Department of State Report on the Meeting of the Postal Operations Council of the Universal Postal Union (UPU), Bern, Switzerland, April 8-19, 2002

Released by the Bureau of International Organization Affairs
May 21, 2002

Introduction

This document, prepared by officers of the U.S. Department of State and the U.S. Postal Service, reports on the annual meeting of the 40-member Postal Operations Council (POC) of the Universal Postal Union (UPU). The meeting was held in Bern, Switzerland, from April 8 to 19, 2002.

During the session, and during the preceding weeks, various subsidiary groups of the POC also held meetings, as did subsidiary groups of the UPU Council of Administration (including two new project teams focusing on reform and a team addressing relations with the World Trade Organization). The new UPU private-sector Advisory Group also met. More than 600 delegates attended some 70 meetings of these bodies during this period. Carlos Da Silva, of Portugal, is chairman of the POC. U.S. delegates participated in more than 45 of these action groups, cooperatives, industry groups and project teams, and USPS officers chaired fourteen of these bodies.

The U.S. delegation to the POC was led by Michael Regan, director of the office of International Postal Affairs of the U.S. Postal Service, in coordination with the Department of State. The delegation included a number of USPS experts in subjects covered by the POC meetings, as well as Neil Boyer of the Department of State, Commissioner Ruth Goldway of the U.S. Postal Rate Commission, Mary Townswick, first secretary of the U.S. Mission to the United Nations in Geneva, and, from the private sector, Susan Presti of the Air Courier Conference of America.

Highlights of the meetings, covered in detail below, included the following:

• The POC rejected proposals to increase terminal dues (the amount one country pays another for delivery of the mail) between industrialized countries during 2004 and 2005. However, it agreed to link terminal dues payments to the quality of service provided in industrialized countries, beginning in 2005.

• Governing bodies set parameters for a study of the growing phenomenon of "Extraterritorial Offices of Exchange" (ETOEs), in which the national post of one country establishes an exchange office in another country.

• Postal security experts discussed growing concern about the security of the post, including the anthrax mailings in the United States, and considered ways to protect the post and its customers and to alert others to potential threats.

• Meetings of the POC were opened for the first time to members of the private sector Advisory Group, a result of the proposals for more openness and transparency put forward in 2001 by the High Level Group on the Future of the UPU.

• For the first time, two of the UPU project teams agreed to make their documents available on the UPU website to all readers, without password protection, and other teams were expected to follow suit.

• The Council delayed action on a proposal from the World Customs Organization for a major expansion of the customs declaration forms included on international packages but agreed to study the issue and make counterproposals by October of 2002.

• A project team on UPU relations with the WTO discussed in detail the proposals before the WTO in which express delivery services would be de-coupled from postal services in the WTO services negotiations.

• A project team began consideration of the process that permits governments to introduce "reservations" to the UPU convention at the time it is adopted, a process that some delegates supported and others termed unmanageable and confusing.

• Officials of the government of Cote d'Ivoire told the Council that preparations for the 2004 UPU Congress in Abidjan are well underway.

Discussions during the POC session also covered technical assistance to developing country postal administrations, direct marketing, Express Mail Service, relations with the International Air Transport Association (IATA), and other issues.

The main event of the POC session was the determination of a set of rules for terminal dues in industrialized countries for the years 2004 and 2005. Over a two-week period, more than 50 hours of formal discussions were held, with meetings marked by animated debate and numerous rounds of secret ballot votes. The ultimate decision was to maintain basically the status quo for industrialized country terminal dues in 2004 and 2005. The percentage of recipient country tariffs on which terminal dues are based will remain at 60%. The 2003 ceiling will not increase, and a quality of service link will be introduced in 2005 rather than 2004. The quality of service link will introduce a pay-for-performance aspect into terminal dues payments, whereby industrialized countries will receive a 2.5% increase in the established rate if they participate in the quality-link monitoring system and another 2.5% increase if they meet an 85% on-time target. If industrialized countries do not meet the target, they will be subject to penalties, losing up to 5% of their terminal dues payments.

This review of terminal dues was initiated at the 1999 UPU Congress in Beijing and has been underway ever since then. That Congress created a new system of terminal dues, with separate provisions for industrialized and developing countries. Having set terminal dues for industrialized countries for the years 2001 to 2003, and taking into account the goal of having terminal dues more closely approach the costs of the services rendered by recipient postal administrations, the Congress had authorized creation of a POC task force that would determine by 2002 the terminal dues rates to be applied by industrialized countries for 2004 and 2005 and set quality of service links to terminal dues payments for those same two years.

