[Federal Register Volume 65, Number 38 (Friday, February 25, 2000)]
[Rules and Regulations]
[Pages 10012-10022]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4427]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Order No. 1285; Docket No. RM2000-1]


Practice and Procedure; Cost, Revenue and Volume Data Generated 
by International Mail Services

AGENCY: Postal Rate Commission.

ACTION: Final rule.

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SUMMARY: This document adopts permanent rules for the analysis of cost, 
revenue and volume data generated by the Postal Service's international 
mail services. These rules will assist the Commission in preparing 
annual reports to Congress, as required by law.

DATES: Effective February 25, 2000.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
1333 H Street NW., Washington, DC 20268-0001, 202-789-6820.

SUPPLEMENTARY INFORMATION:

Regulatory History

    On January 26, 1999, Commission order no. 1226 in docket no. IM99-1 
was published in the Federal Register (64 FR 3991). On November 26, 
1999, the Commission issued order no. 1270 in docket no. RM2000-1(64 FR 
66436). On February 15, the Commission issued this order [no. 1285] in 
docket no. RM200-1 and directed that it be published in the Federal 
Register.

Background

    On October 21, 1998, Public Law 105-277 was signed into law, adding 
section 3663 to the Postal Reorganization Act (PRA) (39 U.S.C. 3663). 
It requires that by July 1 of each year, the Commission ``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 
prior fiscal year. To enable the Commission to carry out that 
directive, section 3663 requires the Postal Service to provide, by 
March 15, ``such data as the Commission may require'' to prepare that 
report. It states that the data provided

shall be 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 analysis of rates for domestic mail.

Initial Notice of Proposed Rulemaking

    On June 30, 1999, the Commission transmitted its first annual 
report on international mail to Congress. On November 18, 1999, the 
Commission issued a notice of proposed rulemaking (NPRM) inviting 
interested persons to comment on the Commission's initial effort to 
satisfy the requirements of 39 U.S.C. 3663. The NPRM invited comments 
on what data the Postal Service should provide to the Commission each 
year to enable the Commission to prepare its report. In particular, the 
Commission invited comment on its proposed rule 103, which appeared as 
appendix A to the NPRM. Proposed rule 103 would add to the Commission's 
periodic reporting rules, a list of items to be included in the Postal 
Service's data submission that must be filed by March 15 of each year 
under section 3663(b). The NPRM also invited comments on the 
appropriate scope and detail of the Commission's annual international 
mail report, including the analytical methods that should be applied to 
calculate the costs, revenues, and volumes of international mail 
services.
    The NPRM described the efforts of several of the Postal Service's 
competitors to obtain the information that the Postal Service provided 
to the Commission to enable it to prepare its initial report on 
international mail. The NPRM invited comments on the procedures that 
should be employed to determine which portions of the report or 
supporting documents should not be publicly disclosed, what criteria or 
standards should govern that determination, what categories of

[[Page 10013]]

commercial information meet those standards, and the basis for any such 
comments. The NPRM also invited comments on any other issues that 
interested persons considered relevant to the Commission's duty to 
analyze and report on international mail costs, revenues, and volumes 
under section 3663.

I. Information Needed to Prepare the Report

    Section 3663(b) of title 39 requires the Postal Service to provide 
by March 15 of each year the information necessary to enable the 
Commission to prepare its international mail report, which is due on 
July 1 of each year. In its NPRM the Commission proposed to regularize 
the set of international mail information items that the Postal Service 
is to provide annually by March 15 by including them in the set of 
periodic reports that the Postal Service is required to file. In 
appendix A to the NPRM, the Commission presented proposed rule 103 
[proposed 39 C.F.R. 3001.103] which included a list of specific 
information items that the Postal Service would be required to provide 
by March 15 of each year. Several sets of comments were received on the 
adequacy of that list.
A. The ICRA--PRC and USPS Versions
    The International Cost and Revenue Analysis (ICRA) report 
summarizes how the costs of collecting, handling, transporting, and 
delivering international mail are attributed to specific international 
services. Some of those costs are incurred by international mail while 
it is in the domestic mail network. There are some differences in the 
methods by which the Postal Service attributes the costs of the 
domestic network and the methods by which the Commission attributes 
these costs. The Commission needs a version of the ICRA that follows 
Commission-approved attribution methods in order to prepare its 
international mail report. It also needs a version of the ICRA that 
follows the attribution methods that the Postal Service prefers in 
order to isolate the effect of methodological changes that the Postal 
Service introduces from year to year from the effect of applying 
Commission approved methods.
    Proposed rule 103 would require the Postal Service to provide both 
a PRC and a USPS version of the ICRA on March 15 of each year. The 
Postal Service states that in order to comply with the Commission's 
request to produce a PRC version of the fiscal year (FY) 1998 ICRA by 
the March 15, 1999 deadline, it had to defer the production of its own 
internal version of the ICRA, due to resource constraints. It asserts 
that resource constraints preventing the simultaneous production of PRC 
and USPS versions of the ICRA will persist in the future, and argues 
that no deadline be imposed on its production of the USPS version of 
the ICRA. It says that it should be able to provide the USPS version of 
the ICRA shortly after the PRC version is provided. It argues that this 
should not disadvantage the Commission. It explains that if it plans to 
make changes in the methods that it uses to attribute international 
mail costs to the various international services, and it would like the 
Commission to affirm them, it expects to incorporate them in the PRC 
version of the ICRA. Initial Comments of United States Postal Service, 
filed December 27, 1999, at 5 (Postal Service Comments).
    The Commission believes that a specific deadline for providing the 
USPS version remains necessary in order to avoid the situation that the 
Commission faced in preparing its initial international mail report. 
The Postal Service made changes to the methods that it used to estimate 
attributable international air transportation costs and to estimate the 
settlement difference that had major impacts on the cost coverages that 
it calculated for several international mail services and for 
international mail as a whole. These changes first appeared in the USPS 
version of the ICRA which the Postal Service provided to the Commission 
on June 7, 1999. Because there was not enough time to carefully 
evaluate these proposed changes, cost coverages for each international 
mail service based on Commission-approved methods and the new methods 
introduced by the Postal Service were calculated. The Commission's 
international mail report included appendices illustrating the impact 
that the Postal Service's new, but unevaluated, methods would have had 
on international mail cost coverages. The Commission would prefer to 
receive notice of such methodological changes in time to thoroughly 
evaluate their rationale and verify that they have been accurately 
applied.
    Final rule 103 retains the requirement that the Postal Service 
provide an audited PRC version of the ICRA by March 15 of each year. In 
light of the resource constraints cited by the Postal Service, and its 
expectation that significant methodological innovations by the Postal 
Service will already be apparent in the PRC version, final rule 103 
will allow the Postal Service until May 15 of each year to provide a 
USPS version of the ICRA. Allowing the Postal Service two extra months 
should substantially ease the Postal Service's burden in providing the 
USPS version of the ICRA.
B. The Domestic CRA and CSC Reports
    The list of items that proposed rule 103 would require the Postal 
Service to provide includes the PRC version of the domestic Cost and 
Revenue Analysis (CRA) and the companion Cost Segments and Components 
(CSC) report. Proposed rule 103 would require the Postal Service to 
provide at least an unaudited PRC version by March 15 of each year. If 
an unaudited version were provided, proposed rule 103 would require the 
Postal Service to provide an audited or finalized PRC version by May 15 
of each year. This would allow the Commission enough time to identify 
and reconcile any discrepancies that there might be between the PRC 
version of the ICRA and the finalized PRC version of the domestic CRA 
and CSC.
    These companion reports estimate what portion of the Postal 
Service's accrued costs in its various cost components can be 
attributed to specific subclasses of domestic mail. The domestic CRA 
shows how total attributable costs are distributed to the various 
subclasses of domestic mail and to international mail as a whole. The 
CSC report displays these costs by cost component. Throughout both 
reports, costs attributed to international services are presented only 
in aggregate. To determine the accuracy of the distribution of 
attributable costs between domestic and international services requires 
an examination of CRA and CSC reports and their underlying workpapers. 
The underlying workpapers show the method and procedures by which the 
Postal Service determines the attributable costs for domestic and 
international services.
    Commission authority to require production of the domestic CRA and 
CSC reports. In its comments, the Postal Service suggests that the 
Commission does not have the statutory authority to require the 
production of the domestic CRA, the CSC, or the supporting 
documentation for these reports, on a specific schedule or in a 
preliminary form. Its principal argument is that section 401(4) of the 
PRA gives the Postal Service the power to keep its own system of 
accounts, and that section 3663 doesn't explicitly override that power. 
Postal Service Comments at 3-4.
    The Postal Service also questions whether the Commission needs a 
comprehensive domestic CRA to prepare its report on international mail. 
At page 8 of its comments, it says that ``it is open to question 
whether 39 U.S.C. 3663 was ever intended by

