[Federal Register Volume 68, Number 20 (Thursday, January 30, 2003)]
[Rules and Regulations]
[Pages 4713-4717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2198]


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POSTAL SERVICE

39 CFR Part 111


Experimental Outside-County Periodicals Co-Palletization 
Classification

AGENCY: Postal Service.

ACTION: Interim rule.

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SUMMARY: This interim rule provides standards for a Postal Service 
experiment testing whether additional rate incentives would encourage 
the co-palletization and drop-shipment of currently sacked bundles of 
individual Periodicals publications. This interim rule will implement 
two additional per-piece discounts for co-palletization of Periodicals 
publications that otherwise would have been prepared in sacks prior to 
co-palletization. The additional per-piece discounts, resulting from 
Docket No. MC2002-3 at the Postal Rate Commission, would apply to 
pieces in bundles placed on SCF and ADC pallets that are drop-shipped 
to either a destination area distribution center (DADC) or a 
destination sectional center facility (DSCF). This interim rule 
includes procedures for preparing and documenting co-palletized 
mailings and for requesting approval to participate in the experiment.

DATES: This interim rule is effective January 30, 2003. Applications 
for participation in the experiment will be available beginning 
February 3, 2003. The starting date for the experiment is April 20, 
2003. Comments on the standards must be received on or before March 3, 
2003.

ADDRESSES: Written comments should be mailed or delivered to the 
Manager, Mail Preparation and Standards, U.S. Postal Service, 1735 N. 
Lynn St., Room 3025, Arlington, VA 22209-6037. Copies of all written 
comments will be available for inspection and photocopying at USPS 
Headquarters Library, 475 L'Enfant Plaza, Washington, DC, between 9 
a.m. and 4 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Joel Walker, 703-292-3652; 
[email protected].

SUPPLEMENTARY INFORMATION: The Postal Service offers certain 
worksharing incentives in the form of discounts to encourage 
palletization and drop-shipping of Periodicals mailings. Co-
palletization allows mailers to combine separately presorted bundles of 
different titles and editions on pallets to achieve the minimum pallet 
weight required to take advantage of current pallet and drop-shipment 
discounts for Periodicals mail (e.g., 250 pounds of mail to a 
destination ADC). However, many publishers of small-circulation 
publications do not choose to take advantage of this opportunity due to 
the increased preparation costs associated with co-palletization. 
[Note: A group of flats presorted together to a common destination is 
currently defined as a ``package'' in the Domestic Mail Manual. 
However, packages in this context are usually referred to as 
``bundles'' by the mailing industry, as well as many postal employees, 
and will be referred to as such throughout this document.]
    Because mail prepared in sacks accounts for a disproportionate 
amount of the Postal Service's costs for processing Periodicals, the 
Postal Service designed an experiment to test whether an additional 
discount would encourage the co-palletization of mail that would 
otherwise be prepared in sacks. Eligibility requires the co-palletized 
mail to be prepared on ADC or SCF pallets that are drop-shipped to 
DADCs or DSCFs. The primary beneficiaries of this incentive should be 
smaller circulation publications, for which, in some cases, complete 
mailings are now in sacks. Some smaller portions of larger mailings 
(sometimes referred to as ``residual'' or ``tail of the mail''), as 
well as smaller circulation versions, editions, and supplemental 
mailings of large circulation publications could also qualify under the 
experiment. The objective of the additional discount is to move mail 
from origin-entered sacks to drop-shipped pallets.
    On September 26, 2002, pursuant to 39 U.S.C. 3623, the Postal 
Service filed with the Postal Rate Commission a request for a decision 
recommending an experimental co-palletization classification, with 
associated discounts, for Outside-County Periodicals. The request was 
designated as Docket No. MC2002-3 by the Commission. The Commission 
recommended the experimental classification and discounts on December 
20, 2002. This recommendation was approved by the Governors on January 
6, 2003, and the Board of Governors set April 20, 2003, as the 
anticipated implementation date for the experiment, which is to last 
two years.
    This experiment provides additional per-piece discounts to co-
palletized Periodicals that cannot be palletized currently because of 
volume and density. The discounts will be available for pieces in 
Periodicals mailings and mailing segments that are currently prepared 
in sacks that, as a result of co-palletizaton, are prepared on ADC or 
SCF pallets and are drop-shipped to DADCs and DSCFs.
    For mail that otherwise would have been prepared in sacks under the 
original presort for the mailing (before co-palletization), a new per-
piece discount of $0.007 would be available for bundles on ADC and SCF 
pallets entered at destination ADCs. For SCF pallets drop-shipped to 
destination SCFs, the new per-piece discount would be $0.01. The 
discounts do not apply to mail prepared on any other pallet level. 
While mailers will be expected to prepare pallets of at least 250 
pounds, the new discount would be available for pallets weighing less 
than 250 pounds. Less than 250-pound pallets (except overflow pallets) 
would not be eligible for the existing pallet discounts (e.g., $0.015 
for drop-shipped mail on pallets of 250 or more pounds).
    Co-palletization will consist of bundles of mail that remain intact 
(before and after co-palletization) and are moved from sacks (before 
co-palletization) to either ADC or SCF pallets to be drop-shipped to 
the appropriate DADC or DSCF. Mail that moves from an ADC pallet before 
co-palletization (e.g., 250 or more pounds to an ADC) to an SCF pallet 
as a result of co-palletization would not be entitled to either of the 
new discounts.
    The following explains the Periodicals mail types that could be 
eligible for the experimental co-palletization discounts:

