The Postal Illuminati

[REWahoo]

Ever wonder why you can purchase something from China for a delivered price less than you would pay for shipping alone if it was purchased in the US? I've often wondered why, and now I found the answer.

It's a conspiracy. Yes, it actually is.

Example: The Mighty Mug

It's a travel mug that's almost impossible to knock over, invented by a guy in New Jersey named Jayme Smaldone. A few months ago, Jayme realized he could order a knockoff Mighty Mug from China and get it shipped for less than it would cost him to ship his mug to a neighbor.

The reason for this price gap, Jayme claims, is a secretive group of postal policymakers that meets every four years to fix international shipping rates. A kind of postal illuminati.

You can thank (or curse, if you are Jayme Smaldome) the Universal Postal Union (UPU), headquartered in Bern Switzerland. This little known group of representatives from the Postal Services of 192 countries meets every four years to set the rules for international mail. And in doing so they have created a reverse trade barrier, actually changing the flow of the global economy.

You can download the Planet Money episode from NPR or link to the transcript here.

 

[marko]

Sadly, this is a minor player in the cast of those who really --and secretly-- rule the world.

 

[braumeister]

I'm sure it's far more complicated than most realize.

Similarly, a friend needed to import some things from China a few years ago and discovered that it only cost a few hundred dollars to ship a full 40-foot container from China to the US west coast. No matter what it contained, what it weighed, or how full it was. I would never have guessed that in a million years.

 

[NW-Bound]

I have been buying small electronic parts from China and Hong Kong, and the price is often not much more than the cost for an international postage stamp from the US. Obviously, the foreign vendors pay a lot less for mailing from their country than I do for mail from the US.

I assumed that the postal service in the destination country will have to eat the cost of delivery, and this NPR talk confirms that.

By the way, I never heard of the Unspillable Cup, but here it is.

 

[COcheesehead]

Not sure I would drink from anything cheap from China. BPA's, lead.

 

[Red Badger]

I had at least one foot in transportation/logistics for all of my civilian career. I was at a conference and met a guy from NC who owned some sawmills. It is not easy or cheap to get a truck to come to a mill nestled deep in the remote NC mountains. Anyway, his business was high end wood flooring. He would ship the wood to China, where it was processed into hardwood flooring. Then, the flooring was shipped back to DC's in the US to be sold. I found it almost unfathomable that bucket brigade of logistics was cheaper than processing the wood locally.

 

[CardsFan]

I'm sure it's far more complicated than most realize.

Similarly, a friend needed to import some things from China a few years ago and discovered that it only cost a few hundred dollars to ship a full 40-foot container from China to the US west coast. No matter what it contained, what it weighed, or how full it was. I would never have guessed that in a million years.

A few hundred dollars (China to US) sounds like a bit of an understatement. I think it more like $2,000 to $3,000, though probably lower if you are shipping thousands each year. Still a bargain if you can maximize the use of the volume and weight limit.

The cost to ship from US to China, however, can be under $500. This is because a high percentage of the containers are returning empty (explained by our trade deficit) and any money to offset the cost of the return trip is a plus. Port charges, customs clearance and drayage to/from rail spur or port are not included in this cost. However, when I was working, we would often ship containers from the Midwest to China for about $1,000, all costs included except duties.

 

[braumeister]

A few hundred dollars (China to US) sounds like a bit of an understatement. I think it more like $2,000 to $3,000

You're probably right, since I only know what my friend (Chinese-American) told me. He had the shipment arranged by relatives in China, which may also be part of the story.

Still, even $3K for a 40 foot container seems much cheaper than I would expect. Depends on what's in it, of course.

 

[davebarnes]

Speaking of TEUs.
Read this https://www.amazon.com/Box-Shipping-Container-Smaller-Economy/dp/0691170819
The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger
It is a quick read and a fascinating story

 

[Anna J]

I was listening to the same broadcast on NPR yesterday. It's amazing how all that works. It was an eye opener.

 

[Koogie]

Speaking of TEUs.
Read this https://www.amazon.com/Box-Shipping-Container-Smaller-Economy/dp/0691170819
The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger
It is a quick read and a fascinating story

You might enjoy this...

 

[Palmtree]

Thanks for the link. I've often wondered the same thing. I can buy an item from China on Ebay for $2.99. Somehow it's manufactured and shipped all the way to the U.S. and someone is still making a (small) profit.
I'm going to download the audio (if possible) and listen to it on my morning walk.

 

[ERD50]

Thanks, I read the transcript, and watched the Merchant Marine video.

I had always wondered about this. I buy some incredibly inexpensive electronics/hobby stuff from China. Often a small envelope, and sometimes a total cost of just a few bucks, including shipping (I hate the phrase 'free shipping' - it's included in the price).

I figured that a small envelope is a tiny, tiny % of a container, so OK, maybe they can ship it for pennies. But that did raise the question of local delivery - I was thinking, don't they essentially need to buy postage from the US dock to my home? This podcast explained that.

Though the explanation itself is sort of in-explicable. Why would a country agree to this? I guess the US thought it was 'good' because they were the winner for a while, and now the tide has turned, and they can't turn the deal around that fast?

Seems like a really stupid system. Why not just charge for local delivery?

-ERD50

 

[jebmke]

Sadly, this is a minor player in the cast of those who really --and secretly-- rule the world.

Cats?