[[Page 10014]]

Congress to authorize the Commission, in effect, to serve as a second 
auditor of the Postal Service's financial data.'' It states that it 
expects to provide the Commission with those parts of the domestic CRA 
and documentation that directly support the development of the ICRA. It 
also states that it would be willing to supplement such documentation 
if critical gaps were identified that seriously interfered with the 
Commission's ability to produce its report by July 1. In any event, the 
Postal Service asserts, the audited domestic CRA will be completed and 
available in time to enable the Commission to use it to complete its 
report on schedule. Accordingly, the Postal Service argues, the rule 
need not be written to require the production of the domestic CRA at 
all; rather it need only specify the production of information needed 
to review the parts of the domestic CRA used to create the ICRA. Id. at 
7-8.
    Several of the commenters disagreed with the Postal Service's 
narrow view of the Commission's authority under section 3663. United 
Parcel Service (UPS) argues that the following language of section 
3663(b) gives the Commission the authority to determine what 
information it needs to prepare its report, and to require it by March 
15 of each year.

    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. (Emphasis supplied in original omitted here.)

Reply Comments of UPS in response to Commission order no. 1270, filed 
January, 2000 (UPS Reply Comments) at 4. UPS and Federal Express 
(FedEx) observe that Congress placed section 3663 in chapter 36 of the 
PRA, and that Congress has given the Commission authority to promulgate 
rules that are necessary and proper to carry out the duties that 
chapter 36 has assigned to the Commission. UPS Reply Comments at 2-5; 
Reply Comments of FedEx in response to order no. 1270, filed January 
10, 2000 (FedEx Reply Comments) at 1-2.
    Section 3603 of the PRA provides:

    The Postal Rate 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. Such 
rules, regulations, procedures and actions shall not be subject to 
any change or supervision by the Postal Service.

UPS emphasizes judicial precedent that holds that an ``agency's data 
selection and choice of statistical methods are entitled to great 
deference'' where ``sophisticated data evaluations [are] mandated by 
[a] lengthy and complicated statute.'' It argues that the PRA is such a 
statute. UPS Reply Comments at 4. The Commission concludes that the 
view of the Commission's authority expressed by FedEx and UPS is better 
supported. The PRA requires the Commission to make sophisticated data 
evaluations with respect to domestic rates. Congress indicated an 
awareness of this in drafting section 3663. The language of section 
3663(b) obligates the Postal Service to provide the Commission with 
financial data on individual international services ``in sufficient 
detail'' to enable the Commission to analyze them ``under the methods 
determined appropriate by the Commission for analysis of rates for 
domestic mail.'' From this it is reasonable to conclude that Congress 
intended that the Commission make sophisticated evaluations of the 
Postal Service's financial data on international services similar to 
those that it makes with respect to financial data on domestic 
subclasses in evaluating domestic rate requests. As FedEx and UPS note, 
the Commission has the authority to promulgate rules that are necessary 
and proper to carry out its chapter 36 responsibilities.
    The Postal Service expresses skepticism that Congress intended the 
Commission to inquire into the accuracy of its financial data on 
international mail. The Commission concludes that such intent is 
strongly implied by the language of section 3663. Section 3663(b) 
requires the Postal Service to provide data in sufficient detail to 
enable the Commission to analyze, not just to passively report, the 
costs, revenues, and volumes of each international mail service. 
[Emphasis on the word analysis omitted here.] It is reasonable to infer 
that verifying the accuracy of data is a basic part of the analysis 
contemplated by Congress. FedEx concurs. FedEx Reply Comments at 2-3, 
n. 2. Indeed, it is hard to imagine what purpose it would serve for 
Congress to assign the task of preparing the report on international 
mail to the Commission rather than the Postal Service, if Congress 
intended that the Commission simply take the Postal Service's 
international mail data on faith.
    As noted, the Postal Service emphasizes that it has the power under 
39 U.S.C. 401(4) to keep its own system of accounts and to determine 
the forms and contents of its business documents. Rule 103 as proposed 
would not conflict with this power. Providing these documents to the 
Commission early enough, and in an edited form that is reliable enough 
to enable the Commission to perform its chapter 36 duty to analyze and 
report on international mail, still leaves postal management free to 
review and refine these documents for its own internal use in whatever 
form, and to whatever degree, best suits its own internal management 
objectives. It should be borne in mind that section 401(4) gives the 
Postal Service the power to keep its own system of accounts and 
determine what form its business documents will take ``except as 
otherwise provided in this title.'' Therefore, if an exception to the 
Postal Service's general section 401(4) powers were thought to be 
necessary to enable the Commission to obtain the detailed and reliable 
financial data from the Postal Service that are necessary to prepare 
its section 3663 report, section 401(4) provides for it.
    The Commission's need for the domestic CRA and CSC reports. It 
seems clear that section 3663 intends that the Commission verify the 
accuracy of the Postal Service's financial data on international mail 
as part of its reporting responsibility. It is also clear that section 
3663(b), together with section 3603, gives the Commission authority to 
require the documentation necessary to do so. The question remains 
whether the Commission needs comprehensive domestic CRA and CSC reports 
to carry out the Commission's duty to analyze and report on the costs, 
revenues, and volumes of international mail.
    The international CRA shows subtotal attributable costs for 
processing, delivery, domestic transportation, international 
transportation, settlement, and all other. The subtotal for processing 
costs reflects the sum of cost segments 2, 3, and 4. Delivery costs 
reflect the sum of cost segments 6, 7, 8, 9, 10, and 12. Transportation 
and settlement costs reflect cost segment 14. All other costs reflect 
the sum of cost segments 1, 11, 13, 15, 16, 17, 18, 19, and 20. The 
first examination the Commission performs is to compare the sum of the 
applicable cost segment amounts in the international C report to the 
subtotal amounts in the ICRA. The Commission can also compare amounts 
in the C report for mail processing and city carrier costs to the 
underlying workpapers that the Postal Service provides in the initial 
submission and evaluate the accuracy of the attributable cost methods 
used.
    As noted, section 3663(b) requires the Commission to analyze the 
costs, revenues, and volumes for each international mail product or 
service,

