[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Rules and Regulations]
[Pages 12390-12394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04784]


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POSTAL SERVICE

39 CFR Part 121


Service Standards for Destination Sectional Center Facility Rate 
Standard Mail

AGENCY: Postal ServiceTM.

ACTION: Final rule.

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SUMMARY: The Postal Service is revising the service standards for 
Standard Mail that is eligible for Destination Sectional Center 
Facility (DSCF) rates. These changes will allow a more balanced 
distribution of DSCF Standard Mail across delivery days.

DATES: Effective Date: April 10, 2014.

FOR FURTHER INFORMATION CONTACT: Anthony Frost, Industry Engagement and 
Outreach, at 202-268-8093; or Prathmesh Shah, Processing and 
Distribution Center Operations, at 404-792-3195.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Comments
III. Statutory Considerations
IV. Explanation of Final Rules

I. Introduction

    On January 3, 2014, the Postal Service published a proposed rule 
(the Proposed Rulemaking) in the Federal Register to solicit public 
comment on a proposal to revise service standards for Standard Mail 
eligible for DSCF rates.\1\ The comment period for the Proposed 
Rulemaking closed on February 3, 2014. The Postal Service received 13 
written comments in response to the Proposed Rulemaking.
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    \1\ Service Standards for Destination Sectional Center Facility 
Rate Standard Mail, 79 FR 376 (Jan. 3, 2014). Concurrent with this 
rulemaking, on December 27, 2013, the Postal Service submitted a 
request to the Postal Regulatory Commission (PRC) for an advisory 
opinion on the service changes associated with the proposed change 
in service standards for Standard Mail eligible for DSCF rates, in 
accordance with 39 U.S.C. 3661(b). PRC Docket No. N2014-1, United 
States Postal Service Request for an Advisory Opinion on Changes in 
the Nature of Postal Services (Dec. 27, 2013). Documents pertaining 
to the Request are available at the PRC Web site, http://www.prc.gov.
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    After considering comments received in response to the Proposed 
Rulemaking, the Postal Service has determined to issue the proposed 
rule as a final rule. As described in the Proposed Rulemaking, the 
final rule seeks to address the imbalance in the proportion of volume 
with a Monday delivery expectation under current service standards, and 
the resulting burden on resources associated with Monday delivery 
operations, by adjusting the service standards applicable to DSCF 
Standard Mail entered on designated days of the week. The Postal 
Service believes that the initiative will help improve the efficiency 
of its operations, and that it complies with all applicable statutory 
requirements. This document explains the new rule.

II. Comments

    In the Proposed Rulemaking, the Postal Service sought public 
comment on proposed revisions to the service standards for Standard 
Mail that is eligible for DSCF rates. The revisions would change the 
service standard (a) from three days to four days for Standard Mail 
pieces that are eligible for a DSCF rate and that are properly accepted 
before the day zero Critical Entry Time on a Friday or Saturday, and 
(b) from four days to five days for DSCF Standard Mail properly 
accepted at the SCF in San Juan, Puerto Rico and destined to the United 
States Virgin Islands, and properly accepted DSCF Standard Mail 
destined to American Samoa. The DSCF Standard Mail service standard 
change is aimed at leveling out the volume in the network, and reducing 
the burdens and costs associated with the Monday delivery of a 
disproportionate amount of volume.

A. Overview

    The Postal Service received 13 written comments in response to the 
Proposed Rulemaking. These responses came from a variety of sources, 
including businesses, publishers, mailer trade associations, and 
others. Most of the written comments received in response to the 
Proposed Rulemaking opposed the service standard change proposed for 
Standard Mail eligible for DSCF rates. Some commenters questioned 
various aspects of the initiative but took no position on the proposed 
rule.
    The commenters that opposed the DSCF Standard Mail service standard 
change focused on the potential negative impact of the service standard 
change on service, and perceived flaws in the process of developing the 
service standard change. With respect to the potential impact on 
service, commenters focused primarily on the potential for the proposed 
rule to reduce the

[[Page 12391]]

predictability and quality of delivery, increase costs for both mailers 
and the Postal Service, and unreasonably burden many customers. In 
addressing procedural issues, commenters expressed dissatisfaction with 
the process leading up to the Proposed Rulemaking, including the live 
testing, and identified multiple issues that, in their opinion, had not 
been considered adequately.
    A small minority of written comments supported aspects of the 
Proposed Rulemaking, including the Postal Service's use of intelligent 
mail data to identify cost savings opportunities and its industry 
outreach to explain the concept.

