparent
as we would like. So it’s hard to know for sure. Jim: It’s not transparent. The Postal Regulatory Commission which regulates
the Postal Service is just now, just in the last few days, has been moving to try to make
these accounts more transparent. Richard: So hopefully in the future, we would
be able to get a better handle on exactly how much money the Postal Service was losing
because of this distortion in terminal dues, is that right? Jim: That’s right. Richard: So terminal dues are what one post
would charge each other to deliver their mail within their country. Jim: Right. Richard: So what we would charge Germany to
deliver German mail within the United States. So I’ve heard that this issue is becoming
more important because of global growing commerce, but also because of e-commerce, and people
buying things over the internet. Can you talk a little bit about why terminal
dues are becoming more important over time? Jim: Sure. So what’s going on is that the postal system
at the international level is changing just like at the domestic level, but in fact even
more quickly. The decline of international documents has
been dramatic over the last two decades, particular… Richard: Of the documents? Jim: Documents, but particularly the last
decade. On the other hand, international e-commerce,
the shipment of packages by post, has boomed. Richard: So goods. You think of goods, right? Jim: Goods. In fact, the UPU has recently changed the
term to goods. And so the economic consequences and the commercial
consequences of the International Postal System is essentially growing because of their increasing
involvement in e-commerce as opposed to simply shipment of documents. Richard: Okay. So there’s a whole another dimension to this
which is really an epidemic in the United States. And that’s opioids. And particularly synthetic opioids like fentanyl,
which are many, many times stronger than heroin, and they’re killing, you know, thousands of
people in the United States. And so there’s, like, a customs element to
this, a social element in the sense that this is a drug epidemic. And can you talk about how that plays into
the UPU and the terminal dues issues? How is that related to both customs security
issues and the opioids?” Jim: Right. So the beginning of the Postal Service’s involvement
in the carriage of packages goes back to the 1920s. And the 1920s agreements provide for a very
simplified custom’s treatment of postal packages. Richard: Relative to private shipments? Jim: Relative to private shipments. Richard: Okay. Jim: So in those days, the International Postal
System was carrying essentially only social packages, you know, grandma’s knitted sweater,
and so forth, right? Over time, these simplified customs procedures
have developed into essentially a UPU-defined postal customs clearance that is different
from the customs clearance that the United States requires for all other cargo and packages. Richard: Now you say different from, but that
would be more lax relative to… Jim: More lax, more simplified. Richard: More simplified, okay. Jim: In the last 20 years, and particularly
in the last 10 years, all right, the dangers posed by an influx of packages has increased,
all right, both because of terrorist threats and because of the increase in drugs, like
the opioids. And so the UPU customs procedures have fallen
further and further behind what’s really needed to control these substances or these hazardous
goods. So that’s a problem which Congress is addressing
right now in something called a STOP Act. And as you suggest here, in addition to the
fact that we are failing to really inspect these postal packages in the same way as we
inspect non-postal packages, we’re also under-pricing the delivery of these packages. So in a sense… Richard: How so? Jim: Because of the terminal dues. So in a sense, we are not only failing to
inspect these packages adequately, but we’re also undercharging or even subsidizing the
delivery of these dangerous packages. Richard: And, Jim, if I understand correctly,
that subsidy or that discount, whatever term we wanna use, the terminal dues that one country
charges another are too low. So for the United States, with increasing
importation from China, you know, the Postal Service is really losing money on a lot of
those. Why is that? Why would they do something like that where
they’re losing money? Why aren’t they charging more reasonable terminal
dues? Jim: Okay. And this is really a question of historical
practice that’s developed. But we are undercharging for the delivery
of packages. And under the UPU agreements, we charge different
rates to different countries. So we charge Germany, for example, a bit more
than we charge China. However, for all countries, the Postal Service
is charging for the delivery of foreign packages something like 40, or 50, or maybe 60% of
what we charge Americans for the same service. So it’s a fairly large discount that we’re
giving to foreign shippers. And now, with the growth of e-commerce, we’re
giving that discount to foreign merchants. Richard: So, Jim, one really compelling question
is this issue of how opioids are getting into the United States. And I understand that, sort of, studies by
Congress and others of how it’s happening is that those opioid shippers actually recommend
the use of the U.S. Postal Service relative to private shippers when they’re sending opioids
into the United States. That seems like a shocking revelation. Can you talk about how that relates to postal
policy, and why would these drug dealers do that? Jim: Sure. It’s very clear that the customs and security
scrutiny of inbound postal packages is much less than is applied to all other packages
whether it’s FedEx and UPS or… Richard: The private shippers. Jim: …the private freight forwarders or
whatever. And it’s very clear that the merchants of
the world understand this. And so that if you call up a foreign merchant
and ask for, let’s say, a sweater from Japan, they will recommend that the sweater is shipped
by the Postal Service or by the International Postal System rather than by a private carrier
because the likelihood of having to pay duty is very little. These packages are just not scrutinized very
much by customs and security. The international drug dealers are very well
aware of the same situation. And so as you say, a recent Senate study indicates
that the manufacturers of illegal drugs like fentanyl recommend to their customers in the
United States that it be shipped to the United States via the post office and not by one
of the private carriers. Richard: I understand it’s so strong that
they only guarantee delivery if it’s actually done through the U.S. Postal Service, but
