[House Report 108-672]
[From the U.S. Government Publishing Office]



108th Congress                                            Rept. 108-672
                        HOUSE OF REPRESENTATIVES
 2d Session                                                      Part 1

======================================================================



 
               POSTAL ACCOUNTABILITY AND ENHANCEMENT ACT

                                _______
                                

               September 8, 2004.--Ordered to be printed

                                _______
                                

  Mr. Tom Davis of Virginia, from the Committee on Government Reform, 
                        submitted the following

                              R E P O R T

                        [To accompany H.R. 4341]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Government Reform, to whom was referred 
the bill (H.R. 4341) to reform the postal laws of the United 
States, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Committee Statement And Views....................................     1
Section-By-Section...............................................     4
Explanation Of Amendments........................................    30
Committee Consideration..........................................    30
Committee Consideration Prior to the 108th Congress..............    31
Roll Call Votes..................................................    33
Application Of Law To The Legislative Branch.....................    34
Statement Of Oversight Findings And Recommendations Of The 
  Committee......................................................    34
Statement Of General Performance Goals And Objectives............    34
Constitutional Authority Statement...............................    34
Federal Advisory Committee Act...................................    34
Unfunded Mandate Statement.......................................    34
Committee Estimate...............................................    34
Budget Authority And Congressional Budget Office Cost Estimate...    35
Changes In Existing Law Made By The Bill As Reported.............    45

                     Committee Statement and Views


                  BACKGROUND AND NEED FOR LEGISLATION

    The United States Postal Service (USPS) processes and 
delivers 208 billion pieces of mail to more than 130 million 
households and businesses in the United States each year. The 
agency's mission, outlined in the Postal Reorganization Act of 
1970, is to provide postal services that bind the Nation 
together through the correspondence of the people, to provide 
access in all communities, and to offer prompt, reliable postal 
services at uniform prices.\1\ The law was designed to 
transform the Postal Service from a bureaucracy subsidized by 
tax revenue to a self-supporting, businesslike entity supported 
by the fees
---------------------------------------------------------------------------
    \1\ 39 U.S.C. 101 et seq.
---------------------------------------------------------------------------
    The mission of the USPS is being challenged by a variety of 
factors including decreasing volume, insufficient revenue, 
mounting debts, and electronic communications alternatives such 
as Internet advertising, electronic bill payments, emails and 
faxes. In addition:
     The Postal Service is the center of a $900 billion 
industry employing 9 million workers nationwide.
     Mail volume has declined during each of Fiscal 
Years 2001, 2002 and 2003.
     USPS has lost $2.3 billion in the last three 
years.
     USPS will be required to file a rate case late in 
2004, which would raise rates an additional 5.4 percent.

                         PRESIDENT'S COMMISSION

    On July 31, 2003, the President's Commission on the Postal 
Service released its recommendations for maintaining the 
viability of the Postal Service. Roughly half of the 
recommendations require legislative change. Most of these 
concerns have been addressed in earlier postal reform 
proposals, although some specific recommendations differ. New 
issues raised by the Commission include reform of the 
collective bargaining process and legislative changes making it 
easier to close post offices and processing centers. In 
addition, the Commission recommended that the Postal Service 
not be responsible for funding the portion of Civil Service 
Retirement System (CSRS) employees' pensions that are 
attributable to their prior military service, for which no 
other agency is responsible under CSRS.

             ADMINISTRATION'S PRINCIPLES FOR POSTAL REFORM

    On December 8, 2003, the Department of the Treasury 
released a set of 5 principles, based on the recommendations of 
the President's Commission, that should guide Congress's effort 
to reform the Postal Service. The principles are:
     Implement Best Practices. Ensure that the Postal 
Service's governing body is equipped to meet the 
responsibilities and objectives of an enterprise of its size 
and scope.
     Transparency. Ensure that important factual 
information on the Postal Service's product costs and 
performance is accurately measured and made available to the 
public in a timely manner.
     Flexibility. Ensure that the Postal Service's 
governing body and management have the authority to reduce 
costs, set rates, and adjust key aspects of its business in 
order to meet its obligations to customers in a dynamic 
marketplace.
     Accountability. Ensure that a Postal Service 
operating with greater flexibility has appropriate independent 
oversight to protect consumer welfare and universal mail 
service.
     Self-Financing. Ensure that a Postal Service 
operating with greater flexibility is financially self-
sufficient, covering all of its obligations.

               POSTAL ACCOUNTABILITY AND ENHANCEMENT ACT

    The ``Postal Accountability and Enhancement Act'' 
affirmatively responds to all five of the Administration's 
principles for postal reform, and incorporates nearly all of 
the seventeen legislative recommendations made by the 
President's Commission on the U.S. Postal Service. This bill 
mandates transparency in the Service's finances, costs, and 
operations. The legislation creates a modern system of rate 
regulation, establishes fair competition rules and a powerful 
new regulator, addresses the Postal Service's universal service 
obligation and the scope of the mail monopoly, and improves the 
collective bargaining process. However, unlike the unlimited 
and unfettered pricing flexibility recommended for the Postal 
Service by the President's Commission for competitive product 
offerings, the bill imposes important controls to protect the 
public interest from unfair competition.
    The objective of the bill is to position the Postal Service 
to operate in a more business-like manner. In order to achieve 
this goal the system must be responsive to market 
considerations and must provide clear incentives for postal 
management and the Postal Service as an institution. The Postal 
Service would no longer operate under a break-even mandate. By 
maximizing gains and minimizing costs, the Postal Service could 
generate earnings that would be retained, and which could be 
distributed as incentives to management as well as employees 
through collective bargaining. Similarly, losses could not be 
recovered by increasing rates beyond specific parameters 
without regulatory approval.

  SUMMARY HIGHLIGHTS OF THE POSTAL ACCOUNTABILITY AND ENHANCEMENT ACT

    Preserve Universal Service. Maintenance of a universal 
postal system must be the cornerstone of any postal reform 
measure. The bill preserves this mandate by giving the Postal 
Service the ability to remain viable and effective. The 
statutory mission of the Postal Service is focused strictly on 
postal services. A study will be required to recommend concrete 
standards for universal service. In addition, the Postal 
Regulatory Commission will develop an annual estimate of the 
costs of universal service so that Congress can better 
understand how to provide the necessary protections in the 
future.
    Promote Efficiency and Flexibility. The bill gives postal 
management and employees the tools to adapt and survive in the 
face of enormous challenges caused by changing technology and a 
dynamic communications marketplace. The bill encourages 
innovation and efficiency by permitting the Postal Service to 
distribute earnings as bonuses to all employees. In the same 
way, losses could not be recovered by increasing rates beyond 
specified parameters without regulatory approval. The bill also 
enables the Postal Service to better react to market conditions 
by streamlining the rate setting process, and permitting rates 
that are better tailored to consumers' needs.
    Ensure Fair Competition and Accountability. Under the 
legislation, the Postal Service will compete on a level playing 
field, under many of the same terms and conditions as faced by 
its private sector competitors, albeit with stronger controls, 
oversight, and limitations in recognition of its governmental 
status. The Postal Service will be given flexibility to price 
competitive products, but competitive products and services 
would have to pay their own costs without subsidy from First-
Class mail revenues. A ``Postal Regulatory Commission'' is 
created to oversee and regulate the Postal Service. The bill 
clarifies the distinction between competitive and market-
dominant products and imposes prohibitions on the Postal 
Service's ability to regulate areas in which it competes. The 
bill additionally, for the first time, subjects the Postal 
Service's competitive products to many of the same laws as 
private companies, including:
           Antitrust laws;
           Fair-trade laws;
           Equal customs procedures; and
           An assumed federal income tax payment.
    Establish a Basis for Future Reforms. The legislation 
mandates several studies, including a comprehensive assessment 
of the scope and standards for universal service. Other 
evaluations address:
           Equal application of laws;
           Plans for assisting displaced workers;
           Quality of ratemaking data for Periodicals' 
        costs; and
           An assessment of the revenue deficiency 
        process.

                           Section-by-Section


                 TITLE I--DEFINITIONS; POSTAL SERVICES

Sec. 101 Definitions

    Section 101 of the bill proposes, for the first time, a 
clear definition of ``postal services'' as the carriage of 
letters, printed matter, or mailable packages, including 
acceptance, collection, processing, delivery, or other services 
supportive or ancillary thereto. The definition is modeled 
after language proposed by the Postal Rate Commission earlier 
this year. (See Proposed Rulemaking Concerning Amendment to the 
Rules of Practice and Procedure, Order No. 1389, Docket No. RM 
2004-1 (Jan. 16, 2004).) The definition of ``postal service'' 
is used to clarify the jurisdiction of the Postal Rate 
Commission (renamed in the bill the ``Postal Regulatory 
Commission'') and the scope of commercial activities that the 
Postal Service is authorized to pursue.
    Section 101 also defines the term ``product'' to mean ``any 
postal service with a distinct cost or market characteristic 
for which a rate or rates are, or may reasonably be applied.''
    Section 101 further clarifies that ``rates,'' as used with 
respect to products, ``includes fees for postal services.'' It 
defines ``market-dominant product'' to as ``a product subject 
to subchapter I of chapter 36'' and ``competitive product'' as 
``a product subject to subchapter II of chapter 36.'' Section 
101 defines ``Consumer Price Index'' to mean the Consumer Price 
Index for All Urban Consumers published monthly by the Bureau 
of Labor Statistics of the Department of Labor. Finally, 
section 101 defines ``year'' to refer to a fiscal year for most 
purposes of rate regulation.

Sec. 102 Postal services

    Section 102 declares that the Postal Service's authority to 
offer products and services is limited to postal services. 
Current law is unclear in this respect. The section strikes a 
provision that gave the Postal Service the specific power ``to 
provide, establish, change, or abolish special nonpostal or 
similar services.'' If the Service unlawfully offers a 
nonpostal service or product, the Postal Regulatory Commission 
may order that the Postal Service cease providing the product 
under the complaint procedures outlined in section 202 of the 
bill. An exception is made for ``special nonpostal or similar 
services'' provided as of May 12, 2004.
    The changes made by this section should not be interpreted 
to impact the Postal Service's ability to furnish government 
services to the public, such as acceptance of passport 
applications and sale of duck stamps, in accordance with 
section 411 of title 39.

Sec. 103 Transparency

    Recognizing the recommendations of the President's 
Commission on the U.S. Postal Service as well as the 
Administration's key principles for reform, including the need 
for amore open and accountable executive branch, the nation's 
postal laws will now include a clear mandate that the Postal Service 
must be subject to a high degree of transparency, including in its 
finances and operations. This is a key foundation for ensuring fair 
treatment of both customers and competitors.

                    TITLE II--MODERN RATE REGULATION

    In the new regulatory regime proposed in the bill, the 
classes of mail and services are classified as either Market 
Dominant or Competitive products. In general, the bill requires 
the Postal Regulatory Commission to design, within 24 months, a 
new system of rate regulation for Market Dominant products. The 
new system will, for the most part, continue the ratemaking 
factors found in current law while providing increased 
flexibility, predictability, incentives for efficiency, and 
long term financial stability. The Commission is required to 
ensure that price increases of subclasses in the Market 
Dominant category do not exceed the rise in the Consumer Price 
Index (CPI) unless such an increase is reasonable and equitable 
and necessary for the Postal Service, under best practices of 
honest, efficient, and economical management, to maintain and 
continue the development of postal services of the kind and 
quality adapted to the needs of the United States.
    With respect to Competitive products, the Postal Regulatory 
Commission must issue regulations within 18 months to guard 
against subsidization by market-dominant products and ensure 
competitive products cover their attributable costs and, as a 
group, make a reasonable contribution to institutional costs. 
Once the Commission has issued its regulations, the Postal 
Service is given, pricing flexibility somewhat comparable to 
that exercised by private competitors. The changes regarding 
competitive products will be complemented by title III, which 
provides for a level playing field for such products in several 
important respects.

Sec. 201 Provisions relating to market-dominant products

    Section 201 of the bill establishes a new, modern system 
for regulation of Market Dominant products, which account for 
almost 90 percent of current Postal Service revenues. In 
current title 39, chapter 36 deals with regulation of postal 
rates. The bill redesignates subchapter I of chapter 36 
(establishing the Postal Rate Commission) as chapter 5 (see 
section 501, below). Section 201 revises subchapter II, which 
currently sets out the process of rate regulation, and 
redesignates it as subchapter I. As amended, subchapter I 
relates only to regulation of Market Dominant products. Section 
201 adds two new provisions to title 39, sections 3621 and 
3622, as follows.
    Section 3621 lists certain postal products to be regulated 
as Market Dominant products immediately after enactment: First-
Class mail (but not priority and express mail, which are deemed 
competitive products), Periodical mail, Standard mail, media 
mail, library mail, and bound printed matter. This list 
specifically includes ``Aunt Minnie'' or ``individual 
consumer'' mail, that is, domestic and international single 
piece First-Class letters and cards. Special services (e.g., 
post office boxes in rural areas, certificates of mailing and 
delivery, etc.) are also regarded as Market Dominant products. 
The products listed have the same meaning given them in the 
Mail Classification Schedule (39 C.F.R. pt. 3001, Subpt. C, 
App. A) as of the date of enactment. After enactment, the 
Commission may revise the list of Market Dominant products. See 
new section 3642 set out in section 203 of the bill.
    Subsection 3622(a) requires the Postal Regulatory 
Commission to establish within 24 months a new system for 
regulating postage rates and classes for Market Dominant 
products. The Commission may subsequently revise the system.
    Subsection 3622(b) provides that the objectives of the new 
system shall be:
          1. Maximize incentives to reduce costs and increase 
        efficiency;
          2. Create predictability and stability in rates;
          3. Maintain high quality service standards;
          4. Allow the Postal Service pricing flexibility;
          5. Assure adequate revenues, including retained 
        earnings, to maintain financial stability; and
          6. Reduce the administrative burden of the ratemaking 
        process.
    Subsection 3622(c) requires that, in establishing or 
revising the new system, the Commission shall take into account 
certain factors, which are modeled after the rate and 
classification factors found in sections 3622 and 3623 of 
current law. These factors include the establishment and 
maintenance of a fair and equitable schedule for rates and 
classification system; the value of the mail service actually 
provided for each class or type of mail to both the sender and 
recipient; the direct and indirect postal costs attributable to 
each class or type of mail service and that portion of all 
other Postal Service costs reasonably assignable to the class 
or type; the effect of rate increases on certain groups; 
available alternative means to sending and receiving letters or 
other mail matter at reasonable costs; the degree of 
preparation of mail for delivery into the system performed by 
the mailer and its effect upon reducing Postal Service costs; 
simplicity of structure for the entire schedule, along with 
simple, identifiable relationships between rates or fees 
charged the various classes of mail for postal services; the 
relative value to the people of the kinds of mail matter 
entered in the postal system and the desirability and 
justification for special classifications and services; the 
importance of providing classifications with extremely high 
degrees of reliability and speed of delivery, and of providing 
classifications without such requirements; the desirability of 
special classifications; and the educational, cultural, 
scientific, and informational value to the recipient.
    Subsection 3622(d) declares that the new system may include 
price caps, revenue targets, cost-of-service regulation, or 
such other forms of regulation as the Commission considers 
appropriate. This subsection lists potential approaches and is 
not intended to limit the options of the Commission to a 
particular result.
    Subsection 3622(e) requires that the system established by 
the Postal Regulatory Commission must ensure that the average 
rate for any subclass does not increase by more than the annual 
increase in the Consumer Price Index unless the Commission has 
determined, after notice and opportunity for a public hearing 
and comment, that such an increase is ``reasonable and 
equitable and necessary to enable the Postal Service, under 
best practices of honest, efficient, and economical management, 
to maintain and continue the development of postal services of 
the kind and quality adapted to the needs of the United 
States.''
    The new system will ensure fairness because the Postal 
Service will not be able to derive from any one subclass a 
percentage increase in revenue greater than CPI and will at the 
same time be encouraged to improve efficiency and control 
costs. In contrast, the current rate-setting process provides 
little or no incentive for the Postal Service to control its 
costs because all costs are ultimately passed through to the 
consumer regardless of how efficiently or inefficiently the 
Postal Service operates.

Sec. 202 Provisions relating to competitive products

    Section 202 of the bill adds a new subchapter II to chapter 
36 of title 39. Subchapter II establishes a flexible system for 
regulation of Competitive products, which currently account for 
about 10 percent of current Postal Service revenues. Section 
202 adds three new sections to title 39, as follows.
    Section 3631 lists the present mail classes and products to 
be included within the Competitive category immediately after 
enactment. This list includes Priority mail, Express mail, 
mailgrams, international mail not included in the market-
dominant category, and parcel post. After enactment, the 
Commission may revise the list of Competitive products. See new 
section 3642 set out in section 203 of the bill. Further the 
section defines ``costs attributable'', as the direct and 
indirect costs attributable to a postal product. Although 
single piece parcels are assigned to the competitive category, 
the Committee expects the Postal Regulatory Commission to 
monitor package delivery services of the Postal Service. If 
there is not effective competition in rural areas or elsewhere, 
the Postal Regulatory Commission should consider appropriate 
changes, including transfers to the market dominant category.
    Section 3632 provides that the Governors of the Postal 
Service may establish rates and classes for all products in the 
Competitive category of mail after giving notice in the Federal 
Register at least 30 days in advance, for rates or classes of 
general applicability in the Nation as a whole or in any 
substantial region. For rates and classes not in that category, 
the Governors must file their decision at least 15 days in 
advance with the Postal Regulatory Commission, which shall 
establish the criteria for determining when rate or class falls 
within this 15 day category. The Governors' new pricing 
authority for competitive products does not take effect until 
the Postal Regulatory Commission promulgates regulations under 
section 3633.
    Section 3633 requires the Postal Regulatory Commission to 
promulgate regulations within 18 months of enactment 
prohibiting subsidization of competitive products by market 
dominant products. The Commission shall ensure that each 
competitive product covers its attributable costs, and in 
addition ensure that competitive products collectively make a 
``reasonable contribution'' to the institutional costs of the 
Postal Service.
    In addressing the attributable costs, the Commission should 
continue to focus on the need to have reliable indicators of 
cost causality. This committee heard testimony from differing 
viewpoints, with some urging a higher attribution of costs. The 
goal of the Commission should be a technically correct result, 
placing accuracy above achieving a particular outcome of higher 
or lower attribution.
    With respect to the requirement that competitive products 
collectively make a reasonable contribution to overhead, it 
should be noted that the broad standard contains inherent 
flexibility. It is not intended to dictate a particular 
approach that the Postal Regulatory Commission should follow.

Sec. 203 Provisions relating to experimental and new products

    Section 203 of the bill adds a new subchapter III to 
chapter 36 of title 39. Subchapter III provides rules for 
market tests of experimental products and for shifting products 
between the Market Dominant and Competitive categories. The new 
subchapter III replaces, and thus repeals, the current 
subchapter III dealing with temporary rates and classes. 
Section 203 adds two new provisions to title 39 as follows.
    Section 3641 authorizes the Postal Service to conduct 
limited market tests, which are exempt from the statutory 
criteria for market-dominant and competitive products. Market 
tests under this section are restricted to periods that last no 
more than two years (which may be increased to three years by 
the Commission) and to products that earn less than $10 million 
annually nationwide (which may be raised to $50 million by the 
Commission). Regardless of duration or size, a market test may 
not be conducted under this section if it will ``create an 
unfair or otherwise inappropriate competitive advantage for the 
Postal Service or any mailer, particularly in regard to small 
business concerns.'' Under this section, the Commission retains 
substantial oversight authority over market tests. Under 
section 3652, the Postal Service is obliged to provide summary 
information in annual reports to the Postal Regulatory 
Commission about market tests.
    Section 3642 authorizes the Postal Regulatory Commission to 
classify new products as falling in either the Market Dominant 
category or Competitive category, to transfer existing products 
between the two categories, and to remove a product from a list 
for a category. Subsection (b) adopts criteria for the two 
categories that reflect the Federal Communications Commission's 
(FCC) approach to defining ``dominant'' carriers for the 
purpose of regulation. Paragraph (b)(1) provides that: ``The 
market-dominant category of products shall consist of each 
product in the sale of which the Postal Service exercises 
sufficient market power that it can effectively set the price 
of such product substantially above costs, raise prices 
significantly, decrease quality, or decrease output, without 
risk of losing business to other firms offering similar 
products. The competitive category of products shall consist of 
all other products.'' Products covered by the postal monopoly 
may not be transferred to the Competitive category. Paragraph 
(b)(3) requires the Postal Regulatory Commission to consider in 
addition (a) the availability and nature of enterprises in the 
private sector engaged in the delivery of the product involved; 
(b) theviews of those who use the product involved on the 
appropriateness of the action; and (c) the likely impact of the 
proposed action on small business concerns. The Commission is also 
allowed to transfer a subclass or other subordinate unit of a class of 
mail or type of postal service.
    Subsection 3642(d) provides that the Postal Regulatory 
Commission must ensure that any change in the lists of products 
in the Market Dominant and Competitive categories is published 
in the Federal Register. Subsection (e) requires that Congress 
be notified when the Commission has concluded a product should 
be transferred and that such transfer may not take effect for 
one year. Subsection (f) provides that the Postal Service may 
not offer any product involving the carriage of letters, 
printed matter, or packages until it is categorized as falling 
in either the Market Dominant or Competitive Category (except 
for an experimental product).

Sec. 204 Reporting requirements and related provisions

    Section 204 of the bill adds a new subchapter IV to chapter 
36 of title 39. In general, subchapter IV provides for annual 
audits of Postal Service operations by the Postal Regulatory 
Commission to ensure compliance with the ratemaking criteria of 
the act.
    Section 3651 requires that the Postal Regulatory Commission 
provide an annual report to the President and the Congress 
concerning its operations, including an assessment of whether 
its regulations for Market Dominant and Competitive products 
are meeting legislative policy. As part of this report, the 
Commission is directed to prepare an estimate of public service 
costs borne by the Postal Service including universal service 
costs, revenue-forgone costs, and other costs (e.g., law 
enforcement activities). The Postal Service must give the 
Commission such information as the Commission deems necessary 
to prepare the reports.
    Subsection 3652(a) requires that the Postal Service submit 
information to the Postal Regulatory Commission, no later than 
three months after the last day of each fiscal year, which 
demonstrates that the rates in effect for all Market Dominant 
and Competitive products during the year are in compliance with 
the requirements of this title. In addition, information must 
be provided on each product in the Market Dominant category 
including volume and market information, along with measures of 
quality of service, including service standards, the level of 
service (in terms of speed and reliability), and customer 
satisfaction. In this manner, the bill mandates that the Postal 
Service must develop measures for and report on, among other 
things, the speed and reliability of postal services in all 
classes of mail in the Market Dominant category. The Postal 
Service Inspector General is required to audit the report 
prepared for Postal Regulatory Commission review.
    Subsection 3652(b) requires annual reporting on work-
sharing discounts, including the per-item cost avoided by the 
Postal Service by virtue of such discount; the percentage of 
such per-item cost avoided that the per-item discount 
represents; and the per-item contribution made to institutional 
costs.
    Subsection 3652(c) provides that the Service must provide 
such data as the Commission requires for market tests but may 
provide summary data on the required costs, revenues, and 
quality of service for market tests for which the Commission 
has not required specific information.
    Subsection 3652(d) states that the Commission will have 
access to all the working papers and supporting materials of 
the Postal Service and the Inspector General in connection with 
the required reports.
    Subsection 3652(e) provides that the Commission must 
develop regulations prescribing the content and form of the 
required annual reports. In doing so, the Commission shall give 
due consideration to providing the public with adequate 
information to assess the lawfulness of rates charged, avoiding 
unnecessary or unwarranted administrative effort or expense on 
the part of the Postal Service, and protecting the 
confidentiality of commercially sensitive information. The 
Commission may specify what information will be provided as 
either (1) public reports or (2) non-public annexes and 
supporting matter. The subsection also contains a provision for 
the Commission, on its own motion or on request from an 
interested party, to initiate a proceeding to improve the 
quality, accuracy, or completeness of Postal Service data 
required by the Commission.
    Subsection 3652(f) provides that the Postal Service may 
obtain confidential treatment for information that is protected 
from disclosure under current law, in accordance with 
provisions outlined in new section 504. See section 502 of the 
bill.
    Subsection 3652(g) requires the Postal Service to provide 
the Commission, as part of information to be examined in the 
annual audit, specific reports that are submitted to Congress, 
including the comprehensive statement required under section 
2401 and the performance plan and program reports required 
under the Government Performance and Results Act.
    Section 3653 provides that, after receiving annual reports 
from the Postal Service in accordance with section 3652, the 
Postal Regulatory Commission shall provide an opportunity for 
public comment. The Commission will then, within 90 days, make 
a written determination whether any rates and fees were not in 
compliance with the law or whether performance goals or any 
service standards were not met. If any noncompliance is found, 
the Commission is required to take appropriate action under the 
revised complaint procedure, section 3662 (section 205 of the 
bill, below). On the other hand, a determination of compliance 
creates a rebuttable presumption of compliance in any complaint 
proceeding on the specific matters reviewed in the annual 
audit.

Sec. 205 Complaints; appellate review and enforcement

    Section 205 of the bill revises the complaint and appellate 
review provisions set out in subchapter V of chapter 36, title 
39 (as redesignated by the bill). In general, the bill 
strengthens the authority of the Postal Regulatory Commission 
to act on complaints. Section 205 repeals current sections 3662 
(rate and service complaints) and 3663 (annual report on 
international services) and adds three sections in title 39 as 
follows.
    Section 3662 provides the Postal Regulatory Commission with 
enhanced authority to respond to complaints of pricing, 
service, or other actions by the Postal Service in violation of 
law. As revised, this section would require the Commission to 
begin proceedings on or dismiss complaints within 90 days and 
if not acted on, the complaint shall be treated in the same way 
as if it had been dismissed pursuant to an order issued by the 
Commission on the last day allowable for the issuance of such 
order under paragraph (1). In subsection 3662(c), the amendment 
gives the Commission broad authority to correct violations by 
ordering the Postal Service to take whatever steps the 
Commission considers appropriate. For instance, the Commission 
may order the Postal Service to adjust the rates of Competitive 
products to lawful levels if they are set below attributable 
costs (the Commission has no such authority under current law). 
The Commission is authorized to suspend rates or 
classifications that are not of general applicability in the 
Nation as a whole or in any substantial region of the Nation. 
The suspension is permitted for only a limited period of time 
pending expedited proceedings under 3662, and four key factors 
are outlined in subsection (d) that the Commission must 
consider in evaluating whether this authority may be exercised. 
In cases of deliberate noncompliance with law, the Commission 
is authorized to levy fines based on the seriousness, nature, 
circumstances, and extent of the noncompliance. Fines resulting 
from provision of Competitive products must be paid out of the 
Competitive Products Fund, and all fines are paid into the 
general Treasury fund.
    Section 3663 provides for appeals of any order or decision 
of the Postal Regulatory Commission to the United States Court 
of Appeals for the District of Columbia Circuit in accordance 
with chapter 706 of title 5 and chapter 158 of title 28.
    Section 3664 gives any United States District Court 
jurisdiction to enforce orders of the Postal Regulatory 
Commission and issue injunctions or restraining orders.

Sec. 206 Workshare discounts

    Section 206 amends Title 39 by adding section 3687, 
requiring the Postal Regulatory Commission to establish rules 
for workshare discounts that ensure that workshare discounts do 
not exceed the cost that the Postal Service avoids as the 
result of private sector workshare activity, except (1) where 
the discount is associated with a new product or service or 
with a change to an existing product or service and is 
necessary to induce certain mailer behavior, although such 
discount cannot be provided for longer than four years; (2) to 
the extent that a reduction in the discount would lead to a 
loss of volume in the affected category and reduce the 
aggregate contribution to institutional costs of the Postal 
Service, from the mail matter subject to the discount, below 
what it otherwise would have been if the discount had not been 
reduced to costs avoided; would result in a further increase in 
the rates paid by mailers not able to take advantage of the 
discount; or would impede the efficient operation of the Postal 
Service; (3) where the amount of the discount above costs 
avoided is necessary to mitigate rate shock and will be phased 
out over time; or (4) where the workshare discount is provided 
in connection with subclasses of mail consisting exclusively of 
mail matter of educational, cultural, or scientific value.

Sec. 207 Clerical amendment

    Section 207 of the bill revises the analysis of chapter 36, 
title 39, in accordance with the changes made by the bill.

           TITLE III--PROVISIONS RELATING TO FAIR COMPETITION

Sec. 301 Postal Service Competitive Products Fund

    Section 301 of the bill adds a new section 2011 to title 
39. Section 2011 establishes an off-budget fund within the 
Treasury for revenues and expenditures associated with 
competitive products. The ``Competitive Products Fund'' is in 
addition to the current Postal Service Fund. The intent of this 
section is to level the playing field for the Postal Service 
and its competitors in the Competitive product market by 
requiring the Postal Service to keep separate financial 
accounts for Market Dominant and Competitive products. 
Separation of accounts also protects the interests of postal 
consumers in the Market Dominant category and taxpayers.
    Subsection 2011 essentially permits the Postal Service to 
manage the Competitive Products Fund in its discretion but 
prohibits the Postal Service from borrowing funds from Treasury 
or borrowing from private capital markets by pledging the full 
faith and credit of the United States. The new fund can borrow 
money to support competitive products by pledging the assets of 
the fund and its revenues and receipts. The Postal Service may 
invest money from the new fund in accordance with rules which 
the Secretary of Treasury shall prescribe (by not later than 18 
months after the date of enactment)--in such other obligations 
or securities as the Postal Service deems appropriate.
    Subsection 2011(h) requires that the Secretary of the 
Treasury, in consultation with the Postal Service, an 
independent accountant, and other appropriate advisors, develop 
recommendations for rules such as accounting practices and 
principles that will identify and value the assets, 
liabilities, capital, and operating costs, associated with 
Competitive products. Treasury's recommendations must be 
submitted to the Postal Regulatory Commission, which must then 
provide an opportunity for all other interested parties to 
present their views. The Postal Service, among others, will 
therefore be able to present its own recommendations and 
counterarguments. While Treasury will have the first 
opportunity to make recommendations, the Committee expects the 
Commission to give consideration to all input from interested 
parties, without a presumption that the Treasury 
recommendations are correct. After taking into account all 
views and information presented, the Commission must issue 
rules providing for the establishment and application of 
accounting practices and principles, certain substantive and 
procedural rules, and submission by the Postal Service of 
annual and periodic reports. The Commission is authorized to 
update the rules as necessary.
    The Postal Service must report to the Postal Regulatory 
Commission on the Competitive Products Fund periodically, as 
may be required by the Commission. In addition, the Postal 
Service must prepare an annual report for the Secretary of the 
Treasury concerning the operation of this Fund. This report 
shall address such matters as risk limitations, reserve 
balances, allocation or distribution of moneys, liquidity 
requirements, andmeasures to safeguard against losses. A copy 
of the report must also be provided to the Commission as part of the 
required annual reports.

Sec. 302 Assumed Federal income tax on competitive products income

    Section 302 of the bill adds a new section 3634 to title 
39. Section 3634 requires the Postal Service each year to 
compute an assumed Federal income tax on income from 
Competitive products and to transfer from the Competitive 
Products Fund to the Postal Service Fund the amount of that 
assumed tax.

Sec. 303 Unfair competition prohibited

    Section 303 of the bill adds a new section 404a to title 
39. Section 404a prohibits the Postal Service from (1) 
establishing rules or regulations which preclude competition or 
give the Postal Service an unfair competitive advantage; (2) 
compelling disclosure, transfer, or licensing of intellectual 
property to any third party; or (3) offering any product or 
service that makes use of information obtained from a person 
that provides or seeks to provide a product to the Postal 
Service (unless the person has consented to such use or 
substantially the same information is otherwise obtainable). 
The Postal Regulatory Commission is required to prescribe 
regulations to carry out the purposes of this section, and the 
prohibitions are enforced through the Commission's strengthened 
complaint process and remedies, which include ordering 
rescission of any regulation.

Sec. 304 Suits by and against the Postal Service

    Section 304 of the bill amends section 409 of title 39 to 
make the Postal Service more amenable to other laws regulating 
the conduct of commercial activities.
    First, the amendment subjects all Postal Service activities 
to federal laws prohibiting the conduct of business in a 
fraudulent manner (the Lanham Act and certain parts of the 
Federal Trade Commission Act).
    Second, the amendment subjects Postal Service conduct with 
respect to competitive products to federal antitrust laws and 
unfair competition prohibitions and eliminates sovereign 
immunity protection from suits in Federal court for violations 
of Federal law. The amended section 409 allows injunctive 
relief against officers and employees of the Postal Service in 
case of violation of the antitrust laws, while the Postal 
Service itself would be subject to all available remedies.
    Third, the amendment would make the Postal Service, to the 
extent it engages in conduct with respect to the provision of 
competitive products, a ``person'' for purposes of the Federal 
bankruptcy laws.
    Fourth, the amendment would require the Postal Service to 
consider local zoning, planning, or land use regulations and 
building codes when constructing or altering buildings.
    As amended, section 409 further requires the Postal Service 
to represent itself in most legal proceedings permitted by the 
amendment as well as in cases involving administrative 
subpoenas issued by the Postal Regulatory Commission and 
appeals of decisions by the Commission or the Governors. The 
amendment requires that judgments arising out of activities of 
the Postal Service must be paid by the Postal Service, and 
judgments arising out of violations of law involving 
competitive products must be paid from revenues from 
competitive products.

Sec. 305 International postal arrangements

    Section 305 of the bill replaces section 407 of title 39. 
Section 407 deals with international postal arrangements.
    New subsection 407(a) establishes a policy framework for 
future international postal agreements that stresses separation 
of regulatory and operational functions.
    Subsection 407(b) vests the Secretary of State with 
authority to lead U.S. delegations in intergovernmental 
meetings devoted to postal matters. The Secretary is barred 
from concluding agreements with respect to any competitive 
product that give preference to any entity, either public or 
private, including the Postal Service. The subsection provides 
the Secretary in carrying out his responsibilities under this 
section shall maintain continuing liaison with other federal 
agencies and the Congress, and appropriate liaison with the 
Postal Service and affected members of the public. The 
subsection further declares that the Secretary of State shall 
establish an advisory committee, under the Federal Advisory 
Committee Act, to help perform such functions as the Secretary 
considers appropriate in connection with the necessary 
coordination and liaison with entities in the public and 
private sectors as the Secretary develops U.S. foreign policy 
related to international postal services and other 
international delivery services.
    Subsection 407(c) provides that, before concluding an 
international agreement that establishes a rate or 
classification for a market-dominant product, the Secretary 
shall request a decision from the Postal Regulatory Commission 
to determine whether the proposed rate or classification is 
consistent with the Commission standards and criteria for 
market dominant products. The Secretary must ensure that 
international agreements are consistent with the Commission's 
decision except to the extent that modification may be required 
by considerations of foreign policy or national security.
    Subsection 407(d) authorizes the Postal Service to enter 
into agreements or contracts as it deems appropriate for 
international postal services or other international delivery 
services without the consent of the Secretary as long as any 
agreements with agencies or subsidiaries of foreign governments 
are contractual in nature and do not purport to be 
international law. The Postal Service must notify the Secretary 
and the Commission of agreements with agencies of foreign 
governments.
    In light of studies conducted by the General Accounting 
Office and the former U.S. Customs Service, subsection 407(e) 
requires the Bureau of Customs and Border Protection of the 
Department of Homeland Security to afford non-discriminatory 
access to U.S. customs procedures for both the Postal Service's 
Competitive products and similar products of U.S.-owned private 
carriers. Since some foreign governments currently limit access 
to simplified customs procedures to government post offices--
thus discriminating between the Postal Service and U.S. private 
carriers--the subsection requires the Secretary of State ``to 
the maximum extent practicable'' to negotiate withother 
countries to make available customs procedures that do not discriminate 
between the Postal Service and U.S. private carriers while fully 
meeting the needs of all types of American shippers.

Sec. 306 Redesignation

    Section 306 redesignates a subchapter heading in chapter 36 
of title 39 to reflect various amendments in the bill.

Sec. 307 Clarification

    Section 306 of the bill amends section 403(c), title 39, to 
clarify that the subsection shall not be construed to prevent 
the establishment of rates that vary with volume if such rates 
will be made available to similarly situated persons and will 
increase the aggregate contribution to the institutional costs 
of the Postal Service. This provision is not intended to 
require the Postal Regulatory Commission to allow establishment 
of such volume-variable rates, but simply to clarify that the 
first sentence of section 403(c) does not prohibit such rates. 
The Commission must still determine whether establishment of 
such rates would satisfy other applicable criteria and 
policies. In determining what constitutes unjust or 
unreasonable discrimination, the committee expects that the 
Commission, like the courts, will take into account the 
inherent differences between market dominant and competitive 
markets. The committee does not intend this provision to 
restrain the ability of the Postal Service to compete fully and 
fairly against private sector competitors in competitive 
markets.

                      TITLE IV--GENERAL PROVISIONS

Sec. 401 Qualification requirements for Governors

    Section 401 of the bill amends section 202 of title 39. 
Section 202 establishes the Board of Governors and provides 
that the nine Governors shall represent the public interest 
generally. The amendment adds a requirement that the President 
shall select at least four Governors based solely on their 
demonstrated ability in managing organizations or corporations, 
in either the public or the private sector, of substantial size 
(employing at least 50,000 employees). The amendment requires 
the President to consult with the Speaker and minority leader 
of the House and the majority and minority leaders of the 
Senate in selecting individuals to nominate to the Board.
    The amendment also has a provision that one of the nine 
Governors must be chosen from among persons unanimously 
nominated by all labor unions recognized by law as collective-
bargaining representatives for employees of the Postal Service 
in one or more bargaining units. The term of office for this 
Governor is three years (instead of nine).
    Section 401 recognizes the bill vests enhanced powers and 
responsibilities in the Governors. A majority of current and 
former Board members have indicated support for well-defined 
qualification requirements for Board appointments. The 
qualification provisions in the bill are modeled on the 
appointment criteria for the Amtrak Board of Directors. Those 
Governors currently serving or nominated before enactment are 
not affected by this change.

