[Federal Register Volume 73, Number 142 (Wednesday, July 23, 2008)]
[Rules and Regulations]
[Pages 43046-43048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16904]



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Part V





Postal Regulatory Commission





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39 CFR Part 3020



Administrative Practices and Procedure; Postal Service; Final Rule

  Federal Register / Vol. 73, No. 142 / Wednesday, July 23, 2008 / 
Rules and Regulations  

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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. CP2008-8, CP2008-9, and CP2008-10; Order No. 85]


Administrative Practice and Procedure; Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Direct final rule.

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SUMMARY: The Commission is adding the Postal Service's negotiated 
agreement with Global Plus to the competitive product list. This action 
is consistent with changes in a recent law governing postal operations. 
Re-publication of the lists of market dominant and competitive products 
is also consistent with new requirements in the law.

DATES: Effective June 23, 2008.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820 or [email protected].

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 33465 (June 12, 
2008).

I. Background

    On June 2, 2008, the Postal Service filed three notices, which have 
been assigned to Docket Nos. CP2008-8, CP2008-9 and CP2008-10, 
announcing prices and classification changes for competitive products 
not of general applicability. The notice in Docket No. CP2008-8 
indicates that ``the Governors have established prices and 
classifications for competitive products not of general applicability 
for Global Plus Contracts.'' \1\ The Postal Service attached a proposed 
revision of the draft Mail Classification Schedule (MCS) (section 
2610.5) concerning Global Plus contracts to the Notice.\2\ Docket No. 
CP2008-8 has been filed pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 
3015.5 and 3020.90. In support of this docket, the Postal Service has 
also filed materials under seal, including the Governors' decision. The 
Postal Service claims that ``[c]ontract prices are highly confidential 
in the business world * * * [and that its] ability * * * to negotiate 
individual contracts would be severely compromised if prices for these 
types of agreements were publicly disclosed.'' Id. at 1-2.
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    \1\ Notice of United States Postal Service of Governors' 
Decision Establishing Prices and Classifications for Global Plus 
Contracts, June 2, 2008, at 1 (Notice).
    \2\ The draft MCS remains under review. The Commission 
anticipates providing interested persons an opportunity to comment 
on the draft MCS in the near future. Modifications to the MCS, such 
as proposed in Docket No. CP2008-8, should, in the future, be filed 
in the dockets designated by the ``MC'' prefix. Contracts executed 
pursuant to those requested classifications are appropriately filed 
as ``CP'' dockets.
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    The notices in Docket Nos. CP2008-9 and CP2008-10 announce 
individual negotiated service agreements; namely, specific Global Plus 
contracts that the Postal Service has entered into with individual 
mailers.\3\ In support of these dockets, the Postal Service has also 
filed materials, including the contracts and supporting materials, 
under seal. The Postal Service asserts that ``[t]he names of customers 
who enter into respective contracts and the related contract prices are 
highly confidential business information.'' Docket No. CP2008-9 Pricing 
Notice at 1; Docket No. CP2008-10 Pricing Notice at 1.
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    \3\ Docket No. CP2008-9, Notice of United States Postal Service 
of Filing a Global Plus Contract, June 2, 2008 (Docket No. CP2008-9 
Pricing Notice); Docket No. CP2008-10, Notice of United States 
Postal Service of Filing a Global Plus Contract, June 2, 2008 
(Docket No. CP2008-10 Pricing Notice).
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    In Order No. 81, the Commission gave notice of the three dockets, 
requested the Postal Service to address certain issues, appointed a 
Public Representative, and provided the public with an opportunity to 
comment.\4\
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    \4\ PRC Order No. 81, Notice and Order Concerning Prices Under 
Global Plus Negotiated Service Agreements, June 6, 2008 (Order No. 
81).
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II. Postal Service Supplemental Filing

