Managing Intercompany Pricing
Believing strongly that payments for the delivery of letter mail should be based on performance, a working group led by IPC started a dialogue for developing a new terminal dues system. The goal was to ensure that payments for delivery of cross-border mail were not only cost-related, but also linked to actual performance.
Known as the REIMS Agreement – Remuneration of International Mails – the system was implemented in April 1999. IPC has been central to the arrangement, as the administrator of the agreement, as the facilitator of negotiations and as the chair of steering committees and working groups.
REIMS has two core principles. Firstly, payment of the terminal dues will only be made in full if a guaranteed level of service quality is met. The agreement has qualified for two exemptions by the European Union under its competition rules. Secondly, payments to delivering posts, known as “terminal dues”, must be linked to actual costs and the receiving country’s domestic postal rates are accepted as a proxy for costs.
Quality of service is judged using IPC’s UNEX test letter monitoring system. The normal target is for 90 percent of letters to be delivered the first working day after arrival in the destination country. If the delivering country posts fail to reach their target they are penalised. The effect of these tough economic penalties has been to improve dramatically postal deliveries among REIMS member posts. Overall, an entire day has been cut from the end-to-end transit time of priority mail.The programme continues to evolve and improve. The most recent version, REIMS IV, entered into force on 1 January 2010 and reflects the changing market and customer needs.