Bureau of International Organization Affairs
July 10, 2008

(2:00 – 5:00 p.m., 10 July 2008, Melrose Hotel, 2430 Pennsylvania Avenue, NW, Washington, D.C.)

Minutes of the meeting

Committee members in attendance

• Maynard Benjamin, Global Envelope Alliance
• Jody Berenblatt, Bank of America
• Michael Coughlin, Accenture
• Gene Del Polito, Association for Postal Commerce
• Ann Fisher, Postal Regulatory Commission
• Bruce Harsh, Department of Commerce
• Juan Ianni, Postal Consultant
• Steve Lopez, Experian Marketing Services
• Gregory Olsavsky, Department of Homeland Security (Customs and Border Protection)
• Michael Regan, U.S. Postal Service
• Sue Presti, Express Delivery and Logistics Association
• Dennis Shea, Pitney Bowes
• Brad Smith, American Council of Life Insurers
• Paul Smith, UPS
• Don Soifer, Lexington Institute

U.S. Department of State officials in attendance

• Michael Glover, Chairman of the Advisory Committee
• Gerald Anderson, Deputy Assistant Secretary of State, Bureau of International Organization Affairs
• Dennis Delehanty, Designated Federal Official for the Advisory Committee
• Katherine Lawrence, Program Manager for Postal Affairs, International Organization Affairs, Technical and Specialized Agencies

This meeting was open to the public. Members of the public who spoke at this meeting are identified as such in the text below.

I. Welcoming remarks and introductions

1. Michael Glover opened the meeting and welcomed participants. Gerald Anderson, Head of the U.S. delegation to the Universal Postal Union (UPU) Congress to be held in Geneva, stressed his interest in the views of the participants on the issues to be taken up by the Congress. Mike Glover noted that the State Department received no suggested agenda items from the public. Members of the public would, however, have the opportunity to raise issues of interest at the end of the meeting. Mr. Glover also noted that following the discussion of each agenda item by Advisory Committee members, the public would be invited to comment on the subject in question. He thanked the Committee members for their contributions to the July 10 agenda.

II. 2008 Geneva UPU Congress calendar

2. Mike Regan gave a detailed description of the calendar of meetings and events that would take place during Congress and discussed the responsibilities of the nine Congress Committees and the subjects to be handled at the Plenary sessions.

3. Mr. Regan explained that each delegation would present its credentials to Committee 1. The Finance Committee (Committee 2) would deal mainly with the UPU budget and related financial issues. The Committee on General Affairs (Committee 3) handles questions of policy relating to the Union itself, the structure of the Union and the provisions of the Constitution and General Regulations. Committees 4 and 5 deal with proposed amendments to the Convention, the former to handle general regulatory issues and the latter devoted to economic issues, particularly terminal dues (remuneration between countries for the delivery of letter post in destination countries) and the Quality of Service Fund which provides additional remuneration based on terminal dues to improve quality of service in developing countries.

4. The remaining Committees are self-explanatory: Committee 6 on Postal Payment Services; Committee 7 on Postal Markets and Products (which also covers the mainly private-sector Consultative Committee and quality of service issues); Committee 8 on Development Cooperation; and Committee 9, the Drafting Committee. The Chair of Congress is normally the host country, which would have been Kenya. However, the civil unrest in that country caused the Congress to be relocated to Geneva, but it was agreed that Kenya would still chair the Congress and the Council of Administration for the coming four-year period.

5. The Committee sessions end on August 5, with the exception of Committee 2 (Finance) which, meeting on August 7, would review the financial implications of Congress decisions. Elections for Director General, Deputy Director General and the members of the Council of Administration (CA) and Postal Operations Council (POC) are to take place on August 6. The constituent meetings of the CA and POC are scheduled for August 11, while the Consultative Committee’s first meeting would take place on the last day of Congress, August 13. A central task of the newly elected Councils would be to select the Chairs and Vice Chairs of their respective Committees to ensure proper distribution of responsibilities by geographical region and levels of development. The POC would hold an initial meeting on August 8 to select its Chair, for which there are four candidates: Russia, Switzerland, Great Britain and Greece. [Note: only three candidates, Great Britain, Greece, Switzerland, were put forward at Congress.]