    In response to Order No. 81, the Postal Service filed a 
pleading,\5\ which (1) stated that the Postal Service intended that the 
Docket No. CP2008-8 shell classification would be the template product, 
and that the agreements submitted in Docket Nos. CP2008-9 and CP2008-10 
would be functionally equivalent agreements within the Docket No. 
CP2008-8 product; (2) provided additional supporting materials under 
part 3020, subpart B of the Commission's rules in support of adding 
Global Plus as the shell classification to the competitive products 
list; see id., Attachment A; (3) stated that there are no existing 
Global Plus contracts that fail to fit within the revised Global Plus 
proposed MCS language; (4) indicated that the Postal Service believes 
that the expiration dates of Global Plus contracts could be made 
publicly available; (5) filed a redacted version of the Governors' 
decision with respect to Docket No. CP2008-8;\6\ and (6) discussed why 
the Postal Service believes that certain provisions in the Docket Nos. 
CP2008-9 and CP2008-10 agreements which provide for price incentives 
prior to regulatory approval for such rates are appropriate.
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    \5\ United States Postal Service Response to Order No. 81 and 
Notice of Filing Information Responsive to Part 3020 of the 
Commission's Rules of Practice and Procedure, June 13, 2008; United 
States Postal Service Notice of Erratum to Response to Order No. 81 
and Notice of Filing Information Responsive to Part 3020 of the 
Commission's Rules of Practice and Procedure, June 16, 2008 
(collectively, Postal Service Response).
    \6\ United States Postal Service Notice of Filing Redacted Copy 
of Governors' Decision No. 08-8, June 16, 2008.
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III. Comments

    Comments were filed by United Parcel Service (UPS), the Public 
Representative, Parcel Shippers Association (PSA), and International 
Mailers' Advisory Group (IMAG).\7\
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    \7\ Docket No. CP2008-8, Comments of United Parcel Service in 
Response to Order Concerning Prices Under Global Plus Negotiated 
Service Agreements; Docket No. CP2008-9, Comments of United Parcel 
Service in Response to Order Concerning Prices Under Global Plus 
Negotiated Service Agreements, Docket No. CP2008-10, Comments of 
United Parcel Service in Response to Order Concerning Prices Under 
Global Plus Negotiated Service Agreements (collectively UPS 
Comments); Public Representative Comments in Response to United 
States Postal Service Notice of Global Plus Services Contracts 
(Public Representative Comments); Comments of Parcel Shippers 
Association in Response to Order No. 81 Concerning Prices Under 
Global Plus Negotiated Service Agreements (PSA Comments); Comments 
of International Mailers' Advisory Group Pertaining to Competitive 
Product Prices--Global Plus Negotiated Service Agreements, PRC 
Docket No. CP2008-10 (IMAG Comments), all filed on June 19, 2008.
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    UPS urges the Commission to require public disclosure of the 
proposed contracts subject to adequate safeguards to allow meaningful 
public insight. It also suggests that the Commission resist any 
``presumption'' that markets for international services are perfectly 
competitive markets since private carriers face more burdensome customs 
and brokerage requirements than postal administrations. UPS Comments at 
1-2.
    The Public Representative comments on several aspects of the Postal 
Service's filings in these cases: (1) Confidentiality; (2) compliance 
with part 3020, subpart B of the Commission's rules; (3) the Governors' 
decision with respect to the shell classification; (4) the specific 
agreements; and (5) the retroactivity provisions. With respect to 
confidentiality, the Public Representative argues that the Postal 
Service should justify the limits of all confidentiality requests to 
comport with the spirit of Federal Rules of Civil Procedure 26(c). 
Public Representative Comments at 3. With respect to the Postal 
Service's filings under part 3020, subpart B, the Public Representative 
believes that the Postal Service should provide as much information as 
possible to assist the Commission in performing its statutory 
functions. Id. at 3-4. The

