[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




                 TREASURY, POSTAL SERVICE, AND GENERAL

                     GOVERNMENT APPROPRIATIONS FOR

                            FISCAL YEAR 2001

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION
                                ________

  SUBCOMMITTEE ON THE TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT 
                             APPROPRIATIONS

                      JIM KOLBE, Arizona, Chairman
 FRANK R. WOLF, Virginia            STENY H. HOYER, Maryland
 ANNE M. NORTHUP, Kentucky          CARRIE P. MEEK, Florida
 JO ANN EMERSON, Missouri           DAVID E. PRICE, North Carolina
 JOHN E. SUNUNU, New Hampshire      LUCILLE ROYBAL-ALLARD, California
 JOHN E. PETERSON, Pennsylvania     
 VIRGIL H. GOODE, Jr., Virginia     

 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

       Michelle Mrdeza, Jeff Ashford, Kurt Dodd, and Tammy Hughes,
                            Staff Assistants
                                ________

                                 PART 2

                      UNITED STATES POSTAL SERVICE

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 64-689 O                   WASHINGTON : 2000



                        COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                     DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania
 JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington
 HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota
 JOE SKEEN, New Mexico                  JULIAN C. DIXON, California
 FRANK R. WOLF, Virginia                STENY H. HOYER, Maryland
 TOM DeLAY, Texas                       ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                     MARCY KAPTUR, Ohio
 RON PACKARD, California                NANCY PELOSI, California
 SONNY CALLAHAN, Alabama                PETER J. VISCLOSKY, Indiana
 JAMES T. WALSH, New York               NITA M. LOWEY, New York
 CHARLES H. TAYLOR, North Carolina      JOSE E. SERRANO, New York
 DAVID L. HOBSON, Ohio                  ROSA L. DeLAURO, Connecticut
 ERNEST J. ISTOOK, Jr., Oklahoma        JAMES P. MORAN, Virginia
 HENRY BONILLA, Texas                   JOHN W. OLVER, Massachusetts
 JOE KNOLLENBERG, Michigan              ED PASTOR, Arizona
 DAN MILLER, Florida                    CARRIE P. MEEK, Florida
 JAY DICKEY, Arkansas                   DAVID E. PRICE, North Carolina
 JACK KINGSTON, Georgia                 MICHAEL P. FORBES, New York
 RODNEY P. FRELINGHUYSEN, New Jersey    CHET EDWARDS, Texas
 ROGER F. WICKER, Mississippi           ROBERT E. ``BUD'' CRAMER, Jr., 
 GEORGE R. NETHERCUTT, Jr.,             Alabama
Washington                              MAURICE D. HINCHEY, New York
 RANDY ``DUKE'' CUNNINGHAM,             LUCILLE ROYBAL-ALLARD, California
California                              SAM FARR, California
 TODD TIAHRT, Kansas                    JESSE L. JACKSON, Jr., Illinois
 ZACH WAMP, Tennessee                   CAROLYN C. KILPATRICK, Michigan
 TOM LATHAM, Iowa                       ALLEN BOYD, Florida
 ANNE M. NORTHUP, Kentucky              
 ROBERT B. ADERHOLT, Alabama            
 JO ANN EMERSON, Missouri               
 JOHN E. SUNUNU, New Hampshire          
 KAY GRANGER, Texas                     
 JOHN E. PETERSON, Pennsylvania         
 VIRGIL H. GOODE, Jr., Virginia     

                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
  TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT APPROPRIATIONS FOR 
                                  2001

                              ----------                              

                                            Tuesday, April 4, 2000.

                      UNITED STATES POSTAL SERVICE

                               WITNESSES

WILLIAM J. HENDERSON, POSTMASTER GENERAL AND CHIEF EXECUTIVE OFFICER
RICHARD PORRAS, CHIEF FINANCIAL OFFICER
KENNETH WEAVER, CHIEF INSPECTOR

                     OPENING COMMENTS BY MR. KOLBE

    Mr. Kolbe. The Subcommittee on Treasury, Postal Service and 
General Government will come to order. I just left our ranking 
member, Mr. Hoyer, over in Rules Committee a few moments ago. 
He is still testifying there. When he comes in, we will take 
his opening remarks and proceed. But I think in the interest of 
time and our panel's time as well, we will go ahead and begin.
    We are very pleased this afternoon to welcome Postmaster 
General Henderson. It is your second appearance before the 
Subcommittee. We also welcome Mr. Richard Porras, the Chief 
Financial Officer, and Ken Weaver, the Chief Postal Inspector.
    I think it is fair to say that the U.S. Postal Service is 
one of the more interesting agencies that comes under the 
jurisdiction of this Subcommittee. We appropriate very little 
for the actual operations of the Postal Service, about one 
tenth of 1 percent. Last year we provided $64 million to cover 
costs of free mail for the blind and overseas voters. That is 
$64 million out of total Postal Service revenue of $63 billion.
    Nonetheless, that doesn't prevent us from getting in the 
middle of all of the Postal Service's issues. Just because we 
don't have jurisdiction over Postal Service operations, we seem 
to be the place where all the major debates seem to occur. From 
international postal agreements to regulations affecting 
commercial mail receiving agencies, and now, of course, this 
year we will certainly have some questions about postal rates. 
These can be difficult and controversial issues, ones that I 
believe are best addressed by the authorizing committee.
    In this regard, let me say that I know that the Postal 
Service supports H.R. 22, the Postal Modernization Act. I have 
a lot of respect for the work of the authorizing committee and 
in particular the chairman of the Subcommittee on Postal 
Service, Mr. McHugh. Under his guidance, I have confidence that 
the Postal Service Subcommittee, the full committee, and the 
Congress can enact reform legislation. We will see legislation 
that come to the floor of the House and the Senate and at least 
be debated. That is where it should be. That is where these 
discussions should take place, not in the context of an 
appropriation bill over which we have little or no impact on 
the Postal Service.
    Postmaster General Henderson you have a very challenging 
job. You have 800,000 employees, 38,169 post offices, stations, 
and branches. You deliver mail 6 days a week to 133 million 
addresses. The average carrier makes 500 delivery stops each 
day. You continue to have record performance for overnight 
delivery of first class mail. There have been some problems 
over the years with performance, but I think recent history 
shows a good track record in that regard.
    I would like to take a moment to compliment you and your 
employees for the work you did in delivering the advance letter 
notifying the American public of the forthcoming Census 
delivery. Despite the mislabeling of addresses that had nothing 
to do with you but was the fault of the contractor, you were 
able to get all this mail delivered without a hitch and I think 
that was an important step in making sure that we have a 
successful Census.
    Having thrown those bouquets your way, let me just say that 
there are of course areas of concern. No one wants to see a 
postal rate increase. I know the Postal Service has to operate 
in a break even capacity. That is what the law says, but it 
concerns me that we are considering a rate change barely a year 
after the last increase went into effect. I am particularly 
concerned about the impact this request is going to have on 
nonprofit mailers. I look forward to some discussion about this 
matter with you today and hope that you can provide some 
assurances that you are seeking some form of relief for the 
anticipated 40 percent increase in the rate for this class of 
mail.
    My second area of concern involves the use of mail for 
fraudulent activities. I appreciate the concern the Postal 
Service showed last year regarding new regulations for 
commercial mail receiving agencies, the postal mailboxes, and 
private organizations that receive mail. I was particularly 
pleased you were able to negotiate with the interested parties 
so that the final regulations would not lose their law 
enforcement components. I hope that as you continue to refine 
the implementation of these regulations, you will not lose 
sight of the significance and impact that these new regulations 
have for the law enforcement community.
    Having said all that, I am anxious to hear about the role 
of the Postal Inspection Service in preventing contraband from 
entering and leaving our borders. I have some questions in that 
area. I know that some of my colleagues have concerns about 
Customs inspections and Customs treatment of certain incoming 
mail and how it is treated differently from that that is being 
delivered by other carriers. Hopefully we can get some more 
information on that and the inspections that are done on 
international mail, including the duties and requirements that 
you have in that regard.
    I look forward to your testimony and, as I said, we will 
take Mr. Hoyer's statement when he arrives. In the meantime, we 
would like you to go ahead and as always, Mr. Henderson, your 
full statement of course will be placed in the record. If you 
would summarize that and then we can go directly to questions. 
I know we have a lot of questions from members.
    Mr. Henderson.

                           SUMMARY STATEMENT

    Mr. Henderson. Thank you. First I would like to introduce 
John Nolan. He is our new deputy postmaster general. He comes 
to us from Merrill Lynch. He had a very distinguished early 
career in the Postal Service, was postmaster of New York and 
then left for a private sector job and now returns. So we are 
pleased to have him on board.
    I will summarize, Mr. Chairman, the state of affairs of the 
Postal Service. I think that we are at a crossroads today. We 
see in the outyears, around 2004, a shift in downsizing of 
volume that we are receiving in the Postal Service, and we 
think desperately that postal reform is needed and we are doing 
everything within our power to educate as many of our customers 
as we can and to promote postal reform as hard as we possibly 
can.
    We also would like to praise Chairman McHugh for what he 
has done on H.R. 22. It is a very important opportunity for us.
    You have a vote?
    Mr. Kolbe. It is going to be more than one vote but we will 
continue here for a little bit here before we break. We still 
have another 8 or 10 minutes. Go ahead.
    Mr. Henderson. I will conclude what I was going to say then 
and let you have a shot at the questions.
    [The information follows:]



    Mr. Kolbe. All right. Thank you very much. I appreciate 
that. That does help us a little bit. Let me get right into the 
question of dutiable mail. A recent study that was conducted by 
Wirthlin Worldwide found that the Customs Service hasn't been 
properly processing the vast majority of all the express 
shipments coming into the United States through the Postal 
Service resulting, in a loss to the U.S. Treasury of more than 
$1 billion. That is not an insignificant amount.
    Can you either now or for the record provide me with how 
many international mail shipments the Postal Service processes 
each year?

                             WIRTHLIN STUDY

    Mr. Henderson. Yes. We disagree with the Wirthlin study. 63 
pieces of mail over 12 days is not a statistically valid way of 
looking at the picture. There are approximately 11 million 
inbound shipments that would be dutiable. That mail does not 
come to us. It goes to Customs and then Customs inspects it and 
then turns it over to us. Of that the vast majority of it are 
single pieces. A third of it comes from our military back into 
the United States. There is really not a Postal Service issue 
with this inbound mail.
    Mr. Kolbe. Let me just interrupt. I am quick with my 
arithmetic. 11 million pieces would mean an average duty of 
about $100, in order to get to a billion dollars of lost 
revenue. If not a single one was being collected, would that be 
an average amount of duty on a package----
    Mr. Henderson. No. I have no clue. I don't think the 
billion dollars is accurate. You take 63 packages----
    Mr. Kolbe. I wonder how they got to that figure. They 
surely knew your 11 million figure you process. They had to 
have that.
    Mr. Henderson. They projected we had 35 million pieces of 
inbound but we track our own inbound and we have 11 million.
    Mr. Kolbe. Go ahead.
    Mr. Henderson. I think that answers the question. I don't 
think the study is valid.
    Mr. Kolbe. How many of these shipments that you have, the 
11 million, are household to household, how many are military?
    Mr. Henderson. A third of them are military and the rest of 
them are basically household to household. There are few 
commercial. Commercial shippers use competitors.
    Mr. Kolbe. How does this compare to the number of 
international shipments that the express consignment industry 
has?
    Mr. Henderson. They have about 1.15 billion inbound 
shipments. That is according to Customs. That is what Customs 
gave us.
    Mr. Kolbe. So yours is less than a percent?
    Mr. Henderson. Right.
    Mr. Kolbe. One of the criticisms that has been levied upon 
the Postal Service is that it is not required to use manifests. 
Particularly, many in the law enforcement community believe 
that manifests are an important tool in targeting contraband 
and ensuring that the appropriate duties are being collected on 
goods coming through the mail. Why can't USPS use an electronic 
manifest system? Are there any constraints under the Universal 
Postal Union to that?
    Mr. Henderson. The inbound mail is foreign mail. It is not 
something that we control. In other words, mail coming into the 
United States is mail from a foreign destination and for us to 
require manifests after Customs has had them, the mail comes 
directly to Customs. It does not come to the Postal Service. It 
is not really appropriate for us to have a manifest when it is 
not our mail. The inbound mail is foreign originating mail.
    Mr. Kolbe. Let me see if I understand that again. My aunt 
in London sends me a Christmas package through the U.S. mail, 
not through consignment but through the U.S. mail. It arrives 
at Kennedy on an air carrier. That does not go to a Postal 
Service facility first? It gets offloaded and goes to Customs?
    Mr. Henderson. Your aunt would mail a package to the United 
States through Royal Mail, through the British Post Office. It 
would come to the United States and go directly to Customs.
    Mr. Kolbe. It comes on an air carrier and is offloaded and 
goes to Customs, not to your facility.
    Mr. Henderson. No. Customs then turns the mail over after 
they have done whatever they want to do to it, turns the mail 
over to us and we deliver it. But it is foreign mail.
    Mr. Kolbe. That would be true then just of first class 
mail--just the packages, not of first class mail; is that 
correct? Because first class mail doesn't go into the Customs 
facility?
    Mr. Henderson. All inbound mail goes to Customs and they 
turn it over to us.
    Mr. Sununu. Mr. Chairman, would you yield for a moment on 
this?
    Mr. Kolbe. Yes.
    Mr. Sununu. But what if it is mailed through a private 
company so it is the same foreign mail. It is the package from 
your relative from England and it is being mailed by a private 
company. Does it go to Customs first but, more importantly, is 
there a manifest for those shipments?
    Mr. Henderson. If it is mailed by a private sector carrier, 
like United Parcel Service, for example, and they don't go 
through the same Customs we do. They have anexpedited form 
because it is commercial mail. They have an expedited form of Customs 
but it does go through Customs, yes.
    Mr. Sununu. Their packages are subject to inspection at 
Customs for contraband?
    Mr. Henderson. That is right.
    Mr. Sununu. What percentage of those packages are 
inspected, either those that go through the expedited process 
or those that come in from--to the post office directly?
    Mr. Henderson. I really don't know on the private sector 
carriers what percentage. Customs I am sure would know that but 
I don't have that information.
    Mr. Sununu. Could we get that for the record?
    Mr. Henderson. We would have to ask Customs for it.
    Mr. Sununu. Thank you very much.
    [The information follows:]

    Question. What percentage of those packages are inspected, 
either those that go through the expedited process or those 
that come in from--to the post office directly?
    Answer. Postal Service letter to Customs Service requesting 
this information attached.



