March 24, 2004

Report on the annual meetings of the Council of Administration and Postal Operations Council of the Universal Postal Union (UPU) in Bern, Switzerland, 2-14 February 2004

Released by the Bureau of International Organization Affairs

Introduction

This report summarizes the decisions taken, discussions held and work accomplished at the annual meetings of the UPU's Council of Administration (CA) and Postal Operations Council (POC).

Since the quinquennial UPU Congress will take place in September of this year in Bucharest, both Councils met early this year in a combined two-week session to give final approval to documents and decisions reflecting the work the Councils have achieved since the 1999 Beijing Congress. Much of the deliberations in Bern to a large extent therefore focused on final touches on CA and POC proposals and documents for submission to the Bucharest Congress.

Nevertheless, a handful of issues -- particularly terminal dues, the Quality of Service Fund, reclassification of countries, and Extra-Territorial Offices of Exchange (ETOEs) -- provoked energetic debate in Bern. Firm decisions were taken on terminal dues and the classification of countries for the purpose of terminal dues calculations, while the U.S. delegation's serious concerns about the structure of proposed reallocation of payments to the Quality of Service Fund left a final decision on a proposal on this subject to the Bucharest Congress in suspense. Efforts by the CA to reach a decision on ETOEs ended in a deadlock, as the CA decided not to decide on this issue, passing responsibility for a decision to the Bucharest Congress.

Other major results of the meetings in Bern included full participation of private sector representatives in the POC's Customs Support Group -- a major demonstration of the UPU's further openness towards private sector involvement in its work -- as well as decisions on parcel post inward land rates and actions on a range of issues described below.

The U.S. delegation to the POC and CA was led by Donald Booth, Director of Technical Specialized Agencies of the Department of State's Bureau of International Organization Affairs. Other members of the delegation included Dennis Delehanty, also of the Department of State; James Wade, Vice President, International Business of the U.S. Postal Service; Linda Kingsley, Vice President, Strategic Planning, Ruth Goldway, U.S. Postal Rate Commissioner; Mike Regan, Lea Emerson, William Alvis and Anthony Alverno all of USPS; and Charles Robinson of the U.S. Postal Rate Commission. In addition, several USPS managers attended meetings of POC groups in Bern. A number of U.S. private sector representatives participated in the Advisory Group meeting as well as in CA and POC committee and plenary meetings.

Postal Operations Council (February 2 to 6)

Terminal dues

As expected, the issue of terminal dues consumed a large part of the deliberations during the first week of the POC/CA session, beginning with a two-day World Roundtable on Terminal Dues attended by 284 participants from 109 member countries and organizations. Support for the Convergence Group terminal dues proposal1 swept through the halls during the Roundtable when 83 countries spoke in favor of the proposals as a package, while 11 spoke in opposition. This support continued through the Terminal Dues Action Group meeting that voted 51 in favor of the package and nine against. The POC plenary subsequently voted, with 30 of the 40 members voting in favor of sending the proposals forward to Congress, and five against. The CA, in turn, endorsed the proposals for submission to Congress in a similar vote of 33 in favor and three opposed.

Despite these ostensibly overwhelming majority votes, most countries expressing general support for the proposals also tempered their support by voicing several serious concerns. One major concern related to the duration of the transition period to a single cost-based system for all countries, rather than the separate "target" and "transitional" systems. Many countries expressed concern that there was no defined end-state, while other countries, mainly developing countries, declared that there must be a long transition period. The Resolution on future terminal dues work set two Congress cycles, i.e., the period from 2006-2013, by the end of which all countries would pay cost-based, county-specific terminal dues. Other concerns related to rate increases for the 2006-09 period -- some countries thought the rate increases were too high, while others stated that the increases were not enough to cover their costs.

____________________
1 For a detailed description of the Convergence Group terminal dues proposal, please refer to the October 2003 Council of Administration Report on this web-site.

Quality of Service Fund (QSF)

Although the U.S. generally supports the Convergence Group proposal with some refinements, such as establishment of an end state for the current bifurcated terminal dues system, the component of the proposal concerning a mechanism by which payments would be made to the LDCs (Least Developed Countries) triggered strong opposition by the U.S. delegation. Under the scheme floated by the Convergence Group, the current 7.5% additional terminal dues payment for the QSF that Industrialized Countries (ICs) pay to Developing Countries (DCs) would increase to 9%. All DCs would then pass along 2% of their QSF receipts to the LDCs. The difficulty with such an arrangement is that the essential purpose of terminal dues -- to ensure that appropriate financial compensation is paid to the destination postal administration for the costs it incurs to deliver inbound international mail -- would be severed, at least to the extent that a portion of terminal dues would be diverted to a pool of funds subsequently redistributed to a certain group of countries. To the U.S., such an arrangement would be the equivalent of a mandatory international levy. The U.S. delegation spoke forcefully against this component of the current terminal dues proposal. By the end of the two-week session, the Terminal Dues Action Group agreed to try to craft a solution that would eliminate pooling of payments in the POC terminal dues proposal to be put forward to the Bucharest Congress.