6. Paul Smith asked how the Consultative Committee could have more interaction with the delegation during the Congress. Mike Glover said that there was no set plan but that the State Department was considering holding periodic meetings with U.S. members of the Consultative Committee to exchange views on work and decisions of Congress.

III. U.S. Positions on major issues at Congress

7. Dennis Delehanty described the U.S. Government’s positions on the major proposals to be considered at Congress. According to the UPU regulations, every matter put before Congress must be in the form of a formal proposal. As of today, 340 proposals are before Congress. The U.S. delegation has formulated a position paper for each proposal.

8. Perhaps the most important issue at Congress for the U.S. delegation will be proposal 10.0.1 submitted by the CA which would amend the Preamble of the Constitution by changing the mission of the UPU. The U.S. Government is concerned with some of the text in this proposal as it would expand the UPU mission statement to include references to trade, and make the promotion of social and economic development part of its core mission. The U.S. Government’s view is that such amendments to the UPU mission statement would detract from the agency’s primary purpose of facilitating the exchange of mail around the world. Furthermore, the U.S. Government notes that these proposed changes have not been fully vetted with the UPU membership and would cause duplication with the missions of other international organizations such as the World Trade Organization. Based on comments made by other member countries, the U.S. delegation estimates there is not sufficient support to approve this amendment to the UPU Constitution. [Note: an amendment to the Mission statement would require the affirmation (a positive vote) of two-thirds of all member countries having the right to vote].

9. Another critical decision to be taken at Congress concerns the ceiling for the UPU budget for the 2009-2012 period. Although the U.S. objects to an increase in member countries’ mandatory contributions, it does support the increased use of extra-budgetary user groups which sometime rely on weighted voting versus the one member, one vote principle.

10. Mr. Delehanty described other proposals of interest to the U.S., such as proposal 57.Rev 1 which would require both the CA and POC to decide the manner in which the results of UPU performance measurements are to be published. This U.S. proposal received support by several co-sponsoring Caribbean countries. The U.S. supports the proposals developed by the POC on terminal dues, which are consistent with the U.S. Strategic Plan for the UPU, but is concerned with proposed changes to classification of countries for purposes of terminal dues and payments to and from the Quality of Service Fund. With regard to terminal dues, the aim of the U.S. delegation will be to push for better cost coverage and a gradual transition of developing countries into the more cost-based “target” terminal dues system applied by industrialized countries.

11. Proposal 61, also put forward by the U.S., would promote advance electronic exchange of customs information between postal administrations. The proposal would help promote implementation of provisions of the Postal Accountability and Enhancement Act concerning customs issues and is consistent with the U.S. Strategic Plan for the UPU.

12. Ann Fisher asked about the expected implementation date for the U.S. proposal on performance measurement. Dennis Delehanty responded by saying that the provisions in the Convention adopted by the 2004 Bucharest Congress established a link between terminal dues payments and the performance of destination countries in delivering inbound international letters. Performance measurements to gauge quality of service began in calendar year 2005. In early 2006, the UPU International Bureau published the individual results for 28 industrialized countries for 2005. This raised concerns among several member countries about the confidentiality of these data – and caused the International Bureau to stop publishing these results until clarity about their publication could be achieved. The U.S. therefore decided to raise this issue through a proposal to Congress. Ann Fisher noted that the Postal Regulatory Commission appreciates the goal of ensuring greater transparency through the publication of performance results for USPS market dominant products.

13. Steve Lopez questioned why the U.S. proposal on performance measurement calls for transparency, but then leaves it up to the respective operator to decide whether or not to publish the results. In response, Dennis Delehanty explained that the wording of the proposal does not necessarily indicate that the actual performance figures themselves would be published. Publication of results could be merely “yes, the operator met its standards” or “no, it did not.” It is uncertain whether or not the member countries would support this proposal at Congress.

14. Michael Coughlin asked why an operator in a liberalized market would disclose its performance results to the UPU. Dennis Delehanty explained that performance measurement is mandated by the UPU. Terminal dues rates are tied to performance.