    Mr. Kolbe. You just suggested some more questions but I am 
going to try to get at least a couple other questions on the 
record here before we have to recess and we will come back. We 
have three votes here.
    Mrs. Emerson.
    Mrs. Emerson. Thanks, Mr. Chairman. Mr. Henderson, back on 
the 21st of March, I don't know if you happened to read this 
article in the New York Times. It has to do with U.S.--it is 
entitled ``U.S. and Thai Officials Attack Sales of Medicine on 
the Internet.'' Of course as a mother of a teenager--well, she 
just turned 18. I guess she doesn't count as a teenager 
anymore--and a 22-year-old, I am very, very concerned about the 
ability to get nonprescribed pharmaceuticals, tranquilizers, 
this Roofie date rape drug and other anabolic steroids, et 
cetera, from the Internet coming right in through the Postal 
Service, and I say this because these Web pages of these 
organizations which I am going to submit for the record do in 
fact discuss how easy it is to discreetly send your packages 
through the U.S. Postal Service. It is very, very frightening 
to me.
    [The information follows:]



    Mrs. Emerson. As a matter of fact, I guess I am shocked 
that these illicit types of drugs would be able to come into 
the United States. I also understand that U.S. Customs seized 
almost 10,000 packages of these drugs from U.S. mail facilities 
in 1999, which is about four and a half times as many as the 
previous year.
    But with that in mind, how can the Postal Service--I mean 
obviously it is not your intent to let this illicit activity or 
illegal activity go on but what are you doing to prevent these 
types of contaminated and perhaps nonprescribed pharmaceuticals 
from coming through the mails?

                        CONTRABAND INTERDICTION

    Mr. Henderson. Let me clarify one point. If it originates 
in a foreign country, it travels to the United States as a 
foreign post. It is not the U.S. Postal Service. We end up 
delivering it. It goes into Customs for inspection. Customs has 
a shot at it then. And then it is turned over to the United 
States Postal Service and Ken Weaver, our Chief Inspector, runs 
joint agency interdiction efforts to try and track this 
contraband if it is in the mail.
    Mrs. Emerson. Can you tell me about how many of these mail 
shipments might have been seized by the postal inspectors this 
year?
    Mr. Henderson. I can ask Ken.
    Mr. Kolbe. Mrs. Emerson, the response to this question will 
have to be the last. We have just 5 minutes remaining and we 
will come back.
    Mr. Weaver. I can't give you a specific response to that. I 
can tell you we work very closely with Customs and the other 
agencies on interdiction. Last year we performed or effected 
over 1,500 arrests based on illegal drugs through the mails.

    Question. Can you tell me about how many of these mail 
shipments might have been seized by the postal inspectors this 
year?
    Answer. Operation Spring Break was the code name for the 
most recent nationwide Inspection Service drug interdiction 
program that was conducted between March 21-31, 2000. During 
the two-week period, Inspection Service field divisions 
profiled outgoing and incoming Express Mail for suspect drugs 
and drug proceeds. Seizures and controlled deliveries were made 
when warranted.
    During the interdiction period, divisions were asked to 
coordinate with other overnight parcel carriers and local law 
enforcement to conduct simultaneous interdictions at those 
carrier sites. A total of three national interdictions will be 
conducted this year in four-month intervals. In addition, 
divisions will continue to profile Express Mail daily in an 
attempt to identify whether or not there are indications the 
mail is being used to transport illicit drugs and drug 
proceeds.
    During the two-week period Operation Spring Break was 
conducted, interdictions resulted in the seizures of 185 
packages containing the controlled substances listed below and 
$428,280. These efforts resulted in the arrests of 50 
individuals.

------------------------------------------------------------------------
             Type of seizure                          Quantity
------------------------------------------------------------------------
Amphetamines.............................  5 lbs.
Cocaine..................................  8.60 lbs.
Ecstasy..................................  1.00 lbs.
Marijuana................................  1,430.64 lbs.
Methamphetamines.........................  11.24 lbs.
Mushrooms................................  5.04 lbs.
Other controlled substances..............  485.50 lbs.
Other non-controlled substances..........  18 lbs.
PCP......................................  2.2 gal.
Steroids.................................  9,281 units
------------------------------------------------------------------------

    Mr. Kolbe. The committee will stand in recess. We will 
resume as soon as we complete these three votes.
    [Recess.]
    Mr. Kolbe. The subcommittee will resume. Mrs. Emerson, I 
will let you proceed. I know you have other questions. If you 
would like to go along the line you were for a couple more 
minutes, and then we will take Mr. Hoyer when he comes in.
    Mrs. Emerson. Thank you, Mr. Chairman. Let me just sort of 
refocus here.
    Mr. Kolbe. I know that feeling. That is why I called on you 
rather than asking questions right away.
    Mrs. Emerson. Thank you, Mr. Chairman. I appreciate it. Mr. 
Henderson, let me pursue this line of questioning a little bit, 
if you don't mind. The whole issue of nonprescribed drugs, or I 
should say pharmaceuticals, that is probably what would be the 
more appropriate term. Do you know how many FDA, Food and Drug 
Administration, inspectors are stationed at our international 
mail facilities in the U.S.?
    Mr. Henderson. No, I don't. I would be happy to look at 
that for the record. To my knowledge, are there none there?
    Mr. Weaver. I am not aware of any.
    Mrs. Emerson. I am under the impression that there either 
are a limited amount or no longer any FDA folks, but one of the 
reasons, and I would love if you could clarify this for me, had 
something to do with their ability or their inability to 
identify high risk shipments. I don't know if there was some 
incident at one of the international mail facilities that might 
have caused that or several but if you could get back to me on 
that, I would be grateful because this is an issue that really 
worries me a lot when you are talking about prescription drugs.
    [The information follows:]

    Question. Do you know how many FDA, Food and Drug 
Administration, inspectors are stationed at our international 
mail facilities in the U.S.?
    Answer. Postal Service letter to FDA requesting this 
information attached. FDA's response dated May 17 is attached.



    Mr. Henderson. For foreign mail, Customs has complete 
authority for inspections so I don't know what their 
relationship is with some FDA inspection.
    Mrs. Emerson. So the Postal Service or postal authority 
doesn't provide Customs with any kind of inspection equipment 
or x-rays or any kind of tools to perform their job?
    Mr. Henderson. The mail goes directly to Customs. It 
doesn't come to the Postal Service. Customs then turns the mail 
over to us for delivery.
    Mrs. Emerson. When the chairman had mentioned earlier 
manifests or some sort of a tracking system, is it conceivable, 
is it possible that the Postal Service could implement some 
kind of program like this so that we could track all of these 
types of shipments that come in?
    Mr. Henderson. It is not likely because it is not our mail. 
In other words, if you are in Thailand and you mail a package, 
you mail it through the Thai post so they control whatever 
requirements we couldn't impose from the United States, 
requirements on the Thai post. Most of the mail that comes into 
the United States are single pieces and if it were contraband, 
I don't think they were identified as contraband.
    Mrs. Emerson. No, obviously. Especially if you read on some 
of these Web pages, it is fascinating how they talk about the 
fact that we will make sure that everything is discreetly 
packaged, that sometimes they will put them inside greeting 
cards and put tabs just flat on there but, see, that is what is 
very worrisome is that does in fact come through the mail and 
these contrabands can in fact come out.
    Mr. Henderson. I don't want to sound like I am condoning 
that. We just have limited ability, limited authority in this 
situation. Customs has the primary responsibility for an 
examination of that incoming matter.
    Mrs. Emerson. A lot of times when other products come into 
the country, there is some--it is regulated and I guess I just 
can't figure out why we can't regulate mail. I understand the 
difference between the private carriers and the other mails but 
it is troublesome to me.
    Mr. Henderson. Mail is regulated. The inbound mail is 
regulated by Customs, not by us. They turn it over to us.
    Mrs. Emerson. Yet when we import agricultural products, 
when we import textiles, all of that is done. That isn't a U.S. 
shipment per se.
    Mr. Henderson. The Postal Service doesn't have the ability 
to regulate a foreign post.
    Mrs. Emerson. Do you--have you all had discussions or 
internal discussions about how we can prevent some of this 
contraband from coming in through the Postal Service? I mean, 
obviously Customs but there has got to be some sort of a 
partnership agreement. Do you all not have enough postal 
inspectors to help take a look at what could possibly be 
contraband packages?
    Mr. Weaver. I think in that case, if I might, once it does 
leave the Customs' jurisdiction, if there are indications that 
illicit drugs are being trafficked through the mails, once it 
passes Customs, now they have the first shot at it and once 
they turn it over to us, if there is still an indication there 
that there are problems, we will work with law enforcement, we 
will work with Customs to try to interdict that and do our 
investigation.
    Mrs. Emerson. Let me ask you just a couple more quick 
questions here because Mr. Sununu is here too. Does the Postal 
Service--do you all--because Customs now has jurisdiction as 
you say, then on the flip side do you all allow Customs to 
inspect outbound international express packages in case there 
might be drug laundering money or some kind of illegal 
substance being sent out?
    Mr. Henderson. Yes. We allow coordinating with the 
Inspection Service the inspection of packages if there is a 
warrant. They have to get a warrant in order to do that. We 
don't have the legal authority to do anything otherwise. The 
search and seizure inspection is protected under title 39, the 
Postal Reorganization Act, and under the fourth amendment so we 
don't really have the authority. We have had several rounds 
with law enforcement officers. We are very sympathetic to 
getting contraband inthe mail. It is just that you can't--under 
privacy law you can't inspect a letter. You can't even take a photocopy 
of a letter if you mail a letter without appropriate authorization from 
the court.
    Mrs. Emerson. Let me ask you, do you know if a national 
security issue would be exempt from the Privacy Act?
    Mr. Henderson. To my knowledge, no. I don't know the answer 
to that.
    Mrs. Emerson. I don't know the answer myself but I would 
think that this is certainly a matter that I would say 
constitutes national security and therefore I don't know why I 
think that some national security is exempt from the Privacy 
Act. So that is something to think about as far as this whole--
getting a warrant. I can't--unless you expect something to 
happen.
    Mr. Weaver. I might add if you have that much information 
that there is something of a national security nature, it 
shouldn't be that much more to obtain a warrant or go through 
that process.
    Mr. Kolbe. Mrs. Emerson.
    Mrs. Emerson. Let me stop now.
    Mr. Kolbe. We will come back on a second round.
    Mrs. Emerson. Thank you.
    Mr. Kolbe. Let me go to the ranking member, Mr. Hoyer, and 
we will come back to Mr. Sununu.
    Mr. Hoyer. Thank you, Mr. Chairman. Gentlemen, welcome to 
today's committee hearing. I was testifying in the Rules 
Committee. Actually, the chairman was there with me. He came 
back to chair this committee hearing and I stayed there.
    Thank you for bringing a long and very successful career 
and expertise and wisdom to the job you now hold, obviously one 
that is critically important for the American public and the 
United States Postal Service. I reiterate this every time you 
testify because I think we need to, on this committee 
particularly, understand what an incredible resource the United 
States Postal Service is. It is 40 percent more productive than 
the second most productive postal service in the world, which 
is Japan. If we had that kind of productivity in some of our 
other industries, my view is that we wouldn't have a trade 
imbalance.
    But having said that, let me pursue a couple of questions I 
am not sure if you have already answered them. Congresswoman 
Northup has raised a number of serious issues. She is not here 
but they are serious issues and you and I have discussed them. 
She has referred to the Air Courier Conference of America 
study. She says the study finds two things: that Customs fails 
to collect millions of dollars in duties and fees on incoming 
international U.S. Postal Service shipments and; because of the 
lax customs inspection rate, drug smugglers would therefore 
view the United States Postal Service as a carrier of choice.
    That was very troubling to me. I asked you that question in 
my office. I would like you to respond on the record to those 
two issues.