 

[deserat]

I have purchased a few electronic parts from China when I was fixing my computer and was truly surprised at the low prices...I wondered about the quality, however, it was just fine.

Now, to ship anything to Europe or South America - ouch! I was trying to sell some of my yarn stash and the shipping was twice the worth of the yarn and that was using the postal service boxes that are a flat fee....insane.

 

[ERD50]

UPDATE - US to renegoitiate postal contracts

Saw this today. Please ignore partisan politics, it's a government action, politics are a part of it, no way to leave that out.

https://www.msn.com/en-us/money/mar...oosts-chinese-retailers/ar-BBOwvhn?ocid=ientp

President Trump moved Wednesday to withdraw from a 144-year-old international postal agreement that enables businesses in China to mail small packages to the United States at a hefty discount, an arrangement government officials said boosts foreign competitors and costs the U.S. Postal Service roughly $170 million per year. ...

“This has been a long-standing, long-festering problem,” said Robert Taub, chairman of the Postal Regulatory Commission, an independent federal agency.

...

Under the treaty, which sets fees that national carriers in 192 countries charge for mail delivery, the U.S. Postal Service bills China-based companies at a sharply discounted rate for parcels that weigh less than 4.4 pounds.

...

That resulted in $170 million in losses for the post office last year.

....

Administration officials said they informed the UPU, which is based in Switzerland, that the United States intends to withdraw from the pact — a one-year process, per United Nations rules.

...

UPU Director General Bishar Hussein said in a statement Wednesday that he “regrets the decision” and welcomed the opportunity to talk further with U.S. officials.

“The UPU remains committed to attainment of the noble aims of international collaboration by working with all its 192 member countries to ensure that the treaty best serves everyone,” he said in the statement.

...

Small packages from China to the United States jumped by 182 percent between 2011 and 2012, according to the latest figures from the U.S. Postal Service.

....

A stronger approach to securing better rates for the United States would include other developed countries, such as Norway, ...

-ERD50

 

[CaptTom]

I saw that, too. Not sure if it's a the right move or not. For example, when and how would these rates have come up for re-negotiation anyway? Is this just a political move to stake out a negotiating position?

I don't know. But if it gets the Post Office more realistic rates, I think it's a good thing. Even if it means I won't be getting small parts shipped from China for a few dollars, including shipping, any more.

 

[Fedup]

Interesting, I didn’t know we do that.

 

[Aerides]

Another positive is this has potential to level the playing field for US based small businesses of similar/same products. It is currently cheaper for a lot of these overseas sellers to ship to the US, than it is for a US seller to ship the same size/weight inside the lower 48.

Of course, lots of bureaucratic hurdles first so reality may not end up as rosy as it looks like right now.

 

[joeea]

Another positive is this has potential to level the playing field for US based small businesses of similar/same products. It is currently cheaper for a lot of these overseas sellers to ship to the US, than it is for a US seller to ship the same size/weight inside the lower 48.

Of course, lots of bureaucratic hurdles first so reality may not end up as rosy as it looks like right now.

When you write "level the playing field" you should also write "we all pay more".

 

[USGrant1962]

I've been shocked a few time when purchasing crap like a charging cable or HDMI cable on Amazon to find it shipped directly from China. Total price $2.00 to $5.00. Seems wrong to me, and now I understand why.

 

[ERD50]

I saw that, too. Not sure if it's a the right move or not. For example, when and how would these rates have come up for re-negotiation anyway? Is this just a political move to stake out a negotiating position?

I don't know. But if it gets the Post Office more realistic rates, I think it's a good thing. Even if it means I won't be getting small parts shipped from China for a few dollars, including shipping, any more.

When I read some of the background when this thread first popped up, I didn't really get an answer to that. It seems as if this at one time favored the US, and maybe the rest is just inertia?

Yes, I too got a kick out of buying these cheap parts from ebay or ali-express, different parts from different suppliers, and still super cheap with (slow) shipping. I'll miss that, but I wan't ordering huge amounts, so not a big deal overall for me.

When you write "level the playing field" you should also write "we all pay more".

Hmmm, I'm not so sure in this case. From what I understand of all this, we were paying the shipping costs all along. But rather than the cost being assigned to my specific purchase, it must have just got pooled into the US Postal budget. That's got to get paid for one way or the other, either in overall postal rates, or some 'can-kicked-down-the-road' future bill.

-ERD50

 

[aja8888]

Hmmm, I'm not so sure in this case. From what I understand of all this, we were paying the shipping costs all along. But rather than the cost being assigned to my specific purchase, it must have just got pooled into the US Postal budget. That's got to get paid for one way or the other, either in overall postal rates, or some 'can-kicked-down-the-road' future bill.

-ERD50

Exactly, WE, the taxpayer, is covering the $192 mil. Not too hard to figure that out. I don't believe the Chinese government is writing our Treasury a check to cover it each year.

 

[ERD50]

Exactly, WE, the taxpayer, is covering the $192 mil. Not too hard to figure that out. I don't believe the Chinese government is writing our Treasury a check to cover it each year.

Yeah, but I just looked and USP revenue is ~ $70B. So ~ $200M is only ~ 0.3%. So kinda small potatoes in relative terms.

Still a big amount though, and it should help US businesses be more competitive, as Aerides mentioned earlier.

-ERD50

 

[Sunset]

Better buy all that weird cheap chinese stuff, that is so fun, before the rates go up.
I need more magnetic balls, etc..