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FAIR COMPETITION IN INTERNATIONAL SHIPPING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

GOVERNMENT OPERATIONS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 16, 2015 

Serial No. 114–29 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 


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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

JASON CHAFFETZ, Utah, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

CYNTHIA M. LUMMIS, Wyoming 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

RON DESANTIS, Florida 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

MARK WALKER, North Carolina 

ROD BLUM, Iowa 

JODY B. HICE, Georgia 

STEVE RUSSELL, Oklahoma 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

WILL HURD, Texas 

GARY J. PALMER, Alabama 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

MATT CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

BRENDA L. LAWRENCE, Michigan 

TED LIEU, California 

BONNIE WATSON COLEMAN, New Jersey 

STACEY E. PLASKETT, Virgin Islands 

MARK DeSAULNIER, California 

BRENDAN F. BOYLE, Pennsylvania 

PETER WELCH, Vermont 

MICHELLE LUJAN GRISHAM, New Mexico 

SEAN MCLAUGHLIN, Staff Director 

DAVID RAPALLO, Minority Staff Director 

MELISSA BEAUMONT, Clerk 

JEFFREY POST, Deputy Staff Director for the Government Operations Subcommittee 

ALEXA ARMSTRONG, Professional Staff Member 


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SUBCOMMITTEE ON GOVERNMENT OPERATIONS

MARK MEADOWS, North Carolina, Chairman 

JIM JORDAN, Ohio 

TIM WALBERG, Michigan, Vice Chair 

TREY GOWDY, South Carolina 

THOMAS MASSIE, Kentucky 

MICK MULVANEY, South Carolina 

KEN BUCK, Colorado 

EARL L. ‘‘BUDDY’’ CARTER, Georgia 

GLENN GROTHMAN, Wisconsin 

GERALD E. CONNOLLY, Virginia, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STACEY E. PLASKETT, Virgin Islands 

STEPHEN F. LYNCH, Massachusetts 


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C O N T E N T S 

Page 

Hearing held on June 16, 2015 ............................................................................... 1 

WITNESSES 

Mr. Robert G. Taub, Acting Chairman of the Postal Regulatory Commission 

Oral Statement ................................................................................................. 3 

Written Statement ............................................................................................ 5 

Mr. Robert J. Faucher, Acting Deputy Assistant Secretary, Bureau of International Organization Affairs, U.S. State Department 

Oral Statement ................................................................................................. 15 

Written Statement ............................................................................................ 17 

Mr. Randy S. Miskanic, Acting Chief Information Officer and Executive Vice 

President, U.S. Postal Service 

Oral Statement ................................................................................................. 22 

Written Statement ............................................................................................ 25 

Ms. Nancy Sparks, Managing Director, Regulatory Affairs, Fedex Express 

Oral Statement ................................................................................................. 30 

Written Statement ............................................................................................ 32 

Mr. Paul Misener, Vice President, Global Public Policy, Amazon.com 

Oral Statement ................................................................................................. 50 

Written Statement ............................................................................................ 52 

The Hon. David C. Williams, Inspector General, U.S. Postal Service 

Oral Statement ................................................................................................. 59 

Written Statement ............................................................................................ 61 


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FAIR COMPETITION IN INTERNATIONAL 

SHIPPING 

Tuesday, June 16, 2015, 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT OPERATIONS, SOMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:23 p.m. in room 

2154, Rayburn House Office Building, the Honorable Mark Meadows [chairman of the subcommittee], presiding. 

Present: Representatives Meadows, Walberg, Massie, Buck, Carter, Grothman, Connolly, Maloney, Norton, Clay and Plaskett. 

Mr. MEADOWS. The Subcommittee on Government Operations 

will come to order. 

Without objection, the Chair is authorized to declare a recess at 

any time. 

The Ranking Member, Mr. Connolly, will be coming shortly. 

When he comes, we will allow him to give his opening statement. 

Today, through the United States Postal Service, it is often 

cheaper to ship a small package from China than to ship that same 

package within the United States. Intuitively, this does not make 

a lot of sense as the nearest coast of China is more than 5,000 

miles away from the United States across a very large body of 

water. 

A simple search of any one of a dozen or more websites helps to 

illustrate the issue. In searching this topic, the Committee staff 

found numerous examples where small, lightweight goods from 

China could be purchased, delivered, shipped and with shipping included, at unbelievable prices such as 99 cents for a stylus pen or 

$1.58 for lipstick. 

Prices like these cause the Postal Service to lose money on at 

least some of this international mail. In fact, the Postal Service lost 

some $75 million on inbound international mail last year alone. 

However, this loss is not necessarily the Postal Service’s fault. 

International mail rates are largely governed by a treaty drafted 

through the Universal Postal Union, a United Nations organization 

with over 192 member countries. 

This treaty covers the establishment of what they call terminal 

dues or the amount of money that one post gives to another post 

for the final delivery of that international mail. Every four years, 

the UPU negotiates a new treaty, the most recent of which will run 

through 2018. The stated goal of these negotiations is to eventually 

create a system that accurately reflects the cost of final delivery in 

each country. 


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Under the current treaty, countries are generally classified as either target or transition. Target group members are typically the 

more industrialized countries and transition group members are 

usually more developing countries. 

While the terminal dues rates between target countries are 

somewhat reflective of delivery costs, rates for mail from transition 

countries to target countries are not. This problem is exacerbated 

by the fact that the classification system for countries is far from 

perfect. Most notably, China is included in the same group as 

Libya, Kazakhstan and others making it eligible for higher preferential rates. 

To help combat terminal dues problems, the Postal Service is authorized to seek out bilateral agreements with countries to secure 

rates above the terminal dues level. However, in most cases, the 

Postal Service has little leverage with the transition countries to 

secure better rates through these added services like parcel tracking. As one example, in 2012, mail sent under a bilateral agreement with China only reduced Postal Service costs by 3 percent 

compared to the terminal dues rate. 

All of this has left thousands of American small businesses at a 

competitive disadvantage against foreign competition, not because 

of the price of the goods, the labor or anything else, but because 

of the size of the hidden shipping subsidies. 

With that in mind, the question becomes, how can we improve 

this situation which brings us to the panel that is before us today. 

Before us, we have key representatives from a wide array of interested parties, including the State Department, the Postal Service, 

the Postal Regulatory Commission, international shippers and the 

domestic retail industry, all of whom have a clear stake in the long 

term future of the terminal dues system. 

I look forward to hearing from all of the witnesses about our current situation, how it came about and what we can do to eliminate 

what I would say anticompetitive trade distortions as quickly as 

possible. As a previous small business guy, the last thing I want 

to do is take my home field advantage and feel I have a disadvantage because someone can ship it at a much cheaper cost from 

5,000 miles away. 

Specifically, I hope the witnesses will share their ideas about 

how we can make the Universal Postal Union more transparent, 

how to reduce the amount of information on international mailing 

that is considered commercially sensitive and not available to the 

public, and how to improve the overall fair competition for international package delivery. 

Mr. MEADOWS. As I said earlier, we will recognize the Ranking 

Member when he gets. 

I will hold the record open for five legislative days for any member who would like to submit a written statement. 

We will now recognize our panel of witnesses. 

I am pleased to welcome the Honorable Robert G. Taub, Acting 

Chairman of the Postal Regulatory Commission. It is good to see 

you again. Mr. Robert J. Faucher, Acting Deputy Assistant Secretary, Bureau of International Organization Affairs at the U.S. 

State Department; Mr. Randy S. Miskanic, Acting Chief Information Officer and Executive Vice President, the United States Postal 


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Service; Ms. Nancy Sparks, Managing Director, Regulatory Affairs 

at FedEx Express; Mr. Paul Misener, Vice President for Global 

Public Policy at Amazon.com; and Mr. David C. Williams, Inspector 

General of the United States Postal Service. 

Welcome to all of you. 

Pursuant to Committee rules, all witnesses will be sworn before 

they testify. Please rise and raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will be the truth, the whole truth, and nothing but 

the truth? 

[Witnesses respond in the affirmative.] 

Mr. MEADOWS. In order to allow time for discussion, I would ask 

that you limit your oral testimony to five minutes. Your entire 

written statement will be made a part of the record. 

We will recognize our first witness for five minutes. 

WITNESS STATEMENTS 

STATEMENT OF ROBERT G. TAUB 

Mr. TAUB. Thank you, Chairman Meadows, Ranking Member 

Connolly, and members of the subcommittee. Good afternoon. I am 

pleased to testify before you today. 

The defining feature of the Postal Regulatory Commission’s responsibilities and current law is that they exist within the larger 

context of U.S. membership in the Universal Postal Union, where 

terminal dues are negotiated as part of a complex process which 

the Chairman outlined in detail in his opening statement. 

The current negotiated framework established by the Postal Accountability and Enhancement Act of 2006 depends upon landmark 

1998 legislation that transferred responsibility for international 

postal policy from the Postal Service to the Secretary of State. 

The 2006 law established clear policy for the U.S. to, among 

other goals, ‘‘promote and encourage unrestricted and undistorted 

competition in the provision of international postal services and 

other international delivery services.’’ The law also established a 

new role for the Commission by directing the Secretary of State to 

request, and the Commission to provide, views on the consistency 

of terminal dues proposals for domestic rate regulation. 

The most recent view stated that ‘‘the Commission continues to 

adhere to the position that the U.S. Government should actively 

promote terminal dues rates in the UPU that are closely aligned 

with domestic postage rates and provide sufficient cost coverage to 

handle, transport and deliver inbound international mail for the 

Postal Service. Terminal dues rates are available only to designated operators. The Commission encourages the Department of 

State to move the UPU to adopt a terminal dues system that is 

more cost-based, country-specific and just and reasonable.’’ 

The 2012 UPU Congress enacted terminal dues that are increasing the Postal Service’s rates for most industrialized countries by 

roughly 13 percent annually from 2014 to 2017. The Commission 

has found that these continued terminal dues increases, if accompanied by cost containment, should have a positive effect on inbound letter post revenue and cost coverage. 