                             WIRTHLIN STUDY

    Mr. Henderson. We didn't think that study is valid. It 
mails 63 packages over 12 days and extrapolated that we had 35 
million dutiable packages coming into the United States. We 
actually know because we count. We have 11 million dutiable 
packages coming into the United States. These packages are not 
U.S. Postal Service products. They are foreign products coming 
from foreign countries over which the United States does not 
have any kind of unilateral authority. If you mail a package 
from London to the United States, you mail it through Royal 
Mail. It then goes to Customs in which Customs can inspect the 
package. After they have done their due diligence, whatever 
that is, that package is then turned over to the United States 
Postal Service for delivery service. The inbound study, I can't 
comment on the amount whether or not Customs is missing things 
or not missing things.
    I don't work in Customs and I am not familiar with that, 
but I can tell you compared to the private sector, there are 
approximately 1.15 billion private sector packages coming into 
the United States versus--the dutiable packages versus our 11 
million packages, a third of which are military sending 
packages home. Most of the packages that come into the United 
States are going to a residence, a household. They are not 
commercial packages. So it can't be manifest----
    Mr. Hoyer. Over 3 million of the 11 million are service 
connected mail?
    Mr. Henderson. That is correct.
    Mr. Hoyer. Now, Congresswoman Northup has also mentioned 
the manifest that UPS or some other shipper creates. We don't 
create those because it is not our mail but what problems does 
that cause us? Congresswoman Northup's premise was--because you 
have a manifest in UPS or some other carrier, you know what is 
in that mail. With mail coming through us, you have no idea 
what is in it.

                            MANIFESTING MAIL

    Mr. Henderson. The private carriers, they are United States 
corporations that are mailing commercial packages into the 
United States. For our mail, it is primarily household to 
household coming from a foreign postal administration, over 
which we have no jurisdiction into the United States, to a 
household. It is just not practical for household to household 
single pieces to have some sort of manifest. We would have a 
hard time selling it to a foreign post anyway.
    For the drug issue that was raised, I don't think if you 
did a manifest for a single piece that the contraband sender 
would put on there that the contents are cocaine. So I just 
don't think--it is a practical way of dealing with this issue.
    Mr. Hoyer. We need to address that, though, because I am 
sure we are going to hear that issue raised again. It is a 
serious issue. Now, whether or not the solution Congresswoman 
Northup might have is one we ought to pursue is another 
question.
    At the National Postal Forum, you announced some serious 
cutbacks in the workforce and the reengineering of postal 
operations and mail processing in order to save $4 billion over 
the next 4 years. How many jobs, General, will be lost in the 
U.S. Postal Service headquarters?

                                JOB CUTS

    Mr. Henderson. Could be as many as 20,000. Probably before 
we are all said and done, it will be more than 20,000 but in 
the beginning we are looking at targeting about 20,000 jobs 
through attrition and through really reworking our work 
processes. We are targeting administration, especially 
purchasing. We think we can save a lot of money. In fact, I met 
with Lou Gerstner at IBM and he said that over 4 years--and his 
purchasing department operates in the same manner as mine --
that over 4 years he saved a billion dollars just by taking out 
paper.
    So we are looking at making more and more of the processes 
in the Postal Service electronic. We are also reaping the 
benefits of some improved productivity efforts that we have 
under way right now. We have very good productivity in our 
field operations. We think that theywill be able to generate 
$700 million of that savings. So transportation is another $100 
million. That is basically taking mail out of the air, putting it on 
surface. So we think there is some great opportunity and we would do 
that almost under any circumstances.
    Mr. Hoyer. You said, but I want to clarify, that the 
reduction you spoke of will be accomplished without RIFs but by 
attrition?
    Mr. Henderson. That is our current plan. I can't promise 
that will remain the same forever but right now we think we can 
do the vast majority of this using attrition and selected 
reassignment. There is one exception to that. We are 
eliminating our remote encoding sites, as I am sure you know. 
Those are the sites where mail that can't be read by an OCR is 
transmitted to a person who keys in the address. Technology is 
such that we no longer require those sites and we have 
provisions to shut them down and we are doing that. We have 
labor agreements on how to handle the people.
    Mr. Hoyer. Last question on this round, General, when 
General Runyon, your predecessor, reduced numbers, there were a 
lot of positives but one of the negatives was, at least in the 
short term, a temporary shortage in some places because buyouts 
were offered across the board. Are you confident that this 
reduction will not impact on the really outstanding levels of 
delivery that have been attained at the 93-94 percent levels?
    Mr. Henderson. Yes.
    Mr. Hoyer. Because that is critical. If they start to slip, 
in my opinion you are going to have some real adverse reaction 
on any kind of discussions about rates.
    Mr. Henderson. I agree with that. We are not going to let 
the service level slip for any reason.
    Mr. Hoyer. Thank you. Thank you, Mr. Chairman.
    Mr. Kolbe. Mr. Sununu.
    Mr. Sununu. Thank you very much, Mr. Chairman. Thank you 
for being here, Mr. Henderson. I certainly want to recognize 
the comments of the chairman and the ranking member about the 
overall strength of the Postal Service, the fact that the 
Service is relying on less and less in the way of direct 
appropriations and indirect appropriation than it has in the 
past and that it is growing in its level of independence and 
that is to the credit of your predecessors and the work that 
you have done so far.
    I want to focus my questions in two areas, though: First, 
just an area of questioning of what else can be done to 
increase this level of independence and to create and continue 
to create a competitive environment in which the service can 
thrive and the quality of service is going to improve for the 
customers out there; and second area, in fact the one where I 
will begin is, some questions about information systems and 
modernization and in assets, which I think is one area of 
improvement and modernization that I would hope would create 
opportunity for the Postal Service, and I also hope it will 
shed light for those who are looking at issues of postal rate 
changes and changes in service and the regulations that you 
work under.
    Here in this committee, we had the director--Commissioner 
of the IRS, Mr. Rossotti, talked about the IRS and its 
information systems and to the Postal Service's credit I am 
sure and in the eyes of taxpayers, you are much more welcome as 
a daily visitor than anyone from the IRS, but they have noticed 
some interesting trends about property and assets and how they 
are calculated and I want to begin there.
    First is just a basic question of whether or not you have a 
system in place that you are comfortable with that is as 
effective as it should be for calculating and controlling and 
evaluating the value of electronic property and equipment and 
land and buildings assets that are kept on your books each 
year.

                            ASSET EVALUATION

    Mr. Henderson. The answer to the question is yes, we are 
very confident that we have a secure system and one that is 
very accurate. We operate much like a business does. We have 
our own profit and loss. We bring outside auditors in to 
validate our annual report. So we have to have the same kind of 
secure safeguards that you would if you ran any business. So we 
are very confident. Our real estate people keep track of our 
assets.
    Mr. Sununu. What is the approximate value?
    Mr. Henderson. I couldn't give you off the top of my head 
but I would be glad to provide it for the record.
    Mr. Sununu. If you would, please.
    Mr. Henderson. Sure.
    [The information follows:]
    Question: What is the approximate value?
    Answer. The data requested is the value of land and 
building assets. The audited figures as of September 30, 1999 
were $16.5 billion for buildings, including $0.6 billion for 
capital leases, and $2.4 billion for land.

    Mr. Sununu. When was the last time--I asked this of the 
Customs Service as well--the last time a physical survey was 
done of the information systems, the computers, and the 
computer infrastructure?
    Mr. Henderson. For Y2K we did a complete physical inventory 
because we didn't want people to have their mail sorted to the 
wrong place. So we have a complete inventory of all our 
Information System resources.
    Mr. Sununu. Did the valuation that came out as a result of 
the physical inventory match what you are carrying on your 
books for the value of those assets?
    Mr. Henderson. I can't answer that question off the top of 
my head, but I'm sure if I talked to our auditors, I can.
    Mr. Porras. The assets, for example, with the computers, if 
they are under $3,000, we expensed some but we keep pretty 
accurate records of all the equipment we have out there. I am 
not sure we went back and tied each one to the inventory record 
but we go through that every year through our audit process, so 
we have to do that anyway.

    Question. Did the valuation that came out as a result of 
the physical inventory match what you are carrying on your 
books for the value of those assets?
    Answer. As stated by Mr. Henderson, the physical survey of 
computers and related resources was conducted for the purpose 
of determining Y2K compliance. Although, during this process, 
an inventory was made of all resources in this category, it was 
not performed for the purpose of verifying the value carried on 
our books. While we do maintain controls for these equipment 
items, our policy is to capitalize only those costing $3,000 or 
more and additional time would have been required to separate 
and/or identify capitalized items from the total. Due to the 
time-critical nature of the Y2K compliance activities, any 
additional actions relating to the financial audit verification 
of computer equipment was not included in the scope of this 
review because that is a function of the annual review of our 
financial statements by our auditors.

    Mr. Sununu. If you have any additional information about 
the difference between what was on the books and what came out 
as a result of the physical inventory, I would appreciate that 
for the record.
    Looking at one particular instance here, last year as you 
dispose of excess inventory or property in the financial report 
you showed 142 million I believe in revenues coming from 
property disposals and sales. The book value of those sales was 
in the neighborhood of 20 million. That is obviously a very 
significant difference between what you are carrying on the 
books and what the actual value of that was. Why such a big 
disparity?
    Mr. Porras. We have to carry assets that are not 
productive. We have to classify them. There is an accounting 
standard 115 by which they are interpreted and defined as 
impaired assets. Those are assets that are no longer 
productive. To give you an example, we had the old Regional 
Office in San Francisco. We also had Rincon Annex. Those 
buildings were no longer postal buildings so you have to carry 
it at the lower of the book value and since there is no 
productive use of that building and that is why they are so low 
in terms of the value, we sold one of those buildings for close 
to $80 million. So those are special assets that we have to 
carry that way.
    Mr. Sununu. Why not carry those on the books at market or 
at least an assessed value instead? Wouldn't that more 
accurately reflect the value of the asset?
    Mr. Porras. They are not really productive to your 
organization. There is an accounting standard you have to go 
through and we do this with the auditors. They define through 
this standard how we record these assets on----
    Mr. Henderson. I asked the same question. I couldn't 
understand if you had an $80 million asset, why you can't put 
it on the books.
    Mr. Sununu. I don't know if that makes me feel better or 
worse. I appreciate that. Any information that you can provide 
for the record about specifically why you would want to carry 
on the books assets at such a deflated value. It would seem to 
grossly undervalue the assets that you have and could lead if 
they are being undervalued to bad business decisions.
    [The information follows:]

    Question. Any information that you can provide for the 
record about specifically why you would want to carry on the 
books assets at such a deflated value. It would seem to grossly 
undervalue the assets that you have and could lead if they are 
being undervalued to bad business decisions.
    Answer. Title 39 requires the Postal Service to follow 
Generally Accepted Accounting Principles (GAAP). GAAP requires 
the initial recording of fixed assets at acquisition cost. Over 
the useful life of an asset, economic conditions may occur that 
significantly impair the usefulness of an asset to the Postal 
Service. If and when that happens, the asset must be revalued 
at the lower of book value or fair market value. This is in 
accordance with GAAP as promulgated by the Financial Accounting 
Standards Board (FASB) in FASB, Statement Number 121, 
Accounting for the Impairment of Long-Lived Assets and for 
Long-Lived Assets to be Disposed of.

    Mr. Porras. Let me clarify that point. The time that we are 
carrying this asset on the books, it is actually not productive 
and then our real estate people go out and see if they can in 
fact get us some income from this particular asset. At the time 
we are actually carrying it, it is not worth $80 million. That 
is what happens when they put some of these deals together.
    Mr. Sununu. It would seem to me that either they are worth 
$80 million or they are not. And again, if they are carried at 
$20 million and sold for $140 million, and I don't specifically 
know what the assets were, then that might lead one to believe 
that if you have a billion dollars worth of assets, that maybe 
the true value of those billion are five or six times, as was 
the case of those assets sold off last year.
    One final question in this area is what is the process that 
you go through for doing these disposals? Is it a well defined 
process and do you employ it consistently?
    Mr. Henderson. Yes. We have a department, an asset 
management group within our real estate group, whose sole 
function is to evaluate our assets and put them in the 
marketplace and see how much money we can get for them.
    Mr. Sununu. Thank you, Mr. Chairman.
    Mr. Kolbe. Mr. Price is next. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. Mr. Henderson,welcome 
back. Glad to see you again and your associates as well.
    Other members have dealt with this Wirthlin study, and it 
may dignify it to call it that, released by the Air Courier 
Conference of America. I know you are familiar with it and I 
think some of the findings have already been discussed here. A 
couple of figures I want to just confirm with you. I understand 
that commercial express carriers handle something like 1.15 
billion inbound international shipments each year.

