[Federal Register Volume 82, Number 242 (Tuesday, December 19, 2017)]
[Rules and Regulations]
[Pages 60117-60119]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27241]


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POSTAL SERVICE

39 CFR Part 501


Revisions to the Requirements for Authority To Manufacture and 
Distribute Postage Evidencing Systems; Customized Postage Products

AGENCY: Postal Service.

ACTION: Final rule.

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SUMMARY: In January, 2017, the Postal Service proposed to amend its 
Postage Evidencing Systems regulations to standardize requirements for 
the authorization to produce Customized Postage, a Special Service 
approved by the Postal Regulatory Commission. Comments were received by 
all authorized providers of Customized Postage products and the 
Alliance of Nonprofit Mailers. The Postal Service considered these 
comments and addresses them below.
    Customized Postage products are provided through authorized Postage 
Evidencing System manufacturer-distributors or through companies 
affiliated with authorized Postage Evidencing System manufacturer-
distributors and approved by the Postal Service. During the development 
of the Customized Postage program, requirements for authorization to 
produce Customized Postage products were described in Federal Register 
notices and in individual approval letters issued to providers. These 
final rules give regulatory form to the existing requirements for 
authorization to produce Customized Postage products, and incorporate 
procedures for the protection of Postal Service business interests. 
Existing providers of Customized Postage products may continue 
provision of Customized Postage products subject to these final rules 
upon their effective date, which coincides with renewal of the product 
year, and any requirements set forth in individual authorization 
letters.

DATES: These amendments take effect on May 15, 2018.

FOR FURTHER INFORMATION CONTACT: Christy Noel, Legal Policy & 
Legislative Advice, U.S. Postal Service, (202) 268-3484.

SUPPLEMENTARY INFORMATION: The Postal Reorganization Act authorizes the 
Postal Service to provide such evidence of postage payment ``as may be 
necessary or desirable.'' 39 U.S.C. 404(a)(4). The Postal Service 
exercises this authority through 39 CFR part 501, which protects postal 
revenues by regulation of manufacturer-distributors of Postage 
Evidencing Systems. Customized Postage products were developed through 
market tests allowing Authorized Postage Evidencing System providers to 
combine evidence of prepayment of postage with a customer-selected or 
customer-provided graphic image for printing and fulfillment. See, 70 
FR 21821 (April 27, 2005); 71 FR 12718 (March 13, 2006). Subsequently, 
Customized Postage was approved as a Special Service by the Postal 
Regulatory Commission. See, 75 FR 11452, 11459 (March 11, 2010). The 
amendments to 39 CFR part 501 create standardized definitions, 
requirements, and procedures applicable to the authorization to provide 
Customized Postage products, and incorporate protections for the Postal 
Service's legal, financial, and brand interests.
    All comments received in response to the proposed rules published 
at 82 FR 1294 (January 5, 2017) requested the creation of a nonprofit 
category of content in addition to the strictly commercial or limited 
social categories of content designated as eligible for customer-
provided or customer-selected images. All comments claimed that the 
inclusion of an eligible nonprofit content category would increase 
program revenues, and the Alliance of Nonprofit Mailers specifically 
alleged that excluding nonprofit content from the categories of 
eligible content would constitute unlawful discrimination against 
nonprofit mailers. The Postal Service disagrees on both counts. 
Customized Postage products are not U.S. stamps; they are a specialized 
form of evidence of prepayment of postage offered through statutory 
authority contained in 39 U.S.C. 404(a)(4). Because they share the 
function and appearance of U.S. stamps, however, the Postal Service 
must limit eligible private content to protect its own business and 
brand interests against dilution, false attribution, appearances of 
endorsement, and other potential impacts. The First Amendment requires 
that such content- or speaker-based restrictions be reasonable and 
viewpoint-neutral. See, Matal v. Tam, 137 S.Ct. 1744, 1763 (2017). 
Selective acceptance of only those nonprofit causes or organizations 
that do not present threats to the Postal Service's brand would 
constitute impermissible viewpoint discrimination, which would endanger 
the entire program. Such legal risks would offset any potential revenue 
increases attributable to the eligibility of nonprofit content. 
Excluding entire categories of content altogether to help avoid 
unlawful viewpoint discrimination is an eminently reasonable limitation 
made in accordance with First Amendment principles. This exclusion does 
not constitute unlawful discrimination against nonprofit mailers, who 
may purchase Customized Postage products subject to the same terms and 
conditions as other users of the mail.
    Comments from existing providers argued that Customized Postage 
restrictions should be uniformly applied across other Postal Service 
programs or products that allow some degree of customization. However, 
tailoring content restrictions to the unique context of each of its 
various customizable products or programs is necessary to serve the 
Postal Service's diverse interests and goals and is consistent with 
First Amendment forum analysis.
    Comments from Authorized Postage Evidencing System providers also 
requested acceptance of otherwise eligible images containing incidental 
depictions of certain prohibited content. For alcohol, tobacco, 
gambling, and weapons, the Postal Service agrees that allowing 
incidental depictions of these prohibited categories of content 
contained within otherwise eligible images would be consistent with 
program purposes while maintaining or increasing revenues. For example, 
an image of toasting wedding celebrants may remain eligible despite 
depictions of alcohol, an image of an armed services member may remain 
eligible despite depictions of weaponry, and so on. However, for 
religious, violent, or political content, the Postal Service does not 
agree that incidental depictions of these prohibited categories of 
content contained within otherwise eligible images would be consistent 
with program purposes. Such an expansion would delegate unduly fine-
grained distinctions to providers and increase First Amendment and 
brand liability.
    The eligibility of alcoholic beverage logos in the commercial 
content category was requested. Although allowing incidental depictions 
of alcohol in a commercial or social context, as explained above, is 
acceptable under the final rules, allowing the non-incidental display 
of logos promoting alcoholic beverage sales creates more brand risks, 
and arguably opens other commercial categories that the Postal Service 
may be compelled to accept by First

