[Federal Register Volume 73, Number 235 (Friday, December 5, 2008)]
[Notices]
[Pages 74212-74213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28816]


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POSTAL REGULATORY COMMISSION

 [Docket Nos. MC2009-10 and CP2009-12; Order No. 141]


International Mail

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is noticing a recently-filed Postal Service 
request to add Inbound Express Mail International (EMS) Originating 
from Foreign Posts to the Competitive Product List. The Postal Service 
has also filed one related contract. This notice addresses procedural 
steps associated with these filings.

DATES: Comments due December 5, 2008.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov.

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

SUPPLEMENTARY INFORMATION: 

I. Background

    On November 19, 2008, the Postal Service filed a request pursuant 
to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Inbound 
International Expedited Services 2 to the Competitive Product List.\1\ 
The Postal Service asserts that Inbound International Expedited 
Services 2 is a competitive product within the meaning of 39 U.S.C. 
3632(b)(3). This Request has been assigned Docket No. MC2009-10.
    The Postal Service contemporaneously filed notice, pursuant to 39 
U.S.C. 3632(b)(3) and 39 CFR 3015.5, that the Governors have 
established prices and classifications not of general applicability for 
inbound Express Mail International (EMS) originating from foreign 
posts. More specifically, the Governors' Decision defines three price 
tiers for Inbound Express Mail originating from foreign posts and 
proposes that the Commission permit the three price tiers applicable to 
EMS from foreign posts that have prices set using the Universal Postal 
Union (UPU) process to be classified as a single product, Inbound 
International Expedited Services 2. Request at 4.\2\
    EMS prices have been established for these agreements by the Postal 
Service in accordance with the UPU,\3\ which authorizes each 
participating destination postal administration to set its prices for 
inbound Express Mail with notification to partners directly or through 
the UPU's International Bureau by August 31 of the year prior to the 
effective date. Request at 2. The Postal Service generally makes 
notification of prices established through the UPU International 
Bureau, but also sends letters directly to foreign postal 
administrations. Governors' Decision at 1, n.2. The Postal Service 
asserts that the EMS Cooperative process allows the destination 
administration to set pieces and weight prices according to a three-
tier system.\4\ The tiers consist of:
    1. Pay-for-performance. Available to members of the Kahala Post 
Group and EMS Cooperative members who elect to comply with pay-for-
performance provisions;
    2. EMS Cooperative. EMS Cooperative members who elect not to comply 
with pay-for-performance provisions; and

[[Page 74213]]

