A powerful United Nations agency is quietly considering allowing companies into a 145-year-old international mailing pact - and it could give Amazon, UPS, FedEx, and a slew of e-retailers unprecedented shipping power
- The Universal Post Union, founded in 1874 as an agency of the United Nations, governs how the world's postal rates are set.
- Unlike other specialized agencies within the UN, the UPU does not count any companies among its members. Its 192 members are exclusively sovereign nations.
- But for the first time, the leadership of that shadowy agency is considering admitting private enterprise to its membership, too.
- Director-General Bishar Hussein invited public and private sector players to a forum in Berne, Switzerland set for January 28, 2020 to discuss the role of corporations in the UPU.
- FedEx, UPS, Amazon, Deutsche Post DHL Group, and Stamps.com confirmed to Business Insider that they plan to send representatives to the January conference.
- Visit Business Insider's homepage for more stories.
The United States Postal Service has been infamously slammed by the decline of letter mail.
So, too, has the Universal Post Union - a specialized agency within the United Nations that sets the world's postal rates. It has 192 members, all of whom are sovereign nations. The UPU is crucial for directing the flows of international mailing and e-commerce, but it's not well understood outside of the international shipping industry and the companies who rely upon it.
The UPU's leader, director-general Bishar Hussein, is aware of the decreasing relevance of national postal offices as the companies that power e-commerce become increasingly profitable - like UPS, FedEx, DHL, and even increasingly logistics-savvy retailers like Amazon and Shopify.
In an about-face for the 145-year-old agency, Hussein has proposed that the UPU "opens up" to these corporations. He invited public and private sector players to a one-day forum in Berne, Switzerland, set for January 28, 2020, to discuss the role of corporations in the UPU, according to several invitees and internal documents viewed by Business Insider.
Amazon, FedEx, UPS, Deutsche Post DHL Group, and Stamps.com confirmed to Business Insider that they plan to send representatives to the January conference. Many of these corporate postal stakeholders are part of the UPU Consultative Committee - a nonvoting organization that represents the private sector.
The US Postal Service had no comment, and the UPU did not respond to multiple inquiries for comment.
The shift to increase UPU private-sector participation will band together warring parties. One particular alliance among the private sector is likely Amazon and FedEx, which have alternatively slammed each other in 2019 as the retailer throws itself into the transportation sector.
And it highlights the rapidly transforming nature of how people connect and do business: Fewer letters, more online orders. E-commerce is expected to jump from 10% of worldwide retail sales in 2017 to 22% in 2023 - and many of those purchases aren't domestic. "It's exciting times and, for some people, nerve-wracking," Amine Khechfe, chief strategy officer at Stamps.com, told Business Insider.
A changing environment
The post offices of the UPU's 192 member nations once dominated their countries' letter and parcel movements, Hussein wrote in an internal memo.
The post office's market share has decreased in recent decades. Post offices went from having a virtual monopoly to claiming 72.8% of letter market share, 39.3% of express mailings, and 37.8% of packages, according to the UPU memo.
"At the international level, post offices are increasingly engaged in competitive e-commerce services rather than traditional letter delivery services," Jim Campbell, an attorney and postal policy consultant, told Business Insider.
Everything that isn't a post office increasingly dominates global shipping - even though those entities aren't part of the transnational shipping organization that determines how packages are moved around the globe.
"In spite of these transformations, stakeholders from the wider postal sector are not yet fully represented at the UPU, thus potentially restraining the organization from retaining its universal nature," Hussein wrote in the memo.
Industry insiders who spoke to Business Insider said companies like UPS, FedEx, and Amazon, as well as smaller e-commerce fulfillment players like Shopify and ShipStation, are interested in increasing their engagement with the UPU.
Granting companies the ability to vote would potentially even out the playing field between the private and public sector; the latter has lower terminal dues and, some say, undergo less customs enforcement.
"We all access the network," Kate Muth, who is executive director of the International Mailers Advisory Group, told Business Insider. "If the UPU is setting rules and regulations that impact the sector, shouldn't they have a better seat at the table? And how do you ensure the rules and regulations aren't overly favorable to the postal operators?"
The demands from the private sector contrast with the economic reality seen by national post offices - and that contrast is particularly remarkable in the US.