                             WIRTHLIN STUDY

    Mr. Henderson. That is correct.
    Mr. Price. And according to this Wirthlin report, Customs 
collected duties on 2.18 million of these shipments. That would 
be, according to my calculation, less than two-tenths of 1 
percent on inbound shipments; is that right?
    Mr. Henderson. That is right.
    Mr. Price. Now, the Postal Service of course collected 
duties on something like 30 percent of the inbound 
international shipments that you are dealing with?
    Mr. Henderson. That is correct.
    Mr. Price. How much did you collect in duties last year or 
for the most recent year that you have data available and what 
kind of system do you have in place to collect and transmit 
duties to the Customs service on a regular basis?
    Mr. Henderson. We have an agreement with Customs. We have a 
$8.25 fee plus whatever the duty is at delivery. Then we give 
the money back--I don't believe--we can get it for the order 
from Customs and for my records what the total Customs values 
were but we have an organized agreement with Customs to collect 
the duties. They pay us for that, too.
    Mr. Price. I see. Anything more you want to add on this? I 
think it has been pretty thoroughly discussed here.
    Mr. Henderson. I said earlier I don't think it is a valid 
study. 63 packages over 12 days to give you insight into either 
1.1 billion from the private sector or 11 million from the 
Postal Service is just not statistically a study you can draw 
any conclusions from.
    Mr. Price. Much less what they call 99 percent statistical 
confidence, whatever that means.
    Mr. Henderson. Our statisticians don't think that is 
correct.
    Mr. Price. Let me turn to another matter, the status of 
your proposed regulations on delivery of mail to commercial 
mail receiving agencies. I understand the Postal Service has 
conducted 1,069 investigations of identity theft, fraud, child 
pornography, and narcotics distribution that involve the use of 
CMRA boxes, is that correct?

                   COMMERCIAL MAIL RECEIVING AGENCIES

    Mr. Henderson. We have conducted an enormous number of 
investigations. We will provide that for you.

    Question. I understand the Postal Service has conducted 
1,069 investigations of identity theft, fraud, child 
pornography, and narcotics distribution that involve the use of 
CMRA boxes, is that correct?
    Answer.

                   STATISTICAL ANALYSIS OF CMRA USAGE

    The numbers below illustrate the frequency Commercial Mail 
Receiving Agencies (CMRAs) appear in Postal Inspection Service 
mail fraud complaints and investigations. In recent years, many 
law enforcement officers have complained that CMRA addresses 
are being utilized for a variety of criminal promotions. For 
example, in a cross-border mail fraud scheme conducted by a 
Canadian citizen James Blair Down, over $12 million was bilked 
from consumers. Mr. Down used 141 variations of CMRA addresses. 
There were also 251 subject of complaints (SOCs) listed in the 
Inspection Service Fraud Complaint System (FCS) that were 
associated with Blair. Of those, the majority utilized 
variations of CMRA addresses. The Blair Down case is an 
excellent illustration of how CMRAs can be used for illicit 
purposes. The new regulations particularly regarding addressee 
identification will make it more difficult for those 
individuals bent on defrauding the public.
    In analyzing the data for CMRA usage captured by our agency 
two primary sources are used--the Fraud Complaint System which 
logs complaints received from consumers on the full spectrum of 
fraud schemes; and, our agency's investigation database 
containing actual cases. Based on investigative intelligence we 
suspect that typically the use of CMRA addresses for illicit 
purposes most often involves credit card or identity frauds, 
which are captured under the ECMT case subject codes. However, 
the data available shows fraud as a higher percentage of CMRA 
involvement in the complaint and case database. The reason for 
the difference is that when we receive a fraud complaint the 
complainant most often knows only the CMRA address of the 
subject. It is not unless we later arrest the operator and 
obtain valid identification that we learn the true address. In 
ECMT cases, inspectors often react to information supplied by a 
credit card investigator or other intelligence and then 
apprehend the individual. The first time the subject's name is 
entered into the agency database is often at the time of arrest 
or interview, and so an actual home address is the first and 
sometimes only record entered into the database. In these 
instances any reference to the CMRA usage would most likely be 
limited to the remarks section of reports or in case field 
notes. This may explain why the ECMT CMRA usage frequency is 
less than in mail fraud cases as the data is not in a format 
for computer comparison applications.
    Finally, but equally important, the USPS shows 
approximately 13,500 registered CMRA addresses in its central 
address database. However, many more independent CMRA type 
businesses thrive as adjunct business services (e.g. a general 
store). The enhanced regulations will increase our knowledge of 
these independents. They can also be incorporated into our data 
and compared to current investigations, which would reveal even 
greater percentages of CMRA usage in criminal activity.

                                     FRAUD COMPLAINT SYSTEM (FCS) 1989--YTD
----------------------------------------------------------------------------------------------------------------
                                                                                    Subject of
                                                                   Complaints       complaint       Dollar loss
----------------------------------------------------------------------------------------------------------------
Total Number in FCS............................................         518,944         94,354       $62,843,329
Total Number Identified as CMRA................................         109,934          9,273        12,228,577
Percentage Identified as CMRA..................................              21              9.8              19
----------------------------------------------------------------------------------------------------------------


                 MAIL FRAUD INVESTIGATIONS FY 1997--YTD
------------------------------------------------------------------------
                                           CMRA-related    Total number
                                           cases opened      of cases
------------------------------------------------------------------------
FB......................................             235           2,187
FC......................................             448           1,926
FG......................................              67             947
                                         -------------------------------
  ......................................             750           5,060
------------------------------------------------------------------------

    Percentage of Fraud Cases with CMRA Usage: 14.8%.

    Note. As an address CMRAs represent less than one percent 
of the deliverable addresses in the United States. However, 21% 
of the complaints received are related to CMRA addresses. 
Moreover, under the consumer fraud category alone for this 
period the cases with CMRA usage is 23.3%.

         EXTERNAL CRIMES MAIL THEFT INVESTIGATIONS FY 1997--YTD

    CMRA-related cases opened: 238.
    Total number of cases: 3,753.
    Percentage of ECMT Cases with CMRA Usage: 6.3%.

    Note. The case subjects for Gang Operation (credit card 
related-212), and Mail Order/Telephone Fraud (583) show the 
highest instances of CMRA involvement in ECMT cases at 15.9% 
and 10.4% respectively.

    Mr. Price. You don't know either how many CMRA boxes were 
involved in those investigations?
    Mr. Henderson. No, sir, I don't.
    [The information follows:]

    Question. You don't know either how many CMRA boxes were 
involved in those investigations?
    Answer. Historically, the Inspection Service have tracked 
investigations by the type of illegal activity--such as 
pornography or identity theft--not by the tool used to carry 
out that activity. Given the sensitivity of this issue, a new 
system is being tested that would enable us to track CMRA 
related fraud and crime.

    Mr. Price. What can you tell me about the rate of similar 
kinds of criminal activity or the number of investigations 
involving post office boxes? What I am trying to get at here is 
whether there is evidence of disproportionate criminal activity 
or a disproportionate share of criminal activity emanating from 
CMRAs.
    Mr. Weaver. We are very, very concerned with the commercial 
mail receiving agencies, and we have taken steps to tighten up 
the controls over how mail is funneled into those boxes because 
we have seen significant instances of criminal activity that 
have emanated there more so than we have in post office boxes 
because I don't believe the controls were as tight for the CMRA 
industry as they were for the post office boxes, and that is 
the initiative that we undertook, to tighten those controls, 
get more information concerning the applications of people 
renting those particular CMRAs, making sure that the 
individuals did properly identify themselves and so forth to 
try to control the amount of fraud that is perpetrated through 
these CMRAs.



    Mr. Price. That is what I want to ask you about, the kind 
of disclosure requirements that you have imposed and the kind 
of regulations. There is evidence, you are saying, that a 
disproportionate share of criminal activity involves those 
kinds of boxes?
    Mr. Weaver. Recently we have seen more crime taking place 
in these type of boxes, yes. I can't give you an exact----
    Mr. Price. Any documentation you can provide on that I 
think would be useful.
    [The information follows:]

    Questions. That is what I want to ask you about, the kind 
of disclosure requirements that you have imposed and the kind 
of regulations. There is, though, evidence you are saying of a 
disproportionate share of criminal activity involving those 
kinds of boxes?
    Answer. As indicated in the past, the Postal Service is 
convinced, based on our own experiences and those reported to 
us by the law enforcement community, consumer groups, financial 
companies and even the CMRA industry, that many illegal 
activities are conducted through CMRAs.

    Mr. Price. What is the purpose of this four-line address 
and additional private mailbox or designation for CMRA box 
holders? Maybe you can describe more fully what kind of 
designation you require. Do you have any evidence that such a 
designation is likely to reduce criminal activity involving 
CMRAs?
    Mr. Henderson. Yes, sir, we think it will. Prior to these 
new regulations going in, a CMRA box owner could identify 
themselves as anything. They can put down suite number or an 
apartment number and in effect be deceiving the people who are 
mailing to that address. And what we have tried to do is 
identify exactly who those CMRA owners are by the designation 
of PMB, private mailbox. So everybody knows when you are 
dealing with this organization or this particular business, 
that that is who you are dealing with. We have also expanded 
that, based on our working with the community, working with a 
number of industry representatives to allow the pound sign or a 
number sign to identify a particular mailer. So it is one or 
the other, either a PMB or a pound sign to identify who it is. 
We think that will help identify these individuals or identify 
the mailers and also help the consumer.
    Mr. Price. Thank you, Mr. Chairman.
    Mr. Kolbe. Mr. Goode.
    Mr. Goode. Thank you, Mr. Chairman. Just a few questions 
here. What is your total number of employees, of FTEs at the 
Postal Service now.

                          EMPLOYEE COMPLEMENT

    Mr. Henderson. It is a little over 800,000.
    Mr. Goode. You are the largest Federal agency employer by a 
good bit.
    Mr. Henderson. Largest civilian employer. I think Wal-Mart 
just recently became a little larger than we are but we are the 
largest federal civilian employer.
    Mr. Goode. What is your total payroll nationally, say, for 
1999?
    Mr. Henderson. $64 billion.
    Mr. Goode. Now I am going to jump to some questions 
locally. I want to tell you thank you for working out so that 
the same mail carrier in Charlotte County could deliver to the 
communities of Saxe and Randolph. I wrote you about that. I 
don't know whether----

                        CHARLOTTESVILLE SERVICE

    Mr. Henderson. Did I take care of that?
    Mr. Goode. The person that came over to my office took care 
of it real quick. I want to thank you for that. But I have 
written you and to Ms. Beamon about 10 or 12--this is on the 
flip side--letters about service in Charlottesville, Virginia. 
There have been pockets of improvement but for instance 
yesterday Darwood Chase sent me two letters that had been sent 
to him from Oklahoma and it took 9 days for him to get one and 
8 days for him to get the other one.
    Mr. Henderson. That is unacceptable.
    Mr. Goode. I am glad you concur and we would appreciate any 
help you can give in getting a little better time delivery in 
Charlottesville. We really need that.
    That is the extent of my questions, Mr. Chairman.
    Mr. Kolbe. Mrs. Meek.
    Mrs. Meek. Thank you, Mr. Chairman. Welcome, Mr. Henderson, 
and all of you from the Postal Service. As you know, I am from 
south Florida and we have had some experiences with emergency 
management and hurricanes and those kinds of things. I am 
concerned about your policy, if you have one throughout the 
Postal Service or even if it is locally determined, regarding 
weather emergencies. A number of employees had their health and 
safety jeopardized right after Hurricane Irene. Some of them 
were on their way to work. Others already were on duty and they 
were jeopardized by the Postal Services' response to the 
situation. There didn't seem to be any overall policy regarding 
that, and it appears to me that there needs to be some policy 
that would guide postal workers in the event of an emergency 
such as the one we had in Florida.

