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UPU QOS Project is Good News for International Mailers

Date: September, 2009 --

'Terminal dues' are the amounts paid by countries to other countries as compensation for delivering letters and small packets in the home market. In short, countries pay each other 'postage' which is referred to as 'terminal dues'. And you, the mailer, pay those 'terminal dues' within the total postage amount you pay the USPS or other postal operator. Note that the UPU has no authority over what the USPS or any other Post charges the mailer. Moreover, countries are also free to negotiate their own inter- country 'terminal dues' amounts if they wish. The USPS has done this with many European countries and Canada.

Terminal dues have been a constant source of negotiation and work at the UPU since first implemented in 1969. Many countries view the UPU means of negotiating them every 4 years as creating inequality, hardship, and uncertainty for both mailers and posts. As a result in 2004 the UPU's membership set a goal called a 'target system'. All but the poorest countries are to enter this system by the end of 2013. For countries in the 'target system' terminal dues will be 'country-specific' and hopefully related to, if not based on, the actual cost of delivery within the destination country. This is a lofty target, since most countries not only don't know what their costs are, but many also have no accounting systems enabling them to determine those costs.

At present there are five categories of countries, or Groups, and the terminal dues amounts which a country pays are based on the Groups in which the dispatching and receiving countries are members. Group 1 contains current industrialized countries and current developing countries having reached a level of development similar to major industrialized countries. These countries are supposed to enter the target system in 2010. Group 5 are the least developed countries. Groups 2,3, and 4 are defined by their position on a 'postal development index'. Groups 4 and 5 will join 'after 2014'. Groups 2 to 5 are referred to as 'transition countries'.

Target system countries pay each other a rate per kilogram and a rate per item based on a percentage of the 20g domestic priority letter tariff which is adjusted annually according to the quality of service performance of the destination country. Maximum and minimum rates are specified for each year through 2013. Quality is discussed below.

Transition countries pay and receive amounts unrelated to domestic tariffs, based on a yearly increase of 2.8% of the adjusted 2009 rates and a worldwide average of 14.64 items per kilogram.

Quality is not forgotten here. A Quality of Service scheme has been created through which a country may claim and receive a 'bonus' amount on top of the terminal dues it receives if it delivers a specified percentage of inbound mail within 5 days of arrival at its office of exchange (J+5). Group 1 countries, i.e., Europe, US, Australia, Japan, Canada, must participate, and countries from other Groups may elect to participate. The target for Group 1 is 88% for 2010. Spain, a Group 2 country with a target of 85%, and Brazil, Group 3 with an 82% target, have elected to participate. The 'bonus' can reach 5% if the country achieves its target.

Finally, and very good news indeed, is the establishment of a Global Monitoring System to monitor the countries' performance. This is a very expensive operation requiring RFID-reader gates and reporting panels of mail recipients. The good news is that the pilot program for this system has commenced operations.

For mailers, all of this hopefully means more predictable and controllable rates, plus a better assurance of quality in destination countries.

Be on the lookout for our next Bi-Monthly issue of FreshData where we will discuss the Quality of Service Fund's (which benefits the least developed countries) progress on installing their monitoring system, development of key performance indicators, and report cards of postal performance.

Remember that Data Services can help you optimize your international mailing budget.