B. Responses to Comments

    This section presents the commenters' concerns by category, along 
with the Postal Service's responses to these concerns.
1. Effect on Volume
    Some commenters stated that the DSCF Standard Mail service standard 
change might lead to accelerated volume declines. In response to these 
commenters, the Postal Service notes that the initiative is limited to 
Standard Mail, and will not impact other classes of mail. Some of the 
commenters asserted that the volume declines would result from the 
combination of Postal Service initiatives, including rate increases 
resulting from the exigency filing and other rate changes, and facility 
closings that occurred independent of the DSCF Standard Mail service 
standard change. However, no commenter offered any empirical basis for 
the belief that the service change, by itself or in conjunction with 
recent price increases, could precipitate an accelerated decline in 
DSCF Standard Mail volumes. It is worth noting that no evidence in 
support of such belief was presented to the Postal Regulatory 
Commission during its review of the proposed service change in Docket 
No. N2014-1.
    In contrast to concerns about the potential negative impact on 
volume that could result from the DSCF Standard Mail service standard 
change, at least one commenter explained that its members preferred 
different delivery days for their mail and their competitors' mail, 
suggesting that load leveling could make DSCF Standard Mail more 
valuable for some mailers. The Postal Service shares the view that this 
change, with its consequent effect on leveling volume at the beginning 
of the week, could create the benefit of reducing the proportion of 
Standard Mail delivered on the heaviest delivery day of the week, and 
decreasing the likelihood of an individual piece being overlooked by 
the recipient because it arrived as part of a disproportionately heavy 
batch of mail on a given day.
2. Effect on Mailers
    Some commenters criticize the service change proposal as imposing 
on affected mailers an unfair share of the burden of cost containment 
necessary to improve postal financial stability, and question whether 
the Postal Service understands the mailing industry's desire for 
predictability, reliability, transparency, and competitive rates. The 
potential sources of the additional burden identified by commenters 
include increased logistical costs necessary to meet in-home dates and 
accommodate customer delivery requirements that will not change in 
response to the DSCF Standard Mail service standard change, and reduced 
opportunities for discounts achieved through comingling and 
copalletization. The Postal Service plans to work with the mailing 
industry in helping mailers adapt to the DSCF Standard Mail service 
standard change and continue their effective use of the mail, through 
the IMb Planning Tool and other channels offered by the Postal Service. 
It should be noted that during the months of April, May, and June in 
2014, the Postal Service will offer a Premium Advertising Mail 
promotion, which offers an upfront discount on First-Class Mail presort 
postage on mailpieces composed entirely of marketing or advertising 
content. But the significance of any burdens resulting from the DSCF 
Standard Mail service standard change is unclear because despite the 
concerns raised in response to the Proposed Rulemaking, the Postal 
Service has observed no change in mailer behavior and experienced no 
increase in customer complaints in locations affected by testing 
associated with the DSCF Standard Mail service standard change.
    Some mailers expressed concerns about the difficulty in obtaining 
Facility Access and Shipment Tracking (FAST) appointments at favorable 
times, and the potential for the new rule to condense mailers' internal 
operating schedules. The Postal Service acknowledges that some mailers 
may need to adjust their mail entry patterns. Accordingly, in response 
to these concerns, the Postal Service will work with mailers to provide 
FAST appointments that better suit their needs. At the same time, to 
enhance the availability of FAST appointments, mailers must take 
corrective action to address the fact that, for more than half of the 
time slots reserved via the FAST system, no one shows up to present 
mail for acceptance. The scheduling of excessive, unused appointments 
causes the FAST system to report as unavailable mail acceptance 
opportunities at facilities that actually are available.
    One commenter requested that the service standard change preserve 
and incorporate postal policy regarding in-home delivery dates 
requested for non-machinable, non-barcoded Standard Mail entered as 
Saturation Mail. Under current policy, local postal managers are 
expected to respond to properly submitted in-home delivery date 
requests by exploring whether, in the normal course of operations, 
opportunities exist to process and deliver mail in a manner that is 
consistent with applicable service standards and requested in-home 
dates. The DSCF Standard Mail service change is not intended to affect 
the current procedures through which mailers may request delivery on or 
by a specific date within the applicable service standard. However, 
such requests do not establish new service standards. Accordingly, 
there is no basis for referencing them in the regulations published at 
39 CFR part 121.
3. Alternatives
    Commenters offered suggestions for alternative operational changes. 
For example, some commenters cited their utilization of a flexible work 
force to meet customer needs as a model available to the Postal Service 
that would enable the preservation of current service standards. The 
Postal Service has increased its use of a flexible workforce, but this 
increased flexibility alone will not resolve the issues targeted by the 
DSCF Standard Mail service standard change. The continued delivery of 
the disproportionate amount of Monday delivery volume under current 
service standards would require the acquisition of a significant number 
of additional vehicles and deployment of employees who would be 
necessary only for Monday delivery operations. Although the Postal 
Service continues its pursuit of even more flexibility in its 
workforce, it is limited by restrictions in its current collective 
bargaining agreements that do not permit implementation of various 
commenter suggestions for workforce flexibility as alternatives to the 
DSCF Standard Mail service standard change.
    The Postal Service continues its pursuit of other efficiency-
enhancing initiatives simultaneously with the final rule, but neither 
the DSCF Standard Mail service standard change nor any of the other 
initiatives are sufficient by

