[Federal Register Volume 73, Number 220 (Thursday, November 13, 2008)]
[Rules and Regulations]
[Pages 67350-67352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26901]



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Part IV





Postal Regulatory Commission





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39 CFR Part 3020



Administrative Practice and Procedure, Postal Service; Final Rule

  Federal Register / Vol. 73, No. 220 / Thursday, November 13, 2008 / 
Rules and Regulations  

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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-3 and CP2009-4; Order No. 127]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Express Mail Contract 2 (MC2009-3) to 
the Competitive Product List. This action is consistent with changes in 
a recent law governing postal operations and a related Postal Service 
request. Republication of the lists of market dominant and competitive 
products is also consistent with new requirements in the law.

DATES: Effective November 13, 2008.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 65708 (November 4, 
2008).
    The Postal Service seeks to add a new product identified as Express 
Mail Contract 2 to the Competitive Product List. For the reasons 
discussed below, the Commission approves the Request.

I. Background

    On October 24, 2008, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Express 
Mail Contract 2 to the Competitive Product List. The Postal Service 
asserts that Express Mail Contract 2 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. MC2009-3.\1\
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    \1\ Request of the United States Postal Service to Add Express 
Mail Contract 2 to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, 
October 24, 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 has been assigned Docket No. CP2009-4. 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 Express Mail Contract 2; \2\ (2) a 
redacted version of the contract; which, among other things, provides 
that the contract will expire 3 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. Request, 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). See 
id., Attachment E.
    The Postal Service filed much of the supporting materials, 
including the Governors' Decision and the specific Express Mail 
Contract 2, 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. 
Id. at 2.
    In Order No. 121, the Commission gave notice of the two dockets, 
appointed a public representative, and provided the public with an 
opportunity to comment.\7\
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    \7\ PRC Order No. 121, Notice and Order Concerning Express Mail 
Contract 2 Negotiated Service Agreement, October 29, 2008 (Order No. 
121).
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II. Comments

    Comments were filed by the Public Representative.\8\ No filings 
were submitted by other interested parties. The Public Representative's 
comments focus principally on confidentiality and pricing under the 
contract. Public Representative Comments at 2-4.
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    \8\ Public Representative Comments in Response to United States 
Postal Service Request to Add Express Mail Contract 2 to Competitive 
Product List, November 5, 2008 (Public Representative Comments).
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    The Public Representative states that a sufficient rationale for 
maintaining the confidentiality of the documents under seal has been 
provided by the Postal Service. Also, based upon a review of materials 
filed by the Postal Service in this proceeding, the Public 
Representative concludes that the contract is beneficial to both 
parties as well as the general public. Id. at 2-3.
    The Public Representative notes that the contract is intended to 
promote new volumes for the Postal Service and provide incentives for 
the shipper. He concludes, inter alia, that the contract should 
generate sufficient revenue to cover the product's attributable costs, 
and contribute to the recovery of total institutional costs assigned to 
competitive products. Id. at 3-4.

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 filed by the Public Representative.
    Statutory requirements. The Commission's statutory 
responsibilities, in this instance, entail assigning Express Mail 
Contract 2 to either the Market Dominant Product List or to the 
Competitive Product List. 39 U.S.C. 3642. As part of this 
responsibility, the Commission also reviews the proposal for compliance 
with the Postal Accountability and Enhancement Act (PAEA) requirements. 
This includes, for proposed competitive products, a review of the 
provisions applicable to rates for competitive products. 39 U.S.C. 
3633.
    Product list assignment. In determining whether to assign Express 
Mail Contract 2 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 so, 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

[[Page 67351]]

provide similar services. Thus, the market precludes the Postal Service 
from taking unilateral action to increase prices without the risk of 
losing volume to private companies. Request, Attachment D, at 2. The 
Postal Service also contends that the Postal Service may not decrease 
quality or output without risking the loss of business to competitors 
that offer similar expedited delivery services. Id. It further states 
that the contract partner supports the addition of the contract to the 
product list to effectuate the negotiated contractual terms. Id. at 3. 
Finally, the Postal Service states that due to the fact that the 
expedited delivery market requires a substantial infrastructure to 
support a national network, only large carriers serve the market under 
consideration. Accordingly, the Postal Service is unaware of any small 
business concerns that could offer comparable service for this 
customer. Id.
    No commenter opposes the proposed classification of Express Mail 
Contract 2 as competitive. Having considered the statutory requirements 
and the support offered by the Postal Service, the Commission finds 
that Express Mail Contract 2 is appropriately classified as a 
competitive product and should be added to the Competitive Product 
List.
    Cost considerations. The Postal Service's filing seeks to establish 
a new domestic Express Mail product. 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 Postal Service contends that adding the Express Mail Contract 2 
product will result in processing Express Mail pieces that are less 
costly for the Postal Service than the average Express Mail piece. See 
id., Attachment A. It believes that its financial analysis shows that 
these cost savings can be accomplished while ensuring that the contract 
covers its attributable costs, does not result in subsidization of 
competitive products by market dominant products, and increases 
contribution from competitive products. Id., Attachment E, at 1.
    Based on the data submitted and the comments received, the 
Commission finds that Express Mail Contract 2 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 Express Mail Contract 2 
indicates that it comports with the provisions applicable to rates for 
competitive products.
    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 Express Mail Contract 2 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.

IV. Ordering Paragraphs

    It is Ordered:
    1. Express Mail Contract 2 (MC2009-3 and CP2009-4) 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 
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.
Steven W. Williams,
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]
    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]

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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)
    Express Mail Contract 2 (MC2009-3 and CP2009-4)
    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, and CP2008-24)
    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. E8-26901 Filed 11-12-08; 8:45 am]
BILLING CODE 7710-FW-P