[Federal Register Volume 74, Number 189 (Thursday, October 1, 2009)]
[Rules and Regulations]
[Pages 50708-50712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-23687]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2009-40 and CP2009-61; Order No. 295]


New Postal Product

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding Parcel Select & Parcel Return Service 
Contract 2 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 October 1, 2009 and is applicable beginning September 
4, 2009.

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

SUPPLEMENTARY INFORMATION:
    Regulatory History, 74 FR 44881 (August 31, 2009).

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

I. Introduction

    The Postal Service seeks to add a new product identified as Parcel 
Select & Parcel Return Service Contract 2 to the Competitive Product 
List. For the reasons discussed below, the Commission approves the 
Request.

II. Background

    On August 21, 2009, the Postal Service filed a formal request 
pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30, et seq., to add Parcel 
Select & Parcel Return Service Contract 2 to the Competitive Product 
List.\1\ The Postal Service asserts that the Parcel Select & Parcel 
Return Service Contract 2 product is a competitive product ``not of 
general applicability'' within the meaning of 39 U.S.C. 3632(b)(3). Id. 
at 1. The Request has been assigned Docket No. MC2009-40.
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    \1\ Request of the United States Postal Service to Add Parcel 
Select & Parcel Return Service Contract 2 to Competitive Product 
List and Notice of Establishment of Rates and Class Not of General 
Applicability, August 21, 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. Id. The contract has been assigned Docket No. CP2009-61.

[[Page 50709]]

    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 Parcel 
Select & Parcel Return Service Contract 2 and certification of the 
Governors' vote; \2\ (2) a redacted version of the contract which, 
among other things, provides (a) that the effective date of the 
contract is the day after the date on which the Commission issues all 
regulatory approvals, and (b) that the contract will expire on May 31, 
2011, unless it is extended for an additional year; \3\ (3) requested 
changes in the Mail Classification Schedule product list; \4\ (4) a 
Statement of Supporting Justification as required by 39 CFR 3020.32; 
\5\ (5) a certification of compliance with 39 U.S.C. 3633(a); \6\ and 
(7) an application for non-public treatment of materials.\7\
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    \2\ Attachment A to the Request. The analysis that accompanies 
the Governors' Decision notes, among other things, that the contract 
will result in new and more profitable volume for the Postal 
Service.
    \3\ Attachment B to the Request.
    \4\ Attachment C to the Request.
    \5\ Attachment D to the Request.
    \6\ Attachment E to the Request.
    \7\ Attachment F to the Request.
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    In the Statement of Supporting Justification, Daniel J. Barrett, 
Manager, Sales Strategy and Customer Support, 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 increase contribution toward the requisite 5.5 
percent of the Postal Service's total institutional costs. Id., 
Attachment D. Thus, Mr. Barrett contends there will be no issue of 
subsidization of competitive products by market dominant products as a 
result of this contract. Id. 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 E.
    The Postal Service filed much of the supporting materials, 
including the unredacted Governors' Decision, the unredacted contract, 
and supporting financial analysis,\8\ under seal. In its application 
for non-public treatment of materials, 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 
confidential. Id., Attachment F.
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    \8\ The Commission appreciates the Postal Service's efforts to 
ensure its financial analysis is complete and thorough. The 
financial analysis filed in this docket should serve as a model for 
future requests.
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    In Order No. 288, the Commission gave notice of the two dockets, 
appointed a public representative, requested supplemental information, 
and provided the public with an opportunity to comment.\9\ On August 
27, 2009, the Postal Service filed a response to the Commission's 
request for supplemental information.\10\
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    \9\ PRC Order No. 288, Notice and Order Concerning Parcel Select 
& Parcel Return Service Contract 2 Negotiated Service Agreement, 
August 25, 2009 (Order No. 288).
    \10\ Response of the United States Postal Service to Request for 
Supplemental Information in Order No. 288, August 27, 2009.
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III. Comments