[[Page 10015]]

under the methods determined appropriate by the Commission for the 
analysis of rates for domestic mail. (Emphasis in original omitted 
here.) The attribution methods that the Commission applies to domestic 
subclasses differ from those the Postal Service currently prefers most 
significantly in cost segments 3 and 7. The Commission needs to verify 
that its attribution methods have been accurately applied by the Postal 
Service in determining the portion of these segment costs that the 
Postal Service attributes to specific international services. To do 
this, the Commission needs to be able to review the workpapers that 
underlie cost segments 3 and 7 of the domestic CSC. Only they show in 
detail how the Postal Service has applied the Commission's attribution 
methods. To analyze the accuracy of the distribution of other segment 
costs between all domestic services and all international services the 
Commission requires not only the domestic CRA and CSC reports, but also 
the underlying workpapers.
    The Commission needs complete domestic CRA and CSC reports because 
they provide control totals for the total of the costs, revenues, and 
volumes estimated for the various international services in the ICRA. 
The domestic CSC report presents attributable costs by component for 
each domestic subclass and for international mail in aggregate. The 
international CSC equivalent attributes segment costs to specific 
international mail services. The sum of the costs attributed to 
specific international services in the international CSC should equal 
the sum of costs attributed to international mail in the domestic CSC. 
Similarly, the sum of the revenues and volumes for specific 
international services presented in the ICRA should equal the aggregate 
international volumes and revenues presented in the domestic CRA.
    There should be little reason to doubt the value of the control 
totals provided in the domestic CRA and CSC. Unlike the ICRA, the 
estimation methods and procedures used in the domestic CRA and CSC have 
been regularly refined under the intense scrutiny of publicly litigated 
rate cases. Consequently, the domestic CRA and CSC reports provide the 
most reliable control totals available for the product-specific 
financial data in the ICRA. If the ICRA totals match the control total, 
then the Commission is assured that no domestic costs, revenues, and 
volumes have found their way into the ICRA and that no international 
costs, revenues, and volumes have been left out of the ICRA. This is 
the most fundamental check that the Commission can provide in its 
report to Congress. Without comprehensive CRA and CSC reports, the 
Commission cannot provide this assurance.
    The Commission also needs a complete domestic CRA to ensure that 
the treatment of attributable and institutional costs in the ICRA is 
consistent with their treatment in the domestic CRA. For example, in 
its FY 1998 ICRA, the Postal Service eliminated costs associated with 
the ``settlement difference'' (the difference between accrued 
settlement costs and imputed settlement costs). For the ICRA to be 
consistent with the domestic CRA, it would appear that the Postal 
Service should remove these costs from the total accrued costs in the 
domestic CRA. The Commission could not assure Congress that the 
treatment of these costs in the ICRA is consistent with their treatment 
in the domestic CRA unless the Commission has a comprehensive domestic 
CRA.
    Requiring an audited domestic CRA and CSC by May 15. These reports 
provide detailed statistical estimates of the costs incurred annually 
by the mail in aggregate and by individual subclasses in particular. 
They are primarily used to provide the cost basis for pricing and 
ratemaking. Proposed rule 103 would require the Postal Service to 
provide PRC versions of the domestic CRA and CSC reports by March 15 of 
each year, in unaudited form, if necessary. It would require the Postal 
Service to provide these reports in audited form no later than May 15 
of each year. Final rule 103 retains this requirement.
    The Postal Service objects to requiring these reports either by a 
specific date, or in a preliminary form. It argues that because of the 
complexity of these reports, and the multiple layers of review they 
undergo, it is unrealistic to require that annual production of these 
reports could be accelerated to March 15. It warns that requiring its 
production ``at an early stage'' risks publication of unreliable 
numbers. The Postal Service asserts that because the CRA and CSC 
reports are official documents, postal management's policy prerogatives 
are infringed if the timing of the reviews and policy clearances 
required to issue the domestic CRA are modified to meet the needs of 
the Commission.
    The Postal Service observes that the PRC version of the domestic 
CRA is not an official document of the Postal Service, and therefore is 
not audited and not endorsed by the Postal Service. Nevertheless, it 
argues the PRC version is a ``variant'' of the official CRA. Therefore, 
it maintains, requiring production of the PRC version of the domestic 
CRA by a specific date, or in preliminary form, raises the same 
objections as if it were the official version. For these reasons, the 
Postal Service asserts, the Commission should only require that the 
domestic CRA be provided ``within two weeks'' of internal presentation 
to Postal Service management, as the Commission's existing periodic 
reporting rules require. Postal Service Comments at 6-8.
    UPS argues that audited versions of the domestic CRA and CSC 
reports should be required by March 15. It contends that it should not 
be difficult to produce audited financial data by March 15--more than 
five months after the close of the fiscal year. It notes that in the 
private sector, audited financial data are required within 90 days of 
the end of the fiscal year. UPS Comments at 11-12. It reminds the 
Postal Service that the March 15 deadline set in section 3663(b) for 
providing information necessary to prepare the international mail 
report was not selected at the Commission's discretion, but is mandated 
by Congress. UPS Reply Comments at 4.
    The Postal Service states that it

strongly believes that rules adopted under the authority of section 
3663 should interfere as little as practicable with the production 
and timing of the Postal Service's internal reports, or with its 
policies on public issuance and disclosure of externally available 
reports.

Postal Service Comments at 4. The Commission agrees. That is what rule 
103 is designed to do.
    In section 3663, Congress assigned the Commission the task of 
analyzing the costs, revenues, and volumes of individual international 
services, and assuring that they have been estimated by methods that 
are consistent with the methods that the Commission applies to domestic 
mail when recommending domestic rates. In fulfilling this mandate, the 
most fundamental check that the Commission can make is to match control 
totals from the domestic CRA and CSC with corresponding amounts in the 
ICRA, to see if any costs, revenues, or volumes have been misallocated 
between international and domestic mail. To do this, the Commission 
requires that complete domestic CRA and CSC reports be provided in time 
to analyze them.
    Congress selected the annual July 1 due date for the Commission's 
reports, and made the judgment that the Postal Service must provide the 
data necessary to prepare the report by March 15 of each year, to give 
the Commission adequate time to analyze the data. The

[[Page 10016]]

