[Federal Register Volume 73, Number 245 (Friday, December 19, 2008)]
[Rules and Regulations]
[Pages 77512-77517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30169]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-8 and CP2009-9; Order No. 147]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding a new international mail product to 
the Competitive Product List. This product is a contract between the 
United States Postal Service and Canada Post for inbound competitive 
services. It modifies and extends an existing agreement. The 
Commission's action is consistent with changes to applicable federal 
law and regulations and with a recent Postal Service request. 
Republication of the lists of market dominant and competitive products 
is also consistent with requirements in the law.

DATES: Effective December 19, 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: Regulatory History, 73 FR 70681 (November 
21, 2008).
    The Postal Service seeks to add a new product identified as Canada 
Post-United States Postal Service Contractual Bilateral Agreement for 
Inbound Competitive Services (MC2009-8 and CP2009-9) to the Competitive 
Product List. For the reasons discussed below, the Commission approves 
the Request.

I. Background

    On November 13, 2008, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add the Canada 
Post-United States Postal Service Contractual Bilateral Agreement for 
Inbound Competitive Services (Bilateral Agreement) to the Competitive 
Product List.\1\ The Postal Service asserts that the Contractual 
Bilateral Agreement 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. MC2009-8.
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    \1\ Request of United States Postal Service to Add Canada Post-
United States Postal Service Contractual Bilateral Agreement for 
Inbound Competitive Services to the Competitive Product List, and 
Notice of Filing (Under Seal) the Enabling Governors' Decision and 
Agreement, November 13, 2008 (Request).
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    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 competitive services as reflected in the Bilateral Agreement. 
More specifically, the Bilateral Agreement, which has been assigned 
Docket No. CP2009-9, governs the exchange of Inbound Surface Parcel 
Post from Canada.
    In support of its Request, the Postal Service filed a redacted 
version of the Governors' Decision establishing prices for the 
Bilateral Agreement. Attached to the Governors' Decision are proposed 
Mail Classification Schedule language; a redacted version of 
management's analysis of the Bilateral Agreement; certification of 
compliance with 39 U.S.C. 3633(a); certification of the Governors' 
vote; \2\ and a Statement of Supporting Justification as required by 39 
CFR 3020.32.\3\ In addition, the Postal

[[Page 77513]]

Service indicates that it filed an unredacted copy of the Governors' 
Decision, the Bilateral Agreement, and other supporting documents 
designed to establish compliance with 39 CFR 3015.5 under seal. Request 
at 2, n.2.
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    \2\ See Attachment 1 to the Request.
    \3\ See Attachment 2 to the Request.
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    In the Statement of Supporting Justification, Lea Emerson, 
Executive Director, International Postal Affairs, asserts that ``[t]he 
addition of the [Bilateral] Agreement as a competitive product will 
enable the Commission to verify that the agreement covers its 
attributable costs and enables competitive products, as a whole, to 
make a positive contribution to coverage of institutional costs.'' Id. 
at 2. W. Ashley Lyons, Manager, Corporate Financial Planning, Finance 
Department, certifies that the contract complies with 39 U.S.C. 
3633(a). Request, Attachment C. He observes that the Bilateral 
Agreement ``should not impair the ability of competitive products on 
the whole to cover an appropriate share of institutional costs.''Id.
    The Postal Service filed much of the supporting materials, 
including the Governors' Decision and the Bilateral Agreement, under 
seal. It maintains that the Bilateral Agreement, related financial 
information, and the Governor's Decision should remain under seal as 
they contain pricing, cost, and other information that are highly 
confidential. Request at 2.\4\
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    \4\ The Postal Service indicates that the materials filed under 
seal constitute a subset of the overarching agreement between the 
parties, representing the parties' agreement concerning inbound 
competitive services. The Postal Service further indicates that the 
parties anticipate finalizing ``this and related agreements by mid-
December, and any lingering details will not affect the rates, 
classification, or other fundamental basis for this Request and 
Notice.'' Request at 5, n.12.
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    The Postal Service has an existing bilateral agreement with Canada 
Post which is set to expire December 31, 2008. Id. at 3. The new prices 
and classifications modify the current agreement, extend it for 1 year, 
and are scheduled to take effect January 1, 2009, or ``after filing 
with and review by the Postal Regulatory Commission, whichever, is 
later.'' Request, Attachment 1, at 2.
    In Order No. 134, the Commission gave notice of the two dockets, 
appointed a public representative, and provided the public with an 
opportunity to comment.\5\ Pursuant to 39 CFR 3015.6, Chairman's 
Information Request No.1 was issued November 24, 2008. The Postal 
Service filed its response on December 1, 2008 as requested.\6\
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    \5\ PRC Order No. 134, Notice and Order Concerning Bilateral 
Agreement with Canada Post For Inbound Competitive Services, 
November 18, 2008 (Order No. 134).
    \6\ Response of United States Postal Service to Chairman's 
Information Request No. 1 and Notice of Filing of Responsive 
Materials (Under Seal) December 1, 2008 (Response).
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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 3-4.
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    \7\ Public Representative Comments in Response to United States 
Postal Service Request to add Canada Post-United States Postal 
Service Contractual Bilateral Agreement for Inbound Competitive 
Services, to the Competitive Product List, and Notice of Filing 
(Under Seal) the Enabling Governors' Decision and Agreement, 
December 3, 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. He reviewed the cost savings measures 
for the contract and determined that the contract is advantageous to 
the Postal Service and beneficial to the general public. Id. He notes 
that the Commission's 2007 Annual Compliance Determination (ACD) found 
that Inbound Surface Parcel Post under the bilateral agreement with 
Canada incurred a loss and the Postal Service is attempting to remedy 
this issue with this agreement.\8\ Additionally, he observes that the 
pay-for-performance standards will improve the performance of both 
postal administrations. He concludes, inter alia, that the contract 
appears to meet each element of 39 U.S.C. 3633(a). Id. at 2.
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    \8\ In the ACD summary of International Mail, issued March 27, 
2008, the Commission concludes that revenue for competitive Inbound 
Surface Parcel Post (at non-UPU rates) did not cover its 
corresponding attributable costs by a relatively small amount.
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III. Commission Analysis