Sec. 402 Obligations

    Current law imposes a $2 billion annual cap on borrowing 
for capital investments and a $1 billion annual cap on 
borrowing for operating expenses. As recommended by the 
President's Commission on the U.S. Postal Service, section 402 
of the bill amends section 2005 of title 39 to eliminate these 
annual sub-limits, but still maintains the overall annual 
borrowing cap of $3 billion. Current law also remains unchanged 
regarding the aggregate $15 billion limit of obligations 
outstanding at any one time, and this cap would apply in the 
aggregate to the Postal Service Fund and the Competitive 
Products Fund.

Sec. 403 Private carriage of letters

    Section 405 of the bill amends section 601 of title 39 to 
provide limited additional statutory exemptions to the postal 
monopoly. In summary, this section provides that a letter may 
be carried outside the mail under three new circumstances: (1) 
when the amount paid to a private carrier is at least 6 times 
the rate then currently charged for the first ounce of a 
single-piece first-class letter, (2) when the letter weighs at 
least 12 and a half ounces, and (3) when private carriage is 
within the scope of current Postal Service regulations that 
purport to suspend the operation of current law.
    The proposed price and weight limits for the postal 
monopoly, 6 times the first-class stamp price and 12 and a half 
ounces, remain significantly more protective of the Postal 
Service than postal monopoly limits enacted in other 
industrialized nations that have concluded smaller monopolies 
will promote greater efficiency without jeopardizing universal 
service. For example, in 1997, the European Union limited 
European postal monopolies to 5 times the stamp price or 12 and 
a half ounces. In 2002, the European Union adopted a second 
postal directive that reduced last year the limits on postal 
monopoly laws to 3 times the stamp price or 3 and a half 
ounces. Canada's postal monopoly has been limited to 3 times 
the stamp price since 1981; Australia's monopoly is limited to 
4 times the stamp price or 8 ounces. Indeed, several countries 
have abolished their postal monopolies or are in the process of 
doing so, including Germany, Sweden, New Zealand, and the 
United Kingdom. In comments submitted to the Committee in 
August 1998, the Department of Justice stated its support for 
limiting the scope of the statutory monopoly with a bright-line 
test for identifying products falling within it. In that August 
1998 correspondence, the Department also noted that the Postal 
Service's entry into competitive markets suggested that 
economic theory did not justify the postal monopoly as it 
existed under current law. In April 1997, the General 
Accounting Office testified that the ``impact of reducing the 
scope of the letter mail monopoly to $2 would not significantly 
affect the Postal Service's ability to provide affordable 
universal service because little of the first-class mail 
volumes that are currently protected by the postal monopoly 
would become subject to competition. * * * Available data 
indicate that less than 3 percent of the first-class mail 
revenues are currently derived from first-class mail that falls 
outside the proposed reduced limit of $2.'' By setting the 
limit at 6 times the first-class stamp price, the amended 
section 601 provides that the price limit on the postal 
monopoly will rise as that the stamp price increases.
    As predicted by the Postal Rate Commission Chairman's 
testimony in 1996, the Postal Service subsequently testified 
that year that it would interpret current Section 601(b) 
ofTitle 39 to allow it to repeal the changes proposed by the bill. 
Subsection (b) is derived from section 7 of an 1864 postal act, and the 
revision repeals it as obsolete--this suspension power has never been 
used as provided; in fact, no occasion is known of the Post Office or 
the Postal Service suspending the exception for postage paid mail. 
Current subsection (b) of 601 simply authorizes the Postal Service to 
suspend the exception of paragraph (a) and thereby forbid the private 
carriage of letters even if postage is paid. The Postal Service's 
authority to reapply the postal monopoly to stamped letters is 
unnecessary and antiquated; it is repealed by the bill. Some entities 
in both the government and the private sector have testified that since 
1974, the Postal Service has often misused the suspension power of 
601(b). Since 1974, the Postal Service has, under color of subsection 
(b), issued regulations that rather than suspend the exception to the 
monopoly for stamped letters set out in subsection (a), instead suspend 
the postal monopoly itself (i.e., the criminal prohibitions set out in 
chapter 83 of title 18, U.S. Code). Indeed, when the Postal Service 
first proposed these regulations in 1973 that purported to derive a 
suspension power for the private express statutes contained in Title 18 
of the U.S. Code, the Postal Rate Commission's General Counsel 
concluded that use of the suspension authority in this way violated the 
legislative language and intent. The ``grandfather clause'' provided in 
the bill will authorize the continuation of private activities that the 
Postal Service has permitted under color of this section. In this way, 
the bill protects mailers and private carriers who have relied upon 
regulations that the Postal Service has adopted to date in apparent 
misinterpretation of the current subsection (b).
    By establishing boundaries for the postal monopoly while 
providing the Postal Service more commercial freedom, the bill 
clarifies the scope of the statutory monopoly that historically 
has been defined solely by the Service.
    The suspension for outgoing international mail would be 
continued, to the extent that it involves the uninterrupted 
carriage of letters from a point within the United States to a 
foreign country for delivery to an ultimate destination outside 
the United States. However, the requirement that a shipper or 
carrier submit to an inspection or audit or face a presumption 
of violation would not be continued. At the time this 
regulation (section 320.8 of title 39 of the Code of Federal 
Regulations) was promulgated, the carriage and delivery of mail 
was generally the preserve of government-owned or sponsored 
postal administrations in foreign countries. The Committee 
intends the suspension to incorporate more recent changes in 
the laws of destinating countries, so that it would not 
prohibit delivery outside a foreign government-owned or 
sponsored post if such delivery is permitted by the laws of the 
foreign country.
    The Postal Regulatory Commission is authorized to adopt 
regulations necessary to carry out the exceptions to the postal 
monopoly set out in section 601 as amended. This amendment does 
not take effect until the Postal Regulatory Commission 
promulgates regulations for the competitive pricing system 
under section 3633.

Sec. 404 Rulemaking authority

    Section 404 of the bill amends section 401(2) of title 39 
to clarify the rulemaking function of the Postal Service. As 
amended, section 401(2) authorizes the Postal Service ``to 
adopt, amend, and repeal such rules and regulations, not 
inconsistent with this title, as may be necessary in the 
execution of its functions under this title and such other 
functions as may be assigned to the Postal Service under any 
provisions of law outside of this title.'' This amendment is 
intended to make clear that the Postal Service is not, unless 
explicitly authorized by Congress, empowered to adopt 
regulations implementing other parts of the U.S. code, e.g., 
the criminal laws. This amendment is fully consistent with the 
legislative history of this provision (which originated in the 
1960 codification) and is modeled on the Federal Communications 
Commission's rulemaking authority, 47 USC 154(i). The amendment 
recognizes that the rulemaking authority of the Postal Service 
is affected by its obligations under title 5 and certain other 
limited provisions of law outside title 39.

Sec. 405 Noninterference with collective bargaining agreements, etc.

    Section 405 of the bill addresses two specific issues. 
First, subsection (a) mandates that, except for section 407, 
nothing in the bill, or amendments made by the bill to current 
law, can affect any of the rights, privileges, or benefits of 
postal employees or the labor organizations representing them. 
Second, subsection (b) clarifies that nothing in the bill will 
affect free mail as currently provided by law for (1) 
correspondence of members of the diplomatic corps and consuls 
of the countries of the Postal Union of Americas and Spain; (2) 
people who are blind and other people with a physical 
impairment preventing them from using or reading conventionally 
printed material; and (3) mailing of balloting materials under 
the Uniformed and Overseas Citizens Absentee Voting Act.

Sec. 406 Bonus authority

    Section 406 of the bill adds a new section 3686 to title 
39. Section 3686 authorizes the Postal Service to establish one 
or more bonus or reward programs in furtherance of the 
objectives of chapter 36. The Postal Regulatory Commission must 
review any such program prior to implementation and approve any 
program that it finds ``likely to achieve the objectives of 
this chapter.'' The section states that bonus payments may 
exceed the salary cap for postal employees established in 
section 1003(a) of title 39 if the relevant program has been 
approved by the Commission. For each employee whose 
compensation exceeds the salary cap by virtue of a bonus 
awarded under this section, the Postal Service is required to 
list in its annual comprehensive statement the name of the 
employee, the amount of the bonus, the limitation of the salary 
cap, and amount by which the cap was exceeded. Nothing in this 
new section is intended to modify existing statutory authority 
for employment in the Postal Service under chapter 10 of title 
39, particularly in regard to section 1001(c) (i.e., authority 
for the Postal Service to hire individuals as executives under 
employment contracts).

Sec. 407 Mediation in collective bargaining disputes

    Section 407 is intended to expedite the resolution of 
collective bargaining disputes. It would replace the fact-
finding panel that currently conducts the first step in the 
dispute resolution process with a mediator appointed by the 
Director of the Federal Mediation and Conciliation Service. If 
the parties are unable to agree and determine to submit the 
dispute to arbitration, the existing process of an arbitration 
board remains in place. This new step in the current bargaining 
process reflects a joint suggestion by the Postal Service and 
its four postal unions, and is based upon a recommendation by 
the President's Commission on the U.S. Postal Service. It 
should assist disagreeing parties inforging a final agreement, 
or limiting the issues that must be addressed if interest arbitration 
becomes necessary.

                TITLE V--ENHANCED REGULATORY COMMISSION

Sec. 501 Reorganization and modification of certain provisions relating 
        to the Postal Regulatory Commission

    Section 501 of the bill creates a new chapter 5 in title 39 
to establish the Postal Regulatory Commission. Chapter 5 
consists of four sections as follows.
    Section 501 of title 39 establishes the Postal Regulatory 
Commission. Section 3601 of current law, establishing the 
Postal Rate Commission, is repealed.
    Section 502 of title 39 sets out the qualifications and 
terms of office for the five Commissioners. This section 
provides that ``Commissioners shall be chosen solely on the 
basis of their technical qualifications, professional standing, 
and demonstrated expertise in economics, accounting, law, or 
public administration.'' Section 3602, establishing terms of 
office for Commissioners of the Postal Rate Commission, is 
repealed. Commissioners currently serving or nominated before 
enactment are not affected by this change.
    Section 503 of title 39 authorizes and directs the 
Commission to issue rules and regulations. Section 503 is a 
redesignation of current section 3603.
    Section 504 of title 39 sets out rules governing the 
administration of the Commission. Section 504 is a 
redesignation of current section 3604.
    In sum, section 501 of the bill recognizes the Commission's 
enhanced responsibilities by establishing the Commission in 
provisions set out in a chapter located in part I of title 39, 
dealing with general matters, rather than, as in current law, 
provisions set out in a subchapter of chapter 36, and dealing 
with rate regulation.

Sec. 502 Authority for Postal Regulatory Commission to issue subpoenas

    Section 502 of the bill amends section 504 of title 39 
(i.e., section 3604 of current law as redesignated by section 
501 of the bill). As amended, section 504 provides that 
Commissioners, any administrative law judge appointed by the 
Commission, and any designated employee of the Commission may 
administer oaths, examine witnesses, take depositions, and 
receive evidence. In addition, the Chairman of the Commission, 
any Commissioner designated by the Chairman, and any 
administrative law judge appointed by the Commission may issue 
subpoenas requiring the attendance and presentation of 
testimony by, or production of documentary or other evidence in 
the possession of, officers, employees, agents, or contractors 
of the Postal Service and to order the taking of depositions of 
and responses to written interrogatories by such persons. Such 
subpoena or order is allowed with respect to any proceeding 
conducted by the Commission under this title. Any subpoena 
requires the written concurrence of a majority of Commissioners 
then holding office in advance of its issuance. Failure to obey 
a subpoena may be referred to the appropriate United States 
district court and failure to obey a court order is punishable 
as a contempt of court.
    The amendment also provides for the handling of information 
the Postal Service views as proprietary that is requested from 
the Postal Service by the Commission. As amended, section 504 
provides that, if the Postal Service determines requested 
information is proprietary and so notifies the Commission in 
writing, the Commission may use the information only for the 
purpose supplied and must restrict access to the information to 
Commission officers and employees. The amendment further 
provides for the possibility of discovery of such information 
by interested parties and requires the Commission to adopt 
rules to protect the confidentiality of such information 
similar to the rules that govern protective orders issued by 
the federal courts under the Federal Rules of Civil Procedure.
    The Committee recognizes that, in the past, specifically 
identified commercially sensitive information has been made 
available to parties--including the Postal Service's 
competitors--during litigation by using protective conditions. 
Such conditions would protect the sensitive commercial nature 
of the information while allowing the competitors' agents full 
access to the information to make their case. The new 
subsection 504(g) of title 39 will allow the Postal Service to 
protect information recognized in past proceedings as 
sensitive. At the same time, it is the Committee's expectation 
that this subsection will not be used to withhold information 
currently available to the public.

Sec. 503 Appropriations for the Postal Regulatory Commission

    Section 503 of the bill further amends section 504 of title 
39 to ensure the financial independence of the Postal 
Regulatory Commission. Under the amendment, funding for the 
Commission will be paid out of the Postal Service Fund, as 
under current law, but the budget of the Commission will no 
longer be subject to disapproval by the Governors.

Sec. 504 Redesignation of the Postal Rate Commission

    Section 504 of the bill changes ``Postal Rate Commission'' 
to the ``Postal Regulatory Commission'' in various statutes.

Sec. 505 Officer of the Postal Regulatory Commission representing the 
        general public

    Section 505 ensures that the existing role of a Consumer 
Advocate is maintained in all proceedings of the new Postal 
Regulatory Commission, to ensure that the interests of the 
general public are represented.

                      TITLE VI--INSPECTORS GENERAL

Sec. 601 Inspector General of the Postal Regulatory Commission

    Section 601 of the bill amends the Inspector General Act of 
1978 to provide for an Inspector General for the Postal 
Regulatory Commission.

Sec. 602 Inspector General of the United States Postal Service to be 
        appointed by the President

    Section 602 of the bill amends the Inspector General Act of 
1978 to require appointment of the Postal Service's Inspector 
General by the President with Senate confirmation, in the same 
manner as the other presidentially appointed Inspectors General 
at major federal departments and agencies.
    The bill also subjects the Postal Service, for the first 
time, to provisions of the Anti-Kickback Act, gives Postal 
Service contractor employees whistleblower protection, and 
requires the Postal Service to develop and issue purchasing 
regulations prohibiting the reimbursement of certain contractor 
costs.
    Under the Anti-Kickback Act, major postal contractors would 
have to maintain compliance systems that would detect and 
prevent kickbacks. In addition, whistleblower protection would 
apply to postal contractors' employees. Finally, the Postal 
Service would be required to develop and issue purchasing 
regulations that prohibit the reimbursement of contract costs 
not allowable under the Postal Service Procurement Manual.
    In addition, this amendment authorizes the Inspector 
General of the Postal Service to audit or oversee the audit of 
the Postal Service's financial statements in order to bring the 
Postal Service in line with the Inspector General Act and meet 
accountability standards required of other federal agencies, as 
well as to implement the annual audit reports required under 
chapter 36 as amended. The independence and objectivity of the 
Inspector General will reinforce the independence of the Postal 
Service's outside accountants.

              TITLE VII--NATIONAL COMMISSION; EVALUATIONS

Sec. 701 Universal Postal Service Study

    Recognizing that the concept of universal postal service 
has never been defined in the United States, and yet is a 
critical component of assessing the future role of a national 
post office, section 701 directs the Postal Service to submit a 
report on universal postal service in the United States to the 
President, Congress, and the Postal Regulatory Commission. The 
report must include a review of the history and development of 
universal service, an explanation of the current scope and 
standards of universal service and what will likely be required 
in the future, a description of groups not currently covered by 
universal service or receiving deficient service or quality, 
and such recommendations as the Postal Service deems 
appropriate. The Postal Regulatory Commission must then 
evaluate the Postal Service's study and issue its own report to 
the President and the Congress. That report must include, 
according to paragraph (b): (1) comments and observations on 
the matters raised in the Postal Service's report as the 
Commission considers appropriate; (2) an estimate of the cost 
attributable to the obligation to provide universal service 
under prior and current law; (3) an estimate of the likely cost 
of fulfilling the obligation to provide universal service; and 
(4) additional topics and recommendations as the Commission 
considers appropriate. According to paragraph (c), in preparing 
the reports required by section 701 the Postal Service and the 
Postal Regulatory Commission (1) shall consult with each other, 
other Federal agencies, users of the mails, enterprises in the 
private sector engaged in the delivery of mail, and the general 
public; and (2) shall address in their respective reports any 
written comments received under this section.

Sec. 702 Assessments of ratemaking, classification and other provisions

    Section 702 of the bill requires the Postal Regulatory 
Commission to report, in conjunction with the views of the 
Postal Service, to the President and the Congress, at least 
every 5 years, on the operation of the amendments made by this 
bill, with recommendations for any legislative or other 
measures necessary to improve the effectiveness or efficiency 
of the nation's postal laws. Specifically, at least the first 
report must include, under paragraph (c), information on (1) 
the operation of the Commission regulations applicable to rates 
for competitive products and relevant recommendations; (2) the 
competitive products fund; and (3) the assumed federal income 
tax on the competitive products fund.

Sec. 703 Study on equal application of laws to competitive products

    Section 703 of the bill requires the Federal Trade 
Commission to prepare a report detailing how federal and state 
laws apply differently to the Postal Service with respect to 
competitive products and private companies providing similar 
products. The Commission is directed to report within one year 
after enactment and to include recommendations for resolving 
any identified disparities in legal treatment. The Federal 
Trade Commission is to consult in preparing its report with the 
Postal Service, the Postal Regulatory Commission, other Federal 
agencies, mailers, private companies that provide delivery 
services, and the general public, and shall append to such 
report any written comments received.

Sec. 704 Greater diversity in Postal Service executive and 
        administrative schedule management positions

    Section 704 of the bill directs the Board of Governors to 
study and report to the President and Congress on the extent of 
representation by women and minorities in supervisory and 
management positions within the Postal Service. In addition, 
the Postal Service is required, as part of its performance 
evaluations of supervisory and management employees, to give 
appropriate consideration to meeting affirmative action goals, 
achieving equal employment opportunity requirements, and 
implementation of plans to achieve greater workforce diversity.

Sec. 705 Plan for assisting displaced workers

    Section 705 of the bill requires the Postal Service to 
develop and be prepared to implement a plan for affording 
reemployment assistance to employees displaced by automation or 
privatization. The plan is to be provided to the Board of 
Governors and Congress within one year of enactment.

Sec. 706 Contracts with women, minorities and small businesses

    Section 706 of the bill requires the Board of Governors, 
within one year, to study and report to the President and 
Congress on the number and value of contracts and subcontracts 
entered into with women, minorities, and small businesses.

Sec. 707 Rates for periodicals

    Section 707 of the bill requires the Postal Service, acting 
jointly with the Postal Regulatory Commission and the General 
Accounting Office, to study and submit to the President and 
Congress a report concerning (1) the quality, accuracy, and 
completeness of the information used by the Postal Service in 
determining the direct and indirect postal costs attributable 
to periodicals; and (2) any opportunities that might exist for 
improving efficiencies in the collection, handling, 
transportation, or delivery of periodicals by thePostal 
Service, including any pricing incentives for mailers that might be 
appropriate. The report shall include recommendations for any 
administrative action or legislation that might be appropriate.

Sec. 708 Assessment of certain rate deficiencies

    Section 708 of the bill requires the Office of Inspector 
General of the Postal Service to study and submit to the 
President, the Congress, and the Postal Service a report 
concerning the Postal Service's administration of the reduced 
rate provisions of section 3626(k) of title 39. The study must 
specifically address the adequacy and fairness of the process 
by which assessments are determined and appealable, including 
whether the Postal Regulatory Commission or any other body 
outside the Postal Service should be assigned a role, and 
whether a statute of limitations should be established for the 
commencement of proceedings by the Postal Service.

Sec. 709 Postal processing and distribution network study

    Section 709 requires the Postal Service to provide a report 
to the President, the Congress, and the Board of Governors on 
the processing and distribution network of the Service, with an 
eye toward recommendations on improving the system's efficiency 
and effectiveness.

Sec. 710 Definition

    Section 710 of the bill declares that the term ``Board of 
Governors'' as used in this title shall have the same meaning 
as given in section 102 of title 39.

     TITLE VIII--MISCELLANEOUS; TECHNICAL AND CONFORMING AMENDMENTS

Sec. 801 Employment of Postal Police Officers

    Section 801 of the bill further amends section 404 and 
makes permanent the authority for the Postal Service to employ 
postal police officers to protect property owned or occupied by 
the Postal Service or under the charge and control of the 
Postal Service and to protect persons on the property. The 
Postal Service currently employs more than one thousand 
uniformed Postal Police Officers who are assigned to critical 
postal facilities throughout the country. The officers provide 
perimeter security, escort high-value mail shipments, and 
perform other essential protective functions. To date, Congress 
has provided temporary authority for such officers each year in 
appropriations bills. The bill language is modeled after the 
appropriations bills, with updates to terminology and statutory 
references.
    One aspect of the appropriations language that has been 
updated is the cross-reference to the Act of June 1, 1949, as 
amended (62 Stat. 281, 40 U.S.C. 318-318d). That Act was 
replaced by 40 U.S.C. 1315. As a result of differences between 
40 U.S.C. 1315 and the older statutory provision, a manager's 
amendment is anticipated to clarify the powers available to the 
officers. The anticipated amendment would replace the last 
sentence of the new section 404(f) created by section 801 of 
the bill with the following: ``With respect to such property, 
such officers shall have the powers available under section 
1315(b)(2)(A)-(C) of title 40 and may have, to such extent as 
the Postal Service may by regulation prescribe, the powers 
available under section 1315(b)(2)(D)-(F) of such title. As to 
such property, the Postal Service may take any action that the 
Secretary of Homeland Security may take under section 1315 of 
title 40, attaching thereto penalties under the authority and 
within the limits provided in subsection (c)(2) of such 
section.''

Sec. 802 Date of postmark to be treated as date of appeal in connection 
        with the closing or consolidation of post offices

    Section 802 of the bill further amends section 404 of title 
39 to provide that the appeal to the Postal Regulatory 
Commission of a post office closing by any person shall be 
considered timely if it is postmarked within 30 days of 
notification of the closure to the appellant. The Commission 
testified that current law, which requires the appeal to be 
received by the Commission within 30 days, precludes adequate 
consideration of certain post office closings.

Sec. 803 Provisions relating to benefits under chapter 81 of title 5, 
        United States Code, for officers and employees of the former 
        Post Office Department

    Section 803 of the bill amends section 8 of the Postal 
Reorganization Act of 1970 (39 U.S.C. 1001 note) and addresses 
the administrative status of employees affected by change made 
by Public Law 105-33 (repealing the authority for transitional 
appropriations) by clarifying their status as officers and 
employees of the U.S. Postal Service with respect to 
compensation for work injuries.

Sec. 804 Obsolete provisions

    Subsection 804(a) of the bill repeals chapter 52 of title 
39, relating to contracts for the surface transportation of 
mail. Such contracts are now let under section 5005 of title 
39.
    Subsection 804(b) authorizes the Postal Service to lengthen 
the statutory four-year limitation on postal transportation 
contracts as it deems appropriate or advisable. The four-year 
limitations in current postal law date from President Grant's 
Administration and reflect the spoils system of that era by 
allowing a new President to assume control of the Post Office 
Department and its accompanying patronage.
    The Committee has spent the last 10 years examining all 
aspects of the Postal Service with the thought of giving it the 
flexibility and the authority it needs to survive as a viable 
public institution well into the future. During our extensive 
review we have discovered some sound policies and programs of 
the Postal Service that have been quite successful and the 
Committee recommends the Postal Service continue that which 
works for it. One such sound policy is the Postal Service 
relationship with its Highway Contractors (Star Routes). For 
the last 56 years, the Postal Service has contracted with 
Highway Contractors for periods up to four years. Such 
contracts may be renewed for successive contract terms and may 
be adjusted, with the consent of the Contractor, for increased 
or decreased costs resulting from changed conditions occurring 
during the contract term. The Postal Service has also provided 
indemnity payments for contracts canceled for reasons other 
than default. This program has returned corresponding benefits 
to both the Postal Service and its Highway Contractors. The 
Postal Service has had the benefit of continuity of service 
from a dedicated group of highway transportation suppliers, and 
the contractors have been able to amortize their costs over a 
longer period of time thus keeping their rates economic and 
efficient. These Highway Contractors have alsoprovided 
efficient and reliable service in times of unanticipated increases in 
Postal mail volume. As a result of this program's highly successful 
history, the Committee recommends that the Postal Service maintain its 
56 year old policy of renewing and adjusting Highway Contractors with 
indemnity provisions or liquidated damages. As noted, the Committee has 
included in this bill a provision that permits the Postal Service to 
contract for longer terms than 4 years.
    The Postal Service is in the midst of a major 
transformation to improve and modernize its operations. The 
Postal Service has identified the procurement area, 
particularly improvements in its supply chain management, as an 
area in need of change and improvement.
    The Committee requested that the Government Accountability 
Office (GAO) determine the Postal Service's progress in 
implementing supply chain management initiatives and whether 
these initiatives have had an effect on small businesses. 
Supply chain management is a process that has helped successful 
private-sector companies leverage their buying power and 
identify more efficient ways to procure goods and services.
    In its report entitled ``Progress in Implementing Supply 
Chain Management Initiatives,'' GAO-04-540, the GAO recommended 
that the Postal Service improve implementation of its bulk fuel 
program, consider adjustments to reverse auction procedures, 
and focus more attention on small, minority-owned, and woman-
owned businesses in carrying out supply chain management 
initiatives. GAO also believes that the Postal Service should 
have a mechanism in place to ensure accountability and 
transparency in its small business contracting.
    The Committee will continue its oversight of these programs 
and urges the Postal Service to move quickly to address issues 
identified by GAO in its report.

Sec. 805 Expanded contracting authority

    Section 805 of the bill amends section 5402 of title 39 and 
corresponding provisions in title 49, relating to air 
transportation. In substance, section 805 permits the Postal 
Service to contract for international air transportation of 
mail at competitive market rates. Under current law the Postal 
Service may contract freely for interstate air transportation 
of mail (outside of Alaska), but international air 
transportation of mail is regulated by the Department of 
Transportation, and U.S. carriers are generally entitled to 
preference in the carriage of U.S. mail. The Postal Service's 
inability to contract freely with U.S. and foreign air carriers 
for international transportation of mail diminishes its 
competitiveness in international markets and costs the Postal 
Service an estimated $40 million to $50 million annually. The 
amendment further provides for (1) repeal of duty-to-carry 
requirements imposed on U.S. air carriers (as inconsistent with 
Postal Service authority to negotiate); (2) exclusion of 
foreign carriers whose governments bar U.S. carriers from 
carrying their international mail; and (3) consultation between 
the Postmaster General and the Secretary of Defense in respect 
to the carriage of international military mail. This has been a 
long standing provision in postal reform bills dating back to 
the 104th Congress. In 1999, the Department of Transportation 
testified in support of this approach.

Sec. 806 Investments

    Section 806 of the bill amends section 2003 of title 39 to 
prohibit the Postal Service from using funds from the Postal 
Service Fund to invest in ``obligations or securities of a 
commercial entity.'' Under the bill, such investments are 
permitted using funds from the Competitive Products Fund.

Sec. 807 Repeal of section 5403

    Section 807 of the bill repeals section 5403 of title 39. 
Section 5403 authorizes the Postal Service unilaterally to 
impose fines on carriers of international mail for delay of the 
mail or ``other delinquencies.'' Since the bill authorizes the 
Postal Service to contract for international mail 
transportation, the authority to levy such fines is no longer 
appropriate.

Sec. 808 Reduced rates

    Section 808 makes changes related to the rates provided for 
``within county publications''--publications within the county 
in which they are published. These types of publications are 
predominantly small-circulation, local newspapers--family-owned 
or small group weeklies targeted toward the news and 
advertising needs of small communities or counties. Before the 
Postal Reorganization Act, within county publications, along 
with other classes of mail and types of mailers such as 
nonprofit periodicals and library matter, were allowed to mail 
at reduced rates of postage. In 1970, the Postal Reorganization 
Act required that the products cover their attributable costs, 
but their institutional costs were paid for by annual 
appropriation. In 1993, Congress phased in rate increases so 
that after five years the reduced rate mailers would eventually 
pay half the institutional costs that comparable commercial 
mailers paid. Following the realization of some practical 
difficulties related to this ``fifty percent markup rule,'' the 
law was changed in 2000 with respect to certain publications. 
Within county publications, however, remained subject to the 
fifty percent markup rule.
    This bill correctly discontinues the fifty percent markup 
rule for within county publications. Continuing such a rule 
could unduly limit the flexibility available to the Postal 
Regulatory Commission in creating a new rate-setting approach. 
In the course of deleting the fifty percent markup rule, 
however, this bill inadvertently deleted the primary statutory 
authority for preferred treatment of within county publications 
in terms of rates.
    Therefore, a manager's amendment is anticipated that will 
preserve the preferred status of within county publication 
rates. The language in the amendment would replace paragraph 
(a)(3) of section 3626 to read: ``Rates of postage for a class 
of mail or kind of mailer under former section 4358 (a)-(c) 
shall be established so that postage on each mailing of such 
mail reflects its preferred status as compared to the postage 
for the most closely corresponding regular-rate category 
mailing.'' This language tracks the phrasing in the current 
statute. The intent of the change is to maintain the special 
status of within county publications while replacing the fifty 
percent markup rule with a more general statement that within 
county rates should reflect the mail's ``preferred status.''
    Because of the local nature of within county publications, 
they have low costs compared to many national publications. As 
a result, the current approach toward within county 
publications is for them to have their own subclass status, 
which keeps them from havingtheir costs averaged together with 
more costly national mail. The manager's amendment is not intended to 
require the Commission or Postal Service to delete the within county 
subclass.

Sec. 809 Hazardous matter

    Section 809 provides for penalties regarding illegal use of 
the mails to transport hazardous matter. It adds a new section 
3018 to title 39 that prohibits the mailing of hazardous 
material, the causing of hazardous material to be mailed, and 
the manufacture, distribution, or sale of containers, packaging 
kits or other devices (for use in mailing hazardous materials) 
that fail to conform with relevant standards. Subsection (c) 
states that persons violating hazardous material mailing 
provisions shall be liable for civil penalties, clean up 
charges, and damages. Subsection (d) states that there must be 
notice and an opportunity for hearing before the Postal Service 
can determine a violation to the hazardous material provisions 
has occurred. Subsection (e) states what matters the Postal 
Service shall consider before determining the amount of civil 
penalties to violators of the hazardous material provisions.

Sec. 810 Provisions relating to cooperative mailings

    Section 810 directs the Postal Regulatory Commission to 
study the Postal Service's Cooperative Mail Rule to determine 
whether it contains adequate safeguards to protect against 
abuses of rates for nonprofit mail and deception of consumers. 
The Cooperative Mail Rule is a long-standing postal regulation 
designed to prevent the commercial exploitation of the 
nonprofit rate by prohibiting for-profit mail matter such as 
advertisements for products and services from being sent at the 
nonprofit rate. It has also been applied to prevent abusive 
relationships between commercial fundraisers and nonprofits, 
and to otherwise regulate those relationships. If the Postal 
Regulatory Commission determines that the Cooperative Mail Rule 
does not adequately safeguard against abuse of the nonprofit 
rate, section 810 authorizes the Commission to promulgate such 
regulations as it deems necessary.

Sec. 811 Technical and conforming amendments

    Miscellaneous technical and conforming amendments required 
by the bill's changes to Title 39.

           TITLE IX--POSTAL PENSION FUNDING REFORM AMENDMENTS

    In 2003, the Postal Civil Service Retirement System Funding 
Reform Act of 2003 (P.L. 108-18 or the Act) was enacted to 
change the calculation of Postal Service contributions to the 
Civil Service Retirement System (CSRS). The Act credited the 
Postal Service for the real value of contributions it had made 
in the past and changed how contributions would be computed in 
the future. The Act provided immediate financial relief to the 
Postal Service, allowing the Postal Service to use the savings 
resulting from the change in FY 2003-2005 to reduce its debt 
and hold postage rates steady. After FY 2005, the Act required 
that the savings go into an escrow account, absent any 
additional congressional action.
    P.L. 108-18 was enacted quickly to avert a financial crisis 
at the Postal Service, which had indicated that, absent a 
change, a rate increase would have been necessary within a 
year. However, the Act left two issues unresolved. First, the 
Act did not address whether the escrow account would be used to 
pay down debt, prefund retiree health benefits, or for some 
other purpose. Second, there was disagreement about what entity 
should be responsible for paying the costs of retirement 
benefits related to military service. Under previous law, the 
Treasury Department had paid those benefits for CSRS retirees. 
P.L. 108-18 shifted the responsibility for military costs to 
the Postal Service, both prospectively and retrospectively.
    This bill addresses both of these issues. The bill removes 
the requirement in P.L. 108-18 that funds be collected and 
placed in an escrow account, and requires the Treasury 
Department to pay the costs of retirement benefits related to 
military service. Returning the responsibility for military 
costs to Treasury will result in an immediate overfunding of 
the CSRS fund. The bill directs the Postal Service to use that 
overfunding and other savings to address both its short- and 
long-term financial needs and ensures that the Postal Service 
reduces its growing unfunded liability for retiree health 
benefits. In its 2003 annual report, the Postal Service 
estimated that liability as being between $47 and $57 billion.

Sec. 901 Civil Service Retirement System

    Section 901 restores the responsibility to the Treasury 
Department for paying retirement costs related to military 
service. Because such a change will result in an immediate 
overfunding of the Postal Service's portion of the CSRS Fund, 
the section terminates the Postal Service's obligation to make 
CSRS contributions. The Office of Personnel Management is 
required to determine whether there is a postal surplus or a 
supplemental liability by June 15, 2006. If there is a surplus, 
as anticipated, the Office must transfer that amount to the 
Postal Service Retiree Health Benefits Fund. If there is a 
supplemental liability, the Office must establish an 
amortization schedule to liquidate the liability by the end of 
FY 2043. All determinations and redeterminations made by the 
Office are subject to review by the Postal Regulatory 
Commission at the Postal Service's request. The Commission must 
submit the results of its review to the Office, the Postal 
Service, and Congress. The Office must reconsider its decision 
in light of the Commission's review and make appropriate 
adjustments.
    Subsection (c) ensures that the monetary impact of 
restoring to Treasury the responsibility for military costs is 
retroactive, as if the relevant provision of P.L. 108-18 had 
not been enacted. It directs the Office to transfer to the CSRS 
Fund amounts that it would otherwise have paid for FY 2003-2005 
and earnings on those amounts.

Sec. 902 Health insurance

    Section 902 would change the way the Postal Service 
finances its share of the cost of providing health care to 
retirees. The Postal Service must pay a portion of health care 
premiums for currently retired employees eligible to 
participate in the Federal Employees Health Benefits (FEHB) 
program. Currently, the Postal Service pays only its portion of 
the health premiums incurred by current retirees each year. 
Under section 902, the Postal Service would begin paying for 
estimated costs of retiree health care as such costs are 
accrued by current workers.
    The bill creates a new on-budget account, the Postal 
Service Retiree Health Benefits Fund (PSRHBF), which would earn 
interest at the same rate as the CSRS Fund. The bill also 
requires calculation of the unfunded liability for health care 
costs of current and future retirees, which would be the 
difference between the assets held in the PSRHBF and the net 
present value of accrued liabilities projected for retiree 
health care.
    Starting in 2006, the bill requires the Postal Service to 
make payments equal to the annual increase in the unfunded 
liability attributable to current employees. The Postal Service 
also would pay annual interest costs on the unfunded liability 
(attributable to current and future retirees). These payments, 
made at the end of each fiscal year, would be deposited into 
the PSRHBF. The Postal Service's share of health care premiums 
for current retirees would be paid out of the PSRHBF as soon as 
adequate funds are available in the account to do so.
    The bill directs the Office of Personnel Management to 
compute the required prefunding and interest payments after 
consultation with the Postal Service. All computations or other 
determinations made by the Office, along with any relevant 
regulations established by the office, are subject to review by 
the Postal Regulatory Commission at the Postal Service's 
request. The Commission must submit the results of its review 
to the Office, the Postal Service, and Congress. The Office 
must reconsider its decision in light of the Commission's 
review and make appropriate adjustments.

Sec. 903 Repealer

    Section 903 repeals section 3 of the Postal Civil Service 
Retirement System Funding Reform Act, related to the 
disposition of savings accruing to the Postal Service. This 
change removes the requirement that savings be placed in an 
escrow account.

Sec. 904 Ensuring appropriate use of escrow and military savings

    Section 904 requires that for the ten years beginning in FY 
2006, two-thirds of the ``total savings''--the amount of money 
the Postal Service would have had to pay to the CSRS Fund if 
P.L. 108-18 and this bill had not been enacted, less any 
amortization payments required to the CSRS Fund for any 
supplemental liability as described above--be used to address 
the Postal Service's long-term needs of prefunding retiree 
health benefits and paying down its debt. Amounts used to 
reduce the postal debt may not exceed a total of $3 billion for 
fiscal years 2006-2015. A safety valve is also put in place to 
allow the Postal Service to appeal to the Postal Regulatory 
Commission for relief from the requirement that two-thirds of 
the savings be allocated for such purposes.
    After FY 2015, there is not a specific statutory 
requirement related to the total savings. Instead, the 
Committee expects that the Postal Service will use its best 
judgment in promoting its the long-term viability (by further 
reducing the unfunded liability for retiree health benefits, 
debt repayment, and other measures) while moderating postage 
rate increases. The absence of a specific requirement after FY 
2015 should not be interpreted by the Postal Service as a sign 
that it no longer needs to be concerned with the outstanding 
unfunded liability for retiree health benefits.

Sec. 905 Effective dates

    Title IX will take effect on October 1, 2005.

                       Explanation of Amendments

    The bill was not amended.

                        Committee Consideration

    In response to the President's call for reform in December, 
the Government Reform Committee's Special Panel on Postal 
Reform and Oversight held three hearings in a two week period 
to examine the need to modernize our nation's postal laws. On 
January 28 the Panel heard from the Treasury Department, the 
Postal Service, the Postal Rate Commission, and the General 
Accounting Office. On February 5, the Panel traveled to 
Chicago, Illinois for a hearing in which the Presidents of all 
postal unions and employee groups testified. The Panel held a 
final hearing on February 11 in which nine CEOs of competitors, 
commercial and nonprofit mailers, and postal reliant businesses 
testified. On March 23, 2004, the Committee held a joint 
hearing with the Senate Governmental Affairs Committee, in 
which it heard testimony from the Secretary of the Treasury and 
the Postal Service.
    All witnesses stated support for the Administration's broad 
principles on postal reform, and the hearings underscored that 
universal postal service is at risk and reform is urgently 
needed to minimize the danger of significant taxpayer bailout 
or dramatic postal rate increases. As the General Accounting 
Office emphasized, the Postal Service's current business model, 
formulated as it was in 1970, is no longer sustainable in the 
21st century.
    On May 12, 2004, the Committee met in open session and 
ordered reported favorably the bill, H.R. 4341 by roll call 
vote, a quorum being present.