Commission is aware that the CRA is a complex statistical document that 
requires careful editing of data from a wide variety of databases 
before it can be relied on. The Commission is also aware that 
historically the Postal Service has usually not released its audited 
version of the domestic CRA until a few weeks before, or a few weeks 
after, May 15. For this reason, rule 103 defers the due date for an 
audited domestic CRA from March 15 to May 15. Rule 103 allows the 
Postal Service two additional months to provide a CRA-PRC version 
beyond the time that section 3663(b) would otherwise require it. This 
liberal provision should go most of the way toward satisfying the 
Postal Service's concern that the section 3663 reporting process 
impinge as little as possible on its internal timetable for generating 
its official reports.
    In its comments, the Postal Service asks the Commission not to 
specify the time that it is to provide the domestic CRA. Postal Service 
Comments at 7-8. The Commission followed this approach in 1999 in 
preparing its first international mail report. On May 5 the Commission 
requested the domestic CRA and CSC reports without specifying a due 
date. The Postal Service provided these reports on June 7. There were 
apparent discrepancies between totals in the CRA provided on June 7 and 
the ICRA that it had provided earlier. In the brief time remaining to 
provide a draft report to the Commission, Commission staff determined 
that these discrepancies apparently were matters of form rather than 
substance.
    If, at that late date, substantive discrepancies had been found in 
the domestic CRA, the Commission could have faced the same dilemma that 
it faced with respect to the ICRA, where substantive changes in cost 
accounting methods were included in a version provided to the 
Commission on June 7, 1999. As previously described, the Commission 
staff was unable to evaluate these changes in the remaining available 
time. Rather than pass judgment on them, it prepared an alternative 
ICRA-PRC version that incorporated these new costing methods and 
presented the resulting cost coverages in an appendix to its report, 
with a disclaimer as to the soundness of the results. Rule 103 is 
designed to prevent similar problems arising with respect to the 
finalized domestic CRA. Because it requires that a finalized domestic 
CRA be provided by May 15, it should provide the Commission with a 
reasonable opportunity to resolve substantive discrepancies if they 
appear, and make any necessary revisions to its report.
    Requiring an unaudited domestic CRA and CSC by March 15. Proposed 
rule 103 would require the Postal Service to provide the Commission an 
unaudited or preliminary version of the domestic CRA by March 15. The 
Commission retains this provision in its final rule 103.
    The Postal Service objects to this aspect of rule 103, 
characterizing it as an ``unrealistic'' acceleration of the typical 
production schedule for the CRA. Postal Service Reply Comments at 14. 
It also considers it unwise, since preliminary data might be 
unreliable. Postal Service Comments at 7. Yet, it also asserts that

[t]his does not mean that use of data and analysis derived from the 
domestic CRA Report at preliminary stages corrupts production of the 
ICRA. For the most part, data and information from the CRA process 
can be relied upon, and its use in the ICRA is independently 
evaluated.

Id. The Postal Service recognizes that to satisfy section 3663(b) it 
must provide a reliable, finalized version of the ICRA by March 15 of 
each year. Id. at 5. In the comment quoted above, the Postal Service 
recognizes that assertions that it can provide a reliable ICRA by March 
15 imply that the CRA from which the ICRA is derived can be developed 
to the point that it is basically reliable by that date as well. The 
Postal Service considers it burdensome to have to complete the basic 
edits on the CRA that would make it, and the ICRA, available by March 
15 of each year. But it should be borne in mind that the need to 
undertake this burden arises from the deadlines mandated by section 
3663, rather than the predilections of the Commission. The Postal 
Service's recent filing in docket no. R2000-1 suggests that it would 
not be unduly burdensome to provide a preliminary, but basically 
reliable version of the CRA by March 15 of each year.
C. Additional Descriptive Materials
    In its comments, the Office of the Consumer Advocate (OCA) asks 
that the Commission include in proposed rule 103 a 30-day period for 
public comment on the adequacy of the information that the Postal 
Service provides on March 15. The OCA is mindful that the Postal 
Service considers much of the product-specific cost, revenue, and 
volume information contained in the ICRA to be commercially sensitive. 
It argues, however, that descriptions of the processes and methods by 
which the Postal Service puts together the ICRA and the databases 
underlying it should not be considered commercially sensitive. 
Accordingly, it proposes to add a long list of explanations and 
documentation to the information items listed in proposed rule 103, and 
to provide a 30-day period for public comment on the adequacy of this 
documentation. OCA Comments at 7-8.
    The OCA proposes that the list of items that rule 103 would require 
the Postal Service to provide by March 15 include descriptions of how 
the Postal Service allocates costs that are shared by domestic and 
international services to those respective services, and descriptions 
of how costs that are shared by international services are allocated 
between specific international services. In addition, the OCA proposes 
that the Postal Service provide descriptions of the product-specific 
methods that it uses to estimate the costs of, respectively, Global 
Package Link, Global Priority Mail, Global Direct Services, Global 
Parcel Services, and International Customized Mail. Id. at 4-5. It 
proposes that the Postal Service provide full documentation of the data 
collection and sampling systems, both domestic and international, that 
contribute to the ICRA, including training manuals and instructions to 
data collectors. It asks that the Postal Service be required to 
describe in detail how reports are generated by these systems, and how 
these reports are used to estimate the costs, revenues, and volumes of 
individual international services. The specific information items that 
are covered by its proposal are listed at pages 4-7 of its comments.
    Both UPS and FedEx endorse the OCA's proposal to add detailed 
descriptions of methods and procedures to the items required by rule 
103, and its proposal that there be a 30-day period for public comment. 
FedEx Reply Comments at 3, UPS Reply Comments at 13-14.
    The Postal Service disagrees. It argues that section 3663 does not 
call for a public documentation exercise, just a cooperative effort 
between the Postal Service and the Commission. It argues that 
supervising a public debate over documentation requirements would 
needlessly tie up the Commission at a time when it is trying to produce 
the required report. The Postal Service asserts that the OCA's proposal 
is focused less on the information that the Commission needs to prepare 
its report than on the information that the lay public might need to 
accomplish the same task. Postal Service Reply Comments at 2-3.
    The OCA's carefully crafted proposal has laudable objectives, but 
for practical reasons, the Commission has decided against expanding the 
list of items that the Postal Service must provide by March 15 
contained in proposed rule

[[Page 10017]]

103. Under rule 103, as proposed and as adopted, the Commission would 
already receive the documentation of the international mail reports and 
data collection systems called for by the OCA. In that documentation, 
the Postal Service historically has included descriptions of any 
changes that it has made to estimation methods that affect 
international mail. We trust that this practice will continue.
    Documentation of system-wide data sampling systems, such as the In-
Office Cost System, the Revenue, Pieces, and Weight system, the Carrier 
Cost System, and TRACS, is a significant undertaking that up to now has 
been required only in omnibus rate cases. The Commission considers it 
unnecessary to require that the Postal Service prepare in-depth 
documentation of its system-wide financial reports and data systems 
every year by March 15. Due to the Postal Service's complaints about 
resource constraints, the Commission has scaled back somewhat its list 
of information items required by March 15 in order to make the 
Service's section 3663(b) obligations somewhat less onerous. Requiring 
in-depth documentation of its domestic data systems by that date is 
likely to compound the difficulties that the Postal Service describes 
in providing the ICRA and a preliminary version of the CRA by that 
date. If, in the brief time that the Commission has after March 15 to 
prepare its report, the Commission perceives a specific need for fresh 
documentation of domestic data systems, it will ask the Postal Service 
for selective supplements of the documentation that it customarily 
provides in omnibus rate cases.
D. Implied Discount for Inbound International Services
    FedEx argues that in terms of cost coverages, the compensation that 
the Postal Service receives for handling and delivering categories of 
inbound international mail is substantially less than the compensation 
that it receives for handling and delivering corresponding categories 
of domestic mail. It argues that these disparities in cost coverage 
are, in effect, discounts that the Postal Service offers to foreign 
postal administrations on inbound mail service. It argues that the 
Postal Service receives reciprocal discounts from foreign postal 
administrations for delivering mail that they receive from the Postal 
Service. FedEx argues that these reciprocal discounts are hidden costs 
of offering outbound service, and serve to reduce the real cost 
coverage on those services. FedEx notes that this issue was raised in 
the questions concerning the Commission's first international mail 
report that were posed to the Commission by the House Postal Service 
Subcommittee. See the NPRM in this docket (order no. 1270) at 7.
    According to FedEx, accounting for this discount is ``the central 
analytical issue'' that the Commission's international mail report 
should address. FedEx Comments at 5. FedEx argues that the Commission's 
report should estimate the extent of the implied discount offered on 
each inbound service and add it to its corresponding outbound service, 
as though it were an attributable cost of the outbound service. This, 
FedEx contends, would yield a true picture of the effective cost 
coverages being earned by the Postal Service's various outbound 
international services. FedEx Comments at 15-16.
    To accurately calculate the implied discount, the Commission would 
have to have information on inbound mail comparable to the billing 
determinant information that the Postal Service collects on domestic 
mail, as well as additional information on the content of inbound mail. 
For example, if it were assumed that inbound single-piece letters would 
be charged First-Class single-piece rates if they were domestic mail, 
it would be necessary to know the volume of those letters by ounce 
increment, in order to infer a domestic price.
    FedEx appears to recognize that such information would be needed to 
perform the analysis that it advocates. To obtain that information, it 
proposes to add the following to the information that rule 103 would 
require by March 15 of each year.

