[Federal Register Volume 69, Number 63 (Thursday, April 1, 2004)]
[Rules and Regulations]
[Pages 17059-17063]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7123]


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POSTAL SERVICE

39 CFR Part 111


Required Number of Pieces Increased for 5-Digit and 5-Digit 
Scheme Packages of Low-Weight Standard Mail Flats

AGENCY: Postal Service.

ACTION: Final rule.

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SUMMARY: This final rule sets forth the implementing Domestic Mail 
Manual (DMM) standards to raise the required minimum number of pieces 
from 10 to 15 at which 5-digit and, for certain automation-compatible 
mail, optional 5-digit scheme presort destination packages are prepared 
in a Standard Mail job consisting of flat-size pieces each weighing no 
more than 5 ounces (0.3125 pound) and measuring no more than \3/4\ inch 
thick.
    This final rule will increase processing efficiencies, reduce the 
overall production of packages (bundles) of certain Standard Mail flat-
size pieces, and decrease overall Postal Service piece and bundle 
handling costs based on extensive Postal Service modeled estimates.

DATES: Effective date: April 1, 2004. Mailings presented for 
verification and acceptance after 12:01 a.m. on Sunday, August 1, 2004, 
must comply with this rule.

FOR FURTHER INFORMATION CONTACT: Cheryl Beller, Product Redesign, at 
(703) 292-3747; or Neil Berger, Mailing Standards, at (703) 292-3645.

SUPPLEMENTARY INFORMATION: Under current mailing standards, mailers 
have the option to prepare 5-digit and 5-digit scheme presort 
destination packages (collectively referred to in this final rule as 5-
digit packages) of Standard Mail flat-size pieces not more than \3/4\ 
inch thick, regardless of the piece weight, whenever there are as few 
as 10 pieces to the same 5-digit ZIP Code or to the same 5-digit scheme 
destination in Domestic Mail Manual (DMM) L007. Under these same 
standards, mailers must prepare such packages when there are 17 or more 
pieces to these destinations. If a mailer selects an optional minimum 
5-digit package size from 10 to 16 pieces, that same package size must 
be used consistently throughout the mailing job for all 5-digit 
packages.
    The current mailing standards allowing the variable package 
minimums were implemented on September 5, 2002, and gave mailers the 
option to select a number from 10 to 17 as the minimum number of pieces 
at which 5-digit packages are prepared in a Standard Mail job of flat-
size pieces no more than \3/4\ inch thick, without regard to the weight 
of the individual pieces. Prior to that date, mailers were required to 
prepare 5-digit packages whenever there were 10 or more pieces to the 
same 5-digit ZIP Code destination. Effective January 9, 2003, mailing 
standards were further amended to permit the preparation of optional 5-
digit scheme packages under DMM L007 using the same flexible minimum of 
10 to 17 pieces. Under current mailing standards, mailers may still 
prepare 5-digit packages with as few as 10 pieces.
    The Postal Service had adopted the current optional 5-digit package 
minimum (optional with 10 to 16 pieces, required with 17 pieces) based 
in large part on an examination of the productivities and piece 
processing efficiencies of the automated flat sorting machine (AFSM) 
100, which can handle flat-size pieces up to \3/4\ inch thick. 
Furthermore, as a result of the combined \3/5\ rate, a change to the 5-
digit package minimum would have little impact on postage.
    Initial analysis of piece, package, and container handling costs 
indicated that the appropriate minimum for 5-digit packages of Standard 
Mail flat-size pieces is, on average, above 10 pieces, and that the 
minimum could be further increased for flats likely to be processed on 
the AFSM 100. AFSM 100-compatible flats are limited to pieces measuring 
no more than 12 inches high, 15 inches long, and \3/4\ inch thick. 
(Only flat-size pieces claimed and prepared at automation rates and 
meeting the