                    EMPLOYEE NATURAL DISASTER POLICY

    Mr. Henderson. We do have a policy of not putting any 
postal worker in jeopardy, so we would not do anything that 
would put a postal worker in harm's way. We go so far as to say 
if you have a bad dog, we will withhold delivery from your home 
until you take care of the pet. So certainly in national 
emergencies--I did hear about that. I don't recall what--we did 
do some looking into it probably as a result of an inquiry from 
your office. I think that was a local call, a local manager 
call. I think we did some follow-up on that if I am not 
mistaken.
    Mrs. Meek. I got a lot of flack on that so I am putting it 
in your lap. I guess my question is should there be a policy 
that dictates that the Postal Service follow the 
recommendations of local emergency management or the county in 
weather emergencies. The county had certain regulations for 
weather emergencies but the Postal Service did not follow the 
county's regulations.
    Mr. Henderson. They should follow the county regulations, 
because if you are evacuated, as an example, you have to go. As 
a citizen, you have to go. We certainly don't keep people 
behind in those situations.
    Mrs. Meek. What happened was that the alarm went out from 
the local weather department that the situation was worsening. 
Everyone else sent their workers home. The postal authorities 
did not. They kept them working. As a matter of fact, the ones 
who were on their way to work, when they got there they were 
told to go home.
    So it did put them in harm's way because the weather people 
weren't quite sure as to what was going to happen. They issued 
a report. The report was not strong enough but when the weather 
authorities did strengthen it, it was too late. The postal 
authorities did not follow the local county mandates. I just 
need to know whether in your opinion--I think it needs to be 
tightened up a little bit from a standpoint of a general 
policy--whether or not they should follow the mandates of the 
local emergency management authority. That is something that I 
would recommend, that is, if Dade County says that this is an 
emergency, then I think that the Postal Service should follow 
that as well.
    Mr. Henderson. I will revisit that.
    Mr. Hoyer. I wanted to add that as a result of Mrs. Meek's 
conversations with me, I did contact your office and we did 
work on it. However, I agree with Mrs. Meek that a fine line 
was drawn here to the detriment of some employees who believed 
they were protecting themselves and their families. Mrs. Meek 
is absolutely right, it should be reviewed and make sure we 
don't put the employees in that position again.
    Mrs. Meek. I also noticed that IRS forms are no longer 
available in the post office. You no longer can go to the post 
office and pick up an IRS form. Is that a general policy 
throughout the post office?

                     INTERNAL REVENUE SERVICE FORMS

    Mr. Henderson. Yes, IRS has withdrawn their forms from us. 
They have another distribution method.
    Mrs. Meek. It was a very good service. I wish it could have 
remained. You see, a lot of us are out here doing pragmatic 
kinds of management. We do have to respond to our citizenry and 
to our constituents.
    I have had a long experience with the Postal Service, 
having worked on the Postal Service Subcommittee before. I have 
never fully understood the way you operate. It is such a 
complex system in terms of the way you do your business.
    Would you mind telling me what is the general rule of thumb 
in terms of your organizational structure, Mr. Henderson?

                        ORGANIZATIONAL STRUCTURE

    Mr. Henderson. Sure. We have corporate headquarters here in 
Washington. It has a Chief Operating Officer who is here who 
has responsibility for 10 areas. The United States is divided 
up into 10 areas. Each area is divided up into what we call 
performance clusters and they range anywhere from 7 to 12 
performance clusters within an area, and that covers 
essentially the senior management structure of the whole 
organization. In addition, we have a cross-section, the 
marketing section in corporate headquarters that looks at e-
commerce opportunities and the like, and then we have a Chief 
Financial Officer. We have head legal counsel. We have a head 
of human resources who is responsible for employee labor 
relations and diversity. So we are structured very similar to a 
private sector business.
    Mrs. Meek. Some of the employees in the Postal Service are 
quite afraid of privatization. Would you comment to me as to 
what you see emerging in the Post Office?

                             PRIVATIZATION

    Mr. Henderson. Well, to look into the future is really to 
look into foreign posts around the world. They are all moving 
in one direction or another towards privatization at different 
rates and different speeds. TNTPOST Group which owns the Dutch 
post, is a private corporation but the government holds the 
majority share. The Deutsche Post, which is going to be private 
next year, they are going to have an Initial Public Offering. 
So it is highly likely the Postal Service--United States Postal 
Service, which is now behind the rest of the world in terms of 
its modernization, will begin moving in that direction.
    H.R. 22, which is Chairman McHugh's bill, is a beginning 
but I think ultimately the Postal Service will face those 
issues of privatization and ownership and all of that, and 
there are big issues concerning the debate of universal 
service, debate of the monopoly.
    One of the reasons that I think reform is so necessary 
today is when you look out into the future, you are going tosee 
significant erosion of traditional mail. So if the Postal Service 
doesn't have the flexibility to operate in more of a private sector 
manner, then essentially its only tool is to raise prices. And if you 
take, for example, Sears, when they lost volume, if their only tool was 
to raise their prices, they would have been bankrupted.
    So I think it is very important for the Postal Service to 
gain pricing flexibility so it can have a relationship with its 
customers, slow down that erosion to provide incentives to 
customers and I think it is important for the health of the 
organization and I think the organization is important for 
America. I think we are an important part of America. A healthy 
Postal Service is good for the economy. I think reform is the 
only answer and I think if we don't get reform, and I feel like 
I sound like Chicken Little, we are going to hit a brick wall. 
The brick wall is going to be raising prices and the customer 
representatives in this room are going to be howling, but that 
is going to be the only course of action that we have. That is 
going to be the statutory process, and that needs to be 
examined, debated, and redone.
    Mrs. Meek. Thank you. I will wait for the next round, Mr. 
Chairman.
    Mr. Kolbe. Thank you, Mrs. Meek. Mrs. Northup.
    Mrs. Northup. Thank you. Hello, Mr. Henderson. I am sorry, 
I had planes canceled last night and this morning. It was late 
getting here.
    Mr. Henderson. I would be disappointed if you didn't.
    Mrs. Northup. I am sure. Mr. Henderson, 2 years ago before 
this committee, maybe 3 years ago, there was a lot of 
discussion about the special arrangements that the Post Office 
had, agreements with Japan, Canada, England in order to 
expedite their export packages. Take Japan, for example, they 
had a special arrangement by which they could bypass or at 
least expedite packages through Japanese Customs. It was 
explained to me in great detail that the Post Office had such 
advanced technology, computer technology, that their computers 
could talk to Japanese computers and a manifest of all exported 
mail leaving--all exported packages leaving this country was on 
a manifest. As soon as the plane was in the air the Japanese 
Customs got that manifest, they went through everything. 
Anything that was a suspicious package they would be able to 
pull. It allowed everything else to clear Customs quickly and 
cheaply.
    It brings to mind two things. One thing is that other 
countries have manifests that the Post Office complies with 
when we send packages to Japan. Why is it so ridiculous for 
anybody to talk about the Post Office having manifests for 
packages coming into this country?

                           CUSTOMS CLEARANCE

    Mr. Henderson. Can I go back to the first comment about the 
Japanese. We had no special arrangement with Japanese Customs. 
I know that assertion floated around but we really had no 
relationship at all with Japanese Customs. We had a 
relationship between L.L. Bean and the Japan Post but we got no 
special consideration.
    Mrs. Northup. You were the carrier.
    Mr. Henderson. Right.
    Mrs. Northup. And there was a manifest.
    Mr. Henderson. There was a manifest for pre-customs 
clearance.
    Mrs. Northup. If it is so silly for postal--post offices 
around the world to have manifests of packages coming into 
their country, why would Japan insist on this but we shouldn't 
insist on it?
    Mr. Henderson. Japan didn't insist on it. We did it as 
every other shipper does to get pre-customs clearance so L.L. 
Bean knew how much to charge the customer for sweaters and 
jackets. It is a normal business practice everybody follows.
    Mrs. Northup. So when you were the carrier taking packages 
to Japan, you produced--there was a manifest for those packages 
so that Japan could assess the fees and the duties?
    Mr. Henderson. The manifest was produced by L.L. Bean, not 
by the United States Postal Service.
    Mrs. Northup. But the point is if the carrier--you do not 
feel that if a catalogue company in France is going to send 
goods by way of the Postal Service into the United States that 
they should produce a manifest for our Customs, you wouldn't 
insist on that?
    Mr. Henderson. A cataloguer in France would use the French 
post, not the U.S. Postal Service, and they would go to Customs 
and whatever arrangements Customs wanted with the French post 
would be between them. We simply are the delivery agent in that 
regard.
    Mrs. Northup. Those packages come into this country and 
they go immediately to 14 stations that you have, don't they, 
if you are going to be the delivery?
    Mr. Henderson. They go to Customs. They don't come to the 
United States Postal Service. Foreign packages coming into the 
United States go to U.S. Customs where Customs does its due 
diligence and then turns them over to the Post Office.
    Mrs. Northup. Mr. Henderson, it is my understanding through 
Customs that that is a technicality, that it comes off the 
plane and goes into a postal building and, yes, there is a 
conveyor belt that a Customs person has a split second that 
they can pull something off with no list in front of them. The 
building is yours where you sort the material and then take it 
on from there.
    Mr. Henderson. The section in the building is controlled by 
Customs. The average package takes about 48 hours to clear. We 
have no authority to go get those packages until Customs clears 
them. They take as long as they want. We have no authority over 
Customs.
    Mrs. Northup. Nobody has authority? Do the private carriers 
when a package comes off an airplane? It is technically 
Customs' authority that rules until they release the package; 
isn't that true?
    Mr. Henderson. Customs provides at the private carrier's 
request a special process to expedite the package through 
Customs, so they bought their own process.
    Mrs. Northup. They pay for it.
    Mr. Henderson. That is right. They pay for their own 
process.
    Mrs. Northup. The fact is it is exactly the same thing. It 
is a building here. It is a room in your postal building here. 
It is a U.S. postal facility. One of them is a UPS or Fed Ex 
facility and there is--as the transfer takes place, a technical 
sort of thing, it is Customs' authority that rules that package 
but for both of them, it is split second. It just so happens 
that the private carriers give a manifest just as I might say 
when the Post Office exports something--a package to Japan 
produces for Japanese Customs.
    Mr. Henderson. The question, I am sorry?
    Mrs. Northup. My question is, why is this different? And 
why is this so presumptuous to think that our Post Officewould 
require the manifest and Customs would as would as what our Post Office 
takes to Japan--and I invite you to read what your predecessor told 
this committee in testimony about the technology and their ability to 
produce the manifest being the reason that Japanese Customs gave them a 
special bypass in terms of time and money, but it is really the same 
thing.
    Mr. Henderson. Japanese Customs didn't do anything for us. 
They require a manifest for pre-customs clearance for 
commercial shippers.
    Mrs. Northup. And for the Post Office?
    Mr. Henderson. No, they don't require a manifest. Only 
commercial shippers. We provide one for pre-customs clearance.
    Mrs. Northup. So the Post Office provides it for any 
commercial shippers that you--if you go to L.L. Bean and you 
say we can provide you with this service, as the admission was 
they did, if you use us and it will help speed it through 
Customs in Japan, you can require a manifest?
    Mr. Henderson. It has nothing to do in our case with the 
speed. The pre-customs clearance is so you know how much duty 
to pay in Japan for a jacket you buy at L.L. Bean in the United 
States. That is why that is required. We have no special 
relationship with Customs. We have no special treatment. We go 
through like any package would through any country in the 
world.
    Mrs. Northup. No, packages that come into the country--I am 
talking about the means of transit. If you are private--if you 
ship by private shipment, you have to have a manifest and you 
prepay, and in my next round we will get into the prepay, you 
prepay the fees and the duty and you pay it before you have 
control over it. When it comes in by you, the Post Office is 
going to be the agent, you accept it from one post office and 
you assume control over it. There is no manifest. There is no 
possible way to check what the contents of those packages are.
    Mr. Henderson. Well, there are several issues there. The 
vast majority of inbound packages from foreign posts are single 
packages, not commercial packages that are going to a 
household--we have no control over that foreign post and we 
wouldn't require a single package to have an electronic 
manifest; moreover, it goes to Customs, not to the Postal 
Service where it is cleared. We can't tell the Japanese post 
what they sent.
    Mrs. Northup. Is this what is filled out when it goes--when 
a package goes overseas with a scanner, with a note that says 
what is in it, what is it worth? Is this what goes out on a 
U.S. Post Office package?
    Mr. Henderson. I would have to look at that more closely. I 
can't see that from here.
    Mrs. Northup. Thank you. It is what you all have----
    Mr. Henderson. I will take your word for that.
    Mr. Kolbe. We will start a second round here. I want to 
talk about the outbound mail also but from a slightly different 
perspective. I thought your answers to Mrs. Emerson's questions 
here were just a little bit too easy in the sense we really 
didn't get into the meat of the issue.
    As I understand it, we have got some conflicting statutes 
here. Title 31 authorizes warrantless searches of outbound 
mail. That would be by Customs. They look for arms that might 
be going out, they look for money that might be laundered or 
whatever. But Title 39 prohibits warrantless searches and that 
is what governs the Postal Service.
    My first question is this: in the case of the packages that 
are going out, the mail packages going out, it is true that 
they are in your control and Customs does not have any 
authorization to inspect--even though their authorizing 
legislation allows inspection? The items are in your control 
and therefore a search requires a warrant?
    Mr. Henderson. That is correct.
    Mr. Kolbe. As I understand it, the Administration is 
planning to submit legislation to conform the two rules and I 
don't know whether this is actually part of postal 
reauthorization legislation, but, what is your position on 
allowing Customs to have warrantless searches?

