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Diplomacy in Action

UPU: Council of Administration 2003 Annual Meeting


December 2, 2003

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Report on the annual Council of Administration session and concurrent meetings of the Postal Operations Council of the Universal Postal Union (UPU) in Bern, Switzerland, 10-24 October 2003

Released by the Bureau of International Organization Affairs
December 2, 2003

Introduction

This report summarizes the decisions taken, discussions held and work accomplished at the annual session of the UPU's Council of Administration (CA) and concurrent meetings of the UPU's Postal Operations Council (POC). These meetings, attended by more than 600 government officials, postal managers and private sector organizations of over 100 countries, took place at the UPU headquarters in Bern, Switzerland from October 10 through 24. [Please note the glossary of abbreviations at the end of this report.]

In its most dramatic decision, the Council approved a resolution put forward by Japan that would require operators of extra-territorial offices of exchange (commonly known as "ETOEs") to obtain the approval of the national government before establishing such offices in the territory of another UPU member country.

The CA also endorsed plans for the next UPU plenipotentiary Congress, which will take place in Bucharest, Romania from September 15 through October 5 of next year. Among these was the designation of Edward E. Horgan, a retired U.S. Postal Service senior executive, as Doyen of Congress.

The Council endorsed a series of proposals for the Bucharest Congress, originally formulated by the High-Level Group formed at the Beijing Congress, to create the UPU's Consultative Committee. Under the proposals, the private sector members of the current Advisory Group would automatically become members of the Consultative Committee, once this entity is created by Congress. The proposals retained a provision that would allow Chairmen of CA and POC committees, working groups and project teams to exclude Consultative Committee members, on an exceptional basis, from meetings where sensitive issues are to be discussed. The U.S. delegation and private sector members of the Advisory Group expressed their concern that this provision might be abused, and serve as an excuse to exclude Consultative Committee members from UPU meetings where they have legitimate interests. This principle was already put to the test during the CA session when a private-sector member of the Advisory Group expressed strong interest in attending a meeting of the POC's "Support Group" on Customs issues. A compromise was reached under which the Advisory Group member attended only a portion of the meeting, but the resulting dialogue promised more openness for future such meetings.

Separately, the U.S. signaled its interest to seek election at Bucharest as one of the three POC member countries to serve on the Consultative Committee. (Three CA member countries will also serve on the Consultative Committee; the U.S., though, will not be eligible for election to the CA at Bucharest.)

In the main, however, the subject of terminal dues dominated the proceedings in Bern.
The first week of the CA session featured a three-day Terminal Dues Workshop, followed by meetings of the Terminal Dues Action Group and its project teams. The primary focus of discussions centered on the eight proposals for the future terminal dues system to be decided at the Bucharest Congress. A "convergence group" had reduced eight original proposals into three "concept proposals" which were discussed in considerable detail. Since the results of the debate showed a slight tendency to support the second of these three concept proposals, an enlarged convergence group was instructed to use this "Concept 2" proposal as a platform for further work and to draw in the most positive elements of the two other concept proposals. Further deliberations took place during the second week at the CA Terminal Dues Project Team, responsible for the principles and policy aspects of terminal dues, as well as during the plenary meetings. In an intervention during the plenary session, the head of the U.S. delegation stressed the importance of adherence to the principles adopted for the future terminal dues system, and highlighted the need to strike the appropriate balance of different interests in order to establish a viable terminal dues system enabling all the posts of the world to provide efficient universal postal service to their customers.

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

Council of Administration decides on ETOEs, Congress preparations and Consultative Committee proposals

A temporary but important resolution on ETOEs

The one controversial issue raised during Plenary concerned a draft resolution proposed by Japan which states that "..the agreement of any UPU member country must be obtained, in accordance with its national legislation, by any other country seeking to establish ETOEs within that country". This resolution, which was adopted by a vote of 33 CA member countries, would serve as a temporary UPU policy towards Extra-territorial Office of Exchange (ETOEs) between now and the September 2004 Bucharest Congress. The resolution was in response to the proliferation of ETOEs observed over the past few years. According to UPU data, there are about 90 registered ETOEs worldwide. About 20 of them are in the United States. An ETOE is an exchange office set up in one country by the post of another country for the purposes of collecting or entering mail.

Upcoming UPU Meetings

The CA confirmed that a Roundtable on terminal dues will be held at UPU headquarters in Bern February 2-3, 2004. This will be followed by a Terminal Dues Action Group meeting on February 4 and a POC plenary February 5-9. There will be a CA plenary on February 11-13. The Bucharest Congress will be held September 15 to October 5, 2004.

Preparations for September 2004 UPU Bucharest Congress on track

Delegates to the CA session expressed their appreciation to governmental and postal officials of Romania, who stepped forward earlier this year to offer to host the quadrennial UPU Congress after civil unrest in C�te d'Ivoire forced that country to withdraw its bid to organize the event. As this major change in venue has taken place so late in the cycle between Congresses, the UPU International Bureau urged UPU member countries to reduce the number of proposals put forward to Congress. (Before the 1999 Beijing Congress, 508 individual proposals were submitted to Congress, primarily from member countries rather than from the two Councils.) As an example of this downsized approach to Congress, the CA endorsed an IB suggestion that only 51 Congress documents be published at Bucharest (at Beijing over 90 documents were printed). Further, the IB staff present at Bucharest will be greatly reduced compared with previous Congresses.

