Government's shipping deal helps Chinese knockoffs undercut local companies

CLEARWATER, Fla. - Manufacturers in the Tampa Bay area and across the nation say they’re losing business to China because our government gives steep shipping discounts to their overseas competitors. 

“It is a hard pill to swallow,” said Florida Candy Factory owner Scott Rehm. “We’re what made America great -- the small mom-and-pops.”

In Clearwater, the Florida Candy Factory cranks our thousands of old mints on vintage machines dating back to 1911. The factory workers boil sugar in kettles, pour it in slabs, spin it with flavor, press it, cut it, wrap it and ship it as ‘Angel Mints’ and Florida saltwater taffy.

“We were working quite heavy and we were doing a lot of packing for these theme parks,” Rehm said.

However, our federal government gave a shipping deal to China, allowing Chinese companies to mail products into our country for a fraction of the price American companies have to pay for domestic shipping. 

The theme parks eventually took the cheaper shipping costs from China and pulled the plug on Scott. 
He had to cut his payroll from 25 workers to four. 

“Left us sort of out on the cold,” he complained. "Those are some of the hardest days we had to go through." 

This goes far beyond the Florida Candy Factory. Records show the U.S. Postal Service is losing money by giving shipping discounts to our biggest economic competitor, requiring companies to pay more than their Chinese competitors for shipping products in their own country. 

“I don’t think anyone had any clue about this…There are very few people who knew it existed let along understand it in its entirety," said New Jersey mug manufacturer Jayme Smaldone. “And it’s something so bad for American businesses. You don’t think that something so stupid could exist in our government!”

Smaldone is the CEO of Mighty Mug, which makes a mug designed to not tip over. He said the U.S. Postal Service charges him around $6 to ship each one from his warehouse in New Jersey to customers around the nation. Several months ago, he discovered Chinese companies were ripping off his ads and selling knockoffs.

"One that really stood out to us was $5.69 with free shipping all the way from China," he noted. 

As he dug into it, he discovered the little-known agency called Universal Postal Union.

We struck a deal with this postal arm of the United Nations to subsidize mail deliveries for less developed nations. The Universal Postal Union placed China in a tier with less-developed nations.

“Just to put it in perspective, China is in the same basket as Cuba and Gabun and these super primitive economic societies,” said Samldone. 

He said it costs around $6.30 to ship one of his Mighty Mugs from New Jersey, or around $1.40 to get the knockoff of his product from China. 

The U.S. Postal Service is raising rates for international deliveries, but manufacturers say it's not enough.

We did find one senator who opposes the discounts for China.  U.S. Senator Bill Cassidy of Louisiana wants to end the subsidies for international shipments.   

LINK: 2017 GAO report on international mail and shipping rates