          Committee Consideration Prior to the 108th Congress

    H.R. 4341 is derived from H.R. 3717, introduced in the 
104th Congress, and H.R. 22, introduced in the 105th and 106th 
Congresses, and H.R. 4970 introduced in the 107th Congress. The 
hearings leading directly to H.R. 4341 were as follows.
    In the 104th Congress, the former Postal Service 
Subcommittee, chaired by Mr. McHugh, held oversight hearings on 
the Postal Service and, in particular, its calls for greater 
commercial flexibility, on February 23, March 2 and 8, May 23, 
June 7, 14, and 28, and November 15, 1995, and January 25 (with 
the Senate Committee on Governmental Affairs) and March 13 and 
19, 1996. In addition, on November 15, 1995, the Subcommittee 
held a legislative hearing on H.R. 210, a bill to provide for 
privatization of the Postal Service.
    On June 25, 1996, Subcommittee Chairman McHugh introduced 
H.R. 3717, the Postal Reform Act of 1996. The Subcommittee held 
legislative hearings on H.R. 3717 on July 10 and 18 and 
September 17 and 26, 1996.
    In the 105th Congress, on January 7, 1997, Subcommittee 
Chairman McHugh reintroduced former H.R. 3717 as H.R. 22, the 
Postal Reform Act of 1997. The Subcommittee held a legislative 
hearing on H.R. 22 on April 16, 1997. The Subcommittee also 
held a general oversight hearing on April 24, 1997. On December 
12, 1997, Mr. McHugh issued a comprehensive, section-by-section 
plan for revision of H.R. 22. In late February 1998, Mr. McHugh 
announced that the Subcommittee was actively soliciting written 
comments through early April on proposed revisions to H.R. 22. 
The Subcommittee received 47 written submissions. The 47 
comments subsequently received were shared with all 
Subcommittee Members for review, and they were posted on the 
Subcommittee's web page for public examination. In addition, 
the Subcommittee received extensive additional comments more 
informally from representatives of interested parties. Through 
this process, the Subcommittee attempted to ensure that the 
public and all postal stakeholders had repeated opportunities 
to provide input on the revisions as proposed December 1997.
    After carefully evaluating all of the comments received, 
Postal Service Subcommittee Chairman McHugh released the text 
of a comprehensive amendment to H.R. 22 on September 2, 1998, 
which was also posted on the Subcommittee's web page. On 
September 24, 1998, the Subcommittee on the Postal Service 
voted to approve H.R. 22, renamed the Postal Modernization Act 
of 1998, as amended by the comprehensive amendment announced by 
Subcommittee Chairman McHugh on September 2, 1998, and to send 
it to the Committee on Government Reform and Oversight for 
further consideration, which did not occur before the 105th 
Congress adjourned.
    With the beginning of the 106th Congress, the Postal 
Service Subcommittee convened a final round of hearings on a 
revised version of H.R. 22 on February 11 and March 4, 1999. 
After incorporating further modifications from these hearings 
on April 29, 1999, Postal Service Subcommittee approved H.R. 22 
again and reported it to the Committee on Government Reform. 
However, the Committee did not consider the bill before the 
106th Congress expired. The Subcommittee did convene additional 
hearings throughout 1999 and 2000 that continued to explore and 
underscore the need for reform.
    In the 107th Congress, the Postal Service Subcommittee was 
abolished and postal issues became the focus of the full 
Government Reform Committee. After several full Committee 
hearings on the Postal Service's worsening financial 
situation--the General Accounting Office added the Service to 
its watch-list of ``high risk'' agencies--the Committee marked-
up a revised postal reform bill, H.R. 4970. H.R. 4970, the 
Postal Accountability and Enhancement Act, was the product of a 
nearly year long bipartisan effort of the Committee staff to 
address remaining concerns and objections that certain 
stakeholders expressed with previous versions of the postal 
reform legislation. Despite support for the legislation, there 
was disagreement among some Committee members over the timing 
of moving the bill forward. As a result, in a mark-up on June 
20, 2002, H.R. 4970 failed on a vote of 6 ayes, 20 no, and 9 
voting ``present.'' Nine Members did not vote.



              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch where the bill relates to the terms and conditions of 
employment or access to public services and accommodations. 
This bill creates a modern system of rate regulation, 
establishes fair competition rules and a powerful new 
regulator, addresses the Postal Service's universal service 
obligation and the scope of the mail monopoly, and institutes 
improvements to the collective bargaining process.
    Legislative branch employees and their families, to the 
extent that they are otherwise eligible for the benefits 
provided by this legislation, have equal access to its 
benefits.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of Rule XIII and clause 
(2)(b)(1) of Rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of Rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of Rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress to enact the law 
proposed by H.R. 4341. Article I, Section 8, Clause 7 of the 
Constitution of the United States grants the Congress the power 
to establish post offices.

                     Federal Advisory Committee Act

    The Committee finds that the legislation does not establish 
or authorize the establishment of an advisory committee within 
the definition of 5 U.S.C. App., Section 5(b).

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandate Reform Act, P.L. 104-4) requires a statement whether 
the provisions of the reported include unfunded mandates. In 
compliance with this requirement the Committee has received a 
letter from the Congressional Budget Office included herein.

                           Committee Estimate

    Clause 3(d)(2) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 4341. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has received 
the following cost estimate for H.R. 4341 from the Director of 
Congressional Budget Office:

H.R. 4341--Postal Accountability and Enhancement Act

    Summary: H.R. 4341 would change the laws that govern the 
operation of the United States Postal Service (USPS), 
particularly those regarding the cost of pensions and health 
care benefits of retired workers and the requirement to hold 
certain funds in escrow. CBO estimates that enacting this 
legislation would result in on-budget savings of $24.1 billion 
and off-budget costs of $34.5 billion over the 2005-2014 
period. (The net expenditures of the USPS are classified as 
``Off-budget.'') Thus, CBO estimates the net cost to the 
unified budget would be $10.4 billion over the 2005-2014 
period. In addition, we estimate that implementing H.R. 4341 
would cost about $1.5 billion over the 2005-2014 period, 
assuming appropriation of the necessary amounts.
    Enacting H.R. 4341 would not affect how much the federal 
government spends on pension or health care benefits for USPS 
retirees. By increasing how much the Postal Service pays to 
finance those benefits and by eliminating the current-law 
escrow account requirements however, the bill would increase 
future budget deficits as measured by the unified federal 
budget, Eliminating the escrow account requirements for the 
USPS would allow that agency to increase spending for capital 
improvements or other projects, pay down its outstanding debt, 
postpone or diminish future rate increases, or some combination 
of these options. Enacting the bill also would reduce direct 
spending by making the costs of the Postal Rate Commission and 
the USPS Office of the Inspector General subject to 
appropriation.
    H.R. 4341 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Major provisions of H.R. 4341 would:
     Eliminate a requirement in Public Law 108-18 (P.L. 
108-18), the Postal civil Service Retirement Funding Reform Act 
of 2003, that the Postal Service place savings from reduced 
pension contributions in escrow.
     Transfer from the Postal Service to the Department 
of the Treasury responsibility for paying pension costs 
associated with military service credits.
     Replace direct payments the Postal Service is 
making for retiree health care costs with payments designed to 
prefund some of the health care costs of current employees when 
they retire.
     Revise the procedure for raising postal rates.
     Stregthen the USPS Board of Governors and the 
Postal Rate Commission, which would be redesignated the Postal 
Regulatory Commission (PRC).
     Make other changes designed to increase the Postal 
Service's competitiveness with private industry.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 4341 is shown in Table 1. The costs of 
this legislation fall within budget functions 370 (commerce and 
housing credit), 550 (health), 900 (net interest), and 950 
(undistributed offsetting receipts).

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 4341
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        By fiscal year, in billions of dollars--
                                                               -----------------------------------------------------------------------------------------
                                                                  2005     2006     2007     2008     2009     2010     2011     2012     2013     2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

On-Budget Effects:
    Estimated Budget Authority................................      0.0     -3.1     -2.0     -2.2     -2.3     -2.5     -2.7     -2.9     -3.1     -3.3
    Estimated Outlays.........................................      0.0     -3.1     -2.0     -2.2     -2.3     -2.5     -2.7     -2.9     -3.1     -3.3
Off-Budget Effects:
    Estimated Budget Authority................................     -0.1      2.8      3.1      3.4      3.5      3.8      4.1      4.3      4.6      5.0
    Estimated Outlays.........................................     -0.1      2.8      3.1      3.4      3.5      3.8      4.1      4.3      4.6      5.0
Total Unified Budget Effect:
    Estimated Budget Authority................................     -0.1     -0.3      1.1      1.2      1.2      1.3      1.4      1.4      1.5      1.7
    Estimated Outlays.........................................     -0.1     -0.3      1.1      1.2      1.2      1.3      1.4      1.4      1.5      1.7

                                                      CHANGES IN SPENDING SUBJECT TO APPROPRIATION

    Estimated Authorization Level.............................      0.1      0.1      0.1      0.1      0.2      0.2      0.2      0.2      0.2      0.2
    Estimated Outlays.........................................      0.1      0.1      0.1      0.1      0.2      0.2      0.2      0.2      0.2      0.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--Components may not add to totals because of rounding.

    Basis of estimate: For this estimate, CBO assumes that H.R. 
4341 will be enacted near the start of fiscal year 2005. CBO 
estimates that enacting the bill would result in on-budget 
savings of $24.1 billion and off-budget costs of $34.5 billion 
over the 2005-2014 period, for a net cost to the unified budget 
of $10.4 billion over the 10-year period. In addition, we 
estimate that implementing H.R. 4341 would cost about $1.5 
billion over the 2005-2014 period, assuming appropriation of 
the necessary amounts, mostly to fund the USPS Office of the 
Inspector General.

Background

    The following paragraphs present background information 
relating to the major provisions of H.R. 4341, mostly for 
postal finances affected by the bill.
    Budgetary Treatment of USPS. Although the Postal Service is 
a federal agency, its financial operations are classified as 
off-budget. Despite this treatment, federal budget documents 
present the net income (gross income minus expenses) of the 
agency in the unified budgetary totals for the federal 
government. The Postal Service is required by law to set 
postage rates to cover its full costs, although from year to 
year its net income may be positive or negative. In fiscal year 
2003, the Postal Service generated $69.5 billion in 
collections, mostly from postage and user fees, and had $64.2 
billion in expenses, for a net cash surplus of $5.3 billion in 
that year.
    USPS and Federal Retirement Plans. Postal Service employees 
participate in the federal government's two main defined 
benefit pension programs. Those workers initially hired prior 
to 1984 are covered by the Civil Service Retirement System 
(CSRS) while those initially hired after 1983, as well as 
former CSRS workers who elected to change federal retirement 
plans in 1987 or 1998, participate in the Federal Employees' 
Retirement System (FERS). In 2003, about 30 percent of the USPS 
workforce was covered by CSRS, and the rest were under FERS.
    The Postal Service and its employees each make payroll 
contributions toward the civilian retirement system (CSRS and 
FERS). Unlike other agencies, the agency contribution rate for 
most CSRS employees is 17.4 percent of basic pay (most other 
agencies contribute 7 percent), while the employee contribution 
rate is 7 percent.\1\ For FERS employees, the agency 
contribution rate for most employees is 10.7 percent, while the 
employee rate is 0.8 percent, plus Social Security payroll 
taxes on both employers and employees. Workers in CSRS receive 
generally higher benefits than those in FERS, but unlike FERS, 
those in CSRS do not participate in Social Security and do not 
receive agency contributions toward the Thrift Savings Plan. In 
addition to its payroll contributions, the Postal Service also 
makes annual amortization payments toward an unfunded liability 
with CSRS. In 2003, that payment as about $300 million.
---------------------------------------------------------------------------
    \1\ P.L. 108-18 increased the contribution rate the Postal Service 
pays for its CSRS employees from 7 percent to 17.4 percent. That 
legislation also eliminated a series of amortization payments the 
Postal Service was required to make for unfunded CSRS liabilities. For 
more details, see CBO's cost estimates of the Postal Civil Service 
Retirement System Funding Reform Act of 2003 (S. 380 and H.R. 735 from 
the 108th Congress). These estimates are posted on www.cbo.gov.
---------------------------------------------------------------------------
    USPS and Federal Health Benefits. The Postal Service also 
pay a portion of health care premiums for currently retired 
USPS employees who are eligible to participate in the Federal 
Employees Health Benefits (FEHB) program. Currently, there are 
over 400,000 Postal Service retirees who participate in the 
FEHB program. On average, the Postal Service currently pays 
about 45 percent of the health care premiums for its retirees. 
Retirees pay about 30 percent of their FEHB premiums with 
general revenues accounting for theremaining amount, roughly 25 
percent. In 2003, the Postal Service paid $1.1 billion to FEHB for 
premiums for current retirees.
    USPS Escrow Fund. Starting in October 2006, the Postal 
Service will be required under current law to begin holding 
funds in an escrow account equal to the difference between what 
the Postal Service currently pays toward CSRS and what it would 
have paid for CSRS benefits prior to the enactment P.L. 108-18. 
Under current law, CBO estimates the Postal Service will need 
to hold in escrow nearly $3 billion in 2006 and $36 billion 
over the 2006-2014 period. H.R. 4341 would eliminate the 
requirement that USPS collect and hold these funds in escrow.

Effects on the unified budget

    H.R. 4341 would not affect how much the federal government 
spends on pension or health benefits for USPS retirees. 
However, by increasing how much the Postal Service pays to 
finance those benefits and by eliminating the current-law 
escrow requirements, the bill would increase future budget 
deficits as measured by the unified federal budget.
    Off-budget payments made by the Postal Service for CSRS and 
FEHB are transfers to on-budget federal accounts, and are 
counted as offsetting receipts (a credit against direct 
spending). Eliminating the USPS transfer to CSRS would reduce 
on-budget offsetting receipts by $13.5 billion over the 2006-
2014 period. Under the bill, that reduction would be offset by 
a $37.6 billion net increase in on-budget offsetting receipts 
paid by the Postal Service for the new health benefits fund. 
Thus, the bill would increase on-budget offsetting receipts by 
$24.1 billion over the 2006-2014 period.
    The collection of funds to be held in escrow by the Postal 
Service is recorded as an off-budget offsetting receipt. 
Eliminating the requirement to fund the escrow account would 
allow the USPS to pay down debt, increase spending for capital 
improvements or other projects, postpone or diminish future 
rate increases, or some combination of these activities. CBO 
estimates that this provision would increase net off-budget 
spending by $36 billion over the 2006-2014 period. (Much of 
that spending would be to fund the new health benefits payments 
mentioned above as on-budget offsetting receipts.) Making the 
costs of the PRC and the USPS Office of the Inspector General 
subject to appropriation would reduce direct spending by the 
Postal Service by $1.5 billion over the next 10 years.
    The combined effect of the $24.1 billion increase in on-
budget receipts, the $36 billion reduction in off-budget 
offsetting receipts, and a $1.5 billion reduction in USPS 
direct spending would produce a $10.4 billion cost to the 
unified budget deficit over the 2006-2014 period. Those effects 
are presented in Table 2 and explained in more detail below.

                                              TABLE 2.--ESTIMATED CHANGES IN DIRECT SPENDING FOR H.R. 4341
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, outlays in billions of dollars--
                                                               -----------------------------------------------------------------------------------------
                                                                  2005     2006     2007     2008     2009     2010     2011     2012     2013     2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING

                       On-Budget Effects

Civil Service Retirement System...............................        0      2.0      1.9      1.8      1.7      1.5      1.4      1.2      1.1      0.9
Postal Service Retiree Health Benefits Fund net of retiree            0     -5.1     -3.9     -4.0     -4.0     -4.0     -4.1     -4.1     -4.2     -4.2
 premium payments to FEHB \1\.................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Total On-Budget Effects.................................        0     -3.1     -2.0     -2.2     -2.3     -2.5     -2.7     -2.9     -3.1     -3.3
---------------------------------------------------------------=========================================================================================
                      Off-Budget Effects

Eliminate Escrow Account......................................        0      2.9      3.2      3.5      3.7      3.9      4.3      4.5      4.8      5.2
Funding for PRC and USPS Inspector General Office Costs            -0.1     -0.1     -0.1     -0.1     -0.2     -0.2     -0.2     -0.2     -0.2     -0.2
 Subject to Appropriation.....................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Total Off-Budget Effects................................     -0.1      2.8      3.1      3.4      3.5      3.8      4.1      4.3      4.6      5.0
---------------------------------------------------------------=========================================================================================
      Total Unified Budget Effects............................     -0.1     -0.3      1.1      1.2      1.2      1.3      1.4      1.4      1.5      1.7

                          MEMORANDUM

Payments from the Postal Service received by PSRHBF...........        0     -5.5     -5.7     -5.9     -6.1     -6.4     -6.6     -6.9     -7.2     -7.6
FEHB premiums paid from PSRHBF................................        0      0.4      1.8      2.0      2.2      2.4      2.6      2.8      3.1      3.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Net outlays of PSRHBF...................................        0     -5.1     -3.9     -4.0     -4.0     -4.0     -4.1     -4.1     -4.2     -4.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Starting in July 2006, CBO assumes that payments of FEHB premiums for Postal Service retirees would be paid out of the Postal Service Retiree Health
  Benefits Fund instead of being paid directly by the Postal Service as under current law. The bill would have no effect on spending by the FEHB program
  for health benefits for Postal Service annuitants.

Notes.--FEHB = Federal Employees Health Benefits program; PSRHBF = Postal Service Retiree Health Benefits Fund; PRC = Postal Regulatory Commission; USPS
  = United States Postal Service. Components may not add to totals because of rounding. Amounts in the table represent net changes in offsetting
  receipts, which are recorded in the budget as changes in direct spending. A positive sign indicates lower offsetting receipts, thus an increase in
  outlays; negative numbers represent increased offsetting receipts, or a reduction in net outlays.

On-budget effects (direct spending)

    CBO estimates the total on-budget effect of the pension and 
health care provisions in H.R. 4341 would be an increase in 
offsetting receipts of $3.1 billion in 2006, $9.7 billion over 
the 2006-2009 period, and $24.1 billion over the 2006-2014 
period. That increase in on-budget collections would come from 
increased transfers (off-budget outlays) coming from the USPS. 
(The off-budget effects are discussed in the following 
section.)
    Civil Service Retirement Contributions. H.R. 4341 would 
change the way the Postal Service finances retirement benefits 
for current and retired employees. Starting in October 2005, 
the bill would transfer financial responsibility for military 
service credits earned by Postal Service employees and retirees 
participating in CSRS from the Postal Service to the Department 
of the Treasury. Military service credits represent time served 
in the U.S. military that is credited toward benefits under the 
civilian retirement system. Most federal agencies are not 
responsible for the cost to the pension system of the military 
service credits incurred by their CSRS employees, but P.L. 108-
18 transferred responsibility for military service credits from 
the Treasury to the Postal Service beginning in June 2004.
    The Office of Personnel Management (OPM) estimates that 
transferring responsibility for military service credits from 
the Postal Service back to the Treasury would cause the Postal 
Service to have overfunded its obligation to CSRS by about 
$19.4 billion through September 2005.\2\ Consequently, under 
H.R. 4341 the Postal Service would no longer be obligated to 
make either agency contributions or any further annual 
amortization payments for CSRS. (Employee contributions would 
continue at 7 percent of basic pay and retirement benefits 
under CSRS would not change.)
---------------------------------------------------------------------------
    \2\ This overfunding, which is calculated on a net-present-value 
basis, represents an estimate of the total amount of money the Postal 
Service will have contributed toward CSRS from 1971 through September 
30, 2005, minus the agency's CSRS liabilities if USPS bears no 
financial responsibility for the pension costs associated with military 
service credits. The projected overfunding is due primarily to larger-
than-expected returns on assets held in the CSRDF.
---------------------------------------------------------------------------
    Spending by the Postal Service--including amounts paid into 
other federal accounts--is considered off-budget spending. 
However, the Civil Service Retirement and Disability Fund 
(CSRDF) is an on-budget account, so the amounts the CSRDF 
collects from the Postal Service are on-budget offsetting 
receipts. Reducing payments the Postal Service makes to the 
CSRDF would result in a reduction in off-budget spending and a 
reduction in on-budget offsetting receipts. CBO estimates 
transferring responsibility for military service credits, and 
the attendant reduction in CSRS contributions such a change 
would bring, would reduce on-budget receipts by $2 billion in 
2006 and $13.5 billion over the 2006-2014 period. Although the 
Treasury Department would then be responsible for the costs 
associated with those pension liabilities under the bill, the 
Treasury payment and receipt by CSRDF are both on-budget 
intragovernmental transactions. That is, the bill would replace 
one intragovernmental transfer with another. Instead of a 
transfer from the off-budget Postal Service to the on-budget 
CSRDF, there would be a transfer from the Treasury to the 
CSRDF.
    Postal Service Retiree Health Benefits Fund. H.R. 4341 also 
would change the way the Postal Service finances its share of 
the cost of providing health care to retirees. Instead of 
directly paying a portion of the health premiums incurred by 
current retirees each year, the USPS would begin paying for 
estimated costs of retiree health care as such costs are 
accrued by current workers. Starting in 2006, H.R. 4341 would 
require the USPS to make payments equal to the annual increase 
in retiree health care liabilities accrued by current 
employees. These payments would be deposited into a new on-
budget account, the Postal Service Retiree Health Benefits Fund 
(PSRHBF), which would earn interest at the same rate as the 
CSRDF. The Postal Service's share of health care premiums for 
current retirees would be paid out of the PSRHBF as soon as 
adequate funds are available in the account to do so.
    Under H.R. 4341, any overfunding toward CSRS liabilities 
(after financial responsibility for military service credits 
reverts to the Treasury) would be transferred from the CSRDF to 
the PSRHBF by June 30, 2006. Based on information provided by 
OPM, CBO anticipates that the transfer to the new fund would 
total $20.2 billion and would occur in June 2006. This amount 
reflects the $19.4 billion in estimated CSRS overfunding plus 
interest that would accrue between the end of the valuation 
period in September 2005 and when CBO assumes the asset 
transfer would take place in June 2006.
    Under the bill, the Postal Service also would pay annual 
interest costs on the unfunded liabilities for health care 
costs of both current and future retirees. The unfunded 
liability would be the difference between the assets held in 
the PSRHBF and the net present value of accrued liabilities 
projected for retiree health care. The bill would direct OPM to 
compute the required prefunding and interest payments after 
consultation with the Postal Service, subject to review by the 
PRC. The bill specifies that payments would be made at the end 
of each fiscal year. Based on information provided by OPM, CBO 
anticipates the net present value of the unfunded liability for 
the health care costs of retirees would amount to $37.7 billion 
at the end of 2006 and would shrink to $35.8 billion by the end 
of 2014. CBO estimates that payments by the Postal Service for 
prefunding health care costs of retirees and interest on the 
remaining unfunded liability would be $5.5 billion in 2006, 
$23.3 billion over the 2006-2009 period, and $58.1 billion over 
the 2006-2014 period.
    CBO expects that the transfer of $20.2 billion from the 
CSRDF to the PSRHBF resulting from the shift in responsibility 
for military service credits would occur in June 2006. 
Therefore, the Postal Service would cease making payments under 
current law for its share of FEHB premiums for annuitants 
beginning in July 2006; with those premium payments instead 
being drawn from the PSRHBF. CBO estimates that change in the 
fundingmechanism for retiree health benefits would reduce off-
budget payments by the Postal Service for FEHB premiums by $0.4 billion 
in 2006 (which reflects premium payments, under current law, for the 
last three months of 2006), $6.3 billion over the 2006-2009 period, and 
$20.5 billion over the 2006-2014 period. On-budget payments for those 
amounts would then be transferred from the PSRHBF to the FEHB program 
to pay the Postal Service's share of health care costs for retirees.
    The bill would require a minimum level of prefunding by the 
Postal Service through 2015, after accounting for disbursements 
for health premiums from the PSRHBF. To achieve the annual or 
cumulative prefunding target, payments from the Postal Service 
to the PSRHBF--net of premiums paid by the PSRHBF--must total 
at least two-thirds of the amount the Postal Service would have 
paid toward CSRS prior to the enactment of P.L. 108-18. If the 
threshold is not met, additional prefunding payments would be 
required to make up the shortfall. Those payments also could be 
used to reduce postal debt (up to $3 billion) in lieu of 
contributions to the fund. The requirement could be waived 
completely by the PRC under certain conditions. CBO anticipates 
that the threshold established under the bill would be met and 
no additional payments would be required through 2014.
    Health premiums paid by the Postal Service for FEHB and any 
payments that would be made into the new PSRHBF would be 
considered on-budget offsetting receipts. CBO estimates the 
increase in on-budget receipts as a result of changes in how 
the Postal Service finances its health care obligations would 
be $5.1 billion in 2006, $17.0 billion over the 2006-2009 
period, and $37.6 billion over the 2006-2014 period.

Off-budget effects (direct spending)

    CBO estimates that enacting H.R. 4341 would result in net 
off-budget costs of $2.8 billion in fiscal year 2006, $12.7 
billion over the 2005-2009 period, and $34.5 billion over the 
2005-2014 period because it would eliminate the requirement to 
fund the escrow account, allowing the Postal Service to 
increase other spending, reduce postal rates, or some 
combination of these actions. The bill also would make the 
costs of the PRC and the USPS Office of the Inspector General 
subject to appropriation, thus reducing direct spending by $1.6 
billion over the next 10 years. The bill contains many other 
provisions that could affect USPS cash flows in each year, but 
we estimate they would not have a significant net effect on the 
USPS over the long term.
    Elimination of Escrow Fund. P.L. 108-18 permanently reduced 
payments by the USPS to the CSRDF. As a result of that act, 
USPS payments to the CSRDF declined by $2.5 billion to $5 
billion annually, beginning in 2003. For fiscal years starting 
in 2006, P.L. 108-18 requires that savings resulting from 
reduced payments to the CSRDF be considered an operating 
expense of the Postal Service and held in escrow, remaining 
unavailable for obligation unless authorized by subsequent 
legislation.
    H.R. 4341 would amend P.L. 108-18 to eliminate the escrow 
fund requirement. As a result of this provision, the Postal 
Service could lower rates and thus reduce its revenues, or 
maintain rates and increase spending, or some combination of 
these actions. The net outlays of the Postal Service would 
increase because collections would not be deposited in escrow. 
CBO estimates that eliminating the escrow requirement would 
increase net spending by about $2.9 billion in 2006, $13.3 
billion over the 2006-2009 period, and $36 billion over the 
2006-2014 period. Much of the spending would go toward making 
new payments to the on-budget account for health care costs.
    Make Cost of PRC and USPS IG Subject to Appropriation. 
Under current law, the PRC and the Inspector General of the 
Postal Service are funded from the Postal Service Fund without 
annual Congressional appropriation. In total, these offices 
spent about $140 million in 2003. H.R. 4341 would authorize the 
appropriation of such sums as may be necessary from the Postal 
Service Fund for these offices. Thus, enacting this legislation 
would reduce direct spending--and therefore, increase spending 
subject to appropriation--by about $140 million annually 
beginning in fiscal year 2005.
    Changes to USPS Rate-Setting Procedures. Under the bill the 
Postal Service would be directed to define the cost basis for 
the different products and services it supplies. These products 
and services would broadly be categorized as market-dominant 
products and competitive products. Different rate-setting 
procedures would apply to these different categories of 
products and services.
    Market-Dominant Products. Under H.R. 4341, market-dominant 
products would include: first-class mail, special services, 
periodicals, standard mail, media mail, library mail, and bound 
printed matter.
    H.R. 4341 would require the PRC to establish, within two 
years of enactment, a new system for regulating postage rates 
for market-dominant products. The bill would permit the new 
system to involve price caps, revenue targets, or other forms 
of incentive or cost-of-service regulation. However, the 
legislation would mandate that the average rate for any market-
dominant product could not rise more than the annual increase 
in the Consumer Price Index (CPI), unless a larger increase 
would be necessary to ensure the viability of the Postal 
Service.
    Later this year we expect the Postal Service to begin 
preparations for a rate case in 2006. Assuming the PRC would 
need the two years that the bill would provide to establish the 
newsystem for regulating rates for market dominant products, we 
assume that the new rate setting system would not be effective until 
after 2006.
    Since 1970, increases in postage rates have largely tracked 
the rate of inflation. Over the past 10 years, rates were 
increased in 1995, 1999, 2001, and 2002 as a result of rate 
cases. After 2006, we expect that the Postal Service would 
increase rates for market-dominant mail servies more frequently 
than under current law, but by smaller increments (as limited 
by the CPI). Over the long term, CBO does not expect that 
enacting H.R. 4341 would significantly change the revenues from 
market-dominant products that the Postal Service would be 
expected to receive under current law.
    Competitive Products. Under H.R. 4341, competitive products 
would include the following: priority mail, express mail, 
mailgrams, international mail, and parcel post. Currently, the 
competitive products contribute less than 15 percent of total 
postal revenues.
    H.R. 4341 would direct the PRC to prohibit subsidizing 
competitive products by market-dominant products, ensure that 
each competitive product covers its attributable costs, and 
ensure that all competitive products collectively make a 
reasonable contribution to the institutional costs of the 
Postal Service. After these requirements have been implemented, 
the USPS could change rates for competitive products without 
consulting the PRC, as long as the cost coverage requirements 
are met. The Postal Service, however, would have to provide 
public notice and justification of changes in rates.
    In addition, H.R. 4341 would require the Postal Service to 
establish a new off-budget fund, the Competitive Products Fund, 
solely for revenues and expenditures associated with 
competitive products. We expect that it could be difficult to 
differentiate postal expenses related only to competitive 
products, as USPS uses the same employees and facilities to 
handle both market dominant and competitive products.
    CBO cannot predict the bill's effect on Postal Service 
revenues from competitive products because the agency could set 
and change prices with few restrictions, although we would 
expect that yearly cash flows under the bill would differ from 
those estimated under current law. CBO also cannot predict how 
successfully the Postal Service might compete in the open 
market. However, the highly competitive nature of the mailing 
industry would tend to keep prices and revenues down, while the 
labor-intensive cost structure of the USPS would maintain 
upward pressure on expenses. Thus, over the long term under 
this legislation, CBO expects the Postal Service to attempt to 
recover its costs and break even as it did before the enactment 
of P.L. 108-18.
    Other Off-Budget Effects. H.R. 4341 would make many other 
changes to the laws governing the Postal Service, the PRC, and 
the delivery of mail and other postal products. Some of these 
provisions, such as the expansion of USPS contracting authority 
for the interstate air transportation of mail, would yield 
savings. Other provisions, including the requirement for 
additional USPS reports and the establishment of an inspector 
general for the PRC, would increase costs. In total, CBO does 
not expect the net effects of these provisions to be 
significant.

Spending subject to appropriation

    H.R. 4341 would authorize the appropriation of such sums as 
may be necessary, out of the Postal Service Fund, for the PRC 
and the Inspector General of the Postal Service. (Currently, 
these offices are funded out of the Postal Service Fund without 
Congressional action.) Beginning in 2005, this provision would 
entail about $140 million a year in spending, subject to 
appropriation of the necessary amounts. Enacting the bill would 
reduce direct spending by the same amount. Spending on these 
activities would likely still be considered off-budget, since 
funds would come from the Postal Service Fund.
    In addition, H.R. 4341 would require OPM to make actuarial 
computations related to the CSRS and PSRHBF trust funds and 
would increase OPM's administrative workload to comply with the 
requirements under the bill. CBO estimates that such activities 
would cost less than $500,000 annually, assuming the 
availability of appropriated funds.
    Intergovernmental and private-sector impact: H.R. 4341 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Previous CBO estimate: This estimate supersedes previous 
cost estimates for H.R. 4341, which CBO transmitted on June 10 
and June 23, 2004. Our June 23 estimate indicated that the bill 
would have a net cost to the unified budget of $8.7 billion 
over the 2005-2014 period. CBO now estimates the bill would 
have a net cost of $10.4 billion over the next 10 years.
    In its previous estimates for H.R. 4341, CBO incorrectly 
calculated the interest payments that the Postal Service would 
be required to make on the unfunded liability of health costs 
for its retirees. This estimate corrects that error. Estimated 
interest payments on the unfunded liability--which would be 
recorded as receipts to an on-budget fund--would be about $1.7 
billion less over the 2006-2014 period than what CBO included 
in the June 23 estimate, adding that amount to CBO's estimate 
of the bill's effect on the unified budget.
    On June 24, 2004, CBO transmitted a cost estimate for S. 
2468, the Postal Accountability and Enhancement Act, as ordered 
reported by the Senate Committee on Governmental Affairs on 
June 2, 2004. S. 2468 also would make changes to the operation 
of the Postal Service. However, the bills present different 
approaches to some of the changes--especially with regard to 
financing the cost of health care benefits of USPS retirees. 
Our estimates reflect those differences. CBO estimates that 
enacting S. 2468 would result in on-budget savings of $20.2 
billion and off-budget costs of $35.8 billion over the 2005-
2014 period, for a net cost to the unified budget of $15.7 
billion over that period.
    Estimate prepared by: Federal Costs: Mark Grabowicz for 
USPS costs (226-2860), Geoffrey Gerhardt for retirement costs 
(226-2820), and Julia Christensen for health care costs. Impact 
on State, Local, and Tribal Governments: Sarah Puro. Impact on 
the Private Sector: Paige Piper/Bach.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                      TITLE 39, UNITED STATES CODE




           *       *       *       *       *       *       *
                             PART I--GENERAL


Chap.                                                               Sec.
1. Postal Policy and Definitions..................................   101
     * * * * * * *
5. Postal Regulatory Commission...................................   501

CHAPTER 1--POSTAL POLICY AND DEFINITIONS

           *       *       *       *       *       *       *



Sec. 101. Postal policy

    (a) * * *

           *       *       *       *       *       *       *

    (d) As an establishment that provides both market-dominant 
and competitive products, the Postal Service shall be subject 
to a high degree of transparency, including in its finances and 
operations, to ensure fair treatment of customers of the Postal 
Service's market-dominant products and companies competing with 
the Postal Service's competitive products.
    [(d)] (e) Postal rates shall be established to apportion 
the costs of all postal operations to all users of the mail on 
a fair and equitable basis.
    [(e)] (f) In determining all policies for postal services, 
the Postal Service shall give the highest consideration to the 
requirement for the most expeditious collection, 
transportation, and delivery of important letter mail.
    [(f)] (g) In selecting modes of transportation, the Postal 
Service shall give highest consideration to the prompt and 
economical delivery of all mail and shall make a fair and 
equitable distribution of mail business to carriers providing 
similar modes of transportation services to the Postal Service. 
Modern methods of transporting mail by containerization and 
programs designed to achieve overnight transportation to the 
destination of important letter mail to all parts of the Nation 
shall be a primary goal of postal operations.
    [(g)] (h) In planning and building new postal facilities, 
the Postal Service shall emphasize the need for facilities and 
equipment designed to create desirable working conditions for 
its officers and employees, a maximum degree of convenience for 
efficient postal services, proper access to existing and future 
air and surface transportation facilities, and control of costs 
to the Postal Service.

Sec. 102. Definitions

    As used in this title--
          (1) * * *

           *       *       *       *       *       *       *

          (3) ``Governors'' means the 9 members of the Board of 
        Governors appointed by the President, by and with the 
        advice and consent of the Senate, under section 202(a) 
        of this title; [and]
          [(4) ``Inspector General'' means the Inspector 
        General appointed under section 202(e) of this title;]
          (4) ``Inspector General'' means the Inspector General 
        of the United States Postal Service, appointed under 
        section 3(a) of the Inspector General Act of 1978;
          (5) ``postal service'' means the carriage of letters, 
        printed matter, or mailable packages, including 
        acceptance, collection, processing, delivery, or other 
        services supportive or ancillary thereto;
          (6) ``product'' means a postal service with a 
        distinct cost or market characteristic for which a rate 
        or rates are, or may reasonably be, applied;
          (7) ``rates'', as used with respect to products, 
        includes fees for postal services;
          (8) ``market-dominant product'' or ``product in the 
        market-dominant category of mail'' means a product 
        subject to subchapter I of chapter 36;
          (9) ``competitive product'' or ``product in the 
        competitive category of mail'' means a product subject 
        to subchapter II of chapter 36;
          (10) ``Consumer Price Index'' means the Consumer 
        Price Index for All Urban Consumers published monthly 
        by the Bureau of Labor Statistics of the Department of 
        Labor; and
          (11) ``year'', as used in chapter 36 (other than 
        subchapters I and VI thereof), means a fiscal year.