(n) For each inbound mail service and each terminal dues regime, the 
Postal Service shall provide (i) an analysis, by pieces and weight, 
of the distribution of such mail among classes of domestic mail, 
(ii) an estimate of the costs and revenues associated with each such 
domestic mail class; and (iii) an estimate of the revenue that would 
have been received if such mail had been posted at domestic postage 
rates; the Postal Service shall also provide all associated 
documentation and workpapers.

    FedEx Comments at 6. FedEx also recognizes that associating 
specific inbound services with specific domestic counterparts will be a 
difficult undertaking. To help the Commission accomplish this task, 
FedEx proposes adding the following provision to rule 103.

(o) For each outbound mail service for which (i) foreign delivery is 
not purchased at a market rate available to competitors of the 
Postal Service and (ii) the Postal Service provides significant 
services to the foreign entity providing delivery, the Postal 
Service shall provide a method of associating with that outbound 
mail service the costs and revenues of one or more inbound mail 
services provided the foreign entity; the Postal Service shall also 
provide all associated documentation and workpapers.

    UPS agrees with FedEx that the delivery of inbound mail is 
inextricably tied to the Postal Service's use of foreign postal 
administrations to deliver its outbound mail. It argues that any losses 
incurred on inbound mail should be borne by the corresponding category 
of outbound mail. UPS Comments at 12-13.
    The Postal Service replies that there is no indication in section 
3663 or its legislative history to indicate that the purpose of the 
Commission's international mail report was to account for any alleged 
discount offered to foreign postal administrations. Postal Service 
Reply Comments at 4. The Postal Service says that it is a misconception 
to view the terminal dues rates that it charges for delivering the mail 
of foreign posts as discounts from the rates charged domestic mail. It 
emphasizes that delivering the mail of foreign posts is an obligation 
of membership in the Universal Postal Union (UPU). It argues that in 
establishing uniform UPU terminal dues rates, the members do not view 
inbound international mail as analogous to domestic mail, whose rates 
are typically set by each member post to recover a specific share of 
the costs of its domestic network. Instead, it argues, inbound 
international mail has its own unique costs, product features, and 
service times, which the uniform terminal dues rates reflect.
    The Postal Service insists that it could not sell domestic delivery 
to the various categories of mail from foreign posts as though it were 
discounted domestic service. It contends the various categories of 
inbound mail cannot be mapped to particular categories of domestic mail 
in terms of content, size and weight profiles, mail preparation, or 
service characteristics. It questions whether such mapping could be 
done in the future. It comments that it is naive to assume that 
existing data systems can be modified to provide data that is 
sufficiently detailed to allow inbound services to be mapped to 
domestic subclasses. It notes that demand elasticities for 
international mail are generally much higher than for domestic mail, 
implying that if the various categories of inbound mail were to be 
priced as domestic mail, they would generally receive lower markups. 
Id. at 6-7, 9.

[[Page 10018]]

    The Postal Service insists that rates for outbound international 
mail are based entirely on the costs of outbound mail, and are not 
influenced in any way by the costs or revenues of inbound mail. Id. at 
8. The Postal Service asserts that a causal connection between outbound 
rates and inbound costs and revenues would be difficult to demonstrate 
because many outbound services do not have a corresponding inbound 
category of mail. It cites International Priority Airmail and 
International Surface Airlift as examples of outbound mail services 
that have no inbound counterpart.
    Historically, UPU terminal dues for Letters and Cards, and ``Autres 
Objets'' (LC/AO) mail have been based on an estimate of the average 
cost of domestic delivery of foreign-origin mail by the posts of a 
broad cross-section of members of the UPU, rather than the domestic 
rates of specific member countries. Although there is little empirical 
evidence that current terminal dues for LC/AO mail now are based 
primarily on the rates and net revenues charged for domestic mail of 
like kind, this situation soon will change. By the year 2001, UPU rates 
for LC/AO mail between industrialized countries are scheduled to be set 
as a percentage of the rates charged for corresponding domestic 
categories. In order to determine what terminal dues to charge in 2001, 
the Postal Service will soon have to gather data that is sufficiently 
detailed to map inbound LC/AO mail to corresponding domestic 
categories. While it appears to be premature to incorporate data 
requirements in rule 103 designed to make such judgments, meeting such 
requirements should be more feasible in the future.

II. Analytical Methods Used in the Report

A. Accounting Method Applied to International Air Transportation Costs 
and to the Settlement Difference
    The Postal Service changed its method of accounting for 
international air transportation costs and for settlement expenses 
between the ICRA-PRC version which it provided to the Commission on 
March 15, 1999, and the ICRA-USPS version that it provided on June 7, 
1999. As explained in appendix F of the Commission's FY 1998 
international mail report, accrued international air transportation 
costs are projections based on the historical level of payments to air 
carriers. Imputed air transportation costs are calculated by 
multiplying outbound volumes by unit air transportation charges, based 
on initial actual air bills.
    Sometime after the close of the fiscal year, the Postal Service 
revises the initial air bills to reflect subsequent corrections. In the 
ICRA report that the Postal Service provided to the Commission in March 
1999, it developed imputed international air transportation costs 
without the benefit of knowing all the corrections made to the initial 
air bills. However, at some point in the process of producing the ICRA, 
the revised actual costs become available. By aggregating the revised 
actual costs and the imputed costs, and calculating the ratio of 
revised cost to imputed costs, the Postal Service created an adjustment 
factor to apply to the international air transportation costs in the 
ICRA, by service and country grouping.
    In the version of the ICRA that the Postal Service provided on 
March 15, it adjusted imputed attributable international air 
transportation cost by service to the accrued level. In the June 
version, it revised international air transportation costs by service 
to reflect only the actual payment to airlines in FY 1998. Accrued 
settlement charges are book costs. They are projections based on 
historical levels of settlement charges. Imputed settlement charges are 
calculated by multiplying volumes recorded by the Military and 
International Accounting and Dispatch System (MIDAS) by known 
settlement charges. Imputed amounts are relied on in the ICRA because 
there can be a lag of several years before corrections to the imputed 
amounts are completed. In the ICRA that the Postal Service provided on 
March 15, the Postal Service treated the difference between actual and 
accrued settlement expenses as a cost that is incremental to 
international mail as a whole. In the June 7 version of the ICRA, the 
Postal Service eliminated the settlement difference cost.
    Because there was not enough time for the Commission to adequately 
evaluate these changes in accounting treatments in its report, the 
Commission presented alternative financial results under both the old 
and the new methods. See appendix F to the Commission's FY 1998 
international mail report. The NPRM invited public comment on the 
merits of these changes in accounting methods used by the Postal 
Service. Order no. 1270 at 13-14.
    UPS comments that the explanations of these changes in accounting 
methods have not been sufficiently clear for it to evaluate their 
merits. It observes that in principle, the accrual method matches costs 
with the production of services more accurately than the cash method, 
citing Financial Accounting Standards Board Statement of Financial 
Accounting Concepts No. 1. It argues that without more detailed 
explanations, there should be a presumption that the accrual method is 
superior. UPS Comments at 12-13.
    The Postal Service replies that the accrual method is less accurate 
than the cash method with respect to both air transportation and 
settlement costs, particularly in FY 1998. The Postal Service states 
that it conducted an analysis in FY 1999 that caused it to adjust 
accrued air transportation costs. It then says

