U.S. Department of State

Released by the Bureau of International Organization Affairs
April 9, 2001

A public meeting for organizations and individuals interested in issues relating to the Universal Postal Union was convened in Room 1408 of the Department of State at 2 p.m. on Thursday, March 15. Due to the illness of Ambassador E. Michael Southwick, who had intended to conduct the meeting, the session was chaired by Neil A. Boyer, Deputy Director of the Office of Technical and Specialized Agencies, in the Department's Bureau of International Organization Affairs.

The purpose of the meeting was to provide a briefing on the status of reform initiatives in the UPU, including both structural reform and revision of policies relating to "terminal dues," the system through which one country compensates another country for delivering the mail. Representatives of private-sector and U.S. Government agencies participated in the briefing. Attached to this report are a list of those present and a list of documents distributed.

Introductory Remarks

Neil Boyer said that Ambassador Southwick regretted that he could not attend the session. He summarized the contents of the documents that were available at the meeting, and said that these and others were available on the Department of State's website: www.state.gov. From the home page of that site, he said, those interested in postal issues should click on Bureaus and Offices, then International Organization Affairs, and then on International Postal Policy. The State site includes materials developed after January 20, 2001, but contains an "archive" link to materials posted before that date.

The UPU High Level Group

Boyer said the overall goal of the United States was to make the UPU more open and transparent, in particular to allow private-sector agencies access to the chief governing body meetings in the UPU. Basic U.S. objectives in this regard had not been achieved at the UPU 1999 Beijing Congress, and further it had been embarrassing that the express couriers, having been invited to the Congress by the UPU Council of Administration (CA), were ejected from Congress committee meetings by vote.

Nevertheless, the Congress had agreed to establish the High Level Group on the Future Development of the UPU (HLG), asking it to study reform proposals, and make recommendations to the CA in October 2001. The CA, in turn, had been given the option of deciding to convene a plenipotentiary meeting of all UPU member states in 2002 in order to amend the UPU Acts, if necessary, and thereby to put the HLG-proposed reforms into effect. Boyer said the HLG had had six meetings since being created in 1999. The most recent one had been in February 2001 (the report was distributed at this meeting). There would be another on May 1-2, and one on July 5-6. It was hoped that the July meeting would result in a final proposal that could be transmitted in writing to the CA in advance of its October 2001 meeting. It was the U.S. goal, Boyer said, to ensure that the HLG and the CA proposed something concrete, and that a plenipotentiary meeting was convened in 2002. Otherwise, the HLG would simply have wasted time and effort for more than two years.

In terms of substance, the HLG was working its way toward a consensus on creation of a third council, to be added to the CA and the Postal Operations Council (POC). The third council -- possibly called a Sector Advisory Council or a Private Sector Council -- would permit interested organizations to interact with the UPU, to learn what was happening within the organization, and to make proposals and put forward suggestions for UPU attention and action. Most importantly, the members of the third council would have observer status in the other two councils, and this went a long way toward achieving the U.S. goal of broadening participation in UPU and making its operations more open and transparent. The lack of openness is what had led to substantial criticism of the UPU by the private sector, especially the express carriers. The U.S. Government had been including two representatives of the private sector in U.S. delegations to UPU meetings, the only country to do so. However, Boyer said he had been told by private agencies that, while they appreciated these opportunities, they did not want to be dependent on invitations from the government to attend UPU meetings. Instead, they wanted to be able to attend in their own capacities, as a matter of right. That was what the U.S. Government was trying to achieve, Boyer said.

Boyer said that some countries that had been very negative about UPU openness at the Beijing Congress now seemed a little more open, and perhaps a consensus could be achieved. However, there was increasing talk of procedural problems, and it was a concern that those opposing reform would now start to focus on procedural delaying tactics rather than on the substance of the issue. For example, if the CA decided to convene a plenipotentiary meeting that could put reform proposals into place, 126 UPU member countries (out of 189) needed to agree, and if a sizeable bloc of countries decided to object to reform, then the meeting could not be held and these reforms would not be possible.

It was noted that UPU staff and others had recognized that operation of a third council would cost staff and financial resources and could be a burden to the UPU. Some had pointed out that admission of private sector observers into the CA and POC could be achieved without creation of a third council. However, Boyer said, there seemed to be growing support for the third council idea, and the United States had decided not to oppose it since its chief goal would be achieved. Michael Regan of the U.S. Postal Service said he thought that agreement to a plenipotentiary meeting in 2002 could be obtained from the requisite 126 member countries if there was consensus in the CA on the need for such a meeting.