[[Page 12392]]

themselves to achieve the level of efficiency targeted by the Postal 
Service. Rather, they are all necessary. From the outset, the Postal 
Service has made clear that the impetus for the DSCF Standard Mail 
service change is the improvement of operations by leveling the 
delivery workload across the days of the week. Although the resulting 
efficiencies are expected to generate cost reductions, such cost 
reductions are a consequence of the initiative, not its goal. 
Accordingly, the load leveling initiative should not be viewed as a 
centerpiece of the Postal Service's ongoing efforts to align its 
overall cost and revenues.
4. Scope of Change
    Focusing on the scope of the DSCF Standard Mail service standard 
change, some mailers questioned the justification for including 
Standard Mail parcels and letters in the service standard change. These 
mailers view the issues targeted by the DSCF Standard Mail service 
standard change as limited only to operations concerning Standard Mail 
flats. However, the Postal Service needs the same flexibility for 
letter operations as well. Accordingly, the DSCF Standard Mail service 
standard change applies to both letters and flats. Parcels comprise 
only a very small proportion of all DSCF Standard Mail. In the interest 
of minimizing mail processing operational complexity and in the absence 
of any compelling reason for treating parcels differently, the service 
change applies to all DSCF Standard Mail.
    One commenter questioned whether the issues targeted by DSCF 
Standard Mail service standard change resulted from Standard Mail 
volume, suggesting instead that the increase in Monday overtime hours 
resulted from route consolidation, network consolidation, parcel volume 
increases, extended casing time, and later carrier arrival at the 
office. Although a variety of events and conditions could have caused 
the current situation of a disproportionate amount of mail volume with 
a Monday delivery expectation, the process associated with the Proposed 
Rulemaking focused on solutions, rather than on the causes of the 
current situation.
5. Effect on Election Mail
    One commenter expressed a concern about the potential impact of the 
DSCF Standard Mail service standard change on the reliability and 
security of election mail delivery. As is the case today, local postal 
managers will work closely with elections board and political campaign 
organization mailers to ensure that DSCF Standard Mail continues as a 
reliable and secure medium of communication. The Postal Service will 
continue to provide mailers exploring the differences between DSCF 
Standard Mail and First-Class Mail with information explaining their 
respective service standards and the long-standing priority of dispatch 
and processing accorded to First-Class Mail. In addition, the Postal 
Service will provide information to local elections boards and campaign 
mailers through multiple channels, including local Postal Customer 
Councils, its Business Services Network, its online Rapid Information 
Bulletin Board System, and local Business Mail Entry Units.
6. Rate Cap Implications
    One commenter questioned whether the DSCF Standard Mail service 
standard change might represent an additional price increase with rate 
cap implications. The Postal Service does not anticipate that the DSCF 
Standard Mail service standard change will have any rate cap 
implications.
7. Testing
    With respect to the implementation process for the DSCF Standard 
Mail service standard change, some commenters questioned the adequacy 
of the South Jersey Operations Test, and encouraged the Postal Service 
to conduct additional testing before implementation. Consistent with 