CHAPTER 2--ORGANIZATION

           *       *       *       *       *       *       *



Sec. 202. Board of Governors

    (a)(1) The exercise of the power of the Postal Service 
shall be directed by a Board of Governors composed of 11 
members appointed in accordance with this section. Nine of the 
members, to be known as Governors, shall be appointed by the 
President, by and with the advice and consent of the Senate, 
not more than 5 of whom may be adherents of the same political 
party. The Governors shall elect a Chairman from among the 
members of the Board. [The Governors shall be chosen to 
represent the public interest generally, and shall not be 
representatives of specific interests using the Postal Service, 
and may be removed only for cause.] The Governors shall 
represent the public interest generally, and at least 4 of the 
Governors shall be chosen solely on the basis of their 
demonstrated ability in managing organizations or corporations 
(in eitherthe public or private sector) of substantial size; 
for purposes of this sentence, an organization or corporation shall be 
considered to be of substantial size if it employs at least 50,000 
employees. The Governors shall not be representatives of specific 
interests using the Postal Service, and may be removed only for cause. 
Each Governor shall receive a salary of $30,000 a year plus $300 a day 
for not more than 42 days of meetings each year and shall be reimbursed 
for travel and reasonable expenses incurred in attending meetings of 
the Board. Nothing in the preceding sentence shall be construed to 
limit the number of days of meetings each year to 42 days.
    (2) In selecting the individuals described in paragraph (1) 
for nomination for appointment to the position of Governor, the 
President should consult with the Speaker of the House of 
Representatives, the minority leader of the House of 
Representatives, the majority leader of the Senate, and the 
minority leader of the Senate.
    (b)(1) The terms of the 9 Governors shall be 9 years, 
except that the terms of the 9 Governors first taking office 
shall expire as designated by the President at the time of 
appointment, 1 at the end of 1 year, 1 at the end of 2 years, 1 
at the end of 3 years, 1 at the end of 4 years, 1 at the end of 
5 years, 1 at the end of 6 years, 1 at the end of 7 years, 1 at 
the end of 8 years, and 1 at the end of 9 years, following the 
appointment of the first of them. Any Governor appointed to 
fill a vacancy before the expiration of the term for which his 
predecessor was appointed shall serve for the remainder of such 
term. A Governor may continue to serve after the expiration of 
his term until his successor has qualified, but not to exceed 
one year.
    (2)(A) Notwithstanding any other provision of this section, 
in the case of the office of the Governor the term of which is 
the first one scheduled to expire at least 4 months after the 
date of the enactment of this paragraph--
          (i) such office may not, in the case of any person 
        commencing service after that expiration date, be 
        filled by any person other than an individual chosen 
        from among persons nominated for such office with the 
        unanimous concurrence of all labor organizations 
        described in section 206(a)(1); and
          (ii) instead of the term that would otherwise apply 
        under the first sentence of paragraph (1), the term of 
        any person so appointed to such office shall be 3 
        years.
    (B) Except as provided in subparagraph (A), an appointment 
under this paragraph shall be made in conformance with all 
provisions of this section that would otherwise apply.

           *       *       *       *       *       *       *

    [(e)(1) The Governors shall appoint and shall have the 
power to remove the Inspector General.
    [(2) The Inspector General shall be appointed--
          [(A) for a term of 7 years;
          [(B) without regard to political affiliation; and
          [(C) solely on the basis of integrity and 
        demonstrated ability in accounting, auditing, financial 
        analysis, law, management analysis, public 
        administration, or investigations.
    [(3) The Inspector General may at any time be removed upon 
the written concurrence of at least 7 Governors, but only for 
cause. Nothing in this subsection shall be considered to exempt 
the Governors from the requirements of section 8G(e) of the 
Inspector General Act of 1978.]

           *       *       *       *       *       *       *


                      CHAPTER 4--GENERAL AUTHORITY

Sec.
401. General powers of the Postal Service.
     * * * * * * *
404a. Specific limitations.
     * * * * * * *

Sec. 401. General powers of the Postal Service

    [The] Subject to the provisions of section 404a, the Postal 
Service shall have the following general powers:
          (1) * * *
          [(2) to adopt, amend, and repeal such rules and 
        regulations as it deems necessary to accomplish the 
        objectives of this title;]
          (2) to adopt, amend, and repeal such rules and 
        regulations, not inconsistent with this title, as may 
        be necessary in the execution of its functions under 
        this title and such other functions as may be assigned 
        to the Postal Service under any provisions of law 
        outside of this title;

           *       *       *       *       *       *       *


Sec. 403. General duties

    (a) * * *

           *       *       *       *       *       *       *

    (c) In providing services and in establishing 
classifications, rates, and fees under this title, the Postal 
Service shall not, except as specifically authorized in this 
title, make any undue or unreasonable discrimination among 
users of the mails, nor shall it grant any undue or 
unreasonable preferences to any such user. The prohibition in 
this subsection shall not be construed to prevent the 
establishment of rates that vary with volume if such rates will 
be made available to similarly situated persons and will 
increase the aggregate contribution to the institutional costs 
of the Postal Service.

Sec. 404. Specific powers

    (a) [Without] Subject to the provisions of section 404a, 
but otherwise without limitation of the generality of its 
powers, the Postal Service shall have the following specific 
powers, among others:
          (1) to provide for the collection, handling, 
        transportation, delivery, forwarding, returning, and 
        holding of mail, and for the disposition of 
        undeliverable mail;
          (2) to prescribe, in accordance with this title, the 
        amount of postage and the manner in which it is to be 
        paid;
          (3) to determine the need for post offices, postal 
        and training facilities and equipment, and to provide 
        such offices, facilities, and equipment as it 
        determines are needed;
          (4) to provide and sell postage stamps and other 
        stamped paper, cards, and envelopes and to provide such 
        other evidences of payment of postage and fees as may 
        be necessary or desirable;
          (5) to provide philatelic services;
          [(6) to provide, establish, change, or abolish 
        special nonpostal or similar services;]
          [(7)] (6) to investigate postal offenses and civil 
        matters relating to the Postal Service;
          [(8)] (7) to offer and pay rewards for information 
        and services in connection with violation of the postal 
        laws, and, unless a different disposal is expressly 
        prescribed, to pay one-half of all penalties and 
        forfeitures imposed for violations of law affecting the 
        Postal Service, its revenues, or property, to the 
        person informing for the same, and to pay the other 
        one-half into the Postal Service Fund; and
          [(9)] (8) to authorize the issuance of a substitute 
        check for a lost, stolen, or destroyed check of the 
        Postal Service.
    (b) Except as otherwise provided, the Governors are 
authorized to establish reasonable and equitable classes of 
mail and reasonable and equitable rates of postage and fees for 
postal services in accordance with the provisions of chapter 
36. Postal rates and fees shall be reasonable and equitable and 
sufficient to enable the Postal Service, under best practices 
of honest, efficient, and economical management, to maintain 
and continue the development of postal services of the kind and 
quality adapted to the needs of the United States.
    (c) The Postal Service shall maintain one or more classes 
of mail for the transmission of letters sealed against 
inspection. The rate for each such class shall be uniform 
throughout the United States, its territories, and possessions. 
One such class shall provide for the most expeditious handling 
and transportation afforded mail matter by the Postal Service. 
No letter of such a class of domestic origin shall be opened 
except under authority of a search warrant authorized by law, 
or by an officer or employee of the Postal Service for the sole 
purpose of determining an address at which the letter can be 
delivered, or pursuant to the authorization of the addressee.
    [(b)] (d)(1) * * *

           *       *       *       *       *       *       *

    (5) A determination of the Postal Service to close or 
consolidate any post office may be appealed by any person 
served by such office to the [Postal Rate] Postal Regulatory 
Commission within 30 days after such determination is made 
available to such person under paragraph (3). The Commission 
shall review such determination on the basis of the record 
before the Postal Service in the making of such determination. 
The Commission shall make a determination based upon such 
review no later than 120 days after receiving any appeal under 
this paragraph. The Commission shall set aside any 
determination, findings, and conclusions found to be--
          (A) * * *

           *       *       *       *       *       *       *

    (6) For purposes of paragraph (5), any appeal received by 
the Commission shall--
          (A) if sent to the Commission through the mails, be 
        considered to have been received on the date of the 
        Postal Service postmark on the envelope or other cover 
        in which such appeal is mailed; or
          (B) if otherwise lawfully delivered to the 
        Commission, be considered to have been received on the 
        date determined based on any appropriate documentation 
        or other indicia (as determined under regulations of 
        the Commission).
    (e) Nothing in this title shall be considered to permit or 
require that the Postal Service provide any special nonpostal 
or similar services, except that nothing in this subsection 
shall prevent the Postal Service from providing any special 
nonpostal or similar services provided by the Postal Service as 
of May 12, 2004.
    (f) The Postal Service may employ police officers for duty 
in connection with the protection of property owned or occupied 
by the Postal Service or under the charge and control of the 
Postal Service, and persons on the property, including duty in 
areas outside the property to the extent necessary to protect 
the property and persons on the property. Such officers shall 
have, with respect to such property, the powers available under 
section 1315 of title 40, and, as to such property, the Postal 
Service may take any action that the Secretary of Homeland 
Security may take under such section, attaching thereto 
penalties under the authority and within the limits provided in 
subsection (c)(2) of such section.

Sec. 404a. Specific Limitations

    (a) Except as specifically authorized by law, the Postal 
Service may not--
          (1) establish any rule or regulation (including any 
        standard) the effect of which is to preclude 
        competition or establish the terms of competition 
        unless the Postal Service demonstrates that the 
        regulation does not create an unfair competitive 
        advantage for itself or any entity funded (in whole or 
        in part) by the Postal Service;
          (2) compel the disclosure, transfer, or licensing of 
        intellectual property to any third party (such as 
        patents, copyrights, trademarks, trade secrets, and 
        proprietary information); or
          (3) obtain information from a person that provides 
        (or seeks to provide) any product, and then offer any 
        product or service that uses or is based in whole or in 
        part on such information, without the consent of the 
        person providing that information, unless substantially 
        the same information is obtained (or obtainable) from 
        an independent source or is otherwise obtained (or 
        obtainable).
    (b) The Postal Regulatory Commission shall prescribe 
regulations to carry out this section.
    (c) Any party (including an officer of the Commission 
representing the interests of the general public) who believes 
that the Postal Service has violated this section may bring a 
complaint in accordance with section 3662.

           *       *       *       *       *       *       *


[Sec. 407. International Postal Arrangements.

    [(a)(1) The Secretary of State shall have primary 
responsibility for formulation, coordination and oversight of 
policy with respect to United States participation in the 
Universal Postal Union, including the Universal Postal 
Convention and other Acts of the Universal Postal Union, 
amendments thereto, and all postal treaties and conventions 
concluded within the framework of the Convention and such Acts.
    [(2) Subject to subsection (d), the Secretary may, with the 
consent of the President, negotiate and conclude treaties, 
conventions and amendments referred to in paragraph (1).
    [(b)(1) Subject to subsections (a), (c), and (d), the 
Postal Service may, with the consent of the President, 
negotiate and conclude postal treaties and conventions.
    [(2) The Postal Service may, with the consent of the 
President, establish rates of postage or other charges on mail 
matter conveyed between the United States and other countries.
    [(3) The Postal Service shall transmit a copy of each 
postal treaty or convention concluded with other governments 
under the authority of this subsection to the Secretary of 
State, who shall furnish a copy to the Public Printer for 
publication.
    [(c) The Postal Service shall not conclude any treaty or 
convention under the authority of this section or any other 
arrangement related to the delivery of international postal 
services that is inconsistent with any policy developed 
pursuant to subsection (a).
    [(d) In carrying out their responsibilities under this 
section, the Secretary and the Postal Service shall consult 
with such federal agencies as the Secretary or the Postal 
Service considers appropriate, private providers of 
international postal services, users of international postal 
services, the general public, and such other persons as the 
Secretary or the Postal Service considers appropriate.]

Sec. 407. International postal arrangements

    (a) It is the policy of the United States--
          (1) to promote and encourage communications between 
        peoples by efficient operation of international postal 
        services and other international delivery services for 
        cultural, social, and economic purposes;
          (2) to promote and encourage unrestricted and 
        undistorted competition in the provision of 
        international postal services and other international 
        delivery services, except where provision of such 
        services by private companies may be prohibited by law 
        of the United States;
          (3) to promote and encourage a clear distinction 
        between governmental and operational responsibilities 
        with respect to the provision of international postal 
        services and other international delivery services by 
        the Government of the United States and by 
        intergovernmental organizations of which the United 
        States is a member; and
          (4) to participate in multilateral and bilateral 
        agreements with other countries to accomplish these 
        objectives.
    (b)(1) The Secretary of State shall be responsible for 
formulation, coordination, and oversight of foreign policy 
related to international postal services and other 
international delivery services, and shall have the power to 
conclude treaties, conventions and amendments related to 
international postal services and other international delivery 
services, except that the Secretary may not conclude any 
treaty, convention, or other international agreement (including 
those regulating international postal services) if such treaty, 
convention, or agreement would, with respect to any competitive 
product, grant an undue or unreasonable preference to the 
Postal Service, a private provider of international postal or 
delivery services, or any other person.
    (2) In carrying out the responsibilities specified in 
paragraph (1), the Secretary of State shall exercise primary 
authority for the conduct of foreign policy with respect to 
international postal services and international delivery 
services, including the determination of United States 
positions and the conduct of United States participation in 
negotiations with foreign governments and international bodies. 
In exercising this authority, the Secretary--
          (A) shall coordinate with other agencies as 
        appropriate, and in particular, shall give full 
        consideration to the authority vested by law or 
        Executive order in the Postal Regulatory Commission, 
        the Department of Commerce, the Department of 
        Transportation, and the Office of the United States 
        Trade Representative in this area;
          (B) shall maintain continuing liaison with other 
        executive branch agencies concerned with postal and 
        delivery services;
          (C) shall maintain continuing liaison with the 
        Committee on Government Reform of the House of 
        Representatives and the Committee on Governmental 
        Affairs of the Senate;
          (D) shall maintain appropriate liaison with both 
        representatives of the Postal Service and 
        representatives of users and private providers of 
        international postal services and other international 
        delivery services to keep informed of their interests 
        and problems, and to provide such assistance as may be 
        needed to ensure that matters of concern are promptly 
        considered by the Department of State or (if 
        applicable, and to the extent practicable) other 
        executive branch agencies; and
          (E) shall assist in arranging meetings of such public 
        sector advisory groups as may be established to advise 
        the Department of State and other executive branch 
        agencies in connection with international postal 
        services and international delivery services.
    (3) The Secretary of State shall establish an advisory 
committee (within the meaning of the Federal Advisory Committee 
Act) to perform such functions as the Secretary considers 
appropriate in connection with carrying out subparagraphs (A) 
through (D) of paragraph (2).
    (c)(1) Before concluding any treaty, convention, or 
amendment that establishes a rate or classification for a 
product subject to subchapter I of chapter 36, the Secretary of 
State shall request the Postal Regulatory Commission to submit 
a decision on whether such rate or classification is consistent 
with the standards and criteria established by the Commission 
under section 3622.
    (2) The Secretary shall ensure that each treaty, 
convention, or amendment concluded under subsection (b) is 
consistent with a decision of the Commission adopted under 
paragraph (1), except if, orto the extent, the Secretary 
determines, by written order, that considerations of foreign policy or 
national security require modification of the Commission's decision.
    (d) Nothing in this section shall be considered to prevent 
the Postal Service from entering into such commercial or 
operational contracts related to providing international postal 
services and other international delivery services as it deems 
appropriate, except that--
          (1) any such contract made with an agency of a 
        foreign government (whether under authority of this 
        subsection or otherwise) shall be solely contractual in 
        nature and may not purport to be international law; and
          (2) a copy of each such contract between the Postal 
        Service and an agency of a foreign government shall be 
        transmitted to the Secretary of State and the Postal 
        Regulatory Commission not later than the effective date 
        of such contract.
    (e)(1) With respect to shipments of international mail that 
are competitive products within the meaning of section 3631 
that are exported or imported by the Postal Service, the Bureau 
of Customs and Border Protection of the Department of Homeland 
Security and other appropriate Federal agencies shall apply the 
customs laws of the United States and all other laws relating 
to the importation or exportation of such shipments in the same 
manner to both shipments by the Postal Service and similar 
shipments by private companies.
    (2) For purposes of this subsection, the term ``private 
company'' means a private company substantially owned or 
controlled by persons who are citizens of the United States.
    (3) In exercising the authority pursuant to subsection (b) 
to conclude new treaties, conventions and amendments related to 
international postal services and to renegotiate such treaties, 
conventions and amendments, the Secretary of State shall, to 
the maximum extent practicable, take such measures as are 
within the Secretary's control to encourage the governments of 
other countries to make available to the Postal Service and 
private companies a range of nondiscriminatory customs 
procedures that will fully meet the needs of all types of 
American shippers. The Secretary of State shall consult with 
the United States Trade Representative and the Commissioner of 
Customs, Department of Homeland Security in carrying out this 
paragraph.
    (4) The provisions of this subsection shall take effect 6 
months after the date of the enactment of this subsection or 
such earlier date as the Bureau of Customs and Border 
Protection of the Department of Homeland Security may determine 
in writing.

           *       *       *       *       *       *       *


Sec. 409. Suits by and against the Postal Service

    (a) [Except as provided in section 3628 of this title,] 
Except as otherwise provided in this title, the United States 
district courts shall have original but not exclusive 
jurisdiction over all actions brought by or against the Postal 
Service. Any action brought in a State court to which the 
Postal Service is a party may be removed to the appropriate 
United States district court under the provisions of chapter 89 
of title 28.

           *       *       *       *       *       *       *

    [(d) The Department of Justice shall furnish, under section 
411 of this title, the Postal Service such legal representation 
as it may require, but with the prior consent of the Attorney 
General the Postal Service may employ attorneys by contract or 
otherwise to conduct litigation brought by or against the 
Postal Service or its officers or employees in matters 
affecting the Postal Service.
    [(e) A judgment against the Government of the United States 
arising out of activities of the Postal Service shall be paid 
by the Postal Service out of any funds available to the Postal 
Service.]
    (d)(1) For purposes of the provisions of law cited in 
paragraphs (2)(A) and (2)(B), respectively, the Postal 
Service--
          (A) shall be considered to be a ``person'', as used 
        in the provisions of law involved; and
          (B) shall not be immune under any other doctrine of 
        sovereign immunity from suit in Federal court by any 
        person for any violation of any of those provisions of 
        law by any officer or employee of the Postal Service.
    (2) This subsection applies with respect to--
          (A) the Act of July 5, 1946 (commonly referred to as 
        the ``Trademark Act of 1946'' (15 U.S.C. 1051 and 
        following)); and
          (B) the provisions of section 5 of the Federal Trade 
        Commission Act to the extent that such section 5 
        applies to unfair or deceptive acts or practices.
    (e)(1) To the extent that the Postal Service, or other 
Federal agency acting on behalf of or in concert with the 
Postal Service, engages in conduct with respect to any 
competitive product, the Postal Service or other Federal agency 
(as the case may be)--
          (A) shall not be immune under any doctrine of 
        sovereign immunity from suit in Federal court by any 
        person for any violation of Federal law by such agency 
        or any officer or employee thereof; and
          (B) shall be considered to be a person (as defined in 
        subsection (a) of the first section of the Clayton Act) 
        for purposes of--
                  (i) the antitrust laws (as defined in such 
                subsection); and
                  (ii) section 5 of the Federal Trade 
                Commission Act to the extent that such section 
                5 applies to unfair methods of competition.
    (2) No damages, interest on damages, costs or attorney's 
fees may be recovered, and no criminal liability may be 
imposed, under the antitrust laws (as so defined) from any 
officer or employee of the Postal Service, or other Federal 
agency acting on behalf of or in concert with the Postal 
Service, acting in an official capacity.
    (3) This subsection shall not apply with respect to conduct 
occurring before the date of the enactment of this subsection.
    (f) To the extent that the Postal Service engages in 
conduct with respect to the provision of competitive products, 
it shall be considered a person for the purposes of the Federal 
bankruptcy laws.
    (g)(1) Each building constructed or altered by the Postal 
Service shall be constructed or altered, to the maximum extent 
feasible as determined by the Postal Service, in compliance 
with one of the nationally recognized model building codes and 
with other applicable nationally recognized codes.
    (2) Each building constructed or altered by the Postal 
Service shall be constructed or altered only after 
consideration of all requirements (other than procedural 
requirements) of zoning laws, land use laws, and applicable 
environmental laws of a State or subdivision of a State which 
would apply to the building if it were not a building 
constructed or altered by an establishment of the Government of 
the United States.
    (3) For purposes of meeting the requirements of paragraphs 
(1) and (2) with respect to a building, the Postal Service 
shall--
          (A) in preparing plans for the building, consult with 
        appropriate officials of the State or political 
        subdivision, or both, in which the building will be 
        located;
          (B) upon request, submit such plans in a timely 
        manner to such officials for review by such officials 
        for a reasonable period of time not exceeding 30 days; 
        and
          (C) permit inspection by such officials during 
        construction or alteration of the building, in 
        accordance with the customary schedule of inspections 
        for construction or alteration of buildings in the 
        locality, if such officials provide to the Postal 
        Service--
                  (i) a copy of such schedule before 
                construction of the building is begun; and
                  (ii) reasonable notice of their intention to 
                conduct any inspection before conducting such 
                inspection.
Nothing in this subsection shall impose an obligation on any 
State or political subdivision to take any action under the 
preceding sentence, nor shall anything in this subsection 
require the Postal Service or any of its contractors to pay for 
any action taken by a State or political subdivision to carry 
out this subsection (including reviewing plans, carrying out 
on-site inspections, issuing building permits, and making 
recommendations).
    (4) Appropriate officials of a State or a political 
subdivision of a State may make recommendations to the Postal 
Service concerning measures necessary to meet the requirements 
of paragraphs (1) and (2). Such officials may also make 
recommendations to the Postal Service concerning measures which 
should be taken in the construction or alteration of the 
building to take into account local conditions. The Postal 
Service shall give due consideration to any such 
recommendations.
    (5) In addition to consulting with local and State 
officials under paragraph (3), the Postal Service shall 
establish procedures for soliciting, assessing, and 
incorporating local community input on real property and land 
use decisions.
    (6) For purposes of this subsection, the term ``State'' 
includes the District of Columbia, the Commonwealth of Puerto 
Rico, and a territory or possession of the United States.
    (h)(1) Notwithstanding any other provision of law, legal 
representation may not be furnished by the Department of 
Justice to the Postal Service in any action, suit, or 
proceeding arising, in whole or in part, under any of the 
following:
          (A) Subsection (d) or (e) of this section.
          (B) Subsection (f) or (g) of section 504 (relating to 
        administrative subpoenas by the Postal Regulatory 
        Commission).
          (C) Section 3663 (relating to appellate review).
The Postal Service may, by contract or otherwise, employ 
attorneys to obtain any legal representation that it is 
precluded from obtaining from the Department of Justice under 
this paragraph.
    (2) In any circumstance not covered by paragraph (1), the 
Department of Justice shall, under section 411, furnish the 
Postal Service such legal representation as it may require, 
except that, with the prior consent of the Attorney General, 
the Postal Service may, in any such circumstance, employ 
attorneys by contract or otherwise to conduct litigation 
brought by or against the Postal Service or its officers or 
employees in matters affecting the Postal Service.
    (3)(A) In any action, suit, or proceeding in a court of the 
United States arising in whole or in part under any of the 
provisions of law referred to in subparagraph (B) or (C) of 
paragraph (1), and to which the Commission is not otherwise a 
party, the Commission shall be permitted to appear as a party 
on its own motion and as of right.
    (B) The Department of Justice shall, under such terms and 
conditions as the Commission and the Attorney General shall 
consider appropriate, furnish the Commission such legal 
representation as it may require in connection with any such 
action, suit, or proceeding, except that, with the prior 
consent of the Attorney General, the Commission may employ 
attorneys by contract or otherwise for that purpose.
    (i) A judgment against the Government of the United States 
arising out of activities of the Postal Service shall be paid 
by the Postal Service out of any funds available to the Postal 
Service, subject to the restriction specified in section 
2011(g).

           *       *       *       *       *       *       *


Sec. 410. Application of other laws

    (a) * * *
    (b) The following provisions shall apply to the Postal 
Service:
          (1) * * *

           *       *       *       *       *       *       *

          (5) the following provisions of title 41:
                  (A) sections 35-45 (known as the Walsh-Healey 
                Act, relating to wages and hours); [and]
                  (B) chapter 6 (the Service Contract Act of 
                1965);
                  (C) the Anti-Kickback Act of 1986 (41 U.S.C. 
                51 and following), other than subsections (a) 
                and (b) of 7 and section 8 of that Act; and
                  (D) section 315 of the Federal Property and 
                Administrative Services Act of 1949 (41 U.S.C. 
                265) (relating to protecting contractor 
                employees from reprisal for disclosure of 
                certain information);

           *       *       *       *       *       *       *

    (e) The Postal Service shall develop and issue purchasing 
regulations that prohibit contract costs not allowable under 
section 5.2.5 of the United States Postal Service Procurement 
Manual (Publication 41), as in effect on July 12, 1995.

           *       *       *       *       *       *       *


                CHAPTER 5--POSTAL REGULATORY COMMISSION

Sec.
501. Establishment.
502. Commissioners.
503. Rules; regulations; procedures.
504. Administration.
505. Officer of the Postal Regulatory Commission representing the 
          general public.

Sec. 501. Establishment

    The Postal Regulatory Commission is an independent 
establishment of the executive branch of the Government of the 
United States.

Sec. 502. Commissioners

    (a) The Postal Regulatory Commission is composed of 5 
Commissioners, appointed by the President, by and with the 
advice and consent of the Senate. The Commissioners shall be 
chosen solely on the basis of their technical qualifications, 
professional standing, and demonstrated expertise in economics, 
accounting, law, or public administration, and may be removed 
by the President only for cause. Each individual appointed to 
the Commission shall have the qualifications and expertise 
necessary to carry out the responsibilities accorded 
Commissioners under the Postal Accountability and Enhancement 
Act. Not more than 3 of the Commissioners may be adherents of 
the same political party.
    (b) A Commissioner may continue to serve after the 
expiration of his term until his successor has qualified, 
except that a Commissioner may not so continue to serve for 
more than 1 year after the date upon which his term otherwise 
would expire under subsection (e).
    (c) One of the Commissioners shall be designated as 
Chairman by, and shall serve in the position of Chairman at the 
pleasure of, the President.
    (d) The Commissioners shall by majority vote designate a 
Vice Chairman of the Commission. The Vice Chairman shall act as 
Chairman of the Commission in the absence of the Chairman.
    (e) The Commissioners shall serve for terms of 6 years.

[Sec. 3603.] Sec. 503. Rules; regulations; procedures

    The [Postal Rate] Postal Regulatory Commission shall 
promulgate rules and regulations and establish procedures, 
subject to chapters 5 and 7 of title 5, and take any other 
action they deem necessary and proper to carry out their 
functions and obligations to the Government of the United 
States and the people as prescribed under this [chapter] title. 
Such rules, regulations, procedures, and actions shall not be 
subject to any change or supervision by the Postal Service. 
Such rules shall include procedures which balance, inter alia, 
the need for protecting due process rights and ensuring 
expeditious decision-making.

[Sec. 3604.] Sec. 504. Administration

    (a) The Chairman of the [Postal Rate] Postal Regulatory 
Commission shall be the principal executive officer of the 
Commission. The Chairman shall exercise or direct the exercise 
of all the executive and administrative functions of the 
Commission, including functions of the Commission with respect 
to (1) the appointment of personnel employed under the 
Commission, except that the appointment of heads of major 
administrative units under the Commission shall require the 
approval of a majority of the members of the Commission, (2) 
the supervision of the personnel employed under the Commission 
and the distribution of business among them and among the 
Commissioners, and (3) the use and expenditure of funds.

           *       *       *       *       *       *       *

    [(d)(1) The Commission shall periodically prepare and 
submit to the Postal Service a budget of the Commission's 
expenses, including, but not limited to, expenses for 
facilities, supplies, compensation, and employee benefits. The 
budget shall be considered approved--
          [(A) as submitted if the Governors fail to act in 
        accordance with subparagraph (B) of this paragraph; or
          [(B) as adjusted if the Governors holding office, by 
        unanimous written decision, adjust the total amount of 
        money requested in the budget.
Subparagraph (B) shall not be construed to authorize the 
Governors to adjust any item included within the budget.
    [(2) Expenses incurred under any budget approved under 
paragraph (1) of this subsection shall be paid out of the 
Postal Service fund established under section 2003 of this 
title.]
    (d) There are authorized to be appropriated, out of the 
Postal Service Fund, such sums as may be necessary for the 
Postal Regulatory Commission. In requesting an appropriation 
under this subsection for a fiscal year, the Commission shall 
prepare and submit to the Congress under section 2009 a budget 
of the Commission's expenses, including expenses for 
facilities, supplies, compensation, and employee benefits.

           *       *       *       *       *       *       *

    (f)(1) Any Commissioner of the Postal Regulatory 
Commission, any administrative law judge appointed by the 
Commission under section 3105 of title 5, and any employee of 
the Commission designated by the Commission may administer 
oaths, examine witnesses, take depositions, and receive 
evidence.
    (2) The Chairman of the Commission, any Commissioner 
designated by the Chairman, and any administrative law judge 
appointed by the Commission under section 3105 of title 5 may, 
with respect to any proceeding conducted by the Commission 
under this title--
          (A) issue subpoenas requiring the attendance and 
        presentation of testimony by, or the production of 
        documentary or other evidence in the possession of, any 
        covered person; and
          (B) order the taking of depositions and responses to 
        written interrogatories by a covered person.
The written concurrence of a majority of the Commissioners then 
holding office shall, with respect to each subpoena under 
subparagraph (A), be required in advance of its issuance.
    (3) In the case of contumacy or failure to obey a subpoena 
issued under this subsection, upon application by the 
Commission, the district court of the United States for the 
district in which the person to whom the subpoena is addressed 
resides or is served may issue an order requiring such person 
to appear at any designated place to testify or produce 
documentary or other evidence. Any failure to obey the order of 
the court may be punished by the court as a contempt thereof.
    (4) For purposes of this subsection, the term ``covered 
person'' means an officer, employee, agent, or contractor of 
the Postal Service.
    (g)(1) If the Postal Service determines that any document 
or other matter it provides to the Postal Regulatory Commission 
pursuant to a subpoena issued under subsection (f), or 
otherwise at the request of the Commission in connection with 
any proceeding or other purpose under this title, contains 
information which is described in section 410(c) of this title, 
or exempt from public disclosure under section 552(b) of title 
5, the Postal Service shall, at the time of providing such 
matter to the Commission, notify the Commission, in writing, of 
its determination (and the reasons therefor).
    (2) No officer or employee of the Commission may, with 
respect to any information as to which the Commission has been 
notified under paragraph (1)--
          (A) use such information for purposes other than the 
        purposes for which it is supplied; or
          (B) permit anyone who is not an officer or employee 
        of the Commission to have access to any such 
        information.
    (3) Paragraph (2) shall not prevent information from being 
furnished under any process of discovery established under this 
title in connection with a proceeding under this title. The 
Commission shall, by regulations based on rule 26(c) of the 
Federal Rules of Civil Procedure, establish procedures for 
ensuring appropriate confidentiality for any information 
furnished under the preceding sentence.
    (h)(1) Notwithstanding any other provision of this title or 
of the Inspector General Act of 1978, the authority to select, 
appoint, and employ officers and employees of the Office of 
Inspector General of the Postal Regulatory Commission, and to 
obtain any temporary or intermittent services of experts or 
consultants (or an organization of experts or consultants) for 
such Office, shall reside with the Inspector General of the 
Postal Regulatory Commission.
    (2) Except as provided in paragraph (1), any exercise of 
authority under this subsection shall, to the extent 
practicable, be in conformance with the applicable laws and 
regulations that govern selections, appointments and 
employment, and the obtaining of any such temporary or 
intermittent services, within the Postal Regulatory Commission.

Sec. 505. Officer of the Postal Regulatory Commission representing the 
                    general public

    The Postal Regulatory Commission shall designate an officer 
of the Postal Regulatory Commission in all public proceedings 
(such as developing rules, regulations, and procedures) who 
shall represent the interests of the general public.

CHAPTER 6--PRIVATE CARRIAGE OF LETTERS

           *       *       *       *       *       *       *



Sec. 601. Letters carried out of the mail

    (a) * * *
    [(b) The Postal Service may suspend the operation of any 
part of this section upon any mail route where the public 
interest requires the suspension.]
    (b) A letter may also be carried out of the mails when--
          (1) the amount paid for the private carriage of the 
        letter is at least the amount equal to 6 times the rate 
        then currently charged for the 1st ounce of a single-
        piece first class letter;
          (2) the letter weighs at least 12\1/2\ ounces; or
          (3) such carriage is within the scope of services 
        described by regulations of the Postal Service 
        (including, in particular, sections 310.1 and 320.2-
        320.8 of title 39 of the Code of Federal Regulations, 
        as in effect on July 1, 2003) that purport to permit 
        private carriage by suspension of the operation of this 
        section (as then in effect).
    (c) Any regulations necessary to carry out this section 
shall be promulgated by the Postal Regulatory Commission.

           *       *       *       *       *       *       *


PART II--PERSONNEL

           *       *       *       *       *       *       *


CHAPTER 10--EMPLOYMENT WITHIN THE POSTAL SERVICE

           *       *       *       *       *       *       *



Sec. 1001. Appointment and status

    (a) * * *

           *       *       *       *       *       *       *

    (d) Notwithstanding section 5533, 5535, or 5536 of title 5, 
or any other provision of law, any officer or employee of the 
Government of the United States is eligible to serve and 
receive pay concurrently as an officer or employee of the 
Postal Service (other than as a member of the Board or of the 
[Postal Rate] Postal Regulatory Commission) and as an officer 
or employee of any other department, agency, or establishment 
of the Government of the United States.

           *       *       *       *       *       *       *


Sec. 1002. Political recommendations

    (a) Except as provided in subsection (e) of this section, 
each appointment, promotion, assignment, transfer, or 
designation, interim or otherwise, of an officer or employee in 
the Postal Service (except a Governor or member of the [Postal 
Rate] Postal Regulatory Commission) shall be made without 
regard to any recommendation or statement, oral or written, 
with respect to any person who requests or is under 
consideration for such appointment, promotion, assignment, 
transfer, or designation, made by--
          (1) * * *

           *       *       *       *       *       *       *


Sec. 1003. Employment policy

    (a) Except as provided under [chapters 2 and 12 of this 
title, section 8G of the Inspector General Act of 1978, or 
other provision of law,] chapter 2 or 12 of this title, 
subsection (b) or (c) of this section, or any other provision 
of law, the Postal Service shall classify and fix the 
compensation and benefits of all officers and employees in the 
Postal Service. It shall be the policy of the Postal Service to 
maintain compensation and benefits for all officers and 
employees on a standard of comparability to the compensation 
and benefits paid for comparable levels of work in the private 
sector of the economy. No officer or employee shall be paid 
compensation at a rate in excess of the rate for level I of the 
Executive Schedule under section 5312 of title 5.
      (b) Compensation and benefits for all officers and 
employees serving in or under the Office of Inspector General 
of the United States Postal Service shall be maintained on a 
standard of comparability to the compensation and benefits paid 
for comparable levels of work in the [respective] other Offices 
of Inspector General of the various establishments named in 
section 11(2) of the Inspector General Act of 1978.
      (c) Compensation and benefits for all Postal Inspectors 
shall be maintained on a standard of comparability to the 
compensation and benefits paid for comparable levels of work in 
the executive branch of the Government outside of the Postal 
Service. As used in this subsection, the term ``Postal 
Inspector'' [included] includes any agent to whom any 
investigative powers are granted under section 3061 of title 
18.

           *       *       *       *       *       *       *


Sec. 1005. Applicability of laws relating to Federal employees

    (a) * * *

           *       *       *       *       *       *       *

    (d)(1) * * *
    (2) The provisions of [subsection (g) of section 5532,] 
subsections (i) and (l)(2) of section 8344[,] and subsections 
(f) and (i)(2) of section 8468 of title 5 shall apply with 
respect to the Postal Service. For purposes of so applying such 
provisions--
          (A) * * *

           *       *       *       *       *       *       *


CHAPTER 12--EMPLOYEE-MANAGEMENT AGREEMENTS

           *       *       *       *       *       *       *



Sec. 1207. Labor disputes

    (a) * * *
    (b) If the parties fail to reach agreement or to adopt a 
procedure providing for a binding resolution of a dispute by 
the expiration date of the agreement in effect, or the date of 
the proposed termination or modification, the Director of the 
Federal Mediation and Conciliation Service shall [direct the 
establishment of a factfinding panel consisting of 3 persons. 
For this purpose, he shall submit to the parties a list of not 
less than 15 names, from which list each party, within 10 days, 
shall select 1 person. The 2 so selected shall then choose from 
the list a third person who shall serve as chairman of the 
factfinding panel. If either of the parties fails to select a 
person or if the 2 members are unable to agree on the third 
person within 3 days, the selection shall be made by the 
Director. The factfinding panel shall issue after due 
investigation a report of its findings, with or without 
recommendations, to the parties no later than 45 days from the 
date the list of names is submitted.], within 10 days appoint a 
mediator of nationwide reputation and professional stature, and 
who is also a member of the National Academy of Arbitrators. 
The parties shall cooperate with the mediator in an effort to 
reach an agreement and shall meet and negotiate in good faith 
at such times and places that the mediator, in consultation 
with the parties, shall direct.
    (c)(1) If no agreement is reached within [90] 60 days after 
the expiration or termination of the agreement or the date on 
which the agreement became subject to modification under 
subsection (a) of this section, or if the parties decide upon 
arbitration but do not agree upon the procedures therefor, an 
arbitration board shall be established consisting of 3 members, 
[not members of the factfinding panel,] 1 of whom shall be 
selected by the Postal Service, 1 by the bargaining 
representative of the employees, and the third by the 2 thus 
selected. If either of the parties fails to select a member, or 
if the members chosen by the parties fail to agree on the third 
person within 5 days after their first meeting, the selection 
shall be made [by the Director. If the parties do not agree on 
the framing of the issues to be submitted, the factfinding 
panel shall frame the issues and submit them to the arbitration 
board.] from a list of names provided by the Director. This 
list shall consist of not less than 9 names of arbitrators of 
nationwide reputation and professional stature, who are also 
members of the National Academy of Arbitrators, and whom the 
Director has determined are available and willing to serve.

           *       *       *       *       *       *       *

    (3) Costs of the arbitration board and [factfinding panel] 
mediation shall be shared equally by the Postal Service and the 
bargaining representative.
    (d) In the case of a bargaining unit whose recognized 
collective-bargaining representative does not have an agreement 
with the Postal Service, if the parties fail to reach agreement 
within 90 days of the commencement of collective bargaining, a 
[factfinding panel will be established] mediator shall be 
appointed in accordance with the terms of subsection (b) of 
this section, unless the parties have previously agreed to 
another procedure for a binding resolution of their 
differences. If the parties fail to reach agreement within 180 
days of the commencement of collective bargaining, and if they 
have not agreed to another procedure for binding resolution, an 
arbitration board shall be established to provide conclusive 
and binding arbitration in accordance with the terms of 
subsection (c) of this section.

           *       *       *       *       *       *       *


           PART III--MODERNIZATION AND FISCAL ADMINISTRATION

Chap.                                                               Sec.
20. Finance.......................................................  2001
     * * * * * * *
[28. Strategic planning and performance management................ 2801]
2801rategic Planning and Performance Management.................

