[Federal Register Volume 85, Number 25 (Thursday, February 6, 2020)]
[Proposed Rules]
[Pages 6838-6841]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-01120]


=======================================================================
-----------------------------------------------------------------------

POSTAL SERVICE

39 CFR Part 501


Authorization To Manufacture and Distribute Postage Evidencing 
Systems

AGENCY: Postal ServiceTM.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Postal Service proposes to amend its Postage Evidencing 
Systems regulations. These changes set forth the procedure to become an 
authorized Postage Evidencing System (PES) provider. The changes also 
update or create new definitions, update all references of the Office 
of Payment Technology to the Office of Commercial Payment, and 
reorganize or reword certain provisions currently in the regulations 
for clarity.

DATES: Comments must be received on or before March 9, 2020.

ADDRESSES: Mail or deliver written comments to: Director, Commercial 
Payment, 475 L'Enfant Plaza SW, Room 3500, Washington, DC 20260. Email 
and faxed comments are not accepted. You may inspect and photocopy all 
written comments, by appointment only, at USPS[supreg] Headquarters 
Library, 475 L'Enfant Plaza SW, 11th Floor North, Washington, DC 20260. 
These records are available for review on Monday through Friday, 9 
a.m.-4 p.m., by calling 202-268-2904. All submitted comments and 
attachments are part of the public record and subject to disclosure. Do 
not enclose any material in your comments that you consider to be 
confidential or inappropriate for public disclosure.

[[Page 6839]]


FOR FURTHER INFORMATION CONTACT: Crystal F. Newman, Business Process 
Specialist Principal, [email protected], 202-268-7072.

SUPPLEMENTARY INFORMATION: The Postal Service has worked over the past 
6 months to create a new PES Provider Applicant Guide (Guide). This 
Guide sets forth the process on how to apply to become a PES Provider. 
It was developed by gathering feedback from stakeholders across the 
organization, and from the learnings derived from onboarding PES 
providers, including the most recent process used. This proposed rule 
sets forth the process to apply to become a provider, and clarifies the 
rule and regulations that an applicant is subject to during the 
application process. While modifying the CFR to refer to the new Guide, 
two other cleanup activities were accomplished. First, paragraph Sec.  
501.3(c) referring to providers allowing the Postal Service to audit 
their locations as a condition for authorization is being moved as it 
is more properly placed under section Sec.  501.2. Second, Sec.  
501.3(d) was not grammatically correct, so the language was updated 
grammatically without changing the content of the requirement.
    Finally, a few other minor changes were made to keep the 
regulations current, including removing `meter imprints' and adding 
`intelligent mail indicia' to the definition of Postage Evidencing 
Systems, and updating the Office of Payment Technology to the Office of 
Commercial Payment, which is its successor organization after the Mail 
Entry and Payment Technology group was reorganized in August 2019.

List of Subjects in 39 CFR Part 501

    Administrative practice and procedure, Postal Service.
    For the reasons stated in the preamble, the Postal Service proposes 
to amend 39 CFR Section 501 as follows:

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

0
 1. The authority citation for 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.

0
2. Amend Sec.  501.1 to revise paragraph (a) and add paragraph (h) to 
read as follows:


Sec.  501.1   Definitions.

    (a) Postage Evidencing Systems regulated by part 501 produce 
evidence of prepayment of postage by any method other than postage 
stamps and permit imprints. A Postage Evidencing System is a device or 
system of components that a customer uses to generate and print 
evidence that postage required for mailing has been paid. Postage 
Evidencing Systems print indicia, such as information-based indicia or 
intelligent mail indicia to indicate postage payment. They include but 
are not limited to postage meters and PC Postage systems.
* * * * *
    (h) Postal Requirements include the Code of Federal Regulations, 
Title 39 Section 501, the Domestic Mail Manual (DMM), the International 
Mail Manual (IMM), and the Intelligent Mail Indicia Performance 
Criteria (IMIPC).
0
3. Revise Sec.  501.2 to read as follows:


Sec.  501.2   Postage Evidencing System provider authorization.

