    U.S. Postal Service: Competitive Concerns About Global Package Link
    Service (Chapter Report, 06/05/98, GAO/GGD-98-104).

    Pursuant to a congressional request, GAO reviewed the United States
    Postal Service's (USPS) Global Package Link (GPL) service, focusing on
    whether differences existed in customs treatment for GPL and private
    express carrier parcels by foreign customs services in Canada, Japan,
    and the United Kingdom.

    GAO noted that: (1) the delivery and customs clearance processes for GPL
    and private express parcels in Canada, Japan, and the United Kingdom
    were based primarily on the domestic import requirements applicable to
    mail and parcels imported by private carriers in those countries; (2)
    all three countries had separate customs clearance processes and
    requirements for mail and parcels imported by private express carriers;
    (3) under U.S. law, the private express carriers were required to submit
    their parcels to U.S. Customs for inspection prior to export, but USPS
    was not subject to this requirement for its outbound parcels; (4)
    differences in foreign customs treatment of GPL and private express
    parcels were greatest in Japan, where private express carriers were
    subject to requirements regarding the preparation of shipping
    documentation and payment of duties and taxes on their parcels that did
    not apply to GPL parcels; (5) in the United Kingdom, USPS was providing
    certain shipping data to the Customs Service on GPL parcels that was
    similar to the information that carriers were required to provide; (6)
    in Canada, GPL and private express parcels were subject to the same
    requirements because GPL parcels were being delivered for USPS by a
    private express carrier there; (7) regarding two major areas of concern
    to the carriers, GAO found no evidence that GPL parcels received
    preferential treatment over private express parcels in terms of: (a) the
    speed of customs clearance in any of the three countries; or (b) the
    assessment of duties and taxes in Canada and the United Kingdom; (8) on
    behalf of individual importers, USPS was paying duties and taxes on GPL
    parcels shipped to Canada and the United Kingdom; (9) GAO was unable to
    determine whether duties and taxes were assessed on dutiable GPL parcels
    shipped to Japan because: (a) USPS did not have records on payment of
    duties and taxes on GPL parcels shipped to Japan, because the recipients
    of postal parcels in Japan are responsible for paying applicable duties
    and taxes; and (b) Japan Customs did not provide statistics on the
    amount of duties and taxes that recipients paid on GPL parcels; (10) GAO
    found that the private express carriers followed similar delivery and
    customs clearance processes for parcels shipped from the United States
    to the three countries in its review; and (11) the private express
    industry has commented that differences in customs clearance
    requirements for postal and privately shipped parcels result in more
    work and higher costs for the carriers, placing them at a disadvantage
    in competing with USPS to provide international parcel delivery service.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  GGD-98-104
         TITLE:  U.S. Postal Service: Competitive Concerns About Global
                 Package Link Service
          DATE:  06/05/98
       SUBJECT:  Foreign governments
                 International trade regulation
                 Postal service
                 Mail transportation operations
                 Postal service contracts
                 Tariffs
                 Customs administration
    IDENTIFIER:  USPS Global Package Link
                 United Kingdom
                 Japan
                 Canada

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    Cover
    ================================================================ COVER

    Report to the Chairman, Subcommittee on the Postal Service, Committee
    on Government Reform and Oversight House of Representatives

    June 1998

    U.S.  POSTAL SERVICE - COMPETITIVE
    CONCERNS ABOUT GLOBAL PACKAGE LINK
    SERVICE

    GAO/GGD-98-104

    Global Package Link Service

    (240269)

    Abbreviations
    =============================================================== ABBREV

      ACCA - Air Courier Conference of America
      COMTIS - Customs Overseas Mail Tax Information System
      CPAS - Customs Pre-Advisory System
      CHIEF - Customs Handling of Import and Export Freight (U.K.)
      C.I.F.  - Cost, insurance, and freight
      DHL - DHL Airways, Inc.
      DMA - Direct Marketing Association
      DTI - Direct Trader Input
      ECU - European Currency Unit
      EMS - Express Mail International Service
      EU - European Union
      FedEx - Federal Express Corporation
      GPL - Global Package Link
      IBU - International Business Unit
      IPCS - International Package Consignment Service
      ISAL - International Surface Airlift
      LVS - Low-Value Shipment Program (Canada)
      NACCS - Nippon Automated Cargo Clearance System (Japan)
      UPS - United Parcel Service
      UPU - Universal Postal Union
      USPS - United States Postal Service
      VAT - Value Added Tax

    Letter
    =============================================================== LETTER

    B-277945

    June 5, 1998

    The Honorable John M.  McHugh
    Chairman, Subcommittee on the Postal Service
    Committee on Government Reform and Oversight
    House of Representatives

    Dear Mr.  Chairman:

    This report responds to your July 22, 1997, request that we review
    the U.S.  Postal Service's (USPS) Global Package Link (GPL) service,
    an international parcel delivery service that the Postal Service
    started in 1995.  This request was made in response to concerns by
    private express carriers that GPL parcels were subject to fewer
    customs clearance requirements and received preferential customs
    treatment overseas, giving USPS an unfair competitive advantage in
    providing international parcel delivery service.  The primary
    objective of our review was to determine whether differences existed
    in the customs treatment for GPL and private express carrier parcels
    by foreign customs services in Canada, Japan, and the United
    Kingdom--the three countries where GPL service was primarily being
    provided in 1997.

    As agreed with the Subcommittee, unless you publicly announce its
    contents earlier, we plan no further distribution of this report
    until 15 days after its issue date.  At that time, we will send
    copies of this report to the Ranking Minority Member of your
    Subcommittee, the appropriations committees, other postal oversight
    committees in Congress, Representative Anne Northup, the Postmaster
    General, and other interested parties.  Copies will also be made
    available to others upon request.

    Major contributors to this report are listed in appendix IX.  If you
    have any questions concerning this report, please call me or Teresa
    Anderson, Assistant Director, on (202) 512-8387.

    Sincerely yours,

    Bernard L.  Ungar
    Director, Government Business
     Operations Issues

    EXECUTIVE SUMMARY
    ============================================================ Chapter 0

       PURPOSE
    ---------------------------------------------------------- Chapter 0:1

    Increased demand for consumer goods worldwide has intensified
    competition between private express carriers and postal services in
    providing international parcel delivery service.  The carriers have
    raised long-standing concerns about trade barriers that they say
    hinder their ability to provide consumers with cost-effective and
    timely delivery of parcels.  In particular, difficulties in clearing
    shipments through customs abroad were cited in a recent GAO survey of
    U.S.  all-cargo airlines as one of the most pervasive problems that
    impairs their competitiveness.\1

    During the summer of 1997, representatives from Federal Express
    Corporation (FedEx) and United Parcel Service (UPS) raised concerns
    to Congress about one of the U.S.  Postal Service's (USPS)
    international parcel delivery services, Global Package Link (GPL).
    They were concerned that USPS has used its governmental status with
    foreign governments to give GPL parcels preferential customs
    treatment--including reduced customs fees and faster customs
    clearance--over private express parcels.  In addition, private
    carriers indicated that the additional expenses they incur to comply
    with customs requirements that do not apply to USPS give the Postal
    Service an unfair competitive advantage.  USPS officials replied that
    GPL was designed to meet the needs of its customers by providing
    direct marketers (mailers of catalog merchandise such as apparel)
    with an economical and simplified means of shipping goods
    internationally, particularly with respect to the automation of
    customs information.  USPS officials also stated that they had made
    no special arrangements with foreign governments that would give GPL
    parcels preferential customs treatment.

    In response to these concerns, the Chairman of the House Subcommittee
    on the Postal Service, House Committee on Government Reform and
    Oversight, asked GAO to review several issues related to the
    competitiveness of the international mail market.  To accommodate
    resource limitations, GAO agreed with the Subcommittee to address
    these issues in a series of reviews.  In this first review, GAO's
    primary objective was to determine whether differences existed in
    customs treatment for the portion of the international mail market
    involving GPL and private express carrier parcels, including the
    customs requirements, processes, and practices of foreign customs
    services in Canada, Japan, and the United Kingdom (U.K.)--the three
    countries where USPS was primarily providing GPL service in 1997.  In
    addition, in this report, GAO discusses some issues related to
    addressing concerns about GPL's perceived competitive advantages.  We
    did not review customs treatment of other, non-GPL international
    postal services, which may have differed from customs treatment of
    GPL parcels.  Further, although other government requirements may
    apply related to both imports and exports, such as those regarding
    airline security and shipments of restricted and prohibited goods,
    the focus of this review included only customs requirements.  In a
    separate review, GAO is addressing other issues related to the Postal
    Service's role and U.S.  representation in the international postal
    organization, the Universal Postal Union (UPU).  In a future review,
    GAO plans to examine issues related to the Postal Service's pricing
    and allocation of costs for its GPL service.

    --------------------
    \1 See GAO's report, International Aviation:  DOT's Efforts to
    Promote U.S.  Air Cargo Carriers' Interests (GAO/RCED-97-13, Oct.
    18, 1996).

       BACKGROUND
    ---------------------------------------------------------- Chapter 0:2

    GPL parcel service is one of several international mail services
    offered by USPS.  According to USPS, GPL was designed as a parcel
    delivery service that would make it easier and more economical for
    direct marketers to export bulk shipments of merchandise
    internationally.\2 During 1997, GPL customers were primarily direct
    marketers, U.S.  companies whose businesses mainly involved mailing
    high-volume shipments of catalog merchandise, such as apparel, to
    consumers in other countries.  First introduced in Japan in 1995, the
    service is now available for parcel shipments to 10 countries.\3
    However, in fiscal year 1997, GPL was operating primarily in only
    three countries--Canada, Japan, and the United Kingdom--and generated
    gross revenues of about $33.5 million.\4 In fiscal year 1997, USPS
    shipped a total of about 2 million GPL parcels to Canada, Japan, and
    the United Kingdom; almost all of the parcels were shipped to Japan.
    GPL parcels represented less than 1 percent of the total number of
    parcels shipped to Canada by the three major carriers and USPS via
    GPL service combined, about 60 percent of those shipped to Japan, and
    about 2 percent of those shipped to the United Kingdom in 1997.\5

    In fiscal year 1997, the GPL service as a whole accounted for less
    than 1 percent of the Postal Service's total outgoing international
    mail volume.

    Upon arrival in the destination countries, both postal and private
    express parcels are subject to clearance by foreign customs
    officials.  Customs services monitor the arrival and departure of
    shipments of goods through their clearance processes at
    ports-of-entry.  To obtain clearance of goods, shippers must fulfill
    the customs requirements of the destination country, including proper
    import documentation and payment of any applicable duties and taxes.

    To identify whether customs treatment differed for GPL parcels and
    similar private express parcels, GAO compared (1) the customs
    statutory and regulatory requirements; and (2) the operational
    practices and processes for importing merchandise through GPL or
    through private express carriers into Canada, Japan, and the United
    Kingdom.  Some of the differences in customs treatment could not be
    linked to written requirements.  Rather, officials from the private
    express carriers, USPS, and foreign customs and postal agencies
    described them to GAO as the operational practices and processes that
    were followed.  GAO also asked these officials to verify its
    descriptions of the processes and the legal basis for foreign customs
    clearance of imported GPL and private express parcels.  The
    information on private express clearance processes discussed in this
    report was obtained from three private express carriers, DHL Airways
    (DHL), FedEx, and UPS, because they were identified as being the
    largest competitors with USPS for parcel delivery services to the
    three foreign countries in this review.

    --------------------
    \2 See appendix I for a chronology of GPL services.

    \3 The 10 countries are Brazil, Canada, Chile, China (GPL service to
    Hong Kong was established before Hong Kong's reversion to China),
    France, Germany, Japan, Mexico, Singapore, and the United Kingdom.

    \4 During the final months of 1997, USPS also sent some GPL parcels
    to Mexico and China.

    \5 Although GAO obtained data on the number of parcels shipped by
    USPS and the three major private competitors to Canada, Japan, and
    the United Kingdom, parcels also may have been shipped via other
    private express carriers and USPS services to those three countries.

       RESULTS IN BRIEF
    ---------------------------------------------------------- Chapter 0:3

    The delivery and customs clearance processes for GPL and private
    express parcels in Canada, Japan, and the United Kingdom were based
    primarily on the domestic import requirements applicable to mail and
    parcels imported by private carriers in those countries.  All three
    countries had separate customs clearance processes and requirements
    for mail and parcels imported by private express carriers.  Under
    U.S.  law, the private express carriers were required to submit their
    parcels to U.S.  Customs for inspection prior to export, but USPS was
    not subject to this requirement for its outbound parcels.

    Differences in foreign customs treatment of GPL and private express
    parcels were greatest in Japan, where private express carriers were
    subject to requirements regarding the preparation of shipping
    documentation and payment of duties and taxes on their parcels that
    did not apply to GPL parcels.  In the United Kingdom, USPS was
    providing certain shipping data to the customs service on GPL parcels
    that was similar to the information that carriers were required to
    provide.  In Canada, GPL and private express parcels were subject to
    the same requirements because GPL parcels were being delivered for
    USPS by a private express carrier there.

    Regarding two major areas of concern to the carriers, GAO found no
    evidence that GPL parcels received preferential treatment over
    private express parcels in terms of (1) the speed of customs
    clearance in any of the three countries or (2) the assessment of
    duties and taxes in Canada and the United Kingdom.  On behalf of
    individual importers, USPS was paying duties and taxes on GPL parcels
    shipped to Canada and the United Kingdom.  GAO was unable to
    determine whether duties and taxes were assessed on dutiable GPL
    parcels shipped to Japan because (1) USPS did not have records on
    payment of duties and taxes on GPL parcels shipped to Japan, because
    the recipients of postal parcels in Japan are responsible for paying
    applicable duties and taxes; and (2) Japan Customs did not provide
    statistics on the amount of duties and taxes that recipients paid on
    GPL parcels.

    GAO found that the private express carriers followed similar delivery
    and customs clearance processes for parcels shipped from the United
    States to the three countries in its review.  However, USPS' delivery
    and customs clearance processes for GPL parcels differed among the
    three countries.  The differences reflected USPS' use of different
    types of GPL delivery agents, which were subject to different sets of
    requirements within the countries.  In Japan and the United Kingdom,
    GPL parcels were delivered by those countries' postal services and
    were treated as mail under customs law.  In Canada, GPL parcels were
    delivered by a private express carrier and were subject to the
    customs laws that applied to private carriers for importing goods.

    The private express industry has commented that differences in
    customs clearance requirements for postal and privately shipped
    parcels result in more work and higher costs for the carriers,
    placing them at a disadvantage in competing with USPS to provide
    international parcel delivery service.  However, USPS officials noted
    that they also incur costs that the private carriers do not, such as
    meeting their obligations to provide delivery service to persons in
    all communities of the United States and to member countries of the
    Universal Postal Union.  In addition, businesses that ship their
    goods internationally, as well as USPS and the carriers, stressed the
    importance of having competitive choices that provide alternatives in
    the cost and speed of international shipping services for consumers.

    The carriers have urged Congress to protect fair competition by
    enacting legislation that would require USPS to compete on the same
    terms, particularly for customs treatment, as private carriers.  This
    proposal raises several questions, such as (1) whether international
    parcels delivered by postal services and private carriers should be
    subject to the same requirements and customs treatment, (2) if so,
    what requirements would be appropriate to apply to international
    parcels, and (3) how the requirements should be implemented.

       GAO'S ANALYSIS
    ---------------------------------------------------------- Chapter 0:4

       DIFFERENCES IN CUSTOMS
       TREATMENT FOR GPL AND PRIVATE
       EXPRESS PARCELS SHIPPED TO
       CANADA, JAPAN, AND THE UNITED
       KINGDOM
    ---------------------------------------------------------- Chapter 0:5

    GAO identified 11 major categories of customs requirements and
    practices that potentially differed between the private express
    carriers and USPS in shipping parcels to Canada, Japan, and the
    United Kingdom.  The 11 categories, only the first of which involved
    U.S.  law, included (1) U.S.  Customs inspection of outbound parcels,
    (2) preparation of import shipping documentation, (3) electronic
    submission of shipping data, (4) use of licensed customs brokers, (5)
    calculation of duties and taxes, (6) the timing of payment of duties
    and taxes, (7) payment for customs clearance outside of regular
    business hours, (8) posting of bonds or other security to customs
    services for storage facilities, (9) retention of shipping records,
    (10) liability for the importation of restricted or prohibited parcel
    contents, and (11) liability for incorrect or missing customs
    declarations.

    According to customs officials in the United States and the countries
    in GAO's review, different requirements and processes for postal and
    commercial imports evolved over time, and the requirements were not
    intended to be the same.  They said that historically, more
    requirements have been imposed on commercial cargo than on postal
    parcels because cargo tended to be high-value merchandise shipped
    from one company to another, but postal parcels tended to be
    low-value items for personal consumption.  In addition, the Customs
    officials said that with the development of the direct marketing
    industry through catalog sales and, more recently, through on-line
    computer orders, these distinctions have been blurred as consumers
    transact their purchases of merchandise goods directly from
    businesses and have the goods delivered to their residences.  The
    need for faster clearance has also prompted the private carriers to
    request special customs requirements that would provide expedited
    clearance.

    Table 1 summarizes the requirements and practices in shipping GPL and
    private express parcels to Canada, Japan, and the United Kingdom in
    the 11 major categories.  The table also indicates areas where USPS
    and the carriers performed the task but were not required to do so by
    law or regulation.

                                         Table 1

                         Comparison of Requirements and Practices
                         for Shipping Parcels to GPL Destination
                                        Countries

                                          GPL destination countries
                          ----------------------------------------------------------
                                Canada              Japan           United Kingdom
                          ------------------  ------------------  ------------------
    Requirements/                    Private             Private             Private
    practices                GPL\a   carrier       GPL   carrier       GPL   carrier
    --------------------  ========  ========  ========  ========  ========  ========
    Submit outbound
     parcels for customs
     inspection\b
    Prepare import
     shipping
     documentation
    Enter shipping data
     into foreign
     customs services'
     computers
    Use licensed customs
     brokers
    Calculate duties and                                   \c                  \d
     taxes
    Pay or secure duties                          \e
     and taxes before
     Customs' release to
     delivery agent
    Pay for customs                                                 \f
     clearance outside
     of regular business
     hours
    Post bonds or
     provide other
     security to customs
     services for
     storage facilities
    Retain shipping
     records
    Importer liability
     for parcel contents
    Importer liability
     for incorrect or
     missing
     declarations
    --------------------------------------------------------------------------------
    Legend

     Required/Applicable
    Practice

    \a GPL parcels were imported into and delivered within Canada for
    USPS by a private express carrier and were therefore required to meet
    the same customs requirements as were imports by private carriers.\

    \b USPS officials noted that the Postal Inspection Service inspects
    some outgoing international parcels prior to export using search
    warrants.

    \c In practice, duties and taxes are in most cases calculated by
    Japan Customs' computer system on the basis of data entered by the
    importers/brokers.

    \d In the United Kingdom, duties and taxes are calculated by H.M.
    Customs' computers on the basis of data provided by the carriers.

    \e In Japan, recipients of postal parcels are not to receive parcels
    until the duties and taxes are paid.

    \f H.M.  Customs officials said that although Parcelforce would be
    liable for customs clearance outside of regular business hours,
    customs clearance for GPL parcels is normally done during regular
    business hours.

    Source:  GAO analysis of information from postal and customs
    officials, laws, and regulations in Canada, Japan, the United Kingdom
    and the United States.

          DIFFERENCES IN CUSTOMS
          TREATMENT FOR GPL AND
          PRIVATE EXPRESS PARCELS
          SHIPPED TO JAPAN
    -------------------------------------------------------- Chapter 0:5.1

    Customs treatment of GPL and private express parcels shipped from the
    United States to Japan was determined largely by Japanese law, which
    prescribed different sets of requirements for postal and private
    express parcels.  Under Japanese law, postal parcels were exempt from
    the major requirements that applied to private express parcels.
    Appendix III provides the basis in Japanese law for the different
    requirements.  Also affecting customs treatment were the carriers'
    different valuations of certain imported goods, which provided the
    basis for determining the amount of duties and taxes owed.

    Private express carriers or their brokers were subject to
    significantly more requirements than were USPS and the Japan Postal
    Bureau in shipping their parcels from the United States to Japan.
    U.S.  law subjected private express parcels to customs inspection
    prior to export, but outbound postal parcels were not subject to this
    requirement.  Under Japanese law, the carriers or their brokers were
    required to provide detailed shipping documentation, calculate duties
    and taxes, pay or secure payment of duties and taxes before Customs'
    release to the delivery agent, and retain shipping records.  In
    addition, the carriers or their brokers were subject to liabilities
    for importing restricted or prohibited parcel contents and for
    incorrect or missing customs declarations.  They also paid for
    customs clearance outside of regular business hours to expedite
    parcel clearance.  Although not required to by law, the carriers
    entered most of their import shipping data into Japan Customs'
    computer system.  By contrast, USPS or the Japan Postal Bureau were
    not subject to these requirements or practices with respect to GPL
    parcels, with the exception of the postal service's potential
    liability for restricted or prohibited parcel contents.

    In shipping parcels from the United States to Japan, USPS and the
    private express carriers followed different delivery and customs
    clearance processes.  A major process difference involved the
    delivery agents used by USPS and the carriers in Japan.  USPS paid
    the Japan Postal Bureau to deliver GPL parcels within Japan.  In
    comparison, employees of the three major private express carriers, or
    their Japanese business partners, delivered their parcels from the
    United States to recipients within Japan.  Further, although private
    express parcels were typically cleared at airport facilities, customs
    clearance at the Japan Postal Bureau facility that received the most
    GPL parcels was located in downtown Tokyo, about 2 hours from the New
    Tokyo International (Narita) Airport, where the parcels arrived from
    the United States.

    According to Japan Customs officials, GPL and private express parcels
    received the same customs treatment.  From information provided by
    USPS and Japan Customs, GAO found no evidence that GPL parcels
    received preferential treatment by Japan Customs over private express
    parcels with respect to the speed of customs clearance.  Data
    provided by USPS indicated that in 1997, clearance of GPL parcels in
    Japan took an average of 2.17 days; according to Japan Customs,
    private express parcels were normally cleared within 2 hours.  The
    carriers reported that customs clearance in Japan generally took
    between 2 and 5 hours for parcels not held for inspection.