                      WARRANTLESS SEARCHES OF MAIL

    Mr. Henderson. We think there is a big public policy issue 
on privacy there. We are not in favor of allowing Customs to 
conduct warrantless searches. We will work with them and I 
think the Inspection Service has worked with them, but there is 
a huge public policy issue on privacy and whether the 
government can search your packages without probable cause, 
which would give you a warrant.
    Mr. Kolbe. I haven't heard that people have expressed those 
concerns about a package going from UPS to Colombia.
    Mr. Henderson. I am sorry?
    Mr. Kolbe. Wouldn't that same privacy concern--if I bundle 
up a package and call UPS to deliver this package to Bogota--
wouldn't they have a warrantless search? They could go to UPS 
and search it?
    Mr. Henderson. I don't know what the policies are with UPS.
    Mr. Kolbe. It is a Customs policy. They do. Obviously they 
can and that is my point. For warrantless searches, if privacy 
hasn't been an issue over the other carriers, why is it such an 
issue for the U.S. Postal Service?
    Mr. Henderson. It has been an issue for us because we are 
following what we believe to be the law----
    Mr. Kolbe. I understand. We are talking about changing the 
law.
    Mr. Henderson. We think there is a privacy issue on being 
able to open packages.
    Mr. Kolbe. You are giving a circular answer. I just said if 
we change the law, and then you said there is a privacy issue, 
and I said that hasn't apparently been a real problem for other 
kinds of carriers. Why do you think it is going to be such a 
problem for you, the Postal Service?
    Mr. Weaver. Excuse me, Mr. Chairman. I think there is a 
difference between our view of packages and cargo and freight 
that is going through other carriers and the mail that is 
entrusted to the U.S. Postal Service. I think that is one of 
the differences, that we feel that the warrantless search would 
invade the privacy of customers who send mail sealed against 
inspection.
    Mr. Kolbe. Describe the difference to me. I have two 
packages here, two identical packages filled with books and I 
call UPS to send one to Bogota and I take the other one down to 
the Postal Service. Tell me the difference.
    Mr. Weaver. The difference is we have been entrusted with 
the security of that mail by Title 39, the Postal 
Reorganization Act.
    Mr. Kolbe. We are talking about changing the law. Why do 
you have a problem changing it?
    Mr. Henderson. We think it is an infringement on privacy. I 
don't mean to be circular.
    Mrs. Northup. Can I answer?
    Mr. Kolbe. I will yield to the gentlelady for a moment.
    Mrs. Northup. The truth is, the fact is, is that only 
Customs in every country has the right without a warrant to 
search a package and to open it. And the fact is if you don't 
actually go through Customs, if they don't actually have it 
like he claims they do, then in fact nobody ever has control of 
that package to open it and search it because only Customs in 
every country has that authority.
    Mr. Kolbe. I understand. We are talking about Customs 
having the same ability to inspect an outgoing package at the 
Postal Service that they now inspect at another carrier. That 
is the issue here. This is clearly an invitation to somebody 
who is, let's say trying to launder money, taking money out of 
the country to use the Postal Service as the favored route if 
you are going to send it by package, knowing that it can't be 
opened or inspected unless you somehow have developed a case in 
advance in order to get a warrant.
    Mr. Weaver. We think there are other ways to address that, 
Mr. Chairman, other than going with a warrantless search.
    Mr. Kolbe. Would you tell me a little bit about your anti-
money laundering efforts that you have under way?
    Mr. Weaver. Certainly. Mr. Chairman, we work with many law 
enforcement agencies. We work with the Financial Crimes 
Enforcement Network, FinCEN, and other agencies to profile, to 
work up information and intelligence where we may have activity 
going on of that nature.
    Mr. Kolbe. Would you provide a summary of contraband 
seizures by type and quantity for the last several years, say 
the last 5 or 6 years and provide that for the record.
    Mr. Weaver. Yes, I would, sir.
    [The information follows:]



    Mr. Kolbe. I still have lots of areas but I will see if I 
can get to it on a third round or not. Mr. Hoyer.
    Mr. Hoyer. Thank you, Mr. Chairman. Let me talk a little 
bit about postal rate increases. Some of the people you 
referred to in the audience are probably interested in them. 
For nonprofits, you proposed rate increases effective January 
2001 for first class magazines, nonprofit mailers and some 
others. I would like to hear your response to the claim that 
since the Postal Service is projecting surpluses--$363 million 
for the past year in 1999, estimates of $100 million for 2000 
and $500 million for 2001--that we should either modify 
substantially or not request rate increases.

                             RATE INCREASE

    Mr. Henderson. Our projection for 2001 is a net loss of 
$1.7 billion, so the Governors of the Postal Service are 
required, in keeping with their fiduciary responsibility, to 
offer a rate case. It is an omnibus rate case across the board 
submitted to the Postal Rate Commission.
    Mr. Hoyer. So the figures I read are----
    Mr. Porras. The $500 million includes a price change 
projected in that number.
    Mr. Henderson. Without the price change, it is $1.7 billion 
loss. So your figure does have the rate case----
    Mr. Hoyer. Does a hundred million also anticipate the 2001 
increase? Is that what you are saying?
    Mr. Porras. It is actually excluded because it would take 
effect after that. That is for this year alone.
    Mr. Hoyer. That is for this present year, projecting $100 
million net profit on $63 billion?
    Mr. Henderson. Yes. $64 billion, yes.
    Mr. Hoyer. I might say as an aside that the magazine folks 
have talked to me and they are appreciative of the fact that 
there apparently is fairly close cooperation-- with the Postal 
Service. I am not sure they are not pleased with the rates, but 
pleased with the cooperation they are getting.
    Let me talk about the effect of e-commerce on the Postal 
Service. I am curious about the role of electronic commerce 
when it comes to the Postal Service. Would you comment on where 
the Postal Service is on e-commerce? Particularly, are you 
already experiencing a decline in letter traffic and, if so, 
what are you projecting for the future? Secondly, what do you 
see as the Postal Service's emerging role in electronic 
commerce, if any?

                          ELECTRONIC COMMERCE

    Mr. Henderson. I think that the Internet has had a mixed 
effect on the Postal Service. On the one hand for e-commerce, 
retailers, lots of folks are choosing the Postal Service to 
deliver their package whether it be from Amazon.com or 
Drugstore.com or whatever for delivery because of our price and 
quality. On the other hand, we are experiencing and have 
experienced real live erosion of standard mass advertising mail 
where cataloguers are going to the Internet and putting up 
banners on the Internet and they are taking the advertising 
monies from direct mail to go to the Internet for prospective 
customers, which was traditionally the market for direct mail 
in the past. So we are seeing a flattening of growth. Because 
of the Christmas season being such a bust for retailers, there 
may be some rebounding on advertising mail, but that is kind of 
a wait and see issue.
    The real issue lies out in the future with bills and 
payments. Bills and payments represent $17 billion of the $65 
billion we have in total revenue. There is a huge incentive in 
the billing industry, because bills are expensive to create, to 
try to take these bills electronic. You can imagine what the 
Postal Service would have to do with rates if we lost $17 
billion of the $65 billion in revenue.
    I will give you an example. It costs AT&T about $1.75 to 
send and receive a bill from you. That doesn't include the 
postage you pay. So there is a huge incentive there for AT&T to 
get these bills out of the mail--and it is not just the cost of 
postage, it is the cost of paper, envelopes, their operations. 
There is a huge incentive there for these large billers to go 
electronic. So I think somewhere in the future that is going to 
occur where you combine bright people and that much money. In 
their case it represents somewhere in the neighborhood of a $1 
billion to their bottomline. Soquite frankly, the large senders 
of bills are chasing electronic alternatives heavily. That will have a 
very negative impact on us in the future.
    Mr. Hoyer. Given that, what do you perceive as your 
response?
    Mr. Henderson. Well, we think we ought to facilitate those 
electronic alternatives on a number of fronts to respond. First 
of all, we think there is a lot of continued waste in the 
organization that we can take out, quite frankly, through use 
of this new technology because it creates an information 
platform in which real-time data can be examined and we can 
then respond to what that information tells us.
    We think this technology provides the ability to put new 
value to packages and new value to letters so they will be more 
attractive in the future. We are talking about tracking, 
advertising and things like that.
    Thirdly, we view ourselves as a trusted third party and so 
there are a lot of folks approaching us to do everything from 
electronic postmarks to secure e-mail addresses to facilitating 
e-payments. There is a whole range of opportunities we are 
evaluating here. Probably the most promising one that looks the 
best as a business model would be something along the lines of 
e-payment where we would be the trusted third party and work 
with your secure electronic mailbox and you could pay your 
bills securely on it and we would work with the private sector. 
There are a number of fronts we are working.
    John Nolan, who you met earlier, is our Deputy Postmaster 
General and is leading the efforts we have on e-commerce. We 
are no different from a private company in that sense. The 
electronic technologies are turning everybody upside down. 
Everybody is turned upside down by virtue of this new channel 
into the home.
    Mr. Hoyer. Thank you. Thank you, Mr. Chairman.
    Mr. Kolbe. Mr. Sununu.
    Mr. Sununu. Thank you, Mr. Chairman. Mr. Henderson, I want 
to commend your comments in response to the questions about e-
mail, which is going to create a more and more uncertain 
environment in electronic commerce in particular, and also to 
your comments about long-term competitive environment in 
response to Mrs. Meek's questions. I think it shows that you 
are truly looking forward into the future, that you recognize 
that the arguments for greater independence and ultimately 
privatization carry a lot of weight, especially given the 
successes that we have seen around the world and also reflect 
the understanding it is not going to be an easy or simple 
process. There are a lot of issues to be considered.
    I want to talk about that issue of independence and one 
particular area where the Postal Service does still benefit 
indirectly from appropriations. It must go through your mind 
well, what am I doing here given that you don't have a direct 
appropriation or last year there was a direct appropriation for 
the reasons that the chairman pointed to but in years past, in 
recent years at times there hasn't been a direct appropriation.
    But indirectly, the Postal Service benefits from the 25 
million or so that this committee has allocated for the Merit 
Systems Protection Board. It is about $25 million a year and 
roughly 25 percent of the cases that are adjudicated by the 
Merit Systems Protection Board are postal cases. So clearly 
that carries with it some burden to the taxpayer. I think the 
historic rationale for that is Federal employees and that is 
what the Merit System Protection Board was set up to do. But if 
the long-term goal is greater financial independence, do you 
think it would make sense at some point to begin reimbursing 
the Merit Systems Protection Board for the costs of 
adjudicating those cases?

                     MERIT SYSTEMS PROTECTION BOARD

    Mr. Henderson. I hadn't thought about it. I think it would 
be better to just cut us away from the Merit Systems Protection 
Board and not have that as a process to adjudicate grievances. 
It is just one more in a series of processes that we have.



    Mr. Sununu. Are you advocating looking for an alternative 
as a private sector company might for reviewing----
    Mr. Henderson. That is right.
    Mr. Sununu. I certainly appreciate those comments and to 
the extent that that is an issue that you can address--focus 
time or energy on in looking at ways to continue to move away 
from the appropriations process, I think that would be helpful. 
I think it would be helpful to the committee and it strengthens 
the arguments that you make not just to a subcommittee like 
this but the arguments that you have to make when you are 
looking at rate cases and when you are looking at changes in 
regulation.
    Has any review been conducted of other areas like this one 
where the Postal Service benefits indirectly from 
appropriations and what other areas would be high on your 
priority list?

                        INDIRECT APPROPRIATIONS

    Mr. Henderson. I don't believe there has been a review of 
indirect appropriations but we would be happy to take a look at 
that.
    [The information follows:]

    Question. Has any review been conducted of other areas like 
this one where the Postal Service benefits indirectly from 
appropriations and what other areas would be high on your 
priority list?
    Answer. Historically, it has been the policy of the Postal 
Service not to contest the public policy determinations made by 
Congress. Accordingly, the Postal Service has conducted no 
overall review of these types of appropriated expenses, which 
largely reflect the overhead costs of those public policy 
decisions. We note, however, that as the Postal Service and its 
operations assume more of a commercial character, such a review 
may become appropriate. In this context, we note that the 
pending reform legislation, H.R. 22, contains provisions for 
reviews of not only postal labor-management relations, but also 
the universal service obligations of the Postal Service, and 
the application of Federal and State laws to the competitive 
activities of the Postal Service. In this context, it is 
possible that some of these policy determinations, and their 
costs, will receive further examination.