           *       *       *       *       *       *       *


                          CHAPTER 20--FINANCE

Sec.
2001. Definitions.
     * * * * * * *
2011. Provisions relating to competitive products.

Sec. 2001. Definitions

    As used in this chapter--
          (1) ``Fund'' means the Postal Service Fund 
        established by section 2003 of this chapter; [and]
          (2) ``Competitive Products Fund'' means the Postal 
        Service Competitive Products Fund established by 
        section 2011; and
          [(2)] (3) ``obligations'', when referring to debt 
        instruments issued by the Postal Service, means notes, 
        bonds, debentures, mortgages, and any other evidence of 
        indebtedness.

Sec. 2002. Capital of the Postal Service

    (a) * * *
    (b) The capital of the Postal Service at any time shall 
consist of its assets, including the balance in the [Fund,] 
Fund and the balance in the Competitive Products Fund, less its 
liabilities.

           *       *       *       *       *       *       *


Sec. 2003. The Postal Service Fund

    (a) There is established in the Treasury of the United 
States a revolving fund to be called the Postal Service Fund 
which shall be available to the Postal Service without fiscal-
year limitation to carry out the purposes, functions, and 
powers authorized by this [title.] title (other than any of the 
purposes, functions, or powers for which the Competitive 
Products Fund is available).
    (b) [There] Except as otherwise provided in section 2011, 
there shall be deposited in the Fund, subject to withdrawal by 
check by the Postal Service--
          (1) * * *

           *       *       *       *       *       *       *

          (7) amounts (including proceeds from the sale of 
        forfeited items) from any civil forfeiture conducted by 
        the Postal Service; [and]
          (8) any transfers from the Secretary of the Treasury 
        from the Department of the Treasury Forfeiture Fund 
        which shall be available to the Postmaster General only 
        for Federal law enforcement related purposes[.]; and
          (9) any amounts collected under section 3018.
    [(c) If] (c)(1) Except as provided in paragraph (2), if the 
Postal Service determines that the moneys of the Fund are in 
excess of current needs, it may request the investment of such 
amounts as it deems advisable by the Secretary of the Treasury 
in obligations of, or obligations guaranteed by, the Government 
of the United States, and, with the approval of the Secretary, 
in such other obligations or securities as it deems 
appropriate.
    (2)(A) Nothing in this section shall be considered to 
authorize any investment in any obligations or securities of a 
commercial entity.
    (B) For purposes of this paragraph, the term ``commercial 
entity'' means any corporation, company, association, 
partnership, joint stock company, firm, society, or other 
similar entity, as further defined under regulations prescribed 
by the Postal Regulatory Commission.

           *       *       *       *       *       *       *

    (e)(1) [The Fund shall be available for the payment of all 
expenses incurred by the Postal Service in carrying out its 
functions as provided by law and, subject to the provisions of 
section 3604 of this title, all of the expenses of the Postal 
Rate Commission.] The Fund shall be available for the payment 
of (A) all expenses incurred by the Postal Service in carrying 
out its functions as provided by law, subject to the same 
limitation as set forth in the parenthetical matter under 
subsection (a); (B) all expenses of the Postal Regulatory 
Commission, subject to the availability of amounts appropriated 
pursuant to section 504(d); and (C) all expenses of the Office 
of Inspector General, subject to the availability of amounts 
appropriated pursuant to section 8J(e) of the Inspector General 
Act of 1978. The Postmaster General shall transfer from the 
Fund to the Secretary of the Treasury for deposit in the 
Department of the Treasury Forfeiture Fund amounts appropriate 
to reflect the degree of participation of Department of the 
Treasury law enforcement organizations (described in section 
9703(p) of title 31) in the law enforcement effort resulting in 
the forfeiture pursuant to laws enforced or administered by the 
Postal Service. Neither the Fund nor any of the funds credited 
to it shall be subject to apportionment under the provisions of 
subchapter II of chapter 15 of title 31.

           *       *       *       *       *       *       *


Sec. 2005. Obligations

    (a)(1) The Postal Service is authorized to borrow money and 
to issue and sell such obligations as it determines necessary 
to carry out the purposes of this [title.] title, other than 
any of the purposes for which the corresponding authority is 
available to the Postal Service under section 2011. The 
aggregate amount of [any such obligations] obligations issued 
by the Postal Service which may be outstanding at any one time 
shall not exceed the maximum amount then allowable under 
paragraph (2) of this subsection. [In any one fiscal year the 
net increase in the amount of obligations outstanding issued 
for the purpose of capital improvements shall not exceed 
$2,000,000,000, and the net increase in the amount of 
obligations outstanding issued for the purpose of defraying 
operating expenses of the Postal Service shall not exceed 
$1,000,000,000.] In any one fiscal year, the net increase in 
the amount of obligations outstanding issued for the purpose of 
capital improvements and the net increase in the amount of 
obligations outstanding issued for the purpose of defraying 
operating expenses of the Postal Service shall not exceed a 
combined total of $3,000,000,000.

           *       *       *       *       *       *       *

    (3) For purposes of applying the respective limitations 
under this subsection, the aggregate amount of obligations 
issued by the Postal Service which are outstanding as of any 
one time, and the net increase in the amount of obligations 
outstanding issued by the Postal Service for the purpose of 
capital improvements or for the purpose of defraying operating 
expenses of the Postal Service in any fiscal year, shall be 
determined by aggregating the relevant obligations issued by 
the Postal Service under this section with the relevant 
obligations issued by the Postal Service under section 2011.
    (b)(1) The Postal Service may pledge the assets of the 
Postal Service and pledge and use its revenues and receipts for 
the payment of the principal of or interest on [such 
obligations,] obligations issued by the Postal Service under 
this section, for the purchase or redemption thereof, and for 
other purposes incidental thereto, including creation of 
reserve, sinking, and other funds which may be similarly 
pledged and used, to such extent and in such manner as it deems 
necessary or desirable. The Postal Service is authorized to 
enter into binding covenants with the holders of such 
obligations, and with the trustee, if any, under any agreement 
entered into in connection with the issuance thereof with 
respect to the establishment of reserve, sinking, and other 
funds, application and use of revenues and receipts of the 
Postal Service, stipulations concerning the subsequent issuance 
of obligations or the execution of leases or lease purchases 
relating to properties of the Postal Service and such other 
matters as the Postal Service deems necessary or desirable to 
enhance the marketability of such obligations.
    (2) Notwithstanding any other provision of this section--
          (A) the authority to pledge assets of the Postal 
        Service under this subsection shall be available only 
        to the extent that such assets are not related to the 
        provision of competitive products (as determined under 
        section 2011(h) or, for purposes of any period before 
        accounting practices and principles under section 
        2011(h) have been established and applied, the best 
        information available from the Postal Service, 
        including the audited statements required by section 
        2008(e)); and
          (B) any authority under this subsection relating to 
        the pledging or other use of revenues or receipts of 
        the Postal Service shall be available only to the 
        extent that they are not revenues or receipts of the 
        Competitive Products Fund.

           *       *       *       *       *       *       *


Sec. 2006. Relationship between the Treasury and the Postal Service

    (a) * * *
    (b) Subject to the conditions of subsection (a) of this 
section, the Postal Service may require the Secretary of the 
Treasury to purchase obligations of the Postal Service in such 
amounts as will not cause the holding by the Secretary of the 
Treasury resulting from such required purchases to exceed 
$2,000,000,000 at any one time. This subsection shall not be 
construed as limiting the authority of the Secretary to 
purchase obligations of the Postal Service in excess of such 
amount. Nothing in this chapter shall be considered to permit 
or require the Secretary of the Treasury to purchase any 
obligations of the Postal Service other than those issued under 
section 2005.
    (c) Notwithstanding section 2005(d)(5) of this title, 
obligations issued by the Postal Service under section 2005 
shall be obligations of the Government of the United States, 
and payment of principal and interest thereon shall be fully 
guaranteed by the Government of the United States, such 
guaranty being expressed on the face thereof, if and to the 
extent that--
          (1) * * *

           *       *       *       *       *       *       *


Sec. 2008. Audit and expenditures

    (a) * * *

           *       *       *       *       *       *       *

    [(d) Nothing] (d)(1) Except as provided in paragraph (2), 
nothing in this section shall be construed as denying to the 
Postal Service the power to obtain audits of the accounts of 
the Postal Service and reports concerning its financial 
condition and operations by certified public accounting firms. 
Such audits and reports shall be in addition to those required 
by this section.
    (2) An audit or report under paragraph (1) may not be 
obtained without the prior written approval of the Inspector 
General.
    [(e) At least once each year beginning with the fiscal year 
commencing after June 30, 1971, the Postal Service shall obtain 
a certification from an independent, certified public 
accounting firm of the accuracy of any financial statements of 
the Postal Service used in determining and establishing postal 
rates.]
    (e)(1) At least once each year beginning with the fiscal 
year commencing after the date of the enactment of the Postal 
Accountability and Enhancement Act, the financial statements of 
the Postal Service (including those used in determining and 
establishing postal rates) shall be audited by the Inspector 
General or by an independent external auditor selected by the 
Inspector General.
    (2) Audits under this section shall be conducted in 
accordance with applicable generally accepted government 
auditing standards.
    (3) Upon completion of the audit required by this 
subsection, the person who audits the statement shall submit a 
report on the audit to the Postmaster General.

Sec. 2009. Annual budget

    The Postal Service shall cause to be prepared annually a 
budget program which shall be submitted to the Office of 
Management and Budget, under such rules and regulations as the 
President may establish as to the date of submission, the form 
and content, the classifications of data, and the manner in 
which such budget program shall be prepared and presented. The 
budget program shall be a business-type budget, or plan of 
operations, with due allowance given to the need for 
flexibility, including provision for emergencies and 
contingencies, in order that the Postal Service may properly 
carry out its activities as authorized by law. The budget 
program shall contain estimates of the financial condition and 
operations of the Postal Service for the current and ensuing 
fiscal years and the actual condition and results of operation 
for the last completed fiscal year. Such budget program shall 
include a statement of financial condition, a statement of 
income and expense, an analysis of surplus or deficit, a 
statement of sources and application of funds, and such other 
supplementary statements and information as are necessary or 
desirable to make known the financial condition and operations 
of the Postal Service. Such statements shall include estimates 
of operations by major types of activities, together with 
estimates of administrative expenses and estimates of 
borrowings. [The budget program shall also include separate 
statements of the amounts which the Postal Service requests to 
be appropriated under subsections (b) and (c) of section 2401 
of this title.] The budget program shall also include separate 
statements of the amounts which (1) the Postal Service requests 
to be appropriated under subsections (b) and (c) of section 
2401, (2) the Office of Inspector General of the United States 
Postal Service requests to be appropriated, out of the Postal 
Service Fund, under section 8J(e) of the Inspector General Act 
of 1978, and (3) the Postal Regulatory Commission requests to 
be appropriated, out of the Postal Service Fund, under section 
504(d) of this title. The President shall include these 
amounts, with his recommendations but without revision, in the 
budget transmitted to Congress under section 1105 of title 31.

           *       *       *       *       *       *       *


Sec. 2011. Provisions relating to competitive products

    (a) There is established in the Treasury of the United 
States a revolving fund, to be called the Postal Service 
Competitive Products Fund, which shall be available to the 
Postal Service without fiscal year limitation for the payment 
of--
          (1) costs attributable to competitive products; and
          (2) all other costs incurred by the Postal Service, 
        to the extent allocable to competitive products.
For purposes of this subsection, the term ``costs 
attributable'' has the meaning given such term by section 3631.
    (b) There shall be deposited in the Competitive Products 
Fund, subject to withdrawal by the Postal Service--
          (1) revenues from competitive products;
          (2) amounts received from obligations issued by the 
        Postal Service under subsection (e);
          (3) interest and dividends earned on investments of 
        the Competitive Products Fund; and
          (4) any other receipts of the Postal Service 
        (including from the sale of assets), to the extent 
        allocable to competitive products.
    (c) If the Postal Service determines that the moneys of the 
Competitive Products Fund are in excess of current needs, it 
may invest such amounts as it considers appropriate in--
          (1) obligations of, or obligations guaranteed by, the 
        Government of the United States; and
          (2) in accordance with regulations which the 
        Secretary of the Treasury shall prescribe (by not later 
        than 18 months after the date of the enactment of the 
        Postal Accountability and Enhancement Act), such other 
        obligations or securities as it deems appropriate.
    (d) The Postal Service may, in its sole discretion, provide 
that moneys of the Competitive Products Fund be deposited in a 
Federal Reserve bank or a depository for public funds.
    (e)(1) Subject to the limitations specified in section 
2005(a), the Postal Service is authorized to borrow money and 
to issue and sell such obligations as it determines necessary 
to provide for competitive products and deposit such amounts in 
the Competitive Products Fund, except that the Postal Service 
may pledge only assets related to the provision of competitive 
products (as determined under subsection (h) or, for purposes 
of any period before accounting practices and principles under 
subsection (h) have been established and applied, the best 
information available from the Postal Service, including the 
audited statements required by section 2008(e)), and the 
revenues and receipts from such products, for the payment of 
the principal of or interest on such obligations, for the 
purchase or redemption thereof, and for other purposes 
incidental thereto, including creation of reserve, sinking, and 
other funds which may be similarly pledged and used, to such 
extent and in such manner as it deems necessary or desirable.
    (2) The Postal Service may enter into binding covenants 
with the holders of such obligations, and with the trustee, if 
any, under any agreement entered into in connection with the 
issuance thereof with respect to--
          (A) the establishment of reserve, sinking, and other 
        funds;
          (B) application and use of revenues and receipts of 
        the Competitive Products Fund;
          (C) stipulations concerning the subsequent issuance 
        of obligations or the execution of leases or lease 
        purchases relating to properties of the Postal Service; 
        and
          (D) such other matters as the Postal Service 
        considers necessary or desirable to enhance the 
        marketability of such obligations.
    (3) Obligations issued by the Postal Service under this 
subsection--
          (A) may not be purchased by the Secretary of the 
        Treasury;
          (B) shall not be exempt either as to principal or 
        interest from any taxation now or hereafter imposed by 
        any State or local taxing authority;
          (C) shall not be obligations of, nor shall payment of 
        the principal thereof or interest thereon be guaranteed 
        by, the Government of the United States, and the 
        obligations shall so plainly state; and
          (D) notwithstanding the provisions of the Federal 
        Financing Bank Act of 1973 or any other provision of 
        law (except as specifically provided by reference to 
        this subparagraph in a law enacted after this 
        subparagraph takes effect), shall not be eligible for 
        purchase by, commitment to purchase by, or sale or 
        issuance to, the Federal Financing Bank.
    (4)(A) This paragraph applies with respect to the period 
beginning on the date of the enactment of this paragraph and 
ending at the close of the 5-year period which begins on the 
date on which the Postal Service makes its submission under 
subsection (h)(1).
    (B) During the period described in subparagraph (A), 
nothing in subparagraph (A) or (D) of paragraph (3) or the last 
sentence of section 2006(b) shall, with respect to any 
obligations sought to be issued by the Postal Service under 
this subsection, be considered to affect such obligations' 
eligibility for purchase by, commitment to purchase by, or sale 
or issuance to, the Federal Financing Bank.
    (C) The Federal Financing Bank may elect to purchase such 
obligations under such terms, including rates of interest, as 
the Bank and the Postal Service may agree, but at a rate of 
yield no less than the prevailing yield on outstanding 
marketable securities of comparable maturity issued by entities 
with the same credit rating as the rating then most recently 
obtained by the Postal Service under subparagraph (D), as 
determined by the Bank.
    (D) In order to be eligible to borrow under this paragraph, 
the Postal Service shall first obtain a credit rating from a 
nationally recognized credit rating organization. Such rating--
          (i) shall be determined taking into account only 
        those assets and activities of the Postal Service which 
        are described in section 3634(a)(2) (relating to the 
        Postal Service's assumed taxable income from 
        competitive products); and
          (ii) may, before final rules of the Postal Regulatory 
        Commission under subsection (h) are issued (or deemed 
        to have been issued), be based on the best information 
        available from the Postal Service, including the 
        audited statements required by section 2008(e).
    (f) The receipts and disbursements of the Competitive 
Products Fund shall be accorded the same budgetary treatment as 
is accorded to receipts and disbursements of the Postal Service 
Fund under section 2009a.
    (g) A judgment against the Postal Service or the Government 
of the United States (or settlement of a claim) shall, to the 
extent that it arises out of activities of the Postal Service 
in the provision of competitive products, be paid out of the 
Competitive Products Fund.
    (h)(1) The Secretary of the Treasury, in consultation with 
the Postal Service and an independent, certified public 
accounting firm and such other advisors as the Secretary 
considers appropriate, shall develop recommendations 
regarding--
          (A) the accounting practices and principles that 
        should be followed by the Postal Service with the 
        objectives of (i) identifying and valuing the assets 
        and liabilities of the Postal Service associated with 
        providing, and the capital and operating costs incurred 
        by the Postal Service in providing, competitive 
        products, and (ii) preventing the subsidization of such 
        products by market-dominant products; and
          (B) the substantive and procedural rules that should 
        be followed in determining the Postal Service's assumed 
        Federal income tax on competitive products income for 
        any year (within the meaning of section 3634).
Such recommendations shall be submitted to the Postal 
Regulatory Commission no earlier than 6 months, and no later 
than 12 months, after the effective date of this section.
    (2)(A) Upon receiving the recommendations of the Secretary 
of the Treasury under paragraph (1), the Commission shall give 
interested parties, including the Postal Service, users of the 
mails, and an officer of the Commission who shall be required 
to represent the interests of the general public, an 
opportunity to present their views on those recommendations 
through submission of written data, views, or arguments with or 
without opportunity for oral presentation, or in such other 
manner as the Commission considers appropriate.
    (B) After due consideration of the views and other 
information received under subparagraph (A), the Commission 
shall by rule--
          (i) provide for the establishment and application of 
        the accounting practices and principles which shall be 
        followed by the Postal Service;
          (ii) provide for the establishment and application of 
        the substantive and procedural rules described in 
        paragraph (1)(B); and
          (iii) provide for the submission by the Postal 
        Service to the Postal Regulatory Commission of annual 
        and other periodic reports setting forth such 
        information as the Commission may require.
Final rules under this subparagraph shall be issued not later 
than 12 months after the date on which the Secretary of the 
Treasury makes his submission to the Commission under paragraph 
(1) (or by such later date as the Commission and the Postal 
Service may agree to). The Commission is authorized to 
promulgate regulations revising such rules.
    (C) Reports described in subparagraph (B)(iii) shall be 
submitted at such time and in such form, and shall include such 
information, as the Commission by rule requires. The Commission 
may, on its own motion or on request of an interested party, 
initiate proceedings (to be conducted in accordance with such 
rules as the Commission shall prescribe) to improve the 
quality, accuracy, or completeness of Postal Service data under 
such subparagraph whenever it shall appear that--
          (i) the quality of the information furnished in those 
        reports has become significantly inaccurate or can be 
        significantly improved; or
          (ii) such revisions are, in the judgment of the 
        Commission, otherwise necessitated by the public 
        interest.
    (D) A copy of each report described in subparagraph 
(B)(iii) shall also be transmitted by the Postal Service to the 
Secretary of the Treasury and the Inspector General of the 
United States Postal Service.
    (i) The Postal Service shall render an annual report to the 
Secretary of the Treasury concerning the operation of the 
Competitive Products Fund, in which it shall address such 
matters as risk limitations, reserve balances, allocation or 
distribution of moneys, liquidity requirements, and measures to 
safeguard against losses. A copy of its then most recent report 
under this subsection shall be included with any other 
submission that it is required to make to the Postal Regulatory 
Commission under section 3652(g).

           *       *       *       *       *       *       *


CHAPTER 24--APPROPRIATIONS AND ANNUAL REPORT

           *       *       *       *       *       *       *



Sec. 2401. Appropriations

    (a) * * *

           *       *       *       *       *       *       *

    (d) As reimbursement to the Postal Service for losses which 
it incurred as a result of insufficient amounts appropriated 
under section 2401(c) for fiscal years 1991 through 1993, and 
to compensate for the additional revenues it is estimated the 
Postal Service would have received under the provisions of 
section 3626(a) (as last in effect before enactment of the 
Postal Accountability and Enhancement Act), for the period 
beginning on October 1, 1993, and ending on September 30, 1998, 
if the fraction specified in subclause (VI) of section 
3626(a)(3)(B)(ii) (as last in effect before enactment of the 
Postal Accountability and Enhancement Act) were applied with 
respect to such period (instead of the respective fractions 
specified in subclauses (I) through (V) thereof), there are 
authorized to be appropriated to the Postal Service $29,000,000 
for each of fiscal years 1994 through 2035.
    (e) The Postal Service shall present to the Committee on 
Governmental Affairs of the Senate and the [Committee on Post 
Office and Civil Service] Committee on Government Reform of the 
House of Representatives and the Committees on Appropriations 
of the Senate and the House of Representatives, at the same 
time it submits its annual budget under section 2009 of this 
title, sufficient copies of the budget of the Postal Service 
for the fiscal year for which funds are requested to be 
appropriated, and a comprehensive statement relating to the 
following matters:
          (1) * * *

           *       *       *       *       *       *       *

[Not later than March 15 of each year,] Each year, the Postal 
Service shall appear before the Committee on Governmental 
Affairs of the Senate and the [Committee on Post Office and 
Civil Service] Committee on Government Reform of the House of 
Representatives to submit information which any such committee 
considers necessary to determine the amount of funds to be 
appropriated for the operation of the Postal Service, and to 
present testimony and respond to questions with respect to such 
budget and statement. Each such committee shall take such 
action as it considers appropriate and shall advise the Postal 
Service of such action.

           *       *       *       *       *       *       *


Sec. 2402. Annual report

    The Postmaster General shall render an annual report to the 
Board concerning the operations of the Postal Service under 
this title. Each report under this section shall include a copy 
of the report most recently received by the Postmaster General 
under section 2008(e)(3). Upon approval thereof, or after 
making such changes as it considers appropriate, the Board 
shall transmit such reports to the President and the Congress.

           *       *       *       *       *       *       *


CHAPTER 28--STRATEGIC PLANNING AND PERFORMANCE MANAGEMENT

           *       *       *       *       *       *       *



Sec. 2803. Performance plans

    (a) The Postal Service shall prepare an annual performance 
plan covering each program activity set forth in the Postal 
Service budget, which shall be included in the comprehensive 
statement presented under section [2401(g)] 2401(e) of this 
title. Such plan shall--
          (1) * * *

           *       *       *       *       *       *       *


Sec. 2804. Program performance reports

    (a) The Postal Service shall prepare a report on program 
performance for each fiscal year, which shall be included in 
the annual comprehensive statement presented under section 
[2401(g)] 2401(e) of this title.

           *       *       *       *       *       *       *


PART IV--MAIL MATTER

           *       *       *       *       *       *       *


                     CHAPTER 30--NONMAILABLE MATTER

Sec.
3001. Nonmailable matter.
     * * * * * * *
3018. Hazardous material.

Sec. 3001. Nonmailable matter

    (a) * * *

           *       *       *       *       *       *       *

    (o)(1) Except as otherwise authorized by law or regulations 
of the Postal Service, hazardous material is nonmailable.
    (2) In this subsection, the term ``hazardous material'' 
means a substance or material designated by the Secretary of 
Transportation under section 5103(a) of title 49.
    [(n)] (o) The district courts, together with the District 
Court of the Virgin Islands and the District Court of Guam, 
shall have jurisdiction, upon cause shown, to enjoin violations 
of section 1716 of title 18.

           *       *       *       *       *       *       *


Sec. 3005. False representations; lotteries

    (a) Upon evidence satisfactory to the Postal Service that 
any person is engaged in conducting a scheme or device for 
obtaining money or property through the mail by means of false 
representations, including the mailing of matter which is 
nonmailable [under 3001(d),] under section 3001(d), (h), (i), 
(j), or (k) of this title, or is engaged in conducting a 
lottery, gift enterprise, or scheme for the distribution of 
money or of real or personal property, by lottery, chance, or 
drawing of any kind, the Postal Service may issue an order 
which--
          (1) * * *

           *       *       *       *       *       *       *

          (3) requires the person or his representative to 
        cease and desist from engaging in any such scheme, 
        device, lottery, or gift enterprise.
For purposes of the preceding sentence, the mailing of matter 
which is nonmailable [under such 3001(d),] under such section 
3001(d), (h), (i), (j), or (k) by any person shall constitute 
prima facie evidence that such person is engaged in conducting 
a scheme or device for obtaining money or property through the 
mail by false representations.

           *       *       *       *       *       *       *


Sec. 3013. Semiannual reports on investigative activities of the Postal 
                    Service

    The [Postmaster General] Chief Postal Inspector shall 
submit semiannual reports to the Inspector General summarizing 
the investigative activities of the Postal Service. One 
semiannual report shall be submitted for the reporting period 
beginning on October 1 and ending on March 31, and the other 
semiannual report shall be submitted for the reporting period 
beginning on April 1 and ending on September 30. Each such 
report shall be submitted within 1 month (or such shorter 
length of time as the Inspector General may specify) after the 
close of the reporting period involved and shall include with 
respect to such reporting period--
          (1) * * *

           *       *       *       *       *       *       *

The information in a report submitted under this section to the 
Inspector General with respect to a reporting period shall be 
included as part of the semiannual report prepared by the 
Inspector General under section 5 of the Inspector General Act 
of 1978 for the same reporting period. Nothing in this section 
shall be considered to permit or require that any report by the 
[Postmaster General] Chief Postal Inspector under this section 
include any information relating to activities of the Inspector 
General.

           *       *       *       *       *       *       *


Sec. 3018. Hazardous material

    (a) In General.--The Postal Service shall prescribe 
regulations for the safe transportation of hazardous material 
in the mail.
    (b) Prohibitions.--No person may--
          (1) mail or cause to be mailed hazardous material 
        that has been declared by statute or Postal Service 
        regulation to be nonmailable;
          (2) mail or cause to be mailed hazardous material in 
        violation of any statute or Postal Service regulation 
        restricting the time, place, or manner in which 
        hazardous material may be mailed; or
          (3) manufacture, distribute, or sell any container, 
        packaging kit, or similar device that--
                  (A) is represented, marked, certified, or 
                sold by such person for use in the mailing of 
                hazardous material; and
                  (B) fails to conform with any statute or 
                Postal Service regulation setting forth 
                standards for a container, packaging kit, or 
                similar device used for the mailing of 
                hazardous material.
    (c) Civil Penalty; Clean-Up Costs and Damages.--
          (1) In general.--A person who knowingly violates this 
        section or a regulation prescribed under this section 
        shall be liable for--
                  (A) a civil penalty of at least $250, but not 
                more than $100,000, for each violation;
                  (B) the costs of any clean-up associated with 
                each violation; and
                  (C) damages.
          (2) Knowing action.--A person acts knowingly for 
        purposes of paragraph (1) when--
                  (A) the person has actual knowledge of the 
                facts giving rise to the violation; or
                  (B) a reasonable person acting in the 
                circumstances and exercising reasonable care 
                would have had that knowledge.
          (3) Separate violations.--
                  (A) Violations over time.--A separate 
                violation under this subsection occurs for each 
                day hazardous material, mailed or caused to be 
                mailed in noncompliance with this section, is 
                in the mail.
                  (B) Separate items.--A separate violation 
                under this subsection occurs for each item 
                containing hazardous material that is mailed or 
                caused to be mailed in noncompliance with this 
                section.
    (d) Hearings.--The Postal Service may determine that a 
person has violated this section or a regulation prescribed 
under this section only after notice and an opportunity for a 
hearing. Proceedings under this section shall be conducted in 
accordance with section 3001(m).
    (e) Penalty Considerations.--In determining the amount of a 
civil penalty for a violation of this section, the Postal 
Service shall consider--
          (1) the nature, circumstances, extent, and gravity of 
        the violation;
          (2) with respect to the person who committed the 
        violation, the degree of culpability, any history of 
        prior violations, the ability to pay, and any effect on 
        the ability to continue in business;
          (3) the impact on Postal Service operations; and
          (4) any other matters that justice requires.
    (f) Civil Actions To Collect.--
          (1) In general.--In accordance with section 409(d), a 
        civil action may be commenced in an appropriate 
        district court of the United States to collect a civil 
        penalty, clean-up costs, and damages assessed under 
        subsection (c).
          (2) Compromise.--The Postal Service may compromise 
        the amount of a civil penalty, clean-up costs, and 
        damages assessed under subsection (c) before commencing 
        a civil action with respect to such civil penalty, 
        clean-up costs, and damages under paragraph (1).
    (g) Civil Judicial Penalties.--
          (1) In general.--At the request of the Postal 
        Service, the Attorney General may bring a civil action 
        in an appropriate district court of the United States 
        to enforce this section or a regulation prescribed 
        under this section.
          (2) Relief.--The court in a civil action under 
        paragraph (1) may award appropriate relief, including a 
        temporary or permanent injunction, civil penalties as 
        determined in accordance with this section, or punitive 
        damages.
          (3) Construction.--A civil action under this 
        subsection shall be in lieu of civil penalties for the 
        same violation under subsection (c)(1)(A).
    (h) Deposit of Amounts Collected.--
          (1) Postal Service Fund.--Except as provided under 
        paragraph (2), amounts collected under subsection 
        (c)(1)(B) and (C) shall be deposited into the Postal 
        Service Fund under section 2003.
          (2) Treasury.--Amounts collected under subsection 
        (c)(1)(A) and any punitive damages collected under 
        subsection (c)(1)(C) shall be deposited into the 
        Treasury of the United States.

CHAPTER 32--PENALTY AND FRANKED MAIL

           *       *       *       *       *       *       *



Sec. 3210. Franked mail transmitted by the Vice President, Members of 
                    Congress, and congressional officials

    (a)(1) * * *

           *       *       *       *       *       *       *

    (6)(A) * * *

           *       *       *       *       *       *       *

    (C) No Member of the Senate may mail any mass mailing as 
franked mail if such mass mailing [is mailed fewer] is 
postmarked fewer than 60 days immediately before the date of 
any primary election or general election (whether regular, 
special, or runoff) for any national, State or local office in 
which such Member is a candidate for election.

           *       *       *       *       *       *       *


            [CHAPTER 36--POSTAL RATES, CLASSES, AND SERVICES


                  [SUBCHAPTER I--POSTAL RATE COMMISSION

[Sec.
[3601. Establishment.
[3602. Terms of office.
[3603. Rules; regulations; procedures.
[3604. Administration.

           [SUBCHAPTER II--PERMANENT RATES AND CLASSES OF MAIL

[3621. Authority to fix rates and classes.
[3622. Rates and fees.
[3623. Mail classification.
[3624. Recommended decisions of Commission.
[3625. Action of the Governors.
[3626. Reduced rates.
[3627. Adjusting free rates.
[3628. Appellate review.
[3629. Reduced rates for voter registration purposes.

              [SUBCHAPTER III--TEMPORARY RATES AND CLASSES

[3641. Temporary changes in rates and classes.
[3642. Special authority relating to reduced-rate categories of mail.

             [SUBCHAPTER IV--POSTAL SERVICES AND COMPLAINTS

[3661. Postal services.
[3662. Rate and service complaints.
[3663. Annual report on international services.

                         [SUBCHAPTER V--GENERAL

[3681. Reimbursement.
[3682. Size and weight limits.
[3683. Uniform rates for books; films; other materials.
[3684. Limitations.
[3685. Filing of information relating to periodical publications.

                 [SUBCHAPTER I--POSTAL RATE COMMISSION

[Sec. 3601. Establishment

    [(a) The Postal Rate Commission is an independent 
establishment of the executive branch of the Government of the 
United States. The Commission is composed of 5 Commissioners, 
appointed by the President, by and with the advice and consent 
of the Senate. The Commissioners shall be chosen on the basis 
of their professional qualifications and may be removed by the 
President only for cause. Not more than 3 of the Commissioners 
may be adherents of the same political party.
    [(b) A Commissioner may continue to serve after the 
expiration of his term until his successor has qualified, 
except that a Commissioner may not so continue to serve for 
more than 1 year after the date upon which his term otherwise 
would expire under section 3602 of this title.
    [(c) One of the Commissioners shall be designated as 
Chairman by, and shall serve in the position of Chairman at the 
pleasure of, the President.
    [(d) The Commissioners shall by majority vote designate a 
Vice Chairman of the Commission. The Vice Chairman shall act as 
Chairman of the Commission in the absence of the Chairman.

[Sec. 3602. Terms of office

    [The Commissioners of the Postal Rate Commission shall 
serve for terms of 6 years except that--
          [(1) the terms of the Commissioners first taking 
        office shall expire as designated by the President at 
        the time of appointment, 1 at the end of 2 years, 2 at 
        the end of 4 years, and 2 at the end of 6 years, 
        following the appointment of the first of them; and
          [(2) any Commissioner appointed to fill a vacancy 
        occurring before the expiration of the term for which 
        his predecessor was appointed shall serve for the 
        remainder of such term.

          [SUBCHAPTER II--PERMANENT RATES AND CLASSES OF MAIL

[Sec. 3621. Authority to fix rates and classes

    [Except as otherwise provided, the Governors are authorized 
to establish reasonable and equitable classes of mail and 
reasonable and equitable rates of postage and fees for postal 
services in accordance with the provisions of this chapter. 
Postal rates and fees shall be reasonable and equitable and 
sufficient to enable the Postal Service under honest, 
efficient, and economical management to maintain and continue 
the development of postal services of the kind and quality 
adapted to the needs of the United States. Postal rates and 
fees shall provide sufficient revenues so that the total 
estimated income and appropriations to the Postal Service will 
equal as nearly as practicable total estimated costs of the 
Postal Service. For purposes of this section, ``total estimated 
costs'' shall include (without limitation) operating expenses, 
depreciation on capital facilities and equipment, debt service 
(including interest, amortization of debt discount and expense, 
and provision for sinking funds or other retirements of 
obligations to the extent that such provision exceeds 
applicable depreciation charges), and a reasonable provision 
for contingencies.

[Sec. 3622. Rates and fees

    [(a) From time to time the Postal Service shall request the 
Postal Rate Commission to submit a recommended decision on 
changes in a rate or rates of postage or in a fee or fees for 
postal services if the Postal Service determines that such 
changes would be in the public interest and in accordance with 
the policies of this title. The Postal Service may submit such 
suggestions for rate adjustments as it deems suitable.
    [(b) Upon receiving a request, the Commission shall make a 
recommended decision on the request for changes in rates or 
fees in each class of mail or type of service in accordance 
with the policies of this title and the following factors:
          [(1) the establishment and maintenance of a fair and 
        equitable schedule;
          [(2) the value of the mail service actually provided 
        each class or type of mail service to both the sender 
        and the recipient, including but not limited to the 
        collection, mode of transportation, and priority of 
        delivery;
          [(3) the requirement that each class of mail or type 
        of mail service bear the direct and indirect postal 
        costs attributable to that class or type plus that 
        portion of all other costs of the Postal Service 
        reasonably assignable to such class or type;
          [(4) the effect of rate increases upon the general 
        public, business mail users, and enterprises in the 
        private sector of the economy engaged in the delivery 
        of mail matter other than letters;
          [(5) the available alternative means of sending and 
        receiving letters and other mail matter at reasonable 
        costs;
          [(6) the degree of preparation of mail for delivery 
        into the postal system performed by the mailer and its 
        effect upon reducing costs to the Postal Service;
          [(7) simplicity of structure for the entire schedule 
        and simple, identifiable relationships between the 
        rates or fees charged the various classes of mail for 
        postal services;
          [(8) the educational, cultural, scientific, and 
        informational value to the recipient of mail matter; 
        and
          [(9) such other factors as the Commission deems 
        appropriate.
    [(c) Regular rates for each class or subclass of mail that 
includes 1 or more special rate categories for mail under 
former section 4358 (d) or (e), 4452 (b) or (c), or 4554 (b) or 
(c) of this title shall be established by applying the policies 
of this title, including the factors of section 3622(b) of this 
title, to the costs attributable to the regular rate mail in 
each class or subclass combined with the mail in the 
corresponding special rate categories authorized by former 
section 4358 (d) or (e), 4452 (b) or (c), or 4554 (b) or (c) of 
this title.
    [(d) Compliance with any provision of the Occupational 
Safety and Health Act of 1970 (29 U.S.C. 651 et seq.) shall not 
be considered by the Commission in determining whether to 
increase rates and shall not otherwise affect the service of 
the Postal Service.

[Sec. 3623. Mail classification

    [(a) Within 2 years after the effective date of this 
subchapter, the Postal Service shall request the Postal Rate 
Commission to make a recommended decision on establishing a 
mail classification schedule in accordance with the provisions 
of this section.
    [(b) Following the establishment of the mail classification 
schedule requested under subsection (a) of this section, the 
Postal Service may from time to time request that the 
Commission submit, or the Commission may submit to the 
Governors on its own initiative, a recommended decision on 
changes in the mail classification schedule.
    [(c) The Commission shall make a recommended decision on 
establishing or changing the schedule in accordance with the 
policies of this title and the following factors:
          [(1) the establishment and maintenance of a fair and 
        equitable classification system for all mail;
          [(2) the relative value to the people of the kinds of 
        mail matter entered into the postal system and the 
        desirability and justification for special 
        classifications and services of mail;
          [(3) the importance of providing classifications with 
        extremely high degrees of reliability and speed of 
        delivery;
          [(4) the importance of providing classifications 
        which do not require an extremely high degree of 
        reliability and speed of delivery;
          [(5) the desirability of special classifications from 
        the point of view of both the user and of the Postal 
        Service; and
          [(6) such other factors as the Commission may deem 
        appropriate.
    [(d) The Postal Service shall maintain one or more classes 
of mail for the transmission of letters sealed against 
inspection. The rate for each such class shall be uniform 
throughout the United States, its territories, and possessions. 
One such class shall provide for the most expeditious handling 
and transportation afforded mail matter by the Postal Service. 
No letter of such a class of domestic origin shall be opened 
except under authority of a search warrant authorized by law, 
or by an officer or employee of the Postal Service for the sole 
purpose of determining an address at which the letter can be 
delivered, or pursuant to the authorization of the addressee.