The POC accordingly had created a Terminal Dues Action Group (TDAG) to study these issues. TDAG and a number of subsidiary project teams had met frequently over the two years since the Beijing Congress. In the week preceding the 2002 POC session, TDAG was to finalize its proposals for 2004 and 2005 for presentation to the POC. However, the 60-member TDAG was itself divided, with some members seeking large increases in terminal dues to achieve what some of them termed "fully allocated costs," while some argued for more gradual increases over a longer period, and some strongly opposed increases, in particular those that ultimately would have to be paid by developing countries to high-cost industrialized countries. (The optional approaches to the issue are described in the United States position paper, which is available on the Department of State website.)

The work plan of the TDAG provided that, after conclusion was reached on terminal dues rates for 2004 and 2005 for industrialized countries, it would move on to propose a harmonized system of terminal dues applicable to all countries from 2006 forward. Some members of the TDAG were concerned that if the increases for 2004 and 2005 were too steep, developing countries would not be able to pay or join in the harmonized system for 2006 and beyond, and that these countries therefore would oppose (vote against) passage of such a system at the 2004 UPU Congress. The U.S. position -- determined by the Department of State after consultation with U.S. stakeholders -- was that, while it was important for terminal dues to increase and more closely approximate actual costs, a gradual increase in terminal dues was more likely to attract the necessary votes of the developing countries and was also more beneficial to the extensive U.S. mailing industry. Accordingly, the U.S. delegation favored what was put forward as Option B in the initial TDAG papers, rather than the sharp increase that was proposed in Option A. Before the April 11 TDAG meeting, however, Australia, New Zealand and other Asian and Pacific island countries put forward a third option - that of no increase whatever.

At a TDAG informal workshop on April 4 and 5, many developing countries expressed concern that they had not received adequate information about the impact of the proposals, in particular whether the proposed increases in terminal dues would later be applied to the developing countries and whether they would be affordable. Most of these countries wanted no increase in the rates, at least until they could better understand the impact on themselves. In contrast, most industrialized countries (with the exception of Australia, New Zealand and Israel) favored the increases in either Option A or Option B, citing the need for better cost coverage and the need to carry out the mandate from the Beijing Congress.

Given that UPU is an intergovernmental organization, all members of TDAG are national governments or postal administrations. However, one member of the UPU private-sector Advisory Group was represented at the workshop. Julian Oliver, Director General of the International Express Carriers Conference, said he was representing the views of a variety of private stakeholders, including the express carriers and the mailing industry, and he urged that the new system be economic, equitable and sustainable. In a period of low inflation, low demand and low margins, he argued for a gradual increase in terminal dues, not a large-step change. The new system should be fair and legal, he said, and WTO issues of equal treatment must be considered. Further, he said, the new system should be sustained for 4-5 years, not be undermined by arbitrage, and it should be open to third-party validation of the cost basis used in each country.

After long debate, in the TDAG meeting on April 11, in a series of votes, all options were rejected except the one providing for no increase. When the POC Committee 1 took up the issue on April 15, Australia, New Zealand, Russia and others argued strongly against any increase, saying that the volume of international mail was decreasing due to growing use of e-mail and other electronic substitutes and that higher costs would further decrease the use of mail. In contrast, Germany led a number of European countries, plus Japan, in arguing that national posts were suffering because international mail was not paying its share of the costs and that terminal dues needed to be sharply increased immediately.

There was another long series of votes in Committee 1. In the 40-member POC, 21 votes are required for adoption of a proposal. Of the 40 members, 25 are from developing countries. The German proposal for a sharp increase received only 7 votes. The more moderate increase in Option B, supported by the United States, received only 13 votes. No developing country voted for either proposal. Ultimately, the committee decided that the current system of terminal dues would be continued during 2004 and 2005, while the TDAG would continue to work on a harmonized system that would apply from 2006 forward and be presented to the 2004 UPU Congress for approval. The committee did approve the application of a new quality of service link for terminal dues payments, as requested by the 1999 Congress, but only from 2005 and not 2004. Under this scheme, a country may receive an increase of 2.5% over the existing cap for terminal dues for participating in the quality monitoring system, an additional 2.5% increase if its on-time delivery target is met 85% of the time, and up to a 5% penalty if the target is not met. Under the POC decisions, these incentives for better service - up to a maximum of 5% over the existing terminal dues cap in 2005 -- will be the only basis for increases in terminal dues.