    Mr. Sununu. I would, especially if you address this area in 
particular. It is 25 percent of $25 million. It may only be $6 
or $7 million as we move forward into the next fiscal year and 
in a lot of parts of the countries that is real money, and 
there is also the long-term goal of the independence I talked 
about.
    Final question and I hope a very brief one, maybe I am 
unique in the town meetings that I participated in back home 
but it has come up on more than one occasion that the Postal 
Service might somehow be conspiring to levy a tax or a fee on 
e-mail. I am sure you have heard this as well and I would like 
to provide you with the opportunity to address those concerns 
forthwith.

                            E-MAIL TAX HOAX

    Mr. Henderson. That is a hoax being perpetrated by I don't 
know who, but I see it periodically in my e-mail, too. Someone 
writes me a nasty letter and says, you dirty so and so, what 
are you trying to do here. We are not trying to do anything. We 
haven't.
    Mr. Sununu. There has been no formal proposal within the 
Postal Service to look at, review or consider such a fee on 
electronic mail?
    Mr. Henderson. No.
    Mr. Sununu. I appreciate your direct answer very much. 
Thank you.
    Mr. Kolbe. I have just been advised by my staff that that 
hoax began in Canada, so it must emanate from the Canadian 
Postal Service who wants to do you no good.
    I know you would be disappointed if you didn't get a chance 
to hear a few more questions from Mrs. Northup and she is 
voting now and on her way back and as soon as she comes back, 
she will resume the hearing and I will be back forthwith. So we 
will finish up very quickly here but she should be back in 2 or 
3 minutes here. We will stand in recess until she returns.
    [Recess.]
    Mrs. Northup [presiding]. We are back in order. I will 
resume my questions.
    Mr. Henderson, I am sorry, but earlier how many packages 
did you say you thought came in every year and then was 
delivered by the mail service?

                            MANIFESTING MAIL

    Mr. Henderson. There are 11 million dutiable packages that 
come in that is tracked and there are--about a third of those 
are military. Almost all of the 11 million are between 
individuals to individuals.
    Mrs. Northup. Since there are no rosters and since there 
are no--and I think that my colleague, I am not sure, talked 
about the Internet sales by drug companies overseas that say if 
you buy from us, we will mail your medicine in packages that 
appear to be casual mailings, personal mailings--then how would 
it be possible for you to know if you don't have any manifest 
of who the sender is and who the receiver is?
    Mr. Henderson. The manifest would have to be a requirement 
of the foreign post where it is mailed. And it is just not 
practical for a single piece to have an electronic manifest.
    Mrs. Northup. My question for you is, is how do you know 
how many pieces are coming in that most of them are from person 
to person since there isn't a manifest, since there is no way 
to track this?
    Mr. Henderson. We have a revenue pieces and weight program. 
It is a very extensive program that is used for rate making 
that samples and calculates the amount of inbound and outbound 
mail in all categories along with all domestic mail by all 
classes.
    Mrs. Northup. You feel pretty sure it is 11 million.
    Mr. Henderson. Yes, we do feel pretty sure.
    Mrs. Northup. Didn't you just testify before Mr. McHugh's 
committee a month ago that it was 7.5 million and 30 percent of 
them were dutiable?
    Mr. Henderson. If I did I misspoke. It is 11 million. That 
probably excluded the military.
    Mrs. Northup. Does military not have dutiable mailing?
    Mr. Henderson. It has dutiable. That number did not include 
the military. That 7.5 is nonmilitary.
    Mrs. Northup. So what you testified there was that it was 
7.5 million packages that come into this country every year 
that is dutiable. I mean, excuse me--that is dutiable and that 
you all collect duty on 30 percent of it.
    Mr. Henderson. If that is what I testified, I don't 
remember, but 7.5 million is the number of the civilian 
packages. If you add the military which I just added in----
    Mrs. Northup. Why would you distinguish them since if they 
purchase something that is dutiable, they would have to pay 
duty too?
    Mr. Henderson. They are just distinguished in our 
accounting process so we will know how much is military mail.
    Mrs. Northup. The 30 percent that you all collected, is 
there somebody here that can confirm that since that was just 
testified to a month ago?
    Mr. Henderson. We can get you that for the record.
    [The information follows:]

    Question. The 30 percent that you all collected, is there 
somebody here that can confirm that since that was just 
testified to a month ago?
    Answer. From 1996 through 1998, the USPS handled, on 
average, nearly 700 million pieces of inbound mail annually. 
This includes all mail received from foreign postal 
administrations as well as mail from U.S. military post offices 
overseas. Of this total, we estimate that the USPS received 
almost 11 million potentially dutiable inbound mail items. This 
includes about 7.5 million items from foreign postal 
administrations and about 3 million potentially dutiable 
military mail items, which we estimate, contained merchandise.

    Mrs. Northup. I would like to pursue why it was 7.5 
exactly. But the figure was I think that you collected duties 
on 30 percent of that, so that means that you did not collect 
duties on 70 percent. Does that concern you?

                           COLLECTING DUTIES

    Mr. Henderson. No, whether or not to collect duties is 
really something that Customs evaluates. We wouldn't have 
anything to do with that. We are just the carrier in that 
instance. No, it doesn't bother me.
    Mrs. Northup. In fact, when you collect duties it is 
because you recognize it as a dutiable package and when you 
knock on the person's door, you collect the duties at that 
point, is that correct?
    Mr. Henderson. We collect the duties that are assessed in 
Customs. We don't recognize the package. We just get the 
handoff from Customs that says you have to collect these 
duties.
    Mrs. Northup. Let me get this right. Customs--the packages 
come in and they come to one of your 14 facilities? They come 
to a building. They come off a plane and come into a building.

                   CUSTOMS UNITS IN POSTAL FACILITIES

    Mr. Henderson. Come into Customs in a building, yes.
    Mrs. Northup. Customs, this building is owned by the Post 
Office. Is the air around the moving sorter, is that what 
Customs owns?
    Mr. Henderson. Usually it is a location where the mail is. 
We don't have access to the mail. There are strict fire walls 
there between Customs and ourselves until Customs has cleared 
the mail. In many instances I think the average clearance time 
is 48 hours.
    Mrs. Northup. According to Customs, when I met with them, 
they told me that they are conveyor belts where packages are 
coming through and they stand and make an instant judgment as 
those packages go down the conveyor belt about whether or not 
there is anything and--but it is in your building, that they 
are standing in your building.
    Mr. Henderson. It is Customs' locations in our building. 
The average package takes 48 hours to clear Customs.
    Mrs. Northup. But overall that is your building? I guess 
the air around the conveyor belt Customs owns.
    Mr. Henderson. It is our roof, our walls and their little 
section.
    Mrs. Northup. It is not even walled off necessarily.
    Mr. Henderson. Many of the places, they are walled off.
    Mrs. Northup. But not necessarily.
    Mr. Henderson. I don't know all of them. I would be able to 
supply that for the record. We would be happy to look at all 12 
or 13 of them.
    [The information follows:]



    Mrs. Northup. When you testified before Mr. McHugh's 
committee it was 7.5 dutiable packages, today it is 11 million. 
30 percent of them you collect duties on and it doesn't bother 
you that 70 percent of them you do not collect duties on?

                           COLLECTING DUTIES

    Mr. Henderson. The 11 million includes the military. The 
7.5 is the domestic.
    Mrs. Northup. Again the military pays duty.
    Mr. Henderson. It doesn't bother me in the sense that it is 
not our job to assess Customs. It is Customs----
    Mrs. Northup. How could Customs possibly assess it if they 
don't have a manifest? How can they possibly assess the correct 
duties?
    If I am mailing something here that is dutiable into the 
United States and there is no list, nothing, how could they 
possibly do that?

                            MANIFESTING MAIL

    Mr. Henderson. The vast majority of mail is almost 
exclusively single pieces. They have a Customs form on there on 
the single piece.
    Mrs. Northup. But there is no list?
    Mr. Henderson. There is only one piece. I could call the 
one label a list because there is only one piece there. It is 
not a commercial mailing.
    Mrs. Northup. If Customs decided tomorrow to do their job 
and to look at each package and they would have to start 
inspecting them individually and matching them up--as you know, 
how much duty you owe depends on this very complicated schedule 
so if you are not using any sort of computer or anything, you 
would have to look it up and then assess the duty and that 
would slow down the mail. Would that be a problem for you? The 
only way they can assess the duties is to either for you to 
give them a list of everything that is coming in like Japan 
gets so they can assess the duties, everything that is coming 
in and they can see, okay, $41,--Customs estimates that the 
average payment is $41 due. So 70 percent of the 11 million 
packages that come in here are not assessed.
    Mr. Henderson. We have no clue as to what is coming in. 
They are mailed individually from foreign posts. We don't have 
any idea what is in those packages or any control over the 
mailing of those packages from foreign posts.
    Mrs. Northup. If Customs decides to do their job, they are 
going to have to know and look up the source of each mailing, 
what is in it. Then you wouldn't object to the bottleneck that 
would create and stop, I mean virtually shut you down?
    Mr. Henderson. Customs has a profile. I don't know how they 
do their job or how they review or select packages. I just know 
that we have no clue from foreign countries on single packages 
what is coming into the United States until Customs turns it 
over to us and we don't know what the contents are.
    Mrs. Northup. Till it comes--no, of course not.
    Mr. Henderson. We don't know what the contents are, period.
    Mrs. Northup. So if other Internet providers around the 
world are doing what we know at least two drug companies are 
doing around the world and that is order through us and we will 
disguise your package so that it doesn't look like a 
professional mailing, every package could be something that 
looked like it was a single person, person to person, but 
actually be some sort of contraband or something that is 
subject to tariffs that somebody wants to avoid.
    Mr. Henderson. Customs can open and inspect any inbound 
package that they choose to. We have no role in that, assessing 
the contents of it or assessing the duties on it. That is a 
Customs function. So you are asking me something about somebody 
else and I really can't respond in a professional manner about 
how Customs ought to do their job.
    Mrs. Northup. But you know how to respond to Japanese 
Customs so they can do their job and get through fast.
    Mr. Henderson. We have no relationship with Japanese 
Customs at all.
    Mrs. Northup. I am going to go back and look up the 
testimony because I am very sure that the Post Office saidthey 
had a very--they had a very good relationship. Let me ask you about the 
lost revenue. When you all--when Customs does--say something does have 
to be assessed, do you know the percentage of time you all actually 
collect that and what percentage of time it is remitted to the U.S. 
Treasury?

                           COLLECTING DUTIES

    Mr. Henderson. I assume 100 percent of the time.
    Mrs. Northup. Didn't you just make a backpayment last year 
for all the revenues that were collected and not remitted?
    Mr. Henderson. That was an accounting disagreement that has 
since been resolved.
    Mrs. Northup. Mr. Chairman, I will give you the chair back.
    Mr. Kolbe [presiding]. Mr. Price.
    Mr. Price. Mr. Henderson, I wanted to come back for this 
round of questioning just to explore with you a bit your recent 
announcement that you are going to be attempting to cut $4 
billion in expenses by 2004. I am concerned about how these 
cuts and in particular the 9,000 positions that will be 
absorbed entirely I gather through attrition will affect mail 
delivery. I understand you are trying to take these positions 
at the administrative level and not among carriers and clerks, 
but I am not sure how either category will fare.
    For example, in North Carolina, as you know, there is one 
person out of that Greensboro district who has responsibility 
for roughly 250 facilities. He can barely see all those 
facilities in a year if he visits one per day, much less do all 
the work for expanding and constructing new facilities. And 
then among the carriers and clerks, I'm not sure it is any 
better. In fact I think it is probably worse. Even in the small 
towns we are adding a route every 18 months and of course many, 
many more than that in the larger cities, and the suburban 
areas.
    How are you going to shape these cuts so you can still make 
the kind of infrastructure investments that are absolutely 
required to keep the mail moving and keep the personnel in 
place that can do the job?

                                JOB CUTS

    Mr. Henderson. The cuts are probably in the neighborhood of 
20,000; 9,000 was the initial look see. Now it has grown to 
20,000 and it is based on----
    Mr. Price. Are these entirely through attrition? How will 
that be achieved?
    Mr. Henderson. As the plan is right now, we plan to go 
through attrition. I want to give you the driver of these cuts. 
The driver of these cuts is our forecast on revenue and our 
intention to forestall as much of a rate case as possible for 
our customers. We don't think that continually raising rates is 
a smart thing to do, so we have to go after productivity gains. 
We are really looking at administrative functions--doing things 
like taking paper processing out of the organization which 
doesn't sound productive, but there is a lot of money 
associated with moving paper and we are also looking at 
transportation costs.
    We are looking at taking $100 million out of transportation 
costs by taking mail out of the air. We are looking at better 
systems, better processing and distribution utilization in our 
field plants and thereby reducing the number of our employees, 
but we are not talking about just randomly cutting jobs without 
examining the work performed. So your example of a person 
responsible for 250 facilities, for example, we wouldn't turn 
around and say, all right, one person has 500 facilities. I 
don't think that is reasonable. We are being very careful in 
what we are doing. We cut a billion dollars out of our budget 
this year and we cut a billion dollars out last year. So we 
have been at this for a while. It is reflected in our 
productivity improvements but we have precise efforts targeted 
for these reductions.
    Mr. Price. Am I correct, though, in assuming that among the 
personnel who meet the public and interface directly with the 
public--the clerks, the carriers--there really are no cuts 
anticipated there? Those positions are multiplying, aren't 
they, quite rapidly in areas like the one I represent?