For the Bucharest Congress, the deadline for submission of proposals by one member country shall be March 14, 2004; proposals supported by at least two member countries may be submitted by May 14, while those supported by at least eight countries must reach the IB by July 14.

Note: The issues to be put before the Bucharest Congress shall be no less complex than those submitted to earlier Congresses, but the Bucharest Congress will be one week shorter - at 14 effective working days - than either the 1994 Seoul Congress or 1999 Beijing Congress.

Advisory Group starts process of developing Consultative Committee workplan

Anticipating the formation of the Consultative Committee at Bucharest, the Advisory Group presented a "white paper" expressing views of members on issues of importance to private-sector stakeholders in the UPU. The paper, which covered key current issues - such as universal service, regulation, liberalization, terminal dues, customs and standards - will serve not only as the Group's contribution to the Bucharest World Postal Strategy, but also as a foundation of the Consultative Committee's work plan following Congress. The World Postal Strategy adopted at Bucharest will be the UPU's basic policy document from 2005 through 2008.

Also looking ahead to Bucharest, members of the Advisory Group informally suggested that the Committee's constituent meeting should be held on October 5, the last day of Congress. Advisory Group members also conceded the urgent need to increase membership in the Group, and later in the Consultative Committee, particularly in the regions not yet well represented, such as Asia-Pacific and Latin America. In the coming months efforts will be made by current members to attract new members from these regions, as well as from Europe and North America.

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The work of the CA is carried out by three Committees and a number of work groups variously described as Project Teams, Action Groups or Boards. These groups report to one of the Committees or to the CA Plenary itself. The three Committees are the following:

  • Committee 1: General Matters of Policy and Principle
  • Committee 2: Budget and Finance
  • Committee 3: Technical Cooperation

Except where otherwise noted below, all the decisions taken by the individual groups summarized below were endorsed by their respective Committees or by the Plenary.

Steady progress on organizational issues, formation of Consultative Committee and recast of the UPU Acts

The work of the CA's Committee 1 on General Matters of Policy and Principle encompasses the current UPU organizational issues, including the High Level Group's proposals to create the mainly private-sector Consultative Committee issuing from the present Advisory Group, ETOEs, and a recast of the Acts of the Union. After the Beijing Congress, to maneuver though these often nettlesome subjects, the Committee formed two Project Teams. The first handles issues related to "Management of the Work of the Union", that is, UPU organizational structure and policy issues of major importance to the worldwide postal network. The second, the "Acts of the Union Project Team" acquired the daunting responsibility of redrafting the UPU Convention.

The Acts of the Union Project Team, which is chaired by Bill Alvis of USPS, agreed to instruct the UPU secretariat to prepare proposals for the Bucharest Congress on the possibility of prohibiting reservations against certain fundamental provisions of the Convention and to apply the rule of the Vienna Convention on reciprocity to certain reservations, particularly those concerning postal charges. This Team also decided to go forward with a consultation with member countries on replacing the term "postal administration" with the terms "member country" and "designated operator." Depending on the results of that consultation, the Team may, at its February 2004 meeting, prepare proposals for Congress making that change in the Constitution, General Regulations, and Convention. The Team also approved definitions of certain other terms to be included in the Constitution and Convention and approved changes in the way proposals are handled between Congresses.

Deliberations of the Management of the Work of the Union Project Team

Roger Higginson of Great Britain chaired the meeting of the Management of the Work of the Union Project Team. Three issues generated most of the discussion: a paper by Germany on the division of responsibilities between governments and operators; the term "postal administration" and ETOEs.

The paper by Germany called for converting the current Postal Operations Council into a Postal Operators Council. This change would bring the UPU into line with what the paper described as a trend to separate these functions at the national level. According to the paper, the Beijing Congress called for a study of the UPU's mission and structure and that the High Level Group had discussed "the need for a clear division of regulatory and operational activities and responsibilities." Various models to accomplish this had also been discussed, including:

  • separating the UPU into two organizations along the lines of IATA (the International Air Transport Association) and ICAO (the International Civil Aviation Organization);
  • completely separating governmental and operational functions within the UPU, with each function having its own managing body and secretariat;
  • maintaining a single UPU but with a hierarchical structure separating governmental and operational issues;
  • maintaining two councils but with greater separation of powers and responsibilities; or,
  • continuing to refine and develop the role of the two councils but also develop a third forum for the private sector.

In Germany's view, the CA had failed in this task, making progress, at most, on private sector participation.

In the ensuing discussion, several participants said that with the proposals to form a Consultative Committee and to provide observer status in UPU meetings to members of that Committee, the UPU had substantially fulfilled the mandate of the Beijing Congress. They also noted that current council structure provided considerable flexibility for UPU members to appoint representatives and pursue issues in accordance with the legal status and relationship between the posts and governments at the national level. The U.S. delegation raised questions about the implications of the complete separation described in Germany's paper for the status of the UPU Convention and its Regulations. In the U.S. delegation's view, the paper appeared to require converting the Regulations from their current status as intergovernmental commitments which could be interpreted and applied within the framework of international treaty law to a new status of a commercial and contractual nature. Moving interpretation and application outside the framework of international treaty law would appear to require adopting the national legal framework of a particular UPU member country, that is, of choosing among the 189 UPU member countries for the jurisdiction that would apply to the commitments embodied in the UPU Regulations. When other participants shared this concern, Germany then indicated that this was a misunderstanding and that the intent was not to have the UPU become a platform for commitments having only a contractual status.

