Category: Freight Forwarding

Spot container shipping rates will continue to subside in the coming weeks following a tepid peak shipping season, according to analysis by Alphaliner.

“With Chinese factories due to close for the Oct. 1 Golden Week holidays, marking the traditional start of the container shipping slack season, carriers have slashed rates ahead of the holidays to build their cargo booking pipeline,” said Alphaliner’s latest weekly report.

“Further rate weakness is expected for the rest of the year, with carriers’ capacity management efforts ineffective so far in stemming the rate decline.”

As reported in FreightWaves, World Container Index spot freight rates on the Shanghai-to-Genoa lane plummeted 13% last week, dragging the global composite index down 6% as a result, according to London-based shipping consultancy Drewry.

Alphaliner noted that spot freight rate indices on the SCFI (Shanghai Containerized Freight Index) have slumped to a four-month low and are down 18% year-on-year — evidence, believes the analyst, that while the slew of container line voided sailings may have helped manage seasonal short-term drops in cargo volumes, they have been ineffective in dealing with a “structural deficit” in demand.

“Carriers have limited room to keep capacity out of the market for extended periods, as the cost of keeping ships inactive will be substantial, while a steady stream of new ships is still expected to be delivered in the coming months and the scrapping of older ships remain very low,” said the report.

“The 2M carriers’ decision to withdraw their FE-North Europe AE-2/Swan service in late September will be short-lived, with MSC already suggesting that the service could return by mid-November.

“Although some of the withdrawn 2M ships will be replacing ships that are undergoing scrubber retrofits, a number of ships that have completed their retrofits are already back in service.”

HMM’s decision to withdraw its FE-North Europe AEX service in September also will be more than compensated for in the second quarter of 2020, when 12 of the line’s new 23,000-TEU newbuilds are phased into the trade, dwarfing the 5,000-TEU ships that were deployed on the old AEX, according to Alphaliner.

However, the rush to fit container vessels with scrubbers ahead of the introduction of IMO 2020 low-sulfur fuels at the start of next year is taking some capacity out of the market.

Blanked sailings and scrubber retrofits pushed up the inactive fleet to 148 units totalling 641,259 TEU of capacity as of Sept. 16, or 2.8% of the total fleet.

“Of these, 25 units for 277,611 TEU are recorded to be undergoing scrubber retrofits,” said the analyst.

“The unemployed ships, excluding those ships undergoing retrofits, have increased to 123 units for 363,648 TEU, compared to 111 units for 223,791 TEU two weeks ago.

“The inactive fleet is expected to rise further in the coming month with more blank sailings already announced, while the number of ships undergoing retrofit is also on the rise.”

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European shippers are woefully unprepared for the supply chain chaos anticipated if the U.K. exits the European Union (EU) at the end of next month, according to Godfried Smit, Secretary-General of the European Shippers’ Council (ESC), a leading representative of the logistics interests of manufacturers, retailers and wholesalers.

As previously reported in FreightWaves, just weeks from a potential October. 31 no-deal Brexit, the U.K.’s political system is close to breakdown with almost every conceivable outcome in terms of EU departure date and trade terms still on the table. Even the September 24 decision of the U.K.’s Supreme Court that the suspension of Parliament by the government of Boris Johnson was “unlawful, void and of no effect” has done little to clarify matters.

What is clear, Smit told FreightWaves, is that ports on the English Channel will be chaotic in the days and weeks after a no-deal Brexit and shippers urgently need to prepare for the worst.

“I think the impact will vary much from sector to sector,” he said. “And there is also separation between big companies and smaller companies [in terms of preparedness]. But we see still a lot of companies that are not fully prepared.

“If you ask companies in France, in Belgium, in the Netherlands, not many of them have looked at how they can continue trading with the U.K. in a no-deal scenario and have applied for the correct authorizations. Some of them are still hoping for the best.”

Even the current U.K. government admits a no-deal Brexit from the EU could see truck flows on English Channel tunnel and ferry routes cut to just 50 percent of current levels for three months, according to recently revealed secret U.K. government documents. Truck drivers could also face delays of up to 2.5 days before crossing into France. 

This will leave some shippers reliant on premium air cargo options, with demand for charter capacity – and prices – expected to spike next month.

While just-in-time trucking and ferry roll-on/roll-off trades are forecast to be devastated, the paperwork involved for simple short-sea container shipper movements will also make load-on/load-off options significantly more complex.