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In addition, as the Commission’s understanding of the UPU terminal dues system grew, it realized that no one had analyzed the 

wider effects of the terminal dues system through the lens of economic theory. Therefore, last year, the Commission contracted with 

Copenhagen Economics to address terminal dues from this perspective. The principal findings of the Copenhagen Economics report 

are detailed in my written testimony. 

Overall, the report found that terminal dues as currently structured create a variety of distortions to competition, demand, trade 

flows and postal operators’ costs. 

Fifteen years ago in March 2000, this Committee held a very 

similar hearing on international postal policy in my capacity as 

subcommittee staff director. The hearing was chaired by former 

Representative John McHugh, to whom I also served as chief of 

staff. I attended the hearing 

The hearing followed the 1999 UPU Congress which committed 

to a goal of achieving a cost-based terminal dues system by 2005. 

There have been three additional UPU Congresses since but the 

goal of the 1999 UPU Congress to achieve cost-based terminal dues 

by 2005 has not been realized. 

I think the conclusion is that progress on terminal dues has been 

glacial since the previous subcommittee hearing 15 years ago. Indeed, a decade and a half later, the Commission stated in a report 

issued less than three months ago ‘‘the Commission recognizes that 

the pricing regime for the inbound letter post product based upon 

the current UPU formula results in noncompensatory terminal 

dues rates. As a result, domestic mailers continue to subsidize the 

entry of inbound letter posts by foreign mailers who use the same 

postal infrastructure but bear none of the burden of contributing 

to its institutional cost.’’ At that hearing 15 years ago, the Commission described the exact same situation. 

Last September, the private sector submitted three terminal 

dues proposals to the State Department’s Federal Advisory Committee. The Commission suggests that the Advisory Committee’s 

recently approved Subcommittee on Terminal Dues carefully examine these proposals and the Copenhagen economics report. 

That report’s key solution, similar prices for similar services, regardless of country of origin or status as private or public operator, 

shows that terminal dues do not have to remain an intractable 

problem. 

On behalf of my fellow commissioners and the entire hard-working agency staff, thank you for the opportunity to testify today. I 

would be happy to answer any questions. 

[Prepared statement of Mr. Taub follows:] 


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Mr. MEADOWS. Thank you so much and thank you for your service. 

Mr. Faucher. 

STATEMENT OF ROBERT J. FAUCHER 

Mr. FAUCHER. Thank you, Mr. Chairman. Thank you for this opportunity to discuss the Department of State’s role in international 

postal matters. 

For 140 years, the Universal Postal Union has provided the 

framework for the international exchange of mail. The United 

States participation in the Universal Postal Union is led by the Department of State, which is responsible for the formulation, coordination and oversight of foreign policy related to international postal services. 

In discharging these responsibilities, the Department of State 

works closely with the Postal Regulatory Commission, the U.S. 

Postal Service and other concerned government agencies, including 

the Department of Homeland Security, the Department of Commerce, and the Office of the United States Trade Representative. 

We also seek advice from the International Postal and Delivery 

Services Advisory Committee, which brings together key private 

sector and government stakeholders. 

In 2012, the International Postal and Delivery Services Advisory 

Committee helped to formulate the 2013–2016 United States Strategic Plan for the Universal Postal Union. This plan identified five 

priorities with regard to the terminal dues system. These priorities 

included supporting the fundamental principle of market-oriented, 

cost-based, country-specific terminal dues. 

Those priorities also included further refining the methodology of 

the terminal dues pricing model to produce rates that more closely 

reflect costs and also included more member states and the target 

terminal dues system. 

Terminal dues rates are established in the Universal Postal 

Union Convention, which is adopted by the Congress of the Universal Postal Union every four years. It establishes universally applicable rules for the provision of international postal services. The 

next Congress of the Universal Postal Union will take place in 

Istanbul in 2016. 

The Department of State provides the head of the U.S. delegation 

to the Congresses and also initiates the Circular 175 process to authorize negotiations. The State Department also coordinates production of position papers that are cleared through an interagency 

process. 

In addition to this interagency coordination, the Department of 

State also solicits the views of the Postal Regulatory Commission 

on the consistency of proposals that are before the Congress that 

could establish a rate or classification for any market dominant 

product with the regulatory standards and criteria established by 

the Postal Regulatory Commission. 

The State Department also ensures that the formulation of the 

United States’ positions is informed by stakeholder input, principally through the International Postal and Delivery Services Advisory Committee, which the Department of State convenes when 

there are issues to consider and before all major Universal Postal 


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Union meetings. Finally, it is important to understand that the 

U.S. delegation to a Congress of the Universal Postal Union has 

sometimes included private sector advisors, whose knowledge and 

perspective has proven to be invaluable. 

The United States is a member of the Postal Operations Council 

and the Council of Administration at the Universal Postal Union. 

These two bodies have the responsibility of preparing the terminal 

dues proposals for the next Universal Postal Convention. 

The State Department has designated the Postal Regulatory 

Commission and the Postal Service as co-leads for U.S. participation in formulation of these proposals. The State Department, however, will retain final authority for determining U.S. positions. 

The focus of current work in the Postal Operations Council is to 

finalize two terminal dues pricing model options that would incorporate the differences in delivery costs associated with mail items 

of different shapes, since, for example, handling costs are higher for 

a box than for an envelope. We strongly support this effort, which 

advances our goal of further refining the pricing model to produce 

terminal dues rates that more closely reflect costs to postal service 

providers. 

In addition, there is a potentially far-reaching initiative to modernize the Universal Postal Union’s physical services portfolio, potentially integrating letter post and parcel post, which would have 

significant implications for terminal dues. 

Let me conclude with a further note on stakeholder consultation. 

At the State Department’s request, a Postal Service official briefed 

the International Postal and Delivery Services Advisory Committee 

on the state of play in terminal dues work at the Postal Operations 

Council at the Committee’s most recent meeting on February 13. 

The Advisory Committee had two lengthy discussions on terminal dues issues in the past year. These discussions focused on 

the proposals presented by Advisory Committee members representing the commercial express delivery industry with the objective of having the United States propose them at the 2016 Istanbul 

Congress. 

The Advisory Committee took no action on these proposals but 

recommended that a subcommittee be formed to facilitate a more 

detailed examination of the terminal dues issues. The State Department accepted this recommendation, and has authorized establishment of a subcommittee for this purpose which should be meeting in the next few weeks. 

Mr. Chairman, thank you again for this opportunity to describe 

the role of the Department of State in international postal matters, 

including the process of establishing terminal dues and to outline 

U.S. goals in this process. 

I would be happy to answer any questions members of the Committee have on these topics or on other matters related to terminal 

dues or the Universal Postal Union or international postal and delivery services in general. 

Thank you. 

[Prepared statement of Mr. Faucher follows:] 


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Mr. MEADOWS. Thank you, Mr. Faucher. 

Before we go on to you, Mr. Miskanic, I am going to recognize 

the Ranking Member, the gentleman from the 11th District of Virginia, Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. Thank you for holding today’s hearing to examine the international postal policy, particularly the current terminal dues rate system. 

We have an excellent panel of witnesses before us. Indeed, I believe it was PRC Chairman Taub who was the catalyst behind the 

last hearing held to examine the international postal system back 

in March 2000. Each witness represents a key entity with expertise 

and importance as to how we can work together to strengthen the 

U.S. strategic approach to future negotiations. 

I look forward to an in-depth conversation today to explore how 

our Nation can work to level the playing field for American small 

businesses and in the process, enhance global competition in 

ecommerce markets to benefit consumers at home and abroad. 

As you noted, Mr. Chairman, the UPU is the global organization 

through which the international community establishes treaties 

governing complex global mail issues such as setting appropriate 

terminal dues rates every four years. Terminal dues are meant to 

cover the domestic cost of handling, transporting and delivering 

mail originating abroad, while ensuring that rates are set in a progressive fashion to ensure that all UPU countries participate in the 

system. 

The concept of the terminal dues system is well intended. Indeed, 

the world needs a mechanism in place to facilitate global mail exchanges. However, there appear to be serious shortcomings in the 

current system that may be harming American business interests. 

For example, recent audits by the U.S. Postal Service’s Inspector 

General found that terminal dues do not cover the Postal Service’s 

actual cost for handling, transporting and delivering letter post 

items from abroad. 

Further, I am concerned that the significant imbalance between 

our Nation’s domestic shipping rates and the incredibly low international shipping rates we charge so-called transitional countries 

to export goods into our country may be providing an artificial and 

unfair competitive advantage to foreign retailers. That harms U.S. 

small businesses. 

According to the Postal Regulatory Commission, the current terminal dues rates may distort competition and artificially increase 

demand for products from foreign vendors who benefit from these 

low transitional country rates. The shipping of epackage which 

weigh up to 4.4 pounds and contain tracking and delivering features from China to the United States have increased by 182 percent just from 2011 to 2012 according to the report by Postal Vision 

2020. 

While this increase is partially a result of technological advancements, it has spurred greater utilization of ecommerce marketplaces, it is highly likely that the unfair competitive advantage provided by the low terminal dues is also a major driver of this dramatic increase. 

American small businesses simply want a level playing field on 

which to compete with foreign retailers, many of whom are formiVerDate Sep 11 2014 09:56 Oct 29, 2015 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 F:\95389.TXT APRIL

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dable business competitors even absent the artificial terminal dues 

pricing advantage they get. 

In addition, private carriers are struggling to compete with carriers who have access to terminal dues. The Postal Service continues to lose money on foreign shipping costs as foreign posts profit. 

The bottom line is that we are here this afternoon to ensure 

there is a fair and equitable global marketplace and that American 

businesses have a fair opportunity to compete on a level playing 

field in the digital age. The one country, one vote structure of the 

UPU does not allow change to happen at a rapid pace. That is why 

it is essential for government agencies and private entities to do 

everything in their power to protect American interests. 

According to Title 39, Section 407, the State Department’s role 

is to ‘‘promote and encourage unrestricted and undistorted competition in the provision of international postal services and other 

international delivery service.’’ This is crucial to ensuring the success of American business and ultimately the American economy. 

I look forward to hearing how the State Department in particular 

has carried out this responsibility. 

I would also like to hear the PRC’s view on the most pressing 

issues with the current system and its proposals on how it can be 

improved to facilitate robust but fair competition. 