[[Page 60118]]

Amendment principles, e.g., logos promoting tobacco, weapons, or 
gambling enterprises.
    Comments from Authorized Postage Evidencing System providers sought 
elimination of the ``not suitable for minors'' restriction in the 
proposed regulations, arguing that the phrase is too subjective and 
impractical to apply. The final rules replace ``not suitable for 
minors'' with ``not suitable for all-ages audiences'' and clarify that 
the phrase applies to all eligible content. The Postal Service believes 
that original program purposes are better served by this phrase, which 
seeks to limit content to family-friendly images or text that would not 
cause concern among mainstream, multi-generational users of the mail. 
To further comport with program purposes, the Postal Service intends 
that the list of specific content prohibitions (alcohol, tobacco, 
gambling, weapons, controlled substances, politics, religion, sex, 
violence, etc.) be read as illustrative and not exhaustive, making 
ineligibility the default presumption for all content considered under 
the Eligibility Criteria. In other words, if proposed content is not a 
commercial or social image that is suitable for all-ages audiences, it 
is not eligible, even if not explicitly included in the list of 
prohibitions. To emphasize this restrictive nature, the final rules 
include a statement indicating that content that is not expressly 
allowed is presumed to be prohibited.
    The Authorized Postage Evidencing System provider Stamps.com 
expressed concern that the regulations as proposed would require 
alteration of Stamps.com's trademarks. Neither the proposed nor the 
final rules require alteration of provider trademarks. The requirement 
that providers disassociate Customized Postage products from U.S. 
stamps is intended to protect official USPS stamps and philatelic 
products and programs from consumer confusion related to the status of 
Customized Postage products, which are a specialized form of evidence 
of prepayment of postage. The final rules simply require providers not 
to ``promote'' Customized Postage products as being official U.S. 
postage stamps.
    Authorized Postage Evidencing System providers argued that 
violations of Customized Postage requirements should not constitute 
grounds for suspension or revocation of authorization to provide 
Postage Evidencing Systems. The Postal Service agrees that Customized 
Postage is a Special Service distinct from Postage Evidencing Systems, 
and these final rules separate the procedures for suspension or 
revocation of authorization accordingly. Furthermore, because 
Customized Postage products have potential to create significant risks 
for Postal Service philatelic programs and brand interests, the final 
rules allow for immediate suspension of authority to provide Customized 
Postage products in the event that the Postal Service determines that 
unacceptable business risks are posed by the provider's Customized 
Postage products or infrastructure.
    Additionally, the final rules specify that providers must publish 
the USPS Eligibility Criteria for customers. Although comments did not 
raise this issue, the inconsistency of publicly available provider 
content guidelines has caused confusion over Customized Postage 
products. Because these amendments are intended to standardize and 
formalize program requirements, the final rules clarify that, in 
addition to adhering to USPS Eligibility Criteria, providers must 
publish the USPS Eligibility Criteria for customers.
    Finally, existing providers requested that Customized Postage 
products be authorized for Forever status or rates outside of First 
Class postage, e.g., Marketing or Nonprofit rates. These issues fall 
outside the scope of the current rulemaking, and the Postal Service 
does not address them here.