[t]he effect is that the accrued costs for FY 1999, including the 
prior year adjustments, dramatically understate the cost 
consequences of the mail carried during that year. We expect that 
beginning with FY 2000, it will be reasonable to return to the use 
of accrued costs for this item.

Postal Service Reply Comments at 12. The Postal Service will be asked 
to explain in more detail what the nature of the adjustments made 
during FY 1999 were, and why a change to the accrual method will be 
reasonable in FY 2000.
    With respect to the settlement difference, the Postal Service 
states that imputed costs will be consistently more accurate than 
accrued costs. It explains that the long lags before actual charges can 
be compiled lead to relatively large adjustments in such things as the 
actual Special Drawing Right conversion rate to be applied. Id.
    Both the air transportation charge and the settlement charge 
adjustments appear to represent judgments by the Postal Service that, 
at least for FY 1999, it should not try to tie actual amounts back to 
book costs because the book costs are likely to prove to be 
substantially different from the actual charges when they become 
available. The Postal Service will be asked to explain whether it will 
attempt to revise its total accrued costs to conform to the imputed or 
actual costs for air transportation and settlement charges that it 
apparently intends to use in its FY 1999 ICRA.
B. Accounting for International Express Mail Service Imbalance Charges
    With respect to inbound international Express Mail Service (EMS), 
the Commission's FY 1998 international mail report, at 38, comments 
that ``[a]chieving a positive outcome for EMS should not pose a problem 
as the Postal Service is free to enter bilateral agreements * * * in 
which rates can be cost based.'' Referencing this passage, UPS says 
that it is not clear whether EMS covers its costs. It observes that the 
charges for domestic delivery of foreign-origin EMS take the form of 
``imbalance charges'' negotiated between country

[[Page 10019]]

pairs. It says that its understanding is that imbalance charges are 
assessed only on the net amount that one country imports from the 
other, and for that reason, a complete financial picture for EMS 
requires that outbound and inbound EMS data be combined. UPS Comments 
at 13-14.
    The Postal Service replies that none of its various compensation 
arrangements for exchanging EMS are accounted for by focusing on net 
flows between country pairs. Postal Service Reply Comments at 13.
    The Commission's interpretation of the Postal Service's response is 
that even if the Postal Service's payments for domestic delivery of EMS 
are based on net amounts, it carries gross outbound and inbound numbers 
on its books, as it does for other international mail classes. The 
Commission will verify with the Postal Service whether this 
understanding is correct.

III. Contents of the International Mail Report

    The Commission's initial report on international mail under section 
3663 was issued on July 1, 1999. The Commission's NPRM did not propose 
any rules that would apply to the content of its report. But, 
recognizing that the content of the report has a bearing on the data 
that is considered necessary to prepare it, the Commission invited 
comments on the contents of its report as well.
A. Reporting Financial Data Individually for ``Initiatives''
    UPS argues that the report should include volumes, revenues, costs, 
and cost coverages for each individual international service, including 
the so-called ``initiatives'' that the Postal Service considers 
especially sensitive, and that these estimates should be disclosed to 
the public. Otherwise, it argues, there is no way for the public to 
judge the fairness of the rates for individual international services. 
UPS Reply Comments at 9-12.
    The international ``initiatives'' are Global Priority Mail, Global 
Package Link, Direct Entry, and International Customized Mail. UPS 
states that the Commission's report ``aggregates'' volume, cost, and 
revenue information for these services, citing page 34 of the report, 
and urges that the report display data on these services individually. 
UPS Reply Comments at 9. The Commission's report to Congress, at page 
34, and at page 9, displays data for these services individually. UPS' 
comments may have been based on the redacted version of the report that 
it received in response to the request that it filed under the Freedom 
of Information Act (FOIA).
B. Reporting Various Unit Measures as Benchmarks
    FedEx proposes that the Commission's international mail report be 
extended to include unit measures of the financial aspects of 
international mail that can be compared to known, standard unit 
measures from other fields. For example, it proposes that the report 
compare the unit cost of air transportation for LC and AO mail (other 
than International Surface Airlift) to the air transportation rates 
established by the Department of Transportation. It offers, as another 
example, comparing the ``unit cost of foreign post delivery, by 
terminal dues regime, with the terminal dues set by the UPU.'' FedEx 
Comments at 18-19. The Commission agrees that standard unit measures of 
financial performance drawn from other sectors might usefully be 
compared to those of international mail. It will consider presenting 
such comparisons in future reports.
C. Reporting Inbound ``discounts'' as Outbound Costs
    As previously noted, FedEx argues that the Commission's report 
should combine costs, revenues, and volumes for inbound services with 
those of their associated outbound services to display joint cost 
coverages. It also argues that the Commission's report should treat the 
discount offered on each individual inbound service as a cost of the 
associated outbound service. FedEx Comments at 8. UPS generally agrees. 
UPS Reply Comments at 12-13. The Postal Service replies that terminal 
dues rates cannot be viewed as discounts from the rates that inbound 
mail would be charged if it were domestic mail. Postal Service Reply 
Comments at 4-11.
    In its initial international mail report, the Commission presented 
estimates of the costs, revenues, and volumes of inbound and outbound 
international services combined, where it had a reasonable basis for 
mapping a given inbound service to an analogous outbound service. It 
intends to make a similar presentation in future reports.