From 2000 to 2019, UPS and FedEx have seen their fiscal year revenues jump by 149% and 282%, respectively. But the US Postal Service's revenue bumped by just 10% in that same time period. The USPS hemorrhaged some $69 billion from 2007 to 2018.
And this fall, the USPS saw its first volume decline since 2010, a drop that industry watchers attributed to FedEx and Amazon increasingly in-housing their own parcels. As Morgan Stanley analysts wrote in a recent report, Amazon is outsourcing its lowest margin shipments to USPS while keeping lucrative deliveries in its internal network.
The UPU is 145 years old, but you probably haven't heard about it until this year
The UPU recently enjoyed a rare news cycle in the mainstream media. President Donald Trump threatened to pull out of the UPU in October 2018, forcing the organization to mend its rules in October 2019 to be more favorable to US manufacturers. White House trade adviser Peter Navarro said the reform in postal dues would save Americans $300 to $500 million annually.
The Trump administration challenged the UPU's sliding-scale fee structure, which granted highly-subsidized rates to developing countries. But as e-commerce exploded, retailers in China, in particular, were able to send goods to US households for ultra-cheap rates. Chinese manufacturers could sometimes access rates that are even lower than what American manufacturers can access in shipping domestically.
Those complaints by the Trump administration are similar to the gripes that private carriers have with the UPU - certain countries benefit from lower terminal dues, while postal offices on the whole are able to circumvent certain customs regulations, these companies say.
"Private carriers believe that, at least with respect to international e-commerce services, postal operators enjoy some unfair advantages because of the UPU," Campbell said.
An emergency meeting this fall prevented what an industry expert described to TIME as "Trump is having his own Brexit." Hussein said the decision to reform those UPU rules comprised "the most remarkable day in the history of the union."
The news cycle likely educated Americans about the important yet shadowy agency. But it also forced executives at retailers and transporters to see how the rules that impacted US manufacturers also may be affecting their own companies.
"Up until this point, the greater private enterprise community may not have thought a lot about the UPU and what the dynamic is around the world and what the impact is," Krish Iyer, who is the director of strategic alliances at shipping solution company ShipStation, told Business Insider.
"I think that now with more private enterprise eyes on it, they realize the importance of it and therefore will try to engage both the UPU as an organization and the posts that are in question," Iyer added.
And what they're learning, according to an industry expert familiar with the viewpoints of major private-sector players, is surprising them. "The UPU has kept everything non-transparent and non-complex," the expert, who spoke on background, told Business Insider. "And finally, that is now being exposed and the world is learning about them."
It differs from other specialized agencies
The UPU has lacked corporate membership since it was established in 1874. However, Hussein wrote in the internal memo that that's unusual compared to other UN agencies.
"This is at odds with the transformations undertaken by other sectorial agencies in the United Nations system, which have all expanded their representativeness to a wide range of stakeholders operating in their respective industries," Hussein wrote.
The model the UPU would likely mimic is that of the International Telecommunication Union, which oversees global information and communication technologies.
The ITU counts more than 700 private-sector members, along with academics and almost 200 participating countries. These include companies ranging from the Afghan Wireless Communication Company to Apple. Only the countries can vote, but the nongovernmental members are still afforded some influence in what happens.
This large membership is also seen at UN industry organizations like the World Tourism Organization, which has some 500 affiliate members from local tourism associations and elsewhere in the private sector.
"The Union has been criticized by some on the outside as being too slow, bureaucratic and political," a Deutsche Post DHL spokesperson told Business Insider. "So, looking at International Air Transport Association or International Civil Aviation Organization, or the ITU, an increased participation of non-postal organizations could potentially enhance the reputation or even the importance of the UPU - in Hussein's view."
Increasing the corporate power at the UPU would likely enable massive transportation companies like UPS and FedEx, as well as retailers like Amazon and Shopify, to engage in policies like determining how addresses are formatted globally, worldwide postal rates, how postal barcodes should appear, and a slew of other policies that private players are increasingly engaged in.
"You have this postal network that's used by a lot of the private sector, and a large, bureaucratic organization that moves slowly - the UPU," Muth said. "But the market is changing so fast."
Read the agenda for the Jan. 28, 2020 meeting
