[Federal Register Volume 73, Number 143 (Thursday, July 24, 2008)]
[Rules and Regulations]
[Pages 43344-43346]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-16991]



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Part IV





Postal Regulatory Commission





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39 CFR Part 3020



Administrative Practices and Procedure; Postal Service; Final Rule

  Federal Register / Vol. 73, No. 143 / Thursday, July 24, 2008 / Rules 
and Regulations  

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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket No. CP2008-5; Order No. 86]


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 Expedited Package Services 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 July 24, 2008.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 32365 (June 6, 
2008).

I. Background

    On May 20, 2008, the Postal Service filed two notices announcing 
price and classification changes for competitive products not of 
general applicability. The notice in Docket No. CP2008-4 informed the 
Commission that ``the Governors have established prices and 
classifications for competitive products not of general applicability 
for Global Expedited Package Services (GEPS) Contracts.''\1\ The Postal 
Service attached a proposed revision of the draft Mail Classification 
Schedule (section 2610.2) concerning GEPS contracts to the Notice.\2\ 
Docket No. CP2008-4 was filed pursuant to 39 U.S.C. 3632(b)(3) and 39 
CFR 3015.5 and 3020.90. In support of that filing, the Postal Service 
also filed materials under seal, including the Governors' decision.
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    \1\ Notice of United States Postal Service of Governors' 
Decision Establishing Prices and Classifications for Global 
Expedited Package Services Contracts, filed on May 20, 2008 
(Goverors' Decision 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.
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    The notice in Docket No. CP2008-5, announced an individual 
negotiated service agreement, namely, a specific GEPS contract the 
Postal Service entered into with an individual mailer.\3\ Docket No. 
CP2008-5 was filed pursuant to 39 CFR 3015.5. In support of that 
docket, the Postal Service also filed materials, including the contract 
and supporting materials, under seal. Given the interrelationship 
between the two dockets, the Commission consolidated the proceedings 
for purposes of review under Docket No. CP2008-5. See PRC Order No. 78.
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    \3\ See Notice of United States Postal Service of Filing a 
Global Expedited Package Service Contract (Pricing Notice).
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    In Order No. 78, the Commission reiterated its position that each 
negotiated service agreement, such as the GEPS contract submitted by 
the Postal Service, will initially be classified as a separate product, 
while acknowledging the possibility of grouping functionally equivalent 
agreements as a single product if they exhibit similar cost and market 
characteristics. Id. at 2-3. This, in effect, invoked the filing and 
review requirements of 39 CFR part 3020, subpart B, along with the 
requirements of rule 3015.5 for competitive products.

II. Postal Service Supplemental Filing

    On June 10, 2008, the Postal Service filed material responsive to 
Order No. 78 and 39 CFR part 3020, subpart B.\4\ In its response, the 
Postal Service states that it does not oppose making GEPS contracts' 
expiration dates publicly available, but continues to maintain that the 
names of specific GEPS customers must be kept confidential. The Postal 
Service also states that all previous GEPS contracts, but one, have 
expired. It states that the one remaining GEPS contract that would not 
meet the new eligibility requirements expires on July 31, 2008. 
Furthermore, the Postal Service clarifies in its response that an 
actual mailing of 5,000 pieces or actual payment of $100,000 is not 
required under the GEPS contracts shell classification, but rather that 
the mailer must merely be capable of meeting those thresholds. The 
material responsive to 39 CFR part 3020, subpart B includes a statement 
of supporting justification sponsored by Frank Cebello, Executive 
Director, Global Business Management for the Postal Service. See Postal 
Service Response, Attachment A.
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    \4\ United States Postal Service Response to Order no. 78 and 
Notice of Filing Information Responsive to Part 3020 of the 
Commission's Rules of Practice and Procedure, June 10, 2008 (Postal 
Service Response).
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III. Comments