List of Subjects in 39 CFR Part 501

    Administrative practice and procedure.
    For the reasons discussed above, the Postal Service amends 39 CFR 
part 501 as follows:

PART 501--AUTHORIZATION TO MANUFACTURE AND DISTRIBUTE POSTAGE 
EVIDENCING SYSTEMS

0
1. The authority citation for 39 CFR part 501 continues to read as 
follows:

    Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 410, 
2601, 2605, Inspector General Act of 1978, as amended (Pub. L. 95-
452, as amended); 5 U.S.C. App. 3.


Sec.  501.7  [Amended]

0
2. Amend Sec.  501.7(c) introductory text by adding, after ``The 
provider must ensure that'', the clause ``, with the exception of 
Customized Postage products,''.

0
3. Add Sec.  501.21 to read as follows:


Sec.  501.21  Customized Postage products.

    (a) Definitions. (1) As used in this section, a provider is:
    (i) A Postage Evidencing System provider as defined under Sec.  
501.1(d) that is authorized by the Postal Service to produce Customized 
Postage products in accordance with this section and subject to any 
additional requirements set forth in individual approval letters; or
    (ii) An entity that is affiliated under conditions respecting 
postage revenue security with a Postage Evidencing System provider and 
authorized by the Postal Service to produce Customized Postage products 
in accordance with this section and subject to any additional 
requirements set forth in individual approval letters.
    (2) Customized Postage products are products combining barcode 
indicia of postage payment with digital, graphic, or pictorial images 
or text. Customers select or provide images or text that meet 
Eligibility Criteria established by the Postal Service, and the image 
or text is combined with the barcode indicia of postage payment by 
providers and produced under controlled conditions for mailing to 
customers.
    (3) As used in this section, a customer is a person or entity 
seeking to purchase Customized Postage products from a provider.
    (b) Eligibility Criteria. The Eligibility Criteria contained in 
this section restrict Customized Postage content by identifying 
allowable images, text, or categories of images or text. Any content 
not identified by the Eligibility Criteria is prohibited. To be 
eligible for use in Customized Postage products, images and/or text 
must meet criteria established by the Postal Service, which are:
    (1) Images or text must be ``commercial'' or ``social,'' as defined 
below:
    (i) Commercial means intended for no purpose other than the sale of 
goods or services in commerce.
    (ii) Social means promoting or depicting people, animals, items, or 
events commonly associated with community relations or companionship 
and likely to generate invitations, announcements, notices, thank-you 
notes, RSVPs, or similar correspondence.
    (2) Acceptable commercial or social images or text must not contain 
content that is unsuitable for all-ages audiences, including but not 
limited to:
    (i) Any non-incidental depiction of alcohol, tobacco, gambling, or 
firearms or other weapons;
    (ii) Any depiction of controlled substances, including but not 
limited to marijuana;
    (iii) Any depiction of political, religious, violent or sexual 
content; or
    (iv) Any depiction of subject matter prohibited for display under 
U.S. law.

