[Federal Register Volume 76, Number 223 (Friday, November 18, 2011)]
[Proposed Rules]
[Pages 71498-71500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29813]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2012-1; Order No. 963]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is establishing a docket in response to a 
Postal Service request for an informal rulemaking on proposed changes 
in certain analytical methods used in periodic reporting. The proposed 
changes affect Foreign Origin mail; Undeliverable As Addressed Parcel 
Select pieces; Express Mail; Standard Mail Presort Letters; Media Mail/
Library Mail; Special Services; and Return Receipt. Establishing this 
docket will allow the Commission to consider the Postal Service's 
proposal and comments from the public.

DATES: Comments are due: December 5, 2011.

ADDRESSES: Submit comments electronically by accessing the ``Filing 
Online'' link in the banner at the top of the Commission's Web site 
(http://www.prc.gov) or by directly accessing the Commission's Filing 
Online system at https://www.prc.gov/prc-pages/filing-online/login.aspx. Commenters who cannot submit their views electronically 
should contact the person identified in the FOR FURTHER INFORMATION 
CONTACT section as the source for case-related information for advice 
on alternatives to electronic filing.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
at (202) 789-6820 (case-related information) or [email protected] 
(electronic filing assistance).

SUPPLEMENTARY INFORMATION: On November 1, 2011, the Postal Service 
filed a petition pursuant to 39 CFR 3050.11 requesting that the 
Commission initiate an informal rulemaking proceeding to consider 
changes in the analytical methods approved for use in periodic 
reporting.\1\ These changes are contained in Proposals Nine through 
Fifteen, which are described below.
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    \1\ Petition of the United States Postal Service Requesting 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposals Nine-Fifteen), November 1, 2011 
(Petition).
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    Proposal Nine: proposed change in method for Inbound Revenue, 
Pieces, and Weight (RPW) reporting. The purpose of Proposal Nine is to 
improve the method for distributing cost segment 14 (domestic 
transportation) costs of Foreign Origin mail to countries and country 
groups in the International Cost and Revenue Analysis (ICRA). Id. at 3. 
Specifically, Proposal Nine would substitute a weight-based method for 
the current piece-based method. Id.
    The Postal Service explains that the ICRA began reporting inbound 
mail statistics separately by country or country group in FY 2008. Id. 
It contends that at that time, the method for distributing domestic 
transportation costs for inbound mail should have changed from the 
piece-based method to a weight-based method to align with the weight-
based method for distributing domestic transportation costs for U.S. 
Origin international mail. Id.
    The Postal Service concludes that Proposal Nine would be an 
improvement over the piece-based method because of the requirement that 
inbound mail statistics be reported by country or country group, and 
because weight per piece varies significantly across countries and 
country groups. Id. at 4.
    The Postal Service illustrates the impact that Proposal Nine would 
have had in FY 2010 in the Excel workbook ``Proposal9.xls,'' filed 
under seal. Id. It states that the results for products are not 
affected and that the impact is most significant for inbound mail from 
Canada. Id.
    Proposal Ten: proposed change in the In-Office Cost System (IOCS) 
for Parcel Select Pieces that are Undeliverable As Addressed (UAA). The 
purpose of Proposal Ten is to change the way that the costs of UAA 
Parcel Select pieces are attributed, which would improve the accuracy 
of Parcel Select attributed costs. Id. at 6. The Postal Service 
proposes that IOCS designate costs for UAA Parcel Select to Parcel 
Select. Id.
    The Postal Service explains that it charged Parcel Post prices for 
UAA Parcel Select pieces for most of FY 2011 and that the IOCS tallies 
relating to these pieces are currently designated as Parcel Post. Id. 
Beginning on June 24, 2011, the Postal Service began charging UAA 
Parcel Select pieces the Parcel Select non-presort price plus an 
additional $3.00 fee. Id. The revenue for these pieces is ascribed to 
Parcel Select. Id.
    Thus, the Postal Service concludes that UAA Parcel Select pieces 
should also be assigned to Parcel Select in IOCS. Id. It illustrates 
the impact that Proposal Ten would have on FY 2010 IOCS dollar-weighted 
tallies in a table titled ``Changes in IOCS dollar-weight tallies due 
to change in treatment of UAA parcel select'' of its Petition. Id.
    Proposal Eleven: proposed change for delivery cost savings for 
Negotiated Service Agreement (NSA) Express Mail.

