BACKGROUND:

Global eCommerce continues to grow, and the Asia-Pacific region is expected to have surpassed North America in eCommerce in 2013, a trend forecasted to continue through at least 2016. To capitalize on this trend, the U.S. Postal Service launched a new item, the ePacket, through a bilateral agreement with China Post in fiscal year (FY) 2011. ePackets are small packages weighing up to 4.4 pounds with tracking and delivery confirmation features and are grouped with other inbound letter post packets. China Post is the largest exporter of ePackets into the U.S. with 96 percent of the total ePacket volume.

The Postal Service has priced ePackets under additional bilateral agreements with Hong Kong and Singapore, and negotiations have begun with South Korea as part of a larger strategy for developing the Postal Service’s international market.

During FY 2012, China generated more than 26 million ePackets, resulting in over $25 million in revenue, a volume increase of 182 percent, and a revenue increase of 316 percent over FY 2011. Our objective was to assess whether the Postal Service accurately determines the cost of inbound China ePackets.

WHAT THE OIG FOUND:

The Postal Service did not isolate the cost of China ePackets, which limits its ability to establish effective pricing strategies. Although China Post sorts and dispatches ePackets separately from other mailpieces, the Postal Service did not calculate ePacket cost data separately from other letter post mailpieces or report it separately in the annual performance report to the Postal Regulatory Commission.

ePacket volume and revenue have increased, but the Postal Service still lost at least $39 million during FYs 2011 and 2012. Until accurate costs for ePackets can be identified and used as a basis for pricing, the risk of revenue loss for ePackets remains high.

The Postal Service could also pursue a product classification change for inbound letter post packets, which could increase revenue from China Post and other business partners in emerging global markets.

WHAT THE OIG RECOMMENDED:

We recommended the Postal Service track and report inbound letter post packet costs separately. We also recommended the Postal Service evaluate a product classification change for inbound letter post packets. 

Comments (7)

  • anon

    This report is now almost 3 years old. What has become of the recommendations? I suggest that absolutely NOTHING has been done. China still floods our markets with cheap, shipped direct-to-homes, goods and they pay practically nothing to ship. Why are US taxpayers and postal ratepayers subsidizing this flooding of our markets? Why does it still cost me $6+ to ship a package that an ePacket shipper gets delivered (with tracking features) for just over $1? Where is the common sense? If you doubled the delivery charge for each of these ePackets - it would still be a 'bargain' compared to what US shippers (even bulk shippers) pay - and would go a LONG way towards making up some of that deficit the USPS continues to run.

    Feb 07, 2018
  • anon

    "The Postal Service has priced ePackets under additional bilateral agreements with Hong Kong and Singapore, and negotiations have begun with South Korea as part of a larger strategy for developing the Postal Service’s international market." How about an agreement with USA businesses and citizens to pay the same price as the Chinese do for ePackets? It would only be fair that we, as Americans, pay no more to ship a small package/envelope one street away than the Chinese pay to ship packages many thousands of miles away. "The Postal Service did not isolate the cost of China ePackets, which limits its ability to establish effective pricing strategies." Who in their right mind enters a cost/fee agreement and does not monitor its impact on operations? Can anyone say negligence? I know the mentality over at the USPS though - The USPS does not need to isolate the cost of ePackets because they will force American businesses and citizens to subsidize their losses. "We recommended the Postal Service track and report inbound letter post packet costs separately." As an American business owner, I recommend charging China no less than American businesses and citizens pay to mail/ship the same size/weight packages/envelopes. Do your tracking and reporting after you make the fee structures fair for Americans. It's no wonder small American businesses can't compete in marketplaces like Amazon, eBay, etc. Right from the start it costs Americans 3-4 times more than what the Chinese pay to ship the same product. Honestly, who really wants to use the USPS when they have such an anti-American postal fee structure.

    Feb 06, 2018
  • anon

    So this is still going on and the postal service is still losing at least $39 million a year and effective january 22nd American citizens will get a rate hike for postage, but we will continue to support china and other countries to drive out american small businesses, and send our money overseas. There is absolutely no reason for us to continue to foot the bill to import Chinese goods that undercut american businesses. This is exactly what President Trump was talking about. THIS MAKES NO ECONOMICAL SENSE, IT DOESN'T DO US ANY GOOD, AND COSTS AMERICA MONEY.

    Jan 06, 2018
  • anon

    Commenters are correct. US regime favors foreigners over Americans. And some wonder why Trump resonates. Tell china to take back its criminal aliens - Countries are assessed based on a series of tailored criteria to determine their level of cooperativeness with ICE’s repatriation efforts. ICE has found that there were 23 countries considered recalcitrant, including: Afghanistan, Algeria, the People’s Republic of China.

    Jul 31, 2016
  • anon

    China is flooding our market with their items, even 'dumping', selling their products for less than it cost to manufacture them. This has had a disastrous effect on American crafters and manufacturers on Amazon, EBay, Etsy and other big marketplaces, including brick and mortars. By allowing EPacket to continue, you are crippling Americans and the American economy. There is no shortage of American alternatives, but at this point, they can not compete with the unfair favoritism being showed to China. This is almost treasonous and I am appalled our government supports this. I will be pushing this issue onto representatives with hopes that a presidential candidate (any) will join in to put a stop to this. This is blatant hostile business maneuvers on China's part and our government is encouraging it. It's time for America to put Americans FIRST.

    Jul 27, 2016
  • anon

    I don't appreciate being made to foot the bill for peddlers of Chinese junk via both my taxes and my postage cost. Congratulations, your exporting both jobs and cash with the same lousy program - a new low even for the U.S. Govt.

    Feb 18, 2016
  • anon

    As a seller on ebay, I have decide to ship with ups/Fedex exclusively. I can not support a organization that steps on Americans to support China.

    Dec 16, 2015