Two reports highlight the importance of this title question for the USPS and the global postal delivery network:
The Universal Postal Union (UPU), in its October, 2022, presentation, Trends and Drivers of International Postal Exchanges, reported a 77% decline in international small packages crossing borders within the postal network from 2020 to 2022. This is consistent with the decline in international small package volume decrease handled by the USPS. [Emphasis added.]
A May, 2023, USPS Office of Inspector General (OIG) report, The International Package Market – Trends And Opportunities For The Postal Service, stated, “Even in an uncertain global economy, international ecommerce is expected to continue to increase at rates of up to 20 percent annually until 2030.” [Emphasis added.]
As we all know, e-commerce volumes increased dramatically during the global pandemic as traditional retail stores were shuttered. Some of that uptick in volume has been lost as consumers returned to their traditional markets for goods—but not all of it has gone away. This applies both to our domestic marketplace and the global marketplace.
Consumers and businesses in different countries and regions do not act the same. E-commerce has not grown consistently around the world, both cross-border and domestically. Other than consumer preferences, government regulations and policies affect the growth—or lack of growth — in cross-border e-commerce. Customs duties and other taxes on imported goods make them more expensive. Complicated regulatory requirements can inhibit companies from selling into other countries. Advanced Electronic Data (AED) requirements, to combat illicit goods and terrorism, present a challenge to postal operators in developing countries. Certainly, the more stringent rules for advance customs information in the EU have had air carriers, postal operators, mail service providers, and mailers scrambling to meet these requirements.
And still, an increase of up to 20% annually in international e-commerce is predicted. This does not mean that all of this will travel through the international postal network, nor does it mean every country will see a 20% increase in inbound and outbound e-commerce. As with the growth of e-commerce during the pandemic, the increase will not be evenly distributed worldwide. Some analysts contend that we are seeing a shift to regional, not global, cross-border.
So, if there are more packages being shipped globally, why is the USPS seeing a 77% decrease in international package volumes, about the same as in the worldwide postal network? Some of that is indeed volume lost to the USPS, particularly for outbound mail. Some of the decrease, however, is a shift of volume from mail imported via the postal network, i.e., from a postal operator in another country, to items imported via a commercial company and entered as domestic mail with the USPS.
In fact, the USPS has had a Global Direct Entry (GDE) for 10 years to allow vetted consolidators to enter items from other countries into the US mail stream for domestic delivery. The proportion of packages that had entered the US via the postal network that are now arriving commercially and being mailed domestically is unclear, as is the effect on the USPS’s finances.
The equivalent to mail from other countries posted here as domestic mail for US delivery is happening to US outbound mail. It is shipped by a commercial company—a consolidator, an e-commerce platform, a private delivery company, etc.—to another country and entered into the postal system in that country. This mail volume and revenue is lost to the USPS. Alternatively, large e-commerce platforms are able to create regional warehouses closer to their more major international markets, which also removes goods from the international postal network.
Commercial customs clearance has required the information now included in postal AED for some time. In addition, commercial customs clearance allows duty and taxes to be paid by the sender or a broker on the sender’s behalf. This is known a DDP — Delivery Duty Paid. Traditionally, goods delivered by the international postal network have been DDU or Delivery Duty Unpaid, requiring the recipient to pay any duty and taxes. Although there are now some exceptions to this, many recipients are unaware of these fees and refuse to accept delivery. As more and more countries are levying duty and sales taxes on small packages, there are very real advantages to DDP solutions providing an advantage to commercial clearance. (The USPS is working on a DDP solution.)
As USPS postage prices have increased for international packages, the cost advantage enjoyed by the USPS has decreased or even disappeared. With the additional DDP advantage of commercial clearance, the USPS is no longer as competitive for international fulfillment of packages to other countries. A strong international postal network is important for consumers and small business sending to foreign destinations. The OIG’s The International Package Market –Trends and Opportunities For The Postal Service report makes it clear that the USPS faces many challenges in maintaining robust international package services for both inbound and outbound mail.
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 U.S. International Postal and Delivery Services Federal Advisory Committee.
This article originally appeared in the July/August, 2023 issue of Mailing Systems Technology.