[Federal Register Volume 67, Number 222 (Monday, November 18, 2002)]
[Rules and Regulations]
[Pages 69478-69479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29097]


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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 inspecting postage 
meter production facilities that are located outside the continental 
United States. This rule requires the manufacturer to reimburse the 
Postal Service for certain costs incurred by required inspections of 
production facilities located outside the continental United States.

DATES: The rule is effective November 18, 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: Title 39, Code of Federal Regulations (CFR) 
part 501, Authorization to Manufacture and Distribute Postage Meters, 
requires the Postal Service to inspect meter production facilities to 
determine if the facilities satisfy Postal Service requirements for 
meter and component security and production quality. A manufacturer may 
have valid business reasons for selecting a particular location for its 
production facilities. However, when a manufacturer chooses to locate 
these facilities outside the continental United States, conducting the 
required inspections of such facilities places an undue cost burden on 
the Postal Service. The Postal Service is requiring the manufacturer to 
reimburse the travel-related costs.
    The proposed rule was published in the Federal Register on May 9, 
2002 [Vol. 67, No. 90, page 31168], with a request for submission of 
comments by June 10, 2002. We received two 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. Both commenters opposed having the provider become responsible 
for the costs incurred by the Postal Service when it conducts required 
inspections of provider facilities located outside the continental U.S. 
One commenter claimed that this requirement is both unfair and 
unreasonable, since it puts an undue burden on a company with 
production facilities outside the U.S., and therefore places non-U.S.-
based companies at a disadvantage. The commenter also noted that in the 
global economy, it is unreasonable to expect products to be sourced 
from a single country. The other commenter noted that even though 
providers have maintained facilities in Europe for years, the Postal 
Service has not asked that the providers pay postal expenses for travel 
to these European locations. The commenter requested that European 
production facilities be exempt from the new rule.
    The Postal Service understands the concern about having providers 
pay the costs incurred for Postal Service personnel who travel outside 
the continental United States to inspect production facilities. The 
initially approved foreign manufacturing and production facilities were 
located in Europe. The Postal Service was able to minimize its cost by 
conducting periodic, routine, security inspections of multiple 
production locations on a single trip. Ongoing routine inspections of 
these long-established locations have resolved many of the security 
issues that can arise during facility startup. Although the final rule 
includes no exemption from the requirement for manufacturers to pay for 
Postal Service inspections of European production facilities, the 
Postal Service plans to continue its policy of funding the cost of 
certain inspection trips, as it has in the past, at its discretion. 
Postal Service funding will be limited to trips for routine inspections 
when the Postal Service can conduct multiple inspections and costs are 
not excessive. The Postal Service must limit its cost exposure by 
requiring manufacturers to pay the travel-related costs for inspections 
outside the continental United States whenever the costs are associated 
with particular security issues related to the manufacturer's products, 
or with the startup or implementation of a new plant or of a new or 
substantially changed manufacturing process. The Postal Service revised 
the proposed rule in response to this comment.
    2. One commenter noted that when the Postal Service inspected 
overseas facilities in the past, the inspection team often visited more 
than one manufacturer or facility on a given trip. The other commenter 
noted that it is unreasonable to require the provider to pay travel 
expenses for inspections, which are conducted in the interests of the 
Postal Service. The commenter suggested that each organization consider 
whether the expense of travel is justified by the benefit gained. If it 
is not, then the trip should be postponed and not billed to another 
organization. The commenter noted that requirement for providers to 
reimburse the Postal Service also raises the issue of who is to decide 
the specifics of travel, including the number of Postal Service 
representatives.
    Although the decision on where to locate production facilities for 
meter products or components is not one in which the Postal Service 
would expect to participate, such decisions may have the effect of 
increasing Postal Service costs incurred in the administration of the 
postage meter program. Given the financial constraints under which the 
Postal Service must operate, and our determination to avoid additional 
revenue security issues, the Postal Service cannot allow the business 
decisions of providers to determine the security of Postal Service 
revenues or to increase Postal Service costs indiscriminately. However, 
in recognition of the concerns expressed, the Postal Service is adding 
paragraph 501.2(c)(i) to clarify the final rule by defining how the 
Postal Service will control the costs allocated to the manufacturer. 
For example, the Postal Service will combine trips to more than one 
facility whenever possible and will limit the number of Postal Service 
representatives on the inspection team to the minimum number required 
to conduct the inspection.
    3. It has come to the attention of the Postal Service that 
companies are considering using production facilities in certain 
foreign countries where political or other impediments may prevent the 
Postal Service from conducting security evaluations of these 
facilities. Postal Service approval to distribute meters produced in 
such facilities may be suspended until such time as satisfactory 
inspections may be conducted. In recognition of this concern, the 
Postal Service is adding paragraph 501.2(c)(ii) to clarify the final 
rule.

[[Page 69479]]

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 (Public Law 
95-452, as amended); and 5 U.S.C. App. 3.

    2. Amend Sec.  501.2 by revising the introductory text and 
paragraphs (c) and (d) to read as follows:


Sec.  501.2  Manufacturer qualification.

    Any concern wanting authorization to manufacture and/or lease 
postage meters for use by licensees under Domestic Mail Manual P030 
must:
* * * * *
    (c) Have, or establish, and keep under its supervision and control, 
adequate production facilities suitable to carry out the provisions of 
Sec. Sec.  501.15 through 501.21 to the satisfaction of the Postal 
Service. The production facilities must be subject to unannounced 
inspection by representatives of the Postal Service. If the provider's 
production facilities are located outside the continental United 
States, the provider will be responsible for all reasonable and 
necessary travel-related costs incurred by the Postal Service to 
conduct the inspections. Travel-related costs are determined in 
accordance with Postal Service Handbook F-15, Travel and Relocation. At 
its discretion, the Postal Service may continue to fund routine 
inspections outside the continental United States as it has in the 
past, provided the costs are not associated with particular security 
issues related to a manufacturer's product, or with the start-up or 
implementation of a new plant or of a new or substantially changed 
manufacturing process.
    (i) When conducting an inspection outside the continental United 
States, the Postal Service will make every effort to combine the 
inspection with other inspections in the same general geographic area 
in order to enable affected manufacturers to share the costs. The 
Postal Service team conducting such inspections will be limited to the 
minimum number necessary to conduct the inspection. All air travel will 
be contracted for at the rates for official government business, when 
available, under such rules respecting class of travel as apply to 
those Postal Service representatives inspecting the facility at the 
time the travel occurs.
    (ii) If political or other impediments prevent the Postal Service 
from conducting security evaluations of meter manufacturing facilities 
in foreign countries, Postal Service approval to distribute meters 
produced in those facilities may be suspended until such time as 
satisfactory inspections may be conducted.
    (d) Have, or establish, and keep under its active supervision and 
control adequate facilities for the control, distribution, and 
maintenance of meters and their replacement or secure disposal or 
destruction when necessary.

Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 02-29097 Filed 11-15-02; 8:45 am]
BILLING CODE 7710-12-P