Posted by Alex Jackson on September 10, 2016
Ever find a
listing on eBay with a small item such as a piece of clothing, jewelry or perhaps a
power cord for your phone and wonder how is it so cheap and how they charge
nothing or next to nothing for shipping?
We were recently updating some hardware in the offices and needed a few cables. What we found surprising was that most of them could be found on eBay for $0.99 with free shipping from China. Many of these cords 5-10 years ago would have retailed for ten times or more for these same cords, so it got us to thinking that as a US seller, it would cost you more to ship such goods from east coast to west coast than the actual price of the item. With eBay insertion fees, final value fees, paypal fees, cost of packaging material and USPS postage, a US seller will be very lucky to break even! So how is it, that Chinese sellers are able to underbid US retailers?
The answer is terminal fees and what you may not realize is that low price is costing you money every time you ship a package or a letter. Let’s look at what’s causing all the headaches the UPU terminal dues. UPU is the universal postal union this is an international governing body that regulates the rates charged by various nations for cross border shipping and the terminal dues are the fees charged by the destination country for the domestic shipping expenses. These rates were originally established to encourage international trade and were designed to benefit smaller developing nations, however this list also includes several economic superpowers like China, Singapore and Hong Kong who can ship a small package just over 2 pound max weight to the states for a fraction of the cost of a domestic shipment. You might think so what? That phone cord is overpriced anyway but you have to look deeper to understand the widespread effect of the rates disparity. Manufacturers in countries like China no longer have to solely rely on a mass merchant or other middleman to facilitate sales to the US consumer. Why sell to a middleman for pennies on the dollar when you can make the full dollar selling to that end user. Eliminating that middle step also eliminates many of the domestic jobs associated with this merchandises distribution. Bad deal right? Maybe the worst of all we are all paying for this in the form of higher postal rates. As the UPU terminal dues currently stand the US postal service loses money on virtually all incoming international shipments. Since the US postal service has no control over these rates their only option is to pass on the loss to the US consumer. While things may look bleak there is a small ray of hope that this issue will be fixed there is a growing awareness of the issue and the push for reform is getting some powerful backers like Amazon. Amazon is all too aware of how this is negatively impacting its massive pool of third party sellers who represent more than 40% of their sales. This September the UPU meets to set rates for 2018-2021 hopefully the department of state our representative in these meetings will make clear how devastating this imbalance is to all Americans and with any luck the playing field will be leveled.