From our private carriers and the ecommerce marketplace providers I would like to gain an understanding of how businesses 

have been affected by these dues, particularly our Nation’s community of small e-retailers. 

I think this is an important hearing. Mr. Chairman, I thank you 

for holding it and look forward to the testimony. I thank you for 

allowing me to interject at this point. 

Mr. MEADOWS. I thank you for your comments. 

Now we will recognize you, Mr. Miskanic, for five minutes. 

STATEMENT OF RANDY S. MISKANIC 

Mr. MISKANIC. Good afternoon, Chairman Meadows, Ranking 

Member Connolly and members of the subcommittee. 

My name is Randy S. Miskanic. I am Acting Chief Information 

Officer and Executive Vice President of the United States Postal 

Service. 

I previously served at the Universal Postal Union in Berne, Switzerland, for approximately three years. I was also a member of the 

U.S. Delegation for the last UPU Congress in Doha in 2012. 

I am pleased to be here today to discuss the UPU terminal dues 

system. The UPU is a specialized agency of the United Nations 

that sets the terms for how the world’s postal operators exchange 

international mail. The organization establish terminal dues rates 

and is the primary forum for cooperation among postal operators. 

The United States is a member of the UPU and exchanges mail 

globally, in accordance with its Acts. The U.S. Department of State, 

the Postal Service, the U.S. Postal Regulatory Commission and representatives of the broader postal industry are all key UPU stakeholders. By law, the State Department is the lead representative 

of the U.S. Government to the UPU. 


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The Postal Service is designated by the United States Government to fulfill the obligations of the UPU Acts, which include exchanging international mail with more than 200 countries and territories. International mail accounts for 4 percent of our revenue 

and 1 percent of our annual total volume. 

Industry representatives, including FedEx, UPS and DHL, directly participate in the State Department’s Advisory Committee 

on International Postal and Delivery Services. A subcommittee will 

be forming to facilitate a more detailed examination of terminal 

dues which will be an appropriate venue for greater stakeholder 

engagement. 

The UPU Congress, which convenes every four years, provides 

the forum for member countries to establish policies and regulations for the global postal sector. Each of the 192 member countries 

is entitled to one vote on proposals introduced to the Congress, including those involving terminal dues. 

Terminal dues are paid and received for the delivery of letters, 

flats and small packages weighing up to 4.4 pounds. The rates, 

which are set by the UPU, and assessed against the originating 

post, are intended to cover processing and delivery costs for inbound international mail. 

Terminal dues rates are based on whether a country is classified 

as target or transition as determinate by its stage of development. 

Target country terminal dues are based on country specific rates 

which is currently 70 percent of domestic postage rates. Transition 

countries pay terminal dues rates that are based primarily on 

lower, worldwide average costs. 

The 2012 Doha Congress established a new formula to produce 

terminal dues that are closer to actual costs which will result in 

increases for both the target and transition countries. While this is 

a favorable development, the changes will take four years to be 

fully implemented from the January 2014 effective date and cost 

coverage may remain under 100 percent. We have long made the 

argument that inbound letter post cost coverage for a country like 

the United States must be improved. 

The terminal dues system is designed to serve multiple competing objectives, including support for developing countries. As 

such, it is not a system suitable for participation by both public 

and private operators, the latter of which differ in several ways 

from universal service providers. 

Private operators are not encumbered by universal service obligations and are free to target only the most lucrative markets. Additionally, they are able to offer service to or from a country without having to carry reverse traffic at a loss. 

Going forward, the Postal Service is advocating for shape-based 

pricing to better achieve cost. It is anticipated that the 2016 

Istanbul Congress will adopt a terminal dues structure that is 

more closely related to the cost of processing and delivering different shapes of mail. 

As an alternative to UPU terminal dues, the Postal Service can 

enter bilateral agreements with foreign postal operators that include negotiated rates for some or all inbound letter post items. Negotiated rates are designed to improve the overall cost coverage 


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and improve efficiencies. Proposed inbound bilateral agreements 

must be filed at the PRC for review and approval. 

While the Postal Service may be better served by negotiating 

terms independently with certain countries, it would be impractical 

to negotiate, sign and file at the PRC, a separate bilateral agreement with each UPU designated operator. 

In many cases, foreign postal operators are not willing to negotiate bilateral agreements as doing so would require paying a rate 

higher than UPU terminal dues. When the Postal Service negotiates with foreign postal operators, there is little bargaining room 

to increase cost coverage because the current UPU terminal dues 

structure provides the base of the negotiating position. 

The Postal Service continues to encourage the UPU and State 

Department to support the principle of cost-based country-specific 

terminal dues and advocates for positions that move toward better 

cost coverage for all inbound UPU mail flows. 

Thank you, Mr. Chairman. I welcome any questions that you and 

the Committee members may have. 

[Prepared statement of Mr. Miskanic follows:] 


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Mr. MEADOWS. Thank you for your testimony. 

Ms. Sparks, we will recognize you for five minutes. 

STATEMENT OF NANCY SPARKS 

Ms. SPARKS. Thank you very much. 

I am here today on behalf of FedEx Express and our 300,000 

team members in the United States and around the world. 

With your permission, I would like to submit my full statement 

for the record and just provide a brief overview now. 

Mr. MEADOWS. Without objection. 

Ms. SPARKS. First, I would like to thank you, Chairman Meadows, Ranking Member Connolly, and members of the Subcommittee 

on Government Operations for convening this hearing on international postal and delivery services. It is extremely timely given 

the upcoming Universal Postal Union Congress in 2016. 

The topic of international postal policy often feels obscure and 

impenetrable, but it is important for the U.S. economy. Today, 

three of the top five players in the global parcel delivery market 

are U.S. entities, FedEx, UPS and the United States Postal Service. Collectively, we employ more than 1 million Americans. We 

connect sellers and buyers and ordinary individuals across the 

globe. We are the conduit for the booming international ecommerce 

trade. 

The next UPU Congress will establish the rules until 2022. The 

time for promoting long needed reforms at the UPU is getting very 

short. The legal framework of the UPU is outdated and ill-equipped 

to handle today’s radically changing market. It produces significant 

regulatory challenges which adversely affect FedEx and the United 

States. 

The world’s post offices, including the Postal Service, are experiencing massive changes due to the steep decline in letters and documents. They are attempting to change their focus to package delivery services, especially ecommerce services. 

Large, international postal companies like Royal Mail, China 

Post and La Poste of France, are now major logistics companies. 

For private carriers like FedEx and UPS, ecommerce services are 

a natural extension of long established global express networks. 

International package delivery has become a big and highly competitive business. 

As you quoted, Congress defined the policy of the United States 

toward this dynamic market in the 2006 PAEA, that is, to promote 

and encourage unrestricted and undistorted competition in the provision of international postal and other international delivery services. 

This declaration rests on two insights. First, international postal 

and delivery services now comprise a single market. Second, competition should be the norm. In the package segment, in particular, 

there is no room for monopoly and no entitlement to a special position for any actor. 

Congress had it right in 2006. Promoting competition on the 

international stage may be hard work but it is necessary to foster 

better and more innovative services which will support international commerce in the 21st Century. The PAEA prescribed the 

right goals and standards for U.S. participation in the UPU. 


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Viewed through the lens of the PAEA, however, there are three 

fundamental problems with the way the UPU interacts with the 

global parcels market. It looks like I am only going to have time 

to talk about one of them, the terminal dues system. 

The UPU has established a system of economically distorted and 

anticompetitive delivery rates for international postal packages. 

These delivery rates are exclusively available to post offices. They 

are not cost-based, as you have heard. They are fixed by agreement 

among posts. 

The gist of the system is that posts give each other large discounts off the domestic passed postage rates they charge their own 

citizens. Discounts are extra deep, as we have heard, for developing 

countries, even though some, like China, Singapore and Hong 

Kong, are powerhouses in international ecommerce. 

When the Postal Service delivers goods from Asia at deeply discounted prices, the losers are U.S. businesses who are placed at a 

competitive disadvantage. Private carriers, like FedEx, are affected 

as well. 

We have identified two other issues in our written testimony, one 

dealing with customs parity and the other dealing with the need 

for institutional reform at the UPU. I appreciate the time you have 

given us today and hope you will find our written statement useful. 

[Prepared statement of Ms. Sparks follows:] 


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Mr. MEADOWS. Thank you, Ms. Sparks. 

I must admit that you are one of the few in Washington, D.C. 

that actually pays attention to the clock and I appreciate that. 

Mr. Misener, I will come to you. The pressure is on. 

STATEMENT OF PAUL MISENER 

Mr. MISENER. Thank you, Mr. Chairman. 

My name is Paul Misener, and I am Amazon.com’s Vice President for Global Public Policy. Thank you for having me. 

Under international postal agreements, the U.S. Postal Service 

charges much lower rates for delivering foreign shipments from 

transfer points in the United States to recipients in the United 

States, than the USPS charges for handling comparable wholly domestic shipments between the same U.S. points. 

This disparity discriminates against American businesses shipping domestically. To allow fair competition in shipping to U.S. 

consumers and equitable treatment of American businesses, the 

international agreements must be reformed. 

Thank you for your attention to this important topic, for holding 

this hearing, and for inviting me. 

Amazon operates a global ecommerce business and we strive to 

be Earth’s most customer-centric company. In the context of shipping, our key customer sets are consumers, buyers, as well as seller. 

For our consumer customers, we offer low prices, vast selection, 

and convenience, and for our seller customers, our Marketplace 

ecommerce platform allows millions of sellers, mostly small businesses and individuals, to sell through Amazons websites. Today, 

more than 40 percent of Amazon’s total unit sales are by these 

third party sellers. 

Delivery is a very important part of the customer experience at 

Amazon. Accordingly, we maintain strong ties to postal operators 

around the world, including the USPS and China Post. 

We believe that two problematic compensation arrangements between them need to be reformed to promote fair competition in 

shipping to American consumers. There is considerable discussion 

about whether these agreements adversely affect the financial 

health of the USPS as its Office of Inspector General concluded in 

a 2014 white paper. 