Following the voting in Committee 1, several European countries and Japan expressed dissatisfaction with the lack of POC support for the work of the TDAG project teams and said that maintaining the status quo went against the mandate of the Beijing Congress. Great Britain and Finland submitted a reservation saying they reserved the "right to apply non-discriminatory terminal dues rates for exchanges between industrialized countries with effect from 1 January 2004." Believing that this approach appeared to allow these countries unilaterally to free themselves of their obligations under the UPU convention, Committee 1 rejected the reservation, with only nine countries voting in favor.

A final round on the terminal dues issue played out on April 18, when the POC plenary discussed the report of Committee 1. Japan sought to reopen the Committee 1 decision and to have the plenary approve the moderate increase that had been presented as Option B, which it argued was in line with the mandate of the Beijing Congress. Japan said that if the POC did not agree, it would seek the legal opinion of the UPU Council of Administration. Australia and New Zealand reiterated their consistent stance against an increase in rates and argued against reopening the issue. In a secret-ballot vote, with 21 votes needed to reopen the question, only 18 voted in favor of the proposal and the conclusions of Committee 1 were therefore confirmed.

TDAG and UPU officials said publicly that the lesson of this long debate - more than 50 hours on this issue over the two-week period - was that developing countries needed to be brought into the discussion at an early stage and throughout all of the negotiations so that they would feel they were partners in the development of a new system of terminal dues payments that ultimately would benefit all UPU members. In the later meeting of the project team on the Management of the Work of the Union, Russia recalled that both the UK and Japan had threatened in these meetings to break out of, or ignore, the UPU terminal dues system, and Russia warned that this was a threat that could destroy the UPU.

Several of the discussion groups during this period addressed the issue of extraterritorial offices of exchange (ETOEs) -- the growing instances of facilities or offices set up by one national postal administration in the territory of another country. In a typical instance, mail from the United States destined for another country, rather than being sent through the U.S. Postal Service, could be picked up by an ETOE operated by the post office of another country in the United States and deposited directly into the domestic mail stream of the destination country at domestic rates if domestic rates are lower than terminal dues, or dispatched under UPU documentation if terminal dues are lower than domestic rates. Alternatively, mail coming into the United States from an industrialized country would not be sent through that country's post but rather through an ETOE operated by a developing-country post office and then given to USPS for delivery, with the intention that USPS would charge only the lower UPU terminal dues rate established for mail coming from developing countries. (In this circumstance, USPS and the posts of Australia, Japan and Canada have notified all UPU member countries that they will not accept ETOE items under UPU documentation or terminal dues but will charge full domestic rates.)

Delegates were informed that, in coordination with the Standards Board and other POC project teams, the Terminal Dues Action Group (TDAG) would study operational challenges to the traditional posts posed by these ETOEs. These include ETOE failure to notify receiving postal administrations of incoming mail, failure to use correct International Mail Processing Center (IMPC) codes identifying the location of an ETOE, and undeliverable items that are returned directly to a host country that had not received postage for the outbound mail. Australia suggested that the UPU Postal Security Action Group consider the possibility that some ETOEs may be committing fraud through labeling in a manner that may lead a host country postal administration to be charged for outbound ETOE traffic. Canada pointed out that the items carried out of Canada by ETOEs are not subject to the same security requirements as outbound mail. IATA said that ETOEs are becoming a problem with the air carriers, and voiced concerns about billing for transportation services, rejection of the mail at destination, liability and customs issues.

UPU senior official Kathleen Mullin (U.S.) told the project team on the Management of the Work of the Union (MWU) that UPU needed to recognize that ETOEs will not go away and probably will grow. The 2004 Abidjan Congress would need to decide if ETOEs were within or outside the UPU concerns. In the meantime, she said, UPU member countries could deal with the ETOEs as they wished, under bilateral agreement or unilateral action.

Brazil, which is coordinating a study of ETOEs within the Council of Administration's MWU project team, presented a briefing on the terms of reference for its study, the status of the work, and the future work plan. The team also had for review an analysis of the ETOE issue prepared by a consultant to the UPU. An initial analysis of the market, and of the environmental dimensions and the impact of ETOEs, will be presented to the October 2002 meetings of the project team and CA Committee 1. Final recommendations on these issues are expected at the 2003 meeting of the CA. The project team agreed to these proposed parameters.

UPU's Postal Security Action Group (PSAG), led by senior U.S. postal inspector Donald Hill, convened two seminars on security threats to the post. The meeting on April 10 included participation of 159 persons from 80 countries, UPU Restricted Unions, and international organizations.

