[Federal Register Volume 74, Number 172 (Tuesday, September 8, 2009)]
[Rules and Regulations]
[Pages 46016-46019]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21438]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-36 and CP2009-55; Order No. 279]


New Postal Product

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Priority Mail Contract 16 to the 
Competitive Product List. This action is consistent with changes in a 
recent law governing postal operations. Republication of the lists of 
market dominant and competitive products is also consistent with new 
requirements in the law.

DATES: Effective September 8, 2009 and is applicable beginning August 
17, 2009.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 74 FR 39122 (August 5, 
2009).

I. Introduction
II. Background
III. Comments
IV. Errata
V. Commission Analysis
VI. Ordering Paragraphs

I. Introduction

    The Postal Service seeks to add a new product identified as 
Priority Mail Contract 16 to the Competitive Product List. For the 
reasons discussed below, the Commission approves the Request.

II. Background

    On July 24, 2009, 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 16 to the Competitive Product List.\1\ The Postal Service 
asserts that the Priority Mail Contract 16 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. MC2009-36.
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    \1\ Request of the United States Postal Service to Add Priority 
Mail Contract 16 to Competitive Product List and Notice of Filing 
(Under Seal) of Contract and Supporting Data, July 24, 2009 
(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. CP2009-55.
    In support of its Request, the Postal Service filed the following 
materials: (1) A redacted version of the contract which, among other 
things, provides that the contract will expire 1 year from the 
effective date, which is proposed to be the day that the Commission 
issues all regulatory approvals; \2\ (2) requested changes in the Mail 
Classification Schedule product list; \3\ (3) a Statement of Supporting 
Justification as required by 39 CFR 3020.32; \4\ and (4) certification 
of compliance with 39 U.S.C. 3633(a).\5\ The Postal Service also 
references Governors' Decision 09-6, filed in Docket No. MC2009-25, as 
authorization of the new product. Notice at 1.
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    \2\ Attachment A to the Request.
    \3\ Attachment B to the Request.
    \4\ Attachment C to the Request.
    \5\ Attachment D to the Request.
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    In the Statement of Supporting Justification, Mary Prince Anderson, 
Acting 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 C, at 1. W. Ashley Lyons, Manager, 
Regulatory Reporting and Cost Analysis, Finance Department, certifies 
that the contract complies with 39 U.S.C. 3633(a). See id., Attachment 
D.
    The Postal Service filed much of the supporting materials, 
including the supporting data and the unredacted contract, 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, certain terms and 
conditions, and financial projections, should remain confidential. Id. 
at 2-3.
    In Order No. 260, the Commission gave notice of the two dockets, 
appointed a public representative, and provided the public with an 
opportunity to comment.\6\
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    \6\ PRC Order No. 260, Notice and Order Concerning Priority Mail 
Contract 16 Negotiated Service Agreement, July 29, 2009 (Order No. 
260).
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III. Comments

    Comments were filed by the Public Representative.\7\ No comments 
were submitted by other interested parties.
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    \7\ Public Representative Comments in Response to United States 
Postal Service Request to Add Priority Mail Contract 16 to 
Competitive Product List, (Public Representative Comments). The 
Commission reads these comments as relating to Priority Mail 
Contract 16, notwithstanding inadvertent reference to Priority Mail 
Contract 15.
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    The Public Representative states that each ``element of 39 U.S.C. 
3633(a) appears to be met by Priority Mail Contract 16. Id. at 2. On 
the other hand, he observes ``it is not clear that the * * * 
justification of this contract * * * comports with the requirements of 
3632(b)(3).'' Id. at 3. He submits that the term of the contract is 
ambiguous, particularly because the provision stating that the contract 
``shall expire one year from the effective date'' is at odds with other 
clauses for annual adjustments. Id. at 3. While recognizing the 
Governors' preapproved pricing shell, he also contends that ``the 
contract expiration must be established definitively since it is an 
essential component of the contract's classification as `a product.' '' 
Id.
    The Public Representative notes that the Postal Service has duties 
to provide packaging and labels. Id. at 2-3. He also points out that 
the ``contract appears to be silent on issues such as manifesting, 
electronically or otherwise.'' Id. at 3. He adds that the Postal 
Service's Request at Attachment C provides a statement of support that 
incorrectly refers to Priority Mail Contract 14, rather than 16.

