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. ***