[Sec. 3624. Recommended decisions of Commission

    [(a) The Postal Rate Commission shall promptly consider a 
request made under section 3622 or 3623 of this title, except 
that the Commission shall not recommend a decision until the 
opportunity for a hearing on the record under sections 556 and 
557 of title 5 has been accorded to the Postal Service, users 
of the mails, and an officer of the Commission who shall be 
required to represent the interests of the general public.
    [(b) In order to conduct its proceedings with utmost 
expedition consistent with procedural fairness to the parties, 
the Commission may (without limitation) adopt rules which 
provide for--
          [(1) the advance submission of written direct 
        testimony;
          [(2) the conduct of prehearing conferences to define 
        issues, and for other purposes to insure orderly and 
        expeditious proceedings;
          [(3) discovery both from the Postal Service and the 
        parties to the proceedings;
          [(4) limitation of testimony; and
          [(5) the conduct of the entire proceedings off the 
        record with the consent of the parties.
    [(c)(1) Except as provided by paragraph (2) of this 
subsection, in any case in which the Postal Service makes a 
request under section 3622 of this title for a recommended 
decision by the Commission on changes in a rate or rates of 
postage or in a fee or fees for postal services the Commission 
shall transmit its recommended decision to the Governors under 
subsection (d) of this section no later than 10 months after 
receiving any such request from the Postal Service.
    [(2) In any case in which the Commission determines that 
the Postal Service has unreasonably delayed consideration of a 
request made by the Postal Service under section 3622 by 
failing to respond within a reasonable time to any lawful order 
of the Commission, the Commission may extend the 10-month 
period described in paragraph (1) of this subsection by one day 
for each day of such delay.
    [(d) The Commission shall transmit its recommended decision 
in a rate, fee, or classification matter to the Governors. The 
recommended decision shall include a statement specifically 
responsive to the criteria established under section 3622 or 
3623, as the case may be.

[Sec. 3625. Action of the Governors

    [(a) Upon receiving a recommended decision from the Postal 
Rate Commission, the Governors may approve, allow under 
protest, reject, or modify that decision in accordance with the 
provisions of this section.
    [(b) The Governors may approve the recommended decision and 
order the decision placed in effect.
    [(c) The Governors may, under protest, allow a recommended 
decision of the Commission to take effect and (1) seek judicial 
review thereof under section 3628 of this title, or (2) return 
the recommended decision to the Commission for reconsideration 
and a further recommended decision, which shall be acted upon 
under this section and subject to review in accordance with 
section 3628 of this title.
    [(d) The Governors may reject the recommended decision of 
the Commission and the Postal Service may resubmit its request 
to the Commission for reconsideration. Upon resubmission, the 
request shall be reconsidered, and a further recommended 
decision of the Commission shall be acted upon under this 
section and subject to review in accordance with section 3628 
of this title. However, with the unanimous written concurrence 
of all of the Governors then holding office, the Governors may 
modify any such further recommended decision of the Commission 
under this subsection if the Governors expressly find that (1) 
such modification is in accord with the record and the policies 
of this chapter, and (2) the rates recommended by the 
Commission are not adequate to provide sufficient total 
revenues so that total estimated income and appropriations will 
equal as nearly as practicable estimated total costs.
    [(e) The decision of the Governors to approve, allow under 
protest, reject, or modify a recommended decision of the 
Commission shall be in writing and shall include an estimate of 
anticipated revenue and a statement of explanation and 
justification. The decision, the record of the Commission's 
hearings, and the Commission's recommended decision shall be 
made generally available at the time the decision is issued and 
shall be printed and made available for sale by the Public 
Printer within 10 days following the day the decision is 
issued.
    [(f) The Board shall determine the date on which the new 
rates, fees, the mail classification schedule, and changes in 
such schedule under this subchapter shall become effective.]

             Chapter 36--Postal rates, classes and services

       Subchapter I--Provisions relating to market-dominant products

Sec.
3621. Applicability; definitions.
3622. Modern rate regulation.
[3623. Repealed].
[3624. Repealed].
[3625. Repealed].
3626. Reduced Rates.
3627. Adjusting free rates.
[3628. Repealed].
3629. Reduced rates for voter registration purposes.

        Subchapter II--Provisions relating to competitive products

3631. Applicability; definitions and updates.
3632. Action of the Governors.
3633. Provisions applicable to rates for competitive products.
3634. Assumed Federal income tax on competitive products.

   Subchapter III--Provisions relating to experimental and new products

3641. Market tests of experimental products.
3642. New products and transfers of products between the market-dominant 
          and competitive categories of mail.

       Subchapter IV--Reporting requirements and related provisions

3651. Annual reports by the Commission.
3652. Annual reports to the Commission.
3653. Annual determination of compliance.

      Subchapter V--Postal services, complaints, and judicial review

3661. Postal services.
3662. Rate and service complaints.
3663. Appellate review.
3664. Enforcement of orders.

                          Subchapter VI--General

3681. Reimbursement.
3682. Size and weight limits.
3683. Uniform rates for books; films, other materials.
3684. Limitations.
3685. Filing of information relating to periodical publications.
3686. Bonus authority.
3687. Workshare discounts.

     SUBCHAPTER I--PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS

Sec. 3621. Applicability; definitions

    (a) Applicability.--This subchapter shall apply with 
respect to--
          (1)(A) single piece first-class letters (both 
        domestic and international);
          (B) single piece first-class cards (both domestic and 
        international); and
          (C) special services;
          (2) all first-class mail not included under paragraph 
        (1);
          (3) periodicals;
          (4) standard mail;
          (5) media mail;
          (6) library mail; and
          (7) bound printed matter,
subject to any changes the Postal Regulatory Commission may 
make under section 3642.
    (b) Rule of Construction.--Mail matter referred to in 
subsection (a) shall, for purposes of this subchapter, be 
considered to have the meaning given to such mail matter under 
the mail classification schedule.

Sec. 3622. Modern rate regulation

    (a) Authority Generally.--The Postal Regulatory Commission 
shall, within 24 months after the date of the enactment of this 
section, by regulation establish (and may from time to time 
thereafter by regulation revise) a modern system for regulating 
rates and classes for market-dominant products.
    (b) Objectives.--Such system shall be designed to achieve 
the following objectives:
          (1) To maximize incentives to reduce costs and 
        increase efficiency.
          (2) To create predictability and stability in rates.
          (3) To maintain high quality service standards.
          (4) To allow the Postal Service pricing flexibility.
          (5) To assure adequate revenues, including retained 
        earnings, to maintain financial stability.
          (6) To reduce the administrative burden of the 
        ratemaking process.
    (c) Factors.--In establishing or revising such system, the 
Postal Regulatory Commission shall take into account--
          (1) the establishment and maintenance of a fair and 
        equitable schedule for rates and classification system;
          (2) the value of the mail service actually provided 
        each class or type of mail service to both the sender 
        and the recipient, including but not limited to the 
        collection, mode of transportation, and priority of 
        delivery;
          (3) the direct and indirect postal costs attributable 
        to each class or type of mail service plus that portion 
        of all other costs of the Postal Service reasonably 
        assignable to such class or type;
          (4) the effect of rate increases upon the general 
        public, business mail users, and enterprises in the 
        private sector of the economy engaged in the delivery 
        of mail matter other than letters;
          (5) the available alternative means of sending and 
        receiving letters and other mail matter at reasonable 
        costs;
          (6) the degree of preparation of mail for delivery 
        into the postal system performed by the mailer and its 
        effect upon reducing costs to the Postal Service;
          (7) simplicity of structure for the entire schedule 
        and simple, identifiable relationships between the 
        rates or fees charged the various classes of mail for 
        postal services;
          (8) the relative value to the people of the kinds of 
        mail matter entered into the postal system and the 
        desirability and justification for special 
        classifications and services of mail;
          (9) the importance of providing classifications with 
        extremely high degrees of reliability and speed of 
        delivery and of providing those that do not require 
        high degrees of reliability and speed of delivery;
          (10) the desirability of special classifications from 
        the point of view of both the user and of the Postal 
        Service;
          (11) the educational, cultural, scientific, and 
        informational value to the recipient of mail matter; 
        and
          (12) the policies of this title as well as such other 
        factors as the Commission deems appropriate.
    (d) Allowable Provisions.--The system for regulating rates 
and classes for market-dominant products may include one or 
more of the following:
          (1) Price caps, revenue targets, or other form of 
        incentive regulation.
          (2) Cost-of-service regulation.
          (3) Such other form of regulation as the Commission 
        considers appropriate to achieve, consistent with 
        subsection (c), the objectives of subsection (b).
    (e) Limitation.--In the administration of this section, the 
Commission shall not permit the average rate in any subclass of 
mail to increase at an annual rate greater than the comparable 
increase in the Consumer Price Index, unless it has, after 
notice and opportunity for a public hearing and comment, 
determined that such increase is reasonable and equitable and 
necessary to enable the Postal Service, under best practices of 
honest, efficient, and economical management, to maintain and 
continue the development of postal services of the kind and 
quality adapted to the needs of the United States.
    (f) Transition Rule.--Until regulations under this section 
first take effect, rates and classes for market-dominant 
products shall remain subject to modification in accordance 
with the provisions of this chapter and section 407, as such 
provisions were last in effect before the date of the enactment 
of this section.

Sec. 3626. Reduced rates

    [(a)(1) Except as otherwise provided in this section, rates 
of postage for a class of mail or kind of mailer under former 
section 4358, 4452(b), 4452(c), 4554(b), or 4554(c) of this 
title shall be established in accordance with the applicable 
provisions of this chapter.
    [(2) For the purpose of this subsection--
          [(A) the term ``costs attributable'', as used with 
        respect to a class of mail or kind of mailer, means the 
        direct and indirect postal costs attributable to such 
        class of mail or kind of mailer (excluding any other 
        costs of the Postal Service);
          [(B) the term ``regular-rate category'' means any 
        class of mail or kind of mailer, other than a class or 
        kind referred to in paragraph (3)(A) or section 
        2401(c); and
          [(C) the term ``institutional-costs contribution'', 
        as used with respect to a class of mail or kind of 
        mailer, means that portion of the estimated revenues to 
        the Postal Service from such class of mail or kind of 
        mailer which remains after subtracting an amount equal 
        to the estimated costs attributable to such class of 
        mail or kind of mailer.
          [(3)(A) Except as provided in paragraph (4) or (5), 
        rates of postage for a class of mail or kind of mailer 
        under former section 4358 of this title shall be 
        established in a manner such that the estimated 
        revenues to be received by the Postal Service from such 
        class of mail or kind of mailer shall be equal to the 
        sum of--
                  [(i) the estimated costs attributable to such 
                class of mail or kind of mailer; and
                  [(ii) the product derived by multiplying the 
                estimated costs referred to in clause (i) by 
                the applicable percentage under subparagraph 
                (B).
    [(B) The applicable percentage for any class of mail or 
kind of mailer referred to in subparagraph (A) shall be the 
product derived by multiplying--
          [(i) the percentage which, for the most closely 
        corresponding regular-rate category, the institutional-
        costs contribution for such category represents 
        relative to the estimated costs attributable to such 
        category of mail, times
          [(ii)(I) one-twelfth, for fiscal year 1994;
          [(II) one-sixth, for fiscal year 1995;
          [(III) one-fourth, for fiscal year 1996;
          [(IV) one-third, for fiscal year 1997;
          [(V) five-twelfths, for fiscal year 1998; and
          [(VI) one-half, for any fiscal year after fiscal year 
        1998.
    [(C) Temporary special authority to permit the timely 
implementation of the preceding provisions of this paragraph is 
provided under section 3642.
    [(D) For purposes of establishing rates of postage under 
this subchapter for any of the classes of mail or kinds of 
mailers referred to in subparagraph (A), subclauses (I) through 
(V) of subparagraph (B)(ii) shall be deemed amended by striking 
the fraction specified in each such subclause and inserting 
``one-half''.]
    (a)(1) Except as otherwise provided in this section, rates 
of postage for a class of mail or kind of mailer under former 
section 4358, 4452(b), 4452(c), 4554(b), or 4554(c) of this 
title shall be established in accordance with section 3622.
    (2) For the purpose of this subsection, the term ``regular-
rate category'' means any class of mail or kind of mailer, 
other than a class or kind referred to in section 2401(c).
          [(4)(A)] (3)(A) Except as specified in subparagraph 
        (B), rates of postage for a class of mail or kind of 
        mailer under former section 4358 (d) or (e) of this 
        title shall be established so that postage on each 
        mailing of such mail shall be as nearly as practicable 
        5 percent lower than the postage for a corresponding 
        regular-rate category mailing.

           *       *       *       *       *       *       *

    [(5)] (4) The rates for any advertising under former 
section 4358(f) of this title shall be equal to 75 percent of 
the rates for advertising contained in the most closely 
corresponding regular-rate category of mail.
          [(6)] (5) The rates for mail matter under former 
        sections 4452 (b) and (c) of this title shall be 
        established as follows:
                  (A) * * *

           *       *       *       *       *       *       *

          [(7)] (6) The rates for mail matter under former 
        sections 4554 (b) and (c) of this title shall be 
        established so that postage on each mailing of such 
        mail shall be as nearly as practicable 5 percent lower 
        than the postage for a corresponding regular-rate 
        mailing.

           *       *       *       *       *       *       *

    (g)(1) * * *

           *       *       *       *       *       *       *

    (3) For purposes of this section and former section 4358(a) 
through (c) of this title, those copies of an issue of a 
publication entered within the county in which it is published, 
but distributed outside such county on postal carrier routes 
originating in the county of publication, shall be treated as 
if they were distributed within the county of publication.
    (4)(A) In the case of an issue of a publication, any number 
of copies of which are mailed at the rates of postage for a 
class of mail or kind of mailer under former section 4358(a) 
through (c) of this title, any copies of such issue which are 
distributed outside the county of publication (excluding any 
copies subject to paragraph (3)) shall be subject to rates of 
postage provided for under this paragraph.
    (B) The rates of postage applicable to mail under this 
paragraph shall be established in accordance with section 3622.
    (C) This paragraph shall not apply with respect to an issue 
of a publication unless the total paid circulation of such 
issue outside the county of publication (not counting 
recipients of copies subject to paragraph (3)) is less than 
5,000.

           *       *       *       *       *       *       *

    (n) In the administration of this section, matter that 
satisfies the circulation standards for requester publications 
shall not be excluded from being mailed at the rates for mail 
under former section 4358 solely because such matter is 
designed primarily for free circulation or for circulation at 
nominal rates, or fails to meet the requirements of former 
section 4354(a)(5).

[Sec. 3627. Adjusting free and reduced rates]

Sec. 3627. Adjusting free rates

    If Congress fails to appropriate an amount authorized under 
section 2401(c) of this title for any class of mail sent free 
of postage under section 3217 or 3403-3406 the rate for that 
class may be adjustedin accordance with the provisions of this 
subchapter so that the increased revenues received from the users of 
such class will equal the amount for that class that the Congress was 
to appropriate.

[Sec. 3628. Appellate review

    [A decision of the Governors to approve, allow under 
protest, or modify the recommended decision of the Postal Rate 
Commission may be appealed to any court of appeals of the 
United States, within 15 days after its publication by the 
Public Printer, by an aggrieved party who appeared in the 
proceedings under section 3624(a) of this title. The court 
shall review the decision, in accordance with section 706 of 
title 5, and chapter 158 and section 2112 of title 28, except 
as otherwise provided in this section, on the basis of the 
record before the Commission and the Governors. The court may 
affirm the decision or order that the entire matter be returned 
for further consideration, but the court may not modify the 
decision. The court may not suspend the effectiveness of the 
changes, or otherwise prevent them from taking effect until 
final disposition of the suit by the court. No court shall have 
jurisdiction to review a decision made by the Commission or 
Governors under this chapter except as provided in this 
section.]

           *       *       *       *       *       *       *


       SUBCHAPTER II--PROVISIONS RELATING TO COMPETITIVE PRODUCTS

Sec. 3631. Applicability; definitions and updates

    (a) Applicability.--This subchapter shall apply with 
respect to--
          (1) priority mail;
          (2) expedited mail;
          (3) mailgrams;
          (4) international mail; and
          (5) parcel post,
subject to any changes the Postal Regulatory Commission may 
make under section 3642.
    (b) Definition.--For purposes of this subchapter, the term 
``costs attributable'', as used with respect to a product, 
means the direct and indirect postal costs attributable to such 
product.
    (c) Rule of Construction.--Mail matter referred to in 
subsection (a) shall, for purposes of this subchapter, be 
considered to have the meaning given to such mail matter under 
the mail classification schedule.

Sec. 3632. Action of the Governors

    (a) Authority to Establish Rates and Classes.--The 
Governors shall establish rates and classes for products in the 
competitive category of mail in accordance with the 
requirements of this subchapter and regulations promulgated 
under section 3633.
    (b) Procedures.--
          (1) In general.--Rates and classes shall be 
        established in writing, complete with a statement of 
        explanation and justification, and the date as of which 
        each such rate or class takes effect.
          (2) Rates or classes of general applicability.--In 
        the case of rates or classes of general applicability 
        in the Nation as a whole or in any substantial region 
        of the Nation, the Governors shall cause each rate and 
        class decision under this section and the record of the 
        Governors' proceedings in connection with such decision 
        to be published in the Federal Register at least 30 
        days before the effective date of any new rates or 
        classes.
          (3) Rates or classes not of general applicability.--
        In the case of rates or classes not of general 
        applicability in the Nation as a whole or in any 
        substantial region of the Nation, the Governors shall 
        cause each rate and class decision under this section 
        and the record of the proceedings in connection with 
        such decision to be filed with the Postal Regulatory 
        Commission by such date before the effective date of 
        any new rates or classes as the Governors consider 
        appropriate, but in no case less than 15 days.
          (4) Criteria.--As part of the regulations required 
        under section 3633, the Postal Regulatory Commission 
        shall establish criteria for determining when a rate or 
        class established under this subchapter is or is not of 
        general applicability in the Nation as a whole or in 
        any substantial region of the Nation.
    (c) Transition Rule.--Until regulations under section 3633 
first take effect, rates and classes for competitive products 
shall remain subject to modification in accordance with the 
provisions of this chapter and section 407, as such provisions 
were as last in effect before the date of the enactment of this 
section.

Sec. 3633. Provisions applicable to rates for competitive products

    The Postal Regulatory Commission shall, within 18 months 
after the date of the enactment of this section, promulgate 
(and may from time to time thereafter revise) regulations--
          (1) to prohibit the subsidization of competitive 
        products by market-dominant products;
          (2) to ensure that each competitive product covers 
        its costs attributable; and
          (3) to ensure that all competitive products 
        collectively make a reasonable contribution to the 
        institutional costs of the Postal Service.

Sec. 3634. Assumed Federal income tax on competitive products income

    (a) Definitions.--For purposes of this section--
          (1) the term ``assumed Federal income tax on 
        competitive products income'' means the net income tax 
        that would be imposed by chapter 1 of the Internal 
        Revenue Code of 1986 on the Postal Service's assumed 
        taxable income from competitive products for the year; 
        and
          (2) the term ``assumed taxable income from 
        competitive products'', with respect to a year, refers 
        to the amount representing what would be the taxable 
        income of a corporation under the Internal Revenue Code 
        of 1986 for the year, if--
                  (A) the only activities of such corporation 
                were the activities of the Postal Service 
                allocable under section 2011(h) to competitive 
                products; and
                  (B) the only assets held by such corporation 
                were the assets of the Postal Service allocable 
                under section 2011(h) to such activities.
    (b) Computation and Transfer Requirements.--The Postal 
Service shall, for each year beginning with the year in which 
occurs the deadline for the Postal Service's first report to 
the Postal Regulatory Commission under section 3652(a)--
          (1) compute its assumed Federal income tax on 
        competitive products income for such year; and
          (2) transfer from the Competitive Products Fund to 
        the Postal Service Fund the amount of that assumed tax.
    (c) Deadline for Transfers.--Any transfer required to be 
made under this section for a year shall be due on or before 
the January 15th next occurring after the close of such year.

              [SUBCHAPTER III--TEMPORARY RATES AND CLASSES


[Sec. 3641. Temporary changes in rates and classes

    [(a) In any case in which the Postal Rate Commission fails 
to transmit a recommended decision on a change in rates of 
postage or in fees for postal services to the Governors in 
accordance with section 3624(c) of this title, the Postal 
Service may establish temporary changes in rates of postage and 
in fees for postal services in accordance with the proposed 
changes under consideration by the Commission. Such temporary 
changes may take effect upon such date as the Postal Service 
may determine, except that such temporary changes may take 
effect only after 10 days' notice in the Federal Register.
    [(b) Any temporary rate or fee established by the Postal 
Service under subsection (a) of this section shall be in 
accordance with the policies of this title and shall not exceed 
such amount as may be necessary for sufficient revenues to 
assure that the total estimated income, including 
appropriations, of the Postal Service shall, to the extent 
practicable, be equal to the total estimated costs of the 
Postal Service.
    [(c) Notwithstanding the provisions of subsection (b) of 
this section, the Postal Service may not establish any 
temporary rate for a class of mail or any temporary fee for a 
postal service which is more than the permanent rate or fee 
requested for such class or postal service by the Postal 
Service under section 3622 of this title.
    [(d) Any temporary change in rates of postage or in fees 
for postal services made by the Postal Service under this 
section shall remain in effect no longer than 150 days after 
the date on which the Commission transmits its recommended 
decision to the Governors under section 3624(d) of this title, 
unless such temporary change is terminated by the Governors 
before the expiration of such period.
    [(e) If the Postal Rate Commission does not transmit to the 
Governors within 90 days after the Postal Service has 
submitted,or within 30 days after the Postal Service has 
resubmitted, to the Commission a request for a recommended decision on 
a change in the mail classification schedule (after such schedule is 
established under section 3623 of this title), the Postal Service, upon 
10 days' notice in the Federal Register, may place into effect 
temporary changes in the mail classification schedule in accordance 
with proposed changes under consideration by the Commission. Any 
temporary change shall be effective for a period ending not later than 
30 days after the Commission has transmitted its recommended decision 
to the Governors.
    [(f) If, under section 3628 of this title, a court orders a 
matter returned to the Commission for further consideration, 
the Postal Service, with the consent of the Commission, may 
place into effect temporary changes in rates of postage, and 
fees for postal services, or in the mail classification 
schedule.

[Sec. 3642. Special authority relating to reduced-rate categories of 
                    mail

    [(a) In order to permit the timely implementation of 
section 3626(a)(3), the Postal Service may establish temporary 
rates of postage for any class of mail or kind of mailer 
referred to in section 3626(a)(3)(A).
    [(b) Any exercise of authority under this section shall be 
in conformance with the requirements of section 3626(a), 
subject to the following:
          [(1) All attributable costs and institutional-costs 
        contributions assumed shall be the same as those which 
        were assumed for purposes of the then most recent 
        proceedings under subchapter II pursuant to which rates 
        of postage for the class of mail or kind of mailer 
        involved were last adjusted.
          [(2) Any temporary rate established under this 
        section shall take effect upon such date as the Postal 
        Service may determine, except that--
                  [(A) such a rate may take effect only after 
                10 days' notice in the Federal Register; and
                  [(B) no such rate may take effect after 
                September 30, 1998.
          [(3) A temporary rate under this section may remain 
        in effect no longer than the last day of the fiscal 
        year in which it first takes effect.
          [(4) Authority under this section may not be 
        exercised in a manner that would result in more than 1 
        change taking effect under this section, during the 
        same fiscal year, in the rates of postage for a 
        particular class of mail or kind of mailer, except as 
        provided in paragraph (5).
          [(5) Nothing in paragraph (4) shall prevent an 
        adjustment under this section in rates for a class of 
        mail or kind of mailer with respect to which any rates 
        took effect under this section earlier in the same 
        fiscal year if--
                  [(A) the rates established for such class of 
                mail or kind of mailer by the earlier 
                adjustment are superseded by new rates 
                established under subchapter II; and
                  [(B) authority under this paragraph has not 
                previously been exercised with respect to such 
                class of mail or kind of mailer based on the 
                new rates referred to in subparagraph (A).
    [(c) The Postal Service may prescribe any regulations which 
may be necessary to carry out this section, including 
provisions governing the coordination of adjustments under this 
section with any other adjustments under this title.
    [(d) Notwithstanding any provision of section 3626(a)(3)(B) 
or subsection (a) of this section, any temporary rates 
established under this section for non-letter-shaped mail under 
former section 4452(b) or 4452(c) of this title shall not be 
lower than the rates in effect for such mail on September 30, 
1993.]

  SUBCHAPTER III--PROVISIONS RELATING TO EXPERIMENTAL AND NEW PRODUCTS

Sec. 3641. Market tests of experimental products

    (a) Authority.--
          (1) In general.--The Postal Service may conduct 
        market tests of experimental products in accordance 
        with this section.
          (2) Provisions waived.--A product shall not, while it 
        is being tested under this section, be subject to the 
        requirements of sections 3622, 3633, or 3642, or 
        regulations promulgated under those sections.
    (b) Conditions.--A product may not be tested under this 
section unless it satisfies each of the following:
          (1) Significantly different product.--The product is, 
        from the viewpoint of the mail users, significantly 
        different from all products offered by the Postal 
        Service within the 2-year period preceding the start of 
        the test.
          (2) Market disruption.--The introduction or continued 
        offering of the product will not create an unfair or 
        otherwise inappropriate competitive advantage for the 
        Postal Service or any mailer, particularly in regard to 
        small business concerns (as defined under subsection 
        (h)).
          (3) Correct categorization.--The Postal Service 
        identifies the product, for the purpose of a test under 
        this section, as either market dominant or competitive, 
        consistent with the criteria under section 3642(b)(1). 
        Costs and revenues attributable to a product identified 
        as competitive shall be included in any determination 
        under section 3633(3) (relating to provisions 
        applicable to competitive products collectively).
    (c) Notice.--
          (1) In general.--At least 30 days before initiating a 
        market test under this section, the Postal Service 
        shall file with the Postal Regulatory Commission and 
        publish in the Federal Register a notice--
                  (A) setting out the basis for the Postal 
                Service's determination that the market test is 
                covered by this section; and
                  (B) describing the nature and scope of the 
                market test.
          (2) Safeguards.--For a competitive experimental 
        product, the provisions of section 504(g) shall be 
        available with respect to any information required to 
        be filed under paragraph (1) to the same extent and in 
        the same manner as in the case of any matter described 
        in section 504(g)(1). Nothing in paragraph (1) shall be 
        considered to permit or require the publication of any 
        information as to which confidential treatment is 
        accorded under the preceding sentence (subject to the 
        same exception as set forth in section 504(g)(3)).
    (d) Duration.--
          (1) In general.--A market test of a product under 
        this section may be conducted over a period of not to 
        exceed 24 months.
          (2) Extension authority.--If necessary in order to 
        determine the feasibility or desirability of a product 
        being tested under this section, the Postal Regulatory 
        Commission may, upon written application of the Postal 
        Service (filed not later than 60 days before the date 
        as of which the testing of such product would otherwise 
        be scheduled to terminate under paragraph (1)), extend 
        the testing of such product for not to exceed an 
        additional 12 months.
    (e) Dollar-Amount Limitation.--
          (1) In general.--A product may be tested under this 
        section only if the total revenues that are 
        anticipated, or in fact received, by the Postal Service 
        from such product do not exceed $10,000,000 nationwide 
        in any year, subject to paragraph (2) and subsection 
        (g). In carrying out the preceding sentence, the Postal 
        Regulatory Commission may limit the amount of revenues 
        the Postal Service may obtain from any particular 
        geographic market as necessary to prevent market 
        disruption (as defined in subsection (b)(2)).
          (2) Exemption authority.--The Postal Regulatory 
        Commission may, upon written application of the Postal 
        Service, exempt the market test from the limit in 
        paragraph (1) if the total revenues that are 
        anticipated, or in fact received, by the Postal Service 
        from such product do not exceed $50,000,000 in any 
        year, subject to subsection (g). In reviewing an 
        application under this paragraph, the Postal Regulatory 
        Commission shall approve such application if it 
        determines that--
                  (A) the product is likely to benefit the 
                public and meet an expected demand;
                  (B) the product is likely to contribute to 
                the financial stability of the Postal Service; 
                and
                  (C) the product is not likely to result in 
                unfair or otherwise inappropriate competition.
    (f) Cancellation.--If the Postal Regulatory Commission at 
any time determines that a market test under this section 
fails, with respect to any particular product, to meet one or 
more of the requirements of this section, it may order the 
cancellation of the test involved or take such other action as 
it considers appropriate. A determination under this subsection 
shall be made in accordance with such procedures as the 
Commission shall by regulation prescribe.
    (g) Adjustment for Inflation.--For purposes of each year 
following the year in which occurs the deadline for the Postal 
Service's first report to the Postal Regulatory Commission 
under section 3652(a), each dollar amount contained in this 
section shall be adjusted by the change in the Consumer Price 
Index for such year (as determined under regulations of the 
Commission).
    (h) Definition of a Small Business Concern.--The criteria 
used in defining small business concerns or otherwise 
categorizing business concerns as small business concerns 
shall, for purposes of this section, be established by the 
Postal Regulatory Commission in conformance with the 
requirements of section 3 of the Small Business Act.
    (i) Effective Date.--Market tests under this subchapter may 
be conducted in any year beginning with the first year in which 
occurs the deadline for the Postal Service's first report to 
the Postal Regulatory Commission under section 3652(a).

Sec. 3642. New products and transfers of products between the market-
                    dominant and competitive categories of mail

    (a) In General.--Upon request of the Postal Service or 
users of the mails, or upon its own initiative, the Postal 
Regulatory Commission may change the list of market-dominant 
products under section 3621 and the list of competitive 
products under section 3631 by adding new products to the 
lists, removing products from the lists, or transferring 
products between the lists.
    (b) Criteria.--All determinations by the Postal Regulatory 
Commission under subsection (a) shall be made in accordance 
with the following criteria:
          (1) The market-dominant category of products shall 
        consist of each product in the sale of which the Postal 
        Service exercises sufficient market power that it can 
        effectively set the price of such product substantially 
        above costs, raise prices significantly, decrease 
        quality, or decrease output, without risk of losing 
        business to other firms offering similar products. The 
        competitive category of products shall consist of all 
        other products.
          (2) Exclusion of products covered by postal 
        monopoly.--A product covered by the postal monopoly 
        shall not be subject to transfer under this section 
        from the market-dominant category of mail. For purposes 
        of the preceding sentence, the term ``product covered 
        by the postal monopoly'' means any product the 
        conveyance or transmission of which is reserved to the 
        United States under section 1696 of title 18, subject 
        to the same exception as set forth in the last sentence 
        of section 409(e)(1).
          (3) Additional considerations.--In making any 
        decision under this section, due regard shall be given 
        to--
                  (A) the availability and nature of 
                enterprises in the private sector engaged in 
                the delivery of the product involved;
                  (B) the views of those who use the product 
                involved on the appropriateness of the proposed 
                action; and
                  (C) the likely impact of the proposed action 
                on small business concerns (within the meaning 
                of section 3641(h)).
    (c) Transfers of Subclasses and Other Subordinate Units 
Allowable.--Nothing in this title shall be considered to 
prevent transfers under this section from being made by reason 
of the fact that they would involve only some (but not all) of 
the subclasses or other subordinate units of the class of mail 
or type of postal service involved (without regard to 
satisfaction of minimum quantity requirements standing alone).
    (d) Notification and Publication Requirements.--
          (1) Notification requirement.--The Postal Service 
        shall, whenever it requests to add a product or 
        transfer a product to a different category, file with 
        the Postal Regulatory Commission and publish in the 
        Federal Register a notice setting out the basis for its 
        determination that the product satisfies the criteria 
        under subsection (b) and, in the case of a request to 
        add a product or transfer a product to the competitive 
        category of mail, that the product meets the 
        regulations promulgated by the Postal Regulatory 
        Commission pursuant to section 3633. The provisions of 
        section 504(g) shall be available with respect to any 
        information required to be filed.
          (2) Publication requirement.--The Postal Regulatory 
        Commission shall, whenever it changes the list of 
        products in the market-dominant or competitive category 
        of mail, prescribe new lists of products. The revised 
        lists shall indicate how and when any previous lists 
        (including the lists under sections 3621 and 3631) are 
        superseded, and shall be published in the Federal 
        Register.
    (e) Notification Requirement.--The Postal Regulatory 
Commission shall, whenever it reaches a conclusion that a 
product or products should be transferred between the list of 
market-dominant products under section 3621 and the list of 
competitive products under section 3631, immediately notify the 
appropriate committees of the Congress. No such transfer may 
take effect less than 12 months after such conclusion.
    (f) Prohibition.--Except as provided in section 3641, no 
product that involves the carriage of letters, printed matter, 
or mailable packages may be offered by the Postal Service 
unless it has been assigned to the market-dominant or 
competitive category of mail (as appropriate) either--
          (1) under this subchapter; or
          (2) by or under any other provision of law.

      SUBCHAPTER IV--REPORTING REQUIREMENTS AND RELATED PROVISIONS

Sec. 3651. Annual reports by the Commission

    (a) In General.--The Postal Regulatory Commission shall 
submit an annual report to the President and the Congress 
concerning the operations of the Commission under this title, 
including the extent to which regulations are achieving the 
objectives under sections 3622 and 3633, respectively.
    (b) Additional Information.--In addition to the information 
required under subsection (a), each report under this section 
shall also include, with respect to the period covered by such 
report, an estimate of the costs incurred by the Postal Service 
in providing--
          (1) postal services to areas of the Nation where, in 
        the judgment of the Postal Regulatory Commission, the 
        Postal Service either would not provide services at all 
        or would not provide such services in accordance with 
        the requirements of this title if the Postal Service 
        were not required to provide prompt, reliable, and 
        efficient services to patrons in all areas and all 
        communities, including as required under the first 
        sentence of section 101(b);
          (2) free or reduced rates for postal services as 
        required by this title; and
          (3) other public services or activities which, in the 
        judgment of the Postal Regulatory Commission, would not 
        otherwise have been provided by the Postal Service but 
        for the requirements of law.
The Commission shall detail the bases for its estimates and the 
statutory requirements giving rise to the costs identified in 
each report under this section.
    (c) Information From Postal Service.--The Postal Service 
shall provide the Postal Regulatory Commission with such 
information as may, in the judgment of the Commission, be 
necessary in order for the Commission to prepare its reports 
under this section.

Sec. 3652. Annual reports to the Commission

    (a) Costs, Revenues, and Rates.--Except as provided in 
subsection (c), the Postal Service shall, no later than 90 days 
after the end of each year, prepare and submit to the Postal 
Regulatory Commission a report (together with such nonpublic 
annex thereto as the Commission may require under subsection 
(e))--
          (1) which shall analyze costs, revenues, and rates, 
        using such methodologies as the Commission shall by 
        regulation prescribe, and in sufficient detail to 
        demonstrate that the rates in effect for all products 
        during such year complied with all applicable 
        requirements of this title; and
          (2) which shall, for each market-dominant product 
        provided in such year, provide--
                  (A) market information, including mail 
                volumes; and
                  (B) measures of the quality of service 
                afforded by the Postal Service in connection 
                with such product, including--
                          (i) the service standard applicable 
                        to such product;
                          (ii) the level of service (described 
                        in terms of speed of delivery and 
                        reliability) provided; and
                          (iii) the degree of customer 
                        satisfaction with the service provided.
Before submitting a report under this subsection (including any 
annex thereto and the information required under subsection 
(b)), the Postal Service shall have the information contained 
in such report (and annex) audited by the Inspector General. 
The results of any such audit shall be submitted along with the 
report to which it pertains.
    (b) Information Relating to Workshare Discounts.--
          (1) In general.--The Postal Service shall include, in 
        each report under subsection (a), the following 
        information with respect to each market-dominant 
        product for which a workshare discount was in effect 
        during the period covered by such report:
                  (A) The per-item cost avoided by the Postal 
                Service by virtue of such discount.
                  (B) The percentage of such per-item cost 
                avoided that the per-item workshare discount 
                represents.
                  (C) The per-item contribution made to 
                institutional costs.
          (2) Workshare discount defined.--For purposes of this 
        subsection, the term ``workshare discount'' refers to 
        presorting, barcoding, dropshipping, and other similar 
        discounts, as further defined under regulations which 
        the Postal Regulatory Commission shall prescribe.
    (c) Market Tests.--In carrying out subsections (a) and (b) 
with respect to experimental products offered through market 
tests under section 3641 in a year, the Postal Service--
          (1) may report summary data on the costs, revenues, 
        and quality of service by market test; and
          (2) shall report such data as the Postal Regulatory 
        Commission requires.
    (d) Supporting Matter.--The Postal Regulatory Commission 
shall have access, in accordance with such regulations as the 
Commission shall prescribe, to the working papers and any other 
supporting matter of the Postal Service and the Inspector 
General in connection with any information submitted under this 
section.
    (e) Content and Form of Reports.--
          (1) In general.--The Postal Regulatory Commission 
        shall, by regulation, prescribe the content and form of 
        the public reports (and any nonpublic annex and 
        supporting matter relating thereto) to be provided by 
        the Postal Service under this section. In carrying out 
        this subsection, the Commission shall give due 
        consideration to--
                  (A) providing the public with adequate 
                information to assess the lawfulness of rates 
                charged;
                  (B) avoiding unnecessary or unwarranted 
                administrative effort and expense on the part 
                of the Postal Service; and
                  (C) protecting the confidentiality of 
                commercially sensitive information.
          (2) Revised requirements.--The Commission may, on its 
        own motion or on request of an interested party, 
        initiate proceedings (to be conducted in accordance 
        with regulations that the Commission shall prescribe) 
        to improve the quality, accuracy, or completeness of 
        Postal Service data required by the Commission under 
        this subsection whenever it shall appear that--
                  (A) the attribution of costs or revenues to 
                products has become significantly inaccurate or 
                can be significantly improved;
                  (B) the quality of service data has become 
                significantly inaccurate or can be 
                significantly improved; or
                  (C) such revisions are, in the judgment of 
                the Commission, otherwise necessitated by the 
                public interest.
    (f) Confidential Information.--
          (1) In general.--If the Postal Service determines 
        that any document or portion of a document, or other 
        matter, which it provides to the Postal Regulatory 
        Commission in a nonpublic annex under this section or 
        pursuant to subsection (d) contains information which 
        is described in section 410(c) of this title, or exempt 
        from public disclosure under section 552(b) of title 5, 
        the Postal Service shall, at the time of providing such 
        matter to the Commission, notify the Commission of its 
        determination, in writing, and describe with 
        particularity the documents (or portions of documents) 
        or other matter for which confidentiality is sought and 
        the reasons therefor.
          (2) Treatment.--Any information or other matter 
        described in paragraph (1) to which the Commission 
        gains access under this section shall be subject to 
        paragraphs (2) and (3) of section 504(g) in the same 
        way as if the Commission had received notification with 
        respect to such matter under section 504(g)(1).
    (g) Other Reports.--The Postal Service shall submit to the 
Postal Regulatory Commission, together with any other 
submission that it is required to make under this section in a 
year, copies of its then most recent--
          (1) comprehensive statement under section 2401(e);
          (2) performance plan under section 2803; and
          (3) program performance reports under section 2804.