The question of how to replace the term "postal administration" in the Acts of the UPU arises from the same developments that underlie the German paper on separating governmental and operational functions in the UPU and typifies some of the hurdles the UPU faces in adapting to these developments. The UPU is an intergovernmental organization made up of member countries. In the UPU Acts, the term "postal administration" is used sometimes to mean member country, sometimes to refer to the government agency responsible for overseeing the implementation of UPU obligations, and sometimes to refer to the postal operator responsible for implementing UPU services.

The Chairman of the working group responsible for the recast of the UPU Acts reported continuing difficulties and a lack of consensus with respect to the use of these terms. In many provisions, it was clear which replacement term would be appropriate. In others, however, it was not clear. Furthermore, a change in a particular provision that might be acceptable to one country could be unacceptable to another. He noted that changing terminology in the Constitution would require approval of two-thirds of the UPU membership and changing terms in the General Regulations would require the presence of two-thirds of the UPU members and approval by a majority of the members represented in Congress. He suggested that a wider consultation of the UPU membership prior to Congress would be helpful to refine the proposals and to assure adequate support for their adoption in Congress. After further discussion, the Project Team agreed to conduct a further consultation and seek to develop recommendations for consideration at the CA in February.

The Brazilian Chairman of the ETOE working group reported on the results of a meeting in Brasilia in August, the failure to reconcile fundamental differences, and the working group's decision to proceed with several proposals reflecting these differences. For example, Great Britain had presented a proposal for a Congress resolution specifying the conditions under which a country receiving ETOE traffic would be obliged to apply UPU provisions. Canada, on the other hand, had presented a proposal for a Congress resolution under which ETOE traffic should be considered as commercial traffic and treated outside the framework of UPU provisions, with delivery contingent on payment of full domestic rates instead of terminal dues. During the discussion, it became clear that a regionally diverse majority of participants had reservations about the British approach while several European representatives continued to support it. In the circumstances, the IB was asked to continue its work on a draft document for Congress that would reflect the divergent views and the CA would make a final decision at its meeting in February regarding the proposals to be put forward to Congress.

The Project Team also heard a report from the Chairman of the Advisory Group regarding its review of the High Level Group recommendations and the consequent CA proposals to Congress to establish a Consultative Committee for private sector participation in the UPU. The Chairman also reported on the white paper presented by members of the Advisory Group identifying ten issues representing the Advisory Group's contribution to the draft Bucharest World Postal Strategy document and its recommendations for future dialogue.

The Project Team also took note of two memoranda prepared by the IB, one concerning the results of a questionnaire on practices in the licensing of postal services, and the other a progress report on the development of a Guide to Postal Regulation.

UPU financial issues (Committee 2)

Committee 2 considered a report by the External Auditor concerning the failure of the "Post*Code" project to be self-financing as directed by the CA. The UPU secretariat reported that "Post*Code" revenues are increasing and that if costs for 2003 are not fully covered by year end, it will seek guidance from the CA in February 2004 on whether to continue advances to the project, revise it or terminate it. The Committee also examined the Quality of Service Fund, which is funded from supplemental terminal dues payments made to developing countries. As of August 31, 2003, the three-year -old Fund had funded 110 projects totaling $10 million. However, the Fund has accumulated unobligated assets of $31 million, and about $15-16 million is added each year. The U.S. delegation stressed that mailers want to see service improve as a result of the Fund and urged that ways be found to accelerate utilization of the funds. The U.S. delegation proposed that the UPU secretariat offer to assist countries in developing project proposals, including possibly development of regional projects. Committee 2 approved the waiver of interest penalties on arrears for Moldova, which has now paid its arrears, and for Guatemala and El Salvador, both of which have signed amortization agreements to repay arrears.

Member state contributions to the UPU are made on the basis of "contribution units." Members indicate the number of contribution units they are willing to pay when they join the UPU. The United States and several other countries pay the maximum, 50 contributory units. At each UPU Congress, countries can adjust the number of contribution units they pay. The UPU reported that since the mid-1990s, the number of contribution units paid has steadily declined, meaning that the value of each contribution unit has been increasing to sustain a zero nominal growth budget. The U.S. delegation urged member states not to use the Bucharest Congress to further reduce their contributions, warning that member states should not assume other countries will continue to take up the slack through ever increasing value for each contribution unit. The U.S. delegation also urged countries that have benefited from economic growth since the last UPU Congress to increase the number of contribution units they pay. Finally, the U.S. delegation led opposition to a UPU secretariat proposal to eliminate establishment of a budget ceiling by the quadrennial Congress.

Technical Cooperation (Committee 3)

The issue of how to finance the UPU's Regional Advisors following the Bucharest Congress caused considerable debate during the deliberations of the CA's Technical Cooperation Committee. Currently the UPU employs seven Advisors who, in addition to their core duties of seeking funding for postal development projects from international lending institutions, also serve as vital counselors to postal managers in developing countries as well as channels of communications between postal administrations - both developed and developing - and UPU headquarters in Bern.

The UPU secretariat favors either reducing the number of Regional Advisors to five or retaining seven Advisors if informal offers of funding the additional two advisors (for the Caribbean and the Arab countries) are forthcoming from member countries. At present the costs of seven Advisors exceed 50% of the UPU's total technical cooperation budget. At this meeting, many delegations spoke strongly in favor of retaining seven Advisors. This will be an issue to watch at the Bucharest Congress; there is consensus about the need to retain seven Advisors, but no decision yet as to how the costs of seven Advisors are to be handled or financed by the UPU.

