[Federal Register Volume 67, Number 221 (Friday, November 15, 2002)]
[Rules and Regulations]
[Pages 69137-69139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28937]


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POSTAL SERVICE

39 CFR Part 501


Authorization To Manufacture and Distribute Postage Meters

AGENCY: Postal Service.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations for checking postage 
meters out of service and for handling faulty meters. The need to 
ensure the security of Postal Service revenues mandates these changes. 
The changes will clarify the responsibilities of the meter provider and 
improve the secure handling of faulty postage meters.

DATES: The rule is effective November 15, 2002.

FOR FURTHER INFORMATION CONTACT: Wayne Wilkerson, Manager of Postage 
Technology Management, at 703-292-3782, or by fax at 703-292-4050.

SUPPLEMENTARY INFORMATION: The United States Postal Service is seeking 
to improve the secure handling of faulty postage meters by the approved 
postage meter providers and to enhance the accuracy of determinations 
by the postage meter providers of the proper amounts of postage to be 
refunded from faulty postage meters. We are amending the regulations 
for checking postage meters out of service and for handling faulty 
meters to address these concerns and to align the regulations with 
changes to the Domestic Mail Manual (DMM) regarding postage meters 
published in the Federal Register on November 8, 2001 (Vol. 66, No. 
217, pages 56432-56447). We have deleted references to mechanical 
meters from the amended section since all mechanical postage meters 
have been decertified since 1999 and should no longer be in service. In 
this final rule, the Postal Service clarifies the definition of 
``faulty'' as it applies to postage meters. In the proposed rule, the 
manufacturer sent all faulty meters to a special, secure facility for 
examination to determine the additional processing required to withdraw 
each meter. In this final rule, the initial examination of a faulty 
meter occurs in the field where the manufacturer or the manufacturer's 
agent determines whether the faulty meter can be withdrawn in 
accordance with procedures for a nonfaulty meter, or needs to be 
handled at the special, secure facility. We are also revising the 
regulation to allow 7 business days to prepare and file the report on 
faulty meters when the meter registers cannot be read, a summary report 
of the appropriate redundant electronic register memory readouts cannot 
be retrieved, and there is no evidence of tampering. We will amend the 
remaining sections of CFR part 501 in the near future so that they 
reflect the changes in the postage meter population and changes in the 
DMM.
    The proposed rule was published in the Federal Register on May 2, 
2002 (Vol. 67, No. 85, pages 22025-22027), with a request for 
submission of comments by June 3, 2002. We received three submissions 
from postage meter manufacturers in response to the solicitation of 
public comments. The Postal Service gave thorough consideration to the 
comments it received, modified the proposed rule as appropriate, and 
now announces the adoption of the final rule.

Discussion of Comments

    1. The three commenters requested clarification of the term 
``faulty.''
    The Postal Service clarified the definition of ``faulty'' as it 
applies to postage meters. Faulty meters include those that are 
inoperable, those that are misregistering or the registers are 
unreadable, those that inaccurately reflect their current status, those 
that show any evidence of tampering or abuse, and those for which there 
is information or other indication that the meter has some mechanical 
or electrical malfunction of any critical security component, such as 
any component the improper operation of which could adversely affect 
Postal Service revenues, or of any memory component, or that affects 
the accuracy of the registers or the accuracy of the value printed. The 
proposed rule is revised in response to these comments.
    2. One commenter assumed that the requirement for manufacturers to 
``(e)nsure that faulty meters are not presented to the licensing Post 
Office for checkout or withdrawal'' meant that nonfaulty meters could 
be presented to the licensing Post Office.
    This assumption is incorrect. The meter licensee returns all meters 
to the manufacturer or the manufacturer's agent for withdrawal, as 
directed in DMM 57, section P030.3.13, Returning a Postage Evidencing 
System or PSD. The manufacturer or its agent checks nonfaulty meters 
out of service under Sec.  510.23(g) and either has an approved process 
for withdrawal, or ensures that the meter is examined by a Postal 
Service employee. Faulty meters are returned to the manufacturer and 
handled by the manufacturer in accordance with the procedures in Sec.  
501.23(h). To clarify the withdrawal process, we deleted the paragraph 
referenced in this comment from the proposed rule.
    3. Two commenters noted the difficulty of complying with the 
requirements for obtaining the licensee's signature to complete PS Form 
3601-C, Postage Meter Activity Report, for faulty meters.
    The Postal Service understands that as of the effective date of 
this rule, PS Form 3601-C does not include a specific place for the 
licensee's signature confirming that the information on the form is 
correct, as required by the proposed regulation. However, until the 
form is revised and widely distributed, and the inventory of old 
versions of the form is depleted, the manufacturer's representative 
should ensure that the licensee (or the licensee's approved 
representative) signs the form and prints his or her name clearly under 
items C3 and C5. The Postal Service suggests that when the licensee is 
unavailable, the licensee's representative or agent who is responsible 
for releasing the meter to the manufacturer and signing the 
manufacturer's paperwork should also be responsible to review and sign 
the Postal Service form. There is no change to the proposed rule as a 
result of this comment.
    4. Some commenters requested more information on the reporting 
requirements for faulty meters. Commenters also requested additional 
time to submit the reports.
    Postage Technology Management will notify manufacturers when there 
are any changes from current reporting requirements for faulty meters. 
The Postal Service has reviewed the request