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Public Representative submits that the formula proposed in the 
Governors' decision comports with the provisions of title 39. Id. at 5. 
With respect to the specific agreements, the Public Representative 
recognizes that the agreements in Dockets Nos. CP2008-9 and CP2008-10 
are not identical, but does not take a position as to whether they 
should be classified as separate products. The Public Representative 
does contend, however, that the agreements satisfy the requirements of 
title 39. Id. at 6. With respect to retroactivity, the Public 
Representative believes that the Postal Service should be provided with 
the same authority as competitors in their customary business 
practices. Id. at 7.
    PSA addresses three points. It endorses the Postal Service's 
suggestion that the Global Plus contracts under the shell 
classification be treated as one ``product.'' PSA Comments at 2-3. It 
argues that confidentiality is extremely important and disclosure would 
keep the Postal Service from successfully competing in competitive 
markets. Id. at 3. Lastly, PSA contends that the level playing field 
envisioned by the Postal Accountability and Enhancement Act (PAEA) of 
2006 requires the Commission, not Postal Service competitors, to review 
and examine the terms of the contracts to ensure there is no cross-
subsidization. Id.
    IMAG focuses on (1) the need to afford the Postal Service maximum 
flexibility for competitive contract rates not of general applicability 
through expedited and predictable Commission proceedings; (2) the 
importance of protecting the confidentiality of commercially sensitive 
information; and (3) the justification for the retroactive pricing 
provisions. IMAG Comments at 1-4.

IV. Commission Analysis

A. Part 3020, Subpart B Requirements

    The Postal Service appears to argue that filing under 39 CFR part 
3020, subpart B is unnecessary in this instance because the Commission 
has already listed all negotiated service agreements concerning 
outbound international mail as competitive products on the product 
list. Therefore, the Postal Service contends, a determination by the 
Commission under section 3642(b) is unnecessary. Postal Service 
Response at 4-5.
    Under the PAEA, the term ``product'' is defined as ``a postal 
service with a distinct cost or market characteristic for which a rate 
or rates are, or may reasonably be applied.'' 39 U.S.C. 102(6). The 
Commission noted in Order No. 43 that ``each negotiated service 
agreement (NSA) is a separate product,'' but may, ``upon proper 
showing, be grouped as one product.'' Order No. 43, paras. 1003, 2177-
78. Additionally, for the classification of each product, the 
Commission must consider the impact on the private sector, the views of 
those that use the product, and the likely impact on small business 
concerns. 39 U.S.C. 3642(b)(3). The Commission must take these factors 
into consideration when evaluating new rate or classification 
proposals. Therefore, until the Postal Service makes an adequate 
showing under the statutory definition and section 3642, including 
subsection (b)(3), that separate negotiated service agreements should 
be grouped together as one product, each negotiated service agreement 
will be treated as a separate product and will be assigned to the 
product list in accordance with section 3642.
    With respect to the Global Plus contracts, the Postal Service has 
filed the Governors' decision and a statement of Frank Cebello in 
support of its proposal to add the Docket No. CP2008-8 shell 
classification to the competitive product list. The Postal Service 
contends that adding the shell classification as a competitive product 
will improve the Postal Service's competitive posture, while allowing 
verification that each agreement covers attributable costs and 
satisfying applicable statutory requirements. Postal Service Response, 
Attachment A, at 2. The draft MCS includes a provision requiring each 
agreement to cover its own attributable costs. See Notice, proposed MCS 
language Sec.  2610.5. Alternatively, adding the individual agreements 
as separate products will also improve the competitive posture of the 
Postal Service, but to a lesser degree. Postal Service Response, 
Attachment A, at 2. In the alternative, the Postal Service sought to 
add the contracts filed in Docket Nos. CP2008-9 and CP2008-10 to the 
competitive product list. Id. at 1-2. The Commission has reviewed this 
supplemental information as well as the materials filed by the Postal 
Service and commenters in Docket Nos. CP2008-9 and CP2008-10, including 
that submitted under seal. These contracts provide services that, under 
the criteria of section 3642(b), are properly classified as 
competitive.