WTO issues attracting attention

Understanding the workings of the World Trade Organization and the potential impact of this institution's policy decisions on terminal dues and the exchange of cross-border mail have become important factors in UPU deliberations. Discussions on WTO issues arose frequently at this year's CA session, particularly in the context of the discussions on terminal dues. The key question is whether the current terminal dues system, with its bifurcated payments system based on whether a country is "industrialized" or "developing," is consistent with the WTO principle of most favored nation (MFN) treatment. A separate project team was formed to follow WTO developments carefully and report on decisions that may have a major effect on postal exchanges.

At this year's CA, Anthony Alverno of USPS, the Chairman of this Relations with the WTO Project Team, convened a seminar on "Building Consensus on Postal Sector Issues within the GATS Negotiations." The seminar featured presentations by WTO, European Union and Swiss negotiators as well as a WTO dispute settlement expert from the World Trade Institute. The seminar presentations focussed on the ongoing Doha Development Agenda's services negotiations and possible harmonization of the different initial "offers" for postal-related sectors; the safeguard, subsidy, and government procurement negotiations as they relate to the General Agreement on Trade in Services (GATS); and the dispute settlement process in the WTO.

The Project Team also endorsed a draft proposal for Congress which would call upon the CA to continue its work on WTO issues from 2005 onwards. The draft resolution would instruct the CA and UPU secretariat to educate UPU members on WTO issues and secure cooperation between the UPU and the WTO through a memorandum of understanding and observer status.

UPU's Quality of Service Fund generates income, but huge sums remain unspent

At the 1999 Beijing Congress, the UPU created a "Quality of Service Fund" to be fed by 7.5% of the terminal dues payments of industrialized countries to developing countries. According to the Fund's provisions, developing countries can only access this 7.5% supplement to their terminal dues payments after submitting a project proposal to the Fund's Board of Trustees, who are elected, as member country representatives, by the POC. Currently Donna Peak of USPS chairs the Board of Trustees, a position she will retain until April of next year.

As of August of this year, the Board of Trustees had approved 110 projects valued at about $10 million. Perhaps since the Fund is still in its initial phase, $31 million remains unspent by postal administrations eligible to receive funds. Approximately $20 million is invested to provide interest sufficient to cover the costs of administering the Fund. This is the third accounting year for the Fund, which generates about $16 million annually for disbursement to developing countries. In Bern, the Trustees heard reports on the status of monies in the Fund, investment of funds and an external audit of the Fund. The CA explored ways of accelerating use of the funds, noting that those contributing to the fund expect to see improvements in quality of service sooner rather than later.

The Trustees also heard a report on a seminar on the Quality of Service Fund recently held in Santiago, Chile for Latin American postal managers. The goal of the seminar was to evaluate the Quality of Service Fund experience, promote benchmarking, encourage regional projects and draw attention to best practices in managing quality of service in the postal industry.

Standards Board successfully deals with processing center and ETOE coding

The UPU's Standards Board performs the crucial tasks of identifying functions related to the exchange of international mail where technology standards are needed, then developing, testing and administrating these standards. The Board's functions and roles have acquired increased visibility and weight in recent years as technical standards grow increasingly critical to postal operations, particularly as they related to cross-border traffic.

In recent months, the Standards Board has tackled the difficult job of refining the standard for IMPC (International Mail Processing Center) codes. These codes, which are meant to be accompanied by scannable bar codes, identify the origin office of exchange of dispatches received at destination office of exchange, information critical for the settlement of inter-administration accounts and for the purpose of keeping accurate statistics, particularly for terminal dues calculations. A current list of IMPC codes appears on the UPU website.

Postal Security Action Group advances agenda

U.S. Chief Postal Inspector and Postal Security Action Group Chairman L. R. Heath chaired the meeting of PSAG on October 17. PSAG, which comprises postal security experts from 65 member countries and 31 observer associations, meets biannually to address such topics as aviation security, bioterrorism, revenue security, mail fraud, drugs in the mail, money laundering, eCommerce security and mail loss prevention. The broad-based goal of the group is to build customer confidence in the mail through security initiatives and support the UPU's strategic objectives.

This PSAG meeting featured the Cash-in-Transit Working Group's keynote presentation on best practices for the transit of cash and high-value items in the post. Meeting participants also heard an update by the Global Mail Security Working Group on the new eMARIA global mail loss database. This application will enable member administrations to contribute mail loss information via an Internet-based program, identifying high-risk routings, airports, and destinations.

Recognizing that postal administrations are expanding postal financial services as a viable means of growing revenue, PSAG has formed the Financial Services/Anti-Money Laundering Working Group. This group will be tasked with developing collaborative educational programs and sharing best practices with administrations wishing to offer new financial services products.