[[Page 4714]]

    [sbull] Small circulation publications.
    [sbull] Residual volume of independently presorted versions of 
publications, as well as editions of current issues of larger 
circulation publications for those destinations where there is 
insufficient volume to prepare an ADC pallet of at least 250 pounds.
    [sbull] Supplemental mailings of large circulation publications.
    [sbull] Multiple titles or multiple versions of a publication that 
are presorted together into bundles through a selective binding 
operation if movement of the presorted bundles (created as a result of 
selective binding) is from sacks to co-pallets.
    [sbull] Mail that is combined in a co-mailing operation that moves 
from sacks (if titles or versions are sorted independently) onto 
pallets that are drop-shipped.
    Co-palletized pieces with less than 250 pounds per title or edition 
per ADC destination, if independently presorted, could qualify for the 
co-palletization discounts. Co-palletized pieces with less that 250 
pounds of mail per title or edition within an ADC remaining after 
preparing SCF pallets could qualify for the co-palletization discounts 
because this mail otherwise would have been prepared in sacks. Mailers 
may build upon originally presorted SCF and ADC pallets, but only the 
co-palletized pieces with less than 250 pounds per title or edition per 
ADC destination, if independently presorted, would qualify for the co-
palletization discounts.
    Other drop-ship and palletization incentives available on the 
current rate schedule would apply to all the pieces based on their 
eligibility (e.g., drop-ship discounts and pallet discounts).
    Because co-palletized volumes are difficult to predict, during the 
experiment co-palletized mail will not be required to be placed on the 
finest level pallet possible. For example, if a co-palletized ADC 
pallet contains more than 500 pounds to a particular SCF, an SCF pallet 
will not be required. Mailers and consolidators will be encouraged to 
periodically reevaluate mail volumes for SCF/ADC destinations to 
determine whether additional SCF pallets could be created on a regular 
basis to maximize presort and worksharing benefits.
    The Postal Service recognizes that there is a relatively small 
volume of mail that is currently either co-palletized or co-mailed and 
drop-shipped. Consolidators who already drop-ship co-palletized volume 
are eligible for the additional discounts if the standards outlined 
below are met.