Andrew Wilson, Director of Security, Consignia (UK), moderated a seminar on Attacks on Postmen and Post Offices. Postal security experts from Belgium, Brazil, Great Britain, Spain, and the United States provided case studies and summarized existing crime trends. It was noted that employee education, community involvement, risk assessment methodology, networking with law enforcement authorities, and limiting the amount of funds in the direct control of individual postmen and postal clerks were significant initiatives to reduce the risks to employees and customers.

Ebbe Andersen, Head of Security, Post Denmark, moderated the Bioterrorism in the Mails seminar. This session included a critical look at events of the last year, including the mailing of letters containing anthrax in the United States, and recommendations on ensuring the safety and security of the mail from biohazards. The panel, consisting of postal security and industry experts from Argentina, Austria, Denmark, INTERPOL, Titan Corporation, and the United States, presented lessons learned from recent bioterrorism events in the United States. The PSAG plans to produce a comprehensive bioterrorism seminar guide including the information presented during the seminar and additional resources to aid postal administrations on this subject.

The coordinator for a joint project of the UPU and the UN International Drug Control Program (UNDCP), entitled Countering Drug Trafficking and Money Laundering via Postal Systems in Africa, reported on the success of the first training initiative in Tanzania. A memorandum of understanding had been signed by officials of the post, customs and the police pledging mutual assistance and cooperation in combating these offenses which affect integrity of the mail. Future training missions were to take place in May in Kenya and Uganda. During this meeting, Pakistan requested approval to become a full member of the PSAG. The PSAG now comprises postal security experts from 55 member and 37 observer countries.

The Council gave extended consideration to proposals for revision of customs declaration forms CN 22 and CN 23. Proposals had been put forward by the World Customs Organization following consultations with representatives of the UPU. However, prior to the POC meeting, UPU Director General Thomas Leavey (U.S.) wrote to the WCO Secretary General to express concern about the complexity of the new proposals and the difficulty that postal administrations, especially in developing countries, would have in providing some of the information required on the new forms. He also noted that the size of the form was larger than many "small packet" postal items and would need to be folded and could thus jam postal sorting machinery. He asked that WCO consider these problems and work with UPU to resolve them.

At the POC session, many administrations (most notably the United Kingdom, Germany, Netherlands, Switzerland, Australia and the United States) voiced concerns about the proposed new data requirements. Concerns related to the WCO request for the harmonized system tariff code and country of origin for all items from commercial senders and for items from private senders valued at more than 300 SDR. WCO representatives at the POC session insisted somewhat contentiously that the proposed forms had to be accepted. Postal officials agreed that the current UPU forms were too small but there was disagreement about what data should be added and how large the form should be.

The POC decided to form a project team to address the concerns of postal officials and to consult further with the WCO. The project team, chaired by Russia and Great Britain, includes representatives of Brazil, the United States, Italy, the Netherlands and Malaysia. Assuming that agreement can be reached in a short period, the POC delegated authority to its Management Committee to approve the new CN forms at its next meeting in October 2002. The revised forms, once approved, will be implemented in 2004 following training of postal customers and employees worldwide. The POC also adopted a U.S. proposal that would allow mailers the option of printing the CN 22 customs form directly from a computer on white paper rather than utilizing the standard green label obtainable from the post office. This makes it easier for consumers to prepare parcels for mailing.

On April 9, the UPU project team on Relations with the World Trade Organization hosted a seminar entitled "Mind the GATS: Defining Developing Country Interests in the Services Negotiations." The seminar brought approximately 50 postal operators and regulators together with four experts on trade policy:

• Lee Tuthill, Senior Counselor in the Trade in Services Division of the WTO Secretariat, delivered a detailed presentation on the architecture of the GATS (General Agreement on Trade in Services).

• Hugo Cayr�s, Minister Counsellor of the Permanent Delegation of Uruguay to the WTO, summarized negotiating proposals put forward in the current round on postal, courier, express, and logistics services.

• Anton van der Lande, Vice President for Public Affairs International of United Parcel Service, presented the views of the International Express Carriers Conference, including what IECC sees as the differences between express delivery and postal services. He advocated a separate industrial classification for express delivery services for negotiation purposes.

• Scott Sinclair, senior research fellow at the Canadian Centre for Policy Alternatives, urged developing countries to approach the trade negotiations with caution. He argued that the implications of GATS obligations and classification proposals may not have been thoroughly understood or analyzed, and suggested that commitments undertaken in the current round of negotiations could unwittingly deprive postal administrations of policy flexibility.

