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Viewpoint: Why impose $12.50 Direct Ship fee?

By Michael Zielinski

The U.S. Mint has made a further modification to the circulating $1 coin Direct Ship program. As of Nov. 15, the Mint will impose an order fulfillment charge of $12.50 for each box of coins ordered through the program.

The Direct Ship program was introduced in June 2008 as a means to proactively comply with the requirement of Public Law 109-145 to remove barriers and improve circulation of the $1 coin. Individuals or businesses were able to order quantities of $250 worth of $1 coins directly from the Mint at face value. Typically, the coins are distributed by the Federal Reserve Banks in $1,000 boxes or $2,000 bags. In theory, the direct distribution in smaller quantities would allow the $1 coins to be more easily introduced into circulation.

Abuses of the program were widely reported in late 2009. Some individuals used the program to earn miles or rewards on their credit cards. Massive quantities of coins were ordered at face value with a credit card, which were immediately deposited at a bank. The net result was zero cost with the accrued credit card rewards. In the most extreme case, a Wall Street Journal article mentioned one person who claimed to have bought $800,000 in coins through the program.

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Since this time, the U.S. Mint has struggled to curb the abuses to the program. Initially, the Mint was reported to have tracked down and cut off some of the biggest abusers. In early newspaper coverage, Mint representatives made statements indicating that coins ordered through the program would be treated as cash advances, although this turned out to be false.
Later, the Mint imposed specific ordering limits and required customers to agree to comply with the intended purpose of the program. In July, the Mint stopped accepting credit card orders through the program and required payment by check, money order, or bank wire.

The Mint offered this explanation for the new $12.50 fee for each box ordered through the program: “This new charge is a result of our continual effort to review programs to ensure that they meet our commitment to prudent fiscal management on behalf of the American public.”

The decision to start imposing a fee now seems completely ridiculous.

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According to data included in a report issued by the Board of Governors of the Federal Reserve System, the United States Mint distributed 244 million $1 coins through the Direct Ship Program through June 1. This means that the US. .Mint absorbed the costs of credit card fees, order fulfillment and shipping for nearly 1 million $250 boxes of coins, during a period of widespread abuse.

After the recent requirement for payment by check, money order or wire was imposed, surely anyone using the program just to earn credit card rewards would have stopped. So now that all of the abusers of the program are finally gone, the U.S. Mint will impose fees on the remaining legitimate users? And this is supposed to remove barriers and improve circulation of $1 coins? Clearly, the original concept of the Direct Ship program has gone completely out the window.

This Viewpoint was originally posted by Michael Zielinski on mintnewsblog. Viewpoint is a forum for the expression of opinion on a variety of numismatic subjects. To have your opinion considered for Viewpoint, write to David C. Harper, Editor, Numismatic News, 700 E. State St., Iola, WI 54990. Send email to david.harper@fwmedia.com.

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