The extent of this expected new logistical and bureaucratic workload was laid bare on September 23 when Ocean Network Express (ONE) issued a customer advisory explaining the extra security filing requirements even for short sea container shipping customers should the U.K. leave the EU without a deal on October. 31.

“The European Commission (EC) has confirmed that as from this date, the U.K. will be treated like any other non -EU country for security filing purposes,” noted the advisory. “EU export cargo that is currently loaded on a service not affected by the EU 24-hour rule, will become subject to ICS ([Import Control System)] filing, depending on the vessel rotation.”

In practice this means that cargo loaded at Southampton and prior EU ports on a vessel rotating Rotterdam – Hamburg – Southampton – Le Havre – Singapore, for example, will require an Entry Summary Declaration (ENS) to be filed in advance of the vessel’s arrival at Le Havre, even if the cargo remained on board during the U.K. port call.

“This is not limited to cargo discharged in an EU port later in the rotation, but also includes FROB cargo ([Foreign cargo Remaining On Board)] transiting the EU and destined for subsequent non -EU ports,” advised ONE.

For shippers, this means filing shipping instructions in advance. For container lines it will likely mean a restructure of service rotations to avoid extra paperwork and possible delays.

For late-movers looking to build up supply chain resilience in the event of a no-deal Brexit, warehousing capacity is also an issue. Many pharmaceutical suppliers and automotive firms reliant on just-in-time supply chains built up stocks ahead of the previous Brexit deadline in late March and have held on to that capacity, meaning availability is now short.

“In terms of preparation, many companies are already too late because to have your distribution organized in a proper way you have to have, perhaps, additional warehouse space in the U.K.,” said Smit. “That’s very difficult to acquire, and if you can acquire it, it’s very expensive.”

Smit continued, “And it’s the same situation if you want to do you own customs declarations. You would need to install your own automated system and there aren’t enough customs software developers and installers.”

He added, “If you don’t want to do it yourself, you need a customs agent, but there are only so many, and most are already working for their long-term customers.” 

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Container ships are setting new records, but for all the wrong reasons, as the vessels become an increasingly popular way to smuggle drugs.  

As FreightWaves’ Mike King reported, the Maersk Gibraltar, which can carry the equivalent of 5,000 common shipping containers, was the site of the U.K.’s largest drug bust as authorities found about 1.2 tonnes of heroin, valued at $148 million. 

The September bust shattered the previous U.K. record set in August of $50 million worth of heroin found in a shipping container.

That same month, Germany set its own record bust of 4.5 tonnes of cocaine found onboard an unidentified container ship at the Port of Hamburg, while another seizure of 1.5 tonnes of cocaine was made less than a week later at Hamburg.

The European Monitoring Center for Drugs and Drug Addiction said in a June 2019 report that the number of cocaine seizures and volumes coming into the continent are at an all-time high. A kilo of cocaine in Europe can fetch 25 times its wholesale price in South America, the report added.

Aside from the smugglers, innocent shippers also get caught up in seizures due to delays and the resulting investigations, said Sherhina Kamal, product director for DP DHL Group’s risk assessment unit Resilience360.

She said shipments coming from South America and other high-risk origins are likely to receive extra scrutiny, as will the carriers are unwitting accomplices in carrying drugs.

“With additional events like these taking place, there might be more checks on ocean freight coming from Latin America,” Kamal said. “The delays are minimal at this point, but given the scale and the frequency of seizures, it may change.”  

The issue of cargo delays will be more critical as trade between the Euopean Union and South America is set to expand, particularly for perishable and time sensitive cargoes such as fresh fruit and agricultural goods. 

The European Union, already the largest importer of fresh fruit in the world, will get even more such shipments from South America as part of a new free trade agreement signed in June.   

Europe is not alone in this problem as demonstrated by the U.S.’ largest cocaine seizure taking place on the MSC Gayane in the Port of Philadelphia in June, netting $1 billion worth of the drug. 

The U.S. Attorney’s Office for Eastern Pennsylvania charged its first member of the MSC’s crew, Nenad Ilic of Montenegro, with conspiracy to distribute cocaine. At least five crew members were arrested as part of the bust.  

The seizure caused MSC to be suspended from U.S. Customs and Border Protection’s C-TPAT program, which provides expedited cargo processing in return for outlining how they deal with risks such as smuggling. 

MSC has since been readmitted to C-TPAT. But the active involvement of a ship’s crew in smuggling, as opposed to drugs being unwittingly loaded onboard, also heightens the risk for shippers, Kamal said, as those carriers’ vessels then become targeted for increased inspections.

