[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4661 Introduced in House (IH)]







107th CONGRESS
  2d Session
                                H. R. 4661

To amend title 39, United States Code, to direct the Postal Service to 
   adhere to an equitable tender policy in selecting air carriers of 
 nonpriority bypass mail to certain points in the State of Alaska, and 
                          for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 2, 2002

 Mr. Young of Alaska introduced the following bill; which was referred 
                 to the Committee on Government Reform

_______________________________________________________________________

                                 A BILL


 
To amend title 39, United States Code, to direct the Postal Service to 
   adhere to an equitable tender policy in selecting air carriers of 
 nonpriority bypass mail to certain points in the State of Alaska, and 
                          for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. RURAL SERVICE IMPROVEMENT.

    (a) Short Title.--This Act may be cited as the ``Rural Service 
Improvement Act of 2002''.
    (b) Findings.--Congress makes the following findings:
            (1) The State of Alaska is the largest State in the Union 
        and has a very limited system of roads connecting communities.
            (2) Alaska has more pilots per capita than any other State 
        in the Union.
            (3) Pilots flying in Alaska are often the most skilled and 
        best-prepared pilots in the world.
            (4) Air travel within the State of Alaska is often hampered 
        by severe weather conditions and treacherous terrain.
            (5) The United States Government owns nearly \2/3\ of 
        Alaska's landmass, including large tracts of land separating 
        isolated communities within the State.
            (6) Such Federal ownership has inhibited the ability of 
        Alaskans to build roads connecting isolated communities.
            (7) Most communities and a large portion of the population 
        within the State can only be reached by air.
            (8) The vast majority of food items and everyday 
        necessities destined for these isolated communities and 
        populations can only be transported through the air.
            (9) The Intra-Alaska Bypass Mail system, created by 
        Congress and operated by the United States Postal Service under 
        section 5402 of title 39, U.S.C., with input from the 
        Department of Transportation, connecting hundreds of rural and 
        isolated communities within the State, is a critical piece of 
        the Alaska and the national transportation system. The system 
        is like a 4-legged stool, designed to--
                    (A) provide the most affordable means of delivering 
                food and everyday necessities to these rural and 
                isolated communities;
                    (B) establish a system whereby the Postal Service 
                can meet its obligations to deliver mail to every house 
                and business in America;
                    (C) support affordable and reliable passenger 
                service; and
                    (D) support affordable and reliable nonmail freight 
                service.
            (10) Without the Intra-Alaska Bypass Mail system--
                    (A) it would be difficult and more expensive for 
                the Postal Service to meet its obligation of delivering 
                mail to every house and business in America; and
                    (B) food, medicine, freight, and everyday 
                necessities and passenger service for these rural and 
                isolated communities would cost several times the 
                current level.
            (11) Attempts by Congress to support passenger and nonmail 
        freight service in Alaska using the Intra-Alaska Bypass Mail 
        system have yielded some positive results, but some carriers 
        have been manipulating the system by carrying few, if any, 
        passengers and little nonmail freight while earning most of 
        their revenues from the carriage of nonpriority bypass mail.
            (12) As long as the Federal Government continues to own 
        large tracts of land within the State of Alaska and forbids the 
        building of roads across these lands to connect isolated 
        communities, it is in the best interest of the Postal Service, 
        the residents of Alaska and the United States--
                    (A) to ensure that the Intra-Alaska Bypass Mail 
                system remains strong, viable, and affordable for the 
                Postal Service;
                    (B) to ensure that residents of rural and isolated 
                communities in Alaska continue to have affordable, 
                reliable, and safe passenger service;
                    (C) to ensure that residents of rural and isolated 
                communities in Alaska continue to have affordable, 
                reliable, and safe nonmail freight service;
                    (D) to encourage that intra-Alaska air carriers 
                move toward safer, more secure, and more reliable air 
                transportation under the Federal Aviation 
                Administration's guidelines and in accordance with part 
                121 of title 14, Code of Federal Regulations, where 
                such operations are supported by the needs of the 
                community; and
                    (E) that Congress make changes to the Intra-Alaska 
                Bypass Mail system to encourage intra-Alaska air 
                carriers to begin operating under part 121, where 
                applicable, and to ensure that the Intra-Alaska Bypass 
                Mail system continues to be used to support substantial 
                passenger and nonmail freight service.