if you do it through a private shipper, they don’t guarantee delivery, is that correct? Jim: Well, I have to say I’ve heard that but
I don’t know of my own personal knowledge. Richard: So I think we’re excited about the
STOP Act. We all think that the STOP Act is a step in
the right direction. And we think it’ll become law probably. But I don’t think anyone is suggesting that
the STOP Act is really a solid solution to this problem. So as a postal attorney and postal international
postal expert, what would your solution be? I mean, this is a major social and security
problem. So what would you recommend we do in terms
of steps toward policy solutions? Jim: Well, the STOP Act is a step forward
in terms of customs and security. It’s not a complete solution but it’s a step
forward. But it does nothing for terminal dues or other
issues. In fact, the president issued a memorandum
instruction to the secretary of state on August 23rd. It basically said, “Do something about the
terminal dues. Make sure that we’re not giving foreigners
a better rate that we’re giving Americans for the same service.” Richard: Seems reasonable. Jim: So far, not much has happened, but the… You know, my understanding is that the White
House is reviewing this whole situation, and is looking at some way to solve it. Now, over the long-term, what’s needed is
clearly a reform of the UPU. It needs to get out of the business of fixing
prices. It needs to probably get out of the business
of overriding national customs and security provisions. And the whole legal basis of the UPU is a
matter that needs to be reconsidered in light of the requirements of the U.S. Constitution
and the needs the United States, okay? That’s a long-term project, difficult to change
in the beginning in a government organization. In the shorter term, the United States could,
consistent with the UPU in fact, we could make a special arrangement with selected post
offices. Now, we only receive a large number of packages
from a fairly small number of countries. And you could imagine some sort of an agreement
among these countries… Richard: Bilateral Agreements. Jim: …bilateral or even multilateral with,
say, the other industrialized countries, and then the big exporters of e-commerce like
China, and Singapore, and Korea, right? And that kind of an agreement, which revised
the terms for delivering inbound packages, which applied stricter controls on customs
and security information, right? That kind of an agreement would still be compatible
with the UPU and would provide a substantial improvement in the situation. You know, probably, that could be done in
the short-term within a year or so. Richard: Okay. The presidential memorandum from August, very
interesting. Can you talk a little bit about the impact
of this current structure on small business in the United States? One company that’s kind of becoming the poster
child as Mighty Mug, which, you know, an imitation mug in China was produced pretty quickly. And you’re actually able to buy that cheaper
from China than you are from Mighty Mug based in the United States. But I wonder if you could give us your views
on how the UPU structure with these terminal dues being so distorted has affected small
business and maybe other businesses in the U.S. Jim: Right. So businesses in the United States particularly
online merchants, which are selling relatively low value items in which the cost of transportation
is a significant part of the final price, those sorts of companies are hurt by the fact
that the Postal Service is charging foreign merchants less than American merchants for
the same service. And this has been a matter that has been subject
to a lot of complaints by mom-and-pop businesses in the United States, all the way up to Amazon,
which testified in Congress and called for a fix to this system. So this is, in fact, a long-running problem
that affects a lot of American businesses. Richard: So I want to just, I guess, one final
question that’s come up, you know, there’s many different dimensions to this. But one is just this is an international agreement
but if I look at the Constitution, you know, I know there’s treaties that are binding on
the United States and have to be ratified in the United States Senate, which seems to
be a good provision of the Constitution. So can you talk a little bit about the legality
of the UPU agreement and how binding that is on the United States government? Jim: So the international postal agreements
are not treaties and they are not reviewed by the Senate. They are, what’s called, executive agreements. It is long established in the United States
that the president can make agreements within certain areas, particularly if he’s authorized
by Congress to make such agreements, right? In the case of postal agreements, the Congress
has long authorized the Postmaster General and now the Secretary of State to make international
postal agreements. But although they are negotiated by the State
Department, they still have to be approved by the United States. And in the case of the current UPU convention,
which includes the terminal dues, that agreement was adopted by the UPU in 2016, it went into
effect January 1, 2018, but it has never been approved formally by the United States government. So apparently, the 2016 UPU agreement and
the terminal dues are not legally binding on the United States, although there’s still
some dispute among various lawyers about that. Richard: Could you just say a few… Like, how does that compare to other international
agreements like NAFTA, like a major trade agreement? Is it less secure in some sense in a legal
sense, less clear than an international trade agreement, or is it a similar process? Jim: It’s similar to international trade agreements. In the case of NAFTA, that was, likewise,
an executive agreement authorized by Congress, but then Congress had to subsequently approve
it. In the case of the international postal agreements,
they are not subsequently reviewed by Congress. But that doesn’t undermine the legality. If it’s officially approved by the State Department
and by our partner countries, then it’s an agreement very much like a treaty that is
binding on the United States under U.S. law. Richard: Jim, thanks for coming and sharing
your expertise on international postal issues. It’s great to have you here. Jim: Pleasure as always, Rick. Thank you. Richard: Hey, everyone, that’s the end of
our discussion with Jim Campbell, international postal policy expert. Thanks for watching. As always, let us know what other topics you’d
like AEI scholars to cover on Viewpoint. And to learn more about International postal
policy issues, check the links in the description below.

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