Sec. 3653. Annual determination of compliance

    (a) Opportunity for Public Comment.--After receiving the 
reports required under section 3652 for any year, the Postal 
Regulatory Commission shall promptly provide an opportunity for 
comment on such reports by users of the mails, affected 
parties, and an officer of the Commission who shall be required 
to represent the interests of the general public.
    (b) Determination of Compliance or Noncompliance.--Not 
later than 90 days after receiving the submissions required 
under section 3652 with respect to a year, the Postal 
Regulatory Commission shall make a written determination as 
to--
          (1) whether any rates or fees in effect during such 
        year (for products individually or collectively) were 
        not in compliance with applicable provisions of this 
        chapter (or regulations promulgated thereunder);
          (2) whether any performance goals established under 
        section 2803 or 2804 for such year were not met; and
          (3) whether any market-dominant product failed to 
        meet any service standard during such year.
If, with respect to a year, no instance of noncompliance is 
found under this subsection to have occurred in such year, the 
written determination shall be to that effect.
    (c) If Any Noncompliance Is Found.--If, for a year, a 
timely written determination of noncompliance is made under 
subsection (b), the Postal Regulatory Commission shall take 
appropriate action in accordance with subsections (c)-(e) of 
section 3662 (as if a complaint averring such noncompliance had 
been duly filed and found under such section to be justified).
    (d) Rebuttable Presumption.--A timely written determination 
described in the last sentence of subsection (b) shall, for 
purposes of any proceeding under section 3662, create a 
rebuttable presumption of compliance by the Postal Service 
(with regard to the matters described in paragraphs (1) through 
(3) of subsection (b)) during the year to which such 
determination relates.

            [SUBCHAPTER IV--POSTAL SERVICES AND COMPLAINTS]


SUBCHAPTER V--POSTAL SERVICES, COMPLAINTS, AND JUDICIAL REVIEW

           *       *       *       *       *       *       *


[Sec. 3662. Rate and service complaints

    [Interested parties who believe the Postal Service is 
charging rates which do not conform to the policies set out in 
this title or who believe that they are not receiving postal 
service in accordance with the policies of this title may lodge 
a complaint with the Postal Rate Commission in such form and in 
such manner as it may prescribe. The Commission may in its 
discretion hold hearings on such complaint. If the Commission, 
in a matter covered by subchapter II of this chapter, 
determines the complaint to be justified, it shall, after 
proceedings in conformity with section 3624 of this title, 
issue a recommended decision which shall be acted upon in 
accordance with the provisions of section 3625 of this title 
and subject to review in accordance with the provisions of 
section 3628 of this title. If a matter not covered by 
subchapter II of this chapter is involved, and the Commission 
after hearing finds the complaint to be justified, it shall 
render a public report thereon to the Postal Service which 
shall take such action as it deems appropriate.

[Sec. 3663. Annual report on international services

    [(a) Not later than July 1 of each year, the Postal Rate 
Commission shall transmit to each House of Congress a 
comprehensive report of the costs, revenues, and volumes 
accrued by the Postal Service in connection with mail matter 
conveyed between the United States and other countries for the 
previous fiscal year.
    [(b) Not later than March 15 of each year, the Postal 
Service shall provide to the Postal Rate Commission such data 
as the Commission may require to prepare the report required 
under subsection (a) of this section. Data shall be provided in 
sufficient detail to enable the Commission to analyze the 
costs, revenues, and volumes for each international mail 
product or service, under the methods determined appropriate by 
the Commission for the analysis of rates for domestic mail.]

Sec. 3662. Rate and service complaints

    (a) In General.--Interested persons (including an officer 
of the Postal Regulatory Commission representing the interests 
of the general public) who believe the Postal Service is not 
operating in conformance with the requirements of chapter 1, 4, 
or 6, or this chapter (or regulations promulgated under any of 
those chapters) may lodge a complaint with the Postal 
Regulatory Commission in such form and manner as the Commission 
may prescribe.
    (b) Prompt Response Required.--
          (1) In general.--The Postal Regulatory Commission 
        shall, within 90 days after receiving a complaint under 
        subsection (a), either--
                  (A) begin proceedings on such complaint; or
                  (B) issue an order dismissing the complaint 
                (together with a statement of the reasons 
                therefor).
          (2) Treatment of complaints not timely acted on.--For 
        purposes of section 3663, any complaint under 
        subsection (a) on which the Commission fails to act in 
        the time and manner required by paragraph (1) shall be 
        treated in the same way as if it had been dismissed 
        pursuant to an order issued by the Commission on the 
        last day allowable for the issuance of such order under 
        paragraph (1).
    (c) Action Required If Complaint Found to Be Justified.--If 
the Postal Regulatory Commission finds the complaint to be 
justified, it shall order that the Postal Service take such 
action as the Commission considers appropriate in order to 
achieve compliance with the applicable requirements and to 
remedy the effects of any noncompliance (such as ordering 
unlawful rates to be adjusted to lawful levels, ordering the 
cancellation of market tests, ordering the Postal Service to 
discontinue providing loss-making products, or requiring the 
Postal Service to make up for revenue shortfalls in competitive 
products).
    (d) Suspension Authority.--The Postal Regulatory Commission 
may suspend implementation of rates or classifications under 
section 3632(b)(3) for a limited period of time pending 
expedited proceedings under this section. In evaluating whether 
circumstances warrant suspension, the Commission shall consider 
factors such as (1) whether there is a substantial likelihood 
that such rate or classification will violate the requirements 
of chapter 1, 4, or 6, or this chapter (or regulations 
promulgated under any of those chapters), (2) whether any 
persons would suffer substantial injury, loss, or damage absent 
a suspension, (3) whether the Postal Service or any other 
persons would suffer substantial injury, loss, or damage under 
a suspension, and (4) the public interest.
    (e) Authority to Order Fines in Cases of Deliberate 
Noncompliance.--In addition, in cases of deliberate 
noncompliance by the Postal Service with the requirements of 
this title, the Postal Regulatory Commission may order, based 
on the nature, circumstances, extent, and seriousness of the 
noncompliance, a fine (in the amount specified by the 
Commission in its order) for each incidence of noncompliance. 
Fines resulting from the provision of competitive products 
shall be paid out of the Competitive Products Fund established 
in section 2011. All receipts from fines imposed under this 
subsection shall be deposited in the general fund of the 
Treasury of the United States.

Sec. 3663. Appellate review

    A person adversely affected or aggrieved by a final order 
or decision of the Postal Regulatory Commission may, within 30 
days after such order or decision becomes final, institute 
proceedings for review thereof by filing a petition in the 
United States Court of Appeals for the District of Columbia. 
The court shall review the order or decision in accordance with 
section 706 of title 5, and chapter 158 and section 2112 of 
title 28, on the basis of the record before the Commission. For 
purposes of this section, the term ``person'' includes the 
Postal Service.

Sec. 3664. Enforcement of orders

    The several district courts have jurisdiction specifically 
to enforce, and to enjoin and restrain the Postal Service from 
violating, any order issued by the Postal Regulatory 
Commission.

                        [SUBCHAPTER V--GENERAL]


                         SUBCHAPTER VI--GENERAL

Sec. 3681. Reimbursement

    No mailer may be reimbursed for any amount paid under any 
rate or fee which, after such payment, is determined to have 
been unlawful after proceedings in accordance with the 
provisions of [section 3628] sections 3662 through 3664 of this 
title, or is superseded by a lower rate or fee established 
under subchapter II of this chapter.

[Sec. 3682. Size and weight limits

    [The Postal Service may establish size and weight 
limitations for mail matter in the same manner as prescribed 
for changes in mail classification under subchapter II of this 
chapter.]

Sec. 3682. Size and weight limits

    The Postal Service may establish size and weight 
limitations for mail matter in the market-dominant category of 
mail consistent with regulations the Postal Regulatory 
Commission may prescribe under section 3622. The Postal Service 
may establish size and weight limitations for mail matter in 
the competitive category of mail consistent with its authority 
under section 3632.

           *       *       *       *       *       *       *


Sec. 3684. Limitations

    Except as provided in section 3627 of this title, no 
provision of this chapter shall be construed to give authority 
to the Governors to make any change in any provision [of 
section 3682 or 3683 or chapter 30, 32, or 34 of this title.] 
of this title.

           *       *       *       *       *       *       *


Sec. 3686. Bonus authority

    (a) In General.--The Postal Service may establish one or 
more programs to provide bonuses or other rewards to officers 
and employees of the Postal Service to achieve the objectives 
of this chapter.
    (b) Waiver of Limitation on Compensation.--
          (1) In general.--Under any such program, the Postal 
        Service may award a bonus or other reward in excess of 
        the limitation set forth in the last sentence of 
        section 1003(a), if such program has been approved 
        under paragraph (2).
          (2) Approval process.--If the Postal Service wishes 
        to have the authority, under any program described in 
        subsection (a), to award bonuses or other rewards in 
        excess of the limitation referred to in paragraph (1)--
                  (A) the Postal Service shall make an 
                appropriate request to the Postal Regulatory 
                Commission, in such form and manner as the 
                Commission requires; and
                  (B) the Postal Regulatory Commission shall 
                approve any such request if it finds that the 
                program is likely to achieve the objectives of 
                this chapter.
          (3) Revocation authority.--If the Postal Regulatory 
        Commission finds that a program previously approved 
        under paragraph (2) is not achieving the objectives of 
        this chapter, the Commission may revoke or suspend the 
        authority of the Postal Service to continue such 
        program until such time as appropriate corrective 
        measures have, in the judgment of the Commission, been 
        taken.
    (c) Reporting Requirement Relating to Bonuses or Other 
Rewards.--Included in its comprehensive statement under section 
2401(e) for any period shall be--
          (1) the name of each person receiving a bonus or 
        other reward during such period which would not have 
        been allowable but for the provisions of subsection 
        (b);
          (2) the amount of the bonus or other reward; and
          (3) the amount by which the limitation referred to in 
        subsection (b)(1) was exceeded as a result of such 
        bonus or other reward.

Sec. 3687. Workshare discounts

    (a) In General.--As part of the regulations established 
under section 3622(a), the Postal Regulatory Commission shall 
establish rules for workshare discounts that ensure that 
workshare discounts do not exceed the cost that the Postal 
Service avoids as the result of private sector workshare 
activity, except--
          (1) where the discount is associated with a new 
        product or service or with a change to an existing 
        product or service and is necessary, over a period of 
        time not to exceed 4 years, to induce mailer behavior 
        that will enable the new or changed product or service 
        in furtherance of the overall economically efficient 
        operation of the Postal Service;
          (2) to the extent that a reduction in the discount 
        would lead to a loss of volume in the affected category 
        and reduce the aggregate contribution to institutional 
        costs of the Postal Service, from the mail matter 
        subject to the discount, below what it otherwise would 
        have been if the discount had not been reduced to costs 
        avoided; would result in a further increase in the 
        rates paid by mailers not able to take advantage of the 
        discount; or would impede the efficient operation of 
        the Postal Service;
          (3) where the amount of the discount above costs 
        avoided is necessary to mitigate rate shock and will be 
        phased out over time; or
          (4) where the workshare discount is provided in 
        connection with subclasses of mail consisting 
        exclusively of mail matter of educational, cultural, or 
        scientific value.
    (b) Reporting Requirement.--Whenever the Postal Service 
establishes or maintains a workshare discount, the Postal 
Service shall, at the time it publishes the workshare discount 
rate, file with the Postal Regulatory Commission a detailed 
report and explanation of its reasons for establishing or 
maintaining the rate, setting forth the data, economic 
analyses, and other information relied on by the Postal Service 
to justify the rate.
    (c) Definition.--For purposes of this section, the term 
``workshare discount'' refers to rate discounts provided to 
mailers for presorting, prebarcoding, handling, or 
transportation, as further defined by the Postal Regulatory 
Commission as part of regulations established under section 
3622(a).

                     PART V--TRANSPORTATION OF MAIL

Chap.                                                               Sec.
50. General.......................................................  5001
[52. Transportation of Mail by Surface Carrier.................... 5201]
     * * * * * * *

CHAPTER 50--GENERAL

           *       *       *       *       *       *       *



Sec. 5001. Provisions for carrying mail

    The Postal Service shall provide for the transportation of 
mail in accordance with the policies established under section 
[101(e) and (f)] 101(f) and (g) of this title and the 
provisions of this chapter. Notwithstanding any other provision 
of this title, the Postal Service may make arrangements on a 
temporary basis for the transportation of mail when, as 
determined by the Postal Service, an emergency arises. Such 
arrangements shall terminate when the emergency ceases and the 
Postal Service is promptly able to secure transportation 
services under other provisions of this title.

           *       *       *       *       *       *       *


Sec. 5005. Mail transportation

    (a) The Postal Service may obtain mail transportation 
service--
          [(1) from common carriers by rail and motor vehicle 
        or persons as provided in chapter 52 of this title;]
          [(2)] (1) from air carriers as provided in chapter 54 
        of this title;
          [(3)] (2) from water carriers as provided in chapter 
        56 of this title; and
          [(4)] (3) by contract from any person [(as defined in 
        section 5201(6) of this title)] or carrier for surface 
        and water transportation under such terms and 
        conditions as it deems appropriate, subject to the 
        provisions of this section.
    (b)(1) Contracts for the transportation of mail procured 
under subsection [(a)(4)] (a)(3) of this section shall be for 
periods not in excess of 4 years [(or where the Postal Service 
determines that special conditions or the use of special 
equipment warrants, not in excess of 6 years)] (or such longer 
period of time as may be determined by the Postal Service to be 
advisable or appropriate) and shall be entered into only after 
advertising a sufficient time previously for proposals. The 
Postal Service, with the consent of the holder of any such 
contract, may adjust the compensation allowedunder that 
contract for increased or decreased costs resulting from changed 
conditions occurring during the term of the contract.
    (2) A contract under subsection [(a)(4)] (a)(3) of this 
section may be renewed at the existing rate by mutual agreement 
between the contractor or subcontractor and the Postal Service.

           *       *       *       *       *       *       *

    (c) The Postal Service, in determining whether to obtain 
transportation of mail [by carrier or person under subsection 
(a)(1) of this section, by contract under subsection (a)(4) of 
this section, or] by contract under subsection (a)(3) of this 
section or by Government motor vehicle, shall use the mode of 
transportation which best serves the public interest, due 
consideration being given to the cost of the transportation 
service under each mode.

           *       *       *       *       *       *       *


         [CHAPTER 52--TRANSPORTATION OF MAIL BY SURFACE CARRIER

[Sec.
[5201. Definitions.
[5202. Applicability.
[5203. Authorization of service by carrier.
[5204. Changes in service; placement of equipment.
[5205. Evidence of service.
[5206. Fines and deductions.
[5207. Surface Transportation Board to fix rates.
[5208. Procedures.
[5209. Special rates.
[5210. Intermodal transportation.
[5211. Statistical studies.
[5212. Special contracts.
[5213. Carrier operations; receipts; expenditures.
[5214. Agreements with passenger common carriers by motor vehicle.
[5215. Star route certification.

[Sec. 5201. Definitions

    [For purposes of this chapter--
          [(1) ``Board'' means the Surface Transportation 
        Board;
          [(2) ``carrier'' and ``regulated surface carrier'' 
        mean a railroad, a freight forwarder, or a motor 
        carrier;
          [(3) ``railroad'' means a railway common carrier, 
        including an electric urban and interurban railway 
        common carrier;
          [(4) ``freight forwarder'' means any regulated 
        freight forwarder which holds itself out to the general 
        public as a carrier to transport or provide 
        transportation of property as authorized by a 
        registration issued by the Board;
          [(5) ``motor carrier'' means a motor carrier, except 
        a passenger-carrying motor vehicle of such a carrier, 
        within the meaning of section 13102(12) of title 49, 
        that holds a registration issued by the Board;
          [(6) ``person'' includes any person other than a 
        carrier holding a certificate or registration issued by 
        the Board; and
          [(7) ``mail'' includes equipment and supplies of the 
        Postal Service.

[Sec. 5202. Applicability

    [This chapter applies to mail transportation performed by 
any person or carrier or carrier combination regardless of the 
mode of transportation actually used to provide the service.

[Sec. 5203. Authorization of service by carrier

    [(a) The Postal Service may establish mail routes and 
authorize mail transportation service thereon.
    [(b) A carrier shall transport mail offered for 
transportation by the Postal Service in the manner, under the 
conditions, and with the service prescribed by the Postal 
Service. A carrier is entitled to receive fair and reasonable 
compensation for the transportation and service connected 
therewith.
    [(c) The Postal Service shall determine the trains or motor 
vehicles upon which mail shall be transported, except that no 
carrier shall be compelled to transport mail on any train or 
vehicle which is operated exclusively for the transportation of 
passengers and their baggage.
    [(d) A carrier shall transport with due speed such mail as 
the Postal Service directs under this section.
    [(e) No carrier shall be required to serve territory it is 
not otherwise authorized to serve, to provide service for the 
Postal Service at a rate which is less than compensatory cost, 
or to provide service at a detriment to the carrier or its 
other customers.
    [(f) Any order or determination of the Postal Service 
providing for the transportation of mail by a motor carrier 
shall be filed with the Board. If the Board finds, within 90 
days after the filing, that the order or determination will be 
detrimental to the motor carrier or its other customers, or 
that such carrier does not operate equipment suitable for the 
transportation of mail, the order or determination shall be 
terminated.
    [(g) An order or determination of the Postal Service under 
this section shall be consistent with the orders of the Board 
under sections 5207 and 5208 of this title.

[Sec. 5204. Changes in service; placement of equipment

    [(a) The Postal Service may authorize, according to the 
need therefor, new or additional mail transportation service by 
carriers at the rate or compensation fixed under this chapter. 
It may reduce or discontinue service with pro rata reductions 
in compensation and indemnity for the loss of reasonable 
investment in equipment used exclusively for mail.
    [(b) A railroad shall place cars used for full or apartment 
post office service in position at such times before departure 
as the Postal Service directs.

[Sec. 5205. Evidence of service

    [A carrier shall submit evidence of its performance of mail 
transportation service, signed by an authorized official, in 
such form and at such times as the Postal Service requires. 
Mail transportation service is considered that of the carrier 
performing it regardless of the ownership of the property used 
by the carrier.

[Sec. 5206. Fines and deductions

    [(a) The Postal Service may fine any carrier an amount not 
to exceed $500 for each day the carrier refuses to perform mail 
transportation services required by it at rates or compensation 
established under this chapter.
    [(b) The Postal Service shall fine a carrier an amount it 
deems reasonable for failure or refusal by that carrier to 
transport mail as required by the Postal Service under section 
5203 of this title.
    [(c) The Board may make deductions from the compensation of 
a carrier for failure to perform mail transportation service as 
required under section 5203 of this title. If the failure to 
perform is due to the fault of the carrier, it may deduct a sum 
not exceeding twice the compensation applying to such service. 
Such deductions shall not be made prior to the expiration of 60 
days following service upon the carrier by the Board of notice 
of intention to assess a fine or make a deduction and of the 
basis therefor.

[Sec. 5207. Surface Transportation Board to fix rates

    [(a) The Board shall determine and fix the fair and 
reasonable rates or compensation for the transportation of mail 
by carrier and the service connected therewith, and shall 
prescribe the method of computing such rates or compensation. 
The Board shall publish its orders stating its determination 
under this section which shall remain in force until changed by 
it after notice and hearing.
    [(b) For the purpose of determining and fixing rates or 
compensation under this section, the Board may make just and 
reasonable classifications of carriers and, where just and 
equitable, fix general rates applicable to carriers in the same 
classification.
    [(c) In determining and fixing fair and reasonable rates or 
compensation under this section, the Board shall consider the 
relation between the Government and carriers as public service 
corporations, and the nature of public service as 
distinguished, if there is a distinction, from the ordinary 
transportation business of the carriers.
    [(d) Initial rates or compensation for mail transportation 
service by any carrier or carriers shall be those agreed to by 
the Postal Service and the carrier or carriers, and such rates 
or compensation shall continue in effect until such time as the 
Board fixes the rates or compensation under subsection (a) of 
this section.

[Sec. 5208. Procedures

    [(a) At any time after 6 months from the entry of an order 
stating the Board's determination under section 5207 of this 
title, the Postal Service or an interested carrier may apply 
for a reexamination and substantially similar proceedings as 
have theretofore been had shall be followed with respect to the 
rates of compensation for services covered by the application. 
At the conclusion of the hearing the Board shall enter an order 
stating its determination.
    [(b) Except as authorized by sections 5207(d), 5209, 5210, 
and 5212 of this title, the Postal Service shall pay a carrier 
the rates or compensation so determined and fixed for 
application at such stated times as named in the order.
    [(c) The Postal Service may file with the Board a 
comprehensive plan stating--
          [(1) its requirements for the transportation of mail 
        by carrier;
          [(2) the character and speed of the trains or motor 
        vehicles which are to carry the various kinds of mail;
          [(3) the service, both terminal and en route, which 
        carriers are to render;
          [(4) what it believes to be the fair and reasonable 
        rates or compensation for the services required; and
          [(5) all other information which may be material to 
        the inquiry, but such other information may be filed at 
        any time in the discretion of the Board.
    [(d) When a comprehensive plan is filed, the Board shall 
give notice of not less than 30 days to each carrier required 
by the Postal Service to transport mail pursuant to such plan. 
A carrier may file its answer at the time fixed by the Board, 
but not later than 30 days after the expiration date fixed by 
the Board in the notice, and the Board shall proceed with the 
hearing.

[Sec. 5209. Special rates

    [Upon petition by the Postal Service, the Board shall 
determine and fix carload or truckload, or less than carload or 
truckload, rates for the transportation of mail not entitled to 
high priority in transportation. A carrier shall perform the 
service at the rates so determined when requested to do so and 
under the conditions prescribed by the Postal Service.

[Sec. 5210. Intermodal transportation

    [The Postal Service may permit a carrier to perform mail 
transportation by any form of transportation it deems 
appropriate at rates or compensation not exceeding those 
allowable for similar service by the designated form of 
transportation.

[Sec. 5211. Statistical studies

    [The Postal Service may arrange for weighing and measuring 
mail transported on carrier mail routes and make other 
computations for statistical and administrative purposes to 
carry out the purposes of this chapter.

[Sec. 5212. Special contracts

    [The Postal Service may enter into special contracts with 
any carrier or person, without advertising, for bids and for 
periods not in excess of 4 years. It may contract to pay lower 
rates or compensation or, where in its judgment conditions 
warrant, higher rates or compensation than those determined or 
fixed by the Board. The fact that the Board has not prescribed 
rates or compensation for the carrier involved, under section 
5207 of this title, shall not preclude execution of a contract 
under this section. Such contracts may be negotiated only after 
reasonable notice has been posted in advance in post offices on 
the post roads to be served, and other carriers or persons have 
been given an opportunity to offer to negotiate for the 
transportation of mail.

[Sec. 5213. Carrier operations; receipts; expenditures

    [The Postal Service shall request any carrier transporting 
the mails to furnish, under seal, such data relating to the 
operations, receipts, and expenditures of such carrier as may, 
in its judgment, be deemed necessary to enable it to ascertain 
the cost of mail transportation and the proper compensation to 
be paid for such service.

[Sec. 5214. Agreements with passenger common carriers by motor vehicle

    [The Postal Service may enter into contracts under such 
terms and conditions as it shall prescribe and without 
advertising for bids for the transportation of mail, in 
passenger-carrying motor vehicles, by passenger common 
carriers, or by motor vehicles over the regular routes on which 
the carrier is permitted by law to transport passengers.

[Sec. 5215. Star route certification

    [(a) Any person who was a contractor under a star route, 
mail messenger, or contract motor vehicle service contract on 
the effective date of this section (or successor in interest to 
any such person), shall, upon application to the Board for the 
territory within which such contractor operated on or before 
the effective date of this section be issued a certificate of 
public convenience and necessity as a motor carrier for the 
transportation of mail by the Board without the Board's 
requiring further proof that the public convenience and 
necessity will be served by such operation and without further 
proceedings.
    [(b) Applications of persons who were not contractors on 
the effective date of this section shall be decided in 
accordance with applicable Board procedure.
    [(c) For purposes of this section, the term ``person'' has 
the same meaning given that term under section 1 of title 1.]

               CHAPTER 54--TRANSPORTATION OF MAIL BY AIR

Sec.
5401. Authorization.
     * * * * * * *
[5403. Fines.]

           *       *       *       *       *       *       *


Sec. 5402. Contracts for transportation of mail by air

    (a) * * *

           *       *       *       *       *       *       *

    [(d) If the Postal Service determines that service by 
certificated air carriers or combination of air carriers 
between any pair or pairs of points in foreign air 
transportation is not adequate for its purposes, it may 
contract for a period of not more than 4 years, without 
advertising for bids, in such manner and under such terms and 
conditions as it may deem appropriate, with any air taxi 
operator or combination thereof for such air transportation 
service. Contracts made under this subsection may be renewed at 
the existing rate by mutual agreement between the holder and 
the Postal Service. The Postal Service, with the consent of the 
air taxi operator, may adjust the compensation under such 
contracts for increased or decreased costs occasioned by 
changed conditions occurring during the contract term. The 
Postal Service shall cancel such a contract when the Secretary 
authorizes an additional certificated carrier or carriers to 
provide service between any pair or pairs of points covered by 
the contract, and such carrier or carriers inaugurate schedules 
adequate for its purposes.
    [(e)(1) The Postal Service may determine rates and contract 
with any air carrier for the transportation of mail by aircraft 
in interstate air transportation either through negotiations or 
competitive bidding.
    [(2)(A) In the exercise of its authority under paragraph 
(1), the Postal Service may require any air carrier to accept 
as mail shipments of day-old poultry, honeybees, and such other 
live animals as postal regulations allow to be transmitted as 
mail matter. The authority of the Postal Service under this 
subparagraph shall not apply in the case of any air carrier who 
commonly and regularly refuses to accept any live animals as 
cargo.
    [(B) Notwithstanding any other provision of law, the Postal 
Service is authorized to assess, as postage to be paid by the 
mailers of any shipments covered by subparagraph (A), a 
reasonable surcharge that the Postal Service determines in its 
discretion to be adequate to compensate air carriers for any 
necessary additional expense incurred in handling such 
shipments.]
    (d)(1) The Postal Service may contract with any air carrier 
for the transportation of mail by aircraft in interstate air 
transportation, including the rates therefor, either through 
negotiations or competitive bidding.
    (2) Notwithstanding subsections (a) through (c), the Postal 
Service may contract with any air carrier or foreign air 
carrier for the transportation of mail by aircraft in foreign 
air transportation, including the rates therefor, either 
through negotiations or competitive bidding, except that--
          (A) any such contract may be awarded only to (i) an 
        air carrier holding a certificate required by section 
        41101 of title 49 or an exemption therefrom issued by 
        the Secretary of Transportation, (ii) a foreign air 
        carrier holding a permit required by section 41301 of 
        title 49 or an exemption therefrom issued by the 
        Secretary of Transportation, or (iii) a combination of 
        such air carriers or foreign air carriers (or both);
          (B) mail transported under any such contract shall 
        not be subject to any duty-to-carry requirement imposed 
        by any provision of subtitle VII of title 49 or by any 
        certificate, permit, or corresponding exemption 
        authority issued by the Secretary of Transportation 
        under that subtitle;
          (C) every contract that the Postal Service awards to 
        a foreign air carrier under this paragraph shall be 
        subject to the continuing requirement that air carriers 
        shall be afforded the same opportunity to carry the 
        mail of the country to and from which the mail is 
        transported and the flag country of the foreign air 
        carrier, if different, as the Postal Service has 
        afforded the foreign air carrier; and
          (D) the Postmaster General shall consult with the 
        Secretary of Defense concerning actions that affect the 
        carriage of military mail transported in foreign air 
        transportation.
    (3) Paragraph (2) shall not be interpreted as suspending or 
otherwise diminishing the authority of the Secretary of 
Transportation under section 41310 of title 49.
    (e) For purposes of this section, the terms ``air 
carrier'', ``air transportation'', ``foreign air carrier'', 
``foreign air transportation'', ``interstate air 
transportation'', and ``mail'' shall have the meanings given 
such terms in section 40102 of title 49.

           *       *       *       *       *       *       *


[Sec. 5403. Fines

    [The Postal Service may impose or remit fines on carriers 
transporting mail by air on routes extending beyond the borders 
of the United States for--
          [(1) unreasonable or unnecessary delay to mail; and
          [(2) other delinquencies in the transportation of the 
        mail.]

           *       *       *       *       *       *       *


CHAPTER 56--TRANSPORTATION OF MAIL BY VESSEL

           *       *       *       *       *       *       *



Sec. 5605. Contracts for transportation of mail by vessel

    The Postal Service may contract for the transportation of 
mail by vessel without advertising for bids [for periods of not 
in excess of 4 years].
                              ----------                              


            SECTION 1402 OF THE VICTIMS OF CRIME ACT OF 1984


                           CRIME VICTIMS FUND

    Sec. 1402. (a) * * *
    (b) Except as limited by subsection (c), there shall be 
deposited in the Fund--
          (1) all fines that are collected from persons 
        convicted of offenses against the United States 
        except--
                  (A) * * *
                  (B) fines to be paid into--
                          (i) the railroad unemployment 
                        insurance account pursuant to the 
                        Railroad Unemployment Insurance Act (45 
                        U.S.C. 351 et seq.);
                          (ii) the Postal Service Fund pursuant 
                        to sections 2601(a)(2) and 2003 of 
                        title 39 of the United States Code and 
                        for the purposes set forth in section 
                        [404(a)(8)] 404(a)(7) of such title 39;

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 5, UNITED STATES CODE




           *       *       *       *       *       *       *
PART I--THE AGENCIES GENERALLY

           *       *       *       *       *       *       *


CHAPTER 1--ORGANIZATION

           *       *       *       *       *       *       *



Sec. 104. Independent establishment

    For the purpose of this title, ``independent 
establishment'' means--
          (1) an establishment in the executive branch (other 
        than the United States Postal Service or the [Postal 
        Rate] Postal Regulatory Commission) which is not an 
        Executive department, military department, Government 
        corporation, or part thereof, or part of an independent 
        establishment; and

           *       *       *       *       *       *       *


CHAPTER 3--POWERS

           *       *       *       *       *       *       *



Sec. 306. Strategic plans

    (a) * * *

           *       *       *       *       *       *       *

    (f) For purposes of this section the term ``agency'' means 
an Executive agency defined under section 105, but does not 
include the Central Intelligence Agency, the General Accounting 
Office, the Panama Canal Commission, the United States Postal 
Service, and the [Postal Rate] Postal Regulatory Commission.

           *       *       *       *       *       *       *


                          PART III--EMPLOYEES

Subpart A--General Provisions

           *       *       *       *       *       *       *



CHAPTER 21--DEFINITIONS

           *       *       *       *       *       *       *



Sec. 2104. Officer

    (a) * * *
    (b) Except as otherwise provided by law, an officer of the 
United States Postal Service or of the [Postal Rate] Postal 
Regulatory Commission is deemed not an officer for purposes of 
this title.

           *       *       *       *       *       *       *


Subpart B--Employment and Retention

           *       *       *       *       *       *       *


CHAPTER 33--EXAMINATION, SELECTION, AND PLACEMENT

           *       *       *       *       *       *       *



             SUBCHAPTER VI--ASSIGNMENTS TO AND FROM STATES


Sec. 3371. Definitions

    For the purpose of this subchapter--
          (1) * * *

           *       *       *       *       *       *       *

          (3) ``Federal agency'' means an Executive agency, 
        military department, a court of the United States, the 
        Administrative Office of the United States Courts, the 
        Library of Congress, the Botanic Garden, the Government 
        Printing Office, the Congressional Budget Office, the 
        United States Postal Service, the [Postal Rate] Postal 
        Regulatory Commission, the Office of the Architect of 
        the Capitol, the Office of Technology Assessment, and 
        such other similar agencies of the legislative and 
        judicial branches as determined appropriate by the 
        Office of Personnel Management; and

           *       *       *       *       *       *       *


Subpart D--Pay and Allowances

           *       *       *       *       *       *       *


CHAPTER 53--PAY RATES AND SYSTEMS

           *       *       *       *       *       *       *



SUBCHAPTER II--EXECUTIVE SCHEDULE PAY RATES

           *       *       *       *       *       *       *



Sec. 5314. Positions at level III

    Level III of the Executive Schedule applies to the 
following positions, for which the annual rate of basic pay 
shall be the rate determined with respect to such level under 
chapter 11 of title 2, as adjusted by section 5318 of this 
title:
          Solicitor General of the United States.

           *       *       *       *       *       *       *

          Chairman, [Postal Rate] Postal Regulatory Commission.

           *       *       *       *       *       *       *


Sec. 5315. Positions at level IV

    Level IV of the Executive Schedule applies to the following 
positions, for which the annual rate of basic pay shall be the 
rate determined with respect to such level under chapter 11 of 
title 2, as adjusted by section 5318 of this title:
          Deputy Administrator of General Services.

           *       *       *       *       *       *       *

          Members, [Postal Rate] Postal Regulatory Commission 
        (4).

           *       *       *       *       *       *       *


CHAPTER 55--PAY ADMINISTRATION

           *       *       *       *       *       *       *



SUBCHAPTER II--WITHHOLDING PAY

           *       *       *       *       *       *       *



Sec. 5514. Installment deduction for indebtedness to the United States

    (a)(1) * * *

           *       *       *       *       *       *       *

    (5) For purposes of this subsection--
          (A) * * *
                  (B) ``agency'' includes executive departments 
                and agencies, the United States Postal Service, 
                the [Postal Rate] Postal Regulatory Commission, 
                the United States Senate, the United States 
                House of Representatives, and any court, court 
                administrative office, or instrumentality in 
                the judicial or legislative branches of the 
                Government, and government corporations.