                          EMPLOYEE COMPLEMENT

    Mr. Henderson. We are growing by about a million deliveries 
a year and for rural delivery, for example, that is a 4 percent 
growth rate. The growth is fairly significant and none of those 
kinds of positions has been targeted. Now, there are some 
window clerks, for example, where supervisors have overstaffed 
their windows or done something like that on an individual 
basis. We would be looking at those situations, but that is not 
where we are going to get the big hits for our budget. I will 
say, and I said this earlier, that in the year 2004, if we 
don't have some reform and some flexibility in pricing, you 
will see a major increase in our projections, our conservative 
projections, with the erosion of bills and payments, you are 
looking at the impact of up to a hundred thousand people which 
would not be able to be accomplished by attrition. But that is 
beginning in the year 2004 and 5. It is not in the immediate 
future.
    Mr. Price. What about the talk we heard a few years ago 
about cutting out Saturday deliveries, that sort of cutback?

                           SATURDAY DELIVERY

    Mr. Henderson. We have gone to Sunday delivery during 
Christmas. We deliver packages on Sunday at no additional cost.
    Mr. Price. Well, you see what I am getting at. I understand 
the cost pressures you are under and I certainly understand the 
need to minimize rate increases. At the same time I am very 
much aware of the personnel needs that it takes to do the job.
    Mr. Henderson. It is a very sensitive balancing act, yes.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Mr. Kolbe. Thank you, Mr. Price. I have just a couple other 
questions in a couple of other areas and then we will conclude 
with Mrs. Northup's questions. We had a few questions here on 
the postal rate increase but I just wanted to ask again, I 
think you said--I heard you say that you thought this year in 
2000, you are projecting only $100 million.

                            2000 NET REVENUE

    Mr. Henderson. That is correct. That is our plan, yes.
    Mr. Kolbe. Your decision to seek this postal rate increase 
was based on your fiscal year 1998 revenues. The 1999 were 
estimated and not finalized; is that correct?

                            RATE CASE COSTS

    Mr. Henderson. When we filed the rate case, 1998 costs, not 
revenues, costs were used. The 1999 costs were not available, 
that is correct.
    Mr. Kolbe. As I understand, the final figures for 1999 
won't be available till May; is that correct?
    Mr. Henderson. April or May, that is correct.
    Mr. Kolbe. There has been some suggestions--what you show 
is 1998, $550 million net profit and 1999, $363 million and 
$100 million for 2000. So you are going down if you don't get 
any kind of a rate increase. But has there not been some 
suggestion that the final figures you might see in 1999 would 
be substantially above $363 million?
    Mr. Henderson. In what manner?
    Mr. Kolbe. That you would end up with--your costs would be 
lower and you would end up with a higher net profit?

                            1999 NET REVENUE

    Mr. Henderson. We looked at the audited 1999 figures and we 
plan to provide that data to the Postal Rate Commission. There 
is very little difference in----
    Mr. Kolbe. You don't see any real difference?
    Mr. Henderson. Not any real significant difference and that 
data will be available to the Postal Rate Commission during the 
course of their hearings.
    Mr. Porras. Let me clarify that point. The bottom line net 
income of $363 million wouldn't change. It is the allocation of 
costs between classes of mail that would be affected. But $363 
million would stay the same.
    Mr. Kolbe. You don't expect any change in that figure when 
the audited figures come in?
    Mr. Porras. No.
    Mr. Kolbe. I think all of us have heard from the magazine 
industry. There are a lot of concerns obviously about 
periodicals rate increases. I think legitimate concern, and I 
think you have expressed some of your concerns about this in 
that you don't want to see this class of mail simply disappear 
from the Postal Service. Clearly that seems to be the direction 
we are headed with a 15 percent increase. I know you have been 
looking for ways to make sufficient savings and efficiencies in 
delivering this particular class of mail since each of your 
classes has to stand alone.
    What progress have you made in this regard that might 
enable you to get down below a 10 percent rate increase?

                       PERIODICALS RATE INCREASE

    Mr. Henderson. We have made substantial progress. We have a 
task force that is actually made up of industry representatives 
and postal operating management and they have made substantial 
progress. I think all the parties are pleased at the progress 
that has been made in reducing the hit of this rate increase.
    Mr. Kolbe. I understand you have actually identified, along 
with Magazine Publishers Association, some cost savings that 
might total as much as $150 million. If those are able to be 
implemented and saved, would you then be able to project an 
increase less than 10 percent, 10 percent or less?
    Mr. Henderson. That final determination would be up to the 
Postal Rate Commission, but we believe $150 million in savings 
would bring it to single digits, yes.
    Mr. Kolbe. Is that a realistic number, $150 million?
    Mr. Henderson. Yes. I think it is going to be greater than 
that actually.
    Mr. Kolbe. Last question in the area of the commercial mail 
receiving agencies. We have been going round and round of 
course on that for some time. I have shared the concern that a 
lot of people, especially law enforcement agencies, have with 
the use of these commercial mail receiving agencies, perhaps 
misleading people by having them think they are mailing to a 
suite or an apartment number when of course it is really 
mailing to a private mailbox. The new regulations which have 
just been published a couple of weeks ago would, as I 
understand it, allow those who get their mail through the 
commercial mail receiving agencies, or CMRAs, to use either the 
PMB, private mailbox, or the designation of a number symbol, 
the symbol for number, but not a suite or apartment; is that 
correct?

                   COMMERCIAL MAIL RECEIVING AGENCIES

    Mr. Henderson. That is correct.
    Mr. Kolbe. Before you put these into the Federal Register, 
these proposed regulations, did you talk to both law 
enforcement and the community that is involved, the regulated 
community?
    Mr. Henderson. Yes, it was actually negotiated by our law 
enforcement arm, the Inspection Service.
    Mr. Kolbe. You obviously support this. Do other law 
enforcement agencies support this, Mr. Weaver?
    Mr. Weaver. Mr. Chairman, not wholeheartedly. They of 
course would like to see a stronger control over this. They 
don't agree with use of the pound sign----
    Mr. Kolbe. They like the use of just PMB.
    Mr. Weaver. Yes, sir. We think this is a balance between 
effective law enforcement and meeting our customers' needs.
    Mr. Kolbe. How about the community that is involved with 
the private mailboxes, what kind of feedback are you getting 
from them or from the public that uses them on these changes so 
far that have been proposed?
    Mr. Weaver. Most of the feedback we have received has been 
from the CMRA industry.
    Mr. Kolbe. How are they responding to it?
    Mr. Weaver. They are in favor of it.
    Mr. Kolbe. They are responding favorably to it?
    Mr. Weaver. Yes.
    Mr. Kolbe. I have a few others for the record here but I 
think that is the main questions that I had.
    Mrs. Northup, I will let you finish with some questions 
here.
    Mrs. Northup. Thank you, Mr. Chairman. I would just like to 
ask your position on H.R. 22, which of course is Mr. McHugh's 
committee's bill they are working on. Section 306 talks about 
your relationship with Customs and about holding all packages 
coming in I think to--let me just--Customs Service and other 
Federal agencies shall apply Customs laws of the United States. 
Another part says, shall deny shipments imported by the Postal 
Service from a foreign country and they can't have access to 
special Customs procedure. Are you all in agreement?

                       H.R. 22 CUSTOMS PROVISIONS

    Mr. Henderson. We are in agreement with H.R. 22absolutely, 
the whole package. That is a package deal. It is not--just for the 
record, it is not everything we wanted and we get some commercial 
freedoms and in return we make some changes. So it is a total package.

                           CUSTOMS CLEARANCE

    Mrs. Northup. I wanted to ask you also when you claimed 
that you don't clear Customs for 48 hours, does that mean the 
packages land, they go into your building and that Customs then 
holds them up, so to speak, 48 hours?
    Mr. Henderson. I wouldn't say they hold them up. It takes 
on the average 48 hours to clear Customs. I don't know what is 
going on there. That is what I have been told anyway.
    Mrs. Northup. What I am trying to figure out is does it 
move from one part of your building to another part of your 
building and at some point it goes through the Customs process 
and that is 48 hours after it lands or does it sit out there on 
the Tarmac?
    Mr. Henderson. I couldn't tell you. It goes to Customs. It 
goes directly to Customs. They have jurisdiction over it.
    Mrs. Northup. So the plane lands. Is it a commercial 
carrier?
    Mr. Henderson. Yes, it could be a private carrier too, but 
most of them are commercial.
    Mrs. Northup. So somebody takes that package off the plane. 
Is that a postal worker?
    Mr. Henderson. Probably is a postal worker, yes, who takes 
it and gives it to Customs to process.
    Mrs. Northup. Wait a minute. And takes it into the 
buildings and then it gets on a conveyor belt and it goes past 
the sight of a Customs inspector. So it gets put on the 
conveyor belt by a postal worker, it gets taken off the 
conveyor belt.
    I would just say, Mr. Chairman, that it is--to say that it 
is held by Customs is a sort of a stretch of what is going on 
here. I am going to end my questions here by saying from the 
beginning I feel like I have been asking parody questions. I 
have 14,000 workers every day whose jobs depend on a private 
carrier and they feel that they are in competition with a very 
savvy post office to your credit, who is very eager to expand 
their share of the market. And, you know, I have postal workers 
in my district too and I hope they all have a growing market. I 
hope they all have a growing market and secure jobs, but I want 
it to be based on fairness. And the questions I have asked for 
3 years have had a tendency to receive answers that packages 
are taken possession of by the Customs. No, they actually go 
into the Post Office facility and a postal worker puts them on 
a conveyor belt. I mean, that is a very misleading idea that 
they are taken possession of by Customs.
    Mr. Henderson. I wasn't intending to be misleading. Customs 
agents don't do postal work. They don't do mail handling work. 
They do the inspection work and the release work. They wouldn't 
run packages around. They don't have the staff to do that and 
postal workers are just helping out at no charge to Customs. We 
are helping out the Customs folks. We are getting the mail from 
the planes. It would be foolish to pay an agent to go out there 
and do this. So I think a lot of this is just practical 
clearing.
    Mrs. Northup. The fact is that you all go about the 
sorting, the processing, and at one point it visually passes 
under the eye of a Customs worker. And my feeling is we try to 
sort out fairness. We need to put all the facts on the table, 
and that is all I am saying. That is why I asked very specific 
questions about this.
    Mr. Henderson. It is in the custody of Customs. Whether 
they clear quickly or whether they take a long time is 
completely up to them. It is not in the custody of the Postal 
Service and it varies. In fact, I will provide you for the 
record the configuration in all of the facilities so you will 
have an exact plan of how those packages are cleared.
    [The information follows:]



    Mrs. Northup. That is fine. I have some questions I am 
submitting, but thank you very much.
    Mr. Kolbe. Thank you, Mrs. Northup. General Henderson, 
thank you very much. Mr. Porras, Mr. Weaver, thank you very 
much for being here today and for your testimony.
    This concludes this hearing on the Postal Service. The 
subcommittee will stand adjourned.





                               I N D E X

                              ----------                              

                      United States Postal Service

                                                                   Page
1999 Net Revenue.................................................    54
2000 Net Revenue.................................................    54
Asset Evaluation.................................................    25
Charlottesville Service..........................................    33
Collecting Duties............................................48, 51, 52
Commercial Mail Receiving Agencies...............................28, 55
Contraband Interdiction..........................................    17
Customs Clearance................................................36, 56
Customs Units in Postal Facilities...............................    48
Electronic Commerce..............................................    42
E-Mail Tax Hoax..................................................    46
Emerson, Questions Submitted by Congresswoman....................    86
Employee Complement..............................................32, 53
Employee Natural Disaster Policy.................................    33
Fiscal Year 2001 Budget..........................................    89
H.R. 22 Customs Provisions.......................................    56
Henderson, Prepared Statement of Postmaster General..............     4
Hoyer, Questions Submitted by Congressman........................    88
Indirect Appropriations..........................................    46
Internal Revenue Service Forms...................................    34
Job Cuts.........................................................24, 53
Manifesting Mail.............................................23, 47, 51
Merit Systems Protection Board...................................    44
Northup, Questions Submitted by Congresswoman....................    74
Organizational Structure.........................................    34
Periodicals Rate Increase........................................    55
Privatization....................................................    35
Questions Submitted by the Committee.............................    64
Rate Case Costs..................................................    54
Rate Increase....................................................    42
Saturday Delivery................................................    54
Warrantless Searches of Mail.....................................    38
Wirthlin Study................................................9, 23, 28

                                
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