The Private-Sector Advisory Group

Boyer said that, in addition to the High Level Group, another major achievement of the 1999 Beijing Congress had been the creation of a private-sector Advisory Group. In fact, this was very similar to the third council idea that was being discussed by the High Level Group. Private-sector agencies were invited to go to Bern for one-day meetings twice a year, to meet with UPU staff and delegations of member countries, to learn about UPU affairs, and to make recommendations for action in the UPU. A major difference was that the participants in the Advisory Group did not have observer status in the CA, POC or the Congress, whereas the third council would have that status. In response to a question, Boyer said it was assumed that if the third council were created, the Advisory Group would cease to exist.

The U.S. Government had actively encouraged private sector agencies to take advantage of this opportunity for greater interaction with the UPU, Boyer said. He noted, however, that there had been problems with the Advisory Group meetings thus far. For the first meeting in May 2000, 27 organizations had been invited, and 19 attended. For the second meeting in October, 9 attended, and only 5 of them had been present for the first meeting. This appeared to reflect a decline in enthusiasm for the meetings. Some had complained that the meetings were not sufficiently substantive, but instead concentrated on procedural issues such as rules of procedure, agenda setting, and payment for the cost of interpretation and documents. There were also criticisms that the group was too disparate in interests for its members to coalesce in discussions of specific issues, and this made it difficult to design an agenda that would have broad appeal. The participants included express carriers, mailers, labor unions, equipment manufacturers and socially concerned agencies. Another concern was that virtually all of the participants were from Europe and North America, and there was no developing country representation.

Because of these problems, Boyer said, a steering committee had been created. The committee had met in February. Boyer and Regan had participated, as had Julian Oliver, head of the International Express Carriers Conference (IECC) and several others. Oliver had been very critical of the format and implementation of Advisory Group meetings, and he led the committee's discussion of proposals for an agenda for the third meeting of the Advisory Group, on April 30. At the end of its session, Boyer said, the steering committee had developed a constructive agenda for the next Advisory Group meeting, and Oliver had seemed pleased at the prospects for a better session in April. The next meeting would include discussions and presentations on the postal market through the year 2010 (with emphasis on the implications for the UPU), universal service, and specific postal issues in the European Union. Because the prospects were looking up, Boyer said the U.S. Government continued to encourage private agencies to utilize this opportunity.

Participants in the public briefing offered a number of ideas on operation of the Advisory Group:

• Several pointed out that Bern was not easily accessible for one-day meetings, and suggested the Advisory Group sessions be held elsewhere.
• One thought that advantage should be taken of new technology, which permitted tele-conferencing so that people could participate from anywhere, without the need to travel.
• One thought that UPU representatives could get time on the agendas of private-sector agency councils in order to facilitate dialogue between the agencies.
• One urged improvement of the UPU internet site, preferably without the use of a password. Boyer said the U.S. delegation already had urged this, since the UPU website was not very user friendly and there seemed no need to password-protect the vast majority of UPU documents. He understood UPU was working on this.

Several asked if private agencies would pay to cover the costs. Boyer said this was under active consideration in regard to the third council being considered by the HLG. Several of the better-endowed organizations had suggested they could contribute in some manner. Exact figures had not been discussed, but it was known that the private agencies would expect something in return -- at least observer status in the major governing bodies -- if they were to contribute. The representative of Federal Express confirmed this position. Since there was no observer status contemplated for participants in the existing Advisory Group, Boyer said he personally felt there should be no charge, that it was embarrassing for UPU to invite private agencies to a day of dialogue and then ask them to pay the costs.

Study of Article 43 of the Beijing Convention

Allison Levy of the U.S. Postal Service reported that USPS, the Department of State, and the Postal Rate Commission had completed negotiations for a study of the impact of potential elimination of Article 43 of the revised UPU Convention negotiated in Beijing in 1999. After competitive bidding, the contract had been awarded to the Battelle Memorial Institute. Levy said Article 43 permits a national postal administration to apply higher domestic rates to mail coming into that country from a second country if the mail in fact had originated in the country where it was delivered. This is known as ABA remail -- from Country A to Country B and back to Country A -- used as a means of obtaining the lower B to A postal rates under the UPU terminal dues system. Particularly under the new UPU terminal dues structure, the B country would likely be a developing country with lower terminal dues rates when mailing to an industrialized country.

The purpose of the study, Levy said, is to determine the impact of potential elimination of Article 43 on all stakeholders, with particular emphasis on the financial impact on the USPS and its ability to fulfill its universal service obligation at affordable rates. Prior to the Beijing Congress, the express courier industry had proposed that the United States seek to eliminate this provision of the UPU convention or unilaterally decide not to enforce it. The courier industry viewed Article 43 (and its predecessors) as anti-competitive and inhibiting free trade. USPS took the position that elimination of Article 43 would put at risk its revenue base and its ability to fulfill its universal service obligation. As a consequence, the Department of State, USPS and the Postal Rate Commission decided jointly to commission a study on the issue before the United States could take a formal position. Levy said the commissioned study set forth 11 tasks and established time lines for completion. The final product should be deliverable in October 2001.

