USPS is heavily subsidized; prohibition has been in place for years

July 23, 2012

By Bill Jaynes
The Kaselehlie Press

July 14, 2012 Pohnpei, FSM-FSM exporters can ship product to the United States any legal way they want, but the United States Postal Service (USPS) is not a legal way to export commercial merchandise from the FSM.

It's not a new rule. It's been in place since the Compact was amended.

Specifically Article VI paragraph five says, "The Government of the Federated States of Micronesia shall undertake to protect the postal services provided by the Government of the United States from exploitation for the monetary gain of private or government organizations or of individuals or of commercial enterprises, including the posting of bulk mail, books, catalogues, goods or materials."

Some people think of the definition of the word "exploitation" in its negative connotation, as in "the exploitation of children, or the exploitation of migrant workers." However, the Webster's II Dictionary says that the first definition of the word is "to use to best advantage." With this as the definition, paragraph five is saying that commercial shippers cannot use USPS for their commercial shipping needs and since it is the first definition of the word that is the one that is meant.

"The USPS pays all transportation costs associated with mail to, from and within the FAS (Freely Associated States)," wrote Leo Tudela of the USPS in Hawaii. "In addition, all monies from the sale of stamps are retain(ed) by the FSM Government."

Essentially, the services of the USPS are just one example of U.S. programs provided above and beyond Compact sector grants. Others in the alphabet soup of extra U.S. programs include the NOAA Weather Station, CDC, EPA, SBA, USDA RD, USDA NRCS, FAA, TSA, the Coast Guard SAR, US Peace Corps, TRIO programs, and others.

According to the Federal Register, dated October 31, 2007, the initial intention contained in the Compact as Amended was to discontinue the "domestic" mail status of the USPS and to phase in the implementation of international mail status, a significantly more expensive service for mailers. On September 15, 2005 the Postal Service published a notice in the Federal Register proposing use of the phased international rate schedules for the Republic of the Marshall Islands (RMI) and the FSM. After considering all of the comments on its proposal to use international postal rates, fees, and mail classifications, on November 23, 2005, USPS posted a final rule implementing the use of international published prices and mailing standards, the Federal Register says.

However, the application of international rates to the FAS had "observable effects on the economy and business correspondence of the RMI and the FSM." USPS considered a number of business solutions to lessen that impact, but none were believed to provide optimal service to the FSM and RMI.

The October 31, 2007 notice in the Federal Register was the final ruling returning the FSM and the RMI to "mail treated as domestic" status. "This decision was a result of highlevel discussions with the RMI and the FSM and consultation with the U.S. Department of State," the Federal Register said.

Commercial exporters are expected to pay the actual cost for shipping their merchandise from the FSM. The subsidized USPS rate is not available to them. That actual USPS cost of that subsidy is quite high.

Currently FSM and USPS are in sensitive negotiations regarding FSM reimbursement to USPS for the cost of excessive increases in exported freight. The amount of money being discussed is substantial.

Using as a case study, a 30 pound box (dimensions 18" x 14" x 14") containing handicrafts, we called various shipping services in the FSM to find out what such a box would cost to ship to Hawaii.

The USPS subsidized rate for that kind of box would be $23.60. Shipping that same box through commercial services located in Pohnpei as Pohnpei exporters are required to do, the price for the same box ranged from $216.50 to $248.20.

The UPS agent in Pohnpei is only an authorized agent for receipt of UPS packages. They do not ship on behalf of UPS so UPS is not an export option for exporters in Pohnpei.

United Cargo said that their rate for shipping packages to Hawaii is $4.99 per kilo for shipments less than 100 kilos. A kilo is 2.2 pounds. Our test box is 13.64 kilos; a total of $68.06. However, in order to ship on United Airlines a shipper must have an account. In order to have an account a shipper must qualify as a "known shipper," a Transportation Safety Administration standard. It is rare that TSA opens the application process. "Sometimes people get really lucky and can get in during open season," said one United employee, "but it's really hard and it hasn't been open for a while."

One U.S. official said that "really smart" FSM exporters would find a representative in the U.S. to market their products and then ship out a container load so that they can realize economies of scale.

A twenty foot container is approximately 1000 cubic feet. Our test box was just over 2 cubic feet, so a twenty foot container could carry nearly 500 of them. But we couldn't get a price quotation to ship a twenty foot container from the FSM to Hawaii since our query was merely hypothetical. We were told that the price changes constantly and that the only way we could get a quotation was to send an email and ask for a bid. The shipper we called would not give us even an approximate figure.

The representative of that shipping agent said that the containers that leave Pohnpei for Hawaii are usually filled with personal household goods belonging to people who are relocating from Pohnpei to the U.S.

A letter pinned up in FSM Post Offices several months ago says, "This is to notify all our valued customers that effective immediately, NO MAIL that contains merchandise, materials, etc., for resale will be accepted…"

It then quotes paragraph five of the Amended Compact and continues.

"In order to effectuate these provisions, the FSM Postal Service reserves the right to require full disclosure of the contents of articles to be mailed as well as spot inspections of the contents of package prior to mailing.

"Violation of these prohibitions may be treated by FSM Postal Service Authorities in accordance with the Postal Crime Act and referral for prosecution," the letter concludes.