[[Page 69138]]

for additional time to submit required reports and agrees that 
additional time should be allowed. The regulation is revised to allow 7 
business days to prepare and file the report on faulty meters when the 
meter registers cannot be read, a summary report of the appropriate 
redundant electronic register memory readouts cannot be retrieved, and 
there is no evidence of tampering.
    5. One commenter suggested that instead of requiring licensees to 
submit daily usage logs whenever register values cannot be read, the 
logs should only be required when the manufacturer is unable to obtain 
the systems report from the meter.
    The Postal Service wants to encourage meter licensees to keep daily 
usage logs. Providing adequate backup for register values is the 
manufacturer's responsibility and the logs can provide the information 
when the meter is faulty. There is no change to the proposed rule as a 
result of this comment.
    6. One commenter asked if there can be more than one dedicated 
secure facility for handling faulty meters that cannot be handled under 
the procedures used for nonfaulty meters.
    A manufacturer can have multiple secure facilities for handling 
faulty meters that cannot be handled under the procedures used for 
nonfaulty meters. However, the Postal Service must inspect and approve 
each such facility. No change is made to the proposed rule as a result 
of this comment.
    7. Some commenters questioned the requirement to ship faulty meters 
via Registered Mail service, Express Mail[reg] service, or Priority 
Mail[reg] service with Delivery Confirmation\TM\ service.
    The initial examination of a faulty meter occurs in the field where 
the manufacturer or the manufacturer s agent determines whether the 
faulty meter can be withdrawn in accordance with procedures for a 
nonfaulty meter, or needs special handling. However, when the registers 
cannot be read, or a summary report of the appropriate redundant 
electronic register memory readouts is not available using Postal 
Service-approved methods, or there is evidence of tampering, or there 
is some information or other indication that the meter has some 
mechanical or electrical malfunction that affects the accuracy of the 
registers or the accuracy of the value printed, the meter must be 
returned to the special, secure facility for processing. Shipment of 
these meters poses a special risk. No manufacturer has or will be 
granted written Postal Service approval to ship these faulty meters 
using means other than Registered Mail service, Express Mail service, 
or Priority Mail service with Delivery Confirmation service. If these 
meters are shipped by alternative (non-Postal Service) means, the 
Postal Service will not authorize payment of refunds for postage value 
left on the meter, since a lack of security in shipping could make the 
faulty meter vulnerable to tampering. However, nonfaulty meters, and 
faulty meters that can be withdrawn using the same procedures as for 
nonfaulty meters, may be shipped using alternate carriers when the 
manager of Postage Technology Management, Postal Service Headquarters, 
gives written permission to ship by another means or service, based 
upon an assessment of the security of the proposed alternative. No 
change is made to the regulation in response to these comments.
    8. One of the commenters questioned the use of ``highest average 
daily usage'' in calculating refund amounts, especially for seasonal 
users, and asked that the regulation recognize other means to retrieve 
meter register readings.
    The methods for developing other data to support the request for 
Postal Service approval of a refund amount are given as examples of 
approved approaches and are not meant to preclude the use of other 
approaches. No change is made to the regulation in response to this 
comment.
    9. One of the commenters suggested the Postal Service consider a 
minimum hold period for faulty meters to be sure all Postal Service 
questions are answered.
    The manufacturer should hold the faulty meter for as long as it 
believes necessary to respond to any questions from the Postal Service 
or to appeal a Postal Service decision on a postage adjustment amount. 
No change is made to the regulation in response to this comment.
    10. Commenters asked for clarification of when the Postal Service 
would require the manufacturer, rather than the Postal Service, to 
issue the refund of any postage value said to remain in a faulty meter. 
One commenter suggested that the Postal Service give prior notice to 
the manufacturer before requiring the manufacturer to issue the 
refunds. The commenters also suggested alternative methods for handling 
refunds for postage value remaining on a faulty meter.
    The Postal Service reimburses remaining postage value in a 
defective postage meter because the funds are Postal Service funds. 
Normally, the Postal Service handles the refund and processes the 
reimbursement for customer convenience. However, when a meter or meter 
model is defective, the manufacturer, rather than the Postal Service, 
is responsible for the defect and should be responsible for handling 
the refund of Postal Service funds to the customer subject to 
reimbursement by the Postal Service. The Postal Service may not have 
prior notice that a meter model was defective and susceptible to 
malfunctioning until it sees a pattern of excessive refund requests. 
Excessive defects may require resubmission of the meter model in 
question for additional testing to ensure that it meets all performance 
criteria and maintains the security of Postal Service funds. The 
regulation does not specify or limit the choice of payment mechanism to 
be used when the manufacturer issues the refund of any postage value 
remaining in a faulty meter. No change is made to the regulation as a 
result of these comments.