Terminal Dues at top of POC and CA Agendas

Terminal Dues dominated the discussions during the first week of the CA session beginning with a three-day Terminal Dues Workshop attended by over 150 delegates from 75 countries. The UPU Director of Markets, Ken McKeown, kicked off the Workshop with a rather bleak overview of downward trends in the international letter post market over the past eight years. Outward international mail volumes reported by postal operators have declined by 21 percent since 1995, with sharp declines in 2001 and 2002. Lea Emerson of the U.S. Postal Service gave a presentation on the various arbitrage opportunities inherent in the current terminal dues system due to the large differences in industrialized country (IC) and developing country (DC) terminal dues, as well as the gaps between terminal dues and domestic postage rates or alternative delivery channels in the destination country. She summarized the situation by stating that further exploitation of the arbitrage gaps will distort the balance of the international mail market, providing financial gains to a few players and further losses to destination country postal operators which could jeopardize their ability to finance universal service. Other presentations on the market environment featured key developments within the European Union to move toward more cost covering terminal dues, as well as issues related to compliance of UPU terminal dues with WTO principles.

Turning to the proposals for the future terminal dues system to go into force in 2006, the three proposals vetted through the October 2002 Terminal Dues Workshop—authored by Brazil, Japan and Russia—grew in number to eight proposals by September 2003. A "convergence group," formed at the August 2003 TDAG Project Team meetings in Brasilia, narrowed down the eight proposals into three "concept proposals" which all workshop participants discussed in facilitated work sessions throughout the three-day workshop. The proposals in Concept 1 (Japan - Sweden) and Concept 3 (Brazil - Moldova - Russia) sought to eliminate the distinction between ICs and DCs, and focus on the use of volume thresholds and/or distinctions based on priority/air mail and surface/economy mail. The Concept 2 series (France - Pan-African Postal Union (PAPU) - Arab Permanent Postal Commission (APPC) retained the IC-DC distinctions with various modifications. After prolonged debate on the strengths and weaknesses of each concept proposal, as well as a "rating" exercise against the principles, the Chair, Gary Halpin of Canada, summarized the results by stating that all three concept proposals address various issues well, but that he felt there was a slight tendency to support Concept 2 as a platform for further work. Several countries thought it was premature to endorse Concept 2, since it was not the consensus view of all the groups. These countries initially preferred to go forward with all three concept proposals, but later agreed, with some reluctance, to the Chairman's summary for the way forward. A mandate was given to an enlarged "convergence group" to use Concept 2 as a platform and draw in the most positive aspects of the Concept 1 and 3 series of proposals. A summary report of the convergence group meeting held two weeks after the session appears below.

The CA Terminal Dues Project Team also met during the session. The mandate of this project team is to approve the guiding principles and methodologies adopted by the POC for the future terminal dues system. One of the most controversial topics addressed during this meeting was whether proposals for a new UPU terminal dues system would be consistent with the Most-Favored Nation (MFN) principle of the General Agreement on Trade in Services (GATS). The Chairman of the CA Relations with the WTO Project Team, Anthony Alverno, presented an analysis of the legal issues related to MFN compliance of the current terminal dues system that maintains differential access to destination country postal networks based on the identity of the origin country (industrialized or developing country), as well as compliance of certain volume-based approaches in five of the eight proposals up for consideration. Alverno's analysis addressed a number of open questions, such as whether the exception in the GATS for governmental services exception applies to postal services; whether the GATS prevails over the UPU Convention; whether terminal dues would be considered "measures" subject to GATS disciplines; and whether there are exceptions for DCs or those classified as Least Developed Countries (LDCs). Views were divided regarding some of these issues, especially whether nationality-based discrimination would be inconsistent with MFN. Alverno pointed out that if GATS disciplines apply to terminal dues, then nationality-based approaches would probably constitute de facto discrimination, contrary to MFN, but volume-based approaches might withstand scrutiny, depending upon how they are structured. In particular, he noted that in a May 1999 letter from the WTO Secretariat to the UPU Secretariat (in Beijing Congress document 72.Add 1.Annex 1), the then WTO Director of Trade in Services stated that while Members of the UPU who are also WTO Members may need to ensure that the terminal dues system would entail no discriminatory measures on their part, they must also ensure "that differential charges, if any, would be based on objective criteria, such as the volume of mail, rather than on the national origin of the service or the supplier." Possible solutions to resolve any potential inconsistencies could include:

  • Move towards a GATS-compatible system;
  • Seek MFN exemption(s) or seek an official interpretation of the GATS which would clarify whether postal services fall within the exception for "services supplied in the exercise of governmental authority";
  • Resort to resolution of the issue under the Dispute Settlement Understanding; or
  • Agree upon a moratorium on dispute settlement (similar to the approach taken by WTO Members on telecommunications accounting rates).

U.S. Terminal Dues Intervention Well Received

The Head of the U.S. delegation, Don Booth, made an intervention on terminal dues during the CA plenary stressing the importance of adhering to the principles adopted for the future terminal dues system, and highlighting the need to strike the appropriate balance of different interests in order to establish a viable terminal dues system enabling all the posts of the world to provide efficient universal postal service to their customers. He said that for high-priced industrialized countries (ICs), "achieving cost coverage" seems to mean raising the cap quickly and by a significant amount, but this would not be the best way to "grow the business", another important principle. Some of the largest postal customers represented in the Advisory Group have stated that they can adjust to moderate and predictable price increases. For low-priced ICs, cost-based terminal dues means raising the floor since it has not increased in five years, while the cap has increased more than 36%. And for DCs, cost-based means receiving sufficient revenues to improve infrastructure.

