On October 17, President Trump announced that the United States may withdraw from a 144-year-old international postal agreement.

The Universal Postal Union (“UPU”), established by the Treaty of Bern of 1874, is an agency of the United Nations that facilitates postal cooperation between governments and regulates cross-border traffic of international mail.

The Trump Administration fears that U.S. businesses are disadvantaged by policies of the UPU that allow Chinese businesses to ship a variety of goods to the United States at “unfairly low prices.” The administration is also concerned that current policies of the UPU facilitate the shipping of counterfeit or otherwise illegal goods to the United States.

The UPU allows developing countries, including China, to ship small packages at lower rates than developed nations. The Trump Administration is seeking changes to the treaty that would allow countries to set their own rates for parcels weighing less than 4.4 lbs. Under the current rules, small packages shipped from China to the U.S. are discounted between 40 and 70 percent. It is estimated that subsidized rates for small packages from China cost the U.S. $300 million per year.

Given the dramatic increase in the number of small packages that are sent via the postal system, largely attributed to global increases in online shopping, the Administration believes the UPU policies should be modernized.

The White House has signaled that the U.S. is open to remaining in the UPU if there is reform. The Congress of the UPU agreed to develop a proposal for modernization, but the proposal would not be presented until 2020. As the United States exits the UPU, the White House plans to establish its own “self-declared” rates for packages. The process to create “self-declared” rates is expected to last at least six months, while the process to withdraw from the UPU would take about one year.