IV. Public Disclosure Procedures

    The Commission's NPRM did not focus on the issue of public 
disclosure. The Commission, nevertheless, thought that it would be 
useful to invite comments on the procedures that the Commission should 
employ to determine what portions of its international mail report or 
supporting documents should not be publicly disclosed, what criteria or 
standards should govern that determination, what categories of 
commercial information meet those standards, and the basis for that 
belief. Order No. 1270 at 14. A number of proposals were received in 
response.
    UPS proposed that the Postal Service accompany the information that 
it provides on March 15 of each year with an indication of the portions 
that it believes are too commercially sensitive to be publicly 
disclosed. The public would be given 30 days to respond to the Postal 
Service claims, and the Postal Service would have 30 days to reply. The 
Commission would then resolve any public disclosure issues in its 
international mail report, and disclose the information that it 
concludes should be made public. UPS Comments at 10. Similarly, FedEx 
proposes that rule 103 require the Postal Service to accompany the 
information that it submits on March 15 of each year with an indication 
of the information that, in its judgment, would qualify for non-
disclosure under alternative legal standards. FedEx proposes that the 
Commission accompany its section 3663 report with appendices showing 
what information the Commission concludes is exempt from public 
disclosure under those same standards. It implies that these appendices 
would provide Congress with detailed guidance to aid it in resolving 
the disclosure issue. FedEx Comments at 17-18.
    The Postal Service emphasizes that in docket no. IM99-1, the 
Commission declined requests to create a special procedure for 
obtaining public access to information provided under the section 3663 
reporting process. In that docket, the Postal Service notes, the 
Commission concluded that Congress intended public disclosure of 
materials provided under section 3663 to be governed by existing public 
disclosure laws and policies. Postal Service Comments at 18.
    The Commission continues to believe that Congress did not intend 
that section 3663 override existing information disclosure laws and 
policies, or the procedures that they provide. Accordingly, existing 
disclosure procedures should govern disclosure issues arising under 
section 3663. These are essentially the procedures that the FOIA 
provides. See docket no. IM99-1, Order Denying UPS Motion to Provide 
Public Access to International Mail Data, issued May 21, 1999, at 4. 
Consistent with these conclusions, the Commission has not incorporated 
special public disclosure procedures in final rule 103.
    The feasibility of these proposals warrant comment as well. The

[[Page 10020]]

Commission recognizes that requiring annual, comprehensive disclosure 
evaluations could accelerate resolution of disclosure issues, 
especially if it is expected that blanket disclosure requests will be 
routinely lodged for these data. But these proposals would require that 
disclosure evaluations be performed during the same limited periods 
that are available to the Postal Service to compile and edit these 
data, and to the Commission to substantively evaluate them. It is a 
formidable task to apply subjective legal disclosure standards in a 
consistent manner, cell by cell, to thousands of pages of hardcopy 
spreadsheets and thousands more of electronic spreadsheets, as 
disclosure law arguably requires. Substantial time and resource 
constraints make it difficult to undertake both very different kinds of 
evaluations simultaneously.

V. Public Disclosure Standards

    Proposed rule 103 refers to a list of reports relevant to 
international mail that the Postal Service is required to provide by 
March 15 of each year. It then states that

[i]nformation contained in these reports that is considered to be 
commercially sensitive should be identified as such, and will not be 
publicly disclosed except as required by applicable law.

    The NPRM invited comments on the legal standard that should govern 
the determination of what information should be considered commercially 
sensitive. Order no. 1270 at 14.
    Section 410(c)(2) of title 39 authorizes the Postal Service to 
withhold commercial information that would not be disclosed ``under 
good business practice.'' In the NPRM, the Commission summarized 
earlier orders in which the Commission concludes, based on several 
Federal court precedents, that section 410(c)(2) is a statutory 
withholding provision that is exempt from the disclosure requirements 
of the FOIA under exemption 3 of that Act. Order no. 1270 at 10. 
Consequently, the Commission concluded, the stricter standard that 
courts have applied to determine whether commercial information is 
exempt under exemption 4 of the FOIA does not apply to the commercial 
records of the Postal Service, at least in the section 3663 context. 
Federal courts generally require a showing that disclosure is likely to 
cause substantial competitive harm before they will authorize 
withholding of agency records under exemption 4.
A. Standard Proposed by UPS
    UPS proposes that rule 103 incorporate the following standard

The entire report and all of the information used to prepare the 
report shall be made available to the public when the report is 
issued, unless (1) such disclosure will result in specific 
identifiable and serious injury to the Postal Service, and (2) the 
interest of the public in full disclosure is outweighed by such 
injury.

UPS Comments at 9.
    UPS argues that in order to accomplish what it perceives to be the 
Congressional purpose underlying section 3663, the burden required to 
justify withholding information under FOIA exemption 4, and in civil 
litigation concerning trade secrets, is a more appropriate withholding 
criterion to apply to information provided under section 3663. UPS 
further argues that the public interest is especially strong in 
obtaining information about the commercial activities of the Federal 
government, making the appropriate burden even greater. UPS contends 
that the language that it proposes to add to rule 103 reflects the 
appropriate burden that should be required to justify withholding 
information provided to the Commission under section 3663. UPS appears 
to argue that the applicability of this balancing analysis is 
supported, at least indirectly, by the opinion in National Western Life 
Insurance Co. v. United States, 512 F. Supp. 454 (N.D. Tex. 1980). UPS 
Comments at 2-9.
B. Standards Proposed by FedEx
    FedEx proposes that rule 103 incorporate the following language

Information contained in these reports that is considered to be 
commercially sensitive under (i) the standard set out in 39 U.S.C. 
410(c) of the Postal Reorganization Act or (ii) the standard of 
public disclosure applied by the Commission in public hearings 
conducted under the Administrative Procedure Act should be 
identified as such, and will not be publicly disclosed except as 
required by applicable law.

FedEx Comments at 18. FedEx argues that the Congressional purpose 
underlying section 3663 was to protect competitors and mailers from 
unfair international mail practices by the Postal Service, and that 
public disclosure is one of the remedies most commonly used by 
Congress. While the ``good business practice'' withholding standard of 
section 410(c)(2) may apply to disclosure requests made by the public, 
it argues, Congress is not subject to that withholding provision.
    FedEx urges that in its international mail report, the Commission 
identify information that it considers commercially sensitive under 
alternative withholding standards. One would be the ``good business 
practice'' standard applicable to disclosure requests made by the 
public. The other would be the stricter standard applicable in the 
Commission's formal rate hearings (essentially the ``substantial 
competitive harm'' standard applied in FOIA cases interpreting 
exemption 4). This, FedEx suggests, would give Congress guidance as to 
what information to disclose if it concludes that the latter 
withholding standard is more appropriate for information provided under 
section 3663. Id. at 17-18.
C. Standard Proposed by Reporters Committee
    In its comments, at 1-2, the Reporters Committee on Freedom of the 
Press (Reporters Committee), proposes that the following sentence be 
eliminated from proposed rule 103.

Information contained in these reports that is considered to be 
commercially sensitive should be identified as such, and will not be 
publicly disclosed except as required by applicable law.

The Reporters Committee interprets this language as embracing a 
presumption against disclosure that assumes that the withholding 
standard in section 410(c)(2) is applicable to section 3663 
information. It argues that the section 410(c)(2) standard does not 
apply, and that the above-quoted language should be deleted from rule 
103.
    The Reporters Committee contends that the section 410(c)(2) 
standard should not apply to section 3663 information because it is not 
a statutory withholding provision that is exempt from the FOIA 
disclosure requirements under exemption 3. To bring a statutory 
withholding provision under exemption 3, the provision must require 
that matter be withheld in a manner that leaves the agency ``no 
discretion on the issue'' [5 U.S.C. 552(b)(3)(A)] or ``establishes 
particular criteria for withholding or refers to particular types of 
matters to be withheld'' [5 U.S.C. 552(b)(3)(B)]. The Reporters 
Committee argues that section 410(c)(2) would not qualify under either 
part A or part B, under the holding in Church of Scientology of 
California v. United States Postal Service, 633 F.2d 1327 (9th Cir. 
1980).
    Section 410(c)(6) allows the Postal Service to withhold 
``investigatory files compiled for law enforcement purposes.'' The 
court in Church of Scientology rejected the Postal Service's argument 
that section 410(c)(6) qualifies as exempt from FOIA under part B. It 
held that section 410(c)(6) did not