    (c) Selection of Carriers of Nonpriority Bypass Mail to Certain 
Points in Alaska.--
            (1) Definitions.--Section 5402 of title 39, United States 
        Code, is amended--
                    (A) by striking subsection (e);
                    (B) by redesignating subsections (a) through (d) as 
                subsections (b) through (e), respectively; and
                    (C) by inserting before subsection (b), as 
                redesignated, the following:
    ``(a) In this section--
            ``(1) the term `acceptance point' means the point at which 
        nonpriority bypass mail originates;
            ``(2) the terms `air carrier', `interstate air 
        transportation', and `foreign air transportation' have the 
        meanings given such terms in section 40102(a) of title 49, 
        U.S.C.;
            ``(3) the term `base fare' is the fare paid to the carrier 
        issuing the passenger ticket or carrying nonmail freight which 
        may entail service being provided by more than 1 carrier;
            ``(4) the term `bush carrier' means a carrier operating 
        aircraft certificated within the payload capacity requirements 
        of subsection (g)(1)(D)(i) on a city pair route;
            ``(5) the term `bush passenger carrier' means a passenger 
        carrier that meets the requirements of subsection (g)(1)(D)(i) 
        and provides passenger service on a city pair route;
            ``(6) the term `bush route' means an air route in which 
        only a bush carrier is tendered nonpriority bypass mail between 
        the origination point, being either an acceptance point or a 
        hub, as determined by the Postal Service, and the destination 
        city;
            ``(7) the term `city pair' means service between an origin 
        and destination city pair;
            ``(8) the term `composite rate'--
                    ``(A) means a combination of mainline and bush 
                rates paid to a bush carrier for a direct flight from 
                an acceptance point to a bush destination beyond a hub 
                point; and
                    ``(B) shall be based on the mainline rate paid to 
                the hub, plus the lowest bush rate paid to bush 
                carriers in the State of Alaska;
            ``(9) the term `equitable tender' means the practice of the 
        Postal Service of equitably distributing mail on a fair and 
        reasonable basis between those air carriers that offer 
        equivalent services and costs between 2 communities in 
        accordance with the regulations of the Postal Service;
            ``(10) the term `existing mainline carrier' means a 
        mainline carrier (as defined in this section) that on January 
        1, 2001, was--
                    ``(A) certified under part 121;
                    ``(B) qualified to provide mainline nonpriority 
                bypass mail service; and
                    ``(C) actually engaged in the carriage of mainline 
                nonpriority bypass mail through scheduled service 
                within the State of Alaska;
            ``(11) the term `mainline carrier' means a carrier 
        operating aircraft under part 121 and certificated within the 
        payload capacity requirements of subsection (g)(1)(D)(ii) on a 
        given city pair route;
            ``(12) the term `mainline route' means a city pair in which 
        a mainline carrier is tendered nonpriority bypass mail;
            ``(13) the term `new', when referencing a carrier, means a 
        carrier that--
                    ``(A) meets the respective requirements of 
                subsection (g)(1)(D)(i) or (ii), depending on the type 
                of route being served and the size of aircraft being 
                used to provide service; and
                    ``(B) began providing nonpriority bypass mail 
                service on a city pair route within the State of Alaska 
                after January 1, 2001;
            ``(14) the term `part 121' means part 121 of title 14, Code 
        of Federal Regulations;
            ``(15) the term `part 135' means part 135 of title 14, Code 
        of Federal Regulations;
            ``(16) the term `scheduled service' means--
                    ``(A) flights are operated in common carriage 
                available to the general public under a published 
                schedule;
                    ``(B) flight schedules are announced in advance in 
                systems specified by the Postal Service, in addition to 
                the Official Airline Guide or the air cargo equivalent 
                of that Guide;
                    ``(C) flights depart whether full or not; and
                    ``(D) customers contract for carriage separately on 
                a regular basis;
            ``(17) the term `Secretary' means the Secretary of 
        Transportation;
            ``(18) the term `121 bush passenger carrier' means a bush 
        passenger carrier providing passenger service on bush routes 
        under part 121;
            ``(19) the term `121 mainline passenger carrier' means a 
        mainline carrier providing passenger service through scheduled 
        service on routes under part 121;
            ``(20) the term `121 passenger aircraft' means an aircraft 
        flying passengers on a city pair route that is operated under 
        part 121;
            ``(21) the term `121 passenger carrier' means a passenger 
        carrier that provides scheduled service under part 121;
            ``(22) the term `135 bush passenger carrier' means a bush 
        passenger carrier providing passenger service through scheduled 
        service on bush routes under part 135; and
            ``(23) the term `135 passenger carrier' means a passenger 
        carrier that provides scheduled service under part 135.''.
            (2) Requirements for selection.--Section 5402(g)(1) of 
        title 39, United States Code, is amended--
                    (A) in the matter preceding subparagraph (A), by 
                inserting after ``in the State of Alaska,'' the 
                following: ``shall adhere to an equitable tender policy 
                within a qualified group of carriers, in accordance 
                with the regulations of the Postal Service, and'';
                    (B) in subparagraph (C) by striking ``to the best'' 
                and all that follows and inserting a semicolon; and
                    (C) in subparagraph (D) by inserting ``with at 
                least 3 scheduled (non-contract) flights per week 
                between two points'' after ``scheduled service''.