    Japan Customs is responsible for assessing duties and taxes on
    imported postal parcels, including GPL parcels.  Private carriers
    calculated the duties and taxes on imported parcels, which were later
    verified by Japan Customs.  The carriers indicated that because they
    or their brokers calculated and paid duties and taxes on parcels
    imported into Japan, their records prove that they pay 100 percent of
    applicable duties and taxes.  The carriers were concerned that they
    have lost direct marketers as customers because of a perception that
    duties and taxes were not always assessed on dutiable postal parcels
    in Japan.

    Japan Customs officials, however, said that duties and taxes were
    being assessed on all dutiable parcels imported from the United
    States.  GAO was unable to determine whether duties and taxes were
    assessed on dutiable GPL parcels shipped to Japan because (1) USPS
    did not have records on payment of duties and taxes on GPL parcels
    shipped to Japan, because the recipients of postal parcels in Japan
    are responsible for paying applicable duties and taxes; and (2) Japan
    Customs did not provide statistics on the amount of duties and taxes
    that recipients paid on GPL parcels.

    Japanese law addresses how imported goods should be valued for the
    purposes of assessing duties and taxes.  However, because of
    different valuations of imported goods by private carriers or their
    brokers, differences existed in the amounts of duties and taxes paid
    on some postal and private express parcels.  The carriers reported
    that the Japan Customs Bureau rarely, if ever, adjusted their
    calculations of duties and taxes on imported parcels.

    Japanese law allowed imported goods to be valued at their wholesale,
    rather than retail, values if the goods are deemed to be for the
    personal use of the importer or are a gift to a person who is a
    resident in Japan and are deemed to be for the personal use of the
    recipient of the gift.  In assessing the customs value of goods,
    Japan Customs officials said imported parcels from direct marketers
    that are addressed to an individual, in many cases, qualified as
    goods deemed to be for the importers' personal use and could be
    valued at their wholesale, rather than retail, values.

    Japan Customs officials said wholesale valuations could be applied
    for both GPL and private express parcels containing goods from direct
    marketers for the recipients' personal use, and they applied a
    standard 60-percent valuation of GPL parcels' retail value to
    calculate wholesale values.  With regard to private express parcels,
    GAO found that the carriers were valuing their imported goods
    differently, which could affect the amount of duties and taxes owed
    on their imported parcels.  Of the three major private express
    carriers GAO contacted for this study, one carrier indicated that it
    was calculating duties and taxes on only imported mail-order goods on
    the basis of wholesale values of the goods.  Another said that it was
    using wholesale valuations for both imported mail-order goods and
    gifts.  The third carrier was not using wholesale valuations for any
    of its imported goods as a basis for calculating duties and taxes.

          DIFFERENCES IN CUSTOMS
          TREATMENT FOR GPL AND
          PRIVATE EXPRESS PARCELS
          SHIPPED TO THE UNITED
          KINGDOM
    -------------------------------------------------------- Chapter 0:5.2

    The customs treatment of GPL and private express parcels being
    shipped from the United States to the United Kingdom was governed by
    legal requirements applicable in the United Kingdom, which included
    U.K.  and European Union (EU) laws and regulations.  USPS' provision
    of certain shipping data to the customs service in the United Kingdom
    on GPL parcels, while not required by law, served to lessen the
    extent of differences in customs treatment of postal and private
    express parcels in the United Kingdom.

    USPS and the private express carriers followed different processes
    for delivering parcels from the United States to the United Kingdom,
    reflecting the use of different delivery agents.  Within the United
    Kingdom, GPL parcels were delivered by Parcelforce, a for-profit
    subsidiary of Royal Mail, the United Kingdom's postal service.  By
    contrast, the three major private express carriers, or their
    contracted local delivery companies, delivered their parcels within
    the United Kingdom.

    As in Japan, private express carriers in the United Kingdom were
    subject to requirements that did not apply to postal services.  In
    the United Kingdom, carriers or their brokers were required to pay or
    secure duties and taxes before customs clearance, provide security to
    the customs service for storage facilities, and retain shipping
    records.  They also paid for customs clearance outside of regular
    business hours to expedite parcel clearance.  By contrast, USPS and
    Parcelforce were not required to pay or secure duties and taxes
    before customs clearance, post bonds or other security to the customs
    service for storage facilities, or retain shipping records; and did
    not normally have GPL parcels cleared outside of regular business
    hours.  Both the carriers and the postal service in the United
    Kingdom were subject to liabilities for importing restricted or
    prohibited goods and for incorrect or missing customs declarations.
    Although Parcelforce was not required by law to maintain records on
    GPL parcels, Parcelforce officials said they planned to keep records
    on GPL shipments for 5 years.

    USPS was providing electronic shipping data on GPL parcels to
    Parcelforce for access by H.M.  Customs officials.  The content of
    USPS' shipping data on GPL parcels was similar to the information
    that the carriers provided to H.M.  Customs on their parcels.\6

    USPS provided documentation indicating that it paid duties and taxes
    on GPL parcels shipped to the United Kingdom in 1997.  USPS officials
    said that they offered to follow these procedures in establishing GPL
    service to the United Kingdom.  Appendix IV provides the basis in
    U.K.  and EU law for the requirements.

    The only apparent difference in customs treatment of postal and
    private express parcels in the United Kingdom related to the reported
    speed of customs clearance.  USPS did not have exact data indicating
    how long customs clearance took in the United Kingdom, but USPS
    officials said that GPL parcels were normally cleared within the same
    day that they arrived in the United Kingdom.  Customs officials in
    the United Kingdom indicated carrier parcels are cleared on average
    in 2 hours.\7

    --------------------
    \6 In providing comments on a draft of this report, Japan Customs
    indicated that it planned to develop an import information system in
    cooperation with USPS that is similar to the one used in the United
    Kingdom.

    \7 The carriers said that under new simplified procedures, customs
    clearance occurred immediately upon arrival for certain imported
    goods.

          DIFFERENCES IN CUSTOMS
          TREATMENT FOR GPL AND
          PRIVATE EXPRESS PARCELS
          SHIPPED TO CANADA
    -------------------------------------------------------- Chapter 0:5.3

    The treatment of GPL and private express parcels being shipped from
    the United States to Canada was determined by Canadian law.  Although
    Canadian law prescribed different sets of requirements for postal and
    private express carrier parcels, GPL parcels were delivered for USPS
    by a private express carrier in Canada and thus were subject to the
    same requirements that private express carriers must follow,
    according to Canadian customs officials.  These requirements included
    the preparation of shipping documentation, calculation of duties and
    taxes,\8 posting of security to the customs service for storage
    facilities, retention of shipping records, and payment for customs
    clearance outside of regular business hours.  According to Revenue
    Canada, which serves as Canada's customs service, the importers of
    parcels in Canada were subject to potential liabilities for the
    importation of restricted or prohibited parcel contents, and the
    importers or their brokers were subject to liabilities for missing or
    incorrect customs declarations.  Appendix V provides the basis in
    Canadian law regarding importing requirements for postal and private
    express parcels.

    --------------------
    \8 USPS provided documentation indicating that it paid duties and
    taxes on GPL parcels shipped to Canada in 1997.

          ISSUES RELATED TO MAKING
          CUSTOMS REQUIREMENTS MORE
          SIMILAR
    -------------------------------------------------------- Chapter 0:5.4

    Issues related to fair competition involve weighing how USPS and its
    private sector competitors can compete, given their different
    requirements and obligations.  The potential implications of whether
    to apply the same requirements, under what terms, and how to apply
    the same requirements for both USPS and the carriers may include a
    number of factors, including those raised by the U.S.  and foreign
    postal and customs services, private express carriers, shippers, and
    consumers.  The private express industry has commented that it wants
    a "level playing field" with USPS in providing international parcel
    delivery service by having Congress apply the same customs
    requirements on USPS and the carriers.  The carriers also noted the
    benefits that simplification of customs formalities for low-value
    shipments could have for all international commerce.  USPS officials
    noted that the Postal Service incurs costs that the private carriers
    do not, such as meeting its obligations to provide delivery service
    to persons in all communities of the United States and to member
    countries of UPU.  Moreover, businesses that ship their goods
    internationally, as well as USPS and the carriers, stressed the
    importance of having competitive choices that provide alternatives in
    the cost and speed of international shipping services for consumers.

    In urging that the same international customs clearance requirements
    should be applied to USPS and the private carriers, the carriers have
    raised fundamental questions about the fairness of competing with a
    government entity that is providing a businesslike service.  The
    carriers commented that competing with a government entity that is
    subject to fewer customs requirements and lower associated costs
    distorts the competitive marketplace.  Depending upon what types of
    competitive international postal products would be subject to the
    same requirements, postal services are concerned that requiring USPS
    and the private carriers to follow the same requirements could affect
    the simplified process that was intended for mail sent from household
    to household internationally.  Another consideration is the potential
    impact on shippers, such as the direct marketing industry, who would
    like to have a choice of different types, costs, and speed of
    delivery services to respond to their customers' demands for their
    goods.

    Determining how to make customs requirements the same would involve
    several considerations.  Changes in U.S.  law by themselves would not
    equalize customs treatment for postal and private express parcels
    under foreign law.  Further, additional analysis would be needed to
    determine whether making customs requirements the same would conflict
    with current international agreements, such as those involving UPU
    service obligations, and whether such changes would impose additional
    workload burdens on postal and customs services worldwide.

    With respect to U.S.  law, opportunities may exist to change customs
    treatment of parcels imported into the United States.  Negotiations
    between USPS and the U.S.  Customs Service regarding the treatment of
    future GPL service incoming to the United States involve discussions
    of issues such as manifesting requirements and payment of duties and
    taxes.  Moreover, in a consideration of what requirements might be
    appropriate, additional opportunities may exist to build on national
    and international proposals to simplify and expedite customs
    clearance procedures worldwide.  Such opportunities include reducing
    paperwork and increasing the dutiable de minimis--the value threshold
    at which imported goods are subject to duties and taxes--which could
    benefit both USPS and the private express carriers.

       AGENCY COMMENTS
    ---------------------------------------------------------- Chapter 0:6

    GAO requested comments on a draft of this report from 10
    organizations, including USPS; Treasury and the U.S.  Customs
    Service; the governments of Canada, Japan, and the United Kingdom; as
    well as the private express carriers included in its review--DHL,
    FedEx, and UPS; and the trade association Air Courier Conference of
    America (ACCA).  GAO received written comments from three
    organizations--ACCA, USPS, and Revenue Canada; Treasury and U.S.
    Customs chose not to provide comments.  The private express carriers
    chose to submit their comments together through ACCA's written
    comments.  GAO's summary of agency comments and response are included
    at the ends of chapters 2 and 3.  The customs services of Canada,
    Japan, and the United Kingdom provided technical comments, which are
    incorporated in appropriate sections throughout the report.

    The comments GAO received generally agreed with the facts presented
    in the report on the differences in the requirements and procedures
    for customs clearance of GPL and private express carrier parcels in
    the three countries in its review.  However, USPS and ACCA had
    different interpretations of the report's message and different
    perspectives on the policy implications of these differences.  GAO
    made changes where appropriate to clarify its message.

    INTRODUCTION
    ============================================================ Chapter 1

    Increased demand for consumer goods worldwide has intensified
    competition between private express carriers and postal services for
    providing international parcel delivery services.\1 Private carriers
    have expressed long-standing concerns about trade barriers, such as
    foreign customs' clearance requirements that they say hinder their
    ability to provide cost-effective and timely delivery of parcels.\2
    More recently, the carriers have raised competitive concerns about
    the U.S.  Postal Service's (USPS) Global Package Link (GPL) service,
    which USPS established in 1995 to provide mailers of catalog
    merchandise, such as apparel, with an economical and simplified means
    of shipping goods internationally.

    In the summer of 1997, representatives from Federal Express
    Corporation (FedEx) and United Parcel Service (UPS) raised concerns
    to Congress about GPL, alleging that USPS has used its governmental
    status with foreign governments to give GPL parcels preferential
    treatment.  In particular, the carriers indicated GPL parcels
    received reduced customs fees and faster customs clearance over
    private express parcels.  USPS officials replied that GPL service was
    designed to provide direct marketers with an economical and
    simplified means of shipping goods internationally, particularly with
    respect to the automation of customs information.  USPS indicated
    that it had not made any special arrangements with foreign
    governments to give GPL parcels preferential customs treatment over
    private express parcels.

    This report responds to a request from the Chairman of the
    Subcommittee on the Postal Service, House Committee on Government
    Reform and Oversight, that we review whether differences existed in
    the customs treatment for GPL and private express carrier parcels
    sent to Canada, Japan, and the United Kingdom--the three countries
    where USPS was primarily providing GPL service in 1997.

    --------------------
    \1 The carriers also deliver freight, but this report focuses on
    parcel delivery service that is comparable to GPL service.

    \2 See GAO's report, International Aviation:  DOT's Efforts to
    Promote U.S.  Air Cargo Carriers' Interests (GAO/RCED-97-13, Oct.
    18, 1996).  The three private express carriers that were involved in
    this GPL review were included in the 1996 report.

       OVERVIEW OF USPS' GPL SERVICE
    ---------------------------------------------------------- Chapter 1:1

    GPL was designed as a bulk delivery service that would make it easier
    and more economical for companies to ship parcels containing
    merchandise internationally.  During 1997, GPL customers were
    primarily direct marketers--mailers of catalog merchandise.  First
    introduced under the name International Package Consignment Service
    (IPCS) to Japan in 1995, and renamed Global Package Link in 1997, the
    service is now available for parcel shipments to 10 countries.\3
    However, in fiscal year 1997, GPL was operating primarily in only
    three countries--Canada, Japan, and the United Kingdom.\4

    Responsibility for implementing GPL and other international mail
    services lies with the USPS' International Business Unit (IBU).
    According to USPS, IBU was started in 1995 with the vision of
    becoming within the next few years--and no later than 2005--the
    "leading global supplier of direct marketing and package delivery
    services and related business transactions to business customers
    worldwide." According to IBU officials, GPL destinations were
    selected after customers expressed an interest in shipping there or
    USPS decided that certain shipping opportunities existed.  Although
    GPL currently operates only as an outbound delivery service for U.S.
    companies, USPS also plans to offer inbound services to foreign
    companies in GPL countries that want to ship products to the United
    States.

    --------------------
    \3 The 10 countries are Brazil, Canada, Chile, China (GPL service to
    Hong Kong was established before Hong Kong's reversion to China),
    France, Germany, Japan, Mexico, Singapore, and the United Kingdom.  A
    several-month delay normally occurs between the time GPL service is
    announced to a new destination and when shipments actually begin.
    The length of the delay depends upon how long it takes to enlist U.S.
    direct marketing companies as customers and establish the necessary
    start-up operations.

    \4 During the final months of 1997, USPS also sent some GPL parcels
    to Mexico and China.

          GPL VOLUME AND REVENUE
    -------------------------------------------------------- Chapter 1:1.1

    GPL is one of several international mailing services offered by
    USPS.\5 In fiscal year 1997, USPS shipped about 2 million parcels via
    GPL service, almost all of which were shipped to Japan.  GPL parcels
    represented less than 1 percent of USPS' total outgoing international
    mail volume of almost 1 billion pieces in fiscal year 1997.  GPL
    gross revenues for fiscal year 1997 were $33.5 million, an increase
    of about 13.5 percent over fiscal year 1996, when GPL generated $29.5
    million in gross revenue.

    The number of GPL parcels being sent to different countries may be
    affected by several key factors, including currency fluctuations and
    cultural preferences for U.S.  goods.  Exports of U.S.  goods sold by
    direct marketers\6 to Japan, for example, increased substantially in
    recent years but have leveled off recently as the U.S.  dollar has
    increased in strength against the Japanese yen, according to the
    American Chamber of Commerce in Japan.  The U.S.  Department of
    Commerce reports that U.S.  merchandise represents 80 to 90 percent
    of the value of total personal imports in Japan.  Direct marketers
    have estimated the value of personal imports in Japan to represent
    sales of $1 billion to $1.5 billion annually.  On the basis of
    catalog requests at direct marketing promotions in Tokyo and Osaka,
    Japan, Japanese consumers prefer goods such as apparel;
    sports/outdoor equipment; videos, cassettes, compact discs, and
    books; and hobby merchandise.

    Generally, GPL mailers said that their success in overseas markets
    depended on their ability to offer unique and high- quality goods at
    favorable prices, including shipping charges.  As shown in figure
    1.1, Canada, Japan, and the United Kingdom together account for about
    one-third of the value of merchandise goods exported from the United
    States, according to 1996 Commerce Department figures.

       Figure 1.1:  U.S.  Merchandise
       Exports to Canada, Japan, and
       the United Kingdom in 1996

       (See figure in printed
       edition.)

    Note:  In 1996, total merchandise exports equaled $624.8 billion.
    Other:  The rest of the world.

    Source:  Department of Commerce.

    --------------------
    \5 Traditionally, the international mail market has included letter
    mail, printed matter, and parcel post for households and businesses.
    Revenues from international mailing services are derived primarily
    from airmail; surface mail; Express Mail International Service (EMS);
    International Surface Airlift (ISAL); and foreign postal
    transactions, such as terminal dues (payments made to and by foreign
    postal services for handling and delivering international mail) and
    other related fees.  Total international mail generated $1.61 billion
    in revenue in fiscal year 1997, compared to $1.65 billion in 1996, a
    decrease of 2.4 percent.

    \6 Direct marketers defined themselves as businesses that sell goods
    directly to consumers.

          GPL START-UP PROCESS
    -------------------------------------------------------- Chapter 1:1.2

    A new GPL customer is required, among other things, to sign an
    agreement with USPS that it will (1) mail at least 10,000 parcels a
    year to 1 or more destination countries;\7 (2) agree to link its
    information systems with those of USPS, enabling the customer and
    USPS to generate reciprocal data transmissions concerning the
    parcels; (3) meet certain shipping preparation requirements; and (4)
    designate USPS as its carrier of choice for each country to which it
    sends GPL parcels.\8 For new GPL customers, USPS creates an
    electronic data link between it and the customer and installs
    proprietary software known as the Customs Pre-Advisory System (CPAS)
    to capture shipping data.\9 For new GPL countries, USPS creates an
    electronic data link with its delivery agents--usually the foreign
    postal services.  USPS may determine the harmonized tariff codes for
    the mailers, depending upon the destination country's customs
    clearance requirements.\10 GPL mailers provide data into CPAS about
    product origin, description, and value for the system to generate
    mailing labels, and in some countries, calculate applicable duties
    and taxes.

    --------------------
    \7 USPS also allows wholesalers to participate in GPL agreements by
    combining shipments from companies with fewer than 10,000 parcels.

    \8 "Carrier of choice" means that GPL customers agree to use USPS as
    their carrier unless the parcel recipients specifically chose another
    carrier.

    \9 CPAS is operated by a USPS contractor called DynCorp.  GPL
    customers transmit the following data to DynCorp:  addresses of
    mailers and recipients, number of items being shipped, description
    and value of individual items, and total value and weight.

    \10 Catalog harmonization is the process of assigning international
    Harmonized Tariff Schedule codes to each product offered in the
    mailer's catalog.  The codes are used to determine the applicable
    tariffs (also referred to as duties) and taxes due in the destination
    country.  Harmonized tariff codes are not needed for GPL parcels
    being sent to Japan; Japan Customs determines the codes.

          KEY ELEMENTS OF GPL SERVICE
          TO CANADA, JAPAN, AND THE
          UNITED KINGDOM
    -------------------------------------------------------- Chapter 1:1.3

    USPS offers different levels of GPL service to Canada, Japan, and the
    United Kingdom, depending upon customers' needs regarding delivery
    speed, parcel tracking, and insurance.  Customers are also bound to
    parcel weight and size limitations, depending on destination.
    Shipping rates vary by country, and customers are eligible for
    certain volume discounts.  As shown in table 1.1, GPL service
    includes two to three levels for each of the three countries (e.g.,
    premium, standard, and economy), with parcels generally scheduled for
    delivery within 2 to 10 business days, depending upon destination;
    time-definite delivery is not guaranteed to any GPL country.

                                        Table 1.1

                          Key Elements of GPL Service to Canada,
                              Japan, and the United Kingdom

                     Size and weight  Delivery         Insurance
    Service level    limitations\a    options\b        coverage           Tracking\c
    ---------------  ---------------  ---------------  -----------------  ----------
    Canada
    --------------------------------------------------------------------------------
    GPL Premium:     Maximum length:  Normal delivery  Insured up to      Through
    Parcels are      60 inches        is 2 to 3        U.S.$500 against   delivery.
    transported      Maximum length/  business days    loss, at no
    from GPL         girth combined:  after dispatch   additional cost,
    processing       108 inches.\     from customer's  but not against
    centers to                        plant to final   delayed delivery.
    Canada           Maximum weight:  delivery,
    overnight,       66 lbs.          depending on
    where parcels                     location.
    are cleared      Minimum length/
    through customs  width: large
    and released to  enough for
    the delivery     necessary
    agent.           customs/
                     delivery
                     label.

    GPL Standard:    (as above)       Normal delivery  Insured for the    (as above)
    Parcels are                       3 to 6 business  declared value,
    transported to                    days after       up to U.S.$100,
    Canada                            dispatch from    but not against
    overnight (same                   customer's       delayed delivery.
    as GPL                            plant to final   Optional coverage
    premium), where                   delivery,        of U.S.$100-
    parcels are                       depending on     $1,000 available
    cleared through                   location; may    for additional
    customs and                       take as long as  cost.
    released to the                   8 days.\b
    delivery agent.
    Ground
    transportation
    is used to
    deliver parcels
    to final
    Canadian
    destination.

    Japan
    --------------------------------------------------------------------------------
    GPL Premium:     Maximum length:  Within 3 to 4    Insured up to      Through
    Parcels are      60 inches        business days    U.S.$500 against   delivery.
    transported to   Maximum length/  after dispatch   loss, at no
    Japan by air,    girth combined:  from customer's  additional cost,
    where they are   108 inches.\     plant.           but not against
    entered into                                       delayed delivery.
    Japan Post's     Maximum weight:
    domestic mail    44 lbs.
    system for
    delivery.        Minimum length/
                     width: large
                     enough for
                     necessary
                     customs/
                     delivery label.

    GPL Premium      GPL Premium      Delivery to be   Insured up to      (as above)
    Oversize:        packages whose   within 3 to 4    U.S.$500 against
    (extension of    length is more   business days    loss, at no
    GPL Premium      than 60 inches   after dispatch   additional cost,
    service):        up to a          from customer's  but not against
    Parcels are      combined         plant.           delayed delivery.
    transported to   length/girth of
    Japan by air,    108 inches.
    where they are
    entered into a   GPL Premium
    private express  packages
    carrier's        weighing more
    delivery         than 44 pounds
    system.          up to a maximum
                     of 70 pounds.