           *       *       *       *       *       *       *


Subpart F--Labor-Management and Employee Relations

           *       *       *       *       *       *       *


CHAPTER 73--SUITABILITY, SECURITY, AND CONDUCT

           *       *       *       *       *       *       *



              SUBCHAPTER IV--FOREIGN GIFTS AND DECORATIONS


Sec. 7342. Receipt and disposition of foreign gifts and decorations

    (a) For the purpose of this section--
          (1) ``employee'' means--
                  (A) an employee as defined by section 2105 of 
                this title and an officer or employee of the 
                United States Postal Service or of the [Postal 
                Rate] Postal Regulatory Commission;

           *       *       *       *       *       *       *


CHAPTER 75--ADVERSE ACTIONS

           *       *       *       *       *       *       *



SUBCHAPTER II--REMOVAL, SUSPENSION FOR MORE THAN 14 DAYS, REDUCTION IN 
             GRADE OR PAY, OR FURLOUGH FOR 30 DAYS OR LESS


Sec. 7511. Definitions; application

    (a) For the purpose of this subchapter--
          (1) ``employee'' means--
                  (A) * * *
                  (B) a preference eligible in the excepted 
                service who has completed 1 year of current 
                continuous service in the same or similar 
                positions--
                          (i) in an Executive agency; or
                          (ii) in the United States Postal 
                        Service or [Postal Rate] Postal 
                        Regulatory Commission; and

           *       *       *       *       *       *       *


Subpart G--Insurance and Annuities

           *       *       *       *       *       *       *


CHAPTER 83--RETIREMENT

           *       *       *       *       *       *       *



SUBCHAPTER III--CIVIL SERVICE RETIREMENT

           *       *       *       *       *       *       *



Sec. 8334. Deductions, contributions, and deposits

    (a)(1)(A) * * *
    (B)(i) * * *
    (ii) In the case of an employee of the United States Postal 
Service, the amount to be contributed under this subparagraph 
shall (instead of the amount described in clause (i)) be equal 
to [the product derived by multiplying the employee's basic pay 
by the percentage equal to--
          [(I) the normal-cost percentage for the applicable 
        employee category listed in subparagraph (A), minus
          [(II) the percentage deduction rate that applies with 
        respect to such employee under subparagraph (A).] zero

           *       *       *       *       *       *       *


Sec. 8348. Civil Service Retirement and Disability Fund

    (a) * * *

           *       *       *       *       *       *       *

    [(h)(1)(A) For purposes of this subsection, ``Postal 
supplemental liability'' means the estimated excess, as 
determined by the Office, of--
          [(i) the actuarial present value of all future 
        benefits payable from the Fund under this subchapter 
        attributable to the service of current or former 
        employees of the United States Postal Service, over
          [(ii) the sum of--
                  [(I) the actuarial present value of 
                deductions to be withheld from the future basic 
                pay of employees of the United States Postal 
                Service currently subject to this subchapter 
                pursuant to section 8334;
                  [(II) the actuarial present value of the 
                future contributions to be made pursuant to 
                section 8334 with respect to employees of the 
                United States Postal Service currently subject 
                to this subchapter;
                  [(III) that portion of the Fund balance, as 
                of the date the Postal supplemental liability 
                is determined, attributable to payments to the 
                Fund by the United States Postal Service and 
                its employees, including earnings on those 
                payments; and
                  [(IV) any other appropriate amount, as 
                determined by the Office in accordance with 
                generally accepted actuarial practices and 
                principles.
    [(B)(i) In computing the actuarial present value of future 
benefits, the Office shall include the full value of benefits 
attributable to military and volunteer service for United 
States Postal Service employees first employed after June 30, 
1971, and a prorated share of the value of benefits 
attributable to military and volunteer service for United 
States Postal Service employees first employed before July 1, 
1971.
    [(ii) Military service so included shall not be included in 
the computation of any amount under subsection (g)(2).
    [(2)(A) Not later than June 30, 2004, the Office shall 
determine the Postal supplemental liability as of September 30, 
2003. The Office shall establish an amortization schedule, 
including a series of equal annual installments commencing 
September 30, 2004, which provides for the liquidation of such 
liability by September 30, 2043.
    [(B) The Office shall redetermine the Postal supplemental 
liability as of the close of the fiscal year, for each fiscal 
year beginning after September 30, 2003, through the fiscal 
year ending September 30, 2038, and shall establish a new 
amortization schedule, including a series of equal annual 
installments commencing on September 30 of the subsequent 
fiscal year, which provides for the liquidation of such 
liability by September 30, 2043.
    [(C) The Office shall redetermine the Postal supplemental 
liability as of the close of the fiscal year for each fiscal 
year beginning after September 30, 2038, and shall establish a 
new amortization schedule, including a series of equal annual 
installments commencing on September 30 of the subsequent 
fiscal year, which provides for the liquidation of such 
liability over 5 years.
    [(D) Amortization schedules established under this 
paragraph shall be set in accordance with generally accepted 
actuarial practices and principles, with interest computed at 
the rate used in the most recent dynamic actuarial valuation of 
the Civil Service Retirement System.
    [(E) The United States Postal Service shall pay the amounts 
so determined to the Office, with payments due not later than 
the date scheduled by the Office.
    [(F) An amortization schedule established under 
subparagraph (B) or (C) shall supersede any amortization 
schedule previously established under this paragraph.
    [(3) Notwithstanding any other provision of law, in 
computing the amount of any payment under any other subsection 
of this section that is based upon the amount of the unfunded 
liability, such payment shall be computed disregarding that 
portion of the unfunded liability that the Office determines 
will be liquidated by payments under this subsection.
    [(4) Notwithstanding any other provision of this 
subsection, any determination or redetermination made by the 
Office under this subsection shall, upon request of the Postal 
Service, be subject to reconsideration and review (including 
adjustment by the Board of Actuaries of the Civil Service 
Retirement System) to the same extent and in the same manner as 
provided under section 8423(c).]
    (h)(1) For purposes of this subsection, the ``Postal 
surplus or supplemental liability'' means the estimated 
difference, as determined by the Office, between--
          (A) the actuarial present value of all future 
        benefits which are payable from the Fund under this 
        subchapter to current or former employees of the United 
        States Postal Service, or their survivors, and 
        attributable to civilian employment with the Postal 
        Service, and
          (B) the sum of--
                  (i) the actuarial present value of deductions 
                to be withheld from the future basic pay of 
                employees of the Postal Service currently 
                subject to this subchapter pursuant to section 
                8334;
                  (ii) that portion of the Fund balance, as of 
                the date the Postal surplus or supplemental 
                liability is determined, attributable to 
                payments to the Fund by the Postal Service and 
                its employees, plus the earnings on such 
                amounts while in the Fund; and
                  (iii) any other appropriate amount, as 
                determined by the Office in accordance with 
                generally accepted actuarial practices and 
                principles.
    (2)(A)(i) Not later than June 15, 2006, the Office shall 
determine the Postal surplus or supplemental liability as of 
September 30, 2005.
    (ii) If a supplemental liability is determined under this 
subparagraph for fiscal year 2005, the Office shall establish 
an amortization schedule, including a series of equal annual 
installments commencing September 30, 2006, which provides for 
the liquidation of such liability by September 30, 2043.
    (iii) If a surplus is determined under this subparagraph 
for fiscal year 2005, the amount of the surplus shall be 
transferred to the Postal Service Retiree Health Benefits Fund 
by June 30, 2006.
    (B)(i) For each of fiscal years 2006 through 2038, the 
Office shall determine the Postal surplus or supplemental 
liability as of the close of such fiscal year, with each such 
determination to be made by June 15th of the following fiscal 
year.
    (ii) If a supplemental liability is determined under this 
subparagraph for a fiscal year, the Office shall establish an 
amortization schedule, including a series of equal annual 
installments commencing on September 30 of the following fiscal 
year, which provides for the liquidation of such liability by 
September 30, 2043.
    (iii)(I) If a surplus of $500,000,000 or more is determined 
under this subparagraph for a fiscal year, the amount of the 
surplus shall be transferred to the Postal Service Retiree 
Health Benefits Fund by June 30th of the following fiscal year.
    (II) If a surplus of less than $500,000,000 is determined 
under this subparagraph for a fiscal year, the surplus shall 
remain in the Fund, subject to transfer in a subsequent fiscal 
year under subclause (I) or subparagraph (C)(iii).
    (C)(i) Not later than June 15, 2040, the Office shall 
determine the Postal surplus or supplemental liability as of 
September 30, 2039.
    (ii) If a supplemental liability is determined under this 
subparagraph for fiscal year 2039, the Office shall establish 
an amortization schedule, including a series of equal annual 
installments commencing September 30, 2040, which provides for 
the liquidation of such liability by September 30, 2043.
    (iii) If a surplus is determined under this subparagraph 
for fiscal year 2039, the amount of the surplus--
          (I) shall be applied first toward reducing the amount 
        of any supplemental liability described in section 
        8423(b)(1)(B); and
          (II) to the extent that any portion of such surplus 
        remains after the application of subclause (I), shall, 
        not later than June 30, 2040, be transferred to the 
        Postal Service Retiree Health Benefits Fund.
    (D) An amortization schedule under this paragraph--
          (i) shall be established in accordance with generally 
        accepted actuarial practices and principles, with 
        interest computed at the rate used in the most recent 
        valuation of the Civil Service Retirement System;
          (ii) shall supersede any amortization schedule 
        previously established under this paragraph; and
          (iii) shall not be taken into account, for purposes 
        of any determination of Postal surplus or supplemental 
        liability, except to the extent of any amounts under 
        such schedule actually paid.
    (E) The Postal Service shall pay to the Office the amounts 
due under any amortization schedule established under this 
paragraph that has not been superseded.
    (3) Notwithstanding any other provision of law, in 
computing the amount of any payment under any other subsection 
of this section that is based on the amount of the unfunded 
liability, such payment shall be computed disregarding that 
portion of the unfunded liability that the Office determines 
will be liquidated by payments under this subsection.
    (4) As used in this subsection, ``Postal Service Retiree 
Health Benefits Fund'' refers to the Postal Service Retiree 
Health Benefits Fund, as established by section 8909a.

           *       *       *       *       *       *       *


CHAPTER 84--FEDERAL EMPLOYEES' RETIREMENT SYSTEM

           *       *       *       *       *       *       *



SUBCHAPTER I--GENERAL PROVISIONS

           *       *       *       *       *       *       *



Sec. 8402. Federal Employees' Retirement System; exclusions

    (a) * * *

           *       *       *       *       *       *       *

    (c)(1) The Office may exclude from the operation of this 
chapter an employee or group of employees in or under an 
Executive agency, the United States Postal Service, or the 
[Postal Rate] Postal Regulatory Commission, whose employment is 
temporary or intermittent, except an employee whose employment 
is part-time career employment (as defined in section 3401(2)).

           *       *       *       *       *       *       *


SUBCHAPTER II--BASIC ANNUITY

           *       *       *       *       *       *       *



Sec. 8423. Government contributions

    (a) * * *
    (b)(1) The Office shall compute--
          (A) the amount of the supplemental liability of the 
        Fund with respect to individuals other than those to 
        whom subparagraph (B) relates, and
          (B) the amount of the supplemental liability of the 
        Fund with respect to current or former employees of the 
        United States Postal Service (and the [Postal Rate] 
        Postal Regulatory Commission) and their survivors;
as of the close of each fiscal year beginning after September 
30, 1987.

           *       *       *       *       *       *       *


SUBCHAPTER VII--FEDERAL RETIREMENT THRIFT INVESTMENT MANAGEMENT SYSTEM

           *       *       *       *       *       *       *



Sec. 8474. Executive Director

    (a) * * *

           *       *       *       *       *       *       *

    (c) The Executive Director may--
          (1) * * *

           *       *       *       *       *       *       *

          (4) secure directly from an Executive agency, the 
        United States Postal Service, or the [Postal Rate] 
        Postal Regulatory Commission any information necessary 
        to carry out the provisions of this subchapter or 
        subchapter III of this chapter and policies of the 
        Board;

           *       *       *       *       *       *       *


                      CHAPTER 89--HEALTH INSURANCE

Sec.
8901.  Definitions.
     * * * * * * *
8909a. Postal Service Retiree Health Benefits Fund.

           *       *       *       *       *       *       *


Sec. 8906. Contributions

    (a) * * *

           *       *       *       *       *       *       *

    (g)(1) * * *
    (2)(A) The Government contributions authorized by this 
section for health benefits for an individual who first becomes 
an annuitant by reason of retirement from employment with the 
United States Postal Service on or after July 1, 1971, or for a 
survivor of such an individual or of an individual who died on 
or after July 1, 1971, while employed by the United States 
Postal Service, shall be paid [by the United States Postal 
Service.] first from the Postal Service Retiree Health Benefits 
Fund up to the amount contained therein, with any remaining 
amount paid by the United States Postal Service.

           *       *       *       *       *       *       *


Sec. 8909a. Postal Service Retiree Health Benefits Fund

    (a) There is in the Treasury of the United States a Postal 
Service Retiree Health Benefits Fund (hereinafter in this 
section referred to as the ``Fund'') which is administered by 
the Office of Personnel Management. Any amounts transferred to 
the Fund under section 8348(h)(2) shall yield interest at a 
rate equal to the weighted average yield of all the investments 
in the Civil Service Retirement and Disability Fund as of the 
date of transfer. All other investments of amounts in the Fund 
shall be made in accordance with subsections (c)-(e) of section 
8348.
    (b) The Fund is available without fiscal year limitation 
for payments required by section 8906(g)(2).
    (c)(1) Not later than June 30, 2006, and by June 30 of each 
succeeding year, the Office of Personnel Management shall 
compute the net present value of the excess of future payments 
required by section 8906(g)(2)(A) for current and future United 
States Postal Service annuitants over the value of the assets 
of the Fund as of the end of the fiscal year ending on 
September 30 of that year. The actuarial costing method to be 
used by the Office and all actuarial assumptions shall be 
established by the Office after consultation with the United 
States Postal Service and must be in accordance with generally 
accepted actuarial practices and principles.
    (2) Not later than September 30, 2006, and by September 30 
of each succeeding year, the Office shall compute and the 
United States Postal Service shall pay into such Fund--
          (A) the portion of the net present value described in 
        paragraph (1) attributable to the current year's 
        service of Postal Service employees; and
          (B) interest on the net present value described in 
        paragraph (1) for that fiscal year, at the interest 
        rate used in computing that net present value.
    (3)(A) Any computation or other determination of the Office 
under this subsection shall, upon request of the Postal 
Service, be subject to review by the Postal Regulatory 
Commission. The Commission shall submit a report containing the 
results of any such review to the Postal Service, the Office of 
Personnel Management, and the Congress.
    (B) Upon receiving the report of the Postal Regulatory 
Commission, the Office of Personnel Management shall reconsider 
its computation or other determination in light of such report, 
and shall make any appropriate adjustments. The Office shall 
submit a report containing the results of its reconsideration 
to the Commission, the Postal Service, and the Congress.
    (4) The Office shall promulgate, after consultation with 
the United States Postal Service, any regulations it deems 
necessary under this subsection.

           *       *       *       *       *       *       *

                              ----------                              


          SECTION 101 OF THE ETHICS IN GOVERNMENT ACT OF 1978


                        PERSONS REQUIRED TO FILE

    Sec. 101. (a) * * *

           *       *       *       *       *       *       *

    (f) The officers and employees referred to in subsections 
(a), (d), and (e) are--
          (1) * * *

           *       *       *       *       *       *       *

          (6) the Postmaster General, the Deputy Postmaster 
        General, each Governor of the Board of Governors of the 
        United States Postal Service and each officer or 
        employee of the United States Postal Service or [Postal 
        Rate] Postal Regulatory Commission who occupies a 
        position for which the rate of basic pay is equal to or 
        greater than 120 percent of the minimum rate of basic 
        pay payable for GS-15 of the General Schedule;

           *       *       *       *       *       *       *

                              ----------                              


             SECTION 501 OF THE REHABILITATION ACT OF 1973


              EMPLOYMENT OF INDIVIDUALS WITH DISABILITIES

    Sec. 501. (a) * * *
    (b) Each department, agency, and instrumentality (including 
the United States Postal Service and the [Postal Rate Office] 
Postal Regulatory Commission) in the executive branch and the 
Smithsonian Institution shall, within one hundred and eighty 
days after the date of enactment of this Act, submit to the 
Commission and to the Committee an affirmative action program 
plan for the hiring, placement, and advancement of individuals 
with disabilities in such department, agency, instrumentality, 
or Institution. Such plan shall include a description of the 
extent to which and methods whereby the special needs of 
employees who are individuals with disabilities are being met. 
Such plan shall be updated annually, and shall be reviewed 
annually and approved by the Commission, if the Commission 
determines, after consultation with the Committee, that such 
plan provides sufficient assurances, procedures, and 
commitments to provide adequate hiring, placement, and 
advancement opportunities for individuals with disabilities.

           *       *       *       *       *       *       *

                              ----------                              


              SECTION 3502 OF TITLE 44, UNITED STATES CODE


Sec. 3502. Definitions

    As used in this subchapter--
          (1) * * *

           *       *       *       *       *       *       *

          (5) the term ``independent regulatory agency'' means 
        the Board of Governors of the Federal Reserve System, 
        the Commodity Futures Trading Commission, the Consumer 
        Product Safety Commission, the Federal Communications 
        Commission, the Federal Deposit Insurance Corporation, 
        the Federal Energy Regulatory Commission, the Federal 
        Housing Finance Board, the Federal Maritime Commission, 
        the Federal Trade Commission, the Interstate Commerce 
        Commission, the Mine Enforcement Safety and Health 
        Review Commission, the National Labor Relations Board, 
        the Nuclear Regulatory Commission, the Occupational 
        Safety and Health Review Commission, the [Postal Rate] 
        Postal Regulatory Commission, the Securities and 
        Exchange Commission, and any other similar agency 
        designated by statute as a Federal independent 
        regulatory agency or commission;

           *       *       *       *       *       *       *

                              ----------                              


                     INSPECTOR GENERAL ACT OF 1978




           *       *       *       *       *       *       *
                  AUTHORITY; ADMINISTRATION PROVISIONS

    Sec. 6. (a) * * *

           *       *       *       *       *       *       *

    (e)(1) * * *

           *       *       *       *       *       *       *

    (3) The Inspector General offices of the Department of 
Commerce, Department of Education, Department of Energy, 
Department of Health and Human Services, Department of Homeland 
Security, Department of Housing and Urban Development, 
Department of the Interior, Department of Justice, Department 
of Labor, Department of State, Department of Transportation, 
Department of the Treasury, Department of Veterans Affairs, 
Agency for International Development, Environmental Protection 
Agency, Federal Deposit Insurance Corporation, Federal 
Emergency Management Agency, General Services Administration, 
National Aeronautics and Space Administration, Nuclear 
Regulatory Commission, Office of Personnel Management, Railroad 
Retirement Board, Small Business Administration, Social 
Security Administration, [and the] Tennessee Valley Authority, 
and United States Postal Service are exempt from the 
requirement of paragraph (2) of an initial determination of 
eligibility by the Attorney General.

           *       *       *       *       *       *       *


   REQUIREMENTS FOR FEDERAL ENTITIES AND DESIGNATED FEDERAL ENTITIES

    Sec. 8G. (a) Notwithstanding section 11 of this Act, as 
used in this section--
          (1) * * *
          (2) the term ``designated Federal entity'' means 
        Amtrak, the Appalachian Regional Commission, the Board 
        of Governors of the Federal Reserve System, the Board 
        for International Broadcasting, the Commodity Futures 
        Trading Commission, the Consumer Product Safety 
        Commission, the Corporation for Public Broadcasting, 
        the Equal Employment Opportunity Commission, the Farm 
        Credit Administration, the Federal Communications 
        Commission, the Federal Deposit Insurance Corporation, 
        the Federal Election Commission, the Election 
        Assistance Commission, the Federal Housing Finance 
        Board, the Federal Labor Relations Authority, the 
        Federal Maritime Commission, the Federal Trade 
        Commission, the Legal Services Corporation, the 
        National Archives and Records Administration, the 
        National Credit Union Administration, the National 
        Endowment for the Arts, the National Endowment for the 
        Humanities, the National Labor Relations Board, the 
        National Science Foundation, the Panama Canal 
        Commission, the Peace Corps, the Pension Benefit 
        Guaranty Corporation, the Securities and Exchange 
        Commission, the Smithsonian Institution, the United 
        States International Trade Commission[, and the United 
        States Postal Service;] and the Postal Regulatory 
        Commission;

           *       *       *       *       *       *       *

          (4) the term ``head of the designated Federal 
        entity'' means any person or persons designated by 
        statute as the head of a designated Federal entity and 
        if no such designation exists, the chief policymaking 
        officer or board of a designated Federal entity as 
        identified in the list published pursuant to subsection 
        (h)(1) of this section, [except that--
                  [(A) with respect to the National Science 
                Foundation, such term means the National 
                Science Board; and
                  [(B) with respect to the United States Postal 
                Service, such term means the Governors (within 
                the meaning ofsection 102(3) of title 39, 
United States Code);] except that, with respect to the National Science 
Foundation, such term means the National Science Board;

           *       *       *       *       *       *       *

    (c) [Except as provided under subsection (f) of this 
section, the] The Inspector General shall be appointed by the 
head of the designated Federal entity in accordance with the 
applicable laws and regulations governing appointments within 
the designated Federal entity.

           *       *       *       *       *       *       *

      [(f)(1) For purposes of carrying out subsection (c) with 
respect to the United States Postal Service, the appointment 
provisions of section 202(e) of title 39, United States Code, 
shall be applied.
      [(2) In carrying out the duties and responsibilities 
specified in this Act, the Inspector General of the United 
States Postal Service (hereinafter in this subsection referred 
to as the ``Inspector General'') shall have oversight 
responsibility for all activities of the Postal Inspection 
Service, including any internal investigation performed by the 
Postal Inspection Service. The Chief Postal Inspector shall 
promptly report the significant activities being carried out by 
the Postal Inspection Service to such Inspector General.
      [(3)(A)(i) Notwithstanding subsection (d), the Inspector 
General shall be under the authority, direction, and control of 
the Governors with respect to audits or investigations, or the 
issuance of subpoenas, which require access to sensitive 
information concerning--
          [(I) ongoing civil or criminal investigations or 
        proceedings;
          [(II) undercover operations;
          [(III) the identity of confidential sources, 
        including protected witnesses;
          [(IV) intelligence or counterintelligence matters; or
          [(V) other matters the disclosure of which would 
        constitute a serious threat to national security.
      [(ii) With respect to the information described under 
clause (i), the Governors may prohibit the Inspector General 
from carrying out or completing any audit or investigation, or 
from issuing any subpoena, after such Inspector General has 
decided to initiate, carry out, or complete such audit or 
investigation or to issue such subpoena, if the Governors 
determine that such prohibition is necessary to prevent the 
disclosure of any information described under clause (i) or to 
prevent the significant impairment to the national interests of 
the United States.
      [(iii) If the Governors exercise any power under clause 
(i) or (ii), the Governors shall notify the Inspector General 
in writing stating the reasons for such exercise. Within 30 
days after receipt of any such notice, the Inspector General 
shall transmit a copy of such notice to the Committee on 
Governmental Affairs of the Senate and the Committee on 
Government Reform and Oversight of the House of 
Representatives, and to other appropriate committees or 
subcommittees of the Congress.
      [(B) In carrying out the duties and responsibilities 
specified in this Act, the Inspector General--
          [(i) may initiate, conduct and supervise such audits 
        and investigations in the United States Postal Service 
        as the Inspector General considers appropriate; and
          [(ii) shall give particular regard to the activities 
        of the Postal Inspection Service with a view toward 
        avoiding duplication and insuring effective 
        coordination and cooperation.
      [(C) Any report required to be transmitted by the 
Governors to the appropriate committees or subcommittees of the 
Congress under section 5(d) shall also be transmitted, within 
the seven-day period specified under such section, to the 
Committee on Governmental Affairs of the Senate and the 
Committee on Government Reform and Oversight of the House of 
Representatives.
      [(3) Nothing in this Act shall restrict, eliminate, or 
otherwise adversely affect any of the rights, privileges, or 
benefits of either employees of the United States Postal 
Service, or labor organizations representing employees of the 
United States Postal Service, under chapter 12 of title 39, 
United States Code, the National Labor Relations Act, any 
handbook or manual affecting employee labor relations with the 
United States Postal Service, or any collective bargaining 
agreement.
      [(4) As used in this subsection, the term ``Governors'' 
has the meaning given such term by section 102(3) of title 39, 
United States Code.]

           *       *       *       *       *       *       *


     SPECIAL PROVISIONS CONCERNING THE UNITED STATES POSTAL SERVICE

    Sec. 8J.  (a) In carrying out the duties and 
responsibilities specified in this Act, the Inspector General 
of the United States Postal Service shall have oversight 
responsibility for all activities of the Postal Inspection 
Service, including any internal investigation performed by the 
Postal Inspection Service. The Chief Postal Inspector shall 
promptly report any significant activities being carried out by 
the Postal Inspection Service to such Inspector General. The 
Postmaster General shall promptly report to such Inspector 
General all allegations of theft, fraud, or misconduct by 
Postal Service officers or employees, and entities or 
individuals doing business with the Postal Service.
    (b) In the case of any report that the Governors of the 
United States Postal Service (within the meaning of section 
102(3) of title 39, United States Code) are required to 
transmit under the second sentence of section 5(d), such 
sentence shall be applied by deeming the term ``appropriate 
committees of Congress'' to mean the Committee on Government 
Reform of the House of Representatives, the Committee on 
Governmental Affairs of the Senate, and such other committees 
or subcommittees of Congress as may be appropriate.
    (c) Notwithstanding any provision of paragraph (7) or (8) 
of section 6(a), the Inspector General of the United States 
Postal Service may select, appoint, and employ such officers 
and employees as may be necessary for carrying out the 
functions, powers, and duties of the Office of Inspector 
General and to obtain the temporary or intermittent services of 
experts or consultants or an organization of experts or 
consultants, subject to the applicable laws and regulationsthat 
govern such selections, appointments, and employment, and the obtaining 
of such services, within the United States Postal Service.
    (d) Nothing in this Act shall restrict, eliminate, or 
otherwise adversely affect any of the rights, privileges, or 
benefits of employees of the United States Postal Service, or 
labor organizations representing employees of the United States 
Postal Service, under chapter 12 of title 39, United States 
Code, the National Labor Relations Act, any handbook or manual 
affecting employee labor relations with the United States 
Postal Service, or any collective bargaining agreement.
    (e) There are authorized to be appropriated, out of the 
Postal Service Fund, such sums as may be necessary for the 
Office of Inspector General of the United States Postal 
Service.

               RULE OF CONSTRUCTION OF SPECIAL PROVISIONS

    Sec. [8J.] 8K. The special provisions under section 8, 8A, 
8B, 8C, 8D, [8E or 8F] 8E, 8F, 8H, or 8J of this Act relate 
only to the establishment named in such section and no 
inference shall be drawn from the presence or absence of a 
provision in any such section with respect to an establishment 
not named in such section or with respect to a designated 
Federal entity as defined under section 8G(a).

           *       *       *       *       *       *       *


                              DEFINITIONS

    Sec. 11. As used in this Act--
          (1) the term ``head of the establishment'' means the 
        Secretary of Agriculture, Commerce, Defense, Education, 
        Energy, Health and Human Services, Housing and Urban 
        Development, the Interior, Labor, State, 
        Transportation, Homeland Security, or the Treasury; the 
        Attorney General; the Administrator of the Agency for 
        International Development, Environmental Protection, 
        General Services, National Aeronautics and Space, or 
        Small Business, or Veterans' Affairs; the Director of 
        the Federal Emergency Management Agency, or the Office 
        of Personnel Management; the Chairman of the Nuclear 
        Regulatory Commission or the Railroad Retirement Board; 
        the Chairperson of the Thrift Depositor Protection 
        Oversight Board; the Chief Executive Officer of the 
        Corporation for National and Community Service; the 
        Administrator of the Community Development Financial 
        Institutions Fund; the chief executive officer of the 
        Resolution Trust Corporation; the Chairperson of the 
        Federal Deposit Insurance Corporation; the Commissioner 
        of Social Security, Social Security Administration; the 
        Board of Directors of the Tennessee Valley Authority; 
        [or] the President of the Export-Import Bank; or the 
        Governors of the United States Postal Service (within 
        the meaning of section 102(3) of title 39, United 
        States Code); as the case may be;
          (2) the term ``establishment'' means the Department 
        of Agriculture, Commerce, Defense, Education, Energy, 
        Health and Human Services, Housing and Urban 
        Development, the Interior, Justice, Labor, State, 
        Transportation, Homeland Security, or the Treasury; the 
        Agency for International Development, the Community 
        Development Financial Institutions Fund, the 
        Environmental Protection Agency, the Federal Emergency 
        Management Agency, the General Services Administration, 
        the National Aeronautics and Space Administration, the 
        Nuclear Regulatory Commission, the Office of Personnel 
        Management, the Railroad Retirement Board, the 
        Resolution Trust Corporation, the Federal Deposit 
        Insurance Corporation, the Small Business 
        Administration, the Corporation for National and 
        Community Service, or the Veterans' Administration, the 
        Social Security Administration, the Tennessee Valley 
        Authority, [or] the Export-Import Bank, or the United 
        States Postal Service, as the case may be;
          * * * * * * *
                              ----------                              


              SECTION 160 OF THE ENERGY POLICY ACT OF 1992

SEC. 160. INSPECTOR GENERAL REVIEW AND AGENCY ACCOUNTABILITY.

    (a) Audit Survey.--Not later than 120 days after the date 
of the enactment of this Act, each Inspector General created to 
conduct and supervise audits and investigations relating to the 
programs and operations of the establishments listed in section 
11(2) of the Inspector General Act of 1978 (5 U.S.C. App.)[, 
and the Chief Postal Inspector of the United States Postal 
Service, in accordance with section 8E(f)(1) as established by 
section 8E(a)(2) of the Inspector General Act Amendments of 
1988 (Public Law 100-504)] shall--
          (1) * * *
          * * * * * * *
                              ----------                              


               SECTION 8 OF THE POSTAL REORGANIZATION ACT

              transfer of post office department personnel
    Sec. 8. (a) Officers and employees of the Post Office 
Department shall become officers and employees of the United 
States Postal Service on the effective date of this section. 
The provisions of this section shall not apply to persons 
occupying the positions of Postmaster General, Deputy 
Postmaster General, Assistant Postmasters General, General 
Counsel, or Judicial Officer. This section shall not be 
construed, however, to prohibit the appointment of such persons 
to positions in the Postal Service.
    (b) For purposes of chapter 81 of title 5, United States 
Code, the Postal Service shall, with respect to any individual 
receiving benefits under such chapter as an officer or employee 
of the former Post Office Department, have the same authorities 
and responsibilities as it has with respect to an officer or 
employee of the Postal Service receiving such benefits.
                              ----------                              


                      TITLE 49, UNITED STATES CODE

          * * * * * * *

                    SUBTITLE VII--AVIATION PROGRAMS

          * * * * * * *

                    SUBPART II--ECONOMIC REGULATION

          * * * * * * *

                 CHAPTER 411--AIR CARRIER CERTIFICATES

          * * * * * * *

Sec. 41107. Transportation of mail

    When the United States Postal Service finds that the needs 
of the Postal Service require the transportation of mail by 
aircraft [in foreign air transportation or] between places in 
Alaska, in addition to the transportation of mail authorized 
under certificates in effect, the Postal Service shall certify 
that finding to the Secretary of Transportation with a 
statement about the additional transportation and facilities 
necessary to provide the additional transportation. A copy of 
each certification and statement shall be posted for at least 
20 days in the office of the Secretary. After notice and an 
opportunity for a hearing, the Secretary shall issue a new 
certificate under section 41102 of this title, or amend or 
modify an existing certificate under section 41110(a)(2)(A) of 
this title, to provide the additional transportation and 
facilities if the Secretary finds the additional transportation 
is required by the public convenience and necessity.
          * * * * * * *

                  CHAPTER 419--TRANSPORTATION OF MAIL

          * * * * * * *

Sec. 41901. General authority

    [(a) Title 39.--The United States Postal Service may 
provide for the transportation of mail by aircraft in 
interstate air transportation under section 5402(e) and (f) of 
title 39.]
    (a) Title 39.--The United States Postal Service may provide 
for the transportation of mail by aircraft in air 
transportation under this chapter and under chapter 54 of title 
39.
    (b) Authority To Prescribe Prices.--Except as provided in 
section 5402 of title 39, on the initiative of the Secretary of 
Transportation or on petition by the Postal Service or an air 
carrier, the Secretary shall prescribe and publish--
          (1) after notice and an opportunity for a hearing on 
        the record, reasonable prices to be paid by the Postal 
        Service for the transportation of mail by aircraft [in 
        foreign air transportation or] between places in 
        Alaska, the facilities used in and useful for the 
        transportation of mail, and the services related to the 
        transportation of mail for each carrier holding a 
        certificate that authorizes that transportation;

           *       *       *       *       *       *       *


Sec. 41902. Schedules for certain transportation of mail

    (a) Requirement.--Except as provided in section 41906 of 
this title and section 5402 of title 39, an air carrier may 
transport mail by aircraft [in foreign air transportation or] 
between places in Alaska only under a schedule designated or 
required to be established under subsection (c) of this section 
for the transportation of mail.
    (b) Statements on Places and Schedules.--Every air carrier 
shall file with the Secretary of Transportation and the United 
States Postal Service a statement showing--
          (1) the places between which the carrier is 
        authorized to provide foreign air transportation (other 
        than foreign air transportation of mail);

           *       *       *       *       *       *       *


Sec. 41903. Duty to provide certain transportation of mail

    (a) Air Carriers.--Subject to subsection (b) of this 
section, an air carrier authorized by its certificate to 
transport mail by aircraft [in foreign air transportation or] 
between places in Alaska shall--
          (1) * * *
          * * * * * * *
    (b) Maximum Mail Load.--The Secretary of Transportation may 
prescribe the maximum mail load for a schedule or for an 
aircraft or type of aircraft for the transportation of mail by 
aircraft [in foreign air transportation or] between places in 
Alaska. If the Postal Service tenders to an air carrier mail 
exceeding the maximum load for transportation by the carrier 
under a schedule designated or required to be established for 
the transportation of mail under section 41902(c) of this 
title, the carrier, as nearly in accordance with the schedule 
as the Secretary decides is possible, shall--
          (1) * * *
          * * * * * * *

Sec. 41907. Prices for foreign transportation of mail

    [(a) Limitations.--]When air transportation is provided 
between the United States and a foreign country both by 
aircraft owned or operated by an air carrier holding a 
certificate under chapter 411 of this title and by aircraft 
owned or operated by a foreign air carrier, the United States 
Postal Service may not pay to or for the account of the foreign 
air carrier a price for transporting mail by aircraft between 
the United States and the foreign country that the Postal 
Service believes will result (over a reasonable period 
determined by the Postal Service considering exchange 
fluctuations and other factors) in the foreign air carrier 
receiving a price for transporting the mail that is higher than 
the price--
          (1) the government of a foreign country or foreign 
        postal administration pays to air carriers for 
        transporting mail of theforeign country by aircraft 
between the foreign country and the United States; or
          (2) determined by the Postal Service to be comparable 
        to the price the government of a foreign country or 
        foreign postal administration pays to air carriers for 
        transporting mail of the foreign country by aircraft 
        between the foreign country and an intermediate country 
        on the route of the air carrier between the foreign 
        country and the United States.
    [(b) Changes.--The Secretary of Transportation shall act 
expeditiously on proposed changes in prices for transporting 
mail by aircraft in foreign air transportation. When 
prescribing those prices, the Secretary shall consider--
          [(1) the prices paid for transportation of mail under 
        the Universal Postal Union Convention as ratified by 
        the United States Government;
          [(2) the price-making elements used by the Universal 
        Postal Union in prescribing its airmail prices; and
          [(3) the competitive disadvantage to United States 
        flag air carriers resulting from foreign air carriers 
        receiving Universal Postal Union prices for 
        transporting United States mail and national origin 
        mail of their own countries.]
          * * * * * * *
                              ----------                              


SECTION 3 OF THE POSTAL CIVIL SERVICE RETIREMENT SYSTEM FUNDING REFORM 
                              ACT OF 2003

                          (Public Law 108-18)

          * * * * * * *

[SEC. 3. DISPOSITION OF SAVINGS ACCRUING TO THE UNITED STATES POSTAL 
                    SERVICE.

    [(a) In General.--Savings accruing to the United States 
Postal Service as a result of the enactment of this Act--
          [(1) shall, to the extent that such savings are 
        attributable to fiscal year 2003 or 2004, be used to 
        reduce the postal debt (in consultation with the 
        Secretary of the Treasury), and the Postal Service 
        shall not incur additional debt to offset the use of 
        the savings to reduce the postal debt in fiscal years 
        2003 and 2004;
          [(2) shall, to the extent that such savings are 
        attributable to fiscal year 2005, be used to continue 
        holding postage rates unchanged and to reduce the 
        postal debt, to such extent and in such manner as the 
        Postal Service shall specify (in consultation with the 
        Secretary of the Treasury); and
          [(3) to the extent that such savings are attributable 
        to any fiscal year after fiscal year 2005, shall be 
        considered to be operating expenses of the Postal 
        Service and, until otherwise provided for by law, shall 
        be held in escrow and may not be obligated or expended.
    [(b) Amounts Saved.--
          [(1) In general.--The amounts representing any 
        savings accruing to the Postal Service in any fiscal 
        year as a result of the enactment of this Act shall be 
        computed by the Office of Personnel Management for each 
        such fiscal year in accordance with paragraph (2).
          [(2) Methodology.--Not later than July 31, 2003, the 
        Office of Personnel Management shall--
                  [(A) formulate a plan specifically 
                enumerating the actuarial methods and 
                assumptions by which the Office shall make its 
                computations under paragraph (1); and
                  [(B) submit such plan to the Committee on 
                Government Reform of the House of 
                Representatives and the Committee on 
                Governmental Affairs of the Senate.
          [(3) Requirements.--The plan shall be formulated in 
        consultation with the Postal Service and shall include 
        the opportunity for the Postal Service to request 
        reconsideration of computations under this subsection, 
        and for the Board of Actuaries of the Civil Service 
        Retirement System to review and make adjustments to 
        such computations, to the same extent and in the same 
        manner as provided under section 8423(c) of title 5, 
        United States Code.
    [(c) Reporting Requirement.--The Postal Service shall 
include in each report rendered under section 2402 of title 39, 
United States Code, the amount applied toward reducing the 
postal debt, and the size of the postal debt before and after 
the application of subsection (a), during the period covered by 
such report.
    [(d) Sense of Congress.--It is the sense of the Congress 
that--
          [(1) the savings accruing to the Postal Service as a 
        result of the enactment of this Act will be sufficient 
        to allow the Postal Service to fulfill its commitment 
        to hold postage rates unchanged until at least 2006;
          [(2) because the Postal Service still faces 
        substantial obligations related to postretirement 
        health benefits for its current and former employees, 
        some portion of the savings referred to in paragraph 
        (1) should be used to address those unfunded 
        obligations; and
          [(3) none of the savings referred to in paragraph (1) 
        should be used in the computation of any bonuses for 
        Postal Service executives.
    [(e) Postal Service Proposal.--
          [(1) In general.--The United States Postal Service 
        shall, by September 30, 2003, prepare and submit to the 
        President, the Congress, and the General Accounting 
        Office its proposal detailing how any savings accruing 
        to the Postal Service as a result of the enactment of 
        this Act, which are attributable to any fiscal year 
        after fiscal year 2005, should be expended.
          [(2) Matters to consider.--In preparing its proposal 
        under this subsection, the Postal Service shall 
        consider--
                  [(A) whether, and to what extent, those 
                future savings should be used to address--
                          [(i) debt repayment;
                          [(ii) prefunding of postretirement 
                        healthcare benefits for current and 
                        former postal employees;
                          [(iii) productivity and cost saving 
                        capital investments;
                          [(iv) delaying or moderating 
                        increases in postal rates; and
                          [(v) any other matter; and
                  [(B) the work of the President's Commission 
                on the United States Postal Service under 
                section 5 of Executive Order 13278 (67 Fed. 
                Reg. 76672).
          [(3) GAO review and report.--Not later than 60 days 
        after the Postal Service submits its proposal pursuant 
        to paragraph (1), the General Accounting Office shall 
        prepare and submit a written evaluation of such 
        proposal to the Committee on Government Reform of the 
        House of Representatives and the Committee on 
        Governmental Affairs of the Senate.
          [(4) Legislative action.--Not later than 180 days 
        after it has received both the proposal of the Postal 
        Service and the evaluation of such proposal by the 
        General Accounting Office under this subsection, 
        Congress shall revisit the question of how the savings 
        accruing to the Postal Service as a result of the 
        enactment of this Act should be used.
    [(f) Determination and Disposition of Surplus.--
          [(1) In general.--If, as of the date under paragraph 
        (2), the Office of Personnel Management determines 
        (after consultation with the Postmaster General) that 
        the computation under section 8348(h)(1)(A) of title 5, 
        United States Code, yields a negative amount 
        (hereinafter referred to as a ``surplus'')--
                  [(A) the Office shall inform the Postmaster 
                General of its determination, including the 
                size of the surplus so determined; and
                  [(B) the Postmaster General shall submit to 
                the Congress a report describing how the Postal 
                Service proposes that such surplus be used, 
                including a draft of any legislation that might 
                be necessary.
          [(2) Determination date.--The date to be used for 
        purposes of paragraph (1) shall be September 30, 2025, 
        or such earlier date as, in the judgment of the Office, 
        is the date by which all postal employees under the 
        Civil Service Retirement System will have retired.
    [(g) Definitions.--For purposes of this section--
          [(1) the savings accruing to the Postal Service as a 
        result of the enactment of this Act shall, for any 
        fiscal year, be equal to the amount (if any) by which--
                  [(A) the contributions that the Postal 
                Service would otherwise have been required to 
                make to the Civil Service Retirement and 
                Disability Fund for such fiscal year if this 
                Act had not been enacted, exceed
                  [(B) the contributions made by the Postal 
                Service to such Fund for such fiscal year; and
          [(2) the term ``postal debt'' means the outstanding 
        obligations of the Postal Service, as determined under 
        chapter 20 of title 39, United States Code.]

                                  
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