Summary
International e-commerce between Germany and Asian countries is growing. E-retailers from China and other Asian countries offer German consumers very low prices and in most cases free delivery. Retailers can offer free delivery benefitting from the low terminal dues paid by China Post for delivery of letters and packets in Germany. There transfer prices (called ‘terminal dues’) are regulated by the Universal Postal Union (UPU).
In principle, goods made in China may be sold and transported to Germany on two different supply chains. First, goods can be transported by freight logistics in large quantities, and then sold in Germany. Second, goods can be sold on Chinese websites and transported individually to Germany by post. Low terminal dues make such individual transport by post economically viable. This study analyses the impact of low terminal dues on consumers, postal operators, retail trade, and the State budget in Germany.
Consumers in Germany clearly benefit from the opportunity to buy directly from Chinese e-retailers, and from free delivery offered by Chinese online shops.
The low level of terminal dues is not cost covering for Deutsche Post (and many other postal operators in Europe). Deutsche Post receives much lower prices for the delivery of letter post from China than for comparable domestic items. Chines e-retailers thus pay lower prices than domestic senders. The result is a loss for Deutsche Post, which accounts for about 120 million Euro in 2016. For the next years, e-commerce items from China to Germany will increase substantially. Other mail and parcel operators have no access to terminal dues. They are potentially missing out on business opportunities related to e-commerce imports from Asia.
Retail traders in Germany principally have disadvantages as low terminal dues promote direct imports from China. Yet in practice, retailers can hardly compete with the low level of costs (and consumer protection rules) in China. Therefore, they do not have significant losses from low terminal dues.
The German State budget loses import VAT and customs charges (but on relatively low level) if merchandise is sent individually through the post and not by freight. These losses are caused by thresholds for taxes and customs on direct imports.
Overall, the economic disadvantages of low terminal dues in Germany are greater that benefits for German consumers. Consumer benefits are outweighed by substantial costs for postal operators and losses for the State budget, retail trade and logistics. We strongly recommend that terminal dues for e-commerce items in the UPU system should be increased, and should be based the effective costs of delivery in the destination country.
Discussion Paper is available for download.