    Comments were filed by the Public Representative.\11\ No filings 
were submitted by other interested parties. The Public Representative 
states that the Postal Service's filing and the Parcel Select & Parcel 
Return Service Contract 2 agreement comply with applicable Commission 
rules of practice. Id. at 3. He also addresses the relationship between 
the data systems used to calculate costs in this case and the Postal 
Service's proposal to change that established methodology as ``proposal 
fourteen'' in Commission Docket No. RM2009-10. Specifically, he notes 
that ``the Commission's determination on the costing methodology might 
impact the data supplied for the instant contract.'' Id. at 4. However, 
the Public Representative ``concede[s] that pricing for this PS&PRS NSA 
appears to fully comply with the three-pronged requirements of 39 
U.S.C. 3633(a), and with the other pricing, cost coverage, and 
contribution provisions of title 39.'' Id.
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    \11\ Public Representative Comments in Response to United States 
Postal Service Request to Add Parcel Select & Parcel Return Service 
Contract 2 to Competitive Product List and Notice of Establishment 
of Rates and Class Not of General Applicability, September 2, 2009 
(Public Representative Comments).
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    The Public Representative believes that the Postal Service has 
provided adequate justification for maintaining confidentiality in this 
case. Id. at 2. He also believes that because the contract is designed 
to help acquire new volume, the contract appears to benefit the general 
public. Id. at 5.

IV. Commission Analysis

    The Commission has reviewed the Request, the contract, the 
financial analysis provided under seal, the supplemental information 
filed by the Postal Service, and the comments filed by the Public 
Representative.
    Statutory requirements. The Commission's statutory responsibilities 
in this instance entail assigning Parcel Select & Parcel Return Service 
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 Parcel 
Select & Parcel Return Service Contract 2 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 D, at 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 ground shipping 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 ground shipping 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 Parcel Select & 
Parcel Return Service Contract 2 as

[[Page 50710]]

competitive. Having considered the statutory requirements and the 
support offered by the Postal Service, the Commission finds that Parcel 
Select & Parcel Return Service Contract 2 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 Parcel Select & Parcel Return Service Contract 2 
ensures 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 Parcel 
Select & Parcel Return Service 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 proposed Parcel Select & Parcel Return Service 
Contract 2 indicates that it comports with the provisions applicable to 
rates for competitive products.
    In his comments, the Public Representative raises the issue of the 
pending Parcel Select and Parcel Return Service methodological changes. 
See Docket No. RM2009-10, Proposal Fourteen. In the instant filing, the 
Postal Service correctly uses the current approved methodology 
concerning Parcel Select and Parcel Return Service Transportation and 
Mail Processing costs. Nevertheless, the Commission believes the 
changes presented in Proposal Fourteen, if approved, would not harm the 
potential profitability of this contract.
    Application for non-public treatment. The Postal Service believes 
that the 10-year period of non-public treatment, as specified in 39 
U.S.C. 3007.30, is insufficient to protect customer identifying 
information. Notice, Attachment F, at 6. It asserts that such 
information should be protected permanently and requests that the 
Commission enter an order extending that duration indefinitely.
    The request is premature. Should the need for non-public treatment 
remain due to ongoing business relationships, the Postal Service may 
submit a motion to the Commission to extend the duration at the 
appropriate time.
    Other considerations. The Postal Service shall notify the 
Commission if the contract is extended for an additional year. 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.
    In conclusion, the Commission approves Parcel Select & Parcel 
Return Service 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.

V. Ordering Paragraphs

    It is ordered:
    1. Parcel Select & Parcel Return Service Contract 2 (MC2009-40 and 
CP2009-61) is added to the Competitive Product List as a new product 
under Negotiated Service Agreements, Domestic.
    2. The Postal Service shall notify the Commission if the contract 
is extended for an additional year 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.

    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]

[[Page 50711]]

    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]
    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 (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 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 Select & Parcel Return Service Contract 2 (MC2009-40 and 
CP2009-61)
    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 Expedited Package Services 2 (CP2009-50)
    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

[[Page 50712]]

    [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. E9-23687 Filed 9-30-09; 8:45 am]
BILLING CODE 7710-FW-P