B. Functionally Equivalent Agreements

    Whether the shell or the actual agreements should be added to the 
competitive product list is a fundamental issue in these cases. The 
Commission seeks to strike an appropriate balance between the Postal 
Service's need for flexibility with the need for adequate regulatory 
oversight. Consideration of a shell classification as a product may 
work in instances where the shell narrowly defines the particular 
product.
    With respect to these cases in particular, the Commission has 
concerns with the breadth of the proposed Global Plus MCS language 
(concerning a variety of different services), and that it does not 
identify principal contract provisions as prerequisites for functional 
equivalency. Thus, the Commission does not believe that the Docket No. 
CP2008-8 shell classification, on its own, provides enough specificity 
to be categorized as a product at this time.\8\
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    \8\ The Governors' decision in Docket No. CP2008-8, however, may 
properly authorize more than one Global Plus contract type.
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    An examination of the contracts, however, reveals that they are 
functionally equivalent in all pertinent respects, notwithstanding 
different revenue thresholds. As a consequence, the Commission 
concludes that it is appropriate to group these contracts as one 
product, which for purposes of the Mail Classification Schedule, will 
be listed on the competitive product list and grouped under the Global 
Plus classification as ``Global Plus 1''. Revisions to the competitive 
product list are shown below the signature line of this order and shall 
become effective upon publication in the Federal Register. Any future 
Global Plus contracts having substantially the same terms and 
conditions as the Global Plus 1 contracts may be filed under section 
3015.5 of the Commission's rules. Global Plus contracts not having 
substantially the same terms and conditions as the Global Plus 1 
contracts must be filed under part 3020, subpart B of the Commission's 
rules.\9\ The Commission will process such contracts as expeditiously 
as practicable consistent with the requirements of title 39.\10\
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    \9\ Future Global Plus contracts having different terms and 
conditions from Global Plus 1 contracts but functionally equivalent 
with one another would be grouped similarly, e.g., as ``Global Plus 
2''. The Postal Service may request such treatment when it files 
such agreements with the Commission. It should support any such 
request with a statement justifying that approach.
    \10\ In the future, if and when the Postal Service files a 
Governors' decision under seal, it shall also file a redacted copy 
of that decision. In addition, the Postal Service shall notify the 
Commission no later than the termination date of each Global Plus 
contract if such contract is terminated pursuant to an early 
termination clause.
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    Under section 3015.5 of the Commission's rules, the explanation and 
justification for the rate or class not of general applicability must 
also

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include the contract. When filing a new (or changed) Global Plus 
contract that it seeks to have classified as functionally equivalent 
with an existing product, e.g., Global Plus 1, the Postal Service shall 
identify all significant differences between the new contract and the 
pre-existing product group. Such differences would include terms and 
conditions that impose new obligations or new requirements on any party 
to the agreement.
    The Global Plus classification language submitted by the Postal 
Service includes the requirement that each agreement executed pursuant 
to that shell classification (and the accompanying Governors' decision) 
cover its attributable costs. This is a key provision and the 
classification language adopted for all competitive negotiated service 
agreements will include the same provision.\11\
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    \11\ The Postal Service filing included proposed classification 
language governing Global Plus contracts. The MCS remains in draft 
form. The language filed by the Postal Service will be deemed 
illustrative until such time as the MCS is finalized.
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    The Commission reviews competitive product filings for compliance 
with section 3633 of title 39 and the Commission's implementing 
regulations which require each product to recover its attributable 
costs, bar cross-subsidization by market dominant products, and require 
competitive products collectively to recover an appropriate share of 
the Postal Service's total institutional costs.
    The Commission has reviewed the materials filed by the Postal 
Service under seal, including the Governors' decision, the contracts 
submitted in Docket Nos. CP2008-9 and CP2008-10, and the financial 
analysis accompanying the contracts, and finds, based on the filed 
materials, that the Docket Nos. CP2008-9 and CP2008-10 agreements 
should cover their attributable costs, should not lead to the 
subsidization of competitive products by market dominant products, and 
should contribute to the recovery of an appropriate share of 
institutional costs by competitive products collectively.

