There's a great Planet Money episode explaining the brokenness of the existing system (https://www.npr.org/sections/money/2018/08/01/634737852/epis...). NPR ends up substantiating the claim of an entrepreneur who says that it costs him more to send a package across the street than it costs someone in China to send a package to that same address.
If you look up the cheapest US shipping rates you'll find they're roughly the same range, and that almost all the comparisons purporting to show otherwise are cheating, typically by using retail pricing on a more expensive shipping option.
>So he turns to his shipping guy. And he asks, how much would it cost for us just to ship this mug, like, not across the ocean, just across the street?
>SMALDONE: He told me it's going to cost us about $6.30 to ship this item.
Amazon page for mighty mug says it's 12.6 oz shipping weight. https://www.amazon.com/Might-Mug-1525-Mighty-Black/dp/B00FZD...
Round up to 13 oz, then look up rates for the cheapest shipping option for packages under a pound "parcel select lightweight". See https://pe.usps.com/text/dmm300/Notice123.htm#_c139
The cheapest rate is $2.02 for 13 oz. This rate applies when mail is injected at the closest mailing point (DDU), which "mailing across the street" corresponds to.
"Parcel select" is a service for large mailers who deliver packages, in bulk, to multiple post facilities in the US, near to the destination of the package and have the USPS do the "last mile delivery". Does China Post have a fleet of trucks, in the US which moves Chinese packages to a closer US postal delivery facility. I believe not.
Moreover, if China did have such a service, someone, China or the US is subsidizing it since individual shippers in China, not doing any aggregating themselves get a rate equivalent to large shippers in the US who aggregate and must pay the costs of this themselves.
"“Parcel Select” is the registered trademark name for the Postal Service’s economical ground delivery service for packages entered in bulk, including those entered at destination facilities. It is designed for and generally used by large- and medium-sized parcel shippers. Parcel Select mailers pay postage that reflects the degree of work-sharing they do in presorting their parcels and/or drop shipping their pieces at a destination facility located closer to the delivery point. Mailers are responsible for transporting their Parcel Select pieces to a destination bulk mail center (DBMC), destination sectional center facility (DSCF), or a destination delivery unit (DDU) for business and residential delivery."
https://about.usps.com/postal-bulletin/2007/html/pb22219/kit...
They explicitly claim that the prices quoted are just for last mile delivery.
The cost for an individual shipper in the US versus the cost for an individual shipper in China is clearly the correct point of comparison and it seems NPR was in making that comparison.
Edit: removed comment about other thread.
International mail is aggregated by China post, and they pay the USPS for the last mile. To evaluate to what extent USPS is subsidizing them, you need to compare to what someone else who aggregates and pays for last mile delivery would pay. This is very different from what an individual shipper would pay.
The aggregation that USPS gives domestic shippers a discount for involves actually doing all but the last mile of the shipping process - taking a large group of packages to the appropriate shipping area. This is a process that would require a shipper to have a fleet of long distance trucks (something large and medium sized US shippers have).
If you're claiming China Post does this in the US, I think you need serious references. And, as I mention above, it ultimately doesn't matter. If China Post is doing this, they would be doing it for free because the total cost we're talking about individual shippers paying, in shipping things from China, is close to the last mile cost that USPS charges domestic shippers.
Labor costs in China are much cheaper than in the US, it stands to reason their cost of sorting there will be less than what the USPS implicitly charges for sorting here.
This is the key point in your claim that was not clear in your top-level comment, which is the source of the confusion/dispute. (I have no idea who is right.) Consider editing your top-level comment to clarify this claim (with an edit flag) and, ideally, link to somewhere that backs it up.
For instance, even if you're right it probably means that China is subsidizing the shipping to the distribution point, which would be an important thing to understand.
But I suppose part of the difference is not due to the subsidy but because the China post has lower labor costs for the aggregation work?
That's end to end, although you do need to pay to ship it to Amazon's warehouse, but that can be done in bulk cheaply.
Under the UPU, the USPS is required to charge Chinese shippers a "terminal fee" for packages shipped from China. However, due to China being classified as a "transitional country" it had extremely low terminal fee rates.
Combined with China subsidizing shipping for export-based businesses, it was generally cheaper for a business in Shenzen to ship small/light products by post than for an American business to ship an equivalent product by USPS across the street.
The deal secured by the US allows the USPS to begin charging new terminal fee rates beginning next summer. Presumably the new rates will change the economics of this situation, but in the meantime Chinese shippers still have at least a year to continue these subsidized shenanigans.
Um...the beneficiary of these "subsidized shenanigans" is the American people!
Bad for the middleman, bad for the parasites, bad for the FBA goofballs, but good for the American people.
So by itself that's a wash, no benefit nor loss.
But also people that could have bought a local product send their money out of the country, which means less money circulating in the economy.
And more labor is spent on shipping than necessary, which means less value per dollar spent.
Both of those hurt the American people.
In vague hand wavy tickle down from a government that isn't going to lower taxes nor reduce total expenditure there might be a benefit in increased funding available for other things but the visible net effect is less money in individual Americans' pockets.