15. Mike Regan pointed out a difference between performance measurement and publishing performance measurement data. The USPS position is to measure performance and link it to payments, but not publicly publish the performance measurement results. Michael Coughlin commented he understood why countries with a designated operator such as the USPS with an obligation to ensure universal service still have reserved areas. He then questioned why fully liberalized countries would agree to open publication of performance results. Dennis Delehanty took the line of discussion one step further by questioning how competitive services could possibly be considered to be covered under the UPU Convention. Anthony Alverno of the USPS and a member of the public, noted that there is no monopoly on outbound products; on inbound the monopoly only extends to inbound letters, not publications, and for only letters that weigh less than 12 ounces. UPU performance measurement systems do not distinguish between these types of inbound letter post items and would therefore apply to all. The USPS has expressed its concern with the publication of performance results.

16. Mike Regan brought the discussion to proposal 54, in which Congress would make recommendations on the structures of the CA and POC and their various committees, boards and working groups. The structure of the former UPU Councils – the Executive Council and the Consultative Council for Postal Studies – reflected the nature of the postal sector up through the late 1980s and early 1990s. Around that time, European countries, which had begun to liberalize their postal markets, started the process of separating postal operations from governmental regulatory and oversight functions. The two UPU Councils, the CA and the POC, arose from liberalization in Europe and elsewhere and were formally created by the 1994 UPU Congress in Seoul. The structures of the two Councils left some flexibility so that member countries could elect representatives that reflected the relationships in their country between the postal administration and the government. However, according to Mike Regan, most of the UPU’s work is still operational in nature – and mainly concerns the exchange of international mail and what the various postal operators agree to. This has created an imbalance in the workloads of the two Councils, where the POC has by far the larger share. After the 2004 Bucharest Congress, member countries were surveyed regarding possible changes to the Union’s structure. Responses indicated that major changes had already been made and there was no need for further changes at this point. But responses also suggested a willingness to “wait and see” how evolving relationships between operators and ministries might develop and to reevaluate these relationships at a later time.

17. Michael Coughlin asked if the changes suggested in proposal 54 were an improvement to the existing structures. Mr. Regan responded that yes, he believed the proposed changes did in fact improve the existing structures.

18. Juan Ianni asked what was meant by the references in some of the proposals to “sustainable development.” Mike Regan answered that “sustainable development” referred both to environmental and development issues.

19. Michael Glover introduced the next topic of discussion, the classification of countries for the purposes of terminal dues and the Quality of Service Fund. Allison Levy of the PRC noted that Barbados has led a working group responsible for producing proposals for Congress on country classification for purposes of terminal dues and the Quality of Service Fund. In doing so, the working group developed a postal development indicator, which includes gross national income per capita (75%), and a postal-specific indicator (25%) that encompasses such factors as letter volume, surface area, and home delivery. The working group’s proposal divided the UPU membership into five groups, from the most developed countries (Group 1) to the Least Developed Countries as designated by the UN which would make up Group 5. Under the methodology adopted by the CA at its February 2008 session, 22 countries would transition to the more cost-based terminal dues system in 2010, and 12 more countries would do so in 2012.

20. However, an updated list of the proposed country classifications produced by the UPU showed glaring anomalies produced by one country, Equatorial Guinea, whose Gross National Income per capita increased dramatically of late from $955 to $8,500. As a result, many countries, particularly those in Groups 2 and 3, shifted to a lower group which would cause a slower transition for medium-income countries to the terminal dues target system. Under the revised calculation, only 14 countries would transition to the target system in 2010. It was expected that country classification would one of the more hotly debated issues at Congress.

21. Allison Levy further noted that a proposal put forward by the British Overseas Territories would allow countries to appeal their classification on a case-by-case basis. The U.S. is supportive of this position. Ms. Levy added that the most recent changes to the country classifications would increase the amounts that many countries receive through the Quality of Service Fund while decreasing what they pay.

22. Noting that $5 million of the annual UPU budget is dedicated to technical assistance for developing countries, Don Soifer noted his concern that some recipient countries of technical assistance may have state-sponsored terrorists.

23. Turning to postal financial issues, Mr. Soifer remarked there were numerous proposals under consideration for the Congress that address anti-money laundering and financial projects, and inquired what position the U.S. held with regard to proposals which would facilitate the growth of postal financial services. Amanda Horan, Office of the U.S. Trade Representative and a member of the public, pointed out that the U.S. delegation was offering an amendment to the major UPU proposal dealing with postal financial services development (proposal 10). The amendment, if adopted, would eliminate references to account-based postal financial services, such as savings services, and references to the introduction of new financial services offered via the postal network.