C. Retroactive Contract Provisions

    In Order No. 81, the Commission directed the Postal Service to 
provide statutory justification for allowing customers to receive 
certain price incentives prior to regulatory approval of such rates, 
subsequent to collection of the difference in the full price if 
regulatory approval is not obtained.\12\ The Postal Service contends 
that ``[t]he retroactivity provisions are not inconsistent with any 
statutory or regulatory authority.'' Postal Service Response at 8. In 
support of this, the Postal Service argues that (1) pragmatic factors 
justify the arrangement and that, in any event, weigh strongly against 
construing the statute to forestall the reimbursement provisions, and 
(2) the mailer remains responsible for payment of the published rates 
if the contracts are not approved.
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    \12\ PRC Order No. 81, Notice and Order Concerning Prices Under 
Global Plus Negotiated Service Agreements, June 6, 2008, at 4 (Order 
No. 81).
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    Section 3642(e) of title 39 states that ``no product that involves 
the physical delivery of letters, printed matter, or packages may be 
offered by the Postal Service unless it has been assigned to the 
market-dominant or competitive category of mail * * *''. This provision 
means that new products, such as a new negotiated service agreement or 
product group not listed in the MCS, may not be offered by the Postal 
Service until such time as the Commission assigns the proposed product 
to the appropriate product list. Additionally, even if the rate or 
class involves a pre-existing product, Commission rule 3015.5, which 
implements section 3632(b)(3) of title 39, requires that notice be 
filed ``at least 15 days before the effective date of the change.'' 
Effectively, this means that any new (or revised) contract must be 
filed prior to the date that the new (or revised) rates become 
effective.
    The Commission understands the Postal Service's pragmatic concerns 
and the need to maintain the status quo. As experience is gained with 
the filing requirements under the PAEA, the parties should be better 
equipped to address such exigencies. If and when such situations arise, 
the Commission stands ready to act quickly on requests for temporary 
relief based on extenuating circumstances.

V. Ordering Paragraphs

    It is Ordered:
    1. The contracts submitted in Docket Nos. CP2008-9 and CP2008-10 
will be added to the competitive product list as one product under 
Negotiated Service Agreements, Outbound International as Global Plus 
Contracts, Global Plus 1 (CP2008-9 and CP2008-10).
    2. The Secretary shall arrange for publication of the amended 
product list in the Federal Register.

    By the Commission.
    Issued: June 27, 2008.
Steven W. Williams,
Secretary.

List of Subjects in 39 CFR Part 3020

    Administrative practice and procedure; Postal Service.

0
For the reasons stated in the preamble, under the authority at 39 
U.S.C. 503, the Postal Regulatory Commission amends 39 CFR part 3020 as 
follows:
0
1. The authority citation for part 3020 continues to read as follows:

    Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.


0
2. In Appendix A to subpart A of part 3020--Mail Classification 
Schedule revise part B, Competitive Products, section 2000 to read as 
follows:
* * * * *

PART B--COMPETITIVE PRODUCTS

 
                      2000 Competitive Product List
 
Express Mail:
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
        International Expedited Services 1 (CP2008-7)
Priority Mail:
    Priority Mail
    Outbound Priority Mail International
    Inbound Air Parcel Post
Parcel Select:
Parcel Return Service:
International:
    International Priority Airlift (IPA)
    International Surface Airlift (ISAL)
    International Direct Sacks--M--Bags
    Global Customized Shipping Services
    Inbound Surface Parcel Post (at non-UPU rates)
    International Money Transfer Service
    International Ancillary Services
Negotiated Service Agreements:
    Domestic
    Outbound International
        Global Plus Contracts
            Global Plus 1 (CP2008-9 and CP2008-10)
 

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[FR Doc. E8-16904 Filed 7-22-08; 8:45 am]
BILLING CODE 7710-FW-P