The position of the United States is quite serious: if the UPU Acts adopted at Bucharest include provisions for such pooling of terminal dues payments, the U.S., which pays more than one-third of the total Quality of Service Fund, would not be able to make QSF payments. An alternative arrangement is needed by the Bucharest Congress.

New U.S. Bioterrorism regulations cause senders abroad serious difficulty

At the February 3 meeting of the Customs Support Group, the difficulties faced by senders abroad in complying with the U.S. Food and Drug Administration's new regulations governing the importation of foodstuffs to the United States dominated the discussions. These regulations were introduced as a result of legislation passed by the U.S. Congress under the Public Health Security and Bioterrorism Preparedness and Response Act. Under the regulations, senders abroad must obtain a Prior Notification number for each shipment containing food via the Food and Drug Administration's website.

In an effort to alleviate the difficulties caused to senders abroad wishing to send foodstuffs in items shipped through postal or express delivery service companies, the Group decided to collect information on the specific problems experienced and transmit the information to the Department of State, which would take the matter up with appropriate U.S. Government agencies.

POC may gain limited authority in setting parcel inward land rates

The POC approved a proposal which, if endorsed by Congress, would give an important role to the International Bureau and POC in the fixing of each administration's inward land rate for parcels. Under the proposal passed by the POC, the base rate for all administrations' inward land rate would be set at 71.4% of their 2003 rates. Administrations would receive bonus percentages that would return their inward land rate to 100% if they offer a set of five product features. The five features concern tracking of parcels, delivery to the home, acceptance of liability, obtaining a signature upon delivery and development and publication of delivery standards. While this approach is a good initial attempt to reduce the persistent inflation of inward land rates, the U.S. delegation argued that rates should be based on domestic costs and cannot be capped if costs are not covered. Of equal concern is the lack of a robust measurement system, validated by a neutral third-party auditor, to gauge the application of the five service features.

In a vote that surprised the Chairman of the POC's Parcels Project Team, the POC narrowly rejected a proposal put forward by the Team that would make the tracking of parcels mandatory in the UPU Acts. Like the proposal concerning the mechanism to reduce inward land rates, the U.S. has concerns about the value of provisions in the Acts that can be neither measured accurately nor enforced.

A suggestion made by the Project Team to study the possibility of combining the UPU's Post-Bucharest work on parcels with that of the EMS Cooperative (that is, to add parcels to the work plan of the EMS Cooperative) or create a separate "Parcels Cooperative" was scrapped by the POC. (In a separate action, the EMS Cooperative Board had rejected the first of these two ideas.). No solid proposals were advanced to Congress which might make the POCs' work on parcels after Bucharest more effective. The subject is urgent and timely. A document on the work of the Project Team for Congress notes that worldwide international parcel volumes fell by 35% from 1990 to 2001.

UPU Telematics Cooperative comes under fire for its new service pricing

The 111-member Telematics Cooperative, which guides the work of the UPU's Postal Technology Center (PTC), held a series of meetings aimed primarily at acquainting postal managers with the Cooperative's IT products. In late 2003, the PTC sent a new pricing structure to large volume users (postal administrations) of Telematics Cooperative products. Some increases were as high as 3000%. While the U.S. Postal Service does not use these services, many USPS partners that share Electronic Data Interchange (EDI) information on their mail flows with the United States do use the services. The proposed increases are due to price increases imposed by the new network provider for EDI message traffic. This issue overshadowed all other discussions at the various Telematics Cooperative User Group meetings. The PTC is negotiating volume discounts with its network provider, but until the negotiations are final, users will face extraordinary increases outside a normal billing cycle.

Another issue attracting close attention in Bern was that of the revision of the Telematics Cooperative Statutes. In late 2002, the USPS had put forward proposals aimed at overhauling the Telematics Cooperative Statutes. The main thrust of the proposals would be to have the Cooperative Board members elected directly by the entire membership, which logically should make the Board more accountable towards the membership. A working group set up to revise the Statutes on the basis of the USPS's 2002 proposals met on February 4 to discuss the latest version of the revised Statutes.