            (3) Application of rates.--Section 5402(g)(2) of title 39, 
        United States Code, is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (A);
                    (B) by striking the period at the end of 
                subparagraph (B) and inserting a semicolon; and
                    (C) by adding at the end the following:
            ``(C) shall offer a bush passenger carrier providing 
        service on a route between an acceptance point and a hub not 
        served by a mainline carrier the opportunity to receive 
        equitable tender of nonpriority bypass mail at mainline service 
        rates when a mainline carrier begins serving that route if the 
        bush passenger carrier--
                    ``(i) meets the requirements of paragraph (1);
                    ``(ii) provided at least 20 percent of the 
                passenger service (as calculated in subsection (h)(5)) 
                between such city pair for the 6 months immediately 
                preceding the date on which the bush carrier seeks such 
                tender; and
                    ``(iii) continues to provide not less than 20 
                percent of the passenger service on the city pair while 
                seeking such tender;
            ``(D) shall offer bush passenger carriers and nonmail 
        freight carriers the opportunity to receive equitable tender of 
        nonpriority bypass mail at mainline service rates from a hub 
        point to a destination city if the city pair is also being 
        served by a mainline carrier and--
                    ``(i) for a passenger carrier--
                            ``(I) the carrier meets the requirements of 
                        paragraph (1);
                            ``(II) the carrier provided at least 20 
                        percent of the passenger service (as calculated 
                        in subsection (h)(5)) on the city pair route 
                        for the 6 months immediately preceding the date 
                        on which the carrier seeks such tender; and
                            ``(III) the carrier continues to provide 
                        not less than 20 percent of the passenger 
                        service on the route; or
                    ``(ii) for a nonmail freight carrier--
                            ``(I) the carrier meets the requirements of 
                        paragraph (1); and
                            ``(II) the carrier provided at least 25 
                        percent of the nonmail freight service (as 
                        calculated in subsection (i)(6)) on the city 
                        pair route for the 6 months immediately 
                        preceding the date on which the carrier seeks 
                        such tender;
            ``(E)(i) shall not offer equitable tender of nonpriority 
        mainline bypass mail at mainline rates to a bush carrier 
        operating from an acceptance point to a hub point, except as 
        described in subparagraph (C); and
            ``(ii) may tender nonpriority bypass mail at bush rates to 
        a bush carrier if the Postal Service determines that--
                    ``(I) the bush carrier meets the requirements of 
                paragraph (1);
                    ``(II) the service to be provided on such route by 
                the bush carrier is not otherwise available through 
                direct mainline service; and
                    ``(III) tender of mail to such bush carrier will 
                not decrease the efficiency of nonpriority bypass mail 
                service (in terms of payments to all carriers providing 
                service on the city pair route and timely delivery) for 
                the route;
            ``(F) may offer tender of nonpriority bypass mail to a 
        passenger carrier from an acceptance point to a destination 
        city beyond a hub point at a composite rate if the Postal 
        Service determines that--
                    ``(i) the carrier provides passenger service in 
                accordance with the requirements of subsection (h)(2);
                    ``(ii) the carrier qualifies under subsection (h) 
                to be tendered nonpriority bypass mail out of the hub 
                point being bypassed;
                    ``(iii) the tender of such mail will not decrease 
                efficiency of delivery of nonpriority bypass mail 
                service into or out of the hub point being bypassed; 
                and
                    ``(iv) such tender will result in reduced payments 
                to the carrier by the Postal Service over flying the 
                entire route; and
            ``(G) notwithstanding subparagraph (F), shall offer 
        equitable tender of nonpriority bypass mail in proportion to 
        passenger and non-mail freight mail pools described in this 
        section between qualified passenger and non-mail freight 
        carriers on a route from an acceptance point to a bush 
        destination at a composite rate if--
                    ``(i)(I) for a passenger carrier, the carrier 
                receiving the composite rate provided 20 percent of the 
                passenger service on the city pair route for the 12 
                months immediately preceding the date on which the 
                carrier seeks tender of such mail; or
                    ``(II) for a nonmail freight carrier, the carrier 
                receiving the composite rate provided at least 25 
                percent of the nonmail freight service for the 12 
                months immediately preceding the date on which the 
                carrier seeks tender of such mail; and
                    ``(ii)(I) nonpriority bypass mail was being 
                tendered to a passenger carrier or a nonmail freight 
                carrier at a composite rate on such city pair route on 
                January 1, 2000; or
                    ``(II) the hub being bypassed was not served by a 
                mainline carrier on January 1, 2000.
The tender of nonpriority bypass mail under subparagraph (G) shall be 
on an equitable basis between the qualified carriers that provide the 
direct service on the city pair route and the qualified carriers that 
provide service between the hub point being bypassed and the 
destination point, based on the volume of nonpriority bypass mail on 
both routes.''.
