Package from China: Who pays the freight?

Michael R. Czinkota


Running a small business which ships low weight merchandise, say 10 T-shirts or small hardware from China to the United States, made logistics cost easy. The U.S. provided for a large shipping discount of 40% to 70%.


Such generosity came from U.S. membership in the Universal Postal Union (UPU). Founded in 1874, the UPU is the international postal organization in Switzerland, committed to a smoothly running international postal system.

In 1969, the UPU’s developed country members implemented discounts for poor nations when shipping small parcels. China then was isolated with few outward shipments. In consequence, consumers in Washington, the shipping cost of a face cream was more affordable from China than from Los Angeles. Today, however, China delivers more than one billion small packages a year to the U.S. and the special discount treatment continued.

Then there came change. The Trump administration announced U.S. withdrawal from the UPU as of October 17, 2018. The objective was to arrive at competitive and fair global shipping rates. This move showed the Trump Administration’s willingness to leave quit multilateral agreements judged unfavorable to U.S. interests. Although the UPU withdrawal process takes one year, U.S. deep discounts for Chinese packages ended immediately.
Now China Post has introduced a new Express Mail Service. It raised the price of packages to the U.S. from $ 30 to $34 for the first 0.5kilogram shipped. Who pays, who benefits?
The United States Postal Service (USPS) can use higher payments from China. But transshipments through other nations and competition will lead to reduced shipping volume.

The price advantage of many Chinese e-commerce vendors declines. Higher cost of shipping reduces this advantage even further. Most endangered are eBay type international vendors. Sellers who compete on price alone face higher cost and more competition. To survive it will become new practice to find alternatives for product and service delivery both for processes as well as markets.

Adjusting the rules for new conditions makes sense. Few parameters conditions have remained static for 144 years. The UPU should get ready for a significant restructuring. What applies to China, the U.S., and other relationships, applies to other nations as well. One should expect further exploration of antiquated subsidies which have been bypassed by new market conditions. Such tracking can identify new opportunities for change and innovation.

De-subsidization will create market alternatives based on new forms of delivery. Such adjustments will be cost analyzed and competitively compared to achieve higher efficiency. Legislators and internationally active framers of distance trade, such as the World Bank and the World Trade Organization can use this opportunity to pinpoint, develop and scale up models which reflect transport cost sensitive sectors and practices. In addition to greater accuracy and fairness, the President’s initiative for higher prices can lead to higher capabilities, more efficiencies and better services. A good start!

Professor Czinkota teaches international business and trade at Georgetown University and the University of Kent. His latest book is ‘In Search For The Soul Of International Business (Businessexpertpress.com) 2018

Trumps Wirtschaftspolitik in den USA / ZIB 2 vom 02.11.2018 um 22.00 Uhr

Trumps Wirtschaftspolitik in den USA / ZIB 2 vom 02.11.2018 um 22.00 Uhr

Outstanding Speaker Award from the American Society for Competitiveness

It was a pleasure for Prof. Michael Czinkota to accept the Outstanding Speaker Award from the American Society for Competitiveness. While this award covered the past, Prof. Czinkota’s acceptance speech focused on the future. He addressed the growing role of curative international marketing, where, without a statute of limitation, the length of time for restitution  shrinks in importance while making up for injustice is the crucial dimension of thought, behavior, and planning for discernment.

Visit From Mr.Barry Rhoads

It was a great pleasure to have Mr. Barry Rhoads, the Chairman of Cassidy & Associates – the largest lobbying firm in Washington — return to my seminar. He gave an overview of US trade and the exposure of importers under the trade policy of the Trump administration. As to be expected – an excellent and in-depth analysis, accompanied by forecasts of the 2018 midterm elections.

No Hostilities Yet

When nations declare adversity onto each other, there is a lapse of time between the declaration of intention and commencement of hostilities. Implementation can take anywhere from months to years. The Brexit discussions are a major example of such conditions.  Code yellow conditions are now in place between Europe and Britain. My wife and I visited England to explore the current and future status.

Evensong in Canterbury Cathedral, seat of the archbishop, is very British, well attended, firm, strong and uplifting. There are definite advantages to singing one’s prayers. The British production of Jersey Boys was another listening adventure, packed house, lots of fun, energetic singing done well. In London no signs of fear or concern.  St. Martins in the Field did not disappoint with renditions of Mozart at candlelight by a Russian pianist. Trafalgar square was humming and buzzing late into the night as usual. Sticking together while exercising simple precautions is the watch-word.

High tea at Harrods was a pleasant experience- but with a twist! Queen Victoria era tea strainers still capture leaves and uplift the taste. The servers in the tea room are sons and daughters of EU nationality, hailing from Hungary, Romania, Estonia, Albania, and Bulgaria. The clientele is mostly Asian.

Vast sums from abroad are being spent at the store- often supported by personal shoppers so that the customer can rapidly move from Hermes to Gucci. That many prices doubled in the past three years seems not to matter. Newspapers report that some of the more intense shoppers purchase more than $2 million of goods per month in one department store alone, supported by the appropriate credit cards Bank Al-Ahly from Egypt, or Union Pay from China. Support also offers inside Mosques for prayer services.

All local spenders can forget about the doorman calling a taxi for them! The crowds are massive, all walking on the right- which is the wrong- side, indicating that hardly anyone is British. Multilingual store staff tells us that China is the main country of origin. Russians are left in the wake. Maybe the sanctions are working!

The diversity of restaurants has greatly increased. No longer are there just simple choices between British kidney pies and Indian basmati rice. Still, a shame that the Chinese chain HaiDiLao, with all its hype on quality and service, has yet to open in the UK.

Uber is very active so one is no longer dependent on the famous and often not appearing taxi.

Drivers are not happy because their income decreased. Still they do not go to places where customers might naturally congregate, like evening performance conclusions at the Royal Albert Hall. Their argument: what if there are no customers? Hard to argue!

Universities, particularly the mid-grade ones, experience enrollment declines. Costs for non– EU students have skyrocketed. The many students from abroad are mostly bonding and banding among their own nationalities and encounter limited social linkages with Britons. Though internationally oriented it is quite difficult at many institutions to study or write dissertations in a non-English language.

News and discussions have become less interested in the US or Europe. On October 3rd there was more highlight of the Day of the Open Mosque, than of German reunification day.

There are many changes, some subtle, some not so much. The English gardens hidden from the street are still beautifully tended and restful. And when eating, there are still vast pots of delicious clotted cream. Faucets, newly installed, still separate hot and cold water, no mixing allowed!

So much for flexibility, adjustment, and stability. Conditions are not grim. Historically one may think of Hannibal’s closing onto Italy, with Roman defeat highly likely. But it did not happen in 216 B,C. and may well not happen in 2019. In spite of signed documents and grim postulations, there is no commencement of hostilities yet. One could label the current conditions as that of the head burying ostrich, but for now, the feeling is good and the living is easy.

Michael Czinkota (czinkotm@georgetown.edu) teaches International Business at Georgetown University in Washington D.”C. and the University of Kent in Canterbury. His latest book “Searching for the Soul of International Business (BEP) appeared this October.
Ilona Czinkota (iczinkota@gmail.com) is an architect and president of Czinkota AIA LLC