It is not difficult to see that as a result of the compensation imbalance, businesses in China end up paying less for delivery in the 

United States than American businesses end up paying for delivery 

in China. 

Another serious problem caused by these agreements is less well 

known and may be less obvious. As an indirect result of the arrangements between China Post and the USPS under which China 

Post under pays the USPS for lightweight deliveries within the 

United States, American businesses of all sizes end up paying more 

than Chinese companies for deliveries to American consumers. 

In other words, because U.S. domestic delivery rates exceed 

international terminal rates here, Chinese companies end up getting a better deal from the USPS than American businesses. Amazingly, when combined with extremely low bulk shipping rates from 

China to U.S. transfer points, shipments from China to points 


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throughout the United States are often cheaper than shipments entirely within the United States. 

The resulting competitive disadvantage to American businesses 

of all sizes is as unfair as it is illogical. For example, at today’s 

rates, the shipping of a 100 gram parcel to Fairfax, Virginia would 

cost a small business in Marion, North Carolina at least $1.94 at 

a distance of 340 miles but would cost a company in Shanghai only 

$1.12 at a distance of 7,000 miles. 

Similarly, shipping a 1 pound parcel to New York City would cost 

nearly $6.00 from Greenville, South Carolina but only $3.66 from 

Beijing. At high volumes, especially for low-priced items, such dramatic shipping cost differences can make or break a small 

ecommerce business. 

The current international agreements that ultimately discriminate against American domestic shippers of all sizes should be reformed. Ideally, international terminal compensation rates would 

rise, approaching the domestic rates of postage and, at least in theory, then both rates could meet at a point of parity less than the 

current domestic rate. 

That is, increases in terminal rates could potentially allow a revenue-neutral reduction in domestic delivery rates, which would 

benefit even more Americans. This reformation would not give an 

advantage to American sellers over foreign-based sellers; rather, it 

merely would level the playing field on which they compete. 

In particular, the United States has a special relationship with 

China. Truly with all the strong and growing ties between our nations we can resolve the anachronistic imbalance which, if it ever 

made sense for China-based dollars to have a shipping price advantage within the United States over U.S.-based sellers, it makes no 

sense now given the strong trading position that China already enjoys. 

In conclusion, existing international agreements offer foreignbased companies much cheaper mail service in the United States 

than the USPS offers to American seller businesses for domestic 

shipments. For the sake of both effective competition in shipping 

and fairness to American seller businesses, the UPU terminal delivery compensation system and current bilateral agreements between the USPS and key foreign postal operators such as China 

Post must be reformed. 

Thank you again for inviting me to testify. I look forward to your 

questions. 

[Prepared statement of Mr. Misener follows:] 


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Mr. MEADOWS. You rose to the occasion, Mr. Misener. 

I will say it is not without recognition by me or the Ranking 

Member that your example was from my district to his district. 

Mr. MISENER. Purely coincidental. 

Mr. MEADOWS. Purely coincidental, I appreciate it. 

Mr. Williams, we will recognize you for five minutes. 

STATEMENT OF DAVID C. WILLIAMS 

Mr. WILLIAMS. Thank you, Mr. Chairman and members of the 

subcommittee for the opportunity to discuss this issue. 

When someone mails a letter or parcel to another country, the 

sending post receives the postage, but then compensates the destination post for its processing and delivery. 

Compensation rates, called terminal dues, are negotiated among 

192 countries at the Universal Postal Union every four years. Each 

nation gets one vote. Countries are also free to enter their own customized bilateral agreements for particular mail flows. The U.S. 

Postal Service has bilateral agreements with Canada Post, China 

Post and others. 

Historically, inbound terminal dues rates have not covered delivery cost for the U.S. Postal Service and many other posts. Last 

year, the Postal Service lost $75 million delivering inbound international mail. Other nations also lose money processing mail for inadequate terminal dues rates. 

The explosion in ecommerce is creating new areas of concern. 

The number of small parcels sent to the United States from China 

has greatly increased. The Postal Service loses money delivering 

each of these parcels, and China Post can send them at lower rates 

than even businesses located here in the United States. 

In 2012, for example, a typical small parcel, the First-Class rate for U.S. businesses was more than $1 higher than the rate China 

Post paid under terminal dues. It is unclear how much China Post 

charges its own large customers. 

To respond to parcel growth and to better cover costs, the Postal 

Service created the ePacket product in a bilateral agreement with 

China Post. The ePackets are small parcels that receive delivery 

tracking. In return, China Post pays higher rates than terminal 

dues. 

In a recent audit, we found the Postal Service received 27 million 

ePackets from China Post in fiscal year 2012. Each packet lost 

$1.10 on average, a negligible improvement of 5 cents compared to 

the loss under terminal dues rates. 

In response, the Postal Service explained that it was negotiating 

a better deal, but it also made clear that substantial rate increases 

could cause China Post to revert to low UPU terminal dues rates, 

which treat China as a developing nation in need of price support. 

The UPU is gradually making changes to terminal dues, although progress has been slow. A 2012 decision will move China 

and several other significant economies to the lowest target category for industrialized countries in 2016. However, this will not 

result in any significant increase in terminal dues rates until 2018. 

Any damage to U.S businesses will likely have occurred by then. 

More beneficially for the Postal Service, the terminal dues rates 

it receives from industrialized countries are increasing 13 percent 


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a year between 2014 and 2017. This will bring the Postal Service 

significant additional revenue, but make it harder than ever for 

British or German goods to compete with Chinese products sold 

here. 

The UPU’s mission is as relevant as when the institution was 

created, but, like many enterprises, the UPU system has been 

greatly disrupted by globalization and the digital age. The process 

is not agile or responsive even to great changes in commerce and 

economics. It can take years for rates to catch up to changing economic realities. 

Many nations have made significant economic progress, but the 

process of bringing their rates in line with the terminal dues paid 

by other developed countries has been slow. Nations still vote on 

the size and timeframe of terminal dues increases. The existence 

of low terminal dues rates as a default hampers nations’ ability to 

negotiate fair agreements. 

The UPU system involves nation-states providing universal service, but excludes private sector carriers whose importance has 

grown with the rise of ecommerce. Gaps in real mail processing 

costs and terminal dues are encouraging exploitative new industries that take advantage of low terminal dues rates and undermine national posts. 

An unintended consequence of terminal dues is that the system 

picks winners and losers, and undermines efficient market forces. 

In the United States, China has an unfair edge over U.S. businesses. These distortions are even greater in other industrialized 

countries. 

Removing market distortions and ensuring agility take on new 

importance with the growth in ecommerce and globalization. My office wants to do additional work in this area and would like to 

work with your staffs to include issues brought out today in that 

body of work. 

Thank you. 

[Prepared statement of Mr. Williams follows:] 


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Mr. MEADOWS. Thank you, Mr. Williams. Thank all of you for 

your testimony. 

I must confess that when I first heard about this particular 

issue, it was not on the top of my bucket list in terms of issues to 

address but I will say, thank you for your illuminating testimony. 

We are going to have a series of questions. I am going to recognize the gentleman from Kentucky, Mr. Massie, for five minutes, 

for a round of questioning. 

Mr. MASSIE. Thank you, Mr. Chairman. 

Mr. Faucher, are terminal dues rates made public? 

Mr. FAUCHER. I can be corrected here, but I believe they are 

made public as part of the UPU’s records. 

Mr. MASSIE. Do small businesses have access to this? 

Mr. FAUCHER. Again, if those records are made public, they 

would have access to those, yes, they would. I could ask my colleagues to correct me if I have this wrong. 

Mr. MASSIE. Is that correct? 

Mr. MISKANIC. That is correct. 

Mr. MASSIE. Ms. Sparks, how is your company specifically impacted by terminal dues rates? 

Ms. SPARKS. I would say there are probably two different ways 

we are affected. First of all, we look at the global competition when 

we talk about delivery services. We not only compete with UPS and 

the United States Postal Service, but we compete offshore with 

Royal Mail and China Post. 

What has happened with the terminal dues system is they have 

set up what I refer to as an exclusive club where they offer each 

other deep discounts but they do not offer them to us. It is very 

difficult for us to get into those markets with a similarly priced 

ecommerce product, so it is difficult to compete. 

Mr. MASSIE. It is not just a problem in the United States where 

we have disparity and people paying higher or lower rates disconnected from the actual cost, it is a problem in other countries? 

Ms. SPARKS. Absolutely. In fact, if you talk to regulators in other 

countries, regulating in Europe, for example, they will tell you that 

their countries are similarly being flooded with these low postal 

charge packages. 

Mr. MASSIE. Do you have access to those rates overseas? 

Ms. SPARKS. No, we would not have access to any rates. We 

would have access to the same rates as a domestic shipper, for instance, as a German shipper would get in Germany. 

Mr. MASSIE. So we make it public here in the U.S. and transparent but not overseas? 

Ms. SPARKS. No, no, I am sorry. I thought you meant access like 

we could use them or get the benefit of them. 

The rates are published, the UPU rates, what they charge each 

other, are published after the Congress once they have been decided upon unless there is a bilateral agreement in place like the 

one the United States has with China. That is not made public. We 

do not know what the United States and China are charging each 

other right now. 

Mr. MASSIE. My next question is for Mr. Misener. Who are the 

winners and losers in the current terminal dues system? 


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Mr. MISENER. The clear losers are American businesses selling to 

American consumers. These are many of the sellers through our 

website. The clear winners are foreign sellers selling to American 

consumers. They get a terrific benefit. 

Overall, it is mostly the distortion among our seller customers 

that has been so frustrating to us. It is a completely unnecessary 

and illogical distortion that one set of sellers would get a benefit 

from the USPS and another set of sellers does not. 

Mr. MASSIE. It seems like there is clearly a problem here. Mr. 

Chairman, I had no idea that this disparity existed either until you 

called this hearing. 

Mr. Miskanic, is it correct that the next chance to fix this is in 

2016 at the next UPU Congress where they are going to discuss 

and set these rates or is there a chance before then? 

Mr. MISKANIC. That is correct. The next chance to fix this is in 

2016 at the Istanbul Congress. 

Mr. MASSIE. I think you mentioned in your testimony, or maybe 

it was someone else that there will be another Committee established to represent stakeholders in the United States or having 

more input? 

