The End of Cheap Shipping from China

Oct 18, 2018, 12:17 AM

Every day, Americans buy tens of thousands of cheap products from China—jeans, electronics, things made of plastic. Two months ago, I even bought a wedding dress.

We buy stuff from China mostly because the low cost of living and lax labor regulations allow manufacturers to make products cheaply there. But there’s another reason, too. It’s really cheap to send stuff from China to the United States, which means sellers there can charge barely anything to ship an already-cheap item 6,000 miles across an ocean. Want an eyebrow razor? On Wish.com, a site that sells products directly from China, you can buy one for 95 cents, plus a $2 shipping fee. A similar eyebrow razor on Walmart.com, by contrast, costs $2.62 for a three-pack, but charges shipping of $5.99. According to Congressional testimony, at current rates, shipping a parcel to Fairfax, Virginia from North Carolina would cost $1.94. From Shanghai, it’d be $1.12.

President Trump has vowed to alter this equation, announcing on Wednesday that he is instructing the U.S. Postal Service to levy higher fees on packages from international destinations including China. The announcement was not very controversial: A variety of parties involved in e-commerce, from Amazon to U.S. small businesses, to sellers on eBay, have been calling on the United States for a long time to charge more for delivery on behalf of foreign postal carriers. The changes could help U.S. small businesses better compete against Chinese merchants, while also slowing the flow of counterfeit good shipped cheaply from overseas.

For more than a century, postal services in various countries have, though the Universal Postal Union, agreed to deliver mail that originated in another country. This service used to be free, until a 1969 update required that postal services pay each other “terminal dues”—fees for delivering another country’s mail—based on how developed a country was: Countries whose postal services were still in transition could charge high dues, while developed countries like the United States would have to charge low dues. In 2006, a new law allowed the United States to enter into bilateral agreements with foreign posts, and essentially agree on terminal dues on their own.

In 2011, when e-commerce really started taking off in the United States, the U.S. Postal Service entered into a bilateral agreement with China Post that gave sellers first-class tracking and delivery confirmation for very low rates, as long as a product was an ‘ePacket’ product, weighing less than 4.4 pounds. With shipping so cheap, and manufacturing in China already so inexpensive, the goods started flowing. The volume of ePackets more than doubled between 2014 and 2016, according to the Postal Service. This helped bring in around $493 million in revenue for the USPS, but also created some additional costs. Specifically, because it’s so expensive to send a product to China, packages that had to be sent back because they were undeliverable cost the U.S. Postal Service anywhere between 20 and 57 cents a package.

That wasn’t the only problem created by the flood of goods from China. Much of the fentanyl currently circulating in the United States has come from online sellers in China. Shipping small electronics and cosmetics across the sea is bad for the environment: one container ship causes as much pollution as 50 million cars. And many of the goods making their way here are cheap knockoffs of products made in the United States. But they’re inexpensive, so Americans keep buying them.

Wednesday’s White House announcement means the United States will soon adopt its own self-declared terminal dues. The United States will also file a notice that it will withdraw from the Universal Postal Union, the White House said, though if it can negotiate new agreements with other countries, it will not withdraw.

The announcement is quintessential Trump—it shatters decades-old respected treaties and threatens to withdraw from an internationa...