Documentation Requirements

    The Postal Service will require documentation (summarized for each 
title and identified by edition, version, or segment) that profiles 
mailings before co-palletization, to substantiate that without co-
palletization the mail would have been prepared in sacks (e.g., ADC 
pallets of 250 or more pounds for any individual title, independently 
presorted version, or selectively bound pool, could not have been 
made). Supplemental mailings prepared after, and separate from, the 
original mailing, would be treated as a separate title and would have 
to meet the same requirements for pieces to be eligible for the 
additional discounts.
    The mailer or consolidator must provide documentation of the mail 
both before and after co-palletization (e.g., mail.dat files that can 
be printed, if necessary), relating only to the mail that is co-
palletized. The ``before'' documentation must be in files that permit 
easy identification of mailings (e.g., by job ID, segment ID, and 
container summary) included in the co-palletization program separate 
from mailings that are not included in the program. The ``after'' 
documentation must identify publications or segments with 250 or more 
pounds to an ADC on pallets (mail that does not qualify for added co-
palletization incentives) separately from volumes of other publications 
or segments with less than 250 pounds that do qualify for the 
incentives. Documentation must be prepared by title and version, 
segment, or edition; or by codes representing each title or version, 
segment, or edition. The mailer or consolidator will output a new file 
for the mail after co-palletization showing how the mail was presorted 
and where it was entered. Data in the ``after'' co-palletization files 
must be easily reconciled with the ``before'' files to validate that 
proper postage has been paid for all pieces.
    The Postal Service is issuing a new postage statement that includes 
the new co-palletization discounts. Periodicals mailers must use this 
postage statement for mailings that qualify for and claim the new 
discounts.
    Publications mailed under the CPP program may be included as part 
of a co-palletized mailing. Publishers may elect to (1) remove the co-
palletized portion of a mailing job from the CPP consolidated postage 
statement and pay postage at the consolidation point, or (2) provide, 
to the preparer of the consolidated postage statement, information 
about the co-palletized portion of their mailing to be included on the 
consolidated postage statement submitted to the New York Rates and 
Classification Service Center.
    Publishers that co-palletize multiple editions of the same 
publication must submit a consolidated postage statement and register 
of mailings.

Data Reporting

    Over the course of the experiment, mailers and consolidators must 
provide the Postal Service with appropriate data regarding publication 
titles that include pieces for which the discounts are claimed. The 
purpose of collecting these data is to provide a measure of the 
experiment's effectiveness. The Postal Service intends to provide 
participants with details regarding the frequency and methodology for 
data reporting prior to implementation of the experiment and expects to 
provide an easily accessible vehicle for reporting via the Internet or 
email.
    Such data will, in aggregated form not identifying particular 
mailings or publications, be reported also to the Postal Rate 
Commission under the terms of its recommendation in Docket No. MC2002-3 
and may be necessary for preparation of any request for future related 
permanent classification changes.
    Participants must provide the following data to the Postal Service 
monthly in spreadsheet format (a model spreadsheet is shown in Exhibit 
A):
    1. Number of titles receiving one or both of the co-palletization 
discounts.
    2. Number of sacks that would have been prepared without co-
palletization, as well as the weight and the number of addressed pieces 
that would have been in these sacks.
    3. Number of pallets that would have been prepared without co-
palletization, as well as the weight and the number of addressed pieces 
that would have been on pallets.
    4. Number of sacks prepared after co-palletization, as well as the 
weight and the number of addressed pieces in these sacks.
    5. Number of pallets containing mail qualifying for the ADC co-
palletization discount (both new pallets and existing pallets built 
upon), as well as the weight and the number of addressed pieces 
receiving the ADC discount on both of these types of pallets.
    6. Number of pallets containing mail qualifying for the SCF co-
palletization discount (both new pallets and existing pallets built 
upon), as well as the weight and the number of addressed pieces 
receiving the SCF discount on both of these types of pallets.

[[Page 4715]]

Application Process

    Parties interested in participating as consolidators in the 
experiment must request approval from the Postal Service. Requests must 
be sent to the Manager, Mail Preparation and Standards, at 1735 N. Lynn 
St., Room 3025, Arlington, VA 22209-6037. The request must be 
accompanied by the following information, which will be treated as 
confidential by the Postal Service:
    1. A completed application form. Application forms will be 
available from the Manager, Mail Preparation and Standards, beginning 
February 3, 2003. Application forms may be requested via email to 
[email protected].
    2. A process map and narrative describing mail movement from 
production through the co-palletization process to dispatch to 
destination entry postal facilities.
    3. Samples of presort documentation (before and after co-
palletization), and a description of when and how presort documentation 
and postage statements are generated.
    4. An explanation of how data for mailings included under the co-
palletization experiment will be collected and reported to the Postal 
Service, including whether the model spreadsheet provided by the Postal 
Service can be used.
    5. A list of the publications to be included in the test initially 
and evidence that each publication has obtained the appropriate 
authorizations at the office(s) where mailings will be verified and 
postage paid. If the applicant is not a printer and/or is consolidating 
publications for other printers, a list of these printers must also be 
included with the application. If the location where mail will be 
consolidated currently does not have a detached mail unit (DMU), 
arrangements must be made to establish one with the local post office 
responsible for the acceptance and verification of mailings.
    Requests to participate will be accepted beginning February 10, 
2003. Applicants meeting all requirements for the co-palletization test 
will receive a 90-day conditional authorization. Final approval will be 
given after the successful completion of the 90-day conditional period.
    The effective date of implementation is April 20, 2003.