Mr. MISKANIC. That is correct, Mr. Massie. There is a subcommittee formed by the State Department specifically to address 

this issue and work on proposals moving forward in anticipation of 

the 2016 Istanbul Congress. 

Mr. MASSIE. Is the State Department optimistic that we can address this in 2016 because these rates are going to be set until 

2021. We do not want to miss the next chance. 

Mr. FAUCHER. I would say the State Department is very optimistic that we will be able to address this problem in 2016, just 

as it was addressed in 2012. We are going to make progress on this 

problem. We might not solve it completely, however, but we are 

going to continue to try to move to terminal dues rates as close to 

the cost base as possible. That is our goal for 2016. 

Mr. MASSIE. Thank you very much. 

I yield back my remaining two seconds. 

Mr. MEADOWS. I thank the gentleman from Kentucky. 

The Chair recognizes the gentleman from Missouri, Mr. Clay, for 

five minutes. 

Mr. CLAY. Thank you, Mr. Chairman, for conducting this hearing. 

I want to talk to Mr. Faucher and Mr. Taub. I would like to discuss the role of the State Department and the Postal Regulatory 

Commission in shaping international mail policy. 

The State Department has the responsibility to coordinate with 

other agencies as appropriate and in particular should give full 

consideration to the authority vested by law or Executive Order in 

the PRC. Is that right, Mr. Faucher? 

Mr. FAUCHER. That is absolutely correct. 

Mr. CLAY. Section 407 states ‘‘Before concluding any treaty, convention or amendment that establishes a rate or classification, the 

Secretary of State shall request the PRC to submit its views on 

whether such rate or classification is consistent with the standards 

and criteria established by the Commission.’’ Is it fair to say the 


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State Department uses the PRC as a tool to evaluate the proposals? 

Mr. FAUCHER. We definitely see the Postal Regulatory Commission as a very important colleague and collaborator in all these 

things. We seek their advice and views on these questions to the 

greatest extent possible because they have the expertise in this 

area. 

Mr. CLAY. Once the State Department receives a recommendation, is it required to follow it? 

Mr. FAUCHER. I do not know I would say required. In almost 

every case I can think of, we have tried to follow what the PRC 

has recommended. We still have our foreign policy prerogatives 

that we must follow also, but I cannot think of a single case that 

I am aware of where we have not followed a PRC recommendation. 

Mr. CLAY. It is my understanding that the U.S. Postal Service is 

not supposed to have involvement in the shaping of international 

postal policy. Is that correct? 

Mr. FAUCHER. Is not supposed to have what? 

Mr. CLAY. Not supposed to have involvement in the shaping of 

international postal policy? 

Mr. FAUCHER. I am not aware of that. I would say it is very important for us to understand the U.S. Postal Service and its constraints and the way it is doing business for us to be able to shape 

international postal policy. 

They are the designated postal operator under the Universal 

Postal Union, so it is very important for us to hear their voice and 

also get their advice on the issues before us. 

Mr. CLAY. Fair enough. 

Mr. Miskanic, would you care to comment on the role of the Postal Service with respect to international postal policy? 

Mr. MISKANIC. The Postal Service serves as a member on the 

U.S. delegation to the UPU. As such, we participate in meetings 

and forums as the formulation of policy is conducted. 

As Mr. Faucher stated, the State Department has the ultimate 

role in shaping foreign policy, however, as the designated postal operator and the entity that bears the universal service obligation for 

the acts of the UPU, we do have the opportunity to participate and 

provide input to that policy. 

Mr. CLAY. Thank you for that response. 

Mr. Taub, it is clear that the State Department relies heavily on 

the PRC’s opinion as to whether these proposals are consistent 

with the law concerning postal policy, is that correct? 

Mr. TAUB. That is correct. We have a clear statutory role in this 

process. 

Mr. CLAY. Is it true that the PRC reviews every proposal that 

could potentially have an effect on postal policy that the State Department receives? 

Mr. TAUB. Indeed, we have a very small staff and a very limited 

budget, but we have dedicated staff to this issue. They go through 

every proposal to ensure whether it has a rate or classification implication and if so, then we go through and assess whether we 

should be providing a view to the Department of State. 


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Mr. CLAY. In that process, in addition to making sure they are 

consistent with the law, are they making a determination as to 

how good or bad the proposal is overall? 

Mr. TAUB. The specific determination we are making is, is the 

specific proposal consistent or inconsistent with the legislative criteria to set market dominant rates in the U.S. which is mainly letters and periodicals. It is not the competitive products; it is a different regulatory regime. We are looking at is the specific proposal 

consistent with the statutory criteria? 

Mr. CLAY. Thank you for your response. 

Mr. Chairman, I finished on time. 

Mr. MEADOWS. Kudos to the gentleman from Missouri for finishing on time. 

I am going to recognize the Vice Chair of this Committee, the 

gentleman from Michigan, Mr. Wahlberg. 

Mr. WALBERG. Thank you, Mr. Chairman. I am starting on time. 

Mr. Misener, to your knowledge, how, if at all, does the State Department take into account the views of American retailers, particularly small businesses, in determining UPU bargaining positions? 

Mr. MISENER. I think it will increase after this hearing. I thank 

the Committee for holding this hearing because it does focus attention on the need to take into account the effects on American businesses within the United States. 

There was an answer earlier to a question about when the next 

opportunity is to adjust these disparities. Mr. Massie asked this 

question. The answer given was with respect to the UPU only. 

As I pointed out in my written testimony, I think there are opportunities for bilateral negotiations where the most significant 

problems arise. A negotiation directly with China on this issue I 

think is in order, without waiting for the UPU Congress or the results of that multinational body. 

Mr. WALBERG. Consultation throughout the process over time, 

checking out with the private sector, would be helpful? 

Mr. MISENER. It is also my responsibility at Amazon to ensure 

that our ideas are transmitted to the State Department, the Postal 

Service and others. I am offering them here today and I will follow 

up. 

Mr. WALBERG. Mr. Faucher, similarly, how much of a voice do 

American businesses have in the process of developing States’ objectives going into the UPU Congress? 

Mr. FAUCHER. I have been in this position for almost two years 

and throughout all the deliberations we have had on this issue, we 

have always taken into account the concerns of U.S. businesses and 

the concerns of U.S. consumers. 

We welcome U.S. businesses to attend our advisory Committee 

meetings, we look for their representatives in various things, we invite them onto our delegations and they have been totally welcomed at all times to make their concerns known to us so that we 

can take those into account. 

Mr. WALBERG. Have they followed up with that openness? 

Mr. FAUCHER. Yes. We have regularly representatives of members at this table who have been members of our delegations representing their interests. That is correct. 


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Mr. WALBERG. Ms. Sparks, what can be done to give more of a 

voice to American business in this process? We have had a request 

from one side, we would like more opportunity. Mr. Faucher says, 

yes, they have the opportunity, we are always open to that. Bring 

us together here. 

Ms. SPARKS. That is a tall order. I think certainly the IPDS, the 

International Postal and Delivery Services Committee, is an excellent vehicle. 

We have found it, at times, to be difficult because there are very 

many opinions in the room. We presented a proposal on terminal 

dues last September. We were told last week that the subcommittee is now being convened. 

These things do not always move as quickly as we would like. 

This is why we found the timing of this hearing to be very important because, in UPU time, September 2016 is a heartbeat away. 

We welcome continued involvement. I did go to Doha as a private 

sector advisor to the delegation in the last Congress and appreciated that opportunity. I would have appreciated it more if I had 

seen the U.S. proposals before I went. 

Mr. WALBERG. You had not seen the proposals? 

Ms. SPARKS. I did not see the U.S. position papers before we 

went. In all deference to Mr. Faucher, he was not in this position 

at that time. This was a previous group we were dealing with. 

Mr. WALBERG. Saved by the appointment time. 

Ms. SPARKS. Getting U.S. commercial input is a learning process. 

I think we are learning and I think this hearing today provides us 

with another opportunity for all of us to learn how to participate. 

Mr. WALBERG. Definitely, as with any business, we are talking 

milliseconds of need and making decisions. If you are waiting too 

long, it is hard to make those key decisions. 

Mr. Taub, would you respond as well to the preceding question 

of how the businesses could be worked with in a better way in coming up with solutions and agendas? 

Mr. TAUB. To give a little context, in my written and oral statement, I had described 15 years ago this Committee holding a very 

similar hearing on this issue. That was before the law changed in 

2006 but it was shortly after the law had changed for the first time 

to have the Secretary of State in the lead role, not the Postal Service. 

The Government Accountability Office testified at that hearing 

and said, the State Department really needs to undertake a federal 

advisory Committee process and probably needs to be mandated. 

The 2006 law did that. 

Frankly, without that change, I am not sure we would have seen 

the structure in place. That structure is in place now. We are members of that FACA, as it is called. I think as Nancy outlined, it has 

been a learning process. 

I would observe that the law did have very specific requirements 

of the Secretary of State’s consultation and involvement with other 

federal agencies and yet, had the Postal Service in that same law 

together with all of our postal and delivery sector, both public and 

private. 

I do have an observation. Having attended the recent FACA 

meeting in my new role as Acting Chair, that the Postal Service 


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is at the table in some ways as another Executive Branch agency. 

They certainly are, but when it comes to Title 39 of the U.S. Code, 

Section 407, there was an intent there to have a better distinction. 

Mr. WALBERG. I appreciate that. 

Mr. Chairman, thank you for giving me additional time. 

Mr. MEADOWS. I thank the gentleman. 

The Chair recognizes the gentlelady, Ms. Plaskett, from the Virgin Islands, for five minutes. 

Ms. PLASKETT. Thank you very much, Mr. Chairman. 

Thank you, lady and gentleman for being here this afternoon. 

I wanted to ask some specific questions that may be a little off 

from what we are specifically talking about. 

I live in a district, the United States Virgin Islands, which for 

all intents and purposes by the Postal Service, as well as some of 

the testifiers, is treated as an international postal zone. I wanted 

to ask questions specific to that. 

Mr. Taub, I wanted to ask you with regard to the Postal Regulatory Commission, if, in fact, the Virgin Islands is considered 

international? 