[[Page 10021]]

display a clear Congressional intent that all of the Postal Service's 
investigatory files be exempt from FOIA. The court further held that 
section 410(c)(6) impermissibly allows the Postal Service, rather than 
Congress, to decide what kind of investigatory files would be hazardous 
to disclose.
    The Reporters Committee contends that by authorizing the Postal 
Service to withhold commercial information that would not be disclosed 
under ``good business practice,'' section 410(c)(2) exhibits the same 
infirmities that the Church of Scientology court identified in section 
410(c)(6). Because section 410(c)(2) should not qualify as an exemption 
3 statute, it argues, the withholding criteria of exemption 4 should 
apply to section 3663 information.
    In its reply comments, the Postal Service argues that the 
Commission has correctly concluded that FOIA procedures should govern 
requests for section 3663 information, and that under those procedures, 
section 410(c)(2) becomes the operable disclosure standard. It points 
out that those who object to applying the ``good business practice'' 
standard of section 410(c)(2) to section 3663 information do not 
attempt to distinguish the two Federal court precedents that expressly 
hold that section 410(c)(2) qualifies as an exemption 3 statute, or 
acknowledge that the Commission has followed these precedents in 
denying access to the same type of information and records covered by 
rule 103. See Order no. 1261 at 3-7, citing Weres Corporation v. United 
States Postal Service, C.A. No. 95-1984, at 3-5 (D.D.C. 1996) 
(unpublished memorandum opinion); and National Western Life, 512 
F.Supp. 454 at 458-59. The Postal Service argues that the holding in 
Church of Scientology is of little relevance because it interprets 
section 410(c)(6) rather than section 410(c)(2). It argues that the 
result turns on the fact that after section 410(c)(6) was adopted, 
Congress revealed its hostility to broad exemptions for investigatory 
files by amending and narrowing an almost identical provision 
authorizing agencies in general to withhold investigatory files (the 
original version of FOIA exemption 7).
    When it sought comments on the disclosure standards that should 
apply to section 3663 information, the Commission anticipated that 
comments would focus primarily on interpretations of the ``good 
business practice'' standard of section 410(c)(2). The comments appear 
to assume that the withholding standard to be applied is a matter of 
Commission discretion. Consequently, the comments focus on alternative 
withholding standards that commenters propose.
    The Commission acknowledges that in Church of Scientology, the 
general criteria that the Court articulated for determining whether a 
statute qualifies as exempt from the FOIA under 5 U.S.C. 552(b)(3)(B) 
differ somewhat from the criteria applied in Weres and Western Life, 
which makes the weight of their authority somewhat less clear. 
Nonetheless, the Commission concurs in the observations of the Postal 
Service that existing Federal court precedents holding that section 
410(c)(2) qualifies as an exemption 3 withholding statute are 
controlling, and that the ``good business practice'' standard applies 
to section 3663 information. Accordingly, the Commission will continue 
to apply that standard in determining whether specific section 3663 
information should be disclosed.
    For the reasons discussed above, the Commission hereby adopts new 
39 CFR 3001.103, as set forth in the attachment to this order. [The 
material in the attachment appears in the Federal Register following 
the preamble.]
    Ordering paragraphs. Ordering paragraph no. 1 states that the 
Commission adopts the provision set out in the attachment as final rule 
39 CFR 3001.103. Ordering paragraph no. 2 states that this rule is 
effective upon publication in the Federal Register. Ordering paragraph 
no. 3 states that the Secretary shall cause this order to be published 
in the Federal Register. [Order 1285 (signed by Commission Secretary 
Margaret P. Crenshaw) was issued by the Commission on February 15, 
2000.]

List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure; Postal Service.


    For the reasons stated in the preamble, the Postal Rate Commission 
amends 39 CFR part 3001 as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

    The authority citation for part 3001 is revised to read as follows:

    Authority: 39 U.S.C. 404(b); 3603, 3622-24, 3661, 3662, 3663.

    2. Add Sec. 3001.103 to subpart G to read as follows:


Sec. 3001.103  Filing of reports required by 39 U.S.C. 3663(b).

    Each report listed in this section shall be filed with the 
Secretary of the Commission on or before March 15th of each year unless 
a later date is specified, and shall cover the most recent full fiscal 
year. Information contained in these reports that is considered to be 
commercially sensitive should be identified as such, and will not be 
publicly disclosed except as required by applicable law. Specific 
sources cited in this section should be understood to include any 
successor or substituted source.
    (a) The International Cost and Revenue Analysis--PRC Version.
    (b) The International Cost and Revenue Analysis--USPS Version, by 
May 15.
    (c) The Cost and Revenue Analysis Report--PRC Version. If an 
unaudited version is provided on March 15, provide an audited version 
no later than May 15. The audited version shall include a statement 
describing all adjustments that affect international mail.
    (d) The Cost Segments and Components Report--PRC Version. If an 
unaudited version is provided on March 15, provide an audited version 
no later than May 15. The audited version shall include a statement 
describing all adjustments that affect international mail.
    (e) Documentation and workpapers for the ICRA, including those 
related to:
    (1) Terminal dues.
    (2) Air conveyance dues.
    (3) Transit charges.
    (4) Imbalance charges.
    (5) Inward land charges.
    (6) Description of cost allocation procedures.
    (7) Identification of costs that are exclusive to international 
mail.
    (8) The cost of joint ventures with other postal administrations.
    (9) International billing determinants.
    (10) The data for Direct Entry separated between inbound and 
outbound as in the Postal Service's response to Item 1 of order no. 
1246.
    (11) The attributable costs for ValuePost/Canada developed in 
accordance with the procedure described in the Postal Service's 
response to Item 2 of order no. 1251, or any alternative procedure 
deemed appropriate as a basis for setting the rates for ValuePost/
Canada. Costs for ValuePost/Canada should be separated between 
publications and all other printed matter.
    (12) Revenues and volumes for Value Post/Canada separated between 
publications and all other printed matter.
    (f) Handbooks pertaining to the collection of volume and revenue 
data (MIDAS, SIRVO, SIRVI, Other) if they were revised or replaced 
since they were last submitted.

[[Page 10022]]

    (g) International CRA manual input, A, B, C, and factor reports on 
a CD-ROM.
    (h) A hard copy of the International CRA manual input and the C 
report International CRA manual input, A, B, C, and factor reports on a 
CD-ROM.
    (i) Cost Segment 3 CRA Worksheets and all supporting files, 
including the MODS-Based Costing Studies--PRC Version. Include all 
databases, SAS and other programs, and output worksheets.
    (j) Cost Segment 7 CRA Worksheets and all supporting files.
    (k) The number of weighted tallies by international service 
separately for clerks and mailhandlers, and for city delivery carriers 
in-office; clerk and mailhandler tallies should be further separated 
for mail processing, window service, and all other.
    (l) Coefficients of variation for:
    (1) IOCS clerk and mailhandler tallies by mail processing, window 
service, and all other.
    (2) IOCS city delivery carriers in-office.
    (3) TRACS for purchased transportation by international, air, 
railroad, and other.
    (4) Outbound volume by international service.
    (5) Inbound volume by international service.
    (m) The percentage of household and the percentage of non-household 
mail for each outbound mail service.
    (n) The percentage of single-piece mail and bulk mail for each 
outbound service.

    Dated: February 18, 2000.
Cyril J. Pittack,
Acting Secretary.
[FR Doc. 00-4427 Filed 2-24-00; 8:45 am]
BILLING CODE 7715-01-U