24. Brad Smith noted that the U.S. financial industry has long fought the provision of financial services by postal service operators and asked if the Advisory Committee members could have access to specific U.S. position papers for the UPU Congress. Dennis Delehanty replied that it is U.S. Government policy not to make position papers for UPU Congress public because these are negotiating positions and their confidential nature must be maintained. He went on to note that one of the U.S.-offered amendments would remove from proposal 10 references to developing new financial services and offered to circulate to the Advisory Committee copies of the U.S. amendments. Bruce Harsh of the Commerce Department, a member of the U.S. delegation, will introduce the U.S. amendment addressing postal financial services in the form of proposal 73 at Congress.

25. Brad Smith then inquired if there is support from other countries for the U.S. amendments. Dennis Delehanty responded by saying the U.S. will be actively seeking support for all U.S. proposals and amendments and encouraged Advisory Committee members to contact their counterparts or contacts abroad to inform them of U.S. proposals and amendments that would be considered during the 24^th Congress. Steve Lopez asked whether the U.S. delegation intended to oppose proposals that facilitate the growth of financial services. [Note: see paragraphs 23 and 24]

26. Gene Del Polito commented that a proposal advanced by the Consultative Committee concerning the .post top-level domain name, if approved, could link together addresses from a number of sources including cell phone numbers to geographic area, and added that he would object to any stance that stood in the way of innovation. He went on to say that he hoped the U.S. would not be so short-sighted as to stifle what developing countries are attempting to accomplish in this field.

27. Juan Ianni commented that the UPU’s real value is to leverage resources such as apportioning projects to the Restricted Unions. Even within Restricted Unions there are vast differences in the depth and scope of resources available. For example, the postal operator in Brazil has a partnership with a big bank, but it is not really in competition with private sector industry and its financial services are aimed at those who do not otherwise have access to basic financial services. He went on to note, however, that he disagreed generally with the approach taken by many postal operators to develop financial services as a cure for their own problems.

28. Steve Lopez commented that investors would be discouraged if international postal operators continued to restrict access data, and urged the U.S. to seek to open access to markets in order to build core assets. Brad Smith agreed with Steve Lopez’s statement and added that he was aware of a proposal to Congress to expand payment cards, indicating he believed there was a conscious effort on the part of the UPU to keep out U.S. payment services in other parts of the world and to build a UPU-backed monopoly over these services. Gene Del Polito acknowledged the obstacles limiting the U.S. ability to assume an aggressive stance against these services, but urged the U.S. “to pay attention” and to encourage the UPU to remain neutral on the subject of new financial services.

IV. Major U.S. proposals

29. Dennis Delehanty briefly outlined the major U.S. proposals, noting that Great Britain is co-sponsoring a U.S. proposal that would provide a solid basis within the UPU Acts for voluntarily funded extra-budgetary user groups. He indicated that he would distribute to Advisory Committee members the entire package of U.S. proposals. During the first week of May, members of the U.S. delegation attended a meeting of the Caribbean Postal Union in Aruba where the U.S. sought support for several of its major proposals. A new proposal (proposal 60), which would instruct the CA to study possible adjustments to the UPU’s mission statement, was a by-product of that meeting. The U.S., which considers this to be an amendment to proposal 20 on the UPU’s future work on reform of its structures and working methods, believes this amendment represents a reasonable way forward to accommodate the U.S. growing concerns with proposed changes to the UPU mission statement. With regard to U.S. proposal 61 on electronic data interchange, the U.S. has already gained support from several countries.

30. Sue Presti asked whether the proposal on the exchange of electronic customs information gained any support from countries that are working with Customs on their projects. Greg Olsavsky answered that it had not.

V. Consultative Committee views on Congress issues

31. Steve Lopez observed that when the U.S. outlined its major issues before Congress, there was no mention of issues of importance to the Consultative Committee. Concerning proposal 49 on the Quality of Service Fund, he added that many private sector members would like their knowledge and contributions to UPU issues to be recognized and therefore be allowed to provide their expertise in discussions on the use Quality of Service Fund resources.