Mr. TAUB. The Virgin Islands is part of the United States and 

in terms of the service standards we are looking at, the Postal 

Service sets those. They are supposed to be covering all of the 

United States. 

Ms. PLASKETT. Can you tell me why in the last five years residents of the Virgin Islands have been required to fill out customs 

forms when they send packages from the U.S. Virgin Islands to the 

United States, to the mainland? 

Mr. TAUB. I cannot answer that. We are the regulator, not the 

operator. Those are operational details. I would suggest the Postal 

Service itself. 

Ms. PLASKETT. Is anyone from the Postal Service testifying today 

able to tell me why that has been imposed on the people who are 

U.S. citizens to fill out these forms every time they try to send a 

package to a relative on the mainland? 

Mr. MISKANIC. Representative Plaskett, the completion of customs forms is directed by Customs and Border Protection. Obviously, the Postal Service would not create an undue burden for 

your constituents. 

Ms. PLASKETT. So we would need to speak with Customs as to 

why they are making us at the U.S. Postal Service fill out customs 

forms? 

Mr. MISKANIC. Yes, ma’am. 

Ms. PLASKETT. You do not have any control over what happens 

within post office? 

Mr. MISKANIC. The Postal Service has no authority over Customs 

and Border Protection, the processing and the requirement of customs forms. 

Ms. PLASKETT. I will direct my questions to them. 

The other thing I found interesting in reading the testimony of 

Ms. Sparks particularly, as well as Mr. Misener from the private 

sector, is the discussion about the disparities in competition that 

is given to businesses outside of the United States and competing 

with U.S. businesses from the rates that are offered. 


AKING-6430 with DISTILLER
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Ms. Sparks, can you tell me why a package coming from the Virgin Islands is treated as international in terms of the rates they 

have to pay whereas individuals sending the same sized package 

with FedEx from the mainland pay domestic prices? 

Ms. SPARKS. I am afraid I cannot. I think what you are asking 

is why does the Postal Service charge that? 

Ms. PLASKETT. No, this is from FedEx. 

Ms. SPARKS. I am going to have to get back to you on that. 

Ms. PLASKETT. Would you? That is very important to us. 

Ms. SPARKS. I would be glad to address that. 

Ms. PLASKETT. If I am sending the same package from the 

States, I get to pay domestic rates but when I pay it from the Virgin Islands, the same sized package, I am charged international 

rates. 

Ms. SPARKS. I would be glad to check it and get back to you. 

Ms. PLASKETT. Mr. Misener, we know that letters are decreasing. 

You talked about that. At the same time, there has been an explosion in terms of ecommerce and the amount of ecommerce activity. 

We have many small businesses in the territory that are trying 

to utilize ecommerce to be able to not just have their goods on 

Amazon or things of that nature but also to ship in other things. 

Our consumers, as well, love using Amazon. 

Is there a reason why in the U.S. Virgin Islands we are not allowed to have certain packages, certain things from Amazon, why 

certain electronics or other things are not treated the same and 

why the rates we have for our shipping are very different than anywhere else, even from our neighbor, Puerto Rico? 

Mr. MISENER. The question about varying rates is what we discussed today. We as a company are sellers that I am here talking 

about, are facing this disparate system that does not make any 

sense. We are sort of victims of it as well. 

The reason why certain goods cannot be shipped to certain 

places, those are restrictions placed upon us as a business usually 

by the manufacturers of certain products. You just cannot sell some 

things into some places. Geographical restrictions exist separate 

and apart from us. We want to provide as much convenience and 

selection as we can to our customers worldwide, including the U.S. 

Virgin Islands. 

Ms. PLASKETT. Are the shipping rates also restricted by those 

manufacturers or are those your rates? 

Mr. MISENER. Neither, they are the rates of the shippers. 

Ms. PLASKETT. Of the shippers? 

Mr. MISENER. Correct. 

Ms. PLASKETT. That you have partnered with, correct? 

Mr. MISENER. That is correct. We pay a variety of shippers, including two at the table, and others to ship things for us worldwide. 

Ms. PLASKETT. Which of the two at the table, Federal Express 

and the Postal Service? 

Mr. MISENER. Yes, not the Inspector General. 

Ms. PLASKETT. I would hope not. I do not know if he has the capacity for that at this time but you never know. 

Thank you very much. 


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Thank you for the indulgence. I will take a little of Mr. Clay’s 

time. 

Mr. MEADOWS. Kind of like carryover minutes. 

I am going to recognize myself for a series of questions. Then we 

will go to the gentlewoman from the District of Columbia. 

I am fascinated, Mr. Misener. This is a big deal to Amazon, this 

what I would call non-competitive rates internationally, correct? 

Mr. MISENER. It is a big deal for our seller customers. We are 

looking out for them. We are going to be fine either way. There is 

kind of an imbalance among our seller customers. It is illogical and 

ends up hurting, as I mentioned, American businesses. 

Mr. MEADOWS. You are an international company, so you could 

potentially benefit greatly from importing products via lower postal 

rates from China directly to Marion, North Carolina. 

Mr. MISENER. I look forward to visiting, sir. Amazon has sellers 

in 100 different countries around the world, so you are absolutely 

right that there are these disparities that operate even within our 

Amazon system. 

We see no need for this as a matter of policy. The very fact is 

it is hurting a segment of our seller customers, American sellers 

selling to American consumers. It is an imbalance that makes no 

sense to us. We are looking out for the entire ecosystem. 

Mr. MEADOWS. It adds real credibility to your testimony because 

the potential for you to be harmed, your company, is at the expense 

of fairness, so I applaud you being here not only as a witness but 

with being willing to speak on behalf of what I see as an unfair 

system with regards to all U.S. citizens. 

Mr. Faucher, you made a comment earlier that was extremely 

troubling because you said, we will listen to all the input of everybody else with one caveat, except if it has a foreign policy implication. Are you suggesting or is it your testimony that the American 

people ought to be paying higher package delivery rates to further 

the foreign policy as it relates to China? 

Mr. FAUCHER. No, that was not the intention of my testimony. 

Mr. MEADOWS. Please clarify for me because that is what it 

sounded like. I want you to clarify it for me because people in 

North Carolina, California or wherever, when they start to hear 

this, they are going to have a real hard time and saying why are 

we giving China better rates than Virginia or California? How can 

you justify that as fair? 

Mr. FAUCHER. The system is not fair and that is what we are trying to improve upon and correct. That is what we have been doing 

for years starting, as far as I know, with the 2012 Congress going 

to the 2016 and 2020 Congresses. 

We will work to make this system more fair for the American 

consumer overall. That means bringing down the cost or matching 

the cost of the terminal dues to the cost of providing the service 

for the international mail that comes into the United States. 

Earlier, I was trying to explain this process we use to develop 

our policies. I was trying to explain that we are not bound 100 percent by rules and regulations that we have to take into account the 

President’s prerogatives to form foreign policy. 

I did not mean to indicate in any way that we want to give favor 

in any way the Chinese consumer over an American consumer or 


AKING-6430 with DISTILLER
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China’s business over American business. At the State Department, we are in the business of promoting American interests, including American consumers and American businessmen. That is 

what we are going to do. 

Mr. MEADOWS. Ms. Sparks helped you out because she gave you 

an olly olly oxen free as I would call it, that you were not there 

during the last time it was negotiated but now you will be. Now 

the pressure will be focused on you. I can assure you this will not 

be the last hearing as we look at this because we are going to look 

for real results. 

Mr. FAUCHER. First of all, it is not just me. There is a whole 

team at the State Department and among all these different agencies that will be working on this issue. We have our strategic goals 

that have been agreed upon and we are trying to achieve those. 

Those goals really are to bring down the cost of this system for the 

American consumer and the American taxpayer. 

Mr. MEADOWS. Mr. Taub said he was part of the hearing when 

he was Chief of Staff here on Capitol Hill. I guess to quote him, 

‘‘it has moved at a glacial pace’’ which I would assume is not very 

fast. 

Are we going to see progress in glacial terms or are we going to 

see progress in real terms? When is it going to be more expensive 

for a Chinese company to ship something from Shanghai to Marion 

than it is for a U.S. company? When can we expect that, 2018? 

Mr. FAUCHER. I really cannot answer that question. I do not 

know. I would hope that we will have the system corrected by then 

so that the costs reflect the actual costs for shipping those products. 

Mr. MEADOWS. I have asked the Committee to go back and get 

some of the testimony from the last hearing because I do not want 

us to be repeating that we would hope it will be fixed and there 

is someone with more gray hair chairing this Committee 15 years 

from now and we have not fixed the problem because it has real 

impact. 

I am going to recognize the gentlelady from the District of Columbia, my good friend, Ms. Norton. 

Ms. NORTON. Thank you very much, Mr. Chairman. I appreciate 

your holding this hearing. It presents new information to me and 

I am getting to understand the complexities. 

As I understand, if there is primary authority, it would be with 

the State Department, although that agency can coordinate with 

other agencies like the Postal Service. I am particularly interested 

in the Postal Service in light of this Committee’s jurisdiction over 

the Postal Service. 

I do not know whether this question is for Mr. Miskanic or Mr. 

Williams. Let us look at the post office. It can make agreements 

with other countries as well, is that correct, the United States Postal Service, Mr. Miskanic? 

Mr. MISKANIC. That is correct, Ms. Norton. 

Ms. NORTON. Does the current terminal system we have discussed make it more difficult for the Postal Service to enter such 

agreements? 

Mr. WILLIAMS. It does. With terminal dues at the back of the person with whom we are negotiating, all they have to do is stand up 


AKING-6430 with DISTILLER
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from the table and the matter is settled by reverting all the way 

back to terminal dues. It puts the person trying to move toward a 

fairer agreement at a severe disadvantage knowing all the other 

party has to do is stand up and it is settled very much in their 

favor. 

Ms. NORTON. That gets us back to the State Department? 

Mr. WILLIAMS. The Universal Postal Union proceedings are all 

representative of the State Department but it can only be solved 

there. As some of the witnesses have said, it has been a chronic 

problem. There has been very little progress against this longstanding problem. 

