Parcel rate increases for US market analyzed

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UK to USA parcel delivery specialist ParcelHero’s head of consumer research, David Jinks MILT, says that from July 1 many companies using the United States Postal Service (USPS) for final delivery will have seen prices rise significantly. He notes that some shippers sending small parcels to the USA are facing a rise in costs of over 100% this month. The increases will hit many mailings that use USPS for final delivery within the USA and put up prices for many traders using the USPS-China ePacket service for e-commerce. 

Here, Jinks explains why the new charges will have a considerable impact on business and e-commerce shipping prices to the USA from China as well as countries, such as the UK, with close trading links to the USA.

USPS has introduced significantly increased charges on packets arriving in the USA because President Trump went to war with China last year over the cheap rates China was enjoying sending parcels of 2kg (4.4 lb) or less to the USA. He was angered by the fact US manufacturers and sellers were potentially losing out on sales, because it cost more for American retailers to send a typical e-commerce parcel between US states than it did for a trader in China to send a packet all the way from China to a US address.

The result of the battle was that the Universal Postal Union (UPU) – the governing body of all international mail services – agreed the USA could set its own self-declared rates on small packages. In reality, the UPU was given little choice, as the alternative would have been that the US quit the organization altogether, which could have led to the collapse of all international mailing agreements.

The new USPS rates for the US leg of an international package mailing to the USA (defined as ‘Inbound Letter Post Small Packets and Bulky Letters’) are US$2.87 (around £2.29) per piece and US$3.95 (around £3.1) per kilogram. That’s around 70% of US domestic postage rates and represents a massive jump for shippers of typical, small e-commerce items from some countries, including China. The overall increase senders will see is highly variable, but the US International Mailers Advisory Group has estimated the USPS inbound rate from China will increase 100% or more from the existing rate.

That will not be the only significant impact of the new rates. We’ve already seen the UK Post Office move rapidly to avoid taking big losses on parcels to the USA. The amount it pays the USPS for the US leg of a shipment has soared as a result of the impact of Covid-19 and the new US self-declared ‘terminal dues’, forcing it to pass on the increase to customers.

It has stated, “As a result of exceptional cost increases outside of our control, we are reluctantly introducing pricing changes for parcels being sent to the USA from July 1. These costs are a direct result of: an increase of more than 100% in the fees the US Postal Service (USPS) charges for the last-mile delivery of international mail. If you are a personal customer, or sell regularly on marketplaces, this will affect the prices you pay over the counter at a Post Office branch.

The new dues will also significantly affect ePacket services. The USPS-China e-commerce shipping service introduced in 2011 revolutionized low-cost imports from Hong Kong and China by reducing rates to almost the same as sea shipping, while knocking weeks off the transit time. Typically, a shipment by sea between China and the USA took eight weeks, whereas most ePacket shipments are under 30 days.

The main benefit for sellers, however, was the low price of ePacket shipments. As an example quoted by Trackingmore.com, it cost Chinese merchants on sites such as Alibaba around RMB 47 (US$6.72/£5.32) to transit a 0.5kg package from China to the USA using ePacket. If they chose an alternative service, such as China Post Express Mail System (EMS) normal rates, it would cost RMB 85 (US$12.15/£9.63).

ePacket offered its best value on very small packets. A 28g package cost just 11 Yuan (US$1.63/£1.30) to ship from China to the USA. These very cheap shipping rates with ePacket meant US consumers gained lower prices and Chinese traders still made a reasonable margin.

Importantly, it was not only Chinese sellers who benefited from the rates. Many drop shipper US traders gained from the ultra-low shipping costs. US drop shippers sell items on US online marketplaces that they have sourced from Chinese websites such as AliExpress. They have them delivered straight to US customers, without ever handling or storing the product themselves.

How much will the changes cost Chinese sellers, US drop shippers and, ultimately, the US public? According to China Post Tracking, the cost of an ePacket mailing to the USA is now RMB 25 (US$3.57/£2.83) per single piece (the price immediately before July was around RMB 15 Yuan [US$2.15/£1.65]) and RMB 70 (US$10/£7.93) per kg with an additional 15 Yuan (US$2.14/£1.70) per kg surcharge.

Now that its price advantage has gone, many traders selling to the USA using ePacket for drop shipping may decide that they want to switch to international couriers. At least that gives the option of a far faster service between destinations such as China and the USA. They may also consider concentrating on bulk orders to reduce overall costs and warehousing stock within the USA.

For the majority of UK sellers shipping directly to the USA, it is economy mailings of up to 2kg that will be most affected by significant price increases at USPS, as these frequently use the postal service for final delivery. Apart from these deliveries, it is likely to be traditional UK Post Office services that connect to USPS deliveries that will be most affected. Express courier shipments such as those available from ParcelHero should, in contrast, be little affected by the new charges.

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