Michael Regan of the USPS said that if UPU terminal dues rates were brought closer to the actual costs of delivering the mail, there would be little economic incentive for countries to engage in ABA remail. Refinement of the terminal dues system could make Article 43 unnecessary. The new study would focus on the major users of the international mail system, asking whether ABA remail would be used if Article 43 were eliminated. For USPS, the question would be whether the loss of revenue was significant or minor. Regan said that even though Article 43 had been approved in Beijing, there remained the option that the United States not apply it.

There were a number of comments and questions about this issue. One speaker said it was comical to undertake a study of whether companies would use a system of cheaper mail if it were available. Another pointed out that ABA remail was not the same as "direct injection" mail from another country, which is permissible under the UPU acts. One speaker asked if Article 43 applied in the case of mail produced in the United States and sent electronically to another country for delivery here. Regan of USPS said that Article 43 applied equally to physical mail that was taken from the United States to another country and returned, and to "non-physical" mail, sent electronically to another country for return to the United States.

UPU Quality of Service Fund

Juan Ianni of USPS described the new Quality of Service Fund (QSF) authorized by the Beijing Congress. He said that terminal dues paid on specific mail flows from industrialized countries to developing countries had been increased by 7.5 per cent. However, instead of going directly to national treasuries in the developing countries, the 7.5 per cent increase would go into a fund to be employed to improve the quality of postal services in the developing country. A board of trustees set up at UPU would make decisions on which projects would be fundable under the QSF, and would monitor its operations. About $17-$18 million was expected to be available in the first year of the QSF existence, 2001, and the Fund activities would last for five years. Ianni said that because the United States is the world's largest exporter of mail, a substantial share of the money going into the new QSF would derive from terminal dues paid by the United States. To ensure that the QSF money is well used, the United States is hoping to be elected to membership on the board.

In response to questions, Ianni said the amount of money involved could be substantial for a few countries, but less for most of the QSF recipients. Smaller countries would be able to save their shares from year to year and consolidate them for a bigger project, or they could join with neighboring countries in creating a regional project. It was explained that the 7.5 per cent increase had been a compromise. At the previous UPU Congress, developing countries had secured a 17 per cent increase that had not been targeted toward service or other improvements. In Beijing, the increase had been limited to 7.5 per cent, and all of the money was to go into the QSF to be applied to postal service quality improvements under strict controls. UPU staff administrative costs, originally targeted for under 10 per cent, now were estimated at only 5 per cent. Ianni said UPU staff and industrialized countries were going to ensure that countries applying for these resources understood the application procedures.

Quality of Service Link in Industrialized Countries

Lea Emerson of USPS reported on current negotiations at UPU regarding terminal dues for industrialized countries. In order to bring these rates closer to actual costs, especially in countries with high domestic postage rates, the UPU transition plan would provide for increases in these rates over a three-year period. A project team of the UPU Terminal Dues Action Group was now assembling cost and postage rate data that would be used in determining the new rates for industrialized countries beginning January 1, 2004.

Emerson said that a new approach was to tie terminal dues payments to the quality of service provided by the country delivering the mail. European countries already are doing this, she said, through the RIEMS system they are developing. Quality of service would be measured through the use of test letters containing computer chips which would provide information on a letter's location as it passed through electronic gates en route to its destination. A question still being debated, she said, was whether to allow reductions in terminal dues payments to a country whose service was sub-standard (penalty system), or to provide for higher level payments to countries that improve service (positive incentive).

Study of Customs Treatment

The House Subcommittee on Postal Operations in late 2000 had ordered a joint study by USPS and the U.S. Customs Service on customs clearance procedures for USPS. This study would also include examination of procedures applied to USPS and private carriers in order to ensure there was a level playing field for similar traffic. Joseph O'Gorman of Customs and Andrew German of USPS reported on progress of the study. O'Gorman said the two agencies were focusing on how to measure equivalent parcels. The post generally involves parcels sent from one residence to another, while private carriers generally handled business to business packages. The joint study was due to the appropriate committee in the Congress on June 28, 2001, and was expected to be released after that date.