Ms. NORTON. Let us look at where there has been some progress 

with the Postal Service. Apparently there is a Postal Service agreement with China of all places. Is that correct? 

Mr. MISKANIC. That is correct. There has been progress on several fronts, both at the UPU and negotiating the bilateral agreements. 

I would caution that progress is not getting us to the point of 

cost coverage. Specifically to answer a question that was posed earlier as to when China would be paying more under the terminal 

dues structure, that will occur in 2016 when they move from a 

transition country to a target country and therefore, are required 

to pay a higher rate from a terminal dues perspective. 

When they are required to do so, the Postal Service could renegotiate the bilateral discussion with them and ask for higher rates as 

a result. As we look toward the Istanbul Congress in 2016, it is our 

objective to have shape-based costing, country-specific that I think 

my colleagues here would generally agree. 

The Postal Service is really looking for cost coverage for these inbound items. I think that is universal across this table. 

There has been progress. Sometimes the pace of the UPU is unfortunate, but we made progress in Doha and are looking to make 

even more in Istanbul. 

Ms. NORTON. Does the bilateral agreement with China relate 

only to so-called epackets? Those are packets that weigh up to 4.4 

pounds. 

Mr. MISKANIC. That is the primary foundation. 

Ms. NORTON. How come? 

Mr. MISKANIC. That is obviously the volume increase that respective foreign postal operator is looking to provide. 

Ms. NORTON. What China is willing to provide? 

Mr. MISKANIC. Correct. 

Ms. NORTON. Do you consider this bilateral agreement with respect to epackets a success? 

Mr. MISKANIC. It is a step in the right direction. But until we 

reach cost coverage, I would be remiss in claiming anything a success. 

Ms. NORTON. Mr. Taub, you report that the bilateral agreements 

cause the same distortions as the terminal dues system. If that is 

so, why is that so? 

Mr. TAUB. One, in context, we have long said and continue to 

maintain that bilateral-multilateral agreements relative to the 

UPU terminal dues rates are better but it is relative. 

Ms. NORTON. Again, why are they better? 


AKING-6430 with DISTILLER
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Mr. TAUB. They are better because the Postal Service itself can 

have the control to negotiate a more compensatory rate than the 

default UPU rate that is available. 

Our report that we had done last year which you referenced did 

observe that similar distortions in effect with terminal dues are 

there with bilaterals. We have to keep in mind that bilaterals are, 

similar to terminal dues, not open to private operators. 

Again, these are agreements that the goal should be similar 

prices for similar services regardless of country of origin and regardless of whether a public or private operator. These agreements 

distort that proverbial first mile, who will I select to ship because, 

for example, FedEx on this table would not be able to be a participant in that type of agreement. 

Ms. NORTON. I thought FedEx and UPS were receiving small 

packages from China. 

Mr. TAUB. I am just referring to the bilateral agreements themselves, in concept, but certainly FedEx can speak to their business. 

Ms. NORTON. FedEx, how is this occurring then, apparently in 

large volumes? 

Ms. SPARKS. We definitely carry packets from China to the 

United States, but we do not receive any pricing benefits similar 

to what foreign post offices give each other. We are in a different 

pricing regime. 

Ms. NORTON. Do you lose money in carrying these small epackets 

from China to the United States? 

Ms. SPARKS. I am afraid I cannot answer that question but I will 

be glad to check into it. 

Ms. NORTON. I would be pleased if you would check into that. Do 

you cover your costs? You have decided to do this on your own, I 

take it. 

Ms. SPARKS. We certainly do not, at this point, offer a service 

similar in terms of the very low prices that China Post charges its 

own shippers. 

Ms. NORTON. So we are not competitive with China Post? 

Ms. SPARKS. I would say that is correct, yes. 

Ms. NORTON. Thank you, Mr. Chairman. 

Mr. MEADOWS. I thank the gentlelady. 

Since I made reference to the hearing in March 2000, at that 

particular point, as Mr. Taub can recollect, the State Department 

said they wanted the cost covered fully by 2005. We missed it by 

at least ten years. 

Are we going to make better progress, Mr. Faucher, in the coming couple of years? You are the only one at the table who can 

probably speak to that. 

Mr. FAUCHER. I would absolutely hope so. I would agree that the 

pace has been very slow, it could be better, but we are negotiating 

with 192 other countries in a global framework for all these sorts 

of things. It is not something we can just wish, snap our fingers 

and have it done. 

We have to work it very carefully, work it very diligently and put 

all our efforts and resources toward achieving this. It would have 

been great to achieve it by 2005. I wish we had achieved it by 

today but we are not there yet. We will continue working toward 


AKING-6430 with DISTILLER
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that goal and hopefully by 2016, 2018, we will be closer if not 

there. 

Mr. MEADOWS. I am going to recognize, and let you off the hook, 

the Ranking Member, Mr. Connolly, for as much time as he desires. 

Mr. CONNOLLY. Thank you so much, Mr. Chairman. 

Mr. Faucher, you heard Mr. Misener use the example of a package going from my home county of Fairfax to the Chairman’s home 

county of Marion, North Carolina. That distance is 340 miles and 

would cost $1.94. A comparable package being shipped from Shanghai, China to Marion, North Carolina, a distance of 7,000 miles, 

would actually cost 82 cents less. 

Is there any rhyme or reason for providing that kind of effective 

subsidy for parcels going back and forth with China in today’s day 

and age? 

Mr. FAUCHER. First of all, I have to say I am not a businessman, 

so I do not know how these business deals are done between the 

shippers and sellers and how they arrive at the rates the shippers 

are going to pay. I am sure there are negotiations among the sellers in China with China Post to figure out what kind of costs they 

are going to have. 

We deal with the terminal dues, which is the cost the United 

States agrees to take on for the international postal mail that 

comes in. You are absolutely correct. It does not make any sense. 

We need to increase the terminal dues so that they cover our costs. 

Mr. CONNOLLY. Aside from the solution, and I agree with you, 

from a foreign policy point of view, from an economic foreign policy 

point of view, even if you are not a businessman, it just kind of 

flies in the face of intuitive sense, given China’s increasing economic development. 

It is a competitor now. It does not need a subsidy, it seems to 

me, to be engaged in commerce with the United States. It certainly 

should not cost less to deliver a package from Shanghai to here 

than it does for me to send a package to my good friend, Mr. Meadows, in North Carolina. 

Mr. FAUCHER. I would agree. 

Mr. CONNOLLY. Does anyone disagree? Does anyone want to take 

the stance of China needs more subsidies from the United States? 

I did not think so. 

Mr. Williams, terminal dues are meant to cover the cost of inbound international mail, correct? 

Mr. WILLIAMS. Correct. 

Mr. CONNOLLY. Would you say these fees cover the actual cost 

of transporting that mail? 

Mr. WILLIAMS. No, sir. We lose revenue on every single package 

that we deliver. 

Mr. CONNOLLY. Why is that? 

Mr. WILLIAMS. The terminal dues are set below the delivery costs 

the Postal Service incurs. 

Mr. CONNOLLY. Reading your last report, we have lost over $200 

million in the 2010 to 2013 period alone on inbound international 

single piece letter post, is that correct? 

Mr. WILLIAMS. That is correct, $233 million. If you include the 

latest figures for 2014, it rises to a cumulative loss of $308 million. 


AKING-6430 with DISTILLER
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Mr. CONNOLLY. Outbound though, we are making money, is that 

correct? You state in the report that the Postal Service has made 

just under $900 million in outbound international mail, is that correct? 

Mr. WILLIAMS. That is correct, sir. 

Mr. CONNOLLY. The PRC report states ‘‘The fact that terminal 

dues do not reflect the domestic price for last mile activities,’’ 

which you already testified, ‘‘implies that designated postal operators may lose money on inbound deliveries and earn money on outbound deliveries,’’ which in fact your report documents. 

Mr. WILLIAMS. That is correct. The concern I think all of us have 

is not that this is a postal issue, but that we are inflicting harm 

on American commerce. Because of all of these anomalies and distortions, we can make or lose money in any given year, but the constant loser is the American businessman and American commerce. 

Mr. CONNOLLY. In essence, Americans mailing to foreign countries are subsidizing foreign mailers who send mail to the United 

States, would that be a fair statement? 

Mr. WILLIAMS. Correct. The American businessmen are paying to 

be devoured by the Chinese businessmen. 

Mr. CONNOLLY. The PRC report also states, ‘‘distortion of competition for first mile and last mile activities is an issue caused by 

the current terminal dues system.’’ Would you agree with that, Ms. 

Sparks? 

Ms. SPARKS. Yes, I would. 

Mr. CONNOLLY. Has the current system left your company, 

FedEx, unable to compete for those first and last mile activities? 

Ms. SPARKS. Certainly at those prices at that price point, yes. 

Mr. CONNOLLY. While I have you here, Ms. Sparks, does FedEx 

or do you support the TPA and the underlying TPP? Would that 

be good for America? 

Ms. SPARKS. Wow, okay. I was not expecting that question. 

Mr. CONNOLLY. I just let it hang out there. 

Mr. MEADOWS. I will give you a clue. You probably ought to answer yes. 

Ms. SPARKS. I think I will follow the Chairman’s lead. 

Mr. CONNOLLY. We are dying to hear from business on that subject. 

Ms. SPARKS. It is an important issue to us and the answer is yes, 

sir. 

Mr. CONNOLLY. I know it was a cheap question but I need allies 

everywhere I can find them. I am very lonely these days on my side 

of the aisle. 

The PRC report also identified the distortion of competition between retailers in the domestic market and markets abroad as an 

issue. Mr. Misener, you would agree? 

Mr. MISENER. Yes, sir. I very much agree with that. We see it 

on our platform. We are seeing different sellers advantaged, different sellers disadvantaged. It turns out that those advantaged 

are overseas and those disadvantaged are domestic. 

Mr. CONNOLLY. What do you think the problem is, Mr. Misener? 

Is it just that we have not gotten around to rationalizing this 

thing? 


AKING-6430 with DISTILLER
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Mr. MISENER. I think that is part of it. We heard today that it 

is difficult for the postal operators like the USPS to negotiate with 

say China Post and form a bilateral agreement if the floor set by 

the UPU is so low. 