“What is more concerning for shippers is these major carriers being implicated in the process,” Kamal said. “If they have their preferential treatment taken away, that will add to time to clear cargo at the ports.”

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Global asset management titan Blackstone Group (NYSE:BX), fresh from a major leap into the U.S. logistics real estate market, has extended its last-mile infrastructure reach into Europe by forming a company called “Mileway” to support pan-European last-mile delivery operations.

The new company will utilize 1,000 logistics ”assets” that Blackstone, which entered real estate in 1991 and today is a major player in virtually all forms of property, has acquired over the years. Mileway will become the largest last-mile logistics real estate firm in Europe, with more than 29 million square feet of space, Blackstone said. More than 80 percent of the capacity is in the U.K., Germany, the Netherlands and France, Blackstone said. 

Published reports have pegged the value of the new company’s portfolio alone at around $8 billion in assets, a staggering sum if accurate, said Marek Różycki, managing partner of Last Mile experts, a Warsaw-based consultancy. Blackstone did not include the portfolio’s value in its announcement, and company officials did not respond to requests for comment on September 25.

In June, Blackstone spent $18.7 billion to acquire 179 million square feet of “urban logistics” assets from GLP, a Singapore investment manager, in the largest-ever real estate investment between privately held multinational firms. The acquisition nearly doubled Blackstone’s U.S. industrial logistics footprint.

In its September 24 announcement, Blackstone said logistics, especially last-mile, remains one of its top investment themes.

The European last-mile logistics real estate sector is fragmented. In the U.K., there is a dearth of suitable last-mile assets to meet what is expected to be growing e-commerce demand, Rozycki said. However, given the breadth of the market – the European Union alone is comprised of 28 countries – it is hard to imagine any one company, even one as large as Blackstone, dominating everywhere, he added.

Emmanuel Van der Stichele, previously fund director of the Goodman European Logistics Fund, was named Mileway’s CEO. The new firm is headquartered in Amsterdam.

Urban congestion remains an annoyance to the traveler and a grief to the environment. BlaBlaCar, a Paris-based online carpooling platform, has just offered to acquire Busfor, which would be its second bus fleet acquisition in 2019.

Busfor is the leading bus-ticketing platform in Russia, Poland and Ukraine, employing 150 people. BlaBlaCar sees this acquisition as a unifying opportunity for Eastern Europe’s fragmented market under a single platform to meet a greater diversity of rider needs.

Carpooling and hitchhiking are old concepts, ones that BlaBlaCar’s founder Frédéric Mazzella utilized when the trains were booked at Christmas, and without a car, he didn’t know how he’d make it to his family across France. Once he got a ride with his sister, he began noticing the ubiquitous vacant car seats on the A10 highway. He launched BlaBlaCar in 2006 with a mission to solve this problem.

Using an online platform to connect drivers who have room in their cars with passengers who desire transit in the same direction, BlablaCar has filled a niche as the largest long distance carpool service in the world. 

In June 2019, BlaBlaCar turned its sights on bus fleets. BlaBlaBus launched in Europe and one month later, the company acquired Ouibus’ 70 lines and fleets. Ouibus, founded in 2012, provided BlaBlaBus with an established network in Western Europe. While BlaBlaCar rebranded Ouibus’ fleets, its plan for Busfor inventory is different. 

“Busfor will retain its own brand, product offering and consumer app, but we will be integrating its supply of bus journeys into the BlaBlaCar platform to help bus carriers and stations grow their customer bases while also creating the best user experience for travelers,” BlaBlaCar co-founder and CEO Nicolas Brusson said.

Busfor partners with 7,000 bus carriers, but buses in this region operate mostly offline. Only 10 percent of bookings are made online; BlaBlaCar sees this as an opportunity for growth. Out of the 80 million registered users of Busfor, 25 million are already using BlaBlaCar’s services. 

Rideshare giant Uber also operates in Eastern Europe, but Brusson doesn’t see the companies as having overlapping markets, at least for the short-term. Uber focuses on short trips within cities, rather than BlaBlaCar’s mission of connecting passengers across entire cities or regions.

Blablacar’s mission is to “bring freedom, equity and brotherhood to the world of travel.” It’s hailed as one of France’s top unicorn companies, which are private companies with at least $1 billion valuations. Eighty million members in 22 countries use the online platform, spanning Europe, Asia, and Central and South America. Its website touts 25 million travelers per quarter, an average of 3.9 people per vehicle, and 1.6 million tons of CO₂ saved each year.  