[[Page 17060]]

standards for the upgraded flat sorting machine (UFSM) 1000 may measure 
up to 1\1/4\ inches thick. All other flat-size pieces may not measure 
more than \3/4\ inch thick.)
    Increasing the minimum for 5-digit packages of such pieces could 
help reduce overall Postal Service processing costs, with the 
additional AFSM 100 piece handlings for pieces moving from 5-digit to 
3-digit packages more than offset by reduced package handling costs. 
Package handling costs include processing the packages, either on a 
small parcel and bundle sorter (SPBS) or manually, and opening the 
packages in preparation for piece processing.
    With the changes announced in this final rule, mailers will not be 
permitted to prepare 5-digit packages until there are 15 or more pieces 
to a 5-digit ZIP Code or optional 5-digit scheme destination for 
Standard Mail mailings of flat-size pieces that each weigh no more than 
5 ounces and measure no more than \3/4\ inch thick. For mailings that 
contain any pieces that weigh more than 5 ounces, and for UFSM 1000 
automation rate flats measuring more than \3/4\ inch thick, regardless 
of weight, mailers will be required to prepare 5-digit packages 
whenever there are 10 or more pieces to a destination. For ease of 
administration, mailers will use the 10-piece package minimum for 
mailings of nonidentical-weight pieces if any pieces in the mailing 
weigh more than 5 ounces.

Comments

Background

    On December 11, 2003, the Postal Service published a proposed rule 
in the Federal Register (68 FR 69066-69069) that contained changes to 
mailing standards in the Domestic Mail Manual (DMM) to raise the 
required minimum number of pieces from 10 to 15 at which 5-digit 
presort destination packages are prepared in a Standard Mail job 
consisting of flat-size pieces each weighing no more than 5 ounces 
(0.3125 pound) and measuring no more than \3/4\ inch thick. The Postal 
Service received comments on the proposed rule from four different 
parties, all involved in some aspect of mail or in the actual 
preparation of mail: an individual mailer, a third-party printer and 
mail house, a mailers' association, and a software developer. The 
Postal Service appreciates these comments and responds to them below.

Implement as an Option

    Three of the four commenters urged that this change be implemented 
as an option rather than a requirement. One commenter believed that 
most mailers have not had adequate time to analyze how this change 
would affect their mailing operations, costs, and service. One of the 
commenters was particularly concerned about the possible erosion of 
delivery service for mail migrating from 5-digit packages to 3-digit 
packages.
    One of the commenters believed that this change contradicts the 
Postal Service goal in the Transformation Plan of striving for 
flexibility and rule simplification as a means to attract more mailers 
and increase mail volumes and revenues. This same commenter noted that 
increasing the 5-digit package minimum to 15 pieces appeared less 
flexible than the current requirement that permits a package minimum to 
range from 10 to 17 pieces.
    One commenter stated that this change should be implemented as an 
option and not a requirement until its impact on Postal Service costs 
can be determined.
    Two commenters stated that the change would complicate rather than 
simplify Standard Mail preparation because of the weight threshold, and 
one questioned whether presort software developers and mail preparers 
would understand the change and be able to handle mailings of 
nonidentical-weight pieces with piece weights varying above and below 5 
ounces.
    The Postal Service has carefully reviewed these comments and would 
like to respond specifically to the concerns expressed about the impact 
on Postal Service costs, the potential erosion of service, and rule 
complexity in the following sections.
(1) Impact on Postal Service Costs
    On September 5, 2002, the Postal Service introduced the 17-piece 
minimum option as announced in the Federal Register on August 20, 2002 
(67 FR 53880-53882). The original modeling conducted by the Postal 
Service for piece, package, and container handling costs indicated that 
the appropriate minimum number of pieces for 5-digit packages of flat-
size Standard Mail pieces was above 10 and that it could be increased 
up to 17 pieces for flats likely to be processed on the automated flat 
sorting machine (AFSM) 100. That original modeling also indicated that 
changing the minimum package size for 5-digit packages would decrease 
the Postal Service combined package and piece handling costs and, at 
the same time, should reduce overall production costs for mailers.
    Additional Postal Service modeling conducted since the 10-to 17-
piece package minimum was implemented, as well as analysis of mailer-
provided data for a variety of actual Standard Mail mailings prepared 
using the current optional 17-piece 5-digit package minimum, both 
support the Postal Service conclusion that the refined specifications 
in this final rule will reduce overall Postal Service piece and package 
handling costs. The data collected from these mailings identified 
reductions in total 5-digit and 3-digit packages that averaged 29 
percent for mailings of pieces weighing no more than 5 ounces. These 
same mailings also showed an inverse relationship between piece weights 
exceeding 5 ounces and the cost benefits; that is, as the piece weights 
increased beyond 5 ounces, the benefits decreased.
    An informal survey of the mailing industry revealed that a 
relatively small number of mailers are taking advantage of the option 
to set their 5-digit package minimum higher than 10 pieces (up to 17 
pieces) and there is no expectation that making the 15-piece minimum 
optional would result in greater use by the mailing industry. With such 
limited participation by the mailing industry, the Postal Service and 
mailers are unable to realize the potential cost saving opportunities 
associated with fewer package handlings, particularly for mailings of 
low-weight pieces. Thus a requirement is the best way to achieve the 
cost savings.
(2) Potential Erosion of Service
    The Postal Service believes that this migration of pieces from 5-
digit to 3-digit packages will produce no noticeable delays in delivery 
of those pieces. In fact, mailers now using the current package option 
(for example, 5-digit packages not prepared with fewer than 17 pieces) 
have reported no erosion of service for flat-size mailpieces that have 
moved from 5-digit to 3-digit packages. The Postal Service would like 
to point out that its internal operations have greatly improved the 
efficiency with which mailpieces in 3-digit packages are processed and 
distributed in today's automated environment.
    The benefits of this change result, in large measure, from 
productivities and piece processing efficiencies of the AFSM 100, which 
can process pieces up to \3/4\ inch thick. Pieces greater than \3/4\ 
inch are generally processed on the UFSM 1000 at significantly lower 
productivities than if processed on the AFSM 100. This recognition of 
how mail is processed may help to explain why mailers using the current 
17-piece option have not reported a negative impact in service.