    GPL Standard:    Maximum length:  Delivery to be   No insurance       Confirmati
    Parcels are      60 inches        within 7 to 10   coverage           on of
    transported to   Maximum length/  business days    available.         dispatch
    Japan by air,    girth combined:  after dispatch                      from GPL
    where they are   108 inches \     from customer's                     processing
    entered into                      plant.                              facility
    Japan Post's     Maximum weight:                                      only.
    domestic mail    66 lbs.
    system for
    delivery.        Minimum length/
                     width: large
                     enough for
                     necessary
                     customs/
                     delivery label.

    United Kingdom\d
    --------------------------------------------------------------------------------
    GPL Premium:     Maximum length:  3rd business     Insured up to      Through
    Parcels are      60 inches        day after        $500 against       delivery.
    transported to   Maximum length/  dispatch from    loss, at no
    the U.K. by      girth combined:  customer's       additional cost,
    air, where they  108 inches.\     facility to      but not against
    are transferred                   final delivery.  delayed delivery.
    for delivery to  Maximum weight:
    Parcelforce for  66 lbs.
    local delivery
    .                Minimum length/
                     width: large
                     enough for
                     necessary
                     customs/
                     delivery label.

    GPL Standard:    (as above)       4th business     (as above)         (as above)
    Parcels are                       day after
    transported to                    dispatch from
    the U.K. by                       customer's
    air, where they                   facility to
    are transferred                   final delivery.
    for delivery to
    Parcelforce for
    local delivery
    .

    GPL Economy:     (as above)       5th or 6th       Insured at an      Available
    Parcels are                       business day     additional cost,   to hand-
    transported to                    after dispatch   but not against    over to
    the U.K. by                       from customer's  delayed delivery.  Parcelforc
    air, where they                   facility to                         e in the
    are transferred                   final delivery.                     U.K.
    to Parcelforce
    for local
    delivery.
    --------------------------------------------------------------------------------
    Note:  Return service is available from all three countries.
    Depending on the country, the shipper or the recipient is responsible
    for returning merchandise to the designated returns center.
    Generally, duties may be refunded if customers did not receive what
    they ordered.

    \a Maximum sizes vary for certain other countries in the GPL program.
    All packages must be large enough to accommodate the necessary labels
    and customs labels on the address side.

    \b Delivery options vary according to the destination country.  For
    Canadian addresses in the Maritimes and extreme northern territories,
    delivery times could be as long as 8 days.  Shippers have the option
    of having USPS transport parcels to a GPL processing center.

    \c Parcels are scanned, for tracking and tracing purposes, using the
    unique barcode affixed to each parcel.

    \d Includes Great Britain and Northern Ireland.

    Source:  Federal Register and USPS.

    GPL parcels are processed at and exported from USPS' GPL processing
    centers located in New York, Chicago, Dallas, Miami, and San
    Francisco as well as the Air Mail Center in Seattle.  GPL parcels
    sent to Canada are also processed at a USPS facility in Buffalo, NY.
    According to USPS, it is required by law to use only U.S.  commercial
    airlines for transporting parcels overseas.  In 9 of 10 GPL
    countries, foreign postal services deliver GPL parcels for USPS.

       OVERVIEW OF PRIVATE EXPRESS
       CARRIER SERVICES
    ---------------------------------------------------------- Chapter 1:2

    Private express carriers have many different types of customers and
    offer various delivery services both domestically and
    internationally, depending upon shippers' needs.  For the purposes of
    this review, we focused on private express services involving the
    shipment of parcels of a size and weight similar to GPL parcels sent
    to the three countries in our review.\11

    Nevertheless, differences may exist between some features of the
    international delivery services provided by postal and private
    express carriers, such as time-definite delivery guarantees and
    door-to-door service, which make an exact comparison impossible.  For
    example, private express services generally provide for guaranteed
    scheduled delivery within 1 to 4 business days, compared to 2 to 10
    business days for delivery of GPL parcels, depending on the
    destination.  Also, private express carriers generally have
    responsibility for their parcels throughout the international
    delivery process, but foreign postal services deliver most GPL
    parcels for USPS in other countries.\12

    Differences may also exist in the tracking services available for GPL
    and private express parcels.

    --------------------
    \11 See table 1.1 for the size and weight limitations for GPL service
    to Canada, Japan, and the United Kingdom.

    \12 GPL parcels are delivered in Canada by Purolator, a private
    express carrier that is partially owned by Canada Post.

          VOLUME, VALUE, AND WEIGHT OF
          GPL AND PRIVATE EXPRESS
          PARCELS SHIPPED TO CANADA,
          JAPAN, AND THE UNITED
          KINGDOM IN 1997
    -------------------------------------------------------- Chapter 1:2.1

    Private express carrier officials said that no published data exist
    on their market shares to Canada, Japan, and the United Kingdom.
    However, at our request, DHL, FedEx, and UPS provided data on the
    combined number of parcels that they shipped to Canada, Japan, and
    the United Kingdom in 1997, excluding documents and freight.  USPS
    provided similar data on GPL parcels shipped to those countries in
    1997.

    DHL, FedEx, and UPS provided data indicating that they sent a total
    of about 8 million parcels to Canada, Japan, and the United Kingdom
    in 1997.  GPL parcels represented less than 1 percent of the total
    number of parcels sent to Canada by the three major carriers and USPS
    via GPL, about 60 percent of those sent to Japan, and about 2 percent
    of those sent to the United Kingdom.\13

    USPS and the three carriers also reported differences in the average
    weight and value of GPL and private express parcels.  USPS reported
    that the average weight of GPL parcels sent to Japan, for example,
    was about 3 pounds; the private express carriers reported that the
    average weight of their parcels to Japan was about 21 pounds.
    Further, USPS reported that the average value of GPL parcels to Japan
    was about $120; the average value of parcels shipped by the private
    express carriers to Japan was about $900.

    --------------------
    \13 Although we obtained data on the number of parcels sent by USPS
    and the three major private competitors to Canada, Japan, and the
    United Kingdom, parcels also may have been sent via other private
    express carriers and USPS services to those three countries.

       OVERVIEW OF CUSTOMS CLEARANCE
       PROCESS
    ---------------------------------------------------------- Chapter 1:3

    Governments generally establish export and import control laws for
    national security and foreign policy purposes, to generate revenue,
    and to protect domestic industries and their citizens.  Customs
    organizations are typically charged with ensuring that all goods and
    persons entering and exiting their countries comply with customs laws
    and regulations, as well as with facilitating the prompt and
    efficient movement of international goods.  To ensure compliance,
    customs services monitor the arrival and departure of shipments of
    goods through their clearance processes.  The export process normally
    consists of seeking permission from customs services to export goods.
    This may involve a process of listing goods on a manifest for
    presentation to the customs services for export clearance.  The
    import process involves the inspection of goods for admissibility and
    the assessment and collection of any applicable duties and fees.

    Duties, also known as tariffs, are charges that a government imposes
    on the goods that are brought into the country.  Using a Harmonized
    Tariff Schedule, each country can establish its own rates, which may
    vary with the type of goods and sometimes with the country of origin.
    In addition, fees or taxes, such as the Value Added Tax (VAT) in
    European Union countries, also may be assessed.  Table 1.2 shows the
    duties and taxes applicable to imported parcels in the three
    countries and the United States.

                                        Table 1.2

                         Duties and Taxes Applicable to Imported
                           Parcels in Canada, Japan, the United
                              Kingdom, and the United States

                Canada           Japan            United Kingdom   United States
    ==========  ---------------  ---------------  ---------------  -----------------
    Duty        Duty on goods    Duty on goods    Duty on goods    Duty on goods
                more than $20    more than        from non-        more than $200 in
                Canadian in      10,000 in       European Union   value; rates vary
                value (about     value (about     countries more   by item.
                U.S. $14\\\a);   U.S. $80\b);     than 22
                rates vary by    rates vary by    European
                item.            item.            Currency Units
                                                  (ECU)in value
                                                  (about 18 or
                                                  about U.S.
                                                  $30\c); rates
                                                  vary by item.

    Tax         7 percent        5 percent        17.5 percent
                federal goods    consumption tax  Value Added Tax
                and services
                tax\d
    --------------------------------------------------------------------------------
    \a Assuming that $1 U.S.=$1.4 Canadian.

    \b Assuming that $1=125.  ( = yen)

    \c Assuming that $1=.6.  ( = British pound)

    \d Revenue Canada collects a harmonized sales tax on "casual goods"
    addressed to recipients in Nova Scotia, New Brunswick, and
    Newfoundland.  "Casual goods" means any goods other than those
    imported for sale or for any commercial, industrial, occupational,
    institutional, or other like use.  The harmonized sales tax of 15
    percent comprises a federal component of 7 percent and a provincial
    component of 8 per cent.  Revenue Canada has also signed agreements
    with Quebec and Manitoba to collect their provincial sales taxes on
    casual goods, which are 7.5 percent and 7 percent, respectively.

    Note:  Other taxes on specific imported commodities, such as tobacco,
    may apply.

    Source:  Canadian, Japanese, U.K., and U.S.  law and customs
    officials.

    Historically, customs clearance requirements and procedures have
    developed along separate tracks for postal and cargo shipments.  In
    the United States, customs requirements for clearance of postal items
    are affected by a postal law (39 U.S.C.  3623) that protects certain
    mail of domestic origin from inspection without a search warrant.
    Customs treatment of international mail parcels originated decades
    ago, when the need to handle large volumes of international mail
    prompted customs and postal administrations to work closely together
    to simplify forms and streamline their procedures for handling mail
    and parcels.

    According to customs officials in the United States and the countries
    in our review, different requirements and processes for postal and
    commercial imports evolved over time, and the requirements were not
    intended to be the same.  They said that historically, more
    requirements have been imposed on commercial cargo than on postal
    parcels.  Customs clearance for international mail parcels was
    intended to be simple for individuals sending parcels to other
    individuals overseas.  International mail primarily consisted of
    written letters and low-value packages containing items for personal
    consumption.  International express cargo, on the other hand, tended
    to be time-sensitive shipments being sent from a company in one
    country to a company in another country for the purpose of generating
    revenue.

    Because of the differences in the nature and value of the items
    entering a country by mail versus commercial cargo, most countries
    established different customs requirements and procedures for these
    two different types of shipments.  However, with the development of
    the direct marketing industry through catalog sales and, more
    recently, through on-line computer orders, the historical
    distinctions between mail parcels and cargo have been blurred, as
    consumers increasingly purchase merchandise goods directly from
    businesses and have the goods delivered to their residences.

    The Universal Postal Union (UPU), an agency of the United Nations
    that governs international postal service, also established customs
    procedures for international mail.\14 Under a UPU international
    agreement, the Universal Postal Convention, member countries are
    provided with a standard declaration form to prepare parcels for
    international shipment.  On the declaration form, mailers provide
    information about a parcel's contents, weight, and value, as well as
    the mailer's and recipient's names and addresses.

    Private express carriers began importing and exporting shipments into
    and out of the United States in the late 1960s and early 1970s as a
    small industry responding to the geographic dispersion of industries
    and organizations.  Initially, the industry provided door-to-door
    service for documents.  Cargo shipments were not part of express
    consignment shipments during the early years because regulatory
    barriers prevented rapid effective movement of packages.

    During the latter 1970s, private express carriers began the practice
    of importing courier-accompanied parcels into the United States via
    commercial airlines.  Initially, the U.S.  Customs Service did not
    recognize the private express industry as a separate entity and
    treated private express shipments as passenger baggage or normal air
    cargo.  In 1987, after repeated requests by the private express
    carriers to be treated as a separate and special industry, the
    Customs Service recognized the need to address the growing private
    express industry.  In May 1989, U.S.  Customs published regulations
    (19 C.F.R.  Part 128) recognizing the special needs of the private
    express industry.  These regulations provided definitions and
    guidelines addressing private express procedures, which included
    application procedures and requirements that the carriers provide
    advance manifest information and reimburse U.S.  Customs for
    expedited clearances, and required the express facility to be highly
    automated.

    Although we will discuss differences between foreign customs
    clearance requirements and processes for postal and private express
    carrier shipments in chapter 2, figure 1.2 is a general overview of
    the major steps involved in U.S.  Customs clearance.  This general
    overview is intended to explain the basic steps in the customs
    clearance process.  The differences between customs clearance
    requirements for postal and private carriers in the United States was
    the subject of a report being prepared by the U.S.  Customs Service
    in 1998 for the House and Senate Appropriations Committees.\15

       Figure 1.2:  Overview of U.S.
       Customs Import Clearance
       Processes for Postal and
       Private Express Shipments

       (See figure in printed
       edition.)

    Source:  U.S.  Customs and USPS regulations.

    --------------------
    \14 Currently, 189 countries are UPU members, including Canada,
    Japan, Great Britain, Northern Ireland, and the United States.
    Countries that signed the Universal Postal Convention agreed to
    universal service obligations that include accepting mail from other
    countries and delivering international mail to its final destination.

    \15 U.S.  Customs Service, A Review of Customs Treatment:
    International Mail and Express Consignment Shipments.  As of May 15,
    1998, U.S.  Customs had not yet issued this report.

       OBJECTIVES, SCOPE, AND
       METHODOLOGY
    ---------------------------------------------------------- Chapter 1:4

    In 1996, we reported to the Chairman of the Subcommittee on the
    Postal Service, House Committee on Government Reform and Oversight,
    the major unresolved issues in the international mail market,
    including concerns about unfair competition by private carriers.\16
    During the summer of 1997, representatives from the largest U.S.
    private express carriers expressed concerns to Congress about GPL,
    alleging that USPS (1) received preferential customs treatment, (2)
    used its governmental status to negotiate special arrangements with
    other governments, and (3) charged shipping rates that did not cover
    all of its operational and administrative costs for GPL service.  In
    response to these concerns, the Chairman of the House Subcommittee on
    the Postal Service requested that we review several issues related to
    the competitiveness of the international mail market.  To accommodate
    resource limitations, we agreed to address these issues in a series
    of reviews.

    In this first review, our primary objective was to determine whether
    differences existed in the customs requirements for the portion of
    the international mail market involving GPL and private express
    carrier parcels.  We agreed to review the requirements for and
    customs treatment of GPL and private express parcels being sent to
    Canada, Japan, and the United Kingdom--the three primary countries
    where GPL service was being provided in 1997.  In this report, we
    also discuss some issues related to addressing concerns about GPL's
    perceived competitive advantages.  We did not review customs
    treatment of other, non-GPL international postal services, which may
    have differed from customs treatment of GPL parcels.  Further,
    although other government requirements that are related to both
    imports and exports may apply, such as those regarding airline
    security and shipments of restricted and prohibited goods, the focus
    of this review included only customs requirements.  In a separate
    review, we are examining issues related to the Postal Service's role
    and U.S.  representation in UPU.  In a future review, we plan to look
    at issues related to the Postal Service's pricing and allocation of
    costs for its GPL service.

    To identify whether customs treatment differed for GPL parcels and
    similar private express parcels, we compared (1) the customs
    statutory and regulatory requirements\17 and (2) the operational
    practices and processes for importing merchandise through GPL or
    through private express carriers into each of the three foreign
    countries.  We were assisted in our analysis of the legal
    requirements in Japan by Dr.  Sung Yoon Cho, Assistant Chief of the
    Far Eastern Law Division at the Library of Congress.  Some of the
    differences in customs treatment could not be linked to written
    requirements.  Rather, officials from the private express carriers,
    USPS, and foreign customs and postal services described them to us as
    the operational practices and processes that were followed.

    To obtain detailed information about GPL service to the three
    countries in our review, we interviewed USPS officials responsible
    for implementing and administering GPL.  We met with officials at the
    U.S.  Customs Service to better understand differences in U.S.
    Customs clearance of postal and commercial shipments.  We interviewed
    government officials at the Japan Postal Bureau and the Japan Customs
    Bureau in Tokyo and Osaka, Japan; Parcelforce and H.M.  Customs and
    Excise officials in London; and Revenue Canada officials in Ottawa to
    understand the customs clearance processes and requirements in each
    country.  We talked to officials at Purolator and PBB Global
    Logistics, respectively, which handle delivery and customs clearance
    of GPL parcels shipped to Canada.  We also asked these officials to
    verify our descriptions of the processes and the legal citations for
    foreign customs clearance of imported GPL and private express
    parcels.

    The information on private express clearance processes discussed in
    this report was obtained from three private express carriers (DHL,
    FedEx, and UPS) because they were identified as being the largest
    competitors with USPS for parcel delivery services to Canada, Japan,
    and the United Kingdom.  We interviewed officials of the three
    private express carriers in the United States, as well as their
    employees involved in customs processing in Japan and the United
    Kingdom, to better understand their shipping and clearance processes
    and their concerns related to the competitiveness of these processes.
    In addition, we talked to representatives of other private
    international delivery companies, including Airborne and Global Mail
    Ltd., as well as the Air Courier Conference of America (ACCA), a
    trade association whose members are domestic and international air
    courier and air express companies operating in the United States, to
    determine if any additional concerns by USPS competitors about GPL
    customs treatment existed.

    We also interviewed several U.S.  direct marketers, including GPL
    customers and customers of the private express companies, to learn
    what factors were important to them in determining how they would
    export their shipments.  Finally, we interviewed officials at the
    U.S.  Department of Commerce, the U.S.  Embassy in Japan, the U.S.
    Chamber of Commerce in Japan, the Direct Marketing Association, and
    the Mail Order Association to better understand the direct marketing
    industry's concerns about the competitiveness of international
    delivery services.

    To better understand customs clearance processing for GPL and
    commercial carrier shipments, we observed the various stages of the
    customs clearance processes, including the procedures involved before
    parcel shipments leave the United States and the procedures involved
    in foreign customs clearance, for both GPL and private express
    carrier shipments.  Our visits to observe pre-export activities that
    occur in the United States included a U.S.  mailer's facility where
    catalog orders are processed; a GPL processing facility at John F.
    Kennedy International Airport in New York; as well as the processing
    centers of the three major private express carriers located in
    Memphis, TN; Louisville, KY; and at Kennedy Airport in New York.  In
    addition, our observations of customs clearance processes included
    the postal and commercial clearance facilities at Kennedy Airport in
    New York; Heathrow, Stansted, and East Midlands Airports in the
    United Kingdom; and the New Tokyo International (Narita) and Osaka
    Kansai International Airports in Japan.

    The purpose of these visits was to obtain a basic understanding of
    the customs clearance process, but the visits were not intended to
    serve as an independent verification of whether the foreign customs
    clearance processes were appropriately implemented as described by
    foreign customs officials.  Further, we did not have audit authority
    that would have provided access to records of foreign customs
    services and would have allowed us to verify the collection of duties
    and taxes on imported parcels from the United States.  We considered
    options to address concerns raised by USPS competitors about whether
    duties and fees were being appropriately assessed on GPL packages.
    However, such options as sending comparable GPL and private express
    parcels as a test to measure differences in customs treatment or
    examining foreign governments' customs records were not deemed
    feasible for a variety of reasons, including methodological and
    resource limitations.  Further, because GPL service currently
    involves only the export of parcels from the United States to other
    countries, we did not assess U.S.  import customs clearance
    processes.

    We did not verify data provided by USPS or the carriers.  USPS
    provided data on the number of GPL parcels shipped to Canada, Japan,
    and the United Kingdom in 1997; the number of which were dutiable;
    and their average weight and value.  USPS also provided documentation
    on the payment of duties and taxes in Canada and the United Kingdom
    for GPL parcels in 1997.  The carriers provided 1997 data on their
    costs of complying with requirements for shipping parcels from the
    United States to Canada, Japan, and the United Kingdom.  In addition,
    the carriers provided data on the number of parcels that they sent to
    those three countries, as well as average parcel weight and value in
    1997.

    We requested comments on a draft of this report from USPS, the
    Department of the Treasury and U.S.  Customs Service; the governments
    of Canada, Japan, and the United Kingdom; ACCA; DHL; FedEx; and UPS.
    We received written comments from three organizations--ACCA, USPS,
    and Revenue Canada; Treasury and U.S.  Customs chose not to provide
    comments.  The private express carriers chose to submit their
    comments together through ACCA's written comments.  The written
    comments are reprinted in appendixes VI through VIII.  A summary of
    the comments and our response are provided at the ends of chapters 2
    and 3.  The customs services of Canada, Japan, and the United Kingdom
    provided technical comments, which are incorporated throughout the
    report where appropriate.  We did our work primarily in Washington,
    D.C., Japan, and the United Kingdom, as well as other locations
    identified in this chapter, from August 1997 through May 1998, in
    accordance with generally accepted government auditing standards.

    --------------------
    \16 See GAO's report U.S.  Postal Service:  Unresolved Issues in the
    International Mail Market (GAO/GGD-96-51, Mar.  11, 1996).

    \17 These requirements pertained only to shipments of low-value items
    not requiring formal customs entry.  Formal customs entry is required
    in the United States on imports valued at more than $1,250; in
    Canada, more than $1,600 Canadian (about $1,142 U.S.); in Japan, more
    than 100,000 (about $800 U.S.); and in the United Kingdom, more than
    2,000 (about $3,333 U.S.).

    DIFFERENCES IN CUSTOMS TREATMENT
    FOR GPL AND PRIVATE EXPRESS
    CARRIER PARCELS SHIPPED TO CANADA,
    JAPAN, AND THE UNITED KINGDOM
    ============================================================ Chapter 2

    Legal differences in foreign customs treatment of postal and private
    express parcels existed in all three countries.  Differences in
    foreign customs treatment of GPL and private express parcels were
    greatest in Japan, where private express carriers were subject to
    requirements regarding the preparation of shipping documentation and
    payment of duties and taxes for their parcels that did not apply to
    GPL parcels.  In the United Kingdom, USPS was providing certain
    shipping data to the customs service on GPL parcels that were similar
    to the information that the carriers were required to provide.
    However, differences remained in the requirements applicable to
    importing postal and private express parcels into the United Kingdom.
    In Canada, GPL and private express parcels were subject to the same
    requirements because GPL parcels were being delivered for USPS by a
    private express carrier there.

