By Giff Johnson
For Variety

MAJURO — United States postal rates for the Marshall Islands are scheduled to jump in mid-2007 for the second year in a row, a development that local businessmen say is crippling the ability of companies here to get goods from the U.S. by post and to compete with the growing dominance of Asian-controlled businesses.
Since the U.S. took over administration of this central Pacific nation after winning it from Japan in World War II, the Marshall Islands was designated as a domestic U.S. zone, replete with American zip, or postal, codes. But that all changed in early 2006, with the implementation of a new Compact of Free Association between the U.S. and Marshall Islands governments that eliminated the domestic mail status in favor of a five year phase-in of international rates.
“This (rate increase) is really affecting the economy of the Marshall Islands and tax revenue for the government,” said Grant Labaun, owner of large clothing and food retail stores who gets most of his products from U.S. vendors through the mail. “The U.S. government should really look at this.”
While a stated purpose behind the Compact agreement with Washington is private sector development, the U.S. move to change the Marshall Islands to an international postal destination has weakened businesses owned by Marshall Islanders by making them less competitive in the face of increasing expansion of small and medium-sized businesses owned by Asians who bring in goods by ship from Asia.
The second annual U.S. rate hike is anticipated later this year, and will raise the base package rate by 220 percent over the pre-2006 domestic prices, and the letter rate by 65 percent.
The one-ounce letter rate from the U.S. to the Marshall Islands was 37 cents in 2005 and rose to 48 cents last year. It is set to jump again to 61 cents later in 2007, according to the U.S. Postal Service.
As part of a proposed revamp of its international package service, the air mail parcel base rate is set to more than double from the pre-2006 domestic price of $3.20 for the first pound. The USPS is planning to hike the starting one-pound rate for air mail parcels to $10.20 this year. The change also affects the Federated States of Micronesia, which has a similar Compact of Free Association with Washington.
Labaun said Marshall Islands companies will soon not be able to do business with U.S. vendors using air mail if the rates keep increasing like this. But sea mail takes far too long to arrive, with vendors demanding payment before merchandise arrives and can be sold, he said. Because of the Marshall Islands’ long-term ties to the United States, many local businesses rely heavily on vendors based in the U.S. for products and services.
The USPS rate hike must still be approved by the USPS board of directors, but that is considered largely a formality.
In addition to concern about the cost, the Marshall Islands Chamber of Commerce has also lodged complaints about the international designation change because it removed many previously offered mail services.
“The recent designation of the Marshall Islands as international rather than domestic combined with the inability to ship or to receive registered, certified or insured mail has severely limited business, government, educational, and personal purchases from the U.S.,” Chamber of Commerce head Jack Niedenthal said in a recent letter to U.S. officials.