            (4) Selection of carriers to hub points.--Section 5402(g) 
        of title 39, United States Code, is amended by adding at the 
        end the following:
    ``(4)(A) Except as provided under subparagraph (B) and paragraph 
(5), the Postal Service shall select only existing mainline carriers to 
provide nonpriority bypass mail service between an acceptance point and 
a hub point in the State of Alaska.
    ``(B) The Postal Service may select a carrier other than an 
existing mainline carrier to provide nonpriority bypass mail service on 
a mainline route in the State of Alaska if--
            ``(i) the Postal Service determines (in accordance with 
        criteria established in advance by the Postal Service) that the 
        mail service between the acceptance point and the hub point is 
        deficient and provides written notice of the determination to 
        existing mainline carriers to the hub point; and
            ``(ii) after the 30-day period following issuance of notice 
        under clause (i), including notice of inadequate capacity, the 
        Postal Service determines that deficiencies in service to the 
        hub point have not been eliminated.
    ``(5)(A) The Postal Service shall offer equitable tender of 
nonpriority bypass mail to a new 121 mainline passenger carrier 
entering a mainline route in the State of Alaska, if that carrier--
            ``(i) meets the requirements of subsection (g)(1)(D)(ii); 
        and
            ``(ii) has provided at least the same number of insured 
        passenger seats as the number of available passenger seats 
        being provided by the mainline passenger carrier providing the 
        greatest number of available passenger seats on that route for 
        the 6 months immediately preceding the date on which such 
        carrier seeks tender.
    ``(B) A new 121 mainline passenger carrier that is tendered 
nonpriority mainline bypass mail under subparagraph (A)--
            ``(i) shall be eligible for equitable tender of such mail 
        only on city pair routes where the carrier meets the conditions 
        of subparagraph (A);
            ``(ii) may not count the passenger service provided under 
        subparagraph (A) toward the carrier meeting the minimum 
        requirements of this section; and
            ``(iii) shall provide at least 20 percent of the passenger 
        service (based on T-100 data) on such route to remain eligible 
        to be tendered nonpriority mainline bypass mail.
    ``(C) Notwithstanding paragraphs (1)(B) and (5)(A), a new 121 
mainline passenger carrier, otherwise qualified under this subsection, 
may immediately receive equitable tender of nonpriority mainline bypass 
mail to a hub point if it meets the requirements of subsections 
(g)(1)(A), (C), and (D) and (h)(2)(B) and--
            ``(i) all qualified 121 mainline passenger carriers 
        discontinue service on that city pair route; or
            ``(ii) no 121 mainline passenger carrier serves that city 
        pair route.
    ``(D) A carrier operating under a code share agreement on the date 
of enactment of the Rural Service Improvement Act of 2002 that received 
tender of nonpriority mainline bypass mail on a city pair route may 
count the passenger service provided under the entire code share 
arrangement on such route if the code share agreement terminates. That 
carrier shall continue to provide at least 20 percent of the passenger 
service (based on T-100 data) between the city pair as a 121 mainline 
passenger carrier while seeking such tender.
    ``(6)(A) Notwithstanding subsection (g)(1)(B), passenger carriers 
providing Essential Air Service under a Department of Transportation 
order issued under subchapter II of chapter 417 of title 49, U.S.C., 
shall be tendered all nonpriority mail, in addition to all nonpriority 
bypass mail, by the Postal Service to destination cities served by the 
Essential Air Service flights consistent with that order unless the 
Postal Service finds that the Essential Air Service carrier's service 
does not meet the needs of the Postal Service.
    ``(B) Service provided under this paragraph, including service 
provided to points served in conjunction with service being subsidized 
under the Essential Air Service contract, may not be applied toward any 
of the minimum eligibility requirements of this section.''.
            (5) Selection of carriers to bush points.--Section 5402 of 
        title 39, United States Code, is amended by adding at the end 
        the following:
    ``(h)(1) Except as provided under paragraph (7), on a given city 
pair route, the Postal Service shall offer equitable tender of 70 
percent of the nonpriority bypass mail on that route to all carriers 
providing scheduled passenger service in accordance with part 121 or 
part 135 that--
            ``(A) meet the requirements of subsection (g)(1);
            ``(B) provided 20 percent or more of the passenger service 
        (as calculated in paragraph (5)) between the city pair for the 
        12 months preceding the date on which the 121 passenger 
        aircraft or the 135 passenger carrier seek tender of 
        nonpriority bypass mail; and
            ``(C) meet the requirements of paragraph (2).