    Regarding two major areas of concern to the carriers, we found no
    evidence that GPL parcels received preferential treatment over
    private express parcels in terms of (1) the speed of customs
    clearance in all three countries and (2) the assessment and
    collection of applicable duties and taxes in Canada and the United
    Kingdom.  On behalf of individual importers, USPS was paying duties
    and taxes on GPL parcels shipped to Canada and the United Kingdom.
    We were unable to determine whether duties and taxes were assessed on
    dutiable GPL parcels shipped to Japan because (1) USPS did not have
    records on payment of duties and taxes on GPL parcels shipped to
    Japan, because the recipients of postal parcels in Japan are
    responsible for paying applicable duties and taxes; and (2) Japan
    Customs did not provide statistics on the amount of duties and taxes
    that recipients paid on GPL parcels.

    The delivery and customs clearance processes for GPL and private
    express parcels in Canada, Japan, and the United Kingdom were based
    primarily on the domestic import requirements applicable to mail and
    goods imported by private carriers in those countries.  U.S.  law
    subjected private express parcels to customs inspection prior to
    export, but outbound postal parcels were not subject to this
    requirement.  Private express carriers must file manifests\1

    on outbound parcels with U.S.  Customs, which the agency uses to
    select certain parcels for inspection.\2

    We found that the private express carriers followed similar delivery
    processes for shipments from the United States to the three countries
    in our review.  Generally, the laws of the importing countries
    required the carriers to provide detailed data and supporting
    documentation on their shipments, such as air waybills, manifests,
    harmonized tariff codes, and invoices.  The carriers were also
    responsible for paying applicable duties and taxes on their imported
    parcels.  However, USPS' delivery and customs clearance processes for
    GPL parcels differed among the three countries.  The differences
    reflected USPS' use of different types of GPL delivery agents, which
    were subject to different sets of requirements within the three
    countries.  In Japan and the United Kingdom, GPL parcels were
    delivered by those countries' postal services and were treated as
    mail under their customs laws.\3 In Canada, GPL parcels were
    delivered by a private express company and were thus subject to
    Canadian customs laws that applied to private carriers for importing
    goods.  The importing requirements for postal and private express
    parcels in the three countries are detailed in appendices III through
    V.

    Different foreign legal requirements also affected how USPS handled
    GPL parcels being shipped from the United States to Canada, Japan,
    and the United Kingdom.  In Japan, for example, USPS was only
    required to affix GPL parcels with labels containing basic customs
    declaration information as prescribed by UPU; the labels were
    generated by USPS' automated data information system, CPAS.  Further,
    USPS was not required to calculate or pay duties and taxes on GPL
    parcels shipped to Japan because, under Japanese law, duties and
    taxes on postal parcels were calculated by Japan Customs and paid by
    the parcel recipients.  By contrast, in the United Kingdom, USPS was
    providing customs information similar to that provided by private
    express carriers as well as calculating and paying duties and taxes
    owed on GPL parcels.  In providing comments on a draft of this
    report, Japan Customs said that it was planning to introduce an
    import information system in cooperation with USPS similar to that
    used in the United Kingdom.  In Canada, where GPL parcels were being
    delivered by a private express carrier and cleared through customs by
    a broker, USPS was providing customs information similar to that
    required from private express carriers, in addition to calculating
    and paying duties and taxes.\4

    We reviewed the applicability of customs requirements to private
    express and GPL parcels shipped from the United States to Canada,
    Japan, and the United Kingdom by interviewing customs officials and
    reviewing the relevant laws and regulations.  In the process, we
    identified 11 major categories of requirements that potentially
    differed between the carriers and postal services.  The 11
    categories, only the first of which involved U.S.  law, included (1)
    U.S.  Customs inspection of outbound parcels, (2) preparation of
    import shipping documentation, (3) electronic submission of shipping
    data, (4) use of licensed customs brokers, (5) calculation of duties
    and taxes, (6) the timing of payment of duties and taxes, (7) payment
    for customs clearance outside of regular business hours, (8) posting
    of bonds or other security to customs services for storage
    facilities, (9) retention of shipping records, (10) liability for
    importation of restricted or prohibited parcel contents, and (11)
    liability for incorrect or missing customs declarations.

    Table 2.1 summarizes our findings regarding the requirements and
    practices in shipping GPL and private express parcels to Canada,
    Japan, and the United Kingdom in the 11 major categories.

                                        Table 2.1

                         Comparison of Requirements and Practices
                         for Shipping Parcels to GPL Destination
                                        Countries

                                          GPL destination countries
    --------------------  ----------------------------------------------------------
                                Canada              Japan           United Kingdom
                          ------------------  ------------------  ------------------
    Requirements/                    Private             Private             Private
    practices                GPL\a   carrier       GPL   carrier       GPL   carrier
    --------------------  ========  ========  ========  ========  ========  ========
    Outbound inspection
     of shipments:
     Outbound parcels
     are subject to
     inspection by U.S.
     Customs before
     departing the
     United States.\\b
    Import shipping
     documentation:
     A manifest or list
     of goods must be
     presented to
     foreign customs
     services for import
     clearance.
    Entering shipping                                                    \
     data into foreign
     customs services'
     computers:
     Importer/broker
     must enter shipping
     data into foreign
     customs' computer
     systems for entry.
    Use of licensed
     customs brokers:
     Importer must use
     licensed customs
     brokers to submit
     shipping
     documentation.
    Calculation of                                         \c                  \d
     duties and taxes:
     Importer/broker
     must calculate
     duties and taxes to
     be verified by
     foreign customs
     services.
    Timing of payment of                          \e
     duties and taxes:
     Duties and taxes
     must be paid or
     secured prior to
     Customs' release of
     shipment to
     delivery agent.\
    Customs service                                                 \f
     charges:
     Importer/broker
     must pay for
     customs clearance
     outside of regular
     business hours.
    Posting of bonds or
     security:
     Importer/broker
     must post bonds or
     provide other
     security to customs
     services for
     storage facilities.
    Shipping records
     retention:
     Importer/broker
     must maintain
     shipping records on
     parcels for 3 to 7
     years.
    Liability for parcel
     contents:
     Importer/broker is
     subject to
     liabilities for
     restricted or
     prohibited contents
     contained in
     parcels.
    Liability for
     incorrect or
     missing
     declarations:
     Importer/broker is
     subject to
     liabilities for
     fines for incorrect
     or missing customs
     declarations.
    --------------------------------------------------------------------------------
    Legend:

     Required/Applicable
    Practice

    \a GPL parcels were imported into and delivered within Canada by a
    private express carrier and were therefore required to meet the same
    customs requirements as were imports by private carriers.

    \b USPS officials noted that the Postal Inspection Service inspects
    some outgoing international parcels prior to export using search
    warrants.

    \c In practice, duties and taxes are in most cases calculated by
    Japan Customs' computer system, the Nippon Automated Cargo Clearance
    System (NACCS), on the basis of data entered by the importer/brokers.

    \d In the United Kingdom, most duties and taxes are calculated by
    H.M.  Customs' computer system, the Customs Handling of Import and
    Export Freight (CHIEF), on the basis of data provided by the
    carriers.

    \e In Japan, recipients of postal parcels are not to receive parcels
    until the duties and taxes are paid.

    \f H.M.  Customs officials said that although Parcelforce would be
    liable for customs clearance outside of regular business hours,
    customs clearance for GPL parcels is normally done during regular
    business hours.

    Source:  GAO analysis of information from customs and postal
    officials, laws, and regulations in Canada, Japan, the United
    Kingdom, and the United States.

    --------------------
    \1 As indicated in 19 C.F.R.  122.75, the manifests for goods
    transported by aircraft generally must list all cargo and, for each
    item, show the air waybill number or marks and numbers on the
    packages and identify the type of goods.

    \2 Carriers routinely screen and inspect some of their parcels for
    contraband before they are presented to U.S.  Customs for inspection.

    \3 Oversize GPL parcels were delivered by a private express carrier
    for USPS in Japan.

    \4 In Canada, private express carriers are not required to provide
    international air waybills on U.S.  imports.  Further, invoices are
    not required to be provided on imports with values less than $1,600
    (Canadian) under the low-value shipment program (see p.  98).

       DIFFERENCES IN CUSTOMS
       TREATMENT FOR GPL AND PRIVATE
       EXPRESS PARCELS SHIPPED TO
       JAPAN
    ---------------------------------------------------------- Chapter 2:1

    Customs treatment of GPL and private express parcels shipped from the
    United States to Japan was determined largely by Japanese law, which
    prescribed different sets of requirements for postal and private
    express parcels.  Under Japanese law, postal parcels were exempt from
    the major requirements that applied to private express parcels.  Also
    affecting customs treatment were the carriers' different valuations
    of certain imported goods, which provided the basis for determining
    the amount of duties and taxes owed.

          DIFFERENCES IN CUSTOMS
          REQUIREMENTS AND PROCESSES
          FOR GPL AND PRIVATE EXPRESS
          PARCELS SHIPPED TO JAPAN
    -------------------------------------------------------- Chapter 2:1.1

    Private express carriers or their brokers were subject to
    significantly more requirements than were USPS and the Japan Postal
    Bureau in shipping their parcels from the United States to Japan.
    U.S.  law subjected private express parcels to customs inspection
    prior to export, but outbound postal parcels were not subject to this
    requirement.  Under Japanese law, the carriers or their brokers were
    required to provide detailed shipping documentation, calculate duties
    and taxes, pay or secure payment of duties and taxes before Customs'
    release to the delivery agent, and retain shipping records.  In
    addition, the carriers or their brokers could be liable for fines and
    penalties regarding the importation of restricted or prohibited
    parcel contents and for incorrect or missing customs declarations.
    They also paid for customs clearance outside of regular business
    hours to expedite parcel clearance.  Although not required to by law,
    the carriers entered most of their import shipping data into Japan
    Customs' computer system.  By contrast, USPS and the Japan Postal
    Bureau were not subject to these requirements and practices with
    regard to GPL parcels, with the exception of the postal services'
    potential liability for restricted or prohibited parcel contents.

    In shipping parcels from the United States to Japan, USPS and the
    private express carriers followed different delivery and customs
    clearance processes.  A major process difference involved the
    delivery agents used by USPS and the carriers in Japan.  USPS paid
    the Japan Postal Bureau to deliver GPL parcels within Japan.  In
    comparison, employees of the three major private express carriers, or
    their Japanese business partners, delivered their parcels from the
    United States to recipients within Japan.  Further, although private
    express parcels were typically cleared at airport facilities, customs
    clearance at the Japan Postal Bureau facility that received the most
    GPL parcels was located in downtown Tokyo, about 2 hours from the New
    Tokyo International (Narita) Airport, where the parcels arrived from
    the United States.

    Differences in the delivery and customs clearance processes for GPL
    and private express parcels reflected different sets of requirements
    contained in Japanese law applicable to postal and private express
    parcels.  Appendix III summarizes the Japanese laws and regulations
    that provide the basis for the different requirements.  Figures 2.1
    through 2.2 show the preparation, delivery, and customs clearance
    processes for GPL and private express parcels to Japan.

       Figure 2.1:  Preparation of GPL
       and Private Express Carrier
       Parcels Prior to Export From
       the United States to Japan

       (See figure in printed
       edition.)

       (See figure in printed
       edition.)

    Source:  GAO analysis of information from the U.S.  Customs Service,
    USPS, DHL, FedEx, and UPS.

       Figure 2.2:  GPL and Private
       Express Carrier Parcel Delivery
       and Customs Clearance in Japan

       (See figure in printed
       edition.)

       (See figure in printed
       edition.)

    Source:  GAO analysis of information from Japan Customs, Japan Postal
    Bureau, USPS, DHL, FedEx, and UPS.

    A comparison of the delivery processes for postal and private express
    parcels in Japan illustrates the differences in the roles of brokers,
    who handled customs clearance for the carriers; and of the Japan
    Postal Bureau, which presented GPL parcels to the Japan Customs
    Bureau for customs clearance (see GPL steps 9 through 17 and carrier
    steps 12 through 19 of fig.  2.2).\5 The carriers were not required
    by law in Japan to use licensed customs brokers.  However, in
    practice, the carriers believed it was necessary to use brokers to
    comply with the requirements for preparing the information needed for
    customs clearance, including air waybills, manifests, harmonized
    tariff codes, and invoices.  Japanese law did not allow the Postal
    Bureau to act as a licensed broker.  Further, Japanese law exempted
    the Postal Bureau from submitting documentation on its imported mail
    that the private carriers were required to provide.\6

    Under Japanese law, the carriers, on behalf of individual importers,
    were required to pay or secure payment of duties and taxes on
    imported parcels before Customs' release to the delivery agent.\7 In
    comparison, Japanese law exempted postal parcels from the requirement
    that importers pay duties and taxes before customs clearance.
    However, recipients of postal parcels were required to pay duties and
    taxes upon delivery at their doors or at the post office before
    receiving their parcels from the Postal Bureau (see step 16 of fig.
    2.2 for both GPL and carriers).  In addition, recipients of dutiable
    GPL parcels were charged a 200-yen fee\8 by the Japan Postal Bureau
    when it collected applicable duties and taxes, but recipients of
    private express parcels were not subject to this fee.  According to
    Japan Customs officials, the basis for charging recipients of
    dutiable postal parcels a 200-yen fee is contained in provisions of
    the Universal Postal Convention and the International Postal Rules.\9

    The carriers' brokers in Japan were not required by law to enter
    parcel data into the Nippon Automated Cargo Clearance System (NACCS),
    Japan Customs' computerized customs clearance system (step 12 of fig.
    2.2 for carriers).  However, to speed customs clearance, the three
    carriers said they entered between 70 percent to 100 percent of their
    import data into NACCS, which automatically calculated duties and
    taxes.  With respect to GPL parcels, Japanese law did not require
    submission of postal data into NACCS.  Instead, Japan Customs
    employees entered data on dutiable postal parcels (values and tariff
    codes) into a separate computer system called the Customs Overseas
    Mail Tax Information System (COMTIS), which determined the duties and
    taxes.

    Brokers were required to hold the carriers' goods in facilities under
    the control of or approved by Japan Customs before customs clearance,
    but they were not required to post bonds in connection with those
    facilities (step 13 of fig.  2.2 for carriers).  GPL parcels were
    held in postal facilities for customs clearance (step 10 of fig.  2.2
    for GPL), and Japan Post was not required to post bonds to secure the
    parcels.

    Japanese law also required private carriers' brokers to pay for
    customs clearance outside of regular business hours.\10 The carriers
    indicated that charges for customs clearance outside of regular
    business hours were often incurred because of limits on the number of
    shipments that could be cleared within an hour in Japan.  Japan
    Customs officials said that GPL parcels were not cleared outside of
    regular business hours.  Further, Japanese law did not subject the
    Japan Postal Bureau to payment for customs clearance of mail outside
    of regular business hours.

    In addition, under Japanese law, carriers' brokers were subject to a
    requirement to maintain customs clearance records on their parcels
    for 3 years.  No similar provision of law applied to records of
    postal items.

    According to Japan Customs, Japanese law imposes fines and penalties
    against any persons, whether postal services or private carriers, for
    importing prohibited goods if they are knowledgeable about the
    illegal parcel contents.

    A Japanese law implemented in October 1997 subjected importers in
    Japan to an additional 10- to 15-percent tax for filing an incorrect
    customs declaration, or failing to file one, without a proper reason.
    This law did not apply to the postal services.

    --------------------
    \5 The private express carrier that delivered oversize GPL parcels to
    Japan used a broker for customs clearance.

    \6 Japan Customs did require that postal parcels be affixed with a
    customs declaration label containing information about contents and
    value, as prescribed under UPU.  However, postal parcels were not
    required to be shipped with harmonized tariff codes.  The Japan
    Postal Bureau also required USPS to provide it with information
    concerning the number of GPL parcels contained in a shipment.

    \7 Japan Customs deducted duties and other import-related taxes from
    the carriers' bank accounts established for that purpose when the
    carriers operate as customs brokers.  Customs also periodically bills
    the carriers for customs inspections outside of regular business
    hours.

    \8 About $1.60, assuming that $1=125.

    \9 Article 32 of the Universal Postal Convention and Article 85 of
    the International Postal Rules.

    \10 Regulations implementing this law require that outside of regular
    business hours on weekdays or at other times during weekends and
    holidays, a fee of 7,800 (about $62 at an exchange rate of 125 per
    dollar) per hour per customs official is charged from 10 p.m.  to 5
    a.m., and 7,400 (about $59) per hour per customs official from 5
    a.m.  to 10 p.m.

          DIFFERENCES IN OPERATIONAL
          PRACTICES AND PROCESSES FOR
          SHIPPING GPL AND PRIVATE
          EXPRESS PARCELS TO JAPAN
    -------------------------------------------------------- Chapter 2:1.2

    Japan Customs is responsible for calculating duties and taxes on
    imported postal parcels, including GPL parcels.  On the other hand,
    private carriers or their brokers must calculate duties and taxes on
    their imported parcels based on applicable law.  These calculations
    of duties and taxes by the carriers are later verified by Japan
    Customs.  The carriers indicated that because they or their brokers
    calculated duties and taxes on parcels imported into Japan, their
    records prove they pay 100 percent of applicable duties and taxes.
    The carriers were concerned that they have lost direct marketers as
    customers because of a perception that duties and taxes were not
    always assessed on dutiable postal parcels in Japan.

    Japan Customs officials, however, said that GPL and private express
    parcels received the same customs treatment.  In addition, the
    officials said that duties and taxes were being assessed on all
    dutiable parcels from the United States.  In providing comments on a
    draft of this report, Japan Customs emphasized that postal parcels,
    including GPL parcels, were subject to full inspection.  We were
    unable to determine whether duties and taxes were assessed on
    dutiable GPL parcels shipped to Japan because (1) USPS did not have
    records on payment of duties and taxes on GPL parcels shipped to
    Japan, because the recipients of postal parcels in Japan are
    responsible for paying applicable duties and taxes; and (2) Japan
    Customs did not provide statistics on the amount of duties and taxes
    that recipients paid on GPL parcels.

    On the basis of information provided by USPS and Japan Customs and
    our observations, we found no evidence that GPL parcels received
    preferential treatment over private express parcels with respect to
    the speed of customs clearance.  However, because of different
    valuations of imported goods by private carriers or their brokers in
    Japan, differences existed in the amounts of duties and taxes paid on
    some postal and private express parcels.  Finally, we were unable to
    determine the significance of USPS' sorting GPL parcels destined for
    Japan by value--a practice that we observed at USPS' GPL facility at
    John F.  Kennedy International Airport in New York.

             ASSESSMENT AND COLLECTION
             OF DUTIES AND TAXES
    ------------------------------------------------------ Chapter 2:1.2.1

    Japan Customs indicated that it collected 1.1 trillion yen in customs
    duties and 2.1 trillion yen in internal consumption taxes in 1996,\11
    but it did not maintain specific statistics reflecting the amount of
    duties collected on GPL parcels or the number of dutiable parcels.
    USPS data indicated that about 44 percent of the GPL parcels shipped
    to Japan in 1997 would have been dutiable.\12 During our tour of the
    International Post Office in Tokyo, where many GPL parcels are
    processed, we observed Japan Customs officials inspecting and
    assessing duties on some GPL parcels.

    Japanese law allowed imported goods to be valued at their wholesale,
    rather than retail, values if the goods were deemed to be for the
    personal use of the importer or were a gift to a person who is a
    resident in Japan and the goods were deemed to be for the personal
    use of the recipient of the gift.\13 In assessing the customs value
    of goods, Japan Customs officials said that imported parcels from
    direct marketers that are addressed to an individual, in many cases,
    qualified as goods deemed to be for the importers' personal use and
    could be valued at their wholesale, rather than retail, values.  The
    officials said that the government's objective in assessing duties
    and taxes on mail-order goods based on their wholesale values was to
    benefit Japanese consumers.

    Japan Customs officials said wholesale valuations could be applied
    for both GPL and private express parcels containing goods from direct
    marketers for the recipients' personal use, and they applied a
    standard 60-percent valuation of GPL parcels' retail value to
    calculate wholesale values.  Japan Customs officials said that their
    formula for calculating the wholesale value of mail-order goods was
    not a written policy, regulation, or law.  The officials said that
    this formula for calculating the wholesale values of goods from
    direct marketers was based on their review of catalogs from
    mail-order companies that sell similar goods.  In addition, the
    officials said that if the information was not available, the
    carriers or their brokers could consult with them to calculate the
    wholesale value using standard profit margins.

    Japan Customs officials said that because most, if not all, GPL
    parcels are shipped by direct marketers, after inspection they
    considered GPL parcels to be for personal use and assessed duties and
    taxes on them on the basis of their wholesale values.  With regard to
    private express parcels, we found that the carriers were valuing
    certain imported goods differently, which could affect the amount of
    duties and taxes owed on their imported parcels.  Of the three major
    private express carriers we contacted for this study, one carrier
    indicated that it was calculating duties and taxes on only imported
    mail-order goods on the basis of wholesale values of the goods.
    Another said that it was using wholesale valuations for both imported
    mail-order goods and gifts.  The third carrier was not using
    wholesale valuations for any of its imported goods as a basis for
    calculating duties and taxes.

    The carriers' valuation of imported goods was important because their
    parcel values provided the basis for calculating duties and taxes;
    however, Japan Customs assessed the value and calculated duties and
    taxes on postal parcels.  The carriers indicated that Japan Customs
    rarely, if ever, adjusted the carriers' calculations of duties and
    taxes to reflect the wholesale values of imported goods.  In
    providing comments on a draft of this report, Japan Customs indicated
    that under the carriers' "self-assessment" system, private express
    parcels were exempt from full inspection.  Further, Japan Customs
    indicated that under the self-assessment system, the carriers' import
    declarations were considered to be correct and would be adjusted only
    at the time of inspection.

    --------------------
    \11 About $8.8 billion and $16.8 billion, respectively, at an
    exchange rate of 125 per dollar.

    \12 USPS assumed that the dutiable de minimis (the value threshold at
    which imported goods are subject to duties and taxes) for GPL parcels
    in Japan was $100 in 1997.  The dutiable de minimis in Japan is
    10,000, the equivalent of about $80 at an exchange rate of 125 per
    dollar.

    \13 Art.  4-6 of Japanese Customs Tariff Law, Law No.  54, April 15,
    1910, as last amended by Law No.  5, March 26, 1997.

