PACKAGES FROM CHINA

"It is often cheaper to ship a package from China to anywhere in the United States than to mail a package from one North Texas city to another."

 

Rep. Kenny Marchant  

April 19, 2018 

To amend title 39, United States Code, to require the United States postal service to establish rates for delivery of inbound international mail that do not discriminate between foreign and domestic mailers, to review foreign practices with respect to the exchange of e-commerce goods with the United States and for other purposes.

Jayme Smaldone, founder and CEO of Mighty Mug, based in Rahway, N.J., said he discovered the discrepancy between foreign and domestic shipping rates while enforcing patents on his spill-resistant mug design.

 

The patented Mighty Mug is advertised as the world's only cup that grips to a smooth surface when bumped into, but lifts naturally. About two years ago, the company started to see a lot of knockoffs of its product, Smaldone said.

 

The company started buying sample products and found a lot of the knock-offs shipped from China, Smaldone said. One high-quality fake cost $5.69 with free shipping from China, and it arrived in eight days, he said.

 

By comparison, to ship a 4 lb. package across the U.S. to California would cost about $18, Smaldone said. "But when I looked, the Chinese competitor of mine, knocking off my intellectual property, gets the same exact delivery from the postal service for $3.70," he said.

 

Before it gets to the U.S., there should be a big cost to ship the package out of China, Smaldone said.

 

"But under my analysis, I believe that China is subsidizing their leg, literally giving their shippers 20-cent shipping, so that their domestic e-commerce business explodes," Smaldone said.

Nothing is simple.  The rates the U.S. charges on small inbound packages are part of an agreement under the Universal Postal Union, which was established in 1874 in Berne, Switzerland.  The current rate structure is not quite that old.  It was negotiated-or renegotiated-in 2016, and the rates agreed to then are due to carry through to 2020.

We confess we are new to this issue, having only recently learned about it from a tweet from Linda Dempsey, NAM's Vice President for International Economic Affairs.  So we won't be offering advice to anyone on postal rates, at least not today.  We will, however, permit ourselves a few observations.

First, it would be no small thing for the United States to disrupt the long- standing arrangements of the Universal Postal Union.  Our impression is that the system has worked well for a long time, and our guess is that pulling out of part of it would have costs. 

Second, there is probably little point in challenging China on its apparent manipulation of the system.  People game legal systems all the time. If Chinese shippers are doing it on a larger scale than anyone had imagined, well, c'est la vie.

Third-and for us this is the important one-this postal anomaly seems to be another example of a commercial arrangement designed for another time and based on assumptions that may no longer be valid.  If change were easy, that would not be a problem. But change is not easy.  The new status quo has its own supporters, and the U.S. as injured party may not have many (or enough) friends in court to do much about it within the system.

Marchant Highlights a Postal Problem.  This is a link to the statement issued by Mr. Marchant's office on April 19.  In effect this is an explanation for the legislation he introduced on the issue earlier that week.  This statement was the source for today's featured quote.  

 

H.R. 5524 is a link to the text of the bill Rep. Marchant introduced on April 16 with a view to correcting the disparity between the cost of shipping certain small packages within the United States and the postal charges faced by certain foreign shippers.

 

China Not Amazon takes you to the article by Cheryl Bolen of Bloomberg Government quote above.  As a primer on the issue, it is first rate.