List of Subjects in 39 CFR Part 501

    Administrative practice and procedure, Postal Service.

The Amendment

    For the reasons set out in this document, the Postal Service is 
amending 39 CFR part 501 as follows:

PART 501--AUTHORIZATION TO MANUFACTURE AND DISTRIBUTE POSTAGE 
METERS

    1. The authority citation for part 501 continues to read as 
follows:

    Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 410, 
2601, 2605; Inspector General Act of 1978, as amended (Pub. L. 95-
452, as amended); and 5 U.S.C. App. 3.


    2. Revise paragraphs (g) and (h) of Sec.  501.23 to read as 
follows:


Sec.  501.23  Distribution controls.

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    (g) Check a nonfaulty meter out of service in accordance with the 
procedures that the Postal Service has approved for that meter when the 
meter is to be removed from service for any reason. Ensure that a 
Postal Service employee certifies the register readings and clears the 
descending register when the meter is checked out of service, unless 
the Postal Service has approved other procedures for the specific meter 
model. Complete the checkout process in a timely manner and transmit 
the required data to the appropriate Postal Service information 
systems. Ensure that no employee of the meter manufacturer or any 
third-party changes, interferes with, or performs

[[Page 69139]]

any element of the Postal Service employee's established checkout and 
withdrawal process for any meter, unless approval for the change in 
procedures is granted in writing by the Postal Service.
    (h) Handle faulty meters, including those that are inoperable, 
those that are misregistering or the registers are unreadable, those 
that inaccurately reflect their current status, those that show any 
evidence of tampering or abuse, and those for which there is 
information or other indication that the meter has some mechanical or 
electrical malfunction of any critical security component, such as any 
component the improper operation of which could adversely affect Postal 
Service revenues, or of any memory component, or that affects the 
accuracy of the registers or the accuracy of the value printed, as 
follows:
    (1) Ensure that all functions required to handle faulty meters are 
completed in a timely manner and in accordance with Postal Service 
regulations and procedures.
    (2) Begin the process to retrieve any faulty meter within 2 
business days of being notified of a problem.
    (3) Complete PS Form 3601-C, Postage Meter Activity Report, in the 
presence of the licensee and obtain the licensee's signature on the 
form confirming that the information is accurate.
    (i) Include the register information on the form when the registers 
can be read.
    (ii) Print the system report, if available for the meter, and 
attach the report to PS Form 3601-C when the register values cannot be 
read.
    (iii)Have the licensee provide any original daily usage logs with 
PS Form 3601-C for refund calculation when the register values cannot 
be read.
    (4) Identify and tag the meter as faulty as soon as the 
manufacturer or the manufacturer's agent receives it from the customer. 
Keep the identification tag and the PS Form 3601-C, which was completed 
under paragraph (h)(3) of this section, with the faulty meter until 
processing is completed and the meter is returned to service or is 
scrapped.
    (5) Secure all faulty meters and maintain the integrity of the 
meter and of the information residing on the meter. Maintain control of 
the meter until processing is completed.
    (6) Ensure that under no circumstance are registers on a faulty 
meter cleared or any funds refunded or transferred until examination 
and processing are completed, the Postal Service has reviewed and 
analyzed the manufacturer's report and determined the appropriate 
postage adjustment, if any, and approved refund procedures are 
followed.
    (7) Maintain a record of the faulty meter and all changes in its 