    ``(2) To remain eligible for equitable tender under this 
subsection, the carrier or aircraft shall--
            ``(A) continue to provide not less than 20 percent of the 
        passenger service on the city pair route for which the carrier 
        is seeking the tender of such nonpriority bypass mail;
            ``(B)(i) for operations under part 121, operate aircraft 
        type certificated to carry at least 19 passengers;
            ``(ii) for operations under part 135, operate aircraft type 
        certificated to carry at least 5 passengers; or
            ``(iii) for operations under part 135 where only a water 
        landing is available, operate aircraft type certificated to 
        carry at least 3 passengers;
            ``(C) insure all available passenger seats on the city pair 
        route on which the carrier seeks tender of such mail; and
            ``(D) operate flights under its published schedule.
    ``(3)(A) Except as provided under subparagraph (E), if a 135 
passenger carrier serves a city pair route and meets the requirements 
of paragraph (1) or (2) when a 121 passenger carrier becomes qualified 
to be tendered nonpriority bypass mail on such route with a 121 
passenger aircraft in accordance with paragraphs (1) and (2), the 
qualifying 135 passenger carriers on that route shall convert to 
operations with a 121 passenger aircraft within 5 years after the 121 
passenger aircraft begins receiving tender on that route in order to 
remain eligible for equitable tender under paragraph (1). The 135 
carrier shall--
            ``(i) begin the process of conversion not later than 2 
        years after the 121 passenger aircraft begins carrying 
        nonpriority bypass mail on that route; and
            ``(ii) submit a part 121 compliance statement not later 
        than 4 years after the 121 passenger aircraft begins carrying 
        nonpriority bypass mail on that route.
    ``(B) Completion of conversion under subparagraph (A) shall not be 
required if all 121 passenger carriers discontinue the carriage of 
nonpriority bypass mail with 121 passenger aircraft on the city pair 
route.
    ``(C) Any qualified carrier operating in the State of Alaska under 
this section may request a waiver from subparagraph (A). Such a 
request, at the discretion of the Secretary, may be granted for good 
cause shown. The requesting party shall state the basis for such a 
waiver.
    ``(D) If 6 years and 3 months after the date of enactment of the 
Rural Service Improvement Act of 2002, a 135 passenger carrier is 
providing service on a city pair route and a 121 passenger aircraft 
becomes eligible to receive tender of nonpriority bypass mail on that 
route, that 135 passenger carrier shall convert to operations under 
part 121 within 12 months of the 121 passenger carrier being tendered 
nonpriority bypass mail. The Postal Service shall not continue the 
tender of nonpriority bypass mail to a 135 passenger carrier that fails 
to convert to part 121 operations within 12 months after the 121 
passenger carrier being tendered such mail under this paragraph.
    ``(E) Notwithstanding the requirements of this subsection, if only 
1 passenger carrier or aircraft is qualified to be tendered nonpriority 
bypass mail as a passenger carrier or aircraft on a city pair route, 
the Postal Service shall tender 20 percent of the nonpriority bypass 
mail described under paragraph (1) to the passenger carrier or aircraft 
providing the next highest level of passenger service on such route.
    ``(4) Qualification for the tender of mail under this subsection 
shall not be counted toward the minimum qualifications necessary to be 
tendered nonpriority bypass mail on any other route.
    ``(5)(A)(i) In this section, the percent of the passenger service 
shall be calculated using the data provided as described under 
subsection (k).
    ``(ii) The Postal Service shall compare the resulting percentage 
under clause (i) to the lesser of--
            ``(I) the amount of the passenger excise tax paid by or on 
        behalf of a carrier, as determined by reviewing the collected 
        amount of base fares for passengers actually flown by a carrier 
        from the origination point to the destination point, divided by 
        the value of the total passenger excise taxes, as determined by 
        reviewing the collected amount of base fares paid by or on 
        behalf of all passenger carriers providing service from the hub 
        point to the bush destination point; or
            ``(II) the amount of half of the passenger excise tax paid 
        by or on behalf of a carrier, as determined by reviewing the 
        collected amount of base fares for passengers actually flown by 
        a carrier on the city pair route, divided by the value of the 
        total passenger excise taxes, as determined by reviewing the 
        collected amount of base fares paid by or on behalf of all 
        passenger carriers providing service between the origination 
        point and the destination point.
    ``(B) For the purposes of calculating passenger service as 
described under subparagraph (A), a bush passenger carrier providing 
intervillage bush passenger service may include the carriage of 
passengers carried along any point of the route between the route's 
origination point and the final destination point. Such calculation 
shall be based only on the carriage of passengers on regularly 
scheduled flights and only on flights being flown in a direction away 
from the hub point. Passenger service provided on chartered flights 
shall not be included in the carrier's calculation of passenger 
service.
    ``(6)(A) The Secretary shall establish new bush rates for passenger 
carriers receiving tender of nonpriority bypass mail under this 
subsection.