Maybe they'll save more to that pension fund, but I can't in good conscience say "The USPS should keep that policy where I can get $3 cheaper shipping from china and the money to pay for it comes out of the USPS pension fund."
If most of the money stays inside the realm of shipping, the average cost for local businesses will go down. (The first order effect just shuffles money around. More to buy from china, less to send to customers, on average the same. A second order effect is that more purchases from china will shift to being bulk, dropping the average cost.)
I agree with you that the right deal was made. But the cheap shipping from China has pretty much proved a market for subsidized small parcel shipping as an economic multiplier that ought to be made available to everyone in the US and abroad.
I'm not sure I agree that there's a big difference between $4 small parcel shipping and $.50 small parcel shipping to the economy, especially when it involves waiting a month for the product.
And that is the primary reason that China subsidizes shipping costs for Chinese manufacturers: to drive foreign competitors out of business until only China is left.
Alternative is getting the same or maybe at best rebranded chinese OEM products, that went through a local distributor that adds his own markup, taxes, and other stuff, because he's operating in bulk quantities.
Changing the current scheme will be bad for plenty of consumers around the world.
It will also make it more expensive to get replacenemnt parts, for typical electronics, and will make self-made repairs more expensive. Because normal (unatuhorized) people can only get many of those spare parts from China.
Making it more expensive to ship from China will have many negative effects. It may have some positive ones, but that's to be seen.
If a middleman ends up cheaper because of bulk shipping, that's because they're actually providing value! They are reducing the total cost of shipping.
If the total shipping cost you pay, including your share of hidden subsidies, goes up? That means you were an above-average china-buyer, and the average citizen was paying part of your bill and getting nothing. That's not fair, and you're not entitled to offload shipping costs onto everyone else.
And I'm also paying quite a bit of taxes that go to someone else's needs, and I have nothing from. Just a nature of taxation and government subsidies.
This just shifts the balance of what's comming back to me, to where I don't care as much, perhaps.
Especially when you're looking internal to the post office.
How are retail stores supposed to compete when Amazon will ship for free! Eventually, there will just be Amazon, and then watch prices skyrocket!
>Combined with China subsidizing shipping for export-based businesses, it was generally cheaper for a business in Shenzen to ship small/light products by post than for an American business to ship an equivalent product by USPS across the street.
Please back this up with examples.
You linked to a price sheet for US shippers. Chinese shippers don't pay those rates. They pay Chinese shipping rates (which I can't provide an authoritative example of because they're negotiated on a vendor basis), and the terminal fee. In many cases, China Post covers the terminal fee and/or all shipping costs for strategic regions, such as for vendors located in Special Economic Zones.
The important thing though is that the terminal fee for Chinese shippers is lower than the lowest postal fee for US shippers.
Yes, Chinese shippers pay different rates. NPR claimed to ship a mighty mug across the street for a US shipper would cost $6.30, when the actual cost would be about a third of that.
The claim seems to be true. Yes, he seems to have overstated his shipping cost and could have done better. Yes, with the combination of all 3 of A) volume pricing, B) presorting, and C) taking it to the specific delivery unit, you can get pretty close to the cost to mail a parcel from China. To somehow take these facts and get to "lolol it's a false claim" is absurd.
If you set up an apples to apples comparison, I think China would end up slightly cheaper much of the time, but nowhere near the hyperbolic numbers that get thrown around. Maybe they pay $2 for something that costs $2.25 or something. It's difficult to point to specific comparable shipments where they're actually cheaper, though.
>The claim was that someone (and, actually, this includes low volume mailers) could mail something from China for a total cost less than his cost to mail it across the street.
Actually, the claim made there was that someone could sell something including shipping from China for less than the shipping cost across the street. This claim is laughably absurd, and the comment I was replying to said that NPR had substantiated that, which is also absurd. If they'd fact checked that podcast the $6.30 figure would have never made it in.
I can't use Amazon's FBA to ship one package cheaper than I could myself.
End, low-volume customers in China can get packages shipped to the US cheaper than I can myself as an end, moderate-volume shipper in the US.
I think using published rates for presorted mail is fair. It's not the cheapest the USPS charges - they give further, unpublished, discounts to Amazon, and they still make a profit there.
If NPR was looking to ask the "average" business what it would take to fulfill a single order, they likely got a good answer. And the shipper may have been overestimating final shipping weight if done on the fly.
Bulk freight of nonperishable things is cheap.
Ask why Australia ships iron ore and coal to China to be made into steel.
Let alone how moving up one step in granularity to the more realistic DSCF pricing, where you go to the closest of 350 facilities instead of the closest of 30000, is already $2.52 for 13oz...
This shows the rate for 12 oz under Parcel Select—Lightweight. Depending how closely you're injecting the product (how many miles the "last mile" is), rates range from $1.83 to $4.34. Not seeing $4.76 anywhere.
I think that's what the NPR report was getting at, with their colorful tales.