    The Commission has reviewed the contract, the financial analysis 
provided under seal that accompanies it, the additional information 
filed by the Postal Service in response to the Chairman's Information 
Request, and the comments filed by the Public Representative.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning the Bilateral Agreement with Canada 
Post for Inbound Competitive Services 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 the 
Bilateral Agreement with Canada Post for Inbound Competitive Services 
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 who use the product and the likely 
impact on small business concerns. 39 U.S.C. 3642(b)(3).
    In Docket No. RM2007-1, Order No. 43, the Commission determined 
that Inbound Surface Parcel Post shipments tendered at negotiated rates 
are appropriately classified as competitive. The Canada Post Bilateral 
Agreement falls within this category.
    The Postal Service asserts that its bargaining position is 
constrained by the existence of other shippers who can provide similar 
services, thus precluding it from taking unilateral action to increase 
prices without the risk of losing volume to private companies. Request, 
Attachment 2, at 2-3. The Postal Service also contends that it may not 
decrease quality or output without risking the loss of business to 
competitors that offer similar expedited delivery services. Id. 
Finally, the Postal Service states that the market for international 
parcel delivery services is highly competitive and that the agreement 
provides a benefit to Canada Post's and the Postal Service's small 
business customers by providing an additional option for shipping 
articles between the United States and Canada. It concludes that there 
should be little, if any negative impact on small business. Id. at 4.
    No commenter opposes the proposed classification of the Canada 
Post-United States Postal Service Contractual Bilateral Agreement for 
Inbound Competitive Services, as competitive.

[[Page 77514]]

Having considered the statutory requirements and the support offered by 
the Postal Service, the Commission finds that the Canada Post-United 
Postal Service Contractual Bilateral Agreement for Inbound Competitive 
Services 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 product for Inbound Surface Parcel Post from Canada. The Postal 
Service asserts the rates provide financial benefits for inbound 
competitive services which are better than those that would exist if 
the rates used are set by the Universal Postal Union (UPU) treaty. 
Request, Attachment 1B, at 1.
    The Postal Service contends, as mentioned in the comments of the 
Public Representative, adding the Canada Post-United States Postal 
Service Contractual Bilateral Agreement for Inbound Competitive 
Services product will result in better cost coverage for Inbound 
Surface Parcel Post and address the Commission's concern about cost 
coverage as expressed in the Annual Compliance Determination for Fiscal 
Year 2007. The Commission's summary and findings for International Mail 
concluded that revenues for corresponding competitive Inbound Surface 
Parcel Post at non-UPU rates did not provide revenues that covered 
attributable costs. The Postal Service states that its financial 
analysis of the new prices negotiated in this agreement shows that this 
contract covers its attributable costs, and does not result in 
subsidization of competitive products by market dominant products and 
should not impair the ability of competitive products on the whole to 
cover an appropriate share of institutional costs. Id., Attachment 1C, 
at 1.
    Based on the data submitted and the comments received, the 
Commission finds that Canada Post-United States Postal Service 
Contractual Bilateral Agreement for Inbound Competitive Services 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 Canada Post-United 
States Postal Service Contractual Bilateral Agreement for Inbound 
Competitive Services indicates that it comports with the provisions 
applicable to rates for competitive products.
    It is our understanding that this contract extension will terminate 
December 31, 2009. If this is not the case, 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 the Canada Post-United 
States Postal Service Contractual Bilateral Agreement for Inbound 
Competitive Services 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. Canada Post-United States Postal Service Contractual Bilateral 
Agreement for Inbound Competitive Services (MC2009-8 and CP2009-9) is 
added to the Competitive Product List as a new product under 
International Inbound Surface Parcel Post (at non-UPU) rates.
    2. 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 Subpart A of Part 3020--Mail Classification
                                Schedule
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                    Part A--Market Dominant Products
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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

[[Page 77515]]

 
    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]
    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]

[[Page 77516]]

 
    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
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                      Part B--Competitive Products
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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)
        Canada Post--United States Postal Service Contractual Bilateral
         Agreement for Inbound Competitive Services (MC2009-8 and CP2009-
         9)
    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)
        Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7)
        Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)
        Priority Mail Contract 1 (MC2008-8 and CP2008-26)
        Priority Mail Contract 2 (MC2009-2 and CP2009-3)
        Priority Mail Contract 3 (MC2009-4 and CP2009-5)
        Priority Mail Contract 4 (MC2009-5 and CP2009-6)
    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]

[[Page 77517]]

 
    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]
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[FR Doc. E8-30169 Filed 12-18-08; 8:45 am]
BILLING CODE 7710-FW-P