Germany Imposes Postal Surcharge
Cross-border direct mailers may be facing higher postage rates, especially for items bound for Germany, as the result of an unexpected court ruling in February. In a decision that’s been widely criticized by the DM industry, the European Court of Justice has upheld a move by Deutsche Post – the German postal service – to surcharge items it believes have been remailed from outside the country.
“Any international company dealing across borders in Europe needs to be aware of the possible implications,” says Simon Burrell, marketing manager of Newsweek International. Because the case has established a precedent, it’s possible that other postal administrations may use it as a basis for applying additional charges to direct mail entering their countries from abroad.
The judgment is the outcome of a case that began five years ago in Frankfurt, Germany. Citibank, a subsidiary of Citicorp, was prosecuted by Deutsche Post over monthly statements sent to its German customers. The bank received transactional data electronically at a production facility in Arnhem, Netherlands, which printed and mailed the statements.
The postal administration’s case was that this constituted remailing, which is illegal under the Universal Postal Union – the international treaty that governs how countries handle incoming mail from abroad. Article 25 of the UPU states that any item of mail produced in country A, which is then transported to country B for mailing back into country A – so-called ABA remailing – is illegal. There are also controls over ABC remailing, where items from country A are shipped to country B for mailing to country C.
Deutsche Post argued that it should be allowed to surcharge Citibank to make the international postage rate equal to the sum payable if the items had been mailed from within Germany. Citicorp’s defense was that its activities did not constitute remailing, but the transfer of data from one territory to another.
“Their lawyers said that if there is a single European market, you can’t say there should be no centralized databases,” says Alastair Tempest, director of FEDMA, the Federation of European Direct Marketing Associations. The German court then passed the case on to the European Court of Justice.
“That court’s reply was that the surcharge is legal,” says Tempest. This draws into question the status of any items that are technically described as hybrid mail, where information has been electronically transferred for processing and production. “The court has considered hybrid mail to be remail, which is extremely worrying,” he says.
The case echoes a move against American Express by Deutsche Post six years ago. The card issuer had previously created its statement mailings and direct mail in a central facility in the Netherlands, but had Royal Mail International send the items across Europe. When threatened with a surcharge by the German postal administration, AmEx began trucking items for its German customers and prospects into Germany for placement in the postal service there.
Other sources in the European financial services sector report similar difficulties. They point out that Deutsche Post already has the second-highest postage rates in Europe (behind Denmark) and that it rarely discounts from its published tariffs, even for bulk presorted mail.
“This will cut down the amount of business international companies do in Europe. The problem is that we’ve already put our budgets together. It makes me question whether to market in Germany because of the postage costs,” says one financial services DMer who asked not to be named, but who is currently negotiating with Deutsche Post.
The ruling is a potential blow to the Dutch direct marketing services sector. It’s been highly successful in promoting the country as a European distribution hub, attracting, among others, American multinational companies looking for a foothold in Europe. The judgment throws into uncertainty the cost base for any mailing services it now offers.
According to Rosemary Smith, managing director of Schober Direct Marketing U.K., “Goodness knows what mailing houses – or companies like Time-Warner that have a significant fulfillment plant in the Netherlands – are going to do. Does it mean they can’t mail internationally because the data was collected locally? Any clients looking to mail into Germany I can only tell that the judgment has been made. The only alternative is to mail from within Germany and pay the higher price.”
Behind the outcome of the case may lurk a deeper and highly political issue. One of the reasons for the success of the Dutch DM services sector has been the low international postal rates charged in that country. The Netherlands has notably failed to sign a new deal on terminal dues – the sum paid by one country to another for handling cross-border mail. Known as Reims II, the agreement has been signed onto by 16 European postal administrations; the agreement brings payments closer to the actual cost of handling incoming mail.
“The question you have to ask is, would this case have been different if the data was coming from France, which has signed up? Is this not a political decision? We will never know, but it is a question,” says Tempest. He believes that a message has been sent to the Dutch postal administration disapproving of its decision not to agree to Reims II’s terms so it can retain lower postage rates.
In FEDMA’s view, if the matter of terminal dues is settled fairly, then remailing will cease to be an issue, because there will be fewer differences between what countries charge for international mail.
International direct mailers will choose their centers of production based on service levels and price, rather than on exploiting loopholes in cross-border postage rates. The main opportunity for achieving an end to surcharging appears to be through amending the second European postal services directive, due in May. The European Commission has informally indicated an interest in ensuring that postal disputes do not create trade barriers.
Unless and until that happens, though, the judgment sets a worrisome precedent.
