Universal Postal Remuneration System Changes

November 5, 2019 | 0 Comments

Minister for the Cabinet Office Wayne Furbert provided an update on the recent developments within the Universal Postal Union [UPU] pertaining to the rates charged by countries for the handling of mail and parcels flowing through their postal services.

Speaking in the House of Assembly on Friday [Nov 1], Minister Furbert said, “As a backdrop to the impasse, the postal remuneration system, also known as the terminal dues system, ensures that countries are compensated for the cost of handling, transporting and delivering bulky letters and small packets across borders.

“Member countries agreed on a new system during the 2016 Universal Postal Congress in Istanbul. However, the USA consistently voiced displeasure with this new system.

“At the UPU Congress, the United Kingdom had two votes – one vote for themselves and one vote for the Overseas Territories [OTs], including Bermuda. Although I had my finger on the button to vote on behalf of the OTs, it was clear that we had to vote under the direction of the UK.

“In this particular situation, the UK supported Option A. Bermuda however, would have benefitted best under Option B. I have asked the Foreign Office to look into how OTs could cast their own votes, since Bermuda pays approximately $80,000 annually to be a member of the UPU.

“Eventually, the UK supported a compromise to the position of the USA, whilst also recognising the need for the structure of the terminal dues to evolve in order to preserve cost-efficient services to our communities.

“The anticipated result of this new system for calculating terminal dues is an increase in revenue for the Bermuda Post Office. For example, we anticipate an increase in revenue of $167,800, or 49% for 2020, and $72,123, or 21%, for 2021.”

The Minister’s full statement follows below:

Mr. Speaker, Today I would like to provide this Honourable House with a report on the recent developments within the Universal Postal Union [UPU], particularly pertaining to the contentious issue of rates charged by countries for the handling of mail and parcels flowing through their postal services.

Mr Speaker, Honourable Members will recall that in July of this year, I gave a background on the history of the UPU, as well as its composition of one hundred and ninety two [192] member countries, including Bermuda. In my previous report to this Honourable House, I mentioned the problems the UPU was facing with the stance of the United States of America [USA] pertaining to rates charged for shipment of mail and parcels.

Mr Speaker, as a backdrop to the impasse, the postal remuneration system, also known as the terminal dues system, ensures that countries are compensated for the cost of handling, transporting and delivering bulky letters and small packets across borders. Member countries agreed on a new system during the 2016 Universal Postal Congress in Istanbul. However, the USA consistently voiced displeasure with this new system.

Mr Speaker, I attended the 3rd Extraordinary Congress of the UPU which was held in Geneva, Switzerland from September 24th to 26th. This Honourable House will recall my previous statement concerning the UPU and the significant challenges it faced with the announcement that the USA intended to leave the UPU in order to set its own postal rates. As I previously mentioned, under the 2016 fee structure, the USA was restricted by the UPU in what it could charge for handling parcels imported into the USA.

Mr Speaker, at this Extraordinary Congress, several options were discussed on the way forward regarding the terminal dues charged country-to-country for the handling of mail and parcels. This congress was swiftly arranged specifically to vote on the various proposals devised by the UPU in response to the USA’s declared intention to leave the UPU in order to charge its own rates.

Mr Speaker, one hundred and fifty three [153] countries were represented at this 3rd Extraordinary Congress, with well over four hundred [400] delegates present.

Mr Speaker, at this congress, the USA issued its statement that included assertions that it was costing the USA a disproportionate amount of money to ship parcels through the US. They also reaffirmed their position that countries should be allowed to declare their own rates and that they fully intended to do so. However; they stated that they were willing to compromise giving the right for the USA to have self-declared rates while other countries implement it over a five year period.

Mr Speaker, the USA urged those present to support their plan for self-declared rates as they believed it was beneficial to all concerned. Representatives from other countries with large economies, including Canada, Australia, Norway, Brazil, New Zealand and South Africa, whilst aligning with the USA, called for changes in the way terminal dues were structured since not all of them fully supported the US position. Of significant note is that China, one of the largest exporters of goods in the world, opposed the proposal of the United States and supported a compromise proposal that would achieve a win-win for all countries.

Mr Speaker, likewise, other economic powers such as Japan, Germany and France supported a compromise proposal that would see a gradual change in the terminal dues remuneration system.

Mr Speaker, I hasten to note that at the UPU Congress, the United Kingdom [UK] had two [2] votes – one vote for themselves and one vote for the Overseas Territories [OTs], including Bermuda. Although I had my finger on the button to vote on behalf of the OTs, it was clear that we had to vote under the direction of the UK. In this particular situation, the UK supported Option A. Bermuda however, would have benefitted best under Option B. I have asked the Foreign Office to look into how OTs could cast their own votes, since Bermuda pays approximately $80,000 annually to be a member of the UPU.

Mr Speaker, eventually, the UK supported a compromise to the position of the USA, whilst also recognising the need for the structure of the terminal dues to evolve in order to preserve cost-efficient services to our communities.

Mr Speaker, initially, there were three major options proposed and discussed at this extraordinary congress. They were as follows:

  • [i] Option A: a proposal by the UPU under which, in 2020 all except the least developed countries would pay the same rates of terminal dues.
  • [ii] Option B: the proposal made by the US which would allow all countries to set their own terminal dues rates, up to a maximum of 100% of the domestic postal tariff.
  • [iii] Option C: a compromise option which would allow countries some freedom to set their own terminal dues, subject to caps over a fixed time period.

Mr Speaker, over the course of two [2] days of grueling negotiations, several variations of Options B and C emerged and these received close consideration and scrutiny by member countries. After much deliberation and presentations by several countries, the first vote was cast on Option B, as amended by a proposal by South Africa. There were one hundred and forty four [144] countries present for this vote and Option B was defeated by a count of fifty seven [57] for; seventy eight [78] against; with nine [9] abstentions.

Mr Speaker, it was clear from this vote that there was a significant difference of opinion on the way forward on this vexatious and controversial issue. Following this vote, a wide range of proposals and amendments emerged, all of which were carefully considered.

Mr Speaker, an additional option, labelled Option V, eventually emerged after several meetings, predominantly between the USA and the UPU Headquarter staff. During deliberation on this new option, the USA stated that it would remain in the UPU if it was approved.

Mr Speaker, in essence, Option V allows qualifying countries to set their terminal dues at seventy percent [70%] of its tariff rates, with an annual increment of one percent [1%]; up to a limit of eighty percent [80%]. During debate and discussion of this new option, over thirty five [35] countries voiced their strong support of it. The Extraordinary Congress overwhelmingly approved the Option V proposal by acclamation.

Mr Speaker, the decision will see the UPU accelerate rate increases to the system used to remunerate the delivery of inbound international bulky letters and small packets, while phasing in self-declared rates starting as soon as 2020. Under the agreed solution, member countries that meet certain requirements – including inbound letter-post volumes in excess of 75,000 metric tons based on 2018 data – would be able to opt-in to self-declare their rates starting 1 July 2020.

Mr Speaker, the decision also included thresholds to protect low-volume, developing countries from the impact of the swift reform.

Mr Speaker, the anticipated result of this new system for calculating terminal dues is an increase in revenue for the Bermuda Post Office. For example, we anticipate an increase in revenue of $167,800, or 49% for 2020, and $72,123, or 21%, for 2021.

Thank you, Mr. Speaker

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