Then, there is the bedeviling task of achieving a country-specific system with all countries paying the same rate to each country—bedeviling because it would lead to an end to the IC-DC distinction for terminal dues purposes. All eight terminal dues reform proposals attempted to tackle this issue. Some proposed a modification to the current IC-DC distinction, while others proposed thresholds based on mail volume, with a flat rate paid on smaller volumes for the purposes of simplicity and limiting the negative impacts on DCs, two other very important principles that we must bear in mind. For the largest mail volumes exceeding a threshold, it is appropriate to use per-item and per-kilo rates which would bring more of the world's mail volumes into a more cost-based system. In order to maintain the integrity of the global postal network, a transition is clearly in order for truly developing posts. Better allocation of Quality of Service Fund resources would facilitate the postal development needed to move toward achieving the goal of a cost-based, country-specific system. A truly dynamic transition is in order, and there must be an end point in the transition process.

Convergence Group decisions on November 11 and 12

The group worked well in a spirit of compromise, convergence and near consensus on most of the major issues that were to be decided. A total of 11 countries attended the meeting, including all of the eight proposal authors except Moldova: Brazil, Burkina Faso representing PAPU (Pan-African Postal Union), France, Japan, Morocco representing the APPC (Arab Permanent Postal Commission), Russia, and Sweden. Canada (Gary Halpin) chaired the meeting, and three TDAG Project Team leaders attended: Finland (PT 3 - Quality Link), Switzerland (PT 1 - Letter Post Pricing) and USA (PT 5 - Statistics and Accounting). The mandate of the group was to use the Concept 2 proposals as a platform to bring together the positive elements found in all three concept proposals in order to propose a new terminal dues system to the World Roundtable on Terminal Dues that will take place February 2 and 3, 2003 in Bern. As a reminder, the three concept proposals were:

  • Concept 1 - Japan and Sweden
  • Concept 2 - France, PAPU and APPC
  • Concept 3 - Brazil, Moldova and Russia

The group first concentrated on elements proposed for the country-specific rates for flows between industrialized countries. This will likely be renamed the "Target System." The percentage of domestic rates (tariffs) will transition over four years to 68%, with a 2% increase per year. The percentage increase in the cap rate will be 13% over four years, with a 5% increase in 2006, and a 2.5% increase in the subsequent three years. The floor rate will increase by a total of 9%, with a 3% increase in 2006 and 2% increase in the subsequent three years.

The group then discussed the rates for what is currently the DC to IC, IC to DC and DC to DC flows. This will be referred to as the "Transitional System". The largest flows would be paid using "per item and per kilogram" rates, and the smaller flows at a new flat rate per kilogram using new study data. The new worldwide flat rate per kilogram will be 3.727 SDR per kilogram (which represents the current IC floor rate at new average number of items per kilogram (IPK) of 15.21). This represents a 9% increase over the current flat rate of 3.427 SDR/kg. The new per item and per kilogram rates for larger mail flows, bulk mail, and revision mechanism will be 0.147 SDR/item and 1.491 SDR/kg (current IC floor). The threshold for larger mail flows to be paid using per item and per kilogram rates will be 100 tons. The percentage for the contribution to the Quality of Service Fund will be 9% (1.5% more than the current amount). In order to allocate funds better to those who need it most, i.e., Least-Developed Countries (LDCs), the additional 1.5% QSF amount will be allocated to LDCs, and DCs that are not LDCs will give 0.5% of their amount to LDCs. This reallocation of 2% to LDCs will give them some 24% of the total QSF fund vs. the 4% that they currently receive due to low inbound mail volumes.

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Postal Operations Council meetings

Concurrent with the CA sessions, several POC action groups, project teams and boards met during October in Bern. The most notable of these were the UPU's two Cooperatives, the EMS (Express Mail Service) Cooperative and Telematics Cooperative. The decisions taken at these meetings are summarized below.

EMS Cooperative gains new Board member, reports on expansion of Pay-for-performance and endorses 2004 business plan

At its annual General Assembly on October 9 and 10, the EMS Cooperative:

  • Elected four members of the seven-person Board, one of which is Brian Hutchins of USPS.
  • Noted the work performed by the EMS Board and EMS Unit on a wide range of initiatives, including EMS payment systems; the technical cooperation activities within the Cooperative's Improver Programme; the Cooperative's new website at www.ems.coop; and experience gained in the new 2002 measurements on use of PREDES2 and RESDES messages for EMS dispatches by postal administrations.
  • Approved the 2004 Pay-for-performance Plan, noting that eight administrations currently apply the Plan and that Brazil and China are expected to join in 2004.
  • Approved measurement standards for 2004 as well as procedures concerning inter-administration accounting arrangements and an optional time-certain service.

Dennis Delehanty of USPS, who had chaired the EMS Board since the creation of the Cooperative in Beijing in September 1999, stepped down as EMS Board member at this General Assembly.

While UPU Telematics products mature, Cooperative works to restructure itself

During October, the Telematics Cooperative, which now has 111 member postal administrations and 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.

The USPS had put forward proposals in late 2002 aimed at overhauling the Telematics Cooperative Statutes, the main thrust of which would be to have the Cooperative Board members elected directly by the membership, which would make the Board more accountable towards the membership.

Two major issues have not yet achieved consensus within the Group. These are whether all seven Board members should be elected directly by the membership (alternatively the Chairmen of the Cooperative's three User Groups would maintain reserved seats on the Board) and what form the Cooperative's member contribution system should take. The Group will endorse an updated version of the Statutes at the February 2004 CA and POC meetings.

