- The Washington Times - Wednesday, June 14, 2000

The Postal Service has a comparative advantage in the dynamic market of shipping international business packages: Its inefficiency. The Postal Service's arcane structure and position as a quasi-government agency has given it special privileges, exempting it from costly regulations. These exemptions make it easier for smugglers to sneak contraband into the country while making legal packages far less likely to pay duties to the Treasury, than if the same package was carried privately by companies like United Parcel Service (UPS) or Federal Express.

Millions of packages enter the United States each year, but not all packages are subject to the same level of scrutiny from Customs agents. If the company carrying a package is UPS, or another private carrier, the package is subject to an elaborate regulatory process. But if the carrier is the Postal Service, a different set of rules apply.

Not surprisingly, U.S. Customs isn't happy about this arrangement. Although, the agency is hesitant to publicly criticize another government agency which has the powerful postal union in its corner, internally the agency has tried to get the Postal Service to submit to the same regulations private businesses do.

Unfortunately, Customs has been unsuccessful and has only invited conflict. One recent conflict was over space in a Postal Service warehouse in Oakland, Calif. Customs is forced to pay rent for the space it uses to inspect packages.

The Postal Service wants to keep its separate set of rules because they add up to a big financial advantage.

In accordance with U.S. law, packages carried by the Postal Service are not subject to searches without a search warrant a protection not extended to packages carried private carriers. Furthermore, when Customs agents do inspect packages, the Postal Service does not have to reimburse Customs for the inspection. Instead, Customs reimburses the Postal Service for office space it uses in postal warehouses. Custom agents also open and repack all packages they inspect only if the carrier is the Postal Service.

One of the clearest examples of a "tilted playing field" in favor of the Postal Service is manifest requirements. Private companies must operate with a tracking system compatible with the U.S. Customs Service. This system ties the country of origin, shipper's name and address, ultimate destination, description of the contents (including weight and dollar value) to the package. Agents use this system to identify packages likely to be carrying contraband or goods subject to duties. Using this software, agents can decide which packages to inspect without leaving their desks.

The Postal Service is not required to integrate its system with Customs and is therefore free to keep a system not equipped to efficiently locate those packages it needs to inspect. Under the Postal Service's system, Customs agents have to randomly select packages to investigate. Packages carrying contraband are therefore much more likely to slip by Customs agents if the Postal Service is carrying the package then if it is carried privately.

The end result is packages sent through the U.S. Postal Service's International Business Unit are far less likely to be searched, pay duties or otherwise be burdened with a higher cost of shipping, than if a private company carries the same package.

This double standard in favor of the Postal Service costs the U.S. Treasury up to $1.5 billion each year in lost duties, according to a recent study by Wirthlin Worldwide. That study found the Treasury lost money in two ways. First, on average, shipments made through the Postal Service are far less likely to result in the filing of a Customs entry than are shipments of similar products by private carriers. No entries were filed for 93.7 percent of packages sent through the Postal Service, the study found, compared with only 11.1 percent of packages carried by express carriers and 29.6 percent for other contract carriers.

The second way Treasury loses is by the amount of money collected from packages entered with Customs. On average, a package carried by the Postal Service pays only $1.33 in duties. By comparison, express carrier packages pay an average of $30.32, and other contract carrier packages pay $29.01 to the Treasury.

Congress can level the playing field. The Lexington Institute, an Arlington based think tank, has mapped out a few simple corrections that would allow the Postal Service and private carriers to compete on equal footing.

• First, the Postal Service should be forced to meet all the manifest requirements now required of private carriers, which includes implementing a tracking system compatible with Customs.

• The Postal Service should also be required to comply with Customs law. That would require mandated administrative controls, to document a package's movement, provide advance information to Customs, and require the shipper to be the importer of record, which requires the shipper to post bonds on packages.

• Finally, search warrant protections should be extended to packages carried by private companies. This extension would greatly facilitate commerce, but still allow Customs to search suspicious packages.

The modern economy increasingly needs efficient and affordable shipping alternatives. By tilting the playing field, the federal government has not only created an unfair business edge for the Postal Service and has placed an unintended burden on the rest of the economy that should be lifted.

Brendan Miniter is an editor for the Commentary pages of The Washington Times and an adjunct fellow with the Lexington Institute.

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