    ``(B) The Secretary shall establish a bush rate based on data 
collected under subsection (k) from 121 bush passenger carriers. Such 
rates shall be paid to all bush passenger carriers operating on city 
pair routes where a 121 bush passenger carrier is tendered nonpriority 
bypass mail.
    ``(C) The Secretary shall establish a bush rate based on data 
collected under subsection (k) from 135 bush passenger carriers. Such 
rates shall be paid to all bush passenger carriers operating on city 
pair routes where no 121 bush passenger carrier is tendered nonpriority 
bypass mail.
    ``(D) The Secretary shall establish a bush rate based on data 
collected under subsection (k) from bush passenger carriers operating 
aircraft on city pair routes where only water landings are available. 
Such rates shall be paid to all bush passenger carriers operating on 
the city pair routes where only water landings are available.
    ``(7) The percentage rate in paragraph (1) shall be 75 percent 3 
years and 3 months after the date of enactment of the Rural Service 
Improvement Act of 2002.
    ``(i)(1) Except as provided under paragraph (7), on a given city 
pair route, the Postal Service shall offer equitable tender of 20 
percent of the nonpriority bypass mail on such route to those carriers 
transporting 25 percent or more of the total nonmail freight (in 
revenue or weight as determined by the Postal Service), for the 12 
months immediately preceding the date on which the freight carrier 
seeks tender of nonpriority bypass mail.
    ``(2) To remain eligible for equitable tender under this 
subsection, a freight carrier shall continue to provide not less than 
25 percent of the nonmail freight service on the city pair route for 
which the carrier is seeking tender of such mail.
    ``(3) If a new freight carrier enters a market, that freight 
carrier shall meet the minimum requirements of subsection (g)(1) and 
shall operate for 12 months on a given city pair route before being 
eligible for equitable tender of nonpriority bypass mail on that route.
    ``(4) If no carrier qualifies for tender of nonpriority bypass mail 
under this subsection, such mail to be divided under this subsection, 
as described in paragraph (1), shall be tendered to the nonmail freight 
carrier providing the highest percentage of nonmail freight service (in 
terms of revenue or weight as determined by the Postal Service as 
calculated under paragraph (6)) on the city pair route. If no nonmail 
freight carrier is present on a route to receive tender of nonpriority 
bypass mail under this paragraph, the nonpriority bypass mail to be 
divided under paragraph (1) shall be divided equitably among carriers 
qualified under subsection (h).
    ``(5) Qualification for the tender of mail under this subsection 
shall not be counted toward the minimum qualifications necessary to be 
tendered nonpriority bypass mail on any other route.
    ``(6)(A) In this subsection, the percent of nonmail freight shall 
be calculated, using the data provided pursuant to subsection (k), by 
dividing the revenue of, or weight of, (as determined by the Postal 
Service) nonmail freight earned by or carried by a carrier from the 
transport of nonmail freight from an origination point to a destination 
point by the total amount of revenue earned, or the weight of, nonmail 
freight carried (as determined by the Postal Service) by all carriers 
from the transport of nonmail freight from the origination point to the 
destination point.
    ``(B) The Postal Service shall compare the resulting percentage 
under subparagraph (A) to the lesser of--
            ``(i) the amount of the freight excise tax paid by or on 
        behalf of a carrier, as determined by reviewing the collected 
        amount of base fares for nonmail freight actually flown by a 
        carrier from the origination point to the destination point, 
        divided by the value of the total nonmail freight excise taxes, 
        as determined by reviewing the collected amount of base fares 
        paid by or on behalf of all nonmail freight carriers providing 
        service from the origination point to the destination point; or
            ``(ii) the amount of half of the nonmail freight excise tax 
        paid by or on behalf of a carrier, as determined by reviewing 
        the collected amount of base fares for nonmail freight actually 
        flown by a carrier on the city pair route, divided by the value 
        of the total nonmail freight excise taxes, as determined by 
        reviewing the collected amount of base fares paid by or on 
        behalf of all nonmail freight carriers providing service on the 
        city pair route.
    ``(7) The percentage rate in paragraph (1) shall be 25 percent 3 
years and 3 months after the date of enactment of the Rural Service 
Improvement Act of 2002.
    ``(j)(1) Except as provided by paragraph (3), there shall be 
equitable tender of 10 percent of the nonpriority bypass mail to all 
carriers on each city pair route meeting the requirements of subsection 
(g)(1) that do not otherwise qualify for tender under subsection (h) or 
(i).
    ``(2) If no carrier qualifies under this subsection with respect to 
a city pair route, the 10 percent of nonpriority bypass mail allocated 
under paragraph (1) shall be divided evenly between the pools described 
under subsections (h) and (i) to be equitably tendered among qualified 
carriers under such subsections, such that--
            ``(A) the amount of nonpriority bypass mail available for 
        tender among qualified carries under subsection (h) shall be 75 
        percent; and
            ``(B) the amount of nonpriority bypass mail available for 
        tender among qualified carries under subsection (i) shall be 25 
        percent.