Among the many other Telematics Cooperative meetings in Bern were two full-day workshops for current and potential users of the products developed by the PTC. These include the International Postal System (IPS), IPS Light and the International Financial System (IFS). Each of these products helps posts collect and share electronic information on mail dispatch, financial transfers, and item tracking between posts, private couriers and financial institutions. The Telematics Cooperative continues to direct the PTC to create products that meet the needs of large administrations while simultaneously developing Internet-based products for smaller administrations.

One prime example of this strategy is a campaign to attract smaller administrations to use IPS Light, the Internet-based tracking application that allows administrations to track both individual items and dispatches. The campaign, a joint effort of the Telematics and EMS Cooperatives, would offer training or promotional sessions in each region leading up to the Bucharest Congress. The first such two-day training session, hosted by USPS on behalf of the EMS Cooperative, took place in Puerto Rico in September. In November, a similar training workshop on IPS Light is to be offered to Asia-Pacific postal managers in Seoul.

Direct Mail Advisory Board hears mixed signals on mail volume growth

The Direct Mail Advisory Board, chaired by James Wade of USPS, heard a number of presentations on volume forecasts that offered conflicting trends in the mail industry. In the U.S., for example, volume forecast scenarios for 2004-2008 show a continued decline in First Class Mail, but an increase in advertising mail.

South Africa announced that Direct Mail is on the rise in that country, where it is the advertising medium of choice for small and mid-size enterprises, while China spoke along similar lines about the development of direct mail in that country. Representing the industrialized countries, Portugal and Italy stated that although electronic substitution is having a profound impact on mail volumes, direct mail is countering the effects of this substitution.

In 2003, seven new members joined the DMAB, bringing the group's membership to 29 postal administrations and 15 private companies and associations. The IB reported on the status of Direct Mail Market Development workshops (four are now planned for 2004), and announced that the handbook "Building Effective Direct Mail Services: Guidelines for Postal Operators" will be published in early 2004. Finally, DMAB participants redrafted the Board's mission statement to better represent the interests of all DMAB members, both public and private.

UPU marketing efforts

A Project Team developing the UPU's Postal Market Information System demonstrated a prototype of this system on the UPU website. The system, whose purpose will be to collect and manage information on postal markets on an international scale, will hold six main databases: research collection, best practices, industry, market statistics, newsfeed, and electronic survey.

The Publishing Sector Industry Group chaired by Italy reported on its quality of service monitoring project to commence in January 2004. The UPU has signed a contract with a consulting company to develop the monitoring system and carry out the pilot program, which will involve eight large publishers and six destination countries in Europe with 20 subscribers per country.

POC group gets serious about ETOE operational requirements

A small working group of interested administrations met in Bern to discuss the operational requirements needed to ensure proper handling of traffic sent from ETOEs to postal administrations. The group included administrations that operate and accept dispatches from ETOEs as well as those that treat them as commercial mail without reference to UPU terms and conditions. The group's role is to understand the operational requirements for both of these types of administrations. While divergent views were heard, the group was able to start development of operational procedures and recommendations which are to be put forward to the POC's Terminal Dues Action Group. The main output of the group will be a matrix of operational issues and recommendations for treatment of traffic originating from ETOEs both under UPU rules and under commercial arrangements. As there are no UPU rules at present for the handling of such exchanges, an informed view of how they should be handled was put forward in a matrix, which is to be distributed shortly to UPU members.

Parcels Project Team seeks mechanisms to reduce inter-administration parcel charges

The POC's Parcels Project Team focused on mechanisms to deal with the perception that inward land rates, parcel rates set by the inbound country, are too high. The Team studied two primary options put forward previously which would cap the rates at either a worldwide average or a country-specific rate which would cap rates at 2003 levels. Both options have termed their proposals as "pay-by-performance", an unfortunate choice of a term to describe this effort, since it calls to mind the EMS Cooperative's Pay-for-performance Plan, under which participating administrations compensate one another based on actual tracking and delivery performance.

The parcel options are based on paying 71.4% of the established rate and then granting bonus percentages that could return the rate to 100% if certain standards are met. The standards include tracking of parcels, delivery to the home, and obtaining a signature upon delivery. While these standards are good initial steps, the U.S. argued that rates should be based on domestic costs and cannot be capped if costs are not covered. These efforts to reduce parcel inward land rates is clearly an issue to watch as the Bucharest Congress approaches.

Dialogue between the airlines and posts

Principal topics taken up at the October 14 meeting of the Contact Committee between the UPU and the International Air Transport Association (IATA) included ETOEs, a draft framework agreement between postal administrations and airlines and expanded use of EDI (Electronic Data Interchange).

Participants discussed the impact of ETOEs on airline operations, particularly the acceptability of documentation and implied or assumed terms and conditions under which the airlines were obligated to accept traffic from ETOEs. The Committee determined that until the UPU took a definitive decision on ETOEs, the issues raised by IATA could not yet be resolved.

The Committee also reviewed the subject of the joint manual on EDI and IATA's interest in encouraging more postal administrations to transmit EDI messages. An effort to resolve the issue of account disputes will be carried forward by Royal Mail and American Airlines, with a report to be provided at the next meeting of the Committee. IATA also expressed interest in examining the methodology used by the U.S. Department of Transportation to calculate rates for the conveyance of mail. Although it was stressed that this was an onerous process that was not reflective of market conditions, there is still an interest on the part of IATA to meet with Department of Transportation officials in early 2004 to review this methodology. Other topics discussed included use of red labels on final bags (referred to PSAG for recommendation), live animals in the mail and greater use of workshops for future meetings.