             SPEED OF CUSTOMS
             CLEARANCE
    ------------------------------------------------------ Chapter 2:1.2.2

    We found no evidence that GPL parcels received preferential treatment
    by Japan Customs in terms of the speed of clearance.  Indeed, it
    appeared that private express parcels were cleared significantly
    faster than were GPL parcels.  According to Japan Customs, private
    express parcels were normally cleared in Japan within 2 hours.  They
    also said that carriers' import requirements made it possible to
    clear private express parcels at the fastest possible speed.  The
    carriers reported that customs clearance in Japan generally took
    between 2 and 5 hours for their parcels not held for inspection.
    Japan Customs officials said that it did not maintain records on
    customs clearance times for GPL parcels, but they also said that most
    GPL parcels were released to the Postal Bureau within the same day
    that they were received.\14 Data provided by USPS indicated that in
    1997, clearance of GPL parcels in Japan took an average of 2.17 days.

    --------------------
    \14 USPS officials said that customs clearance for dutiable GPL
    parcels took longer than 1 day--sometimes up to 2 weeks--during the
    Christmas season, but that Japan Customs had agreed to provide extra
    resources to clear them.

             USPS SORTING GPL PARCELS
             BY VALUE
    ------------------------------------------------------ Chapter 2:1.2.3

    During a tour of USPS' GPL facility at John F.  Kennedy International
    Airport in New York, where GPL parcels are prepared for shipment to
    Japan, we observed USPS employees sorting GPL parcels into two
    categories:  those with a value of $300 or less and those with a
    value of more than $300.  USPS officials said that they were sorting
    the parcels by value at the request of Japan Post on behalf of Japan
    Customs, but Japan Customs officials said that they had not requested
    USPS to do so.  In commenting on a draft of this report, Japan
    Customs indicated that it had requested USPS to sort the parcels by
    destination, but not by value.  If GPL parcels arrived in Japan
    sorted into those less than and those more than $300 in value, they
    would not, however, be separated into those that were dutiable and
    nondutiable.  At an exchange rate of about 125 yen per dollar, the
    dutiable threshold for GPL parcels would be $133, on the basis of
    their wholesale valuation.\15 We were unable to determine the
    significance of this sorting practice.\16

    --------------------
    \15 10,000 (dutiable de minimis)/.6 (wholesale valuation)=16,666,
    or about $133.

    \16 The carriers have suggested that in practice, the dutiable de
    minimis for postal parcels in Japan is 30,000, or about $240, and
    that they would like to be subject to the same de minimis for their
    imported parcels.

       DIFFERENCES IN CUSTOMS
       TREATMENT FOR GPL AND PRIVATE
       EXPRESS PARCELS SHIPPED TO THE
       UNITED KINGDOM
    ---------------------------------------------------------- Chapter 2:2

    The customs treatment of GPL and private express parcels being
    shipped from the United States to the United Kingdom was governed
    primarily by legal requirements applicable in the United Kingdom,
    which included U.K.  and European Union (EU) laws and regulations.
    USPS' provision of certain shipping data to the customs service in
    the United Kingdom on GPL parcels, although not required by law,
    served to lessen the extent of operational differences in the
    treatment of postal and private express parcels in the United
    Kingdom.  However, differences remained in the requirements
    applicable to imported postal and private express parcels.

          DIFFERENCES IN REQUIREMENTS
          AND PROCESSES FOR GPL AND
          PRIVATE EXPRESS PARCELS
          SHIPPED TO THE UNITED
          KINGDOM
    -------------------------------------------------------- Chapter 2:2.1

    As in Japan, private express carriers in the United Kingdom were
    subject to requirements that did not apply to postal services.  In
    the United Kingdom, carriers or their brokers were required to pay or
    secure duties and taxes before customs clearance, provide security to
    the customs service for storage facilities, and retain shipping
    records.  They also paid for customs clearance outside of regular
    business hours to expedite parcel clearance.  By contrast, USPS and
    its delivery agent for GPL parcels in the United Kingdom were not
    required to pay or secure duties and taxes before customs clearance,
    post bonds or other security to the customs service for storage
    facilities, or retain shipping records, and did not normally have GPL
    parcels cleared outside of regular business hours.  Both the carriers
    and the postal service in the United Kingdom were subject to
    liabilities for illegal parcels contents and for incorrect or missing
    customs declarations.\17

    USPS was providing electronic shipping data on GPL parcels to its
    delivery agent in the United Kingdom for access by Her Majesty's
    Customs and Excise (H.M.  Customs) officials.  The content of USPS'
    shipping data on GPL parcels was similar to that provided to H.M.
    Customs by the carriers on their parcels.\18 Further, USPS was paying
    duties and taxes on GPL parcels shipped to the United Kingdom.  USPS
    officials said that they offered to follow these procedures in
    establishing GPL service to the United Kingdom.

    USPS and the private express carriers followed different processes
    for delivering parcels from the United States to the United Kingdom,
    reflecting the use of different delivery agents.  Within the United
    Kingdom, USPS paid Parcelforce, a for-profit subsidiary of Royal
    Mail, the United Kingdom's postal service, to deliver GPL parcels.
    By contrast, employees of the three major private express carriers
    delivered their parcels or contracted with local delivery companies
    within the United Kingdom.

    Differences in the delivery and customs processes for GPL and private
    express parcels to the United Kingdom reflected different sets of
    requirements contained in EU and U.K.  laws and regulations
    applicable to postal and private express carriers.  Appendix IV
    summarizes these laws and regulations.  Figures 2.3 and 2.4 show the
    preparation and delivery and customs clearance processes for GPL and
    private express parcels shipped to the United Kingdom.

       Figure 2.3:  Preparation of GPL
       and Private Express Carrier
       Parcels Prior to Export From
       the United States to the United
       Kingdom

       (See figure in printed
       edition.)

       (See figure in printed
       edition.)

    Source:  GAO analysis of information from the U.S.  Customs Service,
    USPS, DHL, FedEx, and UPS.

       Figure 2.4:  GPL and Private
       Express Carrier Parcel Delivery
       and Customs Clearance in the
       United Kingdom

       (See figure in printed
       edition.)

       (See figure in printed
       edition.)

    Source:  GAO analysis of information from USPS, H.M.  Customs,
    Parcelforce, DHL, FedEx, and UPS.

    Although not required by law, USPS was providing data electronically
    to Parcelforce about GPL parcels being shipped from the United States
    to the United Kingdom.  These data, which were accessible by H.M.
    Customs from Parcelforce, included the parcel contents, values,
    harmonized tariff codes, and an initial calculation of duties and
    taxes owed on GPL parcels.\19 The carriers were required to provide
    some additional documentation on their parcel shipments, including
    air waybills and invoices, that USPS and Parcelforce were not
    required to provide.

    To speed customs clearance, the carriers entered most parcel data
    into the computer systems of H.M.  Customs, although they were not
    required to do so.  The private carriers' data were provided
    initially to a system called Direct Trader Input (DTI)\20 for
    reformatting and retransmitting to H.M.  Customs' computer system,
    the Customs Handling of Import and Export Freight (CHIEF), which
    processed entry data.  Parcelforce was not required to submit data on
    imported mail, including GPL parcels, to DTI or CHIEF.

    Although not required by law, Parcelforce was paying duties and taxes
    on GPL parcels, rather than collecting payment from the recipients at
    the door or post office, as is the practice with other dutiable
    postal parcels.\21 Parcelforce billed USPS for the duties and taxes,
    and USPS collected those amounts from GPL customers.  H.M.  Customs
    billed Parcelforce monthly for duties and taxes incurred on GPL
    parcels.  The private carriers were required to pay or secure duties
    and taxes before customs clearance.  However, H.M.  Customs officials
    said that in practice, most importers or their brokers have a
    deferment account, which allows duties to be paid by the 15th day of
    the following month in which the goods were imported.  Further, in
    April 1997, the United Kingdom initiated a pilot program to simplify
    customs clearance procedures for some types of private express
    shipments, as permitted under EU law.  Under these procedures,
    carriers have up to a month after the goods have been imported to pay
    duties and taxes.  DHL, FedEx, and UPS were participating in this
    pilot program.

    Until the goods are cleared, H.M.  Customs may require the carriers
    to provide security over any facility that has been approved for
    temporary storage.  Parcelforce was not required to provide security
    for goods before customs clearance on GPL parcels, which were held in
    postal facilities until customs clearance.

    Carriers were also required to maintain shipping documentation for at
    least 3 years and up to 4 years.  Although Parcelforce was not
    required by law to maintain records on GPL parcels, Parcelforce
    officials said they planned to keep records on GPL shipments for 5
    years.

    Differences in Operational Practices and Processes for Shipping GPL
    and Private Express Parcels to the United Kingdom

    USPS officials said that as a result of its electronic submission of
    shipping data to H.M.  Customs, which included the values and
    contents of GPL parcels, as well as applicable duties and taxes, all
    duties and taxes were being paid on dutiable GPL parcels being
    shipped to the United Kingdom.  USPS officials provided data
    indicating that over 90 percent of the GPL parcels shipped from the
    United States to the United Kingdom in 1997 were dutiable.\22 In
    addition, USPS provided documentation indicating that it paid duties
    and taxes on GPL parcels shipped to the United Kingdom in 1997.

    The only apparent difference in customs treatment of postal and
    private express parcels in the United Kingdom related to the speed of
    customs clearance.  USPS did not have exact data indicating how long
    customs clearance took in the United Kingdom, but USPS officials said
    that GPL parcels were normally cleared within the same day that they
    arrived in the United Kingdom.  An H.M.  Customs official said that
    private express parcels were cleared, on average, in 2 hours.
    However, the carriers said that under new simplified procedures,
    customs clearance occurred immediately upon arrival for certain
    imported goods.

    --------------------
    \17 H.M.  Customs said that postal personnel could be held liable for
    illegal parcel contents in appropriate circumstances.  Further, they
    said that the law governing incorrect and missing customs
    declarations could also apply to postal personnel.

    \18 USPS was not providing invoices to H.M.  Customs on GPL parcels.
    USPS officials said that the list provided to H.M.  Customs included
    information about parcel contents and values, which constituted an
    invoice.

    \19 Parcelforce officials referred to USPS' data as a "list,"
    compared to the carriers' "manifest" regarding their shipments.

    \20 DTI is an interface between carrier/broker (trade) systems and
    CHIEF.  The DTI system also maintains a central database that
    contains records of all expected/actual arrivals, which fulfills a
    legal requirement to report the landing of goods and their location
    to Customs.  When an entry is sent via DTI, it is matched with the
    inventory record.

    \21 Under EU law, all parcels imported from outside the EU that were
    more than 22 European Currency Units (ECUs) in value, about 18, or
    about $30 ($1=.6), were subject to duty and taxes.  Parcels that
    were gifts valued at less than 45 ECUs, or about 36, were duty-free.

    \22 USPS assumed that the dutiable de minimis for GPL parcels in the
    United Kingdom was about $25 in 1997.

       DIFFERENCES IN CUSTOMS
       TREATMENT FOR GPL AND PRIVATE
       EXPRESS PARCELS SHIPPED TO
       CANADA
    ---------------------------------------------------------- Chapter 2:3

    The treatment of GPL and private express parcels being shipped from
    the United States to Canada was determined by Canadian law applicable
    to imports of goods by private carriers into Canada.  Although
    Canadian law prescribed different sets of requirements for postal and
    private express carrier parcels, USPS chose to have its GPL parcels
    delivered by a private express carrier in Canada.  According to
    Revenue Canada, GPL parcels were therefore treated as goods imported
    by private express carriers.

          DIFFERENCES IN REQUIREMENTS
          AND PROCESSES FOR GPL AND
          PRIVATE EXPRESS PARCELS
          SHIPPED TO CANADA
    -------------------------------------------------------- Chapter 2:3.1

    Although GPL parcels shipped from the United States to Canada
    originated as mail in the United States, they were treated as private
    express parcels in Canada and were subject to the same requirements.
    These requirements included the preparation of shipping
    documentation, calculation of duties and taxes, posting of security
    for storage facilities, retention of shipping records, payment for
    customs clearance outside of regular business hours, and potential
    liability for restricted or prohibited parcel contents and for
    incorrect or missing customs declarations.  Appendix V summarizes the
    Canadian laws and regulations that provide the basis for the
    requirements.

    Figures 2.5 and 2.6 show the preparation, delivery, and customs
    clearance processes for GPL and private express parcels to Canada.

       Figure 2.5:  Preparation of GPL
       and Private Express Carrier
       Parcels Prior to Export From
       the United States to Canada

       (See figure in printed
       edition.)

       (See figure in printed
       edition.)

    Source:  GAO analysis of information from the U.S.  Customs Service,
    USPS, DHL, FedEx, and UPS.

       Figure 2.6:  GPL and Private
       Express Carrier Parcel Delivery
       and Customs Clearance in Canada

       (See figure in printed
       edition.)

       (See figure in printed
       edition.)

    Source:  GAO analysis of information from USPS, Revenue Canada,
    Purolator, DHL, FedEx, and UPS.

    According to Purolator,\23 the private express company that delivered
    GPL parcels for USPS in Canada, the only difference in the process
    between GPL and its other parcels was in the level of automated
    shipping data provided to Revenue Canada.  Purolator indicated that
    USPS provided GPL data electronically through CPAS, but the carrier's
    other commercial customers provided shipping documentation in both
    electronic and paper format.\24 In addition, Purolator indicated that
    CPAS provided harmonized tariff codes on GPL parcels, but some of the
    carrier's other commercial customers did not provide the codes,
    requiring the broker to determine them.  Revenue Canada normally
    charges a $5 per parcel fee for Canada Post to collect duties and
    taxes on imported postal parcels, but USPS avoids this fee on GPL
    parcels because they are imported by a private carrier.

    Purolator said that GPL parcels were being cleared through Revenue
    Canada's low-value shipment program, which allowed Purolator's broker
    to pay duties and taxes and provide harmonized codes after customs
    clearance on goods valued at less than $1,600 Canadian as long as
    security for payment was provided.\25 Under this program, Revenue
    Canada used a manifest to clear goods immediately, and Purolator's
    broker could pay duties and taxes later.\26 USPS provided
    documentation indicating that it paid duties and taxes on GPL parcels
    shipped to Canada in 1997.

    According to Revenue Canada, the recipients of imported parcels in
    Canada were subject to liabilities for importation of restricted or
    prohibited contents, and the importers or their brokers were liable
    for missing or incorrect customs declarations.

    --------------------
    \23 Purolator uses Canada Post to complete delivery of some GPL
    parcels in certain areas of Canada.

    \24 Purolator said that its broker in Canada, PBB Global Logistics,
    receives the CPAS data and creates a courier manifest that is
    submitted to Revenue Canada containing the shipper and consignees'
    names and addresses and description of goods, value, country of
    origin, and harmonized tariff codes.

    \25 $1,600 Canadian is worth about $1,143 U.S., assuming that $1 U.S.
    = $1.4 Canadian.

    \26 Under the low-value shipment program, customs declarations can be
    submitted up to the 24th day of the month following the month in
    which the goods were released, and duties and taxes can be paid up to
    the last business day of the month following the month in which the
    goods were released.

          OPERATIONAL PRACTICES AND
          PROCESSES FOR SHIPPING GPL
          AND PRIVATE EXPRESS PARCELS
          TO CANADA
    -------------------------------------------------------- Chapter 2:3.2

    USPS indicated that because it was submitting detailed shipping
    documentation to Revenue Canada, including data on duties and taxes
    owed, all duties and taxes on GPL parcels being shipped to Canada
    were being paid.  According to USPS, over 95 percent of GPL parcels
    shipped to Canada in 1997 were dutiable.\27 Purolator said that
    customs clearance for GPL and private express parcels is the same,
    ranging from 1/2 hour to 3 hours.  USPS did not have data on how much
    time customs clearance took for GPL parcels in Canada.

    --------------------
    \27 USPS assumed that the dutiable de minimis for GPL parcels in
    Canada was about $14 U.S.  in 1997.

       AGENCY COMMENTS
    ---------------------------------------------------------- Chapter 2:4

    The comments we received from USPS, Revenue Canada, and ACCA
    indicated general agreement with the facts presented in the report on
    the differences in the requirements and procedures for customs
    clearance of GPL and private express parcels in the three countries
    in our review.  Revenue Canada said that the report correctly
    described the key features of its processing of GPL parcels.
    Although USPS and ACCA generally agreed with the differences in
    customs requirements and procedures we described, they had different
    interpretations of the differences in requirements and procedures.
    ACCA also believed that the review's limitations should have been
    more carefully explained.

          COMMENTS RELATED TO CUSTOMS
          TREATMENT
    -------------------------------------------------------- Chapter 2:4.1

    In its comments, USPS said the report confirmed that no preferential
    customs arrangements ("sweetheart deals") benefitting the Postal
    Service existed and that USPS enjoys no customs clearance advantage
    over private express parcels.  USPS said that rather than identifying
    sweetheart deals, the report identified different, but not better,
    customs processes for postal parcels, compared to private parcels.
    In addition, USPS said that its competitors' allegations that GPL
    service is fraught with unfair advantages are erroneous.  USPS also
    agreed with the concerns of its customers that they would lose a
    competitive and attractive shipping option if GPL service were made
    unavailable.

    We did not confirm that sweetheart deals did not exist, as USPS
    indicated in its comments.  Instead, we reported that we found no
    evidence that GPL parcels received preferential treatment over
    private express parcels in two specific areas.  However, we did
    observe some unexplained activities such as the sorting of GPL
    parcels bound to Japan by value at USPS' GPL processing center in New
    York.  Neither Japan Customs nor Japan Postal officials acknowledged
    requesting this practice.

    Although ACCA generally agreed with the stated differences in customs
    treatment between GPL and privately transported parcels described in
    the report, it suggested that additional clarification of the
    commercial implications of the differences in customs treatment would
    be helpful, such as the benefits from cost savings traceable to
    differences in customs treatment.  As we noted in the report,
    differences in customs requirements for GPL and private express
    parcels existed; and in some cases, there were additional
    requirements for the private carriers.  However, we did not assess
    the advantages or disadvantages of these differences.

          COMMENTS RELATED TO THE
          SCOPE OF THE REVIEW
    -------------------------------------------------------- Chapter 2:4.2

    ACCA also noted that although the study's focus on only the outbound
    leg of GPL's shipments was too limited and thus would not illuminate
    all aspects of the issue related to whether USPS has an unfair
    competitive advantage in providing international parcel delivery
    service, it was a good place to start.  ACCA raised four areas of
    concern.  First, it noted that the customs treatment of GPL parcels
    may not be entirely representative of all customs treatment of
    international postal shipments.  Second, ACCA said that the report
    did not include customs treatment of parcels entering the United
    States, particularly return merchandise, which ACCA indicated was
    significant in terms of costs and service.  Third, it stated that we
    did not address the extent to which differences in customs treatment
    may result from manipulation of international law by USPS.  Further,
    ACCA noted several points in this chapter that it believed deserved
    additional clarification or research, including (1) the incidence of
    duty collection, (2) a simplified classification system available to
    postal shipments in Japan, (3) private carrier fees for customs
    clearance, and (4) legal requirements for GPL in Canada.

    On the first issue, we were asked by the requester to focus
    specifically on GPL in response to concerns that the private carriers
    had raised regarding GPL.  Thus, we did not review customs procedures
    related to international postal shipments other than GPL parcels, and
    we were not in a position to comment on the relationship between GPL
    shipments and other international postal shipments.

    On the second issue, we asked the foreign customs officials and
    private carriers for information related to merchandise returns, but
    we did not receive enough information to discuss this issue in a
    meaningful way.  Thus, we did not discuss this issue.

    Regarding the third issue, as ACCA indicated, we are currently
    reviewing issues related to U.S.  representation at UPU.  However, we
    do not anticipate the review will address ACCA's assertion that UPU
    customs procedures are the basis for most of the differences in
    customs treatment identified in this report or whether USPS uses its
    position within UPU to manipulate customs law and practices to its
    advantage.

    We also had some scoping limitations related to some of the areas in
    this chapter where ACCA desired additional clarification.  For
    example, the private carriers believed that the incidence of duty
    collection for GPL shipments is "substantially less than 100 percent
    for shipments entering Japan." As we explain in the Objectives,
    Scope, and Methodology section in chapter 1, we did not have audit
    authority to examine the records of foreign governments to verify the
    incidence of duty collection.  We obtained records from USPS
    indicating that it paid duties and taxes on GPL parcels shipped to
    Canada and the United Kingdom, but USPS was not responsible for duty
    payments in Japan.  Further, as explained in chapter 1, we did not
    conduct a limited test of customs treatment in Japan, as suggested by
    ACCA, because of resource and methodological limitations.  From a
    methodological perspective, a limited test would not produce reliable
    results that would be generalizable to the universe of all GPL
    parcels sent from the United States to Japan.

    ACCA also wanted the report to call more attention to the simplified
    classification system in Japan, which it said was available only for
    postal shipments.  We reported the position of Japan Customs
    officials that the simplified classification system applies to both
    postal and private carrier parcels and cited the relevant provision
    of Japanese law.

    ACCA also stated that private carriers pay for customs clearance
    services outside of regular business hours in part because Customs
    authorities generally refuse to provide dedicated staff at private
    carriers' facilities during normal business hours.  We added
    information to this chapter that the carriers indicated that Japan
    Customs limits the number of parcels that can be cleared per hour.
    However, because we were not informed by the carriers during our
    visit to Japan of their concern about insufficient staffing for
    customs clearance, we did not discuss this matter with Japan Customs.

    Finally, ACCA suggested that table 2.1 show the application of
    customs procedures to GPL in Canada as "practices" rather than
    "requirements." We discussed this issue with Revenue Canada
    officials, who said that the designation should be "requirements"
    because, if USPS uses a private carrier as its delivery agent, it
    must meet the requirements for private carriers.  Although ACCA is
    correct that USPS could choose to use Canada Post to deliver GPL
    parcels in Canada, we relied on Revenue Canada officials in this
    regard.

    ISSUES RELATED TO ADDRESSING
    DIFFERENCES IN REQUIREMENTS FOR
    POSTAL AND PRIVATE EXPRESS PARCELS
    ============================================================ Chapter 3

    The private express industry has commented that differences in
    customs clearance requirements for postal and privately shipped
    parcels result in more work and higher costs for the carriers,
    placing them at a disadvantage in competing with USPS to provide
    international parcel delivery service.  However, USPS officials noted
    that they also incur costs that the private carriers do not, such as
    meeting their obligations to provide delivery service to persons in
    all communities of the United States and to member countries of UPU.
    In addition, businesses that ship their goods internationally, as
    well as USPS and the carriers, stressed the importance of having
    competitive choices that provide alternatives in the cost and speed
    of international shipping services for consumers.