32. Jody Berenblatt stated that the U.S. should work towards integrating the work of the POC with that of the Consultative Committee and that private sector members want to be consulted early on in projects or other activities that fall within the scope of the Consultative Committee. Steve Lopez added that the Consultative Committee supports almost all the U.S. positions, but would like to be more involved with UPU projects and activities and appreciated for the expertise the private sector brings. Dennis Delehanty responded by saying that from the private sector the State Department received written comments only from Charlie Prescott regarding the proposed U.S. Strategic Plan for the UPU 2009-2012. This plan, which contains the principles upon which U.S. priorities for the UPU are to be based, would serve as a road map for the U.S. delegation during Congress in the development of U.S. positions.

VI. Study on universal postal service

33. Dennis Delehanty indicated that the PRC was conducting a study on the universal service obligation within the United States, and that the State Department had recently submitted a paper that raised certain inconsistencies between the UPU Convention and the determinations made by the PRC regarding competitive international postal products.

34. Dennis Shea inquired whether the PRC would issue a public response to the issues the State Department raised. Ann Fisher responded that comments to the study would be posted on the PRC’s website.

35. A member of the public, Will Gensburg, stated that the State Department’s comments on the universal service obligation point to the very same problem he has attempted to draw attention to, namely that USPS has an obligation to deliver international inbound mail products that are “loss-making.” The Postal Accountability and Enhancement Act (PAEA) considers some of these international products to be competitive products. Mr. Gensburg went on to say that he had raised this same issue at the March 2008 Advisory Committee meeting, specifically that USPS enjoys an unfair competitive advantage. At the time he raised the issue, Will Gensburg understood the State Department’s response to be that the advantages USPS enjoys should be put in harmony with PAEA. Will Gensburg then asked if his recollection of the State Department’s response was correct.

36. Dennis Delehanty acknowledged that the issues raised by Will Gensburg were in fact difficult questions and that the State Department had attempted to address some of the dynamics between postal operators and private carriers in its comments to the PRC. Since the March 2008 Advisory Committee meeting, the State Department had taken action regarding extra-territorial offices of exchange (ETOEs) by revising the information on ETOEs on the State Department website. The State Department removed the references to International Mail Processing Center (IMPC) codes assigned to ETOEs in the U.S. on the website, so that the public would not have the impression that the U.S. Government tacitly approved the use of these codes by these ETOEs, a stance which would be inconsistent with U.S. policy towards ETOEs. Under current U.S. policy, ETOEs may not use UPU documentation to export their traffic from the United States. IMPC codes are issued by the UPU International Bureau in Bern.

37. Dennis Delehanty further noted that the UPU has undertaken a study of the use of IMPC codes, and planned to institute a new policy which would require national governments to authorize IMPC codes to entities other than the designated postal operator(s) within its borders. These are complex issues that will require careful consideration both within this country and within the UPU. Beginning with these changes to the information on ETOEs on the State Department website and the UPU study, the State Department and the UPU have taken the first steps towards resolving these issues.

VII. Postal Reform in other countries

38. Juan Ianni raised the issue of postal reform in developing countries and offered the group an abstract on the subject which will be published soon as part of a larger work. He explained why reform in developing countries was important, specifically making it relevant to the vast majority of UPU members who depend on the viability and service performance in the countries of destination. As an exporter of mail, the U.S. has an interest in making sure that postal products and services originating in the U.S. are delivered in a safe and timely manner. The aim of postal reform is to ensure adequate services at the lowest prices. The role of government is to ensure that postal services are provided to the public. According to Mr. Ianni, the universal service obligation should be defined in function of demand rather than supply.

39. Mike Glover commented it was his experience that in some countries utility bills are delivered by private couriers, indicating a lack of confidence by some governments in their own state-owned enterprises. Consequently, if the quality of services offered by designated operators were to improve, mail volumes would likely increase.

VIII. Closing of the meeting

40. Mike Glover brought the meeting to a close by noting that the State Department will issue a notice concerning the date and venue of the next meeting, tentatively planned for September or October of this year. He asked Advisory Committee members to submit agenda items to the Designated Federal Officer (Dennis Delehanty) and urged them to continue to express their views during the meetings. He also remarked that the State Department will consider how best to meet with Advisory Committee members during the 24^th Congress to keep them informed as to the outcome of major proposals of interest.

Minutes prepared by Katherine Lawrence, Bureau of International Organization Affairs, U.S. Department of State.