this concern, the Postal Service has scheduled additional testing in 
the service areas of approximately 30 mail processing facilities 
nationwide, and intends to incorporate the results of these tests into 
the national implementation of the DSCF Standard Mail service standard 
change.
    The performance of live testing before implementation is not 
customary for service standard changes. Under common practice, the 
Postal Service relies on modeling. Accordingly, the use of live testing 
at multiple sites should provide the Postal Service with helpful 
experience that can facilitate successful implementation of the DSCF 
Standard Mail service standard change.
8. Nonstandard Delivery Weeks
    Some commenters expressed a concern regarding the alleged failure 
of the Postal Service to consider the potential effects on delivery 
after a three-day weekend or in a five-day delivery environment. On a 
regular basis, the Postal Service manages the delivery of increased 
volumes of mail after a three-day weekend, and the DSCF Standard Mail 
service standard change will not make the challenge presented by that 
situation more difficult. In the absence of legislative change, the 
Postal Service has no current plans to implement a five-day delivery 
environment. However, assuming that mailers would drop ship mail in a 
five-day environment on the same days as in the present environment, it 
is expected that the implementation of load leveling would reduce the 
impact to delivery operations in making the transition to a situation 
where Standard Mail is delivered five days per week to street 
addresses.
    As the Postal Service implements the final rule, it will remain 
mindful of the concerns expressed by commenters and will work to 
minimize those concerns.

III. Statutory Considerations

    In addition to considering comments, the Postal Service has 
considered the requirements of 39 U.S.C. 3691 and other applicable 
provisions of title 39. Section 3691(b) sets forth objectives that the 
Postal Service's market-dominant service standards must serve, and 
section 3691(c) sets forth factors that the Postal Service must take 
into account when revising the service standards. The Postal Service 
believes that it has properly considered the subsection (c) factors, 
and that the revised service standards achieve the subsection (b) 
objectives.
    Since the passage of the Postal Reorganization Act (PRA), the 
Postal Service has been required to be largely self-supporting. The PRA 
established a cost-of-service system, which allowed the Postal Service 
to set prices at levels necessary to fully cover its costs. This system 
was dramatically altered in 2006 with the passage of the Postal 
Accountability and Enhancement Act (PAEA). In contrast to the PRA, the 
PAEA established a price cap system, with strict limitations on price 
increases for market-dominant product classes. As the PRC has observed, 
a primary goal of the price cap system is ``to incent the Postal 
Service to reduce costs and improve efficiency.'' \2\
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    \2\ PRC Docket No. R2010-4, Order No. 547 (Sept. 30, 2010), at 
80.
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    Section 3691 is situated within this larger context of inducing 
efficiency gains, and the subsection (c) factors are aligned with that 
goal in that, taken together, they balance levels of service for 
customers with the Postal Service's operational and business needs. 
From the formal rulemaking comments that the Postal Service has 
received, it is clear that some customers view the current service 
standards as vitally important, and that some customers would 
experience difficulties if service standards are changed. On a broader