    The carriers have urged Congress to protect fair competition by
    enacting legislation that would require USPS to compete on the same
    terms, particularly for customs treatment, as private carriers.  This
    proposal raises several questions related to GPL, such as (1) whether
    international parcels delivered by postal services and private
    carriers should be subject to the same requirements and customs
    treatment; (2) if so, what requirements might be appropriate to apply
    to international parcels; and (3) how those requirements should be
    implemented.  Although we do not take a position on whether the
    existing requirements or a change in policy would be desirable, we
    discuss some potential implications that have been raised and may be
    relevant to considering how these options could be implemented.

    Regarding the issue of whether the same customs requirements should
    be applied to postal and privately shipped parcels, USPS and private
    carrier officials have conflicting views about whether that would
    achieve a more "level playing field." Additional implications of
    applying the same requirements include the potential effects on the
    costs and choices that would be available to businesses and
    consumers, as well as the potential impact on the workloads of U.S.
    and foreign postal and customs services.  If the same requirements
    were to be applied, many ongoing national and international efforts
    aimed at streamlining customs procedures worldwide could benefit both
    USPS and the private carriers in terms of how they provide
    international parcel delivery services.  Regarding how to implement
    the same requirements, the U.S.  government does not have
    jurisdiction over foreign customs requirements; so changes involving
    foreign requirements might need to be negotiated through bilateral or
    multilateral agreements.  Moreover, potential conflicts with current
    international agreements would have to be considered.

       VIEWS ON APPLYING THE SAME
       REQUIREMENTS
    ---------------------------------------------------------- Chapter 3:1

    The carriers have urged Congress to enact legislation aimed at
    applying the same customs clearance requirements for USPS and the
    private express industry.  This could be achieved in several ways,
    such as (1) applying the carriers' requirements to competitive
    international postal products, (2) allowing the carriers to follow
    the same requirements that apply to competitive international postal
    products, (3) applying simplified procedures to both postal and
    private express parcels, or (4) other options.  In this report, we do
    not attempt to provide a comprehensive analysis of potential changes;
    but we present some of the issues in this regard that were raised by
    stakeholders in the course of our review.

    The carriers are concerned they must incur substantial costs to
    comply with requirements that do not apply to USPS.  At our request,
    DHL, FedEx, and UPS calculated that they incurred over $110 million
    in costs to comply with customs requirements in connection with
    delivering over 8 million parcels to Canada, Japan, and the United
    Kingdom in 1997.  The carriers indicated that they incurred these
    costs in the following areas:  (1) preparation, transmission, and
    submission of shipping documentation; (2) use of licensed customs
    brokers; (3) bonding or other security requirements; (4) customs
    clearance services outside of regular business hours; (5) records
    retention; (6) fines and penalties; (7) liability expenses; and (8)
    expenses related to the payment of duties, taxes, and fees in the
    three countries.  We did not verify the cost data provided by the
    private express carriers or obtain data on the costs that USPS
    incurred to provide GPL service.  We plan to evaluate the cost issues
    in a later review.

    In response to the carriers' concerns about the costs of complying
    with customs clearance requirements, USPS officials said that they
    must incur costs for public service obligations that the private
    carriers do not, such as meeting their universal service delivery
    obligations.  USPS' universal service obligations include delivering
    mail to persons in all communities in the United States and mailing
    to the 189 countries of UPU.  USPS also cited the costs of
    maintaining a universal delivery infrastructure, including a large
    number of unprofitable post offices, and offering customers uniform
    prices.  An official from the Direct Marketing Association (DMA),\1
    which represents direct marketers who ship their goods overseas, said
    that DMA members want a choice of international carriers.  In
    addition, the DMA official said that GPL serves as an important means
    of simplifying the shipment of goods internationally.  The DMA
    official also said that the advantages enjoyed by GPL
    customers--low-cost shipping and various delivery speeds and
    automated customs clearance data--also should be available to private
    carriers' customers.  An official from the Mail Order Association\2
    said that GPL was essential to serving overseas markets and that his
    organization would like to see GPL expanded to additional countries.
    Moreover, officials from several GPL customers said that
    simplification of the customs process and lower shipping costs were
    the primary reasons they used GPL to ship internationally.  USPS and
    the carriers also stressed the importance of competitive choices for
    shippers.

    --------------------
    \1 DMA represents more than 3,600 companies from the United States
    and 49 other countries that include direct marketers, such as
    catalogers, financial services, and publishers.

    \2 The Mail Order Association represents four U.S.  companies:  L.L.
    Bean, Lands' End, JC Penney, and Spiegel.

       POTENTIAL IMPLICATIONS AND
       MEANS OF APPLYING THE SAME
       REQUIREMENTS
    ---------------------------------------------------------- Chapter 3:2

    Determining whether and/or how to make customs requirements more
    similar would involve considering the implications of any changes on
    the postal and customs services, private express carriers,
    businesses, and consumers.  From the perspective of customs services,
    these implications include the potential impact on their workload and
    efforts to implement simplified procedures that facilitate timely and
    cost-effective customs clearance while also allowing them to meet
    their law enforcement and revenue collection responsibilities.  Also,
    postal services would want to ensure that they would be able to
    continue providing universal mail service.  Implementation of the
    same requirements would need to address potential limitations due to
    lack of U.S.  jurisdiction over importing requirements of other
    countries and existing international agreements.

          POTENTIAL ADDITIONAL
          WORKLOAD BURDEN
    -------------------------------------------------------- Chapter 3:2.1

    Depending upon the requirements and what types of competitive
    international postal products were to be treated the same as private
    express parcels, applying the same requirements to international
    postal and privately shipped parcels could affect the workload of
    postal and customs services worldwide, as well as individuals and
    businesses sending mail to the United States.  If the same
    requirements were applied, one option would be to apply the private
    carriers' requirements to USPS' competitive international postal
    products; another option would be to apply USPS' requirements to the
    private carriers.

    Currently, private express carriers must provide U.S.  Customs with
    manifests and supporting documentation, such as invoices, on goods
    imported into the United States.  According to USPS, requiring
    foreign postal services to provide manifests and supporting
    documentation on parcels being shipped to the United States under the
    first option could be a very burdensome task.  In 1996, USPS received
    about 714 million pieces of incoming international mail, including
    about 4 million parcels, most of which were sent from household to
    household.\3 USPS officials also said that most countries do not
    require that they be provided with manifests and supporting
    documentation on incoming international mail.

    Further, under the first option, U.S.  Customs would need to
    determine the potential impact on its resource allocation if all
    inbound and outbound international postal parcels were subject to
    inspection, as are all private express carriers' parcels.  When we
    asked U.S.  Customs officials what impact this could have on the
    agency's workload, they said this issue had not yet been fully
    analyzed.  In a recently issued GAO report, we said that U.S.
    Customs does not have an agencywide process for annually determining
    its need for inspectional personnel for all of its cargo operations
    and for allocating these personnel to commercial ports of entry.\4 We
    recommended that such a process should include conducting annual
    assessments to determine the appropriate staffing levels for its
    operational activities related to processing cargo at commercial
    ports.

    Depending on the option selected and the terms of applying the same
    requirements on competitive international postal products and private
    express carrier shipments, the implications regarding the procedures
    for individuals and businesses who send mail to the United States are
    also a consideration.  Currently, senders of postal parcels to the
    United States affix a simple customs declaration label to the
    parcels.  If the same requirements were imposed on competitive
    international postal products incoming into the United States as
    currently apply to privately shipped imports, individuals and
    businesses in other countries could be required to provide additional
    data not currently provided on the customs declaration labels.  This
    data could include harmonized tariff codes, as well as supporting
    documentation, such as invoices, for postal parcels sent to the
    United States.

    In providing comments on a draft of this report, the carriers said
    they would like to have "postal-like simplicity" applied to the
    customs treatment of privately transported low-value parcels.  We did
    not receive views on the feasibility of this option during the course
    of our review.  However, many of the same workload implications would
    need to be considered, such as how U.S.  Customs could expeditiously
    clear private express parcels while applying the requirements that
    apply to postal parcels.

    As it plans to expand GPL service, USPS is engaged in discussions
    with the U.S.  Customs Service regarding future incoming service.
    Issues being discussed include whether USPS would be required to
    present manifests of incoming GPL parcels and how duties and taxes
    would be paid.  With regard to future incoming GPL service, USPS
    officials said that they were willing to comply with many of the same
    requirements that private express carriers must follow, such as
    preparing manifests and prepaying duties and taxes.  However, they
    indicated that providing invoices would be unnecessary because CPAS
    data included parcel values.  In addition, Postal Service officials
    did not believe that USPS, as a government entity, could be subject
    to the same liabilities and associated penalties as are private
    express carriers.

    USPS officials said that they would like to see their procedures for
    providing shipping data electronically and paying duties and taxes in
    Canada and the United Kingdom applied to GPL service in other
    countries, including Japan.  U.S.  Customs' strategic plan for 1997
    through 2002 indicates that the United States is experiencing a
    period of unprecedented growth in world trade and the value of trade
    imports is expected to double over the next 5 years.  To handle the
    increased volume of trade, U.S.  Customs is planning to expand the
    electronic transmission of data needed by Customs, as well as permit
    the electronic payment of duties and taxes, and take other measures.

    --------------------
    \3 Data on the number of pieces of incoming international mail in
    1997 are not yet available.  In 1997, USPS also handled about 1
    billion pieces of outbound international mail, including at least 6
    million parcels.

    \4 Customs Service:  Processing for Estimating and Allocating
    Inspectional Personnel (GAO/GGD-98-107, April 30, 1998).

          NATIONAL AND INTERNATIONAL
          EFFORTS TO DEVELOP EFFICIENT
          CUSTOMS PROCEDURES
    -------------------------------------------------------- Chapter 3:2.2

    Costs and workload burdens are a concern to all parties.  Therefore,
    efforts to find more efficient and cost-effective customs clearance
    procedures could benefit all parties.  International organizations
    and national governments are attempting to simplify and standardize
    customs procedures worldwide.  These international efforts are
    relevant to the debate over whether the same and which requirements
    should apply to GPL and private express parcels because, as explained
    in chapter 2, most of the requirements that apply to parcels exported
    from the United States are imposed by the importing countries.  All
    three countries in our review have initiated or implemented
    procedures to speed the customs clearance process and reduce the
    paperwork burdens on the carriers for low-value imports.

    In 1993, Canada implemented its courier/low-value shipment program to
    streamline the reporting, release, and accounting procedures for
    certain goods valued at less than $1,600 Canadian.\5 Under the
    program, couriers report the goods to Revenue Canada on a
    cargo/release list, which reduces paperwork burden by eliminating the
    need to present a separate manifest for each parcel.  Revenue Canada
    said it usually receives the list before the goods arrive.  Prior to
    the arrival of goods, customs inspectors are to review the
    cargo/release list and select any parcels to be examined.  Customs
    entry and accounting documentation must be presented by the 24th day
    of the month following the month of release, and the duties and taxes
    must be paid by the last business day of that month.  Revenue Canada
    said it verifies compliance with customs laws through periodic audits
    of importers and customs brokers and other checks.

    In 1996, Japan Customs began allowing shippers to declare imported
    shipments valued at no more than 100,000 yen without preparing an
    invoice as long as the shipper maintains import records.\6 In
    addition, carriers have the option of calculating duties on imports
    into Japan that are valued at no more than 100,000 yen using single
    duty rates that are selected from six categories, eliminating the
    time needed to determine specific duty rates applicable to each
    item.\7 Another new program in Japan allows shippers to clear some
    low-value imports on one air waybill.\8 We asked Japan Customs
    officials whether they would like USPS to provide certain shipping
    documentation on GPL parcels, such as harmonized tariff codes, as
    private carriers do.  In providing comments on this report, Japan
    Customs indicated that it is preparing for the introduction of an
    import information system with the cooperation of USPS that is
    similar to that used in the United Kingdom.

    In April 1997, the United Kingdom initiated a pilot program to
    simplify customs clearance procedures for some types of private
    express shipments.\9 H.M.  Customs indicated that the program is
    aimed at reducing paperwork requirements by allowing electronic
    submission of customs declarations.  In addition, under the
    simplified procedures, carriers may pay duties and taxes the
    following month.  According to the carriers operating in the United
    Kingdom, the new program has reduced customs clearance times for
    qualifying imports from about 2 hours to immediate clearance upon
    arrival.

    At the international level, organizations such as the World Customs
    Organization are examining the issue of simplifying customs
    procedures worldwide.  Similarly, a project was initiated at the 1996
    G-7\10 summit in Lyon, France, to standardize and simplify customs
    procedures scheduled to be completed in 1998.  Two key proposals
    raised at the international forums to streamline customs procedures
    included (1) reducing paperwork requirements on imported goods and
    (2) increasing the dutiable de minimis in various countries.  In the
    three countries in our review, imported nondutiable goods were
    subject to reduced paperwork requirements for customs clearance.  In
    U.S.  dollars, the dutiable de minimis was the equivalent of about
    $14 in Canada, about $30 in the United Kingdom, about $80 in Japan,
    and $200 in the United States.\11 According to the U.S.  Embassy
    officials in Japan, increasing the dutiable de minimis on imported
    goods has been the subject of ongoing negotiations between the United
    States and Japan.  One carrier said that raising the dutiable de
    minimis in Japan from 10,000 yen to 30,000 yen, for example, would
    increase its nondutiable imports from 40 to 80 percent.  Guidelines
    issued by the International Chamber of Commerce in 1996 regarding
    best practices recommended that customs services regularly review
    dutiable de minimis levels to take into account such factors as
    inflation.

    --------------------
    \5 About $1,143 U.S., assuming that $1 U.S.=$1.4 Canadian.

    \6 100,000=$800, assuming that $1=125.

    \7 A Japan Customs official said that under Art.  3-3 of Japan
    Customs Tariff Law, the simplified tariff is applicable to both
    postal and private express parcels imported into Japan.

    \8 Low-value imports that qualify for consolidated customs clearance
    include person-to-person shipments, catalog shipments approved by
    Japan Customs, and company-to-company shipments that are approved and
    registered by Japan Customs.

    \9 The pilot ended on January 31, 1998, and the program was adopted.

    \10 The G-7 countries include Canada, Germany, France, Italy, Japan,
    the United Kingdom, and the United States.

    \11 Assuming that $1 U.S.  is the equivalent of about $1.4 Canadian,
    125, and .6.

          POTENTIAL CONFLICTS WITH
          INTERNATIONAL POSTAL
          AGREEMENTS
    -------------------------------------------------------- Chapter 3:2.3

    The ability of the United States to apply the same international
    customs requirements to both USPS and the private carriers may have
    some limitations, due to the lack of U.S.  jurisdiction over
    importing requirements imposed by foreign governments and potential
    conflicts with current international agreements on customs clearance.
    For example, a UPU agreement prescribes specific procedures for
    member postal services regarding customs declarations on postal
    parcels.\12 These procedures differ from the customs procedures that
    the private carriers are required to follow.  Further, the UPU
    agreement provides that "postal administrations shall accept no
    liability for customs declarations in whatever form these are made or
    for decisions taken by the Customs on examination of parcels
    submitted to customs control."\13 If USPS were subject to the same
    requirements as the private carriers, this provision of the UPU
    agreement could conflict with a requirement to subject USPS to
    liabilities for customs declarations.  Efforts to apply similar
    customs requirements may require bilateral or multilateral
    agreements.

    --------------------
    \12 Universal Postal Union Postal Parcels Agreement, Vol.  3, Art.
    106.

    \13 UPU Postal Parcels Agreement, Vol.  3, Art.  41-3.

       CONCLUSIONS
    ---------------------------------------------------------- Chapter 3:3

    The private express industry has commented that it wants Congress to
    establish a "level playing field" with USPS in providing
    international parcel delivery service by applying the same customs
    requirements on USPS and the carriers.  Issues related to fair
    competition involve weighing how USPS and its private sector
    competitors can compete, given that different sets of requirements
    and obligations currently exist.  The potential implications of
    whether to apply the same requirements, under what terms, and how to
    implement the same requirements for both USPS and the carriers may
    include a number of factors, including those raised by the U.S.  and
    foreign postal and customs services, private express carriers,
    shippers, and consumers.  USPS officials noted that they incur costs
    that the private carriers do not, such as meeting their obligations
    to provide delivery service to persons in all communities of the
    United States and to UPU member countries.  The carriers noted the
    benefits that simplification of customs formalities for low value
    shipments could have for all international commerce.  Moreover,
    businesses that ship their goods internationally stressed their need
    to have competitive choices that provide alternatives in the cost and
    speed of international shipping services for consumers.

    In urging that the same international customs clearance requirements
    should be applied to USPS and the private carriers, the carriers have
    raised fundamental questions about the fairness of competing with a
    government entity that is providing a businesslike service.  The
    carriers believe that competing with a government entity that is
    subject to fewer customs requirements and lower associated costs
    distorts the competitive marketplace.  However, depending upon what
    types of competitive international postal products would be subject
    to the same requirements, postal services are concerned that
    requiring USPS and the private carriers to follow the same
    requirements could affect the simplified process that was intended
    for mail sent from household to household internationally.  Another
    consideration is the potential impact on shippers, such as the direct
    marketing industry, who want to have a choice of different types,
    costs, and speed of delivery services to respond to their customers'
    demands for their goods.

    Determining how to make customs requirements the same would involve
    several considerations.  Changes in U.S.  law by themselves would not
    equalize customs treatment for postal and private express parcels
    under foreign law.  Bilateral or multilateral agreements with other
    countries may also be necessary.  Further, additional analysis would
    be needed to determine whether making customs requirements the same
    would conflict with current international agreements, such as those
    involving UPU service obligations, and if such changes would impose
    additional workload burdens on postal and customs services worldwide.

    With respect to U.S.  law, opportunities may exist to change customs
    treatment of parcels imported into the United States.  Negotiations
    between USPS and the U.S.  Customs Service regarding the treatment of
    future GPL service incoming to the United States involve discussions
    of such issues as manifesting requirements and payment of duties and
    taxes.  Moreover, in considerations of what requirements might be
    appropriate, additional opportunities may exist to build on national
    and international proposals discussed earlier in this chapter to
    simplify and expedite customs clearance procedures worldwide.  Such
    opportunities include reducing paperwork and increasing the dutiable
    de minimis, which could benefit both USPS and the private express
    carriers.

       AGENCY COMMENTS
    ---------------------------------------------------------- Chapter 3:4

    In its comments, ACCA said that this chapter did not develop a sound
    and objective basis for evaluating the policy implications of the
    differences in customs treatment.  It appears that ACCA may have
    misinterpreted our discussion of several issues in this chapter.  We
    did not intend to take a position on the policy issues that are
    discussed in this chapter or make assumptions about the implications
    of changes in policy.  Rather, our intent was to identify some of the
    key issues that are being considered by policymakers in Congress and
    that were raised during our review to provide some perspective on the
    significance of the issues related to differences in customs
    treatment.  We modified this chapter to address ACCA's specific
    concerns.

    ACCA raised four primary areas of concern about this chapter.  First,
    it said our report implied that the principle of equal application of
    the customs laws, as advocated by the carriers, could result in
    adverse consequences, such as eliminating the simplified clearance
    process that currently benefits U.S.  shippers.  In discussing the
    potential implications of the principle of equal application of
    customs laws, we were not taking a position on whether existing
    requirements or a change in policy would be desirable.  Thus, we
    changed our discussion to make this clear where appropriate.

    Second, ACCA said that our report assumed that a U.S.  policy of
    equal application of the customs laws could lead foreign customs
    authorities to subject all postal shipments--or at least all GPL
    parcels--to the customs procedures now applied to privately carried
    shipments.  In this report, we discussed options that were raised
    during the course of our review; however, other options could be
    considered.  One of the possibilities raised in draft legislation was
    to apply the customs requirements for private carriers to all
    competitive international postal products.  ACCA indicated in its
    comments that foreign governments would discover strong incentives to
    extend simplified customs procedures to all U.S.  direct marketing
    shipments tendered by all U.S.  carriers, provided that the carriers
    tender the shipments in the same manner now employed by USPS.  In
    providing informal comments on a draft of this report, H.M.  Customs
    said that simplified procedures already could be used by anyone
    fulfilling its requirements, but that customs inspectors would need
    shipment data in advance, or at least at the time of importation, for
    inspection purposes.  In addition, the World Customs Organization is
    currently reviewing this issue.

    Third, ACCA was concerned that by presenting USPS' views on its
    universal service obligations, our report helped to militate against
    a U.S.  policy of nondiscrimination in customs treatment for U.S.
    carriers.  Although we noted both USPS' stated service obligations
    and the carriers' business choices, we did not take positions on
    their respective arguments.  We sought to provide a fair and balanced
    presentation of the often conflicting interests and opinions
    associated with this issue.

    Finally, ACCA said that our report exaggerated the legal difficulties
    associated with implementing a U.S.  policy requiring equal
    application of customs procedures to U.S.  based carriers.  We
    disagree.  We only pointed out that potential limitations may exist
    in applying equal customs requirements, including the lack of U.S.
    jurisdiction over foreign customs laws.  This discussion was
    presented not as obstacles, but as legal considerations for
    implementing these policies.

    CHRONOLOGY OF GPL SERVICE
    =========================================================== Appendix I

    Since the U.S.  Postal Service (USPS) issued a notice in the Federal
    Register in 1994 that it intended to initiate GPL service (formerly
    called International Package Consignment Service (IPCS)) to Japan,
    the Postal Service has made several amendments, changing Global
    Package Link (GPL) requirements, the type of service, and destination
    countries offered.  Listed below is information from USPS' Federal
    Register notices regarding GPL, in chronological order from 1994 to
    the present.

          DECEMBER 22, 1994
    ------------------------------------------------------- Appendix I:0.1

    Implementation of International Package Consignment Service

    Action:  Interim rule with request for comments.

    USPS announces the implementation of IPCS, an international mail
    service designed for mail-order companies sending merchandise parcels
    to other countries.  To use IPCS, customers will be required to mail
    at least 25,000 parcels a year to each country where it wants to use
    the service and agree to link its information systems with those of
    the Postal Service so that USPS can extract certain information about
    the customer's parcel contents for customs clearance and other
    purposes.  Initially, the service will be available only to Japan.
    Canada is to be added later as a destination country.