[[Page 71499]]

The purpose of Proposal Eleven is to change the method for calculating 
the delivery cost savings of Express Mail from NSAs. Id. at 7.
    The Postal Service explains that it has begun to implement changes 
regarding signatures for Express Mail and that new data on delivered 
Express Mail are now available from the Carrier Cost Systems (CCS). Id. 
It states that these earlier developments led to Proposal Eight: New 
Treatment of Express Mail as Accountable Mail on City Carrier Letter 
Routes, which the Commission recently approved in Order No. 920.\2\ The 
Postal Service contends that the approval of Proposal Eight requires 
corresponding updates to the method for calculating delivery cost 
savings for Express Mail from NSAs. Petition at 7. It asserts that 
Proposal Eleven would also provide an opportunity to replace a proxy 
with actual data from a data system. Id.
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    \2\ Docket No. RM2011-12, Order Concerning Analytical Principles 
for Periodic Reporting (Proposals Four through Eight), October 21, 
2011 (Order No. 920).
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    The Postal Service proposes three major revisions to the Excel 
workbook ``Express Mail Delivery Savings Update FY 2010.xls,'' which it 
filed as a library reference in the FY 2010 Annual Compliance Report 
(ACR).\3\ Proposal Eleven would make the costing method consistent with 
Proposal Eight, replace a former proxy with data specific to Express 
Mail now available from the CCS data system, and remove the assumption 
that carriers seek to obtain signatures on 10 percent of pieces that 
have signature waivers. Petition at 7-8.
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    \3\ Id.; Docket No. ACR2010, USPS-FY10-NP27, 2010 Competitive 
NSA & Nonpostals Materials, December 29, 2010.
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    The Postal Service also revised the Excel workbook 
``SupportExpress--FY10.xls'' to incorporate the cost savings now 
calculated for deviation parcels in addition to the former flats and 
small parcels. Id. at 8. The Postal Service filed both of the revised 
workbooks under seal. Id. The Postal Service illustrates the impact of 
Proposal Eleven in the Excel workbook ``Proposal11Impact.xls,'' filed 
under seal. Id.
    Proposal Twelve: proposed modification of the Standard Mail Presort 
Letters mail processing cost model. The purpose of Proposal Twelve is 
to modify the Standard Mail presort letters mail processing cost model 
consistent with the Commission's directive in the FY 2010 Annual 
Compliance Determination (ACD) to disaggregate the cost estimates for 
nonautomation machinable mixed automated area distribution center 
(MAADC) and automated area distribution center (AADC) presort Standard 
Mail letters. Id. at 9.
    The Postal Service explains that the two Standard Mail 
nonautomation machinable presort letters price categories currently 
listed in the price schedule are MAADC presort letters and AADC presort 
letters. Id. However, the mail processing cost model for Standard Mail 
presort letters has historically included only an aggregate cost 
estimate for these two price categories. Id. Because of this aggregate 
cost estimate, the Commission was unable to evaluate the presort 
discount for nonautomation AADC machinable letters in both the FY 2009 
and FY 2010 ACDs.\4\ In the FY 2010 ACD, the Commission directed the 
Postal Service to ``develop the necessary cost data to permit a 
meaningful analysis of this discount.'' Id.
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    \4\ Docket No. ACR2010, Annual Compliance Determination Report 
Fiscal Year 2010, March 29, 2011, at 110.
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    The Postal Service states that the Standard Mail presort letters 
mail processing cost model contains one mail flow spreadsheet and one 