The introduction of new U.S. tariffs on Chinese exports could finally put airfreight markets on an upward trajectory ahead of the traditional peak season later in Q4 as shippers rush to beat the deadline.

“We expect demand to pick back up leading into the Oct. 15 tariff deadline,” said Neel Jones Shah, executive vice president and head of airfreight at Flexport, adding that capacity ex-Asia is currently available on most primary lane segments, with backlogs minimal.

Predicting what happens during air cargo’s traditional peak season ahead of the holiday season later in the fourth quarter is more difficult. “While U.S. consumer spending is still strong, the impact on peak season and holiday shopping toward late November, early December isn’t clear yet,” he said. 

“Currently, we lack visibility beyond the next two weeks, which is rare for this time of year.”

Indeed, forecasting where freight markets might move has proven unusually difficult throughout 2019, both at sea and in the skies. “Overall air cargo rates and demand haven’t been as robust as last year and it can best be described as choppy,” he said.

“Across the board we’ve seen that everyone is being cautious with airfreight planning. Unrest in Hong Kong, a potential no-deal Brexit and renewed Middle East hostilities all on top of the ongoing tariff war is making it much harder for carriers and shippers to plan accordingly.”

He is clear, however that shippers, as reported in FreightWaves, should expect higher fuel bills to be passed on by carriers after crude oil prices spiked last week following drone attacks on Saudi Arabia.

“Airlines will be heavily impacted as oil prices increase,” he said. “In turn, they’ll likely be passed onto shippers.

“Right now it’s too early to tell how long lasting the recent oil price hike will be and is almost completely dependent on how quickly Saudi Arabian Oil Co. thinks it can return to full production.”

Flexport Asia was briefly banned from using Lufthansa Cargo flights earlier this month after an incident involving dangerous goods. The order was revoked last week after it was found that a shipper had incorrectly declared a shipment and Flexport had not been at fault.

“Flexport worked very closely with Lufthansa on their investigation into our dangerous goods procedures and training at our Hong Kong facilities,” said Shah. “This resulted in an exceptionally quick resolution and immediate lift of the embargo.”

U.S. and European importers are heavily reliant on critical and high-value cargoes uplifted at Asia’s primary hubs, including Hong Kong International Airport (HKIA). Disruptions due to protests at HKIA and reduced slots at some Chinese airports have added complexity to an already volatile 2019. Shah said the “choppy” demand evident globally was equally apparent in Asia.

“We saw a ‘mini peak’ at the end of August ahead of the Sept. 1 tariff deadline. Since then, things have cooled down,” he explained.

“What’s interesting is that this year we’re seeing a much slower return to normal from the mid-autumn festival in China where many flights were canceled over the weekend. Demand hasn’t returned to a steady state as quickly as in past years.

“The impact of even short holidays is a bit more pronounced this year.”

One bright spot has been Southeast Asia, where demand has been relatively stable as shippers shift production to escape the tariff war affecting exports from China.

“However, yields are still a challenge and many freighter carriers are still having a hard time making direct Vietnam flights work without stopping in another city before continuing on to a transfer hub,” he added.

More FreightWaves articles by Mike

Ever since the Paris Climate Agreement, there have been incessant debates on the transport industry’s mammoth impact on the uncontrolled rise of global carbon emissions to date. This led to the industry being inundated with regulations directed at curbing its carbon footprint. 

Local governments have also tried cajoling the transport industry to adopt low-emission vehicles and alternative fuels by providing tax benefits and grants for companies developing greener technology. One such scheme prevalent across several countries is the low tax rates for trucks that burn liquified natural gas (LNG) as fuel – based on the understanding that LNG pollutes less than diesel.

However, findings from a recent study conducted by Transport & Environment (T&E), a European NGO, show that the trucks powered by LNG do not fare better in terms of carbon emissions when compared to diesel trucks. The study examined three recent and popular LNG truck models – Iveco Stralis Hi-road, Volvo FH420, and Scania G340 – and compared their emissions to that of an average diesel truck in the market. 

“The three LNG trucks tested emit two to five times more poisonous NOx than the diesel truck with the lowest test result when driven in a combination of urban areas, regional routes and motorways,” said the T&E report. “When driven in towns and cities, the gas trucks release two to 3.5 times more NOx than the tested diesel truck with the lowest emissions. Trucks powered by biomethane (biogas) would have the same air pollutant emissions as trucks running on fossil gas because the fuel characteristics are the same.”