[[Page 12393]]

level, however, the Postal Service has received no indication that the 
public as a whole views the current service standards as an essential 
element of the mail.
    In regard to the subsection (c) factors that relate to the Postal 
Service's operational and business needs, the Postal Service has 
already set forth, in the Proposed Rulemaking, the mail volume and 
financial realities that necessitate the DSCF Standard Mail service 
standard change. The Postal Service faces an uneven workload for postal 
delivery operations and a disproportionate allocation of resources to 
meet Monday delivery expectations, based on current service standards. 
Specifically, the high volume of Standard Mail with a service standard 
that creates a Monday delivery expectation contributes to the 
significant challenge faced by the Postal Service in seeking to achieve 
efficient and timely completion of delivery operations on Monday, and 
to make dispatch of collection mail picked up by carriers to mail 
processing plants for timely cancellation. This general imbalance in 
the proportion of volume with a Monday delivery expectation contributes 
significantly to increased overtime workhours in delivery operations at 
a time when the Postal Service is faced with increased costs while 
revenues decline as a result of the overall reduction in mail volumes. 
It is imperative, then, for the Postal Service to achieve a more 
balanced distribution of DSCF Standard Mail across delivery days.
    The Postal Service believes that the revised service standards are 
designed to achieve the section 3691(b) objectives. Standard Mail 
should continue to retain its value to customers. The change applies 
only to mail entered on Fridays and Saturdays and the Postal Service 
will work with mailers to help them adjust to the new standards and 
preserve Standard Mail as an attractive and viable medium for the 
delivery of messages and parcels.
    The DSCF Standard Mail service standard change will also help 
improve the Postal Service's performance in meeting service standards, 
by achieving a more balanced distribution of DSCF Standard Mail across 
delivery days.

IV. Final Revisions to Service Standards

    The Postal Service's DSCF Standard Mail service standards are 
contained in 39 CFR part 121. The new version of 39 CFR part 121 
appears at the end of this document. The following is a summary of the 
revisions.
    Before describing how service standards will be revised, it is 
important to explain how service standards are structured. Service 
standards are comprised of two components: (1) A delivery day range 
within which all mail in a given product is expected to be delivered; 
and (2) business rules that determine, within a product's applicable 
day range, the specific number of delivery days after acceptance of a 
mail piece by which a customer can expect that piece to be delivered, 
based on the 3-digit ZIP Code prefixes associated with the piece's 
point of entry into the mail stream and its delivery address.
    Business rules are based on the Critical Entry Time (CET). The CET 
is the latest time on a particular day that a mail piece can be entered 
into the postal network and still have its service standard calculated 
based on that day (this day is termed ``day-zero''). In other words, if 
a mail piece is entered before the CET, the mail piece's service 
standard is calculated from the day of entry, whereas if the mail piece 
is entered after the CET, its service standard is calculated from the 
following day. For example, if the applicable CET is 4:00 p.m., and a 
letter is entered at 3:00 p.m. on a Tuesday, its service standard will 
be calculated from Tuesday, whereas if the letter is entered at 5:00 
p.m. on a Tuesday, its service standard will be calculated from 
Wednesday.
    The Postal Service is revising the Standard Mail service standards 
for pieces that qualify for a DSCF rate and are accepted before the day 
zero CET at the proper DSCF on Friday or Saturday, to enable a more 
balanced distribution of Standard Mail volume across delivery days. For 
these Standard Mail pieces entered on Friday or Saturday at the DSCF 
rate, the Postal Service is changing the current three-day delivery 
expectation to a four-day delivery expectation. And for pieces entered 
at the SCF in San Juan, PR and destined for the U.S. Virgin Islands, as 
well as all DSCF entry pieces destined for American Samoa, the delivery 
expectation for pieces entered on Friday or Saturday changes from four 
days to five days.
    The Postal Service has not made other revisions to its service 
standards in this document.