cost spreadsheet that are supposed to represent the aggregate mail flow 
and costs for the two nonautomation machinable presort letters price 
categories combined. Petition at 9-10. It explains that the mail flow 
spreadsheet lists the outgoing input sub system (ISS) operation as the 
first operation through which both MAADC presort and AADC presort 
letters are processed. Id. at 10. It asserts that while this is true 
for MAADC letters, the first operation for AADC presort letters should 
be the incoming ISS operation. Id.
    The Postal Service's proposed revisions to the Standard Mail 
presort letters mail processing cost model are contained in the Excel 
workbook ``Proposal12.xls.'' Id. at 11. Specific changes to the cost 
model include updating tab names and titles for spreadsheets currently 
in the model, adding mail flow and cost spreadsheets for nonautomation 
machinable AADC presort letters, and removing the Management Operating 
Data System (MODS) spreadsheet from the model. Id. at 10-11.
    The Postal Service illustrates the impact of Proposal Twelve in 
Table 1 of the Petition. Id. at 12. The table compares the instant 
modification to the FY 2010 Standard Mail presort letter model and the 
FY 2010 Standard Mail presort letter model that incorporates the 
Proposal Nine modifications made by the Commission in Order No. 741.\5\
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    \5\ Docket No. RM2011-5, Order Concerning Analytical Principles 
for Periodic Reporting (Proposal Nine), June 3, 2011 (Order No. 
741).
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    Proposal Thirteen: proposed development of a new mail processing 
cost model for Media Mail/Library Mail. The purpose of Proposal 
Thirteen is to develop a new mail processing cost model for Media Mail 
and Library Mail. Petition at 13. The Postal Service explains that in 
Docket Nos. RM2010-12, RM2011-5, and RM2011-6, it presented new or 
revised mail processing cost models for Standard Mail Parcel/Non-Flat 
Machinables (Proposal Seven), Media Mail--Library Mail (Proposal 
Twelve), and Parcel Select/Parcel Return Service (Proposal Thirteen), 
respectively. Id. at 13-14. The Commission conditionally approved each 
proposal and required the Postal Service to perform the analysis using 
the Commission's cost pool classification methodology from Docket No. 
R2006-1. Id.
    The Postal Service states that it has developed a new mail 
processing cost model for Media Mail--Library Mail that relies on the 
format and input data from Proposals Seven and Thirteen and 
incorporates methodological changes approved in Proposal Twelve. Id. at 
14. These methodological changes include the use of the Commission's 
cost pool classification methodology in Docket No. R2006-1. Id. Details 
about the new mail processing cost model for Media Mail--Library Mail 
are described in the Petition and contained in Excel workbook 
``Proposal13.xls.'' Id. at 14-18.
    The Postal Services illustrates the impact of Proposal Thirteen on 
the cost estimates in a table entitled ``Mail Processing Unit Cost 
Impact'' of the Petition. Id. at 18.
    Proposal Fourteen: proposed changes in Special Services cost 
models. The purpose of Proposal Fourteen is to resolve a number of 
inconsistent cost treatments of window-related activities among the 
Special Services cost models, which were filed as library references in 
the FY 2010 ACR. Id. at 19.
    The Postal Service explains that the cost models document the unit 
cost estimates for certain domestic Special Services and supplement the 
cost information provided in library reference USPS-FY10-1.\6\ Some of 
the costing elements commonly incorporated into the cost models now 
were not available or not common practice when the models were first 
created several decades ago. Petition at 19. These costing elements 
include the Waiting Time Adjustment Factor, the Miscellaneous Factor 
for window-