[[Page 17061]]

(3) Rule Complexity
    The Postal Service and the mailing industry have explored the issue 
of different possible minimums for the Standard Mail 5-digit package 
level since 2002 and have jointly determined that software would be 
able to support such a change. Although not required for this rule 
change, use of software certified under the Postal Service Presort 
Accuracy Validation and Evaluation (PAVE) program would help to ensure 
proper mail preparation. Ongoing discussions and exchanges between the 
mailing industry and the Postal Service indicated that using a set 
minimum rather than a ``floating'' or variable minimum, along with a 
set weight maximum of 5 ounces and a set thickness maximum of \3/4\ 
inch would not add undue complexity to mail preparation.
    The Postal Service also wishes to point out that software used for 
many other mail preparation standards, such as the advanced preparation 
options for flat-size mail, requires more sophisticated programming, 
even though the end user is scarcely aware of the complicated code 
behind the actual software application.
    For those mailers who prepare mailings of nonidentical-weight 
pieces through selective binding or comailing operations, the Postal 
Service believes that implementing the rule to have mailers use the 10-
piece 5-digit package minimum whenever the mailing will contain any 
pieces over 5 ounces should avoid sortation errors during list 
processing and mail preparation.
    Although the current optional 10-piece to 17-piece minimum does 
provide mailers with more flexibility than the new minimums in this 
final rule, the fact is that most mailers have not changed their mail 
preparation and continue to use the 10-piece minimum for all mailings 
while other mailers use the 17-piece minimum for all Standard Mail 
mailings, including mailings of pieces well over 5 ounces. As a result, 
the Postal Service and Standard Mail mailers are not achieving current 
cost savings opportunities that are available with a minor change to 
the rules.