List of Subjects in 39 CFR Part 121

    Market-dominant mail products, Service standards.

    For the reasons set out in the preamble, 39 CFR part 121 is amended 
as set forth below.

PART 121--SERVICE STANDARDS FOR MARKET DOMINANT MAIL PRODUCTS

0
1. The authority citation for 39 CFR part 121 continues to read as 
follows:

    Authority: 39 U.S.C. 101, 401, 403, 404, 1001, 3691.


0
2. In Sec.  121.3, revise paragraphs (b)(2) and (b)(3) to read as 
follows:


Sec.  121.3  Standard Mail.

* * * * *
    (b) * * *
    (2) Standard Mail pieces that qualify for a DSCF rate and that are 
accepted before the day-zero Critical Entry Time at the proper DSCF 
have a 3-day service standard when accepted on Sunday through Thursday 
and a 4-day service standard when accepted on Friday or Saturday, 
except for mail dropped at the SCF in the territory of Puerto Rico and 
destined to the territory of the U.S. Virgin Islands, or mail destined 
to American Samoa.
    (3) Standard Mail pieces that qualify for a Destination Sectional 
Center Facility (DSCF) rate and that are accepted before the day zero 
Critical Entry Time at the SCF in the territory of Puerto Rico and 
destined for the territory of the U.S. Virgin Islands, or are destined 
to American Samoa, have a 4-day service standard when accepted on 
Sunday through Thursday and a 5-day service standard when accepted on 
Friday or Saturday.
* * * * *

0
3. In Appendix A to part 121, revise Tables 5 and 6 to read as follows:

Appendix A to Part 121--Tables Depicting Service Standard Day Ranges

* * * * *

[[Page 12394]]



 Table 5--Destination Entry Service Standard Day Ranges for Mail to the Contiguous 48 States and the District of
                                                    Columbia
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                                                                     Contiguous United States
                                                 ---------------------------------------------------------------
                   Mail class                               Destination entry (at appropriate facility)
                                                 ---------------------------------------------------------------
                                                    DDU  (Days)     SCF  (Days)     ADC  (Days)     NDC  (Days)
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Periodicals.....................................               1               1             1-2             1-2
Standard Mail...................................               2             3-4  ..............               5
Package Services................................               1               2  ..............               3
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                        Table 6--Destination Entry Service Standard Day Ranges for Mail to Non-Contiguous States and Territories
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                                                                             Destination entry (at appropriate facility)
                                           -------------------------------------------------------------------------------------------------------------
                                                                  SCF (days)                       ADC (days)                       NDC (days)
                                                      --------------------------------------------------------------------------------------------------
                Mail class                     DDU                 Hawaii,                          Hawaii,                          Hawaii,
                                              (days)               Guam, &     Puerto               Guam, &     Puerto               Guam, &     Puerto
                                                         Alaska    American    Rico &     Alaska    American    Rico &     Alaska    American    Rico &
                                                                    Samoa       USVI                 Samoa       USVI                 Samoa       USVI
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Periodicals...............................          1        1-2          1        1-2   1-3 (AK)     1 (HI)        1-2      10-11         10       8-10
                                            .........  .........  .........  .........   11 (JNU)     2 (GU)  .........  .........  .........  .........
                                            .........  .........  .........  .........   11 (KTN)  .........  .........  .........  .........  .........
Standard Mail.............................          2        3-4        3-5        3-5  .........  .........  .........         14         13         12
Package Services..........................          1          2          2        2-3  .........  .........  .........         12         11         11
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK = Alaska 3-digit ZIP Codes 995-997; JNU = Juneau AK 3-digit ZIP Code 998; KTN = Ketchikan AK 3-digit
ZIP Code 999; HI = Hawaii 3-digit ZIP Codes 967 and 968; GU = Guam 3-digit ZIP Code 969.


Stanley F. Mires,
Attorney, Legal Policy & Legislative Advice.
[FR Doc. 2014-04784 Filed 3-4-14; 8:45 am]
BILLING CODE 7710-12-P