    Accordingly, the Postal Service hereby adopts the following 
regulations on an interim basis. Although exempt from the notice and 
comment requirements of the Administrative Procedure Act (5 U.S.C. 410 
(a)), the Postal Service invites comments on the following revisions to 
the Domestic Mail Manual, incorporated by reference in the Code of 
Federal Regulations. See 39 CFR part 111.

PART 111--[AMENDED]

    1. The authority citation for 39 CFR part 111 continues to read as 
follows:

    Authority: U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 414, 
3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.


    2. Amend the following sections of the Domestic Mail Manual (DMM) 
as set forth below:

G General Information

G000 The USPS and Mailing Standards

* * * * *

G090 Experimental Classifications and Rates

* * * * *
[Add new G092 to read as follows:]

G092 Outside-County Periodicals Co-Palletization Drop-Ship 
Classification

1.0 ELIGIBILITY

1.1 Description

    The standards in G092 apply to mailings that are produced by 
mailers and consolidators who are approved to participate in the 
Outside-County Periodicals Co-Palletization Drop-Ship Classification 
experiment.

1.2 Rate Application

    The Outside-County Co-Palletization Drop-Ship Classification 
discounts apply to pieces meeting the standards in G092.

1.3 Basic Standards

    The basic standards for co-palletized mailings are as follows:
    a. Each mailing must consist of at least two different Periodicals 
publications or two different editions, segments, or versions of a 
Periodicals publication.
    b. Each mailing must be presented with the correct postage 
statement(s). Mailings consisting of different Periodicals publications 
must be accompanied by a separate postage statement for each 
publication. Mailings consisting of different editions or versions of 
the same Periodicals publication must be accompanied by one 
consolidated postage statement and a register of mailings.
    c. Each mailing must meet the documentation and postage payment 
standards outlined in 2.0 and P200.
    d. Each mailing must be entered and postage paid at the post office 
where consolidation takes place, except that postage for publications 
authorized under the Centralized Postage Payment (CPP) system may be 
paid to the New York Rates and Classification Center (RCSC). Each 
publication included in a mailing under these standards must be 
authorized for original entry or additional entry at the post office 
where the consolidated mailing is entered.

1.4 Discount Eligibility

    To be eligible for one of the discounts, mailpieces must be:
    a. Part of a Periodicals mailing meeting the standards in M200, 
M820, or M900.
    b. Part of a mailing segment with less than 250 pounds per title or 
version per ADC destination, if independently presorted. This includes 
mail for an ADC service area that remains after finer levels of pallets 
are prepared.
    c. Prepared as bundles (packages) on pallets under M041 and M045, 
or under M900.
    d. Prepared on either an ADC or SCF pallet of co-palletized pieces. 
Mailers may build on ADC or SCF pallets of 250 or more pounds prepared 
as part of the original presort. However, the pieces originally on 
these pallets (250 or more pounds per title or edition) do not qualify 
for the co-palletization discounts.
    e. Drop-shipped to the appropriate DADC or DSCF.
2.0 DOCUMENTATION
    Each mailing must be accompanied by documentation meeting the 
standards in P012, as well as any other mailing information requested 
by the Postal Service to support the postage claimed (e.g., advertising 
percentage and weight per copy). Documentation must be presented by 
title and version, segment, or edition; or by codes representing each 
title and version, segment, or edition included in the co-palletized 
mailing. In addition, documentation for the co-palletized mailing must:
    a. Upon request, include presort reports showing how the pieces 
would have been prepared prior to co-palletization.
    b. Include presort and pallet reports showing how the co-palletized 
pieces are prepared and where they will be entered (DADC or DSCF).
    c. Distinguish publications or segments that do not qualify for the 
co-palletization discounts (e.g., because there are 250 or more pounds 
to an ADC destination) from those that do qualify for the discounts.
    d. Allow easy reconciliation with reports prepared to reflect how 
mail would have been prepared prior to co-