During the subsequent meeting of the project team and of the private-sector Advisory Group, recent developments in trade issues were discussed. Anthony Alverno of USPS, chairman of the team, reported that he had made a presentation on terminal dues issues to WTO services negotiators in Geneva in March. The presentation had focused on the potential legal and policy issues arising in connection with WTO disciplines and the terminal dues system. Alverno believed the effort had been useful in terms of enhancing awareness and understanding among WTO negotiators about the UPU terminal dues system. The project team also received a briefing on a negotiating proposal in the WTO put forward by New Zealand on postal and courier services.

Susan Presti, Executive Director of the Air Courier Conference of America-International (ACCA), was invited by the project team to discuss the highlights of a roundtable on express delivery services held in March at the U.S. Department of Commerce. She said that a key issue under discussion was the de-coupling of express delivery from postal services in the WTO services negotiations. She said there was a possibility of compromise between the express delivery-related negotiating proposals put forward in the WTO by the United States and the European Community. She also argued that there was a need for creating greater awareness of the express industry's objectives, including within the UPU. Her presentation was followed by debate about the classification of postal and express delivery services under the GATS.

Later, Alverno reported to the Advisory Group on stakeholder interests in the WTO services negotiations. He discussed the schedule on which the WTO services negotiations are being conducted and the contents of various proposals on postal, courier, and express delivery services, including those put forward by WTO member countries (the United States, European Community, Switzerland, New Zealand, MERCOSUR and Bolivia, and Hong Kong, China). He also described views expressed by stakeholders in industry, labor, and civil society (ACCA, IECC, the European Express Association, PostEurop, the Direct Marketing Association, Union Network International), and the Canadian Centre for Policy Alternatives. Alverno also said it was important for stakeholders to support the UPU's proposal to have observer status in the WTO, and to have the WTO execute a proposed memorandum of understanding with the UPU.

During the discussion of the project team on UPU relations with the WTO, a representative of China offered a statement concerning a recent controversy between the Chinese postal administration and the express industry. The United States, EU, Canada, Japan and Switzerland had expressed concern about the Chinese Post Bureau's decision requiring that all express delivery companies register by May 6. Registration is required for operators carrying letters in the reserved area, which is defined to include letters less than 500 grams or letters carried for a price below the Express Mail Service rate charged by the Chinese postal administration. Companies not registering by May 6 faced the prospect of giving up some of their business.

The representative of China said that the decision by the State Post Bureau was based on the postal law of China of 1986, which states that letters and items in the nature of letters are reserved, regardless of whether they are ordinary or express items. He said that in China's GATS Schedule of Specific Commitments, China had not committed itself to permit market access for letters or items in the nature of letters. China said that some companies had been operating illegally for 15 years, and that few companies had registered. The representative said that, while the postal law in China may be changed in the future, the decision of the State Post Bureau is being executed under the current postal law. He also said that China is acting in accordance with its trade commitments. Ms. Presti of ACCA commented on China's statement, noting in particular the opposition to the measure that had been expressed by several WTO Members.

This session of the Postal Operations Council was the first meeting of any UPU council since approval in October 2001 of recommendations for private-sector participation in UPU activities. Those recommendations had been put forward by the High Level Group on the Future Development of the UPU and approved by the Council of Administration (CA). The CA had agreed to send to the next UPU Congress, in 2004, a proposal for creation of a new private-sector "Consultative Committee" whose members would have observer status in the CA, POC and the UPU Congress. The CA agreed that, in the meantime, the members of the existing "Advisory Group" could fill that role and would be welcome at plenary and committee meetings of the CA. The CA in October 2001 recommended that the POC take comparable action, and the POC Management Committee agreed.

Accordingly, the members of the Advisory Group were invited to attend the plenary and main committee meetings of the POC in April 2002. Further, the chairman of the POC urged the chairs of each of the POC-related project teams and working groups to open the meetings of those bodies to Advisory Group members that indicated interest in attending. Most of the chairs agreed to do so, including all 10 of the chairs held by officials of USPS.

In furtherance of openness and transparency, the U.S. chairman of the UPU project team on relations with the WTO secured the approval of the team to increase transparency of its work by agreeing to post its documents on an unrestricted page on the UPU website. The team also voted to recommend to the CA that it agree to post certain WTO-related documents prepared for the Beijing Congress on the unrestricted web page. It was understood that other UPU project teams were also willing to make their documents available on the UPU website without password protection.

In the event, not many of the Advisory Group members took advantage of the opportunities to attend the POC-related meetings, primarily because this was a new invitation issued relatively close to the opening of the POC meeting opening. One member presented private-sector views on terminal dues to the Terminal Dues Action Group, and two participated in the meetings of the project team on UPU relations with the WTO. Also, two of the Advisory Group members - representing the International Express Carriers Conference and the International Mailer's Action Group - attended the POC plenary meetings and took the opportunity to address the Council.