Transit and accounting systems for inter-administration payments

The Transit Systems Project Team decided to propose to Congress:

  • that the current monthly sampling procedures for � d�couvert transit mail should be replaced by annual sampling.
  • that transit mail should be limited to three categories: closed transit mail, transit mail bundled to destination and bags containing bundled and loose transit mail.
  • new worldwide transit rates of 0.705 SDR per kilo for closed transit letter and parcel mail; 6.707 SDR per kilo for transit mail bundled to destination; and 12.179 SDR per kilo for mixed bundled bags.

These new rates, which would completely eliminate existing transit tables, would apply to surface, S.A.L. and air mail. Several members disagreed with the new transit rates, indicating that they were higher than the previous rates. Great Britain indicated that the new rates included conveyance rates. At the request of several countries, including Brazil and Russia, the Team agreed to exclude air conveyance rates from the new transit rates. The Team also agreed to postpone discussion of the recast of the provisions on transit charges, air conveyance dues and parcel-post land rates in the Convention until after the Team reaches agreement of the new transit rates at its next meeting in December in Paris.

The POC's Accounting Project Team reviewed the results of a questionnaire on harmonization of the time frames for submission and acceptance of accounts and use of electronic documents. Of the 11 administrations that replied, most favor deadlines for the presentation of bulk mail statements and discrepancies in accounts. Most also support electronic exchange of accounting documents. The Team will prepare proposals for the Bucharest Congress based on replies to the questionnaire and the Team's work over the past three years.

New Postal Financial Services Agreement drafted

The Postal Financial Services Project Team heard a report on the revised Postal Payment Services Agreement to be put forward to the Bucharest Congress. Among other provisions, the draft Agreement gives priority to electronic money order transfers, stresses quality of service in postal financial services and includes provisions on money laundering. Quality of service standards for postal financial services have been developed and will be summarized on a CD-ROM to be distributed to administrations that sign the Agreement.

POST*Code: Managing a world-wide postal code database

The Post*Code Project Team currently focuses on developing a worldwide standard for the structure of postal addresses, which is to be included in UPU Standard S42. The POST*Code plans to submit S42 to the Standards Board in February 2004 for Status 1 approval, for which the Team must complete a series of necessary action items. After comparison of relevant terms included in the Standards Board Glossary and in S42, the Team identified inconsistencies which will be presented to the Standards Board for adjudication.

New sample data addresses are essential for thorough testing of S42, and representatives of postal administrations were asked to provide the needed data. Currently address data from eight counties have been tested, and testing is ongoing in five further countries. Testing of S42 will be completed by January 2004.

Postal Development Action Group reviews results of work

PDAG, which promotes reform of postal structures worldwide, noted that Juan Ianni, a USPS postal reform expert seconded to the World Bank to work on postal development, will soon end his assignment in that organization. A replacement to continue the considerable work accomplished by Juan during his two years at the World Bank will soon be selected.

One of the PDAG's principal activities is to work with the World Bank Group and other members of the multilateral development bank community to raise the profile of postal reform and accelerate the level of investment in postal sector development. PDAG Chairman Dick Strasser, the USPS's Chief Financial Officer, announced that during the past 15 years of PDAG activity, the amount invested by this community has grown from $3 million invested in a single effort to over $300 million covering more than 25 postal reform projects.

Short takes: Documents presented to the CA's Technical Cooperation Action Group showed that France, which is putting forward the candidacy of Edouard Dayan in the election of UPU Director General at Bucharest, had made substantial financial contributions in the past few years to the UPU's various technical cooperation funds ... PSAG will soon lose a key driver and advocate with the forthcoming retirement of Don Hill of the U.S. Postal Inspection Service ... Since the early 1990s, Don has tirelessly driven the prodigious activity and agenda of PSAG .... At its annual meeting, the English Language Group Management Committee decided to apply sanctions against member countries that persistently fail to pay their dues to the Group ... This is first UPU language group to take such measures, which are long overdue ... Countries against which sanctions are applied would no longer benefit from the services of the English language translation service in Bern, and would not receive UPU documents in English until their arrears are paid ... In Bern, the POC project team on liability issues reviewed 24 proposals that it will submit to the Bucharest Congress ... The proposals mainly address the limitations on liability of postal administrations, period of payment for indemnity, settlement of indemnities between administrations, the treatment and process of inquiries.

Glossary of abbreviations and terms

Abbreviation or term

Full name or explanation

 

 

CA

Council of Administration

DC

Developing country

DMAB

Direct Mail Advisory Board

EDI

Electronic data interchange

ETOE

Extra-territorial office of exchange

EU

European Union

GATS

General Agreement on Trade in Services

IMPC

International Mail Processing Center

IC

Industrialized country

IPK

Items per kilogram

IT

Information Technology

LDC

Least developed country

MFN

Most favored nation

PDAG

Postal Development Action Group

POC

Postal Operations Council

PSAG

Postal Security Action Group

QSF

Quality of Service Fund

Status 0

Standard Boards designation for a working draft specification that has been approved for publication as the basis for testing

Status 1

Standard Boards designation for a draft standard. Testing and evaluation have been completed and any modifications to the draft standard have been identified

Status P

Standard Boards designation for a new work item to begin developing a standard

TDAG

Terminal Dues Action Group

WTO

World Trade Organization

[end]



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