    Effective on December 1, 1994.  (59 Fed.  Reg.  65961 (1994))

          DECEMBER 1, 1995
    ------------------------------------------------------- Appendix I:0.2

    Implementation of International Package Consignment Service

    Action:  Amendment to interim rule.

    Amendment to IPCS provides an additional entry option to IPCS mailers
    whose plants are located more than 500 miles from the USPS processing
    facility at the John F.  Kennedy (JFK) International Airport in New
    York.  These mailers may now process their IPCS parcels using
    USPS-provided workstations to sort and prepare the parcels.  USPS
    will then verify and accept the parcels at the mailers' plants and
    transport the parcels by truck to the nearest Postal Service air mail
    facility (AMF).  From the AMF, USPS dispatches the parcels directly
    to Japan, bypassing the JFK facility.

    Effective on September 1, 1995.  (60 Fed.  Reg.  61660 (1995))

          MARCH 28, 1996
    ------------------------------------------------------- Appendix I:0.3

    Implementation of International Package Consignment Service

    Action:  Interim rule with request for comments.

    Service now available to the United Kingdom and Canada (previously
    available only to Japan).  To use IPCS, customers are required to
    mail at least 25,000 parcels per year to Canada or at least 10,000
    parcels a year to the United Kingdom.  Two levels of service are
    offered to Canada, and three levels of services are offered to the
    United Kingdom.

    Effective on March 28, 1996.  (61 Fed.  Reg.  13765 (1996))

          JULY 11, 1996
    ------------------------------------------------------- Appendix I:0.4

    Implementation of International Package Consignment Service

    Action:  Amendment to interim rule for request for comments.

    To use IPCS, customer must mail at least 25,000 parcels per year to
    Japan, at least 25,000 parcels per year to Canada, or at least 10,000
    per year to the United Kingdom.  This amendment provides an option
    for IPCS customers who meet the minimum mailing requirements to enter
    additional parcels for delivery in any other IPCS country of
    destination at reduced volume thresholds, specifically 5,000 parcels
    per year.

    Effective on July 11, 1996.  (61 Fed.  Reg.  36500 (1996))

          JULY 30, 1996
    ------------------------------------------------------- Appendix I:0.5

    Amendment to International Package Consignment Service to Japan,
    Canada, and the United Kingdom

    Action:  Amendment to interim rule with request for comments.

    In addition to its JFK facility, USPS is adding additional IPCS
    processing facilities sites near the Dallas-Fort Worth International
    Airport and in Chicago, Miami, San Francisco, and Seattle.

    Effective on July 1, 1996.  (61 Fed.  Reg.  39592 (1996))

          OCTOBER 28, 1996
    ------------------------------------------------------- Appendix I:0.6

    Amendment to International Package Consignment Service to Japan,
    Canada, and the United Kingdom

    Action:  Amendment to interim rule with request for comments

    USPS announces prices for "harmonizing" mailers' products being
    delivered via IPCS with customs classifications.  All catalog
    harmonization performed by USPS for the mailer will be billed to the
    mailer at a rate of $1.25 per item (including any future items added
    to the catalog).  The mailer has the option of doing its own
    harmonization, provided the format used is compatible with that of
    USPS' Customs Pre-Advisory System (CPAS) software.

    Effective on October 30, 1996.  (61 Fed.  Reg.  55572 (1996))

          JANUARY 6, 1997
    ------------------------------------------------------- Appendix I:0.7

    IPCS Name Change to Global Package Link

    Action:  Final rule.

    USPS changed the name of IPCS to Global Package Link (GPL).  After
    considering comments to its March 28, 1996, request for comments
    concerning interim regulations implementing IPCS, USPS adopted
    interim regulations as amended, without substantive modification, for
    service to Canada and the United Kingdom.

    Effective on January 6, 1997.  (61 Fed.  Reg.  631 (1997))

          JANUARY 13, 1997
    ------------------------------------------------------- Appendix I:0.8

    Interim Rule for Global Package Link to Canada

    Action:  Interim rule with request for comments.

    New GPL pricing for Canada will result in reduced rates from those
    previously established.  A new Ground Gateway GPL service is
    announced for Canada; Buffalo has been added as a GPL processing
    center for ground service only.  Ground service available to any
    customer within a 500-mile radius of the two gateway
    centers--Seattle, Washington; and Buffalo, New York--and any other
    customer that can use a direct, existing Postal Service
    transportation to one of the two gateways.  Also, a merchandise
    return service is being announced, along with prices, to any customer
    using GPL to Canada.

    Effective on January 13, 1997, except for the new ground gateway
    service from Buffalo, which became effective on January 21, 1997.
    (61 Fed.  Reg.  1674 (1997))

          APRIL 9, 1997
    ------------------------------------------------------- Appendix I:0.9

    Implementation of Global Package Link Service:  Brazil, Chile, and
    Germany

    Action:  Interim rules with request for comments.

    Brazil, Chile, and Germany added as destination countries.  USPS also
    announces that instead of the minimum volume requirements for each
    country to which service is available, an annual minimum volume of
    10,000 parcels to all countries is established.  An interim rule for
    establishing a merchandise return service for customers using the
    service to Japan and the United Kingdom is also announced.

    Effective on April 9, 1997.  (62 Fed.  Reg.  17072 (1997))

          APRIL 21, 1997
    ------------------------------------------------------ Appendix I:0.10

    Global Package Link:  Harmonization services

    Action:  Final Rule.

    USPS will offer free catalog harmonization services for the first
    2,500 catalog items presented for harmonization during first 12
    months following signing of GPL agreement.  Any harmonization in
    excess of 2,500 items for each customer and/or after the first 12
    months will be charged a fee of $1.25 per item.  Mailer has the
    option of doing its own harmonization, provided the format used is
    compatible with that of the Postal Service's CPAS software.

    Effective on April 21, 1997.  (62 Fed.  Reg.  19223 (1997))

          MAY 8, 1997
    ------------------------------------------------------ Appendix I:0.11

    Amendment to Interim Rule for Global Package Link:  Japan

    Action:  Amendment to interim rule with request for comments.

    The number of levels of service to Japan will be changed from three
    to two.  The discount rate structure offered Japan will be adjusted,
    and the name for Express Service will be changed to Premium Service.
    Insurance for the standard service will no longer be available.

    Effective on June 8, 1997.  (62 Fed.  Reg.  25136 (1997))

          MAY 9, 1997
    ------------------------------------------------------ Appendix I:0.12

    Implementation of Global Package Link Service:  China

    Action:  Interim rules with request for comments.

    People's Republic of China added as destination country.  One level
    of service is being offered initially in China and will be available
    only in the cities of Beijing, Guangzhou, and Shanghai.

    Effective on June 9, 1997.  (62 Fed.  Reg.  25515 (1997))

          AUGUST 26, 1997
    ------------------------------------------------------ Appendix I:0.13

    Implementation of Global Package Link Service:  Mexico and Singapore

    Action:  Interim rule with request for comments.

    Mexico and Singapore added as destination countries.  Initially, two
    levels of service to Mexico and Singapore are being offered.

    Effective on August 26, 1997.  (62 Fed.  Reg.  45160 (1997))

          SEPTEMBER 10, 1997
    ------------------------------------------------------ Appendix I:0.14

    Implementation of Global Package Link Service:  France

    Action:  Interim rules with request for comments.

    France added as a destination country.  Initially, one standard
    delivery is available to France; Premium Service is under development
    and will be available next year.

    Effective on September 10, 1997.  (62 Fed.  Reg.  47558 (1997))

          SEPTEMBER 24, 1997
    ------------------------------------------------------ Appendix I:0.15

    Implementation of Global Package Link Service:  Hong Kong

    Action:  Interim rule with request for comments.

    Hong Kong added as destination country.  Initially, one level of
    service to Hong Kong will be offered.

    Effective on September 24, 1997.  (62 Fed.  Reg.  49915 (1997))

          OCTOBER 29, 1997
    ------------------------------------------------------ Appendix I:0.16

    Discount for Mailer-Provided Transportation of Parcels to GPL
    Facility

    Action:  Interim rule with request for comments.

    USPS announces a discount for mailer-provided transportation of
    parcels to a GPL processing facility and is adding a surcharge for
    USPS-provided transportation for mailers located more than 500 miles
    from a GPL processing facility.  USPS also announced the elimination
    of the option for mailers to process GPL parcels.

    Effective on November 28, 1997.  (62 Fed.  Reg.  56074 (1997))

          OCTOBER 31, 1997
    ------------------------------------------------------ Appendix I:0.17

    Interim Rule for Global Package Link to Canada

    Action:  Interim rule with request for comments.

    USPS is offering Ground Courier service to Canada, called GPL
    Standard, and eliminating Ground Gateway Service.  USPS is also
    offering new pricing for the GPL Standard service based on origin and
    destination.  In most cases, new pricing is a reduction in rates
    previously established.

    Effective on October 31, 1997.  (62 Fed.  Reg.  58910 (1997))

          FEBRUARY 25, 1998
    ------------------------------------------------------ Appendix I:0.18

    Increase of Maximum Size and Weight Limits to Existing Global Package
    Link to Japan

    Action:  Interim rules with request for comments.

    Current size allowances for GPL and return services to Japan will be
    increased to U.S.  domestic limits.  Customers wishing to send
    parcels to Japan larger than the current size restrictions--44 pounds
    and maximum length of 60 inches--may use GPL Premium Oversize
    service, an extension of GPL Premium Service, with the same
    attributes as that service.  The Oversize service will include
    parcels longer than 60 inches on a side or weighing more than 44
    pounds up to 70 pounds.  Length/girth combined to be within 108
    inches.

    Effective on February 25, 1998.  (63 Fed.  Reg.  9420 (1998))

          MARCH 18, 1998
    ------------------------------------------------------ Appendix I:0.19

    Implementation of New Market Opportunities Program

    Action:  Interim rule.

    USPS proposes to adopt, as an interim rule, new rates and conditions
    of mailing for the New Market Opportunities Program.  This program is
    designed to meet the needs of direct mail and mail-order companies
    seeking to easily and cost effectively enter the international
    marketplace.  It is available for companies who wish to test sending
    catalogs and merchandise to any or all of the GPL destination
    countries.  Mailers will send catalogs using the International
    Surface Air Lift or VALUEPOST service and merchandise using GPL.  To
    assist the mailers' test in these markets, USPS includes other
    services as part of the program, including translation of order form
    and company information sheet into in-country language; and advice on
    catalog layout, as well as mailing list companies, call centers, and
    other resources in the destination countries.

    Effective on March 18, 1998.  (63 Fed.  Reg.  13124 (1998))

    DOCUMENTATION FOR INTERNATIONAL
    PARCEL SHIPMENTS:  GPL LABEL,
    COMMERCIAL INVOICE, AND AIR
    WAYBILL
    ========================================================== Appendix II

    USPS affixes CPAS-generated mailing labels on GPL parcels.  The GPL
    mailing labels vary slightly according to destination country and
    contain the data elements provided in table II.1.  They also serve as
    customs declaration forms in the importing countries.  USPS also may
    transmit certain information electronically via CPAS to foreign
    customs services, such as harmonized tariff codes, depending upon the
    importing country's requirements.

    Private express carriers send commercial invoices and air waybills
    with their parcel shipments.  A commercial invoice is generally
    considered to be an itemized list of goods shipped specifying their
    price and terms of sale.  An air waybill, also known as a bill of
    lading, is a document used when goods are transported by ship or air
    that serves as a receipt for the shipper, indicating that the carrier
    has accepted the goods listed and has obligated itself to transport
    the shipment to the destination.  The elements of commercial invoices
    and air waybills are listed below.

    Samples of a GPL label, commercial invoice, and an air waybill are
    provided on the following pages.

                                        Table II.1

                          Key Elements of GPL Label, Commercial
                                 Invoice, and Air Waybill

                                                        Commercial       Carrier air
    Document element                   GPL label           invoice           waybill
    --------------------------  ----------------  ----------------  ----------------
    Date
    Name and address of
     shipper
    Name and address of
     recipient
    Country of ultimate
     destination
    Description of each item
     in shipment
    Number of units of each
     item
    Total quantity
    Unit value of each item
     (in currency of purchase)
    Total invoice value (in
     currency of purchase)
    Total weight of parcel
     items
    Total number of parcels in
     shipment
    Total weight of shipment\a
    Harmonized code for each                   b
     item
    Country of manufacture                     b
     (origin) of parcel items
    Terms of sale (e.g.,
     C.I.F)
    Shipper's signature
    --------------------------------------------------------------------------------
    \a Shipment may contain multiple parcels.

    \b Harmonized codes, country of manufacture, and country of origin
    are provided electronically to Purolator/PBB in Canada and
    Parcelforce in the U.K.  although they are not included on the GPL
    label.

    Source:  GAO analysis of information provided by DHL, FedEx, UPS, and
    USPS.

       Figure II.1:  GPL Label for
       Japan

       (See figure in printed
       edition.)

       Source:  USPS.

       (See figure in printed
       edition.)

       Figure II.2:  Commercial
       Invoice

       (See figure in printed
       edition.)

       Source:  GAO-generated.

       (See figure in printed
       edition.)

       Figure II.3:  Air Waybill

       (See figure in printed
       edition.)

       Source:  GAO-generated.

       (See figure in printed
       edition.)

    LEGAL REQUIREMENTS FOR IMPORTING
    PARCELS INTO JAPAN
    ========================================================= Appendix III

    We reviewed Japanese customs laws and regulations for importing
    postal and private express parcels into Japan.  Our primary source
    was Japan Laws and Regulations Concerning Customs Duties and Customs
    Procedures, Rev.  2, published by the Japan Tariff Association
    (1990).  In addition, at our request, a Japanese law expert from the
    Library of Congress researched applicable Japanese customs laws and
    regulations, as well as related legal commentary.  Following our
    review, Japan Customs officials reviewed our compilation of
    requirements, and we made changes where needed.

                                       Table III.1

                         Legal Requirements for Importing Parcels
                                        into Japan

                               Laws and regulations       Laws and regulations
                               applicable to postal       applicable to private
    Customs requirements       parcels                    express carrier parcels
    -------------------------  -------------------------  --------------------------
    A. Import shipping         Not required               Required
    documentation:
    A manifest or list of      Art. 18, para. 2, of       Art. 15, para. 2, of
    goods must be presented    Customs Law exempts        Customs Law requires
    to foreign customs         postal articles from       filing of a declaration
    services for import        requirement to present     inward, including cargo
    clearance.                 cargo manifest. See also   manifest, with Customs.
                               1 Kanzei Hoki Seikai 280
                               (commentary on Customs     Art. 13 of the Cabinet
                               law, Tokyo, Nihon Kanzei   Order for the Enforcement
                               Kyokai, 1992). However,    of Customs Law describes
                               Article 3101 of the Rules  information to be included
                               for Enforcement of the     in the declaration inward,
                               Universal Postal           including place of
                               Convention requires the    shipment, destination,
                               exporter to affix a        mark, numbers,
                               customs declaration on     descriptions, and
                               postal parcels.            quantities of goods. In
                                                          the case of commercial air
                                                          cargo, the airline
                                                          employees can file the
                                                          cargo manifest with
                                                          Customs by entering the
                                                          shipping data into the
                                                          Nippon Automated Cargo
                                                          Clearance System for Air-
                                                          Cargo (NACCS).

    B. Entering shipping data  Not required               Not required
    into foreign customs
    services' computers:       Art. 76 of Customs Law     The Special Act of Customs
    Importer/broker must       exempts postal articles    Procedures through the
    enter shipping data into   from the requirements for  Electronic Data Processing
    foreign customs' computer  filing import              System authorizes the use
    systems for entry.         declarations and invoices  of data processing
                               with Customs.              techniques in the
                                                          submission of declarations
                                                          and other documents.
                                                          However, this is not a
                                                          requirement.

    C. Use of licensed         Not required               Not required
    customs brokers:
    Importer must use          Under Art. 76, para. 3,    Use of customs brokers is
    licensed customs brokers   of Customs Law, postal     not required if the
    to submit shipping         articles are presented to  importers themselves file
    documentation.             Customs by Japan Post.     the import declarations.
                                                          However, under the Law
                                                          Concerning Customs
                                                          Business, Law. No. 122,
                                                          Aug. 1, 1967, as last
                                                          amended by Law No. 91, May
                                                          12, 1995, any person
                                                          intending to submit
                                                          shipping documentation is
                                                          required to obtain a
                                                          permit from Customs.

    D. Calculation of duties   Not required               Required
    and taxes:
    Importer/broker must       Under Art. 6-2, para. 2,   Under Art. 6-2 of Customs
    calculate duties and       of Customs Law, the        Law, the amount of customs
    taxes to be verified by    customs officer            duties payable shall be
    foreign customs services.  determines the tariff      determined by the
                               classification and value   importer/broker. In
                               of goods sent by mail      practice, duties and taxes
                               based on information from  are in most cases
                               the customs declaration    calculated by NACCS on the
                               or invoices attached.      basis of import data
                                                          entered into the system by
                                                          importers/brokers.

    E. Timing of payment of    Not required               Required
    duties and taxes:
    Duties and taxes must be   Art. 76 of the Customs     Art. 72 of the Customs Law
    paid or secured prior to   Law exempts postal         requires payment of
    Customs' release of        articles from the          customs duty by the
    shipment to delivery       requirement in Art. 72     importer/broker prior to
    agent.                     that duty be paid prior    release of goods by
                               to release of goods to     Customs. However, under
                               the post office for        Art. 9-2 of the Customs
                               delivery or collection.    Law, the time limit for
                                                          actual payment of duty can
                               Art. 77, para. 3,          be extended up to 3 months
                               requires payment of        after cargo release with
                               customs duty and tax by    the deposit of security.
                               the person who is to
                               receive postal articles
                               prior to release of goods
                               by the post office.

    F. Customs service         Not applicable             Required
    charges:
    Importer/broker must pay   Art. 100 of the Customs    Art. 100 of the Customs
    for customs clearance      Law does not apply to      Law requires payment of
    outside of normal          postal articles, because   fees to Customs for
    business hours.            the Postal Bureau could    customs clearance service
                               not impose additional      outside of regular
                               charges on individual      business hours.
                               importers for clearance
                               outside of regular
                               business hours. In
                               practice, GPL parcels
                               were not cleared outside
                               of regular business
                               hours.

    G. Posting of bonds or     Not required               Not required
    security:
    Importer/broker must post
    a bond or provide other
    security to the customs
    service for storage
    facilities.

    H. Shipping records        Not required               Required
    retention:
    Importer/broker must       Shipping records are not   Importers are not required
    maintain customs           required for postal        to maintain shipping
    clearance records on       articles.                  records on parcels.
    parcels.                                              However, under Art. 22,
                                                          para. 1, of the law
                                                          concerning customs
                                                          clearance and Art. 8,
                                                          para. 2, of its
                                                          enforcement order, brokers
                                                          must maintain customs
                                                          clearance records of
                                                          parcels for 3 years.

    I. Liability for parcel    Applicable if              Applicable if importer/
    contents: Importer/        knowledgeable about the    broker is knowledgeable
    broker is subject to       illegal parcel contents.   about the illegal parcel
    liability for illegal                                 contents.
    contents contained in      Art. 109 of the Customs
    parcels.                   Law provides penalties     Art. 109 of the Customs
                               for importing prohibited   Law provides penalties for
                               drugs, firearms,           importing prohibited
                               counterfeit money, other   drugs, firearms,
                               antisocial articles, and/  counterfeit money, other
                               or articles infringing     antisocial articles, and/
                               upon intellectual          or articles infringing
                               property rights.           upon intellectual property
                               Potential penalties range  rights. Potential
                               from fines of up to 5      penalties range from fines
                               million yen and            of up to 5 million yen to
                               imprisonment for up to 5   imprisonment for up to 5
                               years.                     years.

    J. Fines for incorrect or  Not applicable             Applicable
    missing declarations:
    Importer/broker is         Art. 76 of the Customs     Arts. 12-2 and 12-3 of the
    subject to liability for   Law exempts postal         Customs Law, as amended by
    fines for incorrect or     articles from the          Law No. 61, March 26, 1997
    missing customs            requirements that          (effective Oct. 1, 1997),
    declarations.              importers file import      requires payment of
                               declarations and invoices  additional taxes at rates
                               with Customs. However,     of 10 percent to 15
                               Art. 114 of the Customs    percent for incorrect or
                               Law subjects senders of    missing declarations
                               parcels to a fine of not   unless a "proper reason"
                               more than 50,000 for      for such is found. Art.
                               making false               113-2 of the Customs Law
                               certifications on the      provides for penalties of
                               customs declaration        imprisonment of not more
                               required by Postal         than 1 year and not more
                               Convention Rules.          than 100,000, or both,
                                                          for serious offenses
                                                          relating to incorrect or
                                                          missing declarations.
    --------------------------------------------------------------------------------

    LEGAL REQUIREMENTS FOR IMPORTING
    PARCELS INTO THE UNITED KINGDOM
    ========================================================== Appendix IV

    We reviewed European Union (EU) and United Kingdom customs laws and
    regulations applicable to importing postal and private express
    parcels into the United Kingdom.  Our primary source was
    Butterworth's Customs Duties Handbook, published by Butterworth's
    (London) 1995.  Following our review, Her Majesty's Customs and
    Excise officials reviewed and commented on a draft of our compilation
    of requirements, and we made changes where needed.

                                        Table IV.1

                         Legal Requirements for Importing Parcels
                                 into the United Kingdom

                               Laws and regulations       Laws and regulations
                               applicable to postal       applicable to private
    Customs requirements       parcels                    express carrier parcels
    -------------------------  -------------------------  --------------------------
    A. Import shipping         Not required               Required
    documentation:
    A manifest or list of      Art. 237 of Commission     Art. 43 of Council Reg.
    goods must be presented    Reg. 2454/93 require that  92/2913 generally requires
    to foreign customs         imported postal parcels    presentation of a summary
    services for import        be accompanied by a C1     declaration to Customs
    clearance.                 and/or C2/CP3              that contains particulars
                               declaration, (renumbered   necessary for the
                               as CN22 and CN23), but     identification of goods.
                               manifests or lists of      Art. 44 of the Council
                               postal parcels are not     Reg. allows the customs
                               required. See also Reg. 7  authorities to permit the
                               of the Postal Packet       use of any commercial or
                               Regs.                      official document (i.e., a
                                                          manifest) as a summary
                                                          declaration. Importers
                                                          also may be required to
                                                          present other documents to
                                                          verify the accuracy of
                                                          particulars in
                                                          declaration. See Art. 68
                                                          of Council Reg.

