[Federal Register Volume 73, Number 205 (Wednesday, October 22, 2008)]
[Rules and Regulations]
[Pages 62886-62888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25130]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2008-8 and CP2008-26]


Administrative Practice and Procedure; Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding a new product identified as Priority 
Mail Contract 1 Negotiated Service Agreement to the Mail Classification 
Schedule Competitive Product List, pursuant to a Postal Service 
request. The request incorporates notice of the Postal Service's 
execution of a related contract. The Commission is also re-publishing 
the lists of market dominant and competitive products. The Commission's 
actions are consistent with changes in a recent law governing postal 
operations.

DATES: Effective October 22, 2008.

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

SUPPLEMENTARY INFORMATION: 

I. Background

    On September 23, 2008, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Priority 
Mail Contract 1 to the competitive product list. The Postal Service 
asserts that Priority Mail Contract 1 is a competitive product ``not of 
general applicability'' within the meaning of 39 U.S.C. 3632(b)(3). 
This Request has been assigned Docket No. MC2008-8.\1\
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    \1\ Request of the United States Postal Service to Add Priority 
Mail Contract to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, 
September 23, 2008 (Request).
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    The Postal Service contemporaneously filed a contract related to 
the proposed new product pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 
3015.5. The contract is assigned Docket No. CP2008-26. The Postal 
Service represents that the contract fits within the proposed Mail 
Classification Schedule (MCS) language.
    In support of its Request, the Postal Service filed the following 
materials: (1) A redacted version of the Governors' Decision, which 
also includes an analysis of the Priority Mail Contract 1; \2\ (2) a 
redacted version of the contract; which, among other things, provides 
that the contract will expire 2 years from the effective date, which is 
proposed to be 1 day after the Commission issues all regulatory 
approvals; \3\ (3) requested changes in the MCS product list; \4\ (4) a 
Statement of Supporting Justification as required by 39 CFR 3020.32; 
\5\ and (5) certification of compliance with 39 U.S.C. 3633(a).\6\
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    \2\ Attachment A to the Request. The analysis that accompanies 
the Governors' Decision notes, among other things, that the contract 
is not risk free, but concludes that the risks are manageable.
    \3\ Attachment B to the Request.
    \4\ Attachment C to the Request.
    \5\ Attachment D to the Request.
    \6\ Attachment E to the Request.
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    In the Statement of Supporting Justification, Kim Parks, Manager, 
Sales and Communications, Expedited Shipping, asserts that the service 
to be provided under the contract will cover its attributable costs, 
make a positive contribution to coverage of institutional costs, and 
will increase contribution toward the requisite 5.5 percent of the 
Postal Service's total institutional costs. Attachment D at 1. Ashley 
Lyons, Manager, Corporate Financial Planning, Finance Department, 
certifies, based on the financial analysis provided by the Postal 
Service, that the contract complies with 39 U.S.C. 3633(a). Attachment 
E.
    The Postal Service filed much of the supporting materials, 
including the Governors' Decision and the specific Priority Mail 
Contract 1, under seal. In its Request, the Postal Service maintains 
that the contract and related financial information, including the 
customer's name and the accompanying analyses that provide prices, 
terms, conditions and financial projections should remain under seal. 
Request at 2.
    In Order No. 111, the Commission gave notice of the two dockets,

[[Page 62887]]

appointed a public representative, and provided the public with an 
opportunity to comment.

II. Comments

    Comments were filed by the Public Representative.\7\ No filings 
were submitted by other interested parties. The Public Representative's 
comments focus on several aspects of the negotiated Priority Mail 
Contract 1: Adequate cost coverage for the product, identification of 
the source and basis for projected volume figures; and use of reliable 
adjustment factors. Public Representative Comments at 3-4. In addition, 
the Public Representative comments on the public interest in ensuring 
that the proposed competitive negotiated service agreements have been 
considered by the Governors and that such agreements provide increased 
options for consumers. Id. at 4-5.
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    \7\ Public Representative Comments in Response to Order No. 111, 
October 8, 2008 (Public Representative Comments).
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    Based on a review of materials filed under seal, the Public 
Representative concludes that the contract comports with 39 U.S.C. 
3633(a). Id. at 4. The Public Representative comments on the projected 
contract volumes recommending that in future filings the Postal Service 
should provide in general terms the nature and source of the volume 
projections for evaluation and review by the Commission. Id. at 5-6. 
Finally, the Public Representative comments that the contract's 
economic adjustment factors appear to be reasonable and provide 
adequate revenue protection for the Postal Service. Id. at 6.