custody, state, and condition (including availability of register 
information) from the time the meter is reported as faulty until 
processing is completed under paragraphs (h)(9), (12), or (14) of this 
section. Make the record available to the Postal Service for its review 
upon request.
    (8) Examine each meter withdrawn for faulty operation as soon it is 
received from the customer to determine if the registers can be read 
and if there is any evidence of tampering.
    (9) When the registers can be read or a summary report of the 
appropriate redundant electronic register memory readouts is available 
using Postal Service-approved methods, and there is no evidence of 
tampering or any problem covered by paragraph (h)(13) of this section:
    (i) Check out the meter and withdraw it from service under 
paragraph (g) of this section.
    (ii) Submit a report to the Postal Service by the 15th of each 
month listing all faulty meters with readable displays and no other 
problems received in the prior month, identifying the meter and 
including an explanation of the meter malfunction.
    (10) Maintain a dedicated, secure facility, approved by the Postal 
Service, for handling faulty meters that cannot be handled under 
paragraph (h)(9) of this section.
    (11) Ship faulty meters not handled under paragraph (h)(9) of this 
section directly to the secure facility described in paragraph (h)(10) 
of this section for processing. Ship these faulty meters via Registered 
Mail service, Express Mail service, or Priority Mail service with 
Delivery Confirmation service.
    (12) If there is no evidence of tampering, if the meter registers 
cannot be read, and if a summary report of the appropriate redundant 
electronic register memory readouts cannot be retrieved:
    (i) Develop other data to support the request for Postal Service 
approval of a postage adjustment amount, such as a manual calculation 
of the estimated value of the descending register based on estimated 
highest average daily usage, or applicable system-generated register 
documentation. Include the original daily usage logs maintained by the 
customer, if any, with the supporting data.
    (ii) Furnish a report explaining the malfunction to the Postal 
Service within 7 days of receiving the meter. Accompany the report with 
a recommendation of the postage adjustment amount that includes all 
data developed to support the recommendation.
    (iii) Maintain control of those meters that have unreadable 
registers and hold them in the manufacturer's dedicated, secure 
facility described in paragraph (h)(10) of this section until a 
representative of the Postal Service approves the postage adjustment 
amount or verifies the condition of the meter before proceeding with 
the meter repair or destruction.
    (13) In some instances, even though the registers can be read, 
there is information or other indication that the meter has some 
mechanical or electrical malfunction that affects the accuracy of the 
registers or the accuracy of the value printed. Handle such meters 
under paragraph (h)(12) of this section.
    (14) If there is evidence or suspicion of tampering:
    (i) Ensure that the meter is handled in a secure manner and 
maintained in its original state until the Postal Service or its agent 
can be present during the examination.
    (ii) After examination, if approved by the Postal Service or its 
agent, process the meter under paragraph (h)(12) of this section.
    (15) Issue the refund of any postage value said to remain in a 
faulty meter, after Postal Service approval of the amount of the 
refund, when the Postal Service requires it. Request reimbursement from 
the Postal Service for these refunds by periodically submitting a 
reimbursement request letter to the Postal Service. Accompany the 
letter with listings and support documentation for each refund and 
indicate the cause of failure for each incident.
* * * * *

Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 02-28937 Filed 11-14-02; 8:45 am]
BILLING CODE 7710-12-P