[[Page 71500]]

related activities, and the Miscellaneous Factor for mail processing-
related activities. Id.
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    \6\ Id.; Docket No. ACR2010, USPS-FY10-1, FY 2010 Public Cost 
and Revenue Analysis (PCRA) Report, December 29, 2010.
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    To be more consistent with the current Cost and Revenue Analysis 
(CRA) methodology, Proposal Fourteen seeks to update several Special 
Services cost models by adding the appropriate Waiting Time Adjustment 
Factor and Miscellaneous Factors. Id. These cost models include Caller 
Service, Certificate of Mailing, Correction of Mailing List, Signature 
Confirmation, Periodicals Applications, P.O. Box Key and Lock, 
Restricted Delivery, and Zip Coding of Mailing List. Id. at 19-20. The 
Postal Service submitted updated cost models in files 
``Proposal14NonPublic.xls,'' filed under seal, and 
``Proposal14Public.zip.'' Id. at 20.
    The Postal Service illustrates the impact that Proposal Fourteen 
would have had on the unit costs reported in the FY 2010 ACR in a table 
on page 20 of the Petition. It includes an unredacted version of the 
table in Excel workbook ``Proposal14Impact.xls,'' filed under seal. Id.
    Proposal Fifteen: proposed changes in cost models related to Return 
Receipt service. The purpose of Proposal Fifteen is to correct and 
improve the cost models related to Return Receipt service, which are 
filed as a library reference in the FY 2010 ACR.\7\ The Postal Service 
states that several Return Receipt options are available to customers: 
The traditional Return Receipt (PS Form 3811), electronic Return 
Receipt (eRR), Return Receipt for Merchandise, and Return Receipt after 
Mailing. Petition at 21. It explains that the original cost study and 
models for Return Receipt service were developed in 1976 and updated in 
Docket Nos. MC96-3, R2000-1, and R2001-1. Id.
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    \7\ Id. at 21; Docket No. ACR2010, USPS-FY10-28, FY 2010 Special 
Cost Studies Workpapers--Special Services (Public Portion), December 
29, 2010.
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    The Postal Service notes that the studies are being updated again 
because some of the steps in the model are no longer performed, and 
some inadvertent errors appear in the current models. Id. It asserts 
that Proposal Fifteen will better align the Return Receipt service cost 
models with current operations and correct errors in those models. Id.
    Specifically, to be consistent with current CRA methodology, the 
Postal Service proposes to add Waiting Time and Miscellaneous (window 
overhead) factors to the window activities cost estimation for Return 
Receipt (PS Form 3811), eRR, and Return Receipt after Mailing.\8\ It 
seeks to add an overhead factor to the delivery activities for Return 
Receipt (PS Form 3811) and remove printing costs from the eRR model 
that were erroneously included in the original model. Id. at 23.
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    \8\ Id. at 23-24. Appendix A describes the details of a cost 
study conducted to identify and measure the costs associated with 
Return Receipt service.
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    Proposal Fifteen would also incorporate the Return Receipt (PS Form 
3811) material costs into the model for Return Receipt for Merchandise. 
Id. The Postal Service explains that these costs were excluded from the 
original model. Id. It asserts that the overall costs of Return Receipt 
for Merchandise decrease in the revised model because the time to 
collect the signature is lower than that in the original model. Id. The 
Postal Service illustrates the impact that Proposal Fifteen would have 
had on the unit costs reported in the FY 2010 ACR in a table on page 24 
of the Petition.
    The Petition and spreadsheets illustrating Proposals Nine through 
Fifteen are available for review on the Commission's Web site, http://www.prc.gov. The Postal Service filed certain materials under seal.\9\
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    \9\ Notice of the United States Postal Service of Filing of 
USPS-RM2012-1/NP1, November 1, 2011; USPS-RM2012-1/NP1, Nonpublic 
Materials Supporting Proposals Nine Through Fifteen (Non-Public), 
November 1, 2011.
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    Pursuant to 39 U.S.C. 505, Lawrence Fenster is designated as the 
Public Representative to represent the interests of the general public 
in this proceeding. Comments are due no later than December 5, 2011.
    It is ordered:
    1. The Petition of the United States Postal Service Requesting 
Initiation of a Proceeding to Consider Proposed Changes in Analytical 
Principles (Proposals Nine-Fifteen), filed November 1, 2011, is 
granted.
    2. The Commission establishes Docket No. RM2012-1 to consider the 
matters raised by the Postal Service's Petition.
    3. Interested persons may submit comments on Proposals Nine through 
Fifteen no later than December 5, 2011.
    4. The Commission will determine the need for reply comments after 
review of the initial comments.
    5. Lawrence Fenster is appointed to serve as the Public 
Representative to represent the interests of the general public in this 
proceeding.
    6. The Secretary shall arrange for publication of this Notice in 
the Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2011-29813 Filed 11-17-11; 8:45 am]
BILLING CODE 7710-FW-P