In the meeting of the Advisory Group itself on April 16, eleven private-sector organizations - representing mailers, express carriers, labor unions, equipment manufacturers and others concerned with postal issues - were present. All twelve of the UPU member countries chosen for membership participated. One of the private stakeholders said there had been amazing progress in achieving openness in UPU, including the opportunity for private agencies to influence UPU and to be influenced. Brazil said it hoped that Advisory Group members would come to UPU council meetings in large numbers, to attend all of the sessions. But another private stakeholder said that the private agencies simply don't have the resources to attend all of the UPU meetings.

The members of the Advisory Group - and later members of the project team on the Management of the Work of the Union (MWU) - discussed some of the details in the proposal for creation of the new private-sector Consultative Committee (CC) in 2004. These included whether the chair of the CC should be held by a government member, a private-sector representative, or be shared. They also discussed how many UPU member countries should be included in CC membership - twelve, as at present in the Advisory Group, or fewer. Concern was expressed that the governments not outnumber and dominate this new body, which was created for the benefit of the private sector. Also on membership, there was discussion of whether individual private companies could join the new CC or only associations of companies, and of whether the current members of the Advisory Group would be considered "charter members" of the CC, without the need to go through a formal application process. There was also a question of whether the CC members should form their own working groups or join working groups already created by the CA and POC; most speakers leaned to the latter approach. The current chairman of the Advisory Group - Felix Muriel of Spain - said that none of these issues was cast in stone and he would welcome continued submission of opinions on these questions.

Advisory Group members also indicated some frustration at continuing discussion of procedures for its operation. One member said the private agencies were interested primarily in the substance of postal issues, not this procedural and organizational activity. He thought the work of the CC should be driven by the technical interests of the members. In terms of the interest of the High Level Group in security "reciprocity" from the private-sector members in exchange for their involvement in UPU councils, one of the stakeholders said this could be done where appropriate, while another said his agency would welcome officials of UPU and of its member states attending its meetings and events. The IECC representative later informed the POC plenary that members of the Advisory Group had agreed to make financial contributions to help cover the costs of the CC.

On substantive questions, the Advisory Group members received briefings on activities in the WTO on the classification of services, on the consistency between the UPU convention and the WTO General Agreement on Trade in Services, on progress in establishing a new terminal dues regime, and on the potential for the Advisory Group to study and recommend new UPU agreements on operational standards.

The new project team on the Management of the Work of the Union (MWU), following an organizational meeting in October 2001, met on April 19 to advance its work plan. This is the team established primarily to follow up the reform proposals from the High Level Group and to consider further reforms for UPU. The MWU team heard a report on the proposed study of ETOEs and approved parameters for that study to go forward. It also heard reports on studies underway on the question of whether UPU should promote separation of postal operators and regulators in member countries, as already exists in some countries, and of whether to consider separation along the same lines within the governing councils of the UPU. One group is considering proposals for definitions of term "postal administration," as it is used in the UPU convention and general regulations, i.e., whether it refers only to a postal operator or more generally to a government or member country.

The MWU team also heard a report on the recent meeting of the Advisory Group, in particular its opinions on the operational details for the future private-sector Consultative Committee. The U.S. representative said it was important that government members of the CC not dominate its discussions, since they had ample opportunity to express their views in other UPU fora, and the CC would exist primarily to encourage private-sector participation. The team agreed to begin drafting a set of rules of procedure for the CC.

The Acts of the Union Project Team is one of two project teams created by Committee 1 of the Council of Administration to extend the UPU reform efforts initiated by the High Level Group on the Future Development of the UPU. The Acts of the Union team, chaired by attorney William Alvis of USPS, devoted most of its April 17 meeting to the issue of procedures for member countries to take reservations to the UPU convention. There had been complaints that reservations often were presented to the UPU Congress within a very short time frame, leaving delegates no time for serious study of the proposed reservations or for consultation on whether to accept them. A result was that reservations on specific provisions of the convention were almost always accepted en bloc, without a vote, even when they were in conflict with each other or with other parts of the convention. One team member said the reservations process had become unmanageable, with the result that delegates sometimes left a Congress not knowing exactly what they had decided.

Some members thought that for these reasons restrictions should be placed on the possibility of introducing reservations. The U.S. representative said that the United States regarded the Vienna Convention on the Law of Conventions as the ultimate authority on this subject and did not want UPU to do anything to undercut the rights given to states by that convention, including the allowance of one year after conclusion of a convention for reservations to be presented. The team reviewed a report prepared by UPU staff explaining the historical reservation practice of the UPU. It also approved a work plan for addressing the reservations issue and approved a draft questionnaire on the practices of handling reservations in other UN agencies. Later questionnaires would solicit the opinion of UPU member states.