That is viewing this completely in a vacuum. It seems like we 

have this much broader relationship with China and this ought to 

be on the table as part of it. If the State Department is limiting 

itself only to negotiating in the UPU, we are missing an opportunity to view this more holistically as part of our bilateral relationship with China. 

Mr. CONNOLLY. I wonder what you think, Mr. Faucher, from the 

State Department point of view, if you have one, but sometimes 

with the best of intentions, we do things to help lift a country so 

that it can improve its economic status, income and the quality of 

the lives of the folks there. 

It is one thing to help a Burkina Faso, not to pick on somebody, 

but it is quite another to decide China still needs the same kind 

of help. What strikes me about this is we have not reevaluated the 

change. When I was growing up, we saw the famines in China. We 

have come a long way from that. 

Does our policy, in this case, the fees we set, reflect that reality, 

that change? Some part of me thinks that it is almost inertia that 

we have not gotten around to it. Obviously we do not have some 

dark, conspiratorial plan to help China beat America in competition but here is something it seems to me to be counterproductive 

and there is no reason China cannot pay the same going freight as 

anyone else. 

Is that fair enough, Mr. Faucher, from the State Department 

point of view? 

Mr. FAUCHER. I would say obviously there is a major difference 

between Burkina Faso and China as it exists today. There has been 

change and I want to point that out. 

China is moving from the transitional phase to the target phase, 

so its rates will be going up reflecting its greater economic power. 

There was also an agreement negotiated by USPS with China also 

reflecting China’s commercial power. 

Mr. CONNOLLY. Mr. Misener is shaking his head. Mr. Misener? 

Mr. MISENER. That is correct. There is going to be this transition 

of group to another group but it will not affect the terminal dues 

rates here in the United States. That alone is not sufficient to 

change the rates. 

Mr. MEADOWS. I think that is the key. If you want to disagree 

with that, I will give you equal time. I would caution you because 

I think the facts would speak otherwise. I think they would agree 

with Mr. Misener. 

Mr. CONNOLLY. Ms. Sparks was also shaking her head. 

Mr. MEADOWS. They are transitional right now and my question 

is transitional to what, to number one in the world? We have to 

look at this from a standpoint of real rates based on real costs and 

based on the fact China is an economic power, without a doubt. I 

think anyone who studies it would see that. 

Transitioning them in terms of where they are categorized in the 

rates must reflect that transition. We are led to believe at this 


AKING-6430 with DISTILLER
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point it would be very minor in terms of the rate difference, even 

by coming out of that. Would you disagree with that? 

Mr. FAUCHER. No, I really would not disagree with anything you 

said other than to point out that there will be an increase as I understand it, I could be corrected here, in the terminal dues rate 

that will be charged to China once they transition to the target 

group. 

Basically we are seeing a trend line here where we are getting 

closer but not quite there, not by a long shot, to covering the cost 

with China. It is moving downward; it is not widening, it is narrowing. 

Mr. CONNOLLY. Mr. Chairman, I just want to give Mr. Taub a 

chance to clarify because he actually had a lot of experience with 

this fee setting and so forth. Did you have a comment? Then I am 

done. 

Thank you, Mr. Chairman. 

Mr. TAUB. I think everything everyone has addressed is a-okay. 

I have nothing to add on that unless there is something specific. 

Mr. MEADOWS. The Chair recognizes the gentleman from Wisconsin, Mr. Grothman. 

Mr. GROTHMAN. Thank you. 

Ms. Sparks, do you think we are effectively advocating for our 

position or are we effectively advocating our interests at the UPU? 

Ms. SPARKS. As a Midwesterner, Wisconsin, right? 

Mr. GROTHMAN. Correct. 

Ms. SPARKS. My son just moved there, nice State. 

Mr. GROTHMAN. Good for him. 

Ms. SPARKS. I think the proof is in the pudding. We have not gotten there yet. It is a very difficult atmosphere to operate in because 

it is a one country, one vote but the United States needs to continue to push very hard for cost-based rates. 

I think historically we have thrown up our hands in the past. I 

think there are European countries experiencing some of the same 

problems. I think there are coalitions that could be made but this 

takes time and resources which is why in our written testimony, 

we advocated a special task force be formed among government 

agencies to talk about how this could better be approached. 

Get the U.S. Trade Representative in there. They are good at negotiating. Get the Department of Commerce in there to represent 

the interests of small businesses. I think there are some things 

that can be done to help the State Department and bolster their 

fact bases and positions. 

Mr. GROTHMAN. Mr. Faucher, in 2016 when the next Universal 

Postal Union Congress meets, how do you plan to do a better job 

of negotiating? 

Mr. FAUCHER. Of negotiating? 

Mr. GROTHMAN. Pushing for a better deal, what are your plans 

next time around? 

Mr. FAUCHER. There are at least two initiatives on terminal dues 

that we are supporting which we hope will improve the system, refine it and make it better. It will not completely solve it, but we 

will continue to push that way. 

We will push for a work program for the Postal Operations Council so that in the following cycle, after the next Congress, it will be 


AKING-6430 with DISTILLER
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forced to look at these issues much more closely and make progress 

on them along the lines we have been discussing today. 

Mr. GROTHMAN. Ms. Sparks, we are 40 percent of the world’s 

mail volume. Are other countries, do you think, looking for us to 

take a leadership role and change some of this stuff? 

Ms. SPARKS. There is no question in my mind that other countries are looking for us to be a leader here. At the last UPU Congress, there was a resolution introduced to do a study similar to 

what Mr. Faucher talked about. 

That was championed by the Nordic countries and was finally 

withdrawn for lack of support. If I remember correctly, the United 

States was not out there strongly advocating for that particular 

amendment. I am glad to hear that we would be doing something 

like that in this Congress. 

Mr. GROTHMAN. Do you think in the past we really have not been 

aggressive enough, have not taken the leadership role some people 

are expecting from us? Is that accurate, do you think? 

Ms. SPARKS. I hate to say we lack aggression. 

Mr. GROTHMAN. I am sure you do not, but go ahead. 

Ms. SPARKS. I think we could be stronger advocates for costbased pricing for transparent treatment of mailers and, as Mr. 

Taub said, for similar prices for similar services. 

That is not the tradition of the UPU. The tradition of the UPU 

is that the haves pay the have-nots. What has brought this problem to a head is the have-nots suddenly have a lot. 

Mr. GROTHMAN. I have one more question for you. About a year 

ago, Alibaba bought 10 percent of the Singapore Post. I think as 

a result of that, and due to the convention, USPS is really subsidizing Alibaba to compete with American companies. Do you 

think this might be the beginning of a trend? 

Mr. MISENER. I hope not. We do see that companies with strong 

ties to transition countries or countries that have much lower terminal dues rates for shipments to the United States are better advantaged, they are better positioned to take advantage of these disparities. 

I do not know what the stake in the Singapore Post will do for 

them but it does not make sense that as a postal operator, partly 

owned now by a private company, these subsidies would end up in 

the hands of a foreign private company. That makes as little sense 

as the underlying structure. 

Mr. GROTHMAN. It is not possible this would happen again? 

Mr. MISENER. I do not see why it would not be possible. 

Mr. GROTHMAN. It could be possible, right? 

Mr. MISENER. Certainly. 

Mr. GROTHMAN. Thank you for indulging me for an extra half 

minute. 

Mr. MEADOWS. I thank the gentleman. 

I thank each of you for your responses. I want to close with this. 

Mr. Miskanic, do you reimburse the State Department for representation costs as it relates to negotiating this? Does the Postal 

Service do that? 

Mr. MISKANIC. Yes, the Postal Service, under an interagency 

agreement, reimburses the State Department a nominal amount. 

Mr. MEADOWS. What is that amount? 


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Mr. MISKANIC. Approximately $150,000 a year for administrative 

costs. 

Mr. MEADOWS. You actually pay him to represent you in negotiating, in a generic sense? Obviously, it is not him personally. 

Mr. MISKANIC. Yes, by the 1999 Omnibus Appropriations, we are 

required to reimburse the State Department. It varies based upon 

the level of engagement. 

Mr. MEADOWS. Ms. Sparks, does that create a competitive disadvantage for you? 

Ms. SPARKS. I think it certainly creates the appearance of a conflict. We think it actually stems from a historical anomaly when 

representation was first assigned to the State Department. We 

think that could easily be gotten rid of in a future appropriations 

bill by just lining out that item. 

Mr. MEADOWS. Mr. Faucher, I am going to put you on the spot 

but I will do it in a nice way hopefully. You would never want to 

have the appearance of a conflict of interest, would you? 

Mr. FAUCHER. That is a softball question. No. 

Mr. MEADOWS. In that, you would certainly support getting rid 

of this reimbursement that would come from the Postal Service to 

you for representation? You would support legislation to that effect 

if it came in a bipartisan manner from Mr. Connolly and I? 

Mr. FAUCHER. I think we would support continuing to receiving 

the amount we receive so that we can carry out our function under 

the law. 

Mr. MEADOWS. You would not support legislation to do away 

with that? 

Mr. FAUCHER. The source of it is up to Congress basically. 

Mr. MEADOWS. I am saying, if we put it forward, you would not 

be pushing back from the State Department and say no, we really 

want that money to come in from the Postal Service? 

Mr. FAUCHER. I cannot imagine why we would do that. 

Mr. MEADOWS. I would hope that would be the answer. 

I am going to thank each of you for your willingness to participate. I have tried to keep part of this jovial and yet at the same 

time, it is a very serious, serious matter that the American people 

would not understand. 

I do not understand. Mr. Connolly and I were just talking and 

we do not understand it. The message needs to be clear at the 

State Department that if there is a foreign policy reason for it, we 

want to know what the compelling foreign policy reason would be, 

not just generically but why is it so compelling that the American 

people should be subsidizing foreign package and postal rates from 

someone who, as Ms. Sparks so eloquently put it, were the havenots and now they are the haves. 

With that, I would like to thank you all. 

If there is no further business before the Committee, without objection, the subcommittee stands adjourned. 

[Whereupon, at 4:01 p.m., the subcommittee was adjourned.] 

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