The results are startling, as governments have largely been conducive of LNG-powered vehicles, with policymakers approving tax breaks and subsidies for businesses willing to move towards LNG trucks.

Apart from being a lot more caustic to air quality, LNG trucks also emit particulate matter – volumes that are comparable to diesel trucks. Though no contributor to global warming in itself, the microparticulate matter can get lodged within the lungs when inhaled, thus causing complications and in some cases, death. 

Curbing NOx emissions is critical in Europe, especially in the wake of the Dieselgate scandal, which is estimated to have caused enough damage to air quality for it to result in 5,000 additional premature deaths annually across the continent. Most of the air quality deterioration happens in urban spaces, which also are more densely populated compared to the countryside. 

Then there is the issue of people migrating towards industrialized regions in search of work and better living conditions. In Europe, roughly three in every four Europeans live in an urban setting, and the numbers are only going to increase as we move forward. Municipalities are realizing the issue and are bringing in sweeping reforms that include splitting cities into zones and banning old and highly polluting vehicle models from driving within central and highly traffic prone zones.  

The research study on LNG trucks was carried out by Dutch applied science research organization TNO, which reported that in urban driving conditions, NOx emissions from all the three tested LNG trucks measured to be 39% to 117% higher than an average diesel vehicle tested earlier at the site. 

These findings directly negate the claims of automakers, who argue that LNG trucks have negligible carbon emissions compared to diesel trucks. “The TNO reports show that these claims are not true. In fact, the Scania and Iveco trucks tested emitted quite large numbers of particles per kilometer during urban driving conditions,” said T&E in its report. “These emissions during urban driving are particularly worrying as they can have a significant impact on air quality in towns and cities.”

The EU policies see LNG to be a cleaner alternative in transport systems, which when the recent findings are accounted for, may not be not the case. The Alternative Fuels Infrastructure Directive (AFID) supports the development of infrastructure for alternative fuels, and it lists LNG to be one of the primary alternative fuels that can replace diesel as fuel for trucks. This has resulted in European truck manufacturers receiving up to €17 million in funding via various EU research grants for perfecting LNG powertrains. 

European countries struggling to reduce carbon emissions despite massive tax cuts and regulatory measures, will need to wake up to the emissions reality of LNG trucks and look to cease schemes that encourage its adoption within the transport sector. 

As delegates from 192 nations gather in Geneva Sept. 24 and 25 to determine the fate of global postal commerce, a compromise has been advanced to let the U.S. Postal Service (USPS) significantly increase the rates it charges foreign postal systems for processing foreign-origin parcels and mail.

The proposal, if it passes muster, would keep the U.S. in the Universal Postal Union (UPU), the 145-year-old governing body that the Trump administration plans to leave next month unless UPU delegates vote to approve the changes it has demanded to the global postal cost structure. It would also dramatically increase the postal rates paid by businesses and consumers from nations that have benefitted from a half-century of artificially low rates on U.S-bound shipments. Notably, Chinese merchants and consumers could see postal rates more than double because China Post would be charged a much higher rate by USPS to process postal shipments.

According to two industry sources, the compromise, crafted by Germany and France and informally agreed to by the U.S., would permit the U.S. and any country doing business with it to “self-declare” their international postal rates by July 1, 2020, at a rate effectively equal to 70% of what UPS would charge to handle a domestic parcel or mail shipment, a fee system that has been known as “terminal dues.” That is much higher than the dues now paid by many so-called developing countries that use the USPS. In the case of China, still classified a “developing” country under UPU guidelines, China Post pays USPS about 35% of what it costs USPS to process a postal shipment within its borders, estimates Alex Yancher, co-founder of Passport, a U.S.-based international parcel delivery firm who has been closely following the saga. 

The proposal would establish a phase-in period for countries operating under the current UPU system to migrate to a self-declare model where their costs would rise after decades of paying artificially low dues, the sources said. The shift would begin in 2021 and run through 2025, the sources said. Terminal dues increases would max out at 13% in 2021 and increase by 10% each year after that, the sources said. This would ease many governments’ concerns about the impact of price shocks while aiding cost-recovery efforts of destination postal systems.Terminal dues account for up to 60% of the cost of a typical international mail shipment, according to Yancher.

The matter will come to a head Sept. 25 when the delegates will vote on one of three options related to the terminal dues structure. One option keeps the status quo while permitting a small increase in terminal dues. A second, which has been proposed by the U.S., allows for all nations to shift to self-declaration by mid-October, which would immediately end the terminal dues structure. The third would allow the U.S. to self-declare and establish a self-declaration phase-in for other countries. The latter two options would keep the U.S. in the UPU. The vote will be a simple majority–50% plus 1.

