Express Delivery Services: Competitive Conditions Facing US
Total Page:16
File Type:pdf, Size:1020Kb
U.S. International Trade Commission COMMISSIONERS Deanna Tanner Okun, Chairman Jennifer A. Hillman, Vice Chairman Marcia E. Miller Stephen Koplan Charlotte R. Lane Daniel R. Pearson Robert A. Rogowsky Director of Operations Acting Director, Office of Industries This report was prepared by the Office of Industries Michael Nunes, Project Leader [email protected] Joann Tortorice, Deputy Project Leader [email protected] Staff assigned Russell Hillberry, Amanda Horan, Diane Manifold, Benjamin Randol, Heather Sykes, and Michelle Vaca-Senecal With special assistance from: Lynette Gabourel and Cynthia Payne Under the direction of Richard W. Brown, Division Chief Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Express Delivery Services: Competitive Conditions Facing U.S.-based Firms in Foreign Markets Investigation No. 332--456 Publication 3678 April 2004 ABSTRACT Following receipt on July 1, 2003 of a request from the House Committee on Ways and Means (the Committee) (see appendix A), the United States International Trade Commission (USITC or the Commission) instituted investigation No. 332-456, Express Delivery Services: Competitive Conditions Facing U.S.-based Firms in Foreign Markets under section 332(g) of the Tariff Act of 1930 (19 U.S.C. 1332(g)). As requested by the Committee, this study examines the composition of the global industry, major market participants, and factors driving change, including regulatory reform, in major foreign markets; examines the extent to which competition among express delivery suppliers in foreign markets may be affected by government-sanctioned monopolies competing in those markets; and identifies additional impediments to trade encountered by U.S.-based express delivery service suppliers in foreign markets. At the request of the Committee, for the purpose of the study, the Commission defined express delivery services as: (i) the expedited collection, transport and delivery of documents, printed matter, parcels and/or other goods, while tracking the location of, and maintaining control over, such items throughout the supply of the service; and (ii) services provided in connection therewith, such as customs facilitation and logistics services. In its examination, the Commission found that demand for express delivery services is increasing rapidly as a result of electronic commerce growth, the internationalization of business, and rising demand by manufacturers for outsourced logistic services. U.S.-based express delivery providers increasingly compete with foreign postal firms that provide express delivery services in addition to monopoly- protected letter mail delivery services. In such instances, competition may be impeded by anticompetitive monopoly practices, such as postal firms’ use of profits from monopoly-protected services to support services offered in competition. U.S.- based express delivery service firms also face impediments in the form of operational restrictions, investment limitations, discriminatory access to essential facilities, and poor customs environments. Some of these impediments may be addressed through trade disciplines contained in the General Agreement on Trade in Services (GATS), where a negotiating round is currently underway. Bilateral and other multilateral free trade agreements may also serve to remedy impediments. In its analysis of customs impediments, the Commission quantified the effect of foreign customs procedures on express delivery services. The analysis shows that poor customs environments impede time-sensitive deliveries more than other shipments, and that improved customs environments may increase the likelihood that a particular good would be shipped by air. One series of econometric experiments shows that improved customs environments would result in increased U.S. exports, thereby benefitting U.S.-based express delivery providers. i Table of Contents Page Abstract .................................................................. i Executive summary .................................................. vii Chapter 1. Introduction ............................................. 1-1 Objective and scope......................................................... 1-1 Methodology .............................................................. 1-2 Report structure ............................................................ 1-2 Chapter 2. Industry overview and international trade flows .............................................................. 2-1 Introduction ............................................................... 2-1 Industry overview ........................................................... 2-1 Operation of the industry ..................................................... 2-4 Competitive aspects of the industry ............................................. 2-4 Competition among express delivery providers ................................ 2-4 Competition with national postal providers ................................... 2-8 Factors driving change and growth in the industry ............................. 2-9 Trade and investment patterns................................................. 2-13 Cross-border trade ...................................................... 2-13 Affiliate transactions .................................................... 2-15 Chapter 3. Impediments to trade in express delivery services .......................................................... 3-1 Anti-competitive practices of foreign postal monopolies ............................ 3-1 Introduction ........................................................... 3-1 Specific instances of anti-competitive practices ............................... 3-3 Deutsche Post.............................................................. 3-3 The complaint ......................................................... 3-3 Article 82 determination ................................................. 3-4 The Article 87 determination.............................................. 3-6 Canada post ............................................................... 3-6 The complaint ......................................................... 3-6 The decision........................................................... 3-7 Other pending cases regarding anti-competitive practices ............................ 3-8 Policies and regulations that apply to express delivery service firms ................... 3-10 Right to establishment................................................... 3-10 iii Table of Contents–Continued Page Chapter 3. Impediments to trade in express delivery services–continued Postal regulations ......................................................... 3-10 Licensing requirements..................................................... 3-11 Barriers at customs........................................................ 3-12 Discriminatory customs treatment of private firms................................ 3-12 Low de minimis thresholds.................................................. 3-13 Weight and value restrictions................................................ 3-14 Customs documentation .................................................... 3-14 Inspections .............................................................. 3-16 Policies and regulations that have an indirect impact on EDS firms...................... 3-17 Chapter 4. Evolving remedies to impediments .............. 4-1 Postal reform .............................................................. 4-3 European postal reform .................................................. 4-3 Implementation by member states.......................................... 4-4 Postal reform in other countries ................................................ 4-8 Argentina............................................................. 4-8 Australia.............................................................. 4-8 New Zealand .......................................................... 4-10 Norway............................................................... 4-10 Switzerland............................................................ 4-10 Trade negotiations .......................................................... 4-11 The General Agreement on Trade in Services................................. 4-11 GATS framework....................................................... 4-12 Schedules of Commitments............................................... 4-12 The current GATS negotiations................................................ 4-21 GATS negotiating proposals .............................................. 4-21 GATS offers........................................................... 4-23 The Chile and Singapore FTAs............................................ 4-27 Customs facilitations efforts ................................................... 4-28 Multilateral agreements .................................................. 4-29 Impact of customs impediments on express delivery service firms ................. 4-31 Chapter 5. Summary ................................................ 5-1 Industry composition and factors driving change .................................. 5-1 Impediments to trade ........................................................ 5-2 Remedies to impediments .................................................... 5-3 Benefits of improving customs environments ..................................... 5-4 iv Table of Contents–Continued