III. Commission Analysis

    The Commission has reviewed the contract and the financial analysis 
provided under seal that accompanies the agreement as well as the 
comments by the Public Representative.
    The Postal Service's filing is distinguishable from previously 
filed negotiated service agreements. It seeks to establish a new 
domestic Priority Mail product, but not as a shell classification. 
Rather, the contract is predicated on unit costs for major mail 
functions, e.g., window service, mail processing, and transportation, 
based on the shipper's mail characteristics.
    The Commission's review of the supporting data uncovered certain 
inconsistencies which, on further inspection, do not substantially 
alter the financial results, but which nonetheless merit comment. Some 
of the underlying cost figures were developed from the Postal Service's 
FY2007 Annual Report to the Commission instead of from the Commission's 
FY2007 Annual Compliance Determination. The latter, representing the 
latest available information, is to be used in future filings.\8\ With 
respect to volume mix, the Postal Service relies on two different 
sources of information, namely, an existing special study and data 
reported by Origin Destination Information System (ODIS). While the use 
of these two sources of data does not cause the financial results to 
vary significantly (compared to using only one source), any future 
similar contracts should employ a single source to derive volume 
distributions, or alternatively, provide adequate justification for 
using more than one source.
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    \8\ Modifications, if any, to such data to reflect changed 
circumstances would need to be fully supported.
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    Based on the data submitted, the Commission finds that the Priority 
Mail Contract 1 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 competitive products' contribution to 
institutional costs (39 U.S.C. 3633(a)(3)). Thus, an initial review of 
the proposed Priority Mail Contract 1 indicates that it comports with 
the provisions applicable to rates for competitive products.
    The Postal Service shall notify the Commission of the effective 
date of the instant contract. In addition, the Postal Service shall 
promptly notify the Commission when the contract terminates no later 
than the actual termination date. The Commission will then remove the 
contract from the Mail Classification Schedule at the earliest possible 
opportunity.
    In conclusion, the Commission approves Priority Mail Contract 1 as 
a new product. The revision to the competitive product list is shown 
below the signature of this Order and is effective upon issuance of 
this Order.
    It Is Ordered:
    1. Priority Mail Contract 1 (MC2008-8 and CP2008-26) is added to 
the competitive product list as a new product under Negotiated Service 
Agreement, Domestic.
    2. The Postal Service shall notify the Commission of the effective 
date and the termination date of the contract as discussed in this 
Order.
    3. The Secretary shall arrange for the publication of this Order in 
the Federal Register.

List of Subjects in 39 CFR Part 3020

    Administrative practice and procedure, Postal Service.

    By the Commission.

    Issued October 15, 2008.
Judith M. Grady,
Acting Secretary.

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:

PART 3020--PRODUCT LISTS

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. Revise Appendix A to subpart A of part 3020--Mail Classification to 
read as follows:

Appendix A to Subpart A of Part 3020--Mail Classification Schedule

Part A--Market Dominant Products
1000 Market Dominant Product List
First-Class Mail
    Single-Piece Letters/Postcards
    Bulk Letters/Postcards
    Flats
    Parcels
    Outbound Single-Piece First-Class Mail International
    Inbound Single-Piece First-Class Mail International
Standard Mail (Regular and Nonprofit)
    High Density and Saturation Letters
    High Density and Saturation Flats/Parcels
    Carrier Route
    Letters
    Flats
    Not Flat-Machinables (NFMs)/Parcels
Periodicals
    Within County Periodicals
    Outside County Periodicals
Package Services
    Single-Piece Parcel Post
    Inbound Surface Parcel Post (at UPU rates)
    Bound Printed Matter Flats
    Bound Printed Matter Parcels
    Media Mail/Library Mail
Special Services
    Ancillary Services
    International Ancillary Services
    Address List Services
    Caller Service
    Change-of-Address Credit Card Authentication
    Confirm
    International Reply Coupon Service
    International Business Reply Mail Service
    Money Orders
    Post Office Box Service
Negotiated Service Agreements
    HSBC North America Holdings Inc. Negotiated Service Agreement
    Bookspan Negotiated Service Agreement
    Bank of America Corporation Negotiated Service Agreement
    The Bradford Group Negotiated Service Agreement
Market Dominant Product Descriptions
First-Class Mail [Reserved for Class Description]
    Single-Piece Letters/Postcards [Reserved for Product 
Description]

[[Page 62888]]