[[Page 46017]]

    With respect to confidentiality, the Public Representative believes 
that ``[t]o comply with Order No. 247 in Docket[s] MC2009-30 and 
CP2009-40, the Postal Service should include with its filing a redacted 
copy of the Governors' Decision and certification.'' Id. at 4. 
(Footnote omitted.)
    The Public Representative concurs that the Postal Service provides 
adequate justification for maintaining confidentiality in this case. 
Id. at 4. Yet, he concludes that the Priority Mail Contract 16 
agreement does not comport with the requirements of title 39, even 
though it may otherwise be appropriately classified as competitive. Id. 
at 5. He indicates, however, the contract discrepancies could be 
remedied. Id.
    In response to the Public Representative's Comments, the Postal 
Service filed an errata to address uncertainties or correct errors of 
its Request as to adding Priority Mail Contract 16 to the Competitive 
Product List as a separate product.\8\
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    \8\ Errata to Request of the United States Postal Service to Add 
Priority Mail Contract 16 to Competitive Contract List and Notice of 
Filing (Under Seal) of Corrected Contract (August 10, 2009) 
(Errata).
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IV. Errata

    The Errata includes: (a) A revised contract to clarify the term 
intended by the parties is 3 years, instead of 1 year; (b) a revised 
second page, along with the other original pages, again filed under 
seal, and a redacted copy; and (c) a revised page that corrects a 
typographic error on the Request at Attachment C, so as to change the 
reference to Priority Mail Contract 16, instead of 14. Errata at 1. The 
Postal Service further replies that it complies with the Governors' 
Decision requiring recitation of any postage payment method required; 
pointing out that since ``a particular postage payment is not required, 
* * * none is stated.'' Id. at 2.

V. Commission Analysis

    The Commission has reviewed the Request, the contract, the 
financial analysis provided under seal that accompanies it, the 
comments filed by the Public Representative, and the Errata.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning Priority Mail Contract 16 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 Priority 
Mail Contract 16 as a product to the Market Dominant Product List or 
the Competitive Product List, the Commission must consider whether:

    [T]he 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).
    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 C, para. (d). 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. It 
further states that the contract partner supports the addition of the 
contract to the Competitive Product List to effectuate the negotiated 
contractual terms. Id. at para. (g). Finally, the Postal Service states 
that the market for expedited delivery services is highly competitive 
and requires a substantial infrastructure to support a national 
network. It indicates that large carriers serve this market. 
Accordingly, the Postal Service states that it is unaware of any small 
business concerns that could offer comparable service for this 
customer. Id. at para. (h).
    No commenter opposes the proposed classification of Priority Mail 
Contract 16 as competitive. Having considered the statutory 
requirements and the support offered by the Postal Service, the 
Commission finds that Priority Mail Contract 16 is appropriately 
classified as a competitive product and should be added to the 
Competitive Product List.
    Cost considerations. The Postal Service presents a financial 
analysis showing that Priority Mail Contract 16 results in cost savings 
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.
    Based on the data submitted, the Commission finds that Priority 
Mail Contract 16 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 
proposed Priority Mail Contract 16 indicates that it comports with the 
provisions applicable to rates for competitive products.
    Agreement duration. The Errata reconciles the apparent temporal 
discrepancy between the one-year term and annual adjustments, 
indicating that the parties had agreed to a three-year term. Regardless 
of the number of years, the contract still remains terminable on thirty 
day's written notice by either party. Id. Notwithstanding that the 
revised pages of the contract did not appear to be jointly executed, 
the Commission is satisfied that the parties intend the contract's 
duration to be 3 years, not one as originally filed. The Errata also 
addresses the Public Representative's concerns related to the 
subsidiary issues raised that pertain to the contract's duration.
    Other considerations. The Postal Service shall promptly notify the 
Commission of the scheduled termination date of the agreement. If the 
agreement terminates earlier than anticipated, the Postal Service shall 
inform the Commission prior to the new termination date. The Commission 
will then remove the product from the Competitive Product List.
    Furthermore, the Public Representative's assessment of Order No. 
247 is well-taken. Public Representative Comments at 3-4. Subsequently, 
the Commission issued Order No. 266, which clarified the policy 
regarding self-contained docket filings. See Docket No. CP2009-47, 
Order Concerning Filing a Functionally Equivalent Global Plus 1 
Contract Negotiated Service Agreement, July 31, 2009, at 6-7 (Order No. 
266). In recent filings, the Postal Service has adhered to this policy.
    In conclusion, the Commission approves Priority Mail Contract 16 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.