Wait for Cost-Based Rates

    Two of the commenters stated that this change should be presented 
as an option rather than a requirement until cost-based rates have been 
implemented, when prices rather than rules can control Postal Service 
costs.
    One commenter noted that even though the new package minimum of 15 
pieces has no rate implication for Standard Mail pieces because both 5-
digit and 3-digit sortation levels for flat-size mail are charged the 
same 3/5 rate, that it could certainly have rate implications if a 
similar minimum package size of 15 pieces were applied to other classes 
of mail. That commenter did not believe that changes to the rules for 
minimum package size were appropriate at this time and that the Postal 
Service should wait until it implements cost-based pricing, when pieces 
and packages will cover their equitable share of Postal Service costs.
    The issue of cost-based rates is outside the scope of this final 
rule. However, the Postal Service wishes to assure the mailing industry 
that it is continuing to pursue its cost-based rates product redesign 
initiative, developed with the mailing industry. The Postal Service 
believes that the change in this final rule will allow the mailing 
industry and the Postal Service to take advantage of opportunities to 
improve flats processing efficiencies and restrain costs under the 
current rate structure.
    It must be noted that approximately 40 percent of Postal Service 
mail processing costs for Standard Mail flats are associated with 
package and container handlings. Implementation of this change for 
Standard Mail flats will help to reduce these costs. As the Postal 
Service continues to seek ways to align rates and preparation 
requirements with customer needs and capabilities in the future, it 
also seeks ways to provide mail preparation standards that reduce 
combined Postal Service and mailer costs that do not require changes to 
the current rate structure, that can be implemented in the near future, 
and that are consistent with the future Postal Service operations 
environment. The Postal Service has no intention of extending this rule 
change to other classes of mail independent of an omnibus rate case or 
mail classification case that may include mail preparation and rate 
changes.

Postpone Implementation Date

    Two commenters stated that the implementation date of April 4, 
2004, as published in the proposed rule, would not provide sufficient 
time to prepare for this mail preparation change. One commenter 
recommended that the Postal Service provide adequate training for 
Postal Service employees on any modifications to the use of the Mail 
Evaluation Readability Lookup Instrument (MERLIN ) and any related 
MERLIN software updates so that mail acceptance will not be delayed if 
this change is implemented.
    The software developer, in particular, presented several concerns 
about the implementation date. The developer explained that the 
proposed implementation date of April 4, 2004, would not provide 
sufficient time to write and test required software changes, have the 
software tested and certified by the Postal Service under its PAVE 
program, and distribute the software to its customer base.
    In view of the extremely practical concerns cited by the mailers 
and the software developer, as well as the need to give adequate notice 
about this change to the mailing industry and Postal Service personnel, 
the Postal Service will postpone the effective date of this change to 
August 1, 2004. The Postal Service believes that this additional time 
ensures that software developers, Standard Mail mailers, and Postal 
Service employees will have sufficient time to prepare for this change.
    Although mailers using the new 15-piece 5-digit package minimum are 
not required to use PAVE-certified software (except for palletized 
mailings prepared under the package reallocation option in DMM M045, or 
mailings prepared under DMM M920, M930, or M940), PAVE tests will be 
available for presort software vendors to test this new minimum.
    The required date to begin using the 15-piece 5-digit package 
minimum is August 1, 2004. At that time, mailings presented for 
verification and acceptance that consist of any flat-size pieces 
weighing more than 5 ounces or any automation rate pieces measuring 
more than \3/4\ inch thick, regardless of weight, will no longer be 
permitted to use a 5-digit package minimum greater than 10 pieces. Also 
on that date, mailings presented for verification and acceptance that 
consist of flat-size pieces weighing no more than 5 ounces (and 
measuring no more than \3/4\ inch thick) will not be permitted to use a 
5-digit package minimum other than 15 pieces.
    Before the August 1 implementation date, preferably as soon as 
practical, the Postal Service recommends that mailers begin using a 
minimum of 15 pieces for 5-digit and optional 5-digit scheme package 
preparation permitted as an option under current mailing standards for 
mailings of pieces that weigh no more than 5 ounces. This would be 
especially critical for mailings scheduled for production before August 
1 but with a verification and acceptance date after August 1. The 
Postal Service also recommends that mailers limit the number of 
packages they produce and take necessary steps to ensure package 
integrity by setting their maximum package size as close to the 
maximums permitted in DMM M020, particularly