    Bulk Letters/Postcards [Reserved for Product Description]
    Flats [Reserved for Product Description]
    Parcels [Reserved for Product Description]
    Outbound Single-Piece First-Class Mail International [Reserved 
for Product Description]
    Inbound Single-Piece First-Class Mail International [Reserved 
for Product Description]
Standard Mail (Regular and Nonprofit) [Reserved for Class 
Description]
    High Density and Saturation Letters [Reserved for Product 
Description]
    High Density and Saturation Flats/Parcels [Reserved for Product 
Description]
    Carrier Route [Reserved for Product Description]
    Letters [Reserved for Product Description]
    Flats [Reserved for Product Description]
    Not Flat-Machinables (NFMs)/Parcels [Reserved for Product 
Description]
Periodicals [Reserved for Class Description]
    Within County Periodicals [Reserved for Product Description]
    Outside County Periodicals [Reserved for Product Description]
Package Services [Reserved for Class Description]
    Single-Piece Parcel Post [Reserved for Product Description]
    Inbound Surface Parcel Post (at UPU rates) [Reserved for Product 
Description]
    Bound Printed Matter Flats [Reserved for Product Description]
    Bound Printed Matter Parcels [Reserved for Product Description]
    Media Mail/Library Mail [Reserved for Product Description]
Special Services [Reserved for Class Description]
    Ancillary Services [Reserved for Product Description]
    Address Correction Service [Reserved for Product Description]
    Applications and Mailing Permits [Reserved for Product 
Description]
    Business Reply Mail [Reserved for Product Description]
    Bulk Parcel Return Service [Reserved for Product Description]
    Certified Mail [Reserved for Product Description]
    Certificate of Mailing [Reserved for Product Description]
    Collect on Delivery [Reserved for Product Description]
    Delivery Confirmation [Reserved for Product Description]
    Insurance [Reserved for Product Description]
    Merchandise Return Service [Reserved for Product Description]
    Parcel Airlift (PAL) [Reserved for Product Description]
    Registered Mail [Reserved for Product Description]
    Return Receipt [Reserved for Product Description]
    Return Receipt for Merchandise [Reserved for Product 
Description]
    Restricted Delivery [Reserved for Product Description]
    Shipper-Paid Forwarding [Reserved for Product Description]
    Signature Confirmation [Reserved for Product Description]
    Special Handling [Reserved for Product Description]
    Stamped Envelopes [Reserved for Product Description]
    Stamped Cards [Reserved for Product Description]
    Premium Stamped Stationery [Reserved for Product Description]
    Premium Stamped Cards [Reserved for Product Description]
    International Ancillary Services [Reserved for Product 
Description]
    International Certificate of Mailing [Reserved for Product 
Description]
    International Registered Mail [Reserved for Product Description]
    International Return Receipt [Reserved for Product Description]
    International Restricted Delivery [Reserved for Product 
Description]
    Address List Services [Reserved for Product Description]
    Caller Service [Reserved for Product Description]
    Change-of-Address Credit Card Authentication [Reserved for 
Product Description]
    Confirm [Reserved for Product Description]
    International Reply Coupon Service [Reserved for Product 
Description]
    International Business Reply Mail Service [Reserved for Product 
Description]
    Money Orders [Reserved for Product Description]
    Post Office Box Service [Reserved for Product Description]
Negotiated Service Agreements [Reserved for Class Description]
    HSBC North America Holdings Inc. Negotiated Service Agreement 
[Reserved for Product Description]
    Bookspan Negotiated Service Agreement [Reserved for Product 
Description]
    Bank of America Corporation Negotiated Service Agreement
    The Bradford Group Negotiated Service Agreement
Part B--Competitive Products
Competitive Product List
Express Mail
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
    Inbound 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
Special Services
    Premium Forwarding Service
Negotiated Service Agreements
    Domestic
    Express Mail Contract 1 (MC2008-5)
    Priority Mail Contract 1 (MC2008-8 and CP2008-26)
    Outbound International
    Global Expedited Package Services (GEPS) Contracts
    GEPS 1 (CP2008-5, CP2008-11, CP2008-12, and CP2008-13, CP2008-
18, CP2008-19, CP2008-20, CP2008-21, CP2008-22, CP2008-23, CP2008-
24, and CP2008-25)
    Global Plus Contracts
    Global Plus 1 (CP2008-9 and CP2008-10)
    Global Plus 2 (MC2008-7, CP2008-16 and CP2008-17)
    Inbound Direct Entry Contracts with Foreign Postal 
Administrations (MC2008-6, CP2008-14 and CP2008-15)
Competitive Product Descriptions
    Express Mail [Reserved for Group Description]
    Express Mail [Reserved for Product Description]
    Outbound International Expedited Services [Reserved for Product 
Description]
    Inbound International Expedited Services [Reserved for Product 
Description]
    Priority [Reserved for Product Description]
    Priority Mail [Reserved for Product Description]
    Outbound Priority Mail International [Reserved for Product 
Description]
    Inbound Air Parcel Post [Reserved for Product Description]
    Parcel Select [Reserved for Group Description]
    Parcel Return Service [Reserved for Group Description]
    International [Reserved for Group Description]
    International Priority Airlift (IPA) [Reserved for Product 
Description]
    International Surface Airlift (ISAL) [Reserved for Product 
Description]
    International Direct Sacks--M-Bags [Reserved for Product 
Description]
    Global Customized Shipping Services [Reserved for Product 
Description]
    International Money Transfer Service [Reserved for Product 
Description]
    Inbound Surface Parcel Post (at non-UPU rates) [Reserved for 
Product Description]
    International Ancillary Services [Reserved for Product 
Description]
    International Certificate of Mailing [Reserved for Product 
Description]
    International Registered Mail [Reserved for Product Description]
    International Return Receipt [Reserved for Product Description]
    International Restricted Delivery [Reserved for Product 
Description]
    International Insurance [Reserved for Product Description]
    Negotiated Service Agreements [Reserved for Group Description]
    Domestic [Reserved for Product Description]
    Outbound International [Reserved for Group Description]
Part C--Glossary of Terms and Conditions [Reserved]
Part D--Country Price Lists for International Mail [Reserved]

[FR Doc. E8-25130 Filed 10-21-08; 8:45 am]
BILLING CODE 7710-FW-P