[[Page 4716]]

palletization if requested to verify compliance with standards for 
discount eligibility.
    e. Provide the following data in spreadsheet format (using the 
model spreadsheet provided by the Postal Service):
    (1) Number of titles receiving one or both of the co-palletization 
discounts.
    (2) Number of sacks that would have been prepared without co-
palletization, as well as the weight and the number of addressed pieces 
that would have been in these sacks.
    (3) Number of pallets that would have been prepared without co-
palletization, as well as the weight and the number of addressed pieces 
that would have been prepared on pallets.
    (4) Number of sacks prepared after co-palletization, as well as the 
weight and the number of addressed pieces in these sacks.
    (5) Number of pallets containing mail qualifying for the ADC co-
palletization discount, as well as the weight and the number of 
addressed pieces receiving the ADC discount on these pallets.
    (6) Number of pallets containing mail qualifying for the SCF co-
palletization discount, as well as the weight and the number of 
addressed pieces receiving the SCF discount on these pallets.
3.0 DISCOUNTS
    The following discounts are available:
    a. For pieces sorted to an SCF or ADC pallet of 250 or more pounds 
and drop-shipped to the appropriate DADC: $0.007 per piece.
    b. For pieces sorted to an SCF pallet of 250 or more pounds and 
drop-shipped to the appropriate DSCF: $0.01 per piece.
    c. Co-palletized pieces sorted to overflow DSCF or DADC pallets 
qualify for the corresponding co-palletization discount.
    d. Co-palletized pieces sorted to ADC pallets weighing between 100 
and 250 pounds and drop-shipped to the appropriate DADC: $0.007per 
piece.
4.0 REQUEST TO PARTICIPATE
    A mailer or consolidator may request approval to mail in the 
experimental Outside-County Periodicals Co-Palletization Drop-Ship test 
by submitting a written request to the Manager, Mail Preparation and 
Standards. The request must be accompanied by the following:
    a. A completed application form (available from the Manager, Mail 
Preparation and Standards).
    b. A process map and narrative demonstrating how and where presort 
and co-palletization reports (including ``before'' and ``after'' data) 
are created as they relate to mail movement and consolidation of 
packages to be co-palletized. The map and narrative must also describe 
mail movement from production through the co-palletization process to 
dispatch to destination entry postal facilities.
    c. Samples of all required documentation that must be provided at 
the time of mailing, including ``before'' and ``after'' reports and 
postage statements. The sample reports must demonstrate:
    (1) How the co-palletized portion of the mailing is segregated from 
other mailing segments on the ``before'' reports.
    (2) How mailing jobs, mailing segments, and containers will be 
identified in both ``before'' and ``after'' reports to allow 
reconciliation of the reports.
    (3) How pieces appearing on the ``after'' reports that qualify for 
the co-palletization discounts (mailing segments with less than 250 
pounds to an ADC) are differentiated from those that do not (mailing 
segments with 250 or more pounds to an ADC).
    d. An explanation of how data for mailings included under the co-
palletization experiment will be collected and reported to the Postal 
Service, including whether the model spreadsheet provided by the Postal 
Service can a copy of the spreadsheet that will be used.
    e. An initial list of the publications to be included in the test 
and evidence that each publication has obtained the appropriate 
additional entry authorizations at the office where mailings will be 
verified and postage paid. The list must indicate if the publications 
are authorized under the Centralized Postage Payment (CPP) System. If 
the applicant is not a printer and/or is consolidating publications for 
other printers, a list of these printers must be included with the 
application.
5.0 DECISION ON REQUEST
    The Manager, Mail Preparation and Standards, approves or denies a 
written request to participate in the experimental Outside-County 
Periodicals Co-Palletization Drop-Ship Classification test. If the 
application is approved, the mailer or consolidator will be notified in 
writing by the Manager, Mail Preparation and Standards. Initial 
approval is for a conditional 90-day period. When the mailer or 
consolidator has demonstrated the ability to prepare and enter mailings 
under the standards in G092, final authorization will be granted. If 
the application is denied, the mailer or consolidator may file at a 
later date or submit additional information needed to support the 
request.
6.0 POSTAL SERVICE SUSPENSION
    The Manager, Mail Preparation and Standards, may suspend at any 
time an approval to participate in the experiment when there is an 
indication that postal revenue is not fully protected. The manager will 
notify the participant in writing of the decision. The suspension 
becomes effective upon the mailer's receipt of the notification.
* * * * *
    An appropriate amendment to 39 CFR 111 to reflect the changes 
will be published if the interim rule becomes final.

Neva R. Watson,
Attorney, Legislative.
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[FR Doc. 03-2198 Filed 1-29-03; 8:45 am]
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