[[Page 17062]]

for packages prepared on pallets (e.g., 20 pounds).
    As part of this final rule, DMM E620.2.0 Presorted Rates, is 
reorganized in its entirety. Other than 5-digit package minimum, no 
other minimums in DMM E620 have been changed.
    For the reasons presented in the proposed rule and those noted 
above in this final rule, the Postal Service adopts the following 
changes in the Domestic Mail Manual (DMM), which is incorporated by 
reference in the Code of Federal Regulations (CFR). See 39 CFR 111.1.

List of Subjects in 39 CFR Part 111

    Administrative practice and procedure, Postal Service.

PART 111--[AMENDED]

0
1. The authority citation for 39 CFR part 111 continues to read as 
follows:

    Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 414, 
416, 3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

0
2. Revise the following sections of the Domestic Mail Manual (DMM) as 
follows:

Domestic Mail Manual (DMM)

* * * * *

E Eligibility

* * * * *

E600 Standard Mail

* * * * *

E620 Presorted Rates

1.0 BASIC STANDARDS

1.1 All Pieces

    All pieces in a Regular Standard Mail or Nonprofit Standard Mail 
Presorted rate mailing must:
* * * * *
[Revise 1.1b to read as follows:]
    b. Except as provided in 1.2, be part of a single mailing of at 
least 200 addressed pieces or 50 pounds of pieces qualifying for 
Presorted Standard Mail. Basic rate and 3/5 rate pieces prepared as 
part of the same mailing are subject to a single minimum volume 
standard. Regular and Nonprofit mailings must meet separate minimum 
volumes.
* * * * *
2.0 RATES
[Revise 2.0 by reorganizing text to read as follows:]

2.1 Application

    Presorted rates for Regular and Nonprofit Standard Mail apply to 
letters, flats, and machinable and irregular parcels that meet the 
eligibility standards in E610 and the preparation standards in M045, 
M610, M800, or, for flat-size mail only, M900.

2.2 Basic Rate

    The basic rate applies to pieces that do not meet the standards for 
3/5 rates described in 2.3.

2.3 3/5 Rates

    The 3/5 rate applies to qualifying pieces if they are presented:
    a. For letter-size pieces (see C050.2.0), in quantities of 150 or 
more pieces for a single 3-digit ZIP Code prefix area, prepared in 5-
digit or 3-digit trays.
    b. For flat-size pieces (see C050.3.0):
    (1) In a 5-digit scheme (under M950) or 5-digit package of 10 or 
more pieces, or 15 or more pieces, as applicable; or in a 3-digit 
package of 10 or more pieces; placed in a 5-digit scheme (under M920), 
5-digit, or 3-digit sack containing at least 125 pieces or 15 pounds of 
pieces.
    (2) In a 5-digit package of 10 or more pieces, or 15 or more 
pieces, as applicable, that is part of a group of packages sorted to a 
merged 5-digit or merged 5-digit scheme (under M920) sack that contains 
either at least one qualifying carrier route package of 10 or more 
pieces, or contains at least 125 pieces or 15 pounds of pieces prepared 
in 5-digit packages (both automation and Presorted rate 5-digit 
packages count toward the 125-piece or 15-pound sack minimum).
    (3) In a 5-digit scheme (under M950) or 5-digit package of 10 or 
more pieces, or 15 or more pieces, as applicable; or in a 3-digit 
package of 10 or more pieces; palletized under M045, M920, M930, or 
M940.
    c. For machinable parcels (see C050.4.0):
    (1) In a 5-digit scheme (L606), 5-digit, ASF, or BMC sack 
containing at least 10 pounds of parcels. (The 3/5 rates are available 
only when all possible 5-digit scheme and 5-digit sacks are prepared.)
    (2) On a 5-digit scheme (L606), 5-digit, ASF, or BMC pallet. (The 
3/5 rates are available only when all possible 5-digit scheme and 5-
digit pallets are prepared.)
    d. For irregular parcels (see C050.5.0), in a 5-digit scheme 
(L606), 5-digit, or 3-digit sack containing at least 125 parcels or 15 
pounds of parcels. (The 3/5 rates are available only when all possible 
5-digit scheme and 5-digit sacks are prepared.)
    e. For commingled machinable and irregular parcels, in a 5-digit 
scheme (L606) or 5-digit sack containing at least 10 pounds of parcels.
* * * * *