    Order No. 78 also provided an opportunity for public comment on the 
Postal Service's proposals. Comments were received from the Public 
Representative and United Parcel Service (UPS).\5\ Neither the Public 
Representative nor UPS expresses opposition to the GEPS contract shell 
classification or the specific GEPS contract proposed by the Postal 
Service. The Public Representative states in his comments that both the 
GEPS shell classification and the individual GEPS contract comport with 
the provisions of title 39. The Public Representative and United Parcel 
Service both discuss issues encompassing the provision of materials 
under seal. Public Representative Comments at 2-3; UPS Comments at 1-3.
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    \5\ Public Represenative Comments in Response to United States 
Postal Service Notice of Global Expedited Packages Services Contract 
(Public Representative Comments); Comments of United Parcel Service 
in Response to Order Concerning Prices Under Global Expedited 
Package Services Negotiated Service Agreements (UPS Comments); both 
filed June 16, 2008.
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IV. Commission Analysis

A. Statutory Requirements

    The statutory responsibility of the Commission, in this instance, 
is to assign a new product to either the market dominant list or the 
competitive product list. 39 U.S.C. 3642. As part of this 
responsibility, the Commission also will preliminarily review the 
proposal for compliance with the requirements of the Postal 
Accountability and Enhancement Act (PAEA) of 2006. For proposed 
competitive products, this includes a review of the provisions 
applicable to rates for competitive products. 39 U.S.C. 3633.
    The Postal Service contends that adding the shell classification 
(GEPS contracts) as a product will improve the Postal Service's 
competitive posture. It argues that this can be accomplished while 
allowing verification that each contract covers attributable costs, 
does not result in subsidization of competitive products by market 
dominant products, and increases contribution from competitive 
products. Alternatively, the Postal Service states that adding the 
individual agreement as a product also will improve its competitive 
posture, but to a lesser degree. Postal Service Response, Attachment A, 
at 2.
    The Commission has reviewed the financial analysis provided under 
seal that accompanies the agreement and finds that the specific GEPS 
contract submitted should cover its attributable costs (39 U.S.C. 
3633(a)(2)); should not lead to the subsidization of competitive 
products by market dominant products (39 U.S.C. 3633(a)(1)), and should 
have a positive effect on the collective competitive products' ability 
to provide their appropriate share of institutional costs (39 U.S.C. 
3633(a)(3)). Thus, a preliminary review of the GEPS contract indicates 
that it comports with the

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provisions applicable to rates for competitive products.
    In determining whether to assign the GEPS contract as a product to 
the market dominant product list or the competitive product list the 
Commission must consider whether:

    * * * the Postal Service exercises sufficient market power that 
it can effectively set the price of such product substantially above 
costs, raise prices significantly, decrease quality, or decrease 
output, without risk of losing a significant level of business to 
other firms offering similar products.

39 U.S.C. 3642(b)(1). If this is the case, the product will be 
categorized as market dominant. The competitive category of products 
shall consist of all other products.
    The Commission is further required to consider the availability and 
nature of enterprises in the private sector engaged in the delivery of 
the product, the views of those that use the product, and the likely 
impact on small business concerns. 39 U.S.C. 3642(b)(3).
    The Postal Service asserts that its bargaining position is 
constrained by the existence of other shippers who can provide similar 
services. Thus, the market precludes the Postal Service from taking 
unilateral action to increase prices or decrease service without the 
risk of losing volume to private companies in the international 
shipping industry. Postal Service Response, Attachment A, at 2-3. The 
Postal Service contends that private consolidators and freight 
forwarders may offer international shipping arrangements under similar 
conditions. Id. at 3. The Postal Service has no specific data on the 
views of those that use the products on the regulatory classification. 
Id. at 4. Finally, the Postal Service states that large shippers serve 
the market under consideration, and that there should be little impact 
upon small business other than adding an additional option for shipping 
articles from the United States to foreign destinations. Id.
    The Commission previously assigned Outbound International to the 
competitive product list under Negotiated Service Agreements.\6\ The 
Postal Service contends that the proposed GEPS contract falls within 
this designation. The Commission has not received public opposition to 
the proposed regulatory classification during the comment period. 
Having considered the statutory requirements, the argument put forth by 
the Postal Service, and the public comment, the Commission finds that 
GEPS contract is appropriately categorized as a competitive product and 
should be added to the competitive product list. The revisions to the 
competitive product list are shown below the signature of this order, 
and shall become effective upon publication in the Federal Register.
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    \6\ PRC Order No. 43, Order Establishing Ratemaking Regulations 
for Market Dominant and Competitive Products, October 29, 2008, 
para. 4004, Appendix A, at 9.
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B. Mail Classification Schedule