    ``(3)(A) Except as provided by subparagraph (B), the percentage 
rate under paragraph (1) shall be 0 percent 3 years and 3 months after 
the date of enactment of the Rural Service Improvement Act of 2002.
    ``(B) The percentage rate under paragraph (1) shall remain 10 
percent for equitable tender for 6 years and 3 months after the date of 
enactment of the Rural Service Improvement Act of 2002 for a 
nonpriority bypass mail carrier on bush routes originating from the 
main hub of the carrier designated under subparagraph (C), if the 
carrier seeking the tender of such mail--
            ``(i) meets the requirements of subsection (g)(1);
            ``(ii) is not qualified under subsection (h) or (i);
            ``(iii) operates routes originating from the main hub of 
        the carrier designated under subparagraph (C); and
            ``(iv) has invested at least $500,000 in a physical hanger 
        facility prior to January 1, 2002 in such a hub city.
    ``(C) For purposes of subparagraph (B), a carrier may designate 
only one hub city as its main hub and once such designation is 
transmitted to the Postal Service it may not be changed. Such selection 
and transmission must be transmitted to the Postal Service within 6 
months of the date of enactment of the Rural Service Improvement Act of 
2002. A carrier attempting to receive tender of nonpriority bypass mail 
under this subsection shall not be eligible for such tender after the 
carrier becomes qualified for tender of nonpriority bypass mail under 
subsection (h) or (i) on any route. The purchase of another carrier's 
hanger facility after such date of enactment shall not be considered 
sufficient to meet the requirement of subparagraph (B)(iv).
    ``(k)(1) Not less than every 2 years, in conjunction with annual 
updates, the Secretary shall review the need for a bush mail rate 
investigation. The Secretary shall use show cause procedures to 
speedily and more accurately determine the cost of providing bush mail 
service. In determining such rates, the Secretary shall not take into 
account the cost of passenger insurance rates or premiums paid by the 
passenger carriers or other costs associated with passenger service.
    ``(2) In order to assure sufficient, reliable, and timely traffic 
data to meet the requirements of this subsection, the Secretary shall 
require--
            ``(A) the monthly submission of the bush carrier's data on 
        T-100 diskettes, or any other suitable form of data collection, 
        as determined by the Secretary; and
            ``(B) the carriers to retain all books, records, and other 
        source and summary documentation to support their reports and 
        to preserve and maintain such documentation in a manner that 
        readily permits the audit and examination by representatives of 
        the Postal Service or the Secretary.
    ``(3) Documentation under paragraph (2) shall be retained for 7 
years or until the Secretary indicates that the records may be 
destroyed. Copies of flight logs for aircraft sold or disposed of shall 
be retained.
    ``(4) Carriers qualified to be tendered nonpriority bypass mail 
shall submit to the Secretary the number and type of aircraft in the 
carrier's fleet, the level of passenger insurance covering its fleet, 
and the name of the insurance company providing such coverage.
    ``(5) Not later than 30 days after the last day of each calendar 
month, carriers shall report to the Secretary the excise taxes paid by 
city pair to the Department of the Treasury and the weight of and 
revenue earned by the carriage of nonmail freight. Final compiled data 
shall be made available to carriers providing service in the hub.
    ``(l) No qualified carrier may be tendered nonpriority bypass mail 
under subsections (h) and (i) simultaneously on a route unless no other 
carrier is tendered mail under either subsection.
    ``(m)(1) Carriers qualifying for tender under subsections (h) and 
(i) simultaneously shall be tendered nonpriority bypass mail under 
subsection (h).
    ``(2) A carrier shall be tendered nonpriority bypass mail under 
subsection (i) if that carrier--
            ``(A) was qualified under both subsections (h) and (i) 
        simultaneously; and
            ``(B) becomes unqualified under subsection (h) but remains 
        qualified under subsection (i).
    ``(n)(1) A carrier operation resulting from a merger or acquisition 
between any 2 carriers operating between points in Alaska shall have 
the passenger and nonmail freight of all such merged or acquired 
carriers on the applicable route counted toward meeting the resulting 
carrier's minimum requirements to receive equitable tender of 
nonpriority bypass mail on such route for the 6-month period following 
the merger or acquisition.
    ``(2) After the 6-month period described under paragraph (1), the 
carrier resulting from the merger or acquisition shall demonstrate that 
the carrier meets the minimum passenger or nonmail freight carriage 
requirements of this section to continue receiving tender of such mail.