Peter Navarro, President Trump’s assistant for trade and manufacturing policy and the administration’s point man on the U.S-China trade dispute, wrote in a Sept. 11 op-ed piece in the Financial Times that the U.S. is amenable to the latter two options. However, the first option, which maintains the status quo, will result in the U.S. leaving the UPU on Oct. 17, Navarro said. The administration has framed the postal issue as another example of China gaming the global trade system and how the administration is hell-bent on stopping it. Navarro is expected to attend the special UPU “Congress,” only the third such meeting in its history. In a Sept. 11 op-ed published in the Financial Times, Navarro

At that point, the U.S., which handles about half the world’s mail, will move to negotiate bilateral agreements with each of its postal trading partners. This scenario could create enormous turmoil in the market since so many shipping protocols have been established through the UPU’s multilateral framework. Neither the State Department, which oversees the U.S. role in UPU, or USPS have articulated a post-exit plan, which has reminded some observers of a postal version of Brexit, where a majority of British citizens voted for the nation to leave the European Union (EU) only to discover that there was no viable post-exit strategy to implement. 

USPS has assured mailers it will remain in the international mailing business even if the U.S. exits the UPU. In addition, third-party providers like integrated communications R.R. Donnelley & Co., (NYSE:RRD) said they are standing ready to assist customers with a post-exit transition. The question, though, is whether USPS can serve any country which the U.S. has not negotiated an agreement. “Some of the bilateral agreements could be reached quickly enough to maintain relative continuity, but I suspect some may be protracted due to trade disruption already occurring,” said Matthew White, strategist for consultancy iDrive Logistics, a consultancy that is working with clients with exposure to the issue. 

In theory, companies like FedEx Corp. (NYSE:FDX) and DHL Express would benefit because their rates would be more competitive with the adjusted pricing. Freight forwarders could conceivably benefit if they are able to consolidate foreign mail shipments, clear them through U.S. Customs and induct them into the USPS network. However, much of what comes from developing countries are low-value goods that satisfy Americans’ seemingly insatiable desire for cheap imports. Higher shipping prices from fully private businesses could result in less ordering activity.

If one of the administration’s endgames is to move production of low-value merchandise back to the U.S., that’s unlikely to work, according to one of the sources. Few, if any, U.S.-based producers would be able to turn a profit making the stuff at low price points that U.S. consumers are accustomed to, the source said.

A different world

For more than 100 years, it was free for one post to have another post deliver its letters domestically. UPU member countries set up the terminal dues system in 1969 to compensate one another for delivering international mail within their borders. The dues were based on how developed a country was in delivering mail. Developed countries like the US would charge lower dues, while developing countries would charge higher dues. The system worked well when international mail was mostly flat letters because the incremental cost of delivering a latter is nominal. However, the dues system of the time did not foresee the surge in small, low-cost packages originating in nations like China and the higher costs incurred by USPS in processing those shipments without losing money on them.

The original formula remained until 2016 when the UPU, under pressure from the Obama administration, approved a 20% increase. But that wasn’t enough to satisfy critics. Postal systems like China Post, which was part of a developing economy at the time, still pay very low rates for USPS’ services, a situation that critics said has led to USPS losing $1 for every shipment from China that it processes, and that fails to reflect China’s modern-day status as an advanced and wealthy trading nation. More than half of business-to-consumer parcel traffic entering the U.S. comes from China.

For example, it costs more to ship a parcel via USPS between New York and Boston than from Beijing to Boston because of artificially low dues paid by China, a factoid that no one appears to dispute.

The current system puts U.S. companies at a competitive disadvantage against foreign businesses, and creates opportunities for dues “arbitrage” that digs an even deeper hole for USPS, according to Yancher, For example, shippers who fulfill international orders placed on the website of Chinese e-commerce company Wish.com, will ship goods from China to countries like Tajikistan, which has even cheaper rates to ship to the U.S., and then have the Tajik Post deliver packages to the U.S. for final delivery, Yancher said. “The extra cost of shipping from China to Tajikistan is worth it in order to capture the low rates offered by the Tajik Post,” he said. Wish.com has built a billion-dollar business largely on the backs of cheap postal transactions, he said. 

Fed up with the purported inequities, the administration notified the UPU last October that it will leave the group after a mandatory one-year waiting period unless it is able to immediately self-declare rates and bring terminal dues up to levels that match USPS’ cost to serve.