Endorsement for a worldwide J+5 standard for mail delivery

The POC applied its seal of approval to a proposal put forward by the Quality of Service Project Team to set J+5 as the overall worldwide average standard for the delivery of priority letters. In postal lexicon, "J" stands for the date on which a letter is mailed (from the French "jour"). A "J+5" standard would mean that a letter mailed in the origin country would be expected to be delivered to the addressee in the destination country five working days after it is mailed. According to the draft resolution, 50% of letters should meet this standard.

This global J+5 standard, if approved by the Bucharest Congress, would be a major step forward for the UPU. For the first time, the organization would have pronounced upon the length of time it should take, on average, for international letters to be delivered after they are posted. The global J+5 standard nevertheless raises practical considerations about measurement methodologies which may take years before solutions satisfactory to all are developed and implemented. Worth noting, though, is text in the resolution to encourage the development of regional standards that would be considerably more rigorous than the worldwide standard.

EMS Cooperative evaluates its effectiveness and discusses its future role

At a workshop held on January 30, the EMS Cooperative formed teams to analyze the market for EMS service in preparation of drafting a business plan for presentation to the organization's next General Assembly on September 28 in Bucharest.

One week later the POC plenary approved a draft Congress resolution proposing that the UPU general budget continue to fund institutional and support costs, while the EMS Cooperative would complete funding for all staff positions. The Cooperative would thereby return two staff positions to the International Bureau, and EMS Cooperative expenses as such would no longer be included in the regular UPU budget. This draft Congress proposal was endorsed by the CA the following week.

Proposals on liability put forward to Congress

On February 2, the Liability Project Team considered a package of proposals for submission to Congress covering a wide range of issues, including the following:

  • optional forwarding of inquiries on ordinary items between administrations;
  • insertion of valuables in registered items;
  • provisions to allow administrations to pay claims without receipt of an inquiry; and
  • absolving administrations from liability for items sent to non-existent addresses.

The following week the POC approved these and a series of other proposals related to liability which will now be put forward to the Bucharest Congress. The POC, however, rejected several draft Congress proposals presented by the Project Team, including:

  • a series of proposals to establish an optional supplementary indemnity for registered service;
  • proposals to set a conclusive presumption of loss if an article has not been delivered or returned to sender within a two month period; and
  • a proposal to establish a one year statute of limitations on legal proceedings related to indemnity claims.

The United States opposed this last proposal on the grounds that the Convention was not the appropriate vehicle for effecting changes to federal statutes of limitations in the context of indemnity claims for loss or damage to international mail.

Short takes: The first meeting of POC after the Bucharest Congress is tentatively scheduled to take place in Bern January 17-28, 2005. .... This session will tackle the scores of proposals submitted to Congress aiming to revise provisions of the Letter Post and Parcel Post Regulations ... A resolution adopted by the POC for Congress on the UPU's policy toward standards stresses that the Standards Board shall continue to develop standards from an "enabling viewpoint" and not a regulatory standpoint ... The POC approved resolutions to continue the UPU's work after Bucharest on postal security, postal development, standards, environmental issues, direct mail, marketing, postal financial services, customer relations, cooperation with IATA and the World Customs Organization and standardization of addressing through the work accomplished under the POST*Code project.

Council of Administration (February 9 to 13)

Classification of countries for calculation of terminal dues rates

The CA approved a Congress resolution that would endorse the new UNDP system for categorizing countries as "net contributor countries" (NCCs), "middle-income countries", and "low-income countries. " This issue of classification of countries had triggered intense debate within the UPU over the past year, since the IB had learned and announced to the UPU membership that the UNDP had overhauled the system by which it has classified countries upon which the current UPU terminal dues system is based. In 1999, the UPU adopted the list for the different purpose of assigning separate terminal dues rates, and systems for calculating the rates, to the two categories of countries.

Since 2000, much of the work of the CA and POC on terminal dues had been premised on the assumption of a more or less static list of industrialized countries and developing countries. The UNDP's decision to overhaul the structure of its list and apply three rather than two categories of countries caused both the CA and POC to take the new UNDP classification of countries into consideration in its work in developing proposals for the terminal dues system to be adopted by the Bucharest Congress.

Under the draft Congress resolution approved by the CA, countries that would move from the status of "developing country" to NCC status would be allowed a four-year grace period before entering the terminal dues "target system." For the duration of the Acts of the Bucharest Congress, they would not be required to pay into the UPU's Quality of Service Fund and neither would they receive resources from the Fund.

