[Federal Register Volume 73, Number 221 (Friday, November 14, 2008)]
[Rules and Regulations]
[Pages 67393-67396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26960]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-1 and CP2009-2; Order No. 128]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Parcel Return Service Contract 1 to 
the Competitive Product List. This action is consistent with changes in 
a recent law governing postal operations and a recent Postal request. 
Republication of the lists of market dominant and competitive products 
is also consistent with new requirements in the law.

DATES: Effective November 14, 2008.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 64370 (October 29, 
2008).
    The Postal Service seeks to add a new product identified as Parcel 
Return Service Contract 1 to the Competitive Product List. For the 
reasons discussed

[[Page 67394]]

below, the Commission approves the request.

I. Background

    On October 15, 2008, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Parcel 
Return Service Contract 1 to the Competitive Product List. The Postal 
Service asserts that the Parcel Return Service Contract 1 product 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. 
MC2009-1.\1\
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    \1\ Request of the United States Postal Service to Add Parcel 
Return Service Contract to Competitive Product List and Notice of 
Establishment of Rates and Class Not of General Applicability, 
October 15, 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. CP2009-2. 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 
authorizing the new product which also includes an analysis of the 
Parcel Return Service 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 Governor's Decision notes, among other things, that the cost 
estimates may vary but the risks reviewed and evaluated are limited.
    \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, Daniel J. Barrett, 
Acting Manager, Product & Business Development, Ground Shipping 
Services, 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. W. 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 Parcel Return 
Service 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. Id. at 2.
    In Order No. 119, the Commission gave notice of the two dockets, 
appointed a public representative, and provided the public with an 
opportunity to comment. In addition, the Commission posed questions to 
the Postal Service seeking supplemental information.

II. Comments

    Comments were filed by the Public Representative.\7\ 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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    \7\ Public Representative Comments in Response to United States 
Postal Service Request to Add Parcel Return Service Contract to 
Competitive Product List, October 29, 2008.
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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 reduces costs for both 
parties. 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 4.

III. Commission Analysis

    The Commission's statutory responsibilities in this instance entail 
assigning Parcel Service Return Contract 1 to either the Market 
Dominant Product List or the Competitive Product List. 39 U.S.C. 3642. 
As part of this responsibility, the Commission also reviews the 
proposals 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. 39 U.S.C. 3642 governs the assignment of 
new products to the Market Dominant or Competitive Product List. In 
this case, Parcel Return Service Contract 1 is being proposed by the 
Postal Service to be added to the Competitive Product List.
    The statutory standard that the Commission must consider is 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 must 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 without the risk of losing volume 
to private companies. Request, Attachment D, at 2-3. 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. at 2. 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 market 
for ground shipping services requires a substantial infrastructure to 
support a national network, only large shippers 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 Parcel Return 
Service Contract 1 as competitive. Having considered the statutory 
requirements and the support offered by the Postal Service and the 
public comment, the Commission finds that Parcel Return Service 
Contract 1 is appropriately classified as a competitive product and

[[Page 67395]]

should be added to the Competitive Product List.
    Cost considerations. The Commission has reviewed the contract, the 
financial analysis provided under seal that accompanies the agreement 
including the responses to the questions posed in PRC Order No. 119, as 
well as the comments by the Public Representative. Based on an analysis 
of the information submitted, the cost accounting methods proposed in 
Docket No. RM2008-6 are to be used for updating costs for subsequent 
years of the contract.\8\ The analysis of the Commission is included as 
part of the record of these proceedings in Library Reference PRC-
CP2009-2-NP-LR-1.
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    \8\ In its supplemental filing, the Postal Service indicated its 
intent to do so. See Response of the United States Postal Service to 
Commission's Inquiries in Order No. 119, section IV, October 27, 
2008.
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    Library Reference PRC-CP2009-2-NP-LR-1 is the analysis of the 
Postal Service data which updates the original data with the 
supplemental data filed by the Postal Service on October 27, 2008, and 
provides calculations for revenue per piece for each of the negotiated 
service agreement's rate categories. The analysis finds that the 
updated data do not cause financial results to vary significantly.
    Based on the data submitted, the Commission finds that Parcel 
Return Service 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, a preliminary review 
of the proposed Parcel Return Service Contract 1 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, but 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 Parcel Return Service 
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. Parcel Return Service Contract 1 (MC2009-1 and CP2009-2) 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]
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]

[[Page 67396]]

    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)
    Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)
    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. E8-26960 Filed 11-13-08; 8:45 am]
BILLING CODE 7710-FW-P