    ``(o) In addition to any penalties applied to a carrier by the 
Federal Aviation Administration or the Secretary, any carrier that 
significantly misstates passenger or nonmail freight data required to 
be reported under this section on any route, in an attempt to qualify 
for tender of nonpriority bypass mail, shall receive--
            ``(1) a 1-month suspension of tender of nonpriority bypass 
        mail on the route where the data was misstated for the first 
        offense;
            ``(2) a 6-month suspension of tender of nonpriority bypass 
        mail on the route where the data was misstated for the second 
        offense;
            ``(3) a 1-year suspension of tender of all nonpriority 
        bypass mail in the entire State of Alaska for the third offense 
        in the State; and
            ``(4) a permanent suspension of tender of all nonpriority 
        bypass mail in the entire State of Alaska for the fourth 
        offense in the State.
    ``(p)(1) The Postal Service or the Secretary, in carrying out 
subsection (g)(2), (h), or (i), may deny equitable tender to an 
otherwise qualified carrier who does not operate under this section in 
good faith.
    ``(2) The Postal Service or the Secretary may waive any provision 
of subsection (h) or (i), if the carrier provides substantial passenger 
or nonmail freight service on the route where the carrier seeks tender 
of nonpriority bypass mail.
    ``(3) In granting waivers for or denying tender to carriers under 
this subsection, the Postal Service or the Secretary shall consider--
            ``(A) the passenger needs of the destination to be served 
        (including amount and level);
            ``(B) the nonmail freight needs of the destination to be 
        served;
            ``(C) the mail needs of the destination to be served;
            ``(D) the amount or level of passenger service already 
        available to the destination;
            ``(E) the amount of nonmail freight service already 
        available to the destination;
            ``(F) the amount of nonpriority bypass mail service already 
        available to the destination; and
            ``(G) the savings to the Postal Service in terms of 
        payments made to carriers.
    ``(q) The Secretary shall make a regular review of carriers 
receiving, or attempting to qualify to receive, equitable tender of 
nonpriority bypass mail. If the Secretary suspends or revokes an 
operating certificate, the Secretary shall notify the Postal Service. 
Upon such notification, the Postal Service shall cease tender of mail 
to such carrier until the Secretary certifies the carrier is operating 
in a safe manner. Upon such receipt, the carrier shall demonstrate that 
it otherwise meets the minimum carriage requirements of this section 
before being tendered mail under this section.
    ``(r) The Postal Service shall have the authority to tender 
nonpriority bypass mail to any carrier that meets the requirements of 
subsection (g)(1) on any route on an emergency basis. Such emergency 
tender shall cease when a carrier qualifies for tender on such route 
under the terms of this section.
    ``(s) Notwithstanding any other provision of law, and except for 
written contracts authorized under subsections (b), (c) and (d) of this 
section, tender by the Postal Service of any category of mail to a 
carrier for transportation between any two points within the State of 
Alaska shall not give rise to any contract between the Postal Service 
and a carrier, nor shall any such carrier acquire any right in 
continued or future tender of such mail by virtue of past or present 
receipt of such mail. This subsection shall apply to any case commenced 
before, on, or after the date of enactment of this subsection.''.
    (d) Actions of Air Carriers To Qualify.--Beginning 6 months after 
the date of enactment of this Act, if the Secretary determines, based 
on the Secretary's findings and recommendations of the Postal Service, 
that an air carrier being tendered nonpriority bush bypass mail is not 
taking actions to attempt to qualify as a bush passenger or nonmail 
freight carrier under section 5402 of title 39, United States Code, (as 
amended by this Act) the Postal Service shall immediately cease tender 
of all nonpriority bypass mail to such carrier.
    (e) Technical and Conforming Amendments.--
            (1) Title 39.--Section 5402 of title 39, United States 
        Code, is amended--
                    (A) in subsections (b) through (e) (as redesignated 
                by this Act) and subsection (f) by striking ``Secretary 
                of Transportation'' each place it appears and inserting 
                ``Secretary''; and
                    (B) in subsection (f)--
                            (i) by striking ``subsections (a), (b), and 
                        (c)'' and inserting ``subsections (b), (c), and 
                        (d)''; and
                            (ii) by striking ``subsection (d)'' and 
                        inserting ``subsection (e)''.
            (2) Title 49.--Section 41901 of title 49, United States 
        Code, is amended in subsection (a), by striking ``5402(d)'' and 
        inserting ``5402(e)''.
    (f) Reports to Congress.--Not later than 12 months after the date 
of enactment of this Act, the Postal Service and the Secretary of 
Transportation shall submit a report to the Committee on Government 
Reform of the House of Representatives and the Committee on 
Governmental Affairs of the Senate on the progress of implementing this 
Act.
    (g) Effective Dates.--
            (1) In general.--Except as provided under paragraphs (2) 
        and (3), this Act (including the amendments made by this Act) 
        shall take effect on the date of enactment of this Act.
            (2) Selection of carriers.--Subsection (c)(5) shall take 
        effect 15 months after the date of enactment of this Act.
                                 <all>