    The Postal Service previously proposed applicable draft Mail 
Classification Schedule language for Global Expedited Package Services 
(GEPS) Contracts.\7\Attachment A to the Governors' decision Notice 
filed in Docket No. CP2008-4 puts forward changes to that previously 
proposed language laying out the newly proposed eligibility 
requirements for GEPS 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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    \7\ See United States Postal Service Submision of Additional 
Mail Classification Schedule Information in Response to Order No. 
43, November 20, 2007.
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C. Updating the Mail Classification Schedule

    The GEPS contract contains a provision for early termination of the 
contract. The Postal Service shall promptly notify the Commission of an 
early termination, but in no event later than the actual termination 
date. The Commission then will remove the contract from the Mail 
Classification Schedule at the earliest possible opportunity. The 
Postal Service also shall notify the Commission of any renewal of the 
contract 15 days prior its occurrence. Otherwise, the Commission will 
assume that the contract has lapsed at its designated expiration date 
and remove the contract from the Mail Classification Schedule without 
notice.

D. Additional Agreements

    As of now, the GEPS contract submitted in Docket CP2008-5, 
represented as ``GEPS 1'' in the competitive product list, is the 
product. In the future, the Postal Service may enter into other GEPS 
contracts substantially similar to the one submitted in Docket CP2008-
5. When this occurs, GEPS 1 will be considered the product and the 
included individual contracts will be treated as price categories under 
the product.\8\
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    \8\ This may require future modification of the GEPS 1 
descriptive language.
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    If the Postal Service determines that it has entered into an 
agreement substantially equivalent to GEPS 1 with another mailer, it 
may file such a contract under rule 3015.5. In each case, the 
individual contract must be filed with the Commission, and each 
contract must meet the requirements of 39 U.S.C. 3633. The Postal 
Service shall identify all significant differences between the new 
contract and the pre-existing product group, GEPS 1. Such differences 
would include terms and conditions that impose new obligations or new 
requirements on any party to the contract. The Commission will verify 
whether or not any subsequent contract is in fact substantially 
equivalent. Contracts not having substantially the same terms and 
conditions as the GEPS 1 contract must be filed under 39 CFR part 3020, 
subpart B.

E. Confidentiality of Information

    The Commission is aware that the treatment of information as 
confidential is a sensitive issue. The Postal Service, the Public 
Representative, and United Parcel Service all express valid concerns 
that the Commission will address in the future on a broader level.
    In this docket, the Commission will take a limited first step to 
add transparency and facilitate the process of reviewing future 
agreements of this style. The Commission has reviewed the Governor's 
decision supporting the request provided as required by rule 
3020.31(b), and has determined that most of the document does not pose 
a risk of competitive harm if disclosed. In fact, the Postal Service 
disclosed similar information associated with Docket Nos. CP2008-8, 
CP2008-9, and CP2008-10. The Postal Service is directed to file a 
redacted version of the Governor's decision provided under seal in 
Docket No. CP2008-4.\9\
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    \9\ The redacted version should be filed under Docket No. 
CP2008-5. The Commission anticipates the redacted version will be 
similar in nature to what the Postal Service provided associated 
with Docket Nos. CP2008-8, CP2008-9, and CP2008-10, on June 16, 
2008.
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V. Ordering Paragraphs

    It is Ordered:
    1. The GEPS contract filed in Docket No. CP2008-5 is added as a 
product not of general applicability to the competitive product list 
under Negotiated Service Agreements, Outbound International, as Global 
Expedited Package Services (GEPS) Contracts, GEPS 1 (CP2008-5).
    2. The Postal Service shall file with the Commission a redacted 
version of the Governors' decision provided under seal in Docket No. 
CP2008-4 by July 23, 2008.

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    3. The Secretary shall arrange for publication of this Order 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
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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 Expedited Package Services (GEPS) Contracts
            GEPS 1 (CP2008-5)
        Global Plus Contracts
            Global Plus 1 (CP2008-9 and CP2008-10)
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[FR Doc. E8-16991 Filed 7-23-08; 8:45 am]
BILLING CODE 7710-FW-P