The team also approved a report from Switzerland on work in progress to clarify definitions to be added to the UPU Acts. It expressed its agreement with the proposed recasting of the liability articles of the Convention, which had been proposed by the Liability Project Team. The draft convention and regulations to be presented for approval by the 2004 Congress will be supplemented to take these changes into account.

The Standards Board, at a quarterly meeting during the POC session, approved a proposal to create an international barcoding structure for customer-applied identifiers. Such a system will allow mailers to track individual letters in transit through the postal system. The Direct Mail Advisory Board will work with the Standards Board in creating the draft international standard.

The Standards Board, led by Ray Morgan of USPS, also approved a 78-position international ID as the standard international tag. The U.S. 62-position tag was grandfathered in, with the following stipulations: 1) the USPS ID tag is an obsolete standard; 2) only the United States, Canada, and Ireland may use this ID tag; and 3) this tag may be used indefinitely and does not have an expiration date. The USPS believes this is the best possible solution, since it allows USPS to continue using the U.S. tag, but does not have negative impact on the use of the new international standard by the rest of the world postal community. USPS believes that, as it refits its processing machines, infrastructure, and readers over the coming years, it can adapt them to the 78-position international tag.

A subproject team on POST*Code Technology, chaired by the USPS, focuses on developing standardized address templates for each member country to improve the quality of addresses on international mail. That team plans to submit a status 0 application for the standard for international address elements to the Standards Board in October. This application will consist of: 1) a finalized list of address elements, 2) a definition of address templates for at least five countries, and 3) a test plan for validating the methodology chosen by the team. Posts and private industry in at least five countries will carry out the tests jointly. Finland, Morocco, Venezuela and the U.S. have volunteered to take part.

The POC agreed at this meeting that postal administrations should be called upon to recognize postal standards. It was the opinion of the Standards Board that the majority of postal standards should be enabling rather than enforceable. This issue was debated by the POC, but there was ultimate agreement with the Standards Board approach.

UPU created a new Quality of Service Fund, effective January 1, 2001, designed to assist developing countries with improving their service. Money in the fund is paid by industrialized countries as part (7.5%) of the terminal dues they owe developing countries. The Quality of Service Fund Board of Trustees met April 10 and 11 to discuss work procedures and to review projects. Up to December 31, 2001, $13.9 million had been billed as advance QSF payments for 2001. The trust's administrative budget for 2001-2002 was $609,000, or 4.4% of the total funds collected, well below the targets set for these expenses.

The Board reported that, for 2001-2002, 51 proposals had been received from 40 countries. Twenty proposals were considered at the April 10-11 meeting. Of the 51 total projects, 27, totaling $2.7 million, had been approved, including two standard projects (those over $150,000). In general terms, the Board felt that procedures that had been established for the QSF appeared to be functioning well and the quality of the proposals submitted had improved steadily. The Board said that the emphasis in the future will be on monitoring the success of the projects themselves and in ensuring the financial health of the QSF (the United States chairs the finance subcommittee of the QSF Board). There will also be more effort to promote regional projects (Brazil has announced that it will donate $200,000 of its QSF resources to regional projects) and to coordinate QSF projects with other technical cooperation and development projects.

A project team studying quality of service in UPU member countries during 2001 said there had been a deterioration of service levels, some of which could be attributed to the uncertainties in the period after September 11. A new Emergency Information System, installed through the UPU after September 11 was reported to be working well. The team said that end-to-end quality of service testing would be replaced by continuous testing in 2003.

USPS Chief Financial Officer Richard Strasser chaired the Postal Development Action Group. The group reviewed progress in promoting postal development and heard from three speakers regarding their experiences in postal reform and Information and Communications Technologies (ICT). A World Bank representative addressed issues of sector policy as they relate to postal reform. The Deputy Director General of Posts in Costa Rica gave a presentation of their experiences with ICT. The Director General of Cameroon described that country's experience with postal reform and their cultural, social, and economic program.

The Parcels Project Team agreed to study a system of pay for performance for parcels in its efforts to lower inward land rates and raise service quality. The U.S. Postal Service will participate in a subgroup that will develop pay-for-performance proposals to be discussed at the October meeting. With respect to the implementation of tracking for parcels, France is conducting a study of which administrations apply barcodes to postal parcels and are able to transmit tracking data to international postal networks. France, Switzerland and the United States will conduct a pilot test of tracking for parcels later this year.

