More changes in international mail are coming as I write this in early June, continuing what mailers experienced earlier this year and in 2020. The COVID pandemic was—is—responsible for some changes; others are changes in laws or regulations in the US and other countries. The consequences from the pandemic touched all classes of mail. The legal and regulatory changes affect primarily packages and physical goods (as opposed to letters or documents). The same declines in letter volumes and increases in e-commerce package volumes that we’re seeing in domestic volumes are happening internationally.
One unanticipated positive result of the changes we’ve seen appears in the USPS financial statements: the volume of international mail decreased, but the revenue from international mail increased. While international mail has often been profitable over the years, the higher profitability is due to the substantial increase in what the USPS charges other countries for packages coming into the US. US mailers are also seeing higher postage rates to other countries because of the self-declared rates for packages approved at a UPU extraordinary congress in October 2019. Whether the US Strengthen Opioid Misuse Prevention (STOP) Act enforcement, postage increases, and competition from non-postal carriers will further decrease volumes and start depressing revenue won’t be clear for many months.
The STOP Act took effect on January 1, 2021. The Act mandates that all inbound items to the US have Advanced Electronic Data (AED) sent to USPS and forwarded to Customs. Customs can provide temporary exemptions for countries, and mitigation of problematic items is possible. (Both the US and the EU countries are facing problems with the completeness and accuracy of inbound AED.) Which countries are exempt is not publicly available, nor are specifics of what mitigation is possible before packages are returned to whatever countries sent them. The Customs and Border Protection Agency (CBP) published its interim final rule, due in October 2020, in February 2021, allowing a one-year phase in of the enforcement actions. Exactly when and how more rigorous enforcement will be implemented is not clear, but it is coming.
Capacity on air carriers to transport mail is returning as the pandemic lessens, although it is not expected to reach pre-pandemic levels until 2023 or later. USPS staff handling the contracting of transit capacity are again able to schedule sufficient air lift in a timely manner to many destination countries. As the roller-coaster ride of the pandemic ends here in the US, closures and restriction continue as other countries mandate measures to control COVID outbreaks. Many countries have not reinstated signatures by the recipient, with delivery personnel verifying receipt. As vaccination rates remain low worldwide, particularly in less developed countries, closures and restrictions are likely to continue into 2022 and 2023.
USPS Export Compliance, which was suspended earlier this year, will likely restart soon and possibly before publication of this article. (The date has not been announced.) Export Compliance confirms that the required data is submitted electronically for articles requiring customs information as part of the Shipping Services File (SSF). Non-compliant mail will be returned to the sender. The requirements are in USPS Publication 199.
Changes Inside and Outside the US Continue to Impact
Changes in the laws of foreign countries that affect inbound or outbound mail can be difficult for mailers and shippers to track if the country making the change doesn’t publicize it to other countries. The major changes in 2021 have been in Europe and the US. With 27 countries in the EU, including some major US trading partners, European Union (EU) changes in regulations and enforcement can have a major impact on US mailers.
Brexit: The UK (British) exit from the common market of the EU finally took effect at the end of 2020 under an agreement that neither particularly liked. Still, this agreement was better than no agreement on the terms between the UK and the EU. At the same time, the UK instituted new regimes for sales tax—VAT--and duties on inbound goods. As of January 1, 2021, the tax regime changed, making all items subject to VAT. As paperwork required for transit of goods between the EU and the UK caused delays and confusion, imports and exports decreased. It isn’t clear how much of the decrease was due to COVID restrictions and how much was due to the new tax and customs requirement. Some items not subject to customs duties are subject to VAT. It is clear that the tax and customs enforcement did account for some portion of the decrease. This may be an indicator of what will happen when the EU introduces similar measures, discussed below.
These regulations apply to goods arriving from the US by mail or by other carriers. While customs forms and reporting were in place for US mailers and shippers before this, the VAT payment requirements are new and require registration with the UK tax authorities (https://www.gov.uk/vat-registration/when-to-register, and scroll down to “Businesses Outside the UK”). If duty is not paid by the sender (DDP), it is collected from the recipient. Postal items do not usually have an option to pay the duty in advance and goods are with unpaid duty (DDU). Duty is collected from the recipient.
EU customs: Beginning in March 2021, new regulations and procedures under ICS2 were implemented for goods entering the EU, including more rigorous AED, and customs duties with a lowered de minimis, the starting amount for duty payment. Each of the 27 countries in the EU enact their own laws to implement EU directives, so there are variations from country to country. Rumors and questions about whether some or all EU countries will require items that USPS designates as conditional, particularly the World Customs Organization’s Harmonized System (HS) Code or Number which are required on commercial, but not postal, customs forms. (HS Code information is available from the US government at https://www.trade.gov/harmonized-system-hs-codes.) The recipient’s email or phone number may ease the delivery process if VAT or customs duty needs to be collected.
EU VAT: The 27 countries of the EU join those imposing sales taxes on July 1. Since each item would be assessed for VAT, customs enforcement is likely to tighten. The specifics of VAT rates and exemptions vary between countries, as each country enacts its own regulations and restrictions. For items from outside the EU, VAT will be collected with duty from the recipient. Registration in a single country under the Import One-Stop Shop (IOSS) covers all the EU countries. Although some countries have said they will not be prepared and the EU cooperative of public postal operators requested a delay, it seems likely enforcement will begin July 1. (More information is at https://ec.europa.eu/taxation_customs/business/vat/ioss_en.) Duty and VAT may be collected by the postal operator in the recipient’s country for an additional fee if it is not paid by the sender.
Altogether these changes—documentation requirements, higher postage, stricter customs enforcement, sales tax charges—may lead to slower delivery and a temporary decrease in cross-border e-commerce orders. Or it many simply move cross-border fulfillment into other non-postal channels. Larger companies, with greater resources, may have a temporary advantage over smaller companies until new third-party solutions appear.
Businesses like stability. There are no indications we will see it soon.
Merry Law is President of WorldVu LLC and the editor of Guide to Worldwide Postal-Code and Address Formats. She is a member of the UPU’s Addressing Work Group and of the U.S. International Postal and Delivery Services Federal Advisory Committee.
This article originally appeared in the July/August, 2021 issue of Mailing Systems Technology.