With higher international postage prices in January 2021, particularly for small packages; potential new requirements for Advanced Electronic Data (AED) and to the USPS Shipping Services File (SSF); and changes to customs duties and to foreign taxes on sales, international mailers are facing many changes in a short timeframe. These issues, plus the effects of the COVID-19 pandemic, have created uncertainty and concerns among international mailers.
Terminal dues, the rates countries pay each other for international mail, will again increase across all types of letter mail in January. Under UPU definitions, letter mail includes all items weighing less than two kilograms (4.4 pounds). Within letter mail, the UPU defines three formats—P, G, and E—by size and weight. Format P for petit (small) is basically postcards and regular sized letters. Format G for grand (large) covers larger sized letters and flats. Small packages and all items containing goods are format E for encombrant (cumbersome).
Terminal dues are expressed as X SDR per kilogram plus Y SDR per item. SDRs ( Special Drawing Rights) are used by UN agencies to calculate charges or credits between countries. Effective July 2020, 31 countries self-declared rates, and an additional 13 did so for January 2021. Of those on both lists, eight reduced their July rates, 19 increased their rates, and one remained about the same. The remaining three countries made changes between the per kilogram and per item rates. The US rate for inbound packages as of July 1 was 2.088 SDR per item plus 2.878 SDR per kilogram ($2.948/item + $1.843/pound). In January, the US inbound rate will be 2.332 SDR per item plus 3.038 SDR per kilogram ($3.292/item + $1.946/pound).
The US also negotiates bilateral agreements—agreements between two countries—one rates and other postal matters, like tracking. These agreements are normally not put in place until the UPU publicly announces the rates filed with them. Many of the countries with higher inbound and outbound mail volumes to the US have reached agreements, which are not publicly available. The recently announced January 2021 postal rates are based on terminal dues or bilateral agreements. The USPS continues to pursue bilateral agreements with additional countries.
We are seeing greater increases in both inbound and outbound postage for packages than for other items. The increase in US inbound rates for small packages in July 2020 resulted in very substantial (up to 100%) increases in postage from some countries. (The effect of these prices aren’t known because they can’t be separated from the effect of the pandemic.) In July, the USPS did not increase its outbound published postage rates for packages. USPS did substantially increase the postage for packages paid by international mail consolidators under their contracts with USPS. This, in effect, reduced the consolidators’ workshare discounts.
During the negotiations in September 2019, the US agreed to pay the UPU CHF 8 million ($8.767 million) a year for five years in exchange for the ability to impose self-declared rates in July 2020. These payments were to be more than covered by the increased income from international packages. No one could have anticipated the COVID-19 pandemic. Many countries limited or stopped the exchange of international mail. International air transport was greatly effected by border closures and by shut-downs. The former led to depressed revenues and the latter led to much higher costs for shipping mail to other countries.
China, a major importer into the US by mail, has seen higher costs for their mail to the US. This was an intentional effect of the self-declared rates. (China did not self-declare small package rates.) There is now competition among US inbound mail processing firms to transport goods from Chinese companies bound to US destinations and process them for mailing here at pre-sort domestic rates. The same process may be used by companies in other countries fulfilling US-destination orders.
The anticipated customs and tax changes will be difficult for exporters, particularly for small and medium enterprises (SMEs) and occasional international mailers of goods. All the countries in the European Union (EU) are instituting a new protocol for AED beginning on March 15, 2021. Some items on customs forms and in the Shipping Services File (SSF) transmitted to USPS by mailers of goods now listed as conditional—not required by USPS, but possibly required by the destination county-- may be required early in 2021 by USPS. These items include phone numbers for the sender and recipient, license and tax ID numbers, and the HS tariff number.
The most problematic of these for many mailers and mail processors is the HS tariff number or code. This is the Harmonized Tariff Schedule code number describing items in a shipment, already mandatory for commercial shipping but not postal items. The codes can be looked up in the online US Harmonized Tariff Schedule https://hts.usitc.gov/current at no cost. For example, my company, WorldVu LLC, mails books to fulfill orders. The HS code for most books is 4901.99. Mail service providers and mailers need to be aware that this will be required in the near future, probably in early 2021.
The EU and individual countries in the EU and elsewhere have announced changes to customs duties and to other taxes on goods coming into the country. Many customs changes reduce the minimum value of goods that are allowed into the country without payment of duty, called the de minimus. Goods can be imported as delivered duty paid (DDP) or delivered duty unpaid (DDU). In almost all cases, postal items are DDU and the recipient is required to pay the customs duty.
Value Added Tax (VAT) and Good and Services Tax (GST), types of taxes on sales, are being levied more frequently on imported items. These vary from country to country and territory to territory. With more than 200 countries and territories, it is extremely difficult for mailers, particularly SMEs, to track tax requirements unless the country or territory makes it known internationally.
The extension period for a trade agreement on Brexit, the British withdrawal from the EU, will end at the end of 2020. Without an agreement between the EU and the UK, delays and confusion are expected in supply chains, logistics, and customs processing at all entry points to the EU and the UK. As this is being written, an agreement seems unlikely.
All of these changes are planned between January 1 and March 15 of 2021, creating uncertainty for international mailers.
Merry Law is President of WorldVu LLC and the editor of Guide to Worldwide Postal-Code and Address Formats. She is a member of the UPU’s Addressing Work Group and of the US International Postal and Delivery Services Federal Advisory Committee.
This article originally appeared in the Fall 2020 International issue of PARCEL.