[[Page 46018]]

VI. Ordering Paragraphs

    It is ordered:
    1. Priority Mail Contract 16 (MC2009-36 and CP2009-55) is added to 
the Competitive Product List as a new product under Negotiated Service 
Agreements, Domestic.
    2. The Postal Service shall notify the Commission of the scheduled 
termination date and update the Commission if termination occurs prior 
to that date, 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.

    Issued: August 17, 2009.

    By the Commission.
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 
Schedule 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
    Inbound International
    Canada Post--United States Postal Service Contractual Bilateral 
Agreement for Inbound Market Dominant Services
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]
    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]

[[Page 46019]]

    Bank of America Corporation Negotiated Service Agreement
    The Bradford Group Negotiated Service Agreement

Part B--Competitive Products

2000 Competitive Product List
Express Mail
    Express Mail
    Outbound International Expedited Services
    Inbound International Expedited Services
    Inbound International Expedited Services 1 (CP2008-7)
    Inbound International Expedited Services 2 (MC2009-10 and 
CP2009-12)
Priority Mail
    Priority Mail
    Outbound Priority Mail International
    Inbound Air Parcel Post
    Royal Mail Group Inbound Air Parcel Post Agreement
Parcel Select
Parcel Return Service
International
    International Priority Airlift (PA)
    International Surface Airlift (SAL)
    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 Contract 3 (MC2009-15 and CP2009-21)
    Express Mail Contract 4 (MC2009-34 and CP2009-45)
    Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7)
    Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009-
14)
    Express Mail & Priority Mail Contract 3 (MC2009-13 and CP2009-
17)
    Express Mail & Priority Mail Contract 4 (MC2009-17 and CP2009-
24)
    Express Mail & Priority Mail Contract 5 (MC2009-18 and CP2009-
25)
    Express Mail & Priority Mail Contract 6 (MC2009-31 and CP2009-
42)
    Express Mail & Priority Mail Contract 7 (MC2009-32 and CP2009-
43)
    Express Mail & Priority Mail Contract 8 (MC2009-33 and CP2009-
44)
    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)
    Priority Mail Contract 5 (MC2009-21 and CP2009-26)
    Priority Mail Contract 6 (MC2009-25 and CP2009-30)
    Priority Mail Contract 7 (MC2009-25 and CP2009-31)
    Priority Mail Contract 8 (MC2009-25 and CP2009-32)
    Priority Mail Contract 9 (MC2009-25 and CP2009-33)
    Priority Mail Contract 10 (MC2009-25 and CP2009-34)
    Priority Mail Contract 11 (MC2009-27 and CP2009-37)
    Priority Mail Contract 12 (MC2009-28 and CP2009-38)
    Priority Mail Contract 13 (MC2009-29 and CP2009-39)
    Priority Mail Contract 14 (MC2009-30 and CP2009-40)
    Priority Mail Contract 15 (MC2009-35 and CP2009-54)
    Priority Mail Contract 16 (MC2009-36 and CP2009-55)
    Priority Mail Contract 17 (MC2009-37 and CP2009-56)
    Outbound International
    Direct Entry Parcels Contracts
    Direct Entry Parcels 1 (MC2009-26 and CP2009-36)
    Global Direct Contracts (MC2009-9, CP2009-10, and CP2009-11)
    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 (CP2008-8, CP2008-46 and CP2009-47)
    Global Plus 2 (MC2008-7, CP2008-48 and CP2008-49)
    Inbound International
    Inbound Direct Entry Contracts with Foreign Postal 
Administrations (MC2008-6, CP2008-14 and CP2008-15)
    International Business Reply Service Competitive Contract 1 
(MC2009-14 and CP2009-20)
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. E9-21438 Filed 9-4-09; 8:45 am]
BILLNG CODE 7710-FW-P