    B. Entering shipping data  Not required               Not required
    into foreign customs
    services' computers:                                  Art. 61 of Council Reg.
    Importer/broker must                                  92/2913 and Arts. 4a, 183,
    enter shipping data into                              & 222-224 of the
    foreign customs' computer                             Commission Reg. 2454/93
    systems for entry.                                    authorize the use of data
                                                          processing techniques in
                                                          the submission of
                                                          declarations and other
                                                          documents. However, this
                                                          is not a requirement;
                                                          declarations etc. could
                                                          also be submitted in
                                                          writing, according to Art.
                                                          61 of Council Reg. 92/
                                                          2913.

    C. Use of licensed         Not required               Not required
    customs brokers:
    Importer must use                                     Arts. 5 & 64 of Council
    licensed customs broker                               Reg. 92/2913 and Art. 178
    to submit shipping                                    of Commission Reg. 2454/
    documentation.                                        93 allow appointment of
                                                          representatives for
                                                          dealings with customs
                                                          authorities, require
                                                          declarants to be
                                                          "established in the
                                                          Community," and provide
                                                          that the declarant must
                                                          have his residence or
                                                          business in the customs
                                                          territory.

    D. Calculation of duties   Not required               Not required
    and taxes:
    Importer/broker must       Art. 217 of Council Reg.   Art. 217 of Council Reg.
    calculate duties and       92/2913 requires Customs   92/2913 requires Customs
    taxes to be verified by    to calculate import        to calculate import duties
    foreign customs services.  duties and authorizes the  and authorizes the use of
                               use of practical           practical procedures for
                               procedures for entry in    entry in accounts.
                               accounts.

    E. Timing of payment of    Not required               Required
    duties and taxes:
    Duties and taxes must be   Reg. 5 of the Postal       Art. 74 of Council Reg.
    paid or secured prior to   Packet Regs. exempts       92/2913 and Sec. 43 & 44
    Customs' release of        postal parcels from the    of Customs and Excise
    shipment to delivery       requirement for importers  Management Act require
    agent.                     to pay or make security    importers to pay or make
                               for payment before goods   security for payment
                               are released.              before goods are released.

    F. Customs service         Applicable                 Applicable
    charges:
    Importer/broker must pay   Art. 239 of Commission     Art. 239 of Commission
    for customs clearance      Reg. 2454/93 requires the  Reg. 2454/93 requires the
    outside of normal          declarant to pay costs     declarant to pay costs
    business hours.            associated with the        associated with the
                               examination of goods in    examination of goods in
                               places or at times other   places or at times other
                               than those appointed.      than those appointed.
                               Art. 237 of the
                               Commission Reg. 2454/93
                               allows Customs
                               authorities to require
                               postal administrations to
                               be the declarant.

    G. Posting of bonds or     Not required               Required
    other security:
    Importer/broker must post                             Arts. 50 and 51 of Council
    a bond or provide other                               Reg. 92/2913 require goods
    security for storage                                  to be held in temporary
    facilities.                                           storage until cleared and
                                                          authorize Customs to
                                                          require security. See also
                                                          Sec. 157 of the Customs
                                                          and Excise Management Act.

    H. Shipping records        Not required               Required
    retention: Importer/
    broker must maintain                                  Art. 16 of Council Reg.
    shipping records on                                   92/2913 requires that
    parcels.                                              records be kept for at
                                                          least 3 years. Sec. 75A of
                                                          the Customs & Excise
                                                          Management Act and Reg. 9
                                                          of the Customs Traders
                                                          Regs. provide that records
                                                          may be required to be kept
                                                          for up to 4 years.

    I. Liability for parcel    Applicable                 Applicable
    contents: Importers/
    brokers are subject to     Sec. 50 and Sch. 1 of the  Sec. 50 and Sch. 1 of the
    liability for illegal      Customs & Excise           Customs & Excise
    contents contained in      Management Act provide     Management Act provide
    parcels.                   penalties for the          penalties for the improper
                               improper importing of      importing of prohibited or
                               prohibited or restricted   restricted goods.
                               goods. Depending on the    Depending on the offense
                               offense and                and circumstances,
                               circumstances, penalties   penalties could range from
                               could range from fines     fines (i.e., 3 times the
                               (i.e., 3 times the value   value of the goods) to
                               of the goods) to           imprisonment for a term
                               imprisonment for a term    not exceeding 14 years
                               not exceeding 14 years     (for certain prohibited
                               (for certain prohibited    drugs).
                               drugs).

    J. Fines for incorrect or  Could be applicable when   Applicable
    missing declarations:      importer/broker provides
    Importers/brokers are      customs declaration        Reg. 8 of the Customs
    liable for fines for                                  Controls Regs. provides
    incorrect or missing       Reg. 8 of the Customs      penalties for failure to
    customs declarations.      Controls Regs. provides    provide customs
                               penalties for failure to   declarations in the
                               provide customs            required form.
                               declarations in the
                               required form.             Sec. 167 of the Customs &
                                                          Excise Management Act
                               Sec. 167 of the Customs &  provides penalties for
                               Excise Management Act      providing declarations
                               provides penalties for     that are untrue in any
                               providing declarations     material respect.
                               that are untrue in any     Depending on the offense
                               material respect.          and circumstances,
                               Depending on the offense   penalties could range from
                               and circumstances,         fines to imprisonment for
                               penalties could range      a term not exceeding 2
                               from fines to              years.
                               imprisonment for a term
                               not exceeding 2 years.
    --------------------------------------------------------------------------------
    Note:  Laws and regulations cited:  European Economic Community
    Council Regulation No.  92/2913, Commission Regulation No.  2454/93,
    Customs and Excise Management Act (1979), Post Office Act (1953),
    Postal Packet (Customs & Excise) Regulations (1986), Customs Controls
    on Importation of Goods Regulations (1991), and Customs Traders
    (Accounts and Records) Regulations (1995).

    LEGAL REQUIREMENTS FOR IMPORTING
    PARCELS INTO CANADA
    =========================================================== Appendix V

    We reviewed Canadian customs laws and regulations for importing
    postal and private express parcels into Canada.  Revenue Canada
    informed us that it has three basic programs for processing parcels
    through Canadian Customs:  the mail program, the Courier/Low-Value
    Shipments Program (LVS), and regular cargo program.  The mail program
    is used to process parcels that are presented to Customs by Canada
    Post.  The LVS program is used to process private express parcels if
    they are valued at less than $1,600 Canadian.  GPL parcels, as well
    as comparable private express carrier parcels, are processed under
    LVS because GPL parcels are currently being delivered by a private
    express carrier.  We included legal requirements under the mail
    program to provide a comparison of the two sets of requirements.

    Our primary source was the Customs Act (Departmental Consolidation,
    November 1997).  We also reviewed relevant regulations issued by
    Revenue Canada.  Following our review, Revenue Canada officials
    reviewed and commented on a draft of our compilation of requirements,
    and we made changes where needed.

                               Laws and regulations       Laws and regulations
                               applicable to postal       applicable to private
    Customs requirements       parcels                    express carrier parcels
    -------------------------  -------------------------  --------------------------
    A. Import shipping         Not required               Required
    documentation:
    A manifest or list of      Sec. 12 of the Customs     Sec. 12 of the Customs Act
    goods must be presented    Act provides that          provides that generally,
    to foreign customs         generally, imported goods  all imported goods are
    services for import        are required to be         required to be reported to
    clearance.                 reported to the customs    the customs office as
                               office as prescribed by    prescribed by regulation.
                               regulation. Mail items
                               are required only to have  Memorandum D-17-4-0 (Jan.
                               a standard declaration     20, 1997, concerning the
                               form attached. Customs     Courier/Low Value Shipment
                               inspectors examine the     (LVS) Program-Low Value
                               declaration and, if        Commercial Goods, provides
                               necessary, open the item   that presentation of a
                               to examine any invoice     cargo release list meets
                               enclosed or physically     the reporting requirements
                               examine the contents and   under Section 12. The
                               the parcel. See            cargo/release list must
                               Memorandum D5-1-1 (April   include (1) a unique
                               21, 1997).                 identifier number
                                                          generated by the courier;
                                                          (2) the consignee's name
                                                          and address; (3) the
                                                          importer's name and
                                                          address; (4) the name of
                                                          the shipper, exporter, or
                                                          vendor; (5) the quantity;
                                                          (6) the weight of the
                                                          shipment; (7) the
                                                          estimated value for duty
                                                          in Canadian dollars; (8) a
                                                          description of the goods;
                                                          and (9) the country of
                                                          origin. Also, the cargo/
                                                          release list must contain
                                                          the carrier code and name,
                                                          U.S. port of exit, vehicle
                                                          identification number,
                                                          office of release, and
                                                          date.

    B. Entering shipping data  Not required               Not required
    into foreign customs
    services' computers:       Postal items are           Under sec. 8.1 (3) of the
    Importer/broker must       presented to Customs by    Customs Act, persons may
    enter shipping data into   Canada Post, and Customs   be authorized to file
    foreign customs' computer  inspectors enter data.     forms electronically but
    systems for entry.         See Memorandum D5-1-1.     are not required to do so.

    C. Use of licensed         Not required               Not required
    customs brokers:
    Importer must use          Postal items are           For commercial goods
    licensed brokers to        presented to Customs by    imported under the
    submit shipping data.      Canada Post. See           Courier/LVS program,
                               Memorandum D5-1-1.         importers must either
                                                          clear the goods themselves
                                                          or use a customs broker.
                                                          If customs brokers are
                                                          used, they must hold a
                                                          license under Sec. 9 of
                                                          the Customs Act. See
                                                          Memorandum D17-4-0.

    D. Calculation of duties   Not required               Required
    and taxes:
    Importer/broker must       According to Sec. 24 of    Memorandum D17-1-10
    calculate duties and       the Guidelines and         outlines how to complete
    taxes to be verified by    General Information Part   the form, which requires
    foreign customs services.  of D5-1-1, the customs     importer/broker to
                               inspector determines the   calculate duties and
                               tariff classification and  taxes.
                               value of goods sent by
                               mail on the basis of
                               information from the
                               customs declaration or
                               invoices attached and
                               enters data into the
                               postal Import Control
                               System.

    E. Timing of payment of    Not required               Required
    duties and taxes:
    Duties and taxes must be   Under the customs          Sec. 33 of the Customs Act
    paid or secured prior to   international mail         states that goods may be
    Customs' release of        processing system, Canada  released prior to the
    shipment to delivery       post collects the duties   payment of duties in such
    agent.                     and taxes on behalf of     circumstances as may be
                               Customs before releasing   prescribed and shall be
                               the parcels to the         paid thereon within a
                               importer. Subsection       prescribed time.
                               147.(1) and the Customs    Memorandum D-17-1-0 allows
                               Act provide authority for  for release before payment
                               this arrangement.          with security.

    F. Customs service         Not required               Required
    charges:
    Importer/broker must pay                              Regulations Respecting
    for customs clearance                                 Special Customs Services
    outside of normal                                     (Jan. 1, 1996) require
    business hours.                                       payment for clearance
                                                          outside of regular
                                                          business hours.

    G. Posting of bonds or     Not required               Required
    other security:
    Importer/broker must post                             The Customs Sufferance
    a bond or provide other                               Warehouse Regulations,
    security for storage                                  pursuant to Sec. 19 of the
    facilities.                                           Customs Act, requires
                                                          posting of security for
                                                          such facilities.

    H. Shipping records        Not required               Required
    retention:
    Importer/broker must                                  The records retention
    maintain shipping records                             period for commercial
    on parcels.                                           goods imported under the
                                                          Courier/LVS program is 6
                                                          years plus the current
                                                          year. See Sec. 2 of the
                                                          Importers Records
                                                          Regulations (Memorandum
                                                          D17-1-21) and subsection
                                                          17(2) of the Customs
                                                          Brokers Licensing
                                                          Regulations.

    I. Liability for parcel    Applicable                 Applicable
    contents: Importers/
    brokers are subject to     Importers are responsible  Importers are responsible
    liability for illegal      for complying with         for complying with
    contents contained in      Canadian laws with regard  Canadian laws with regard
    parcels.                   to controlled,             to controlled, restricted,
                               restricted, or prohibited  or prohibited goods. Such
                               goods.                     goods are not eligible for
                                                          importation under the
                                                          Courier/LVS program.

    J. Fines for incorrect or  Not applicable             Applicable
    missing declarations:
    Importers/brokers are      However, under Sec. 12 of  As specified in Sec. 3 of
    subject to liabilities     the Customs Act, the       the Reporting of Imported
    for fines for incorrect    sender of a parcel could   Goods Regulations,
    or missing customs         be subject to liability    pursuant to Sec. 12 of the
    declarations.              for failure to provide a   Customs Act, failure to
                               customs declaration.       report goods to Customs is
                                                          subject to a penalty of
                                                          $400 per shipment.

                                                          Under Sec. 33.1 of the
                                                          Customs Act, every person
                                                          who fails to account for
                                                          imported goods in
                                                          accordance with law or
                                                          regulation is liable to a
                                                          penalty of $100 for each
                                                          failure.
    --------------------------------------------------------------------------------

    (See figure in printed edition.)Appendix VI
    COMMENTS FROM USPS
    =========================================================== Appendix V

    (See figure in printed edition.)

    (See figure in printed edition.)Appendix VII
    COMMENTS FROM ACCA
    =========================================================== Appendix V

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    (See figure in printed edition.)

    The following are GAO's comments on specific issues included in the
    letter dated May 8, 1998, from the Air Courier Conference of America
    (ACCA).  These comments include the views of DHL, FedEx, and UPS.
    Other issues that were discussed in the letter have been included in
    the report text.

    GAO COMMENT

    1.  In its letter, ACCA said that GPL service actually began a year
    earlier than indicated in the report with a USPS service called
    International Customized Mail (ICM).  However, USPS' Manager of Mail
    Order said that ICM was not the beginning of GPL service, since ICM
    involved the sending of letters, not parcels.  Further, this USPS
    official said that USPS' competitors with regard to ICM were foreign
    postal services, not private express carriers.

    2.  ACCA said that we did not address the extent to which differences
    in customs treatment for GPL parcels may be the result of USPS'
    "manipulation of international law." We did not address this issue
    because it was outside the scope of our review.

    3.  ACCA said that it would be helpful for the report to provide more
    information about the commercial implications of differences in
    customs treatment.  ACCA noted cost differences in the carriers'
    average cost of complying with customs requirements and average GPL
    revenue.  Within the scope of this review, we did not attempt to
    compare carrier costs with USPS revenues.  We plan to make GPL cost
    issues the subject of a future review.

    4.  ACCA said we should have more thoroughly investigated the
    incidence of duty collection on GPL parcels shipped to Japan,
    including questioning direct marketers about whether duties were
    being collected on their parcels imported into Japan.  In fact, we
    did question some direct marketers about this issue, but we were not
    informed that duties were not being collected on dutiable GPL parcels
    being shipped to Japan.

    5.  ACCA questioned whether we relied on a verbal statement from a
    Japan Customs official that the simplified tariff discussed in
    chapter 3 applied to both postal and private express parcels.  In
    fact, we posed this question in an electronic message to a Japan
    Customs official who currently works in the Japanese Embassy in
    Washington D.C., and received an electronic written response that it
    applied to both postal and private express parcels under Art.  3-3 of
    Japanese Customs Tariff Law.  This official's statement was contained
    in a draft of this report that was provided to Japan Customs, which
    did not disagree with this information.  In addition, we verified
    with our Japanese law expert at the Library of Congress that the law
    applied to both postal and private express parcels.  Further, we
    provided Japan Customs with a copy of a document furnished by a
    private express carrier suggesting that the simplified tariff applied
    only to postal parcels.  Japan Customs officials responded that they
    did not know the source of this document and reiterated that the
    simplified tariff applied to both postal and private express parcels.

    (See figure in printed edition.)Appendix VIII
    COMMENTS FROM REVENUE CANADA
    =========================================================== Appendix V

    MAJOR CONTRIBUTORS TO THIS REPORT
    ========================================================== Appendix IX

    GENERAL GOVERNMENT DIVISION,
    WASHINGTON, D.C.

    Teresa L.  Anderson, Assistant Director
    Robert G.  Homan, Evaluator-in-Charge
    Melvin J.  Horne, Senior Evaluator
    Hazel J.  Bailey, Communications Analyst
    Martin de Alteriis, Senior Social Science Analyst

    OFFICE OF GENERAL COUNSEL,
    WASHINGTON D.C.

    Jill Poses Sayre, Senior Attorney

    GLOSSARY
    ============================================================ Chapter 1

          AIR WAYBILL
    -------------------------------------------------------- Chapter 1:0.1

    A nonnegotiable instrument of air transport that serves as a receipt
    for the shipper, indicating that the carrier has accepted the goods
    listed and obligates itself to carry the consignment to the airport
    of destination according to specified conditions.  See also bill of
    lading.

          BILL OF LADING
    -------------------------------------------------------- Chapter 1:0.2

    A document that establishes the terms of a contract between a shipper
    and a transportation company under which freight is to be moved
    between specified points for a specified charge.  Usually prepared by
    the shipper on forms issued by the carrier, it serves as a document
    of title, a contract of carriage, and a receipt for goods.  See also
    air waybill.

          BOND
    -------------------------------------------------------- Chapter 1:0.3

    An obligation made binding by a money guarantee; also the amount of
    the money guarantee.

          BROKER
    -------------------------------------------------------- Chapter 1:0.4

    An individual or firm licensed to enter and clear goods through
    Customs.  Also referred to as a customhouse broker.

          CERTIFICATE OF ORIGIN
    -------------------------------------------------------- Chapter 1:0.5

    A document, required by certain foreign countries for tariff
    purposes, certifying the country of origin of specified goods.

          C.I.F.
    -------------------------------------------------------- Chapter 1:0.6

    Cost, insurance, and freight.  A pricing term indicating that the
    cost of the goods, insurance, and freight are included in the quoted
    price.

          COMMERCIAL INVOICE
    -------------------------------------------------------- Chapter 1:0.7

    An itemized list of goods shipped specifying their price and terms of
    sale.

          CONSIGNMENT
    -------------------------------------------------------- Chapter 1:0.8

    Delivery of merchandise from an exporter (the consignor) to an agent
    (the consignee) under agreement that the agent sell the merchandise
    for the account of the exporter.

          CONSUMPTION TAX
    -------------------------------------------------------- Chapter 1:0.9

    A consumption tax is levied on a taxpayer's expenditures for goods
    and services, rather than on an individual's income.

          CUSTOMS
    ------------------------------------------------------- Chapter 1:0.10

    The authorities designated to collect duties levied by a country on
    imports and exports.  The term also refers to the procedure involved
    in such collection.

          DE MINIMIS
    ------------------------------------------------------- Chapter 1:0.11

    Threshold value amount at which imported goods are subject to duties
    and taxes.  For example, the de minimis for imported parcels to Japan
    is 10,000 (U.S.$ 80).  \1

    --------------------
    \1 Using an exchange rate of 125 per U.S.  dollar.

          DUTY
    ------------------------------------------------------- Chapter 1:0.12

    A tax imposed on imports by the Customs authority of a country.  Also
    called a tariff or a customs tariff, a customs tax collected on
    foreign products to generate revenues or discourage imports.
    Normally, a country's tariff schedules specify the amount of duty
    chargeable to a given class of imports.  Duties are generally based
    on the value of the goods (ad valorem duties) and/or some other
    factor, such as weight or quantity (specific duties), or a
    combination of value and other factors (compound duties).

          EUROPEAN CURRENCY UNIT (ECU)
    ------------------------------------------------------- Chapter 1:0.13

    The ECU is a currency basket comprising a predetermined amount of a
    number of different currencies.  ECUs include most of the EU
    currencies.

          EUROPEAN UNION (EU)
    ------------------------------------------------------- Chapter 1:0.14

    Umbrella term referring to a "three-pillar" construction comprising
    the European Community and two new pillars:  Common Foreign and
    Security Policy (including defense) and Justice and Home Affairs
    (notably cooperation between police and other authorities).  The EU
    is governed by a five-part institutional system, including the
    European Commission; the EU Council of Ministers; the European
    Parliament and the European Court of Justice; and the Court of
    Auditors, which monitors EU budget spending.

          EXCHANGE RATE
    ------------------------------------------------------- Chapter 1:0.15

    The price at which one country's currency can be converted into
    another's.  A wide range of factors influences exchange rates, which
    generally change slightly each trading day; however, some rates are
    fixed by agreement.

          EXCISE TAX
    ------------------------------------------------------- Chapter 1:0.16

    Tax on the sale or manufacture of a commodity, usually a luxury item.
    Example:  U.S.  federal and state taxes on alcohol and tobacco.

          EXPORT LICENSE
    ------------------------------------------------------- Chapter 1:0.17

    A government document that permits the licensee to export designated
    goods to certain destinations.

          FEE
    ------------------------------------------------------- Chapter 1:0.18

    A sum paid or charged for a service; a sum can be a fixed amount.

          HARMONIZED TARIFF SCHEDULE
    ------------------------------------------------------- Chapter 1:0.19

    A standardized commodity description and coding system for commercial
    products developed by the Customs Cooperation Council.

          MANIFEST
    ------------------------------------------------------- Chapter 1:0.20

    An instrument in writing that lists the individual shipments
    constituting cargo.

          PENALTY
    ------------------------------------------------------- Chapter 1:0.21

    A sum of money or right forfeited as a consequence of undesirable or
    illegal conduct.

          TARIFF
    ------------------------------------------------------- Chapter 1:0.22

    A tax on imports or exports, usually imposed either to raise revenue
    or to protect domestic firms.  A tariff may also be used to correct
    an imbalance of payments.  The money collected under tariffs is
    called a customs duty or duty.

          UNIVERSAL POSTAL UNION (UPU)
    ------------------------------------------------------- Chapter 1:0.23

    The UPU is an agency of the United Nations that governs international
    postal service; it also established some customs procedures for
    international mail.  In 1995, 189 countries were UPU members,
    including Canada, Japan, the United Kingdom, and the United States.
    Countries that signed the Universal Postal Convention agreed to
    accept mail from other countries and to deliver the international
    mail to its final destination.

          VALUE ADDED TAX (VAT)
    ------------------------------------------------------- Chapter 1:0.24

    A consumption tax levied on the value added to a product at each
    stage of its manufacturing cycle as well as at the time of purchase
    by the ultimate consumer.  The VAT is a fixture in European countries
    and a major source of revenue for the EU.

    *** End of document. ***