E640 Automation Rates

1.0 REGULAR AND NONPROFIT RATES
* * * * *

1.5 Rate Application--Flats

    Automation rates apply to each piece that is sorted under M045, 
M820, or M900 into the corresponding qualifying groups:

[Revise 1.5a to read as follows:]

    a. Pieces in 5-digit or 5-digit scheme packages of 10 or more 
pieces, or 15 or more pieces, as applicable, or in 3-digit packages of 
10 or more pieces qualify for the 3/5 automation rate.
* * * * *

M Mail Preparation and Sortation

* * * * *

M600 Standard Mail (Nonautomation)

M610 Presorted Standard Mail

* * * * *
4.0 PREPARATION--FLAT-SIZE PIECES
* * * * *

4.2 Packaging and Labeling

    Preparation sequence, package size, and labeling:

[Revise 4.2a to read as follows:]

    a. 5-digit (required):
    (1) For mailings containing only pieces weighing 5 ounces (0.3125 
pound) or less: 15-piece minimum; red Label 5 or optional endorsement 
line (OEL).
    (2) For mailings containing any pieces weighing more than 5 ounces 
(0.3125 pound): 10-piece minimum; red Label 5 or OEL.
* * * * *

M800 All Automation Mail

* * * * *

M820 Flat-Size Mail

* * * * *
5.0 STANDARD MAIL

5.1 Packaging and Labeling

    Preparation sequence, package size, and labeling:

[Revise 5.1a and 5.1b to read as follows:]

    a. 5-digit scheme (optional):
    (1) For mailings containing only pieces weighing 5 ounces (0.3125 
pound) or less: 15-piece minimum; optional endorsement line (OEL) 
required.
    (2) For mailings containing any pieces weighing more than 5 ounces 
(0.3125 pound): 10-piece minimum; OEL required.

[[Page 17063]]

    b. 5-digit (required):
    (1) For mailings containing only pieces weighing 5 ounces (0.3125 
pound) or less and measuring \3/4\ inch thick or less: 15-piece 
minimum; red Label 5 or OEL.
    (2) For mailings containing any pieces weighing more than 5 ounces 
(0.3125 pound) or measuring more than \3/4\ inch thick: 10-piece 
minimum; red Label 5 or OEL.
* * * * *

M900 Advanced Preparation Options for Flats

* * * * *

M950 Co-Packaging Automation Rate and Presorted Rate Pieces

* * * * *
3.0 STANDARD MAIL
* * * * *

3.2 Package Preparation

    Package size, preparation sequence, and labeling:

[Revise 3.2a and 3.2b to read as follows:]

    a. 5-digit scheme (optional):
    (1) For mailings containing only pieces weighing 5 ounces (0.3125 
pound) or less: 15-piece minimum; optional endorsement line (OEL) 
required.
    (2) For mailings containing any pieces weighing more than 5 ounces 
(0.3125 pound): 10-piece minimum; OEL required.
    b. 5-digit (required):
    (1) For mailings containing only pieces weighing 5 ounces (0.3125 
pound) or less and measuring \3/4\ inch thick or less: 15-piece 
minimum; red Label 5 or OEL.
    (2) For mailings containing any pieces weighing more than 5 ounces 
(0.3125 pound) or measuring more than \3/4\ inch thick: 10-piece 
minimum; red Label 5 or OEL.
* * * * *
    We will publish an appropriate amendment to 39 CFR 111.3 to reflect 
these changes.

Neva R. Watson,
Attorney, Legislative.
[FR Doc. 04-7123 Filed 3-31-04; 8:45 am]
BILLING CODE 7710-12-P