    3. All Others. International posts who choose not to be members of 
the EMS Cooperative.
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    \1\ Request of the United States Postal Service Regarding 
Inbound Express Mail International (EMS) from Foreign Posts to Add 
Inbound International Expedited Services 2 to Competitive Product 
List; and Notice of Establishment of Rates and Classifications Not 
of General Applicability, November 19, 2008 (Request).
    \2\ The Governors' Decision states that the Mail Classification 
Schedule (MCS) language which sets forth three EMS price tiers 
addresses the Commission recommendation that a consistent approach 
be used for ``organizing competitive product negotiated agreements 
within the Mail Classification Schedule.'' PRC Order No. 84, Order 
Concerning the China Post Group Inbound EMS Agreement, Docket No. 
CP2008-7, June 27, 2008, at 6.
    \3\ See Attachment 4 to the Request, Certification of Prices for 
Inbound Express Mail International (EMS), which states prices were 
established by letter dated August 28, 2008, to the International 
Bureau of the UPU.
    \4\ The Postal Service states that at the time of Governors' 
Decision No. 08-20 in this proceeding, EMS prices met all 
requirements of the financial model which is reflected in the 
decision. The financial model filed under seal in the instant case 
provides inputs that became available subsequent to the Governors' 
vote. This model as filed has an anomaly because the margin is 
slightly below the threshold set by the Governors. However, the 
Postal Service contends that this difference should not impact the 
Commission's approval of the prices that were established in August 
2008 and that the cost coverage presented in the model as filed is 
above 100 percent and satisfies the statutory pricing criteria for 
competitive products.
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Request at 2.
    In support of its Request, the Postal Service filed a redacted 
version of the Governors' Decision establishing prices and 
classifications for Inbound Express Mail International.\5\ The Postal 
Service also filed a Statement of Supporting Justification as required 
by 39 CFR 3020.32,\6\ certification of the Governors' vote,\7\ and 
certification of compliance with 39 U.S.C. 3633(a).\8\ In addition, the 
Postal Service indicates that it filed an unredacted copy of the 
Governors' Decision, the agreements with foreign posts and other 
supporting documents designed to establish compliance with 39 CFR 
3015.5 under seal. Request at 1, n.2.
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    \5\ See Attachment 1 to the Request.
    \6\ See Attachment 2 to the Request.
    \7\ See Attachment 3 to the Request.
    \8\ See Attachment 4 to the Request.
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    In the Statement of Supporting Justification, Brian T. Hutchins, 
Manager, International Postal Relations, explains that in the instant 
case, the Postal Service has considered that the new product could have 
been requested to be merged with the existing product Inbound 
International Expedited Services 1. He observes, however, the Postal 
Service only deals with inbound EMS from foreign posts which have one 
set of demand and market characteristics and a single set of pricing 
formulas approved by the Governors. He also states that the prices are 
established through negotiation as with the China Post Group \9\ or 
unilaterally pursuant to the UPU EMS Cooperative.
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    \9\ See Docket No. CP2008-7, PRC Order No. 84, Order Concerning 
the China Post Group Inbound EMS Agreement, June 27, 2008.
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    He notes the rationale for the Postal Service's submission of a 
separate request is because the pricing formula for EMS was finalized 
through the UPU in August 2008 with the knowledge that the pricing 
would be established before the Commission had an opportunity to review 
the pricing formula for the first time under the Postal Accountability 
and Enhancement Act (PAEA). The decision was made to submit this 
Request as a second product for inbound EMS rather than as an addition 
to the existing product (Inbound International Expedited Services 1). 
The Postal Service views this as a method to simplify the process of 
adding the product. Request, Attachment 2, at 2. He observes that the 
Commission could determine that inbound EMS from foreign posts with the 
established UPU prices should be included with the existing inbound EMS 
product (Inbound International Expedited Services 1). However, he 
states that with either approach, approval of the product will 
``improve the Postal Service's competitive posture, while enabling the 
Commission to verify that prices set according to EMS Cooperative 
procedures cover their attributable costs and make a positive 
contribution * * * toward the requisite 5.5 percent of the Postal 
Service's total institutional costs paid for by competitive products.'' 
Id. at 2-3.
    W. Ashley Lyons, Manager, Corporate Financial Planning, Finance 
Department, certifies that the contract complies with 39 U.S.C. 
3633(a). Request, Attachment 4. He asserts that the EMS agreement 
``prices demonstrate that EMS should cover its attributable costs and 
preclude the subsidization of competitive products by market dominant 
products.'' Id.
    The Postal Service filed much of the supporting materials, 
including the Governors' Decision and the EMS agreements with foreign 
posts, under seal. It maintains that the EMS agreements with foreign 
posts, related financial information, and the Governors' Decision 
should remain under seal as they contain pricing, cost, and other 
information that are highly confidential. Request at 5.
    The Postal Service's existing EMS agreements with the proposed 
pricing and classification changes established in the Governors' 
Decision are scheduled to take effect January 1, 2009 after review by 
the Commission. Governors' Decision at 3.

II. Notice of Filings

    The Commission establishes Docket Nos. MC2009-10 and CP2009-12 for 
consideration of the Request pertaining to the proposed Inbound 
International Expedited Services 2 product and the related agreements, 
respectively. In keeping with practice, these dockets are addressed on 
a consolidated basis for purposes of this Order; however, future 
filings should be made in the specific docket in which issues being 
addressed pertain.
    Interested persons may submit comments on whether the Postal 
Service's filings in the captioned dockets are consistent with the 
policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR part 3015, and 39 CFR 
3020 subpart B. Comments are due no later than December 5, 2008. The 
public portions of these filings can be accessed via the Commission's 
Web site (www.prc.gov).
    The Commission appoints Paul L. Harrington to serve as Public 
Representative in these dockets.
    It is Ordered:
    The Commission establishes Docket Nos. MC2009-10 and CP2009-12 for 
consideration of the matters raised in each docket.
    1. Pursuant to 39 U.S.C. 505, Paul L. Harrington is appointed to 
serve as officer of the Commission (Public Representative) to represent 
the interests of the general public in these proceedings.
    2. Comments by interested persons in these proceedings are due no 
later than December 5, 2008.
    3. The Secretary shall arrange for the publication of this Order in 
the Federal Register.

    By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. E8-28816 Filed 12-4-08; 8:45 am]
BILLING CODE 7710-FW-P