Private sector representatives at the meeting asked about the progress of the study and about the Customs intention to conduct inspections of outbound mail, the practices of private couriers in reimbursing Customs for special services, and the Customs requirement of manifests of the contents of package transported by the private couriers. USPS said it was administratively difficult, if not impossible, for USPS to require manifests by private citizens sending essentially personal mail. The Customs representative was asked if the bar regarding manifests and reimbursements could be lowered for the private carriers to create more comparable customs treatment. The answer was that this would not be done, that Customs wanted all shipping to at least meet the customs requirements now imposed on the private carriers. It was acknowledged that this could lead to stronger requirements on similar parcels carried by USPS. In essence, it was the Customs desire to raise the bar for USPS for equivalent traffic and not to lower the bar for the private carriers.

Ratification of the Beijing Convention

Boyer said that the UPU Convention had been amended by the 1999 UPU Congress in Beijing. The new protocol to the convention had only recently been translated and made available for ratification by the UPU member states. The protcol had been sent to the White House for ratification, but no action had been taken. (Following this meeting, on March 30, 2001, President Bush ratified the protocol to the UPU convention, and subsequently the Department of State issued an explanatory statement about U.S. policy toward reform of the UPU.)

* * * * * * * *

PUBLIC MEETING ON ISSUES
RELATING TO THE UNIVERSAL POSTAL UNION

March 15, 2001, 2:00 - 4:00 p.m.
Department of State, Room 1408

AGENDA

1. Status of the UPU High Level Group reform efforts
Ambassador Michael Southwick
Department of State

2. Status of the UPU Private-Sector Advisory Group
Neil Boyer, Department of State

3. Terminal Dues

• Study of remail provisions (Article 43 UPU Beijing Convention)
  John Alepa, USPS
• Quality of Service Fund Status
  Juan Ianni, USPS
• New Quality of Service Link
  Lea Emerson, USPS

4. Customs Issues: USPS-U.S. Customs Study
Andrew German, USPS
Philip Warker, U.S. Customs

5. USG Ratification of the UPU Beijing Convention
Ambassador Southwick

6. Upcoming meetings:

• Postal Union of the Americas, Spain and Portugal (PUASP) Consultative and Executive Council meeting, March 19-23, 2001
• Postal Operations Council, April 18-27, 2001
• Private-Sector Advisory Group, April 30, 2001
• High Level Group on UPU Reform, May 1-2, 2001
• Council of Administration, October 18-26, 2001

7. Other matters

* * * * * * * *

U.S. GOVERNMENT PUBLIC BRIEFING
ON ISSUES RELATING TO THE
UNIVERSAL POSTAL UNION

March 15, 2001, 2:00-4:00 p.m.
Room 1408, Department of State

Documents Distributed

• Agenda for the Briefing
• Statement on "The Universal Postal Union and U.S. International Postal Policy"
• Agenda of Meetings of the UPU Postal Operations Council, April 2001
• Timetable for Meetings of the UPU Postal Operations Council, Advisory Group and High Level Group, April-May 2001
• Agenda of the Consultative and Executive Council of the Postal Union of the Americas, Spain and Portugal (PUASP), March 2001
• Summary Sheet on Proposed UPU "Sector Advisory Council"
• Report of the UPU High Level Group meeting of February 15-16, 2001
• Report of the UPU High Level Group meeting of October 12-13, 2000
• Report of the Advisory Group meeting of October 11, 2000
• Report of the meeting of the UPU Council of Administration, October 2000

* * * * * * * *

Participants in Public Briefing
On the Universal Postal Union

March 15, 2001
2:00 p.m. - 4:00 p.m.
Room 1408, Department of State

Department of State
BOYER, Neil A., Chairman

Pitney Bowes Inc.
LINNEHAN, Ann
UEMOTO, Karen

Graphic Communications Association
SCHARPF, Norman W.

Association for Postal Commerce
DEL POLITO, Gene
GALLO, Anthony

National Association of Letter Carriers
SAUBER, James

Trans Global Consultant
CHAIDO, Larry

Mailers Council
McLEAN, Robert E.

Postal Rate Commission
GOLDWAY, Ruth
ROBINSON, Charles

U.S. Customs Service
WARKER, Philip
O' GORMAN, Joseph

GAO
ANDERSON, Teresa
JOHN, Ken

U.S. Postal Service
REGAN, Michael
LEVY, Allison
LALLY, William
IANNI, Juan
EMERSON, Diana Lea
ALVIS, William
ALVERNO, Anthony F.
MAGALSKI, Michael A.
GERMAN, Andrew

Department of Commerce
HARSH, Bruce

Department of Justice
JONES II, William H.

USTR
ASCHER, Bernard

Readers Digest
ROWE, Kathleen

Experian
LUBENOW, Joe

Bloomberg
STRABEN, Amy

Federal Express
SPENCE, David

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