US Postal Service weathers ‘unprecedented decline’ in international volume

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Dive Brief:

  • The U.S. Postal Service is weathering “an unprecedented decline” in international volume despite a boom in the cross-border e-commerce market, the agency’s Office of Inspector General said in a May 15 white paper.
  • Total USPS inbound international volume decreased 74% over the past five fiscal years, while outbound international volume fell 38% over the same period. Increased competition, new international supply chain models and higher prices for lightweight postal products all contributed to the decline, the OIG said.
  • To combat the volume drop, the report suggested USPS develop commercial shipping options, make the postal channel easier to use and expedite efforts to combat counterfeit, low-cost shipping labels on packages entering the U.S.

Dive Insight:

The Postal Service wants to boost its standing versus the likes of FedEx and UPS as part of a 10-year transformation plan under Postmaster General Louis DeJoy, and growing its cross-border package volumes would help it do so.

Agency management said in a response to the OIG’s white paper that it agrees it “is under increasing competitive pressure in the international package market,” with slower delivery times, higher rates and limited visibility challenging the global postal model.

Reasons for the volume declines vary based on whether the package is inbound to the U.S. or outbound to another country, according to the report.

For inbound volume, large shippers have increasingly moved to alternative shipping models in which packages are consolidated and enter into the U.S. as bulk commercial shipments. These packages are then passed on to the Postal Service and other carriers for last-mile delivery, leading the agency to deem them domestic shipments rather than international.

“As a result, the role of the Postal Service in the international package supply chain is becoming that of [a] domestic delivery provider, which involves both benefits and challenges,” the OIG said.

Meanwhile, the Postal Service’s international outbound volumes have been in decline since the 2013 fiscal year. The OIG noted that competitors have outperformed the agency’s package products in this space when it comes to things like speed and reliability.

Some of those shortcomings are due to pandemic-related disruptions, as the agency suspended package delivery to more than 20 countries. As of June 2, mail service suspensions are still in place for more than two dozen countries because of pandemic impacts and other disruptions, according to the Postal Service.

“Postal Service management indicated that the uncertainty created by suspensions also led several shippers to permanently shift all their outbound volumes to other carriers, creating volume losses that extended beyond the countries initially affected by suspensions,” the OIG said.

The OIG recommended several ways for the Postal Service to become more competitive in the international package space, including the offering of a “Delivery Duty Paid” solution for merchants to know how much sales tax and customs duties will be due in the destination country.

Delivery Duty Paid, already offered by most commercial carriers, allows foreign online buyers to pay these costs upon purchase rather than upon delivery, leading to a better customer experience. The report said the Postal Service began development work on such a solution this year.

Editor’s note: This story was first published in our Logistics Weekly newsletter. Sign up here.

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