[[Page 60119]]

    (3) Acceptable commercial or social images or text must not contain 
content that the customer or provider does not have the right to use 
either directly or under license, including but not limited to images 
or text that may be the subject of third party rights such as 
copyright, trademarks, or rights of publicity or privacy.
    (4) The Postal Service reserves the right to determine 
independently whether any image, text, or category of images or text 
meets any of the Eligibility Criteria contained in this section.
    (c) Customized Postage provider authorization is conditioned on the 
following requirements:
    (1) Publication of Eligibility Criteria. Providers must make the 
Eligibility Criteria set forth in paragraph (b) of this section 
available to customers on provider websites or in any other medium 
through which Customized Postage products are purchased.
    (2) Use of Eligibility Criteria in purchases. Providers must 
maintain a process in providing or accepting images and/or text for 
Customized Postage products that uses only the Eligibility Criteria set 
forth in paragraph (b) of this section.
    (i) Providers may not use any other eligibility criteria, represent 
the use of any other eligibility criteria to customers, or otherwise 
give the appearance that any eligibility criteria other than the 
Eligibility Criteria set forth in paragraph (b) of this section is used 
in providing or accepting images and/or text for Customized Postage 
products.
    (ii) In the event that full and good faith administration of the 
process required by this paragraph (c)(2) of this section fails to 
determine eligibility of an individual image, text, or category of 
images or text, providers may seek clarification from the Postal 
Service.
    (3) Use of Eligibility Criteria in promotional material. Providers 
must ensure that any images and/or text used in providing or promoting 
Customized Postage products, for individual sale or as part of a 
category of images and/or text provided or made available for customer 
selection, displayed on provider websites or in any medium, including 
without limitation exemplars, ordering templates, customization 
options, or customer correspondence:
    (i) Are fully compatible with the Eligibility Criteria set forth in 
paragraph (b) of this section; and
    (ii) Do not give the appearance that images that are not fully 
compatible with the Eligibility Criteria set forth in paragraph (b) of 
this section are available or offered for purchase through providers or 
otherwise.
    (4) Disassociation from U.S. stamps. Providers must not promote 
Customized Postage products as ``U.S. stamps'' or make any 
representations tending to imply that Customized Postage products are 
related in any way to official U.S. postage stamps or to any aspect of 
the Postal Service philatelic program.
    (5) Authorization fee and Eligibility Criteria audit. Providers 
must pay an annual authorization fee and participate in any audit 
conducted by the Postal Service to ensure that the customer-selected or 
-provided images or text displayed on Customized Postage products or in 
the promotion in any medium of Customized Postage products are in 
compliance with the Eligibility Guidelines set forth in paragraph (b) 
of this section.
    (6) Individual authorization letters. Additional conditions and 
requirements for provider authorization may be set forth in individual 
provider authorization letters.
    (7) Suspension and revocation of Authorization. The Postal Service 
may suspend or revoke authorization to produce Customized Postage 
products if the provider engages in any unlawful scheme or enterprise; 
fails to comply with any provision in this part, or any provision in an 
individual approval letter; fails to implement instructions issued by 
the Postal Service within its authority over Customized Postage 
products; misrepresents to customers of the Postal Service any 
decisions, actions, or proposed actions of the Postal Service 
respecting its regulation of Customized Postage products; or if 
Customized Postage products or infrastructure of the provider is 
determined to constitute an unacceptable risk to Postal Service 
business interests, including legal, financial, or brand interests.
    (8) Correspondence. The Postal Service office responsible for 
administration of this part is the Office of Brand Marketing or its 
successor organization. All correspondence with the Postal Service 
required by this part is to be made to this office in person or via 
mail to 475 L'Enfant Plaza SW, Room 5117, Washington, DC 20260-0004.

Ruth B. Stevenson,
Attorney, Federal Compliance.
[FR Doc. 2017-27241 Filed 12-18-17; 8:45 am]
BILLING CODE 7710-12-P