ETOEs continue to stymie the CA

In its plenary session on February 12, the CA made no progress on resolving the complex problem of extra-territorial offices of exchange, other than to signal the difficulties that the Bucharest Congress will face in reaching consensus on a decision on this issue. Before the CA session, Canada had submitted a proposal on the subject of ETOEs that in a slightly revised version gained the co-sponsorship of Japan, Spain and the United States. Under the proposal, the CA would declare that ETOEs are commercial operations and that items sent from ETOEs are not to be covered under the Acts of the UPU unless so authorized by the legislation of the country of destination. The proposal further specified that barring such exceptional authorization, items from ETOEs could not be included on UPU postal documentation, such as the CN 38 delivery bill or the CN 22 and CN 23 customs declaration forms.

At the CA plenary, five countries supportive of ETOEs moved to postpone debate on the subject until the Bucharest Congress which, given the divided opinions in the hall, was the result finally reached after long deliberations about process rather than the substance of the Canada proposal. In view of the difficult nature of the issue, the CA agreed to put forward two opposing proposals to Congress, that is, the Canadian proposal for a Resolution declaring that ETOEs are commercial entities and outside the scope of the UPU Acts, as well as two proposals to amend the UPU Convention that would in essence, legitimize ETOEs under the UPU Acts, the approach supported by several European countries that operate ETOEs themselves.

Proposals to form Consultative Committee with private-sector members still solidly on track

The CA further endorsed the long-awaited creation of a permanent entity, the Consultative Committee, whose members are drawn from private-sector trade associations as well as public-sector representatives of member countries. The final decision to form this Committee will be taken during the first week of the Bucharest Congress.

In related decisions, the CA set October 5 for the constituent meeting of the Consultative Committee and left open the possibility of increasing the number of member countries on the Committee from six to ten (that is, from three POC members and three CA members to five from each Council.)

Acts of the Union Project Team tackles issue of reservations

On February 4, the Acts of the Union Project Team, chaired by Bill Alvis of USPS, approved draft Congress proposals which would:

  • amend the UPU Constitution to make clear that reservations to the Constitution and General Regulations are not permitted,
  • amend the Convention to designate specific provisions which are fundamental and against which reservations are not allowed;
  • amend the Convention to make reservations reciprocal; and
  • amend the Rules of Procedure of Congress to improve the way that proposed reservations are considered by Congress.

The Project Team also approved a proposed resolution for Congress to direct the CA to develop proposals to replace the term "postal administration" with the terms "member country" and "operator" and establish a deadline for the development of those proposals. The CA subsequently approved all of these actions.

WTO Project Team Resolution

The CA approved a draft Congress resolution presented by the Project Team responsible for relations with the WTO chaired by Tony Alverno of USPS which would call upon the CA elected at Bucharest and the IB to monitor developments in international law relating to trade in services, continue efforts to secure cooperation between the UPU and the WTO through a memorandum of understanding, and seek compatibility between the rules of the UPU and those of the WTO. The WTO's reluctance to conclude a MOU with the UPU has produced a growing sense of frustration within the UPU which at this and other recent UPU meetings has manifested itself when the subject of the WTO is raised.

Short takes: The CA approved a draft Congress resolution that would maintain seven UPU Regional Advisors, including the two Regional Advisors that serve the Western Hemisphere (one for Latin America and one for the Caribbean) ... A proposal by the UPU International Bureau to reduce the number of Regional Advisors from seven to five provoked stiff resistance at the CA's October 2003 session ... But funding the expenses of all seven Regional Advisors, which consume over half of the UPU's budget for technical cooperation, remains undecided .... The CA also passed resolutions to continue the work, after Bucharest, on management of the work of the Union and WTO issues.

Glossary of abbreviations and terms

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.
Abbreviation or term Full name or explanation
CA Council of Administration
CN A series of forms in the UPU Convention for use in international postal operations, such as Form "CN 38 Delivery Bill.Airmail". The letters "CN" refer to "Convention"
DC Developing country
EMS Express Mail Service
ETOE Extra-territorial office of exchange
GATS General Agreement on Trade in Services
IATA International Air Transport Association
IC Industrialized country
LDC Least Developed Country
MOU Memorandum of Understanding
NCC Net Contributor Country
POC Postal Operations Council
PTC Postal Technology Centre
QSF Quality of Service Fund
UNDP United Nations Development Programme
WTO World Trade Organization