The team was told that UPU staff would hire a consultant to draft a development and marketing guide for parcels and consignment, mainly for use by developing countries. The team also discussed results of a questionnaire on the consignment services offered by UPU member postal administrations. Eight postal administrations have volunteered consignment experts to develop an operational guide for consignment, similar to the guide that the UPU currently publishes for EMS.

The Liability Project Team is studying issues related to marketing, operations and legal aspects of liability. With respect to operations, by June, Italy will submit to the IB the results of its study of the weaknesses of registered, insured and recorded delivery services; customers' suggestions for improvement; and procedures for acceptance of CN08 inquiries. Regarding marketing, for October, Sweden will distribute the results of its questionnaire on insurance for registered items and standardization of retention periods, acceptance of inquiries via Internet and inquiries on unregistered items. The legal issues subgroup, which is led by Belgium and includes the United States, is trying to define a standard timeframe after which an item may be considered as lost. There was consensus that there could not be one global standard. The subgroup will study how this issue is dealt with in other international agreements and develop proposals for October 2002..

The contact committee bringing together representatives of UPU and the International Air Transport Association (IATA) adopted the recommendations of its recently held London Workshop and decided that its next workshop would focus on 1) a degressive rate structure for the UPU Basic Airmail Conveyance Rate (BCR), 2) security surcharges, and 3) International Mail Processing Center (IMPC) codes. Because of the effectiveness and success of the workshops, it was agreed that the Contact Committee would meet only once per year, in October, while workshops will be conducted twice a year.

The EMS (Express Mail Service) Cooperative Board reviewed progress on several major initiatives, including the 2002 Audit and Measurement Program, for which PWC Consulting is now acting as third-party auditor; the Cooperative's pay-for-performance plan; a standard EMS bilateral agreement for application in January 2003; a new contribution system for the Cooperative which would more closely align members' import and export EMS volumes with their contributions to the Cooperative; expansion of the Internet-based "rugby" system for response to inter-administration inquiries; the EMS contracts in the non-exporting countries; and preparations for the October 2002 Cooperative General Assembly.

The Cooperative also held a one-day workshop where participants heard about Cooperative achievements since October of last year, the pay-for-performance plan, and likely changes to the postal customs declaration forms CN 22 and CN 23. During the POC meeting, Board members also conducted discussions with representatives of the Postal Technology Centre concerning the migration of the POST*Net server to a private service provider and the development, maintenance, promotion and support of an Internet-based tracking system for smaller member administrations of the Cooperative.

The DMAB approved a proposal from its Steering Committee for a revision of its policy direction. Henceforth, the DMAB will act in an advisory capacity to the UPU on direct mail matters and concentrate its available funds on workshops and education rather than further research. The members also agreed on a new fee structure. Private members will now pay $2,000 per year, reduced from $8,000 currently, and public members will pay from $2,000 to $8,000, depending on their stage of industrialization. The joining fee has been reduced to $2,500 from $5,000.

The remainder of the DMAB session was open to all participants in the POC meetings and guests from private companies who attended as observers. The thrust of the meeting was "Direct Mail in Difficult Times," with presentations from various member countries and organizations.

Officials of the government of Cote d'Ivoire told the POC plenary that preparations for the UPU Congress, beginning September 22, 2004, were well underway. The conference site in Abidjan is expected to be ready by December 2003. Some 1,500 hotel rooms were being held for delegates, and 500 more were being updated. DeutschePost was making conference furniture available. Special provisions were being made for internet access for delegates, electronic voting in the conference hall, security forces, health facilities, preferential rates for airlines, a social program and delegate excursions.

Chairman Huang of the Council of Administration said he had visited Abidjan in December 2001 and had been deeply impressed by the commitment of the Cote d'Ivoire president to the successful undertaking of this large meeting. UPU Director General Leavey said that the UPU secretariat was collaborating closely with Cote d'Ivoire and was very pleased with the progress being made. UPU was also pleased with the support that had thus far been offered by Germany, France and China and he was certain that Cote d'Ivoire would welcome support from others.

• Private-sector Advisory Group of the Council of Administration, October 28, 2002, in Geneva

• UPU High-Level Strategic Conference, October 29-31, 2002, in Geneva

• Council of Administration Project Team on Management of the Work of the Union, November 1, 2002, in Bern

• UPU Council of Administration, November 3-7, 2002, in Bern

• UPU Postal Operations Council, March 31-April 11, 2003 (tentative), in Bern.

• 23^rd UPU Congress, August 15 to September 22, 2004 (tentative), in Abidjan, Cote d'Ivoire.

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