    (a) The Postal Service considers Postage Evidencing Systems and 
their respective infrastructure to be essential to the exercise of its 
specific powers to prescribe postage and provide evidence of payment of 
postage under 39 U.S.C. 404(a)(2) and (4).
    (b) Due to the potential for adverse impact upon Postal Service 
revenue, the following activities may not be engaged in by any person 
or entity without prior, written approval of the Postal Service. 
Persons or entities that perform these activities are referred to 
collectively as Postage Evidencing System (PES) Providers in this 
section.
    (1) Manufacturing and/or distributing any Postage Evidencing System 
that generates or produces U.S. postage.
    (2) Repairing, refurbishing, remanufacturing, modifying, or 
destroying any component of a Postage Evidencing System that accounts 
for or authorizes the printing of U.S. postage.
    (3) Owning or operating an infrastructure that maintains operating 
data for the production of U.S. postage, or accounts for U.S. postage 
purchased for distribution through a Postage Evidencing System.
    (4) Owning or operating an infrastructure that maintains operating 
data that is used to facilitate registration with the Postal Service of 
customers of a Postage Evidencing System.
    (c) Approval to become a Postage Evidencing System Provider
    (1) Any person or entity seeking authorization to become a PES 
Provider must submit a request to the Postal Service in writing to the 
Office of Commercial Payment. Once the request is received, the Office 
of Commercial Payment will provide the applicant the PES Provider 
Applicant Guide and the Intelligent Mail Indicia Performance Criteria 
(IMIPC), the IMIPC setting forth PES and indicia specification and 
requirements. The contact information for Commercial Payment can be 
found in Sec.  501.2(f).
    (2) The PES Provider Applicant Guide sets forth the process for 
applicants seeking to become a PES Provider. An applicant is subject to 
the rules in both that Guide and the IMIPC, while they are attempting 
to gain approval to become a PES Provider.
    (3) An applicant applying for approval to become a PES Provider 
must undergo three (3) primary phases which are laid out in the PES 
Provider Applicant Guide: (1) Applicant Introduction and Letter of 
Intent, (2) Applicant Qualification and Registration, and (3) PES 
Evaluation. Each phase includes prerequisites to enter the phase, 
deliverables expected during that phase, and requires written approval 
by the Office of Commercial Payment to allow the process to continue to 
the next phase.
    (4) To the extent that an applicant reaches the PES Evaluation 
phase, then the applicant is governed by Postal Requirements, the 
IMIPC, and the PES Provider Applicant Guide even though not yet an 
authorized PES Provider.
    (5) The Postal Service, in its sole discretion, may approve an 
applicant. In reaching its approval determination, the Postal Service 
may review factors and make determinations including, but not limited 
to, satisfactory evidence of the applicant's integrity and financial 
responsibility, commitment to comply with the Postal Requirements, and 
a determination that disclosure to the applicant of Postal Service 
customer, financial, or other data of a commercial nature necessary to 
perform the function for which approval is sought would be appropriate 
and consistent with the good business practices within the meaning of 
39 U.S.C. 410(c)(2).
    (6) No applicant is considered a PES Provider until the Postal 
Service issues a final written decision. This is accomplished by the 
provision of a final written approval of the applicant's status as an 
authorized PES Provider in writing from Vice President of Mail Entry & 
Payment Technology (or successor). The applicant is approved in writing 
to engage in the function(s) for which authorization was sought and 
approved.
    (d) To the extent that any person or entity is approved to be a PES 
Provider, such PES Provider must adhere to the Postal Requirements.
    (e) As a condition of obtaining authorization under this section, 
the PES Provider's facilities used for the

[[Page 6840]]

manufacture, distribution, storage, resetting, repair, refurbishment, 
remanufacturing, modifying, or destruction of a Postage Evidencing 
System and all facilities housing infrastructure supporting Postage 
Evidencing Systems will be subject to unannounced inspection by 
representatives of the Postal Service. If such facilities are outside 
the continental United States, the PES Provider will be responsible for 
all reasonable and necessary travel-related costs incurred by the 
Postal Service to conduct the inspections. Travel-related costs are 
determined in accordance with Postal Service Handbook F-15, Travel and 
Relocation. At its discretion, the Postal Service may continue to fund 
routine inspections outside the continental United States as it has in 
the past, provided the costs are not associated with particular 
security issues related to a PES Provider's Postage Evidencing System 
or supporting infrastructure, or with the start-up or implementation of 
a new plant or of a new or substantially changed manufacturing process.
    (1) When conducting an inspection outside the continental United 
States, the Postal Service will make every effort to combine the 
inspection with other inspections in the same general geographic area 
in order to enable affected PES Providers to share the costs. The 
Postal Service team conducting such inspections will be limited to the 
minimum number necessary to conduct the inspection. All air travel will 
be contracted for at the rates for official government business, when 
available, under such rules respecting class of travel as apply to 
those Postal Service representatives inspecting the facility at the 
time the travel occurs.
    (2) If political or other impediments prevent the Postal Service 
from conducting security evaluations of Postage Evidencing System 
facilities in foreign countries, Postal Service approval of the 
activities conducted in such facilities may be suspended until such 
time as satisfactory inspections may be conducted.
    (f) The Postal Service office responsible for administration of 
this part is the Office of Commercial Payment or successor 
organization. All submissions to the Postal Service required or invited 
by this part are to be made to this office in person or via mail to 475 
L'Enfant Plaza SW, Room 3500, Washington, DC 20260-0004.
0
4. Amend Sec.  501.3 by
0
a. Removing paragraph (c);
0
b. Redsignating paragraph (d) as paragraph (c);
0
c. Revising newly redesignated paragraph (c); and
0
d. Redesignating paragraph (e) as paragraph (d).
    The revision to read as follows:


Sec.  501.3   Postage Evidencing System provider qualification.

* * * * *
    (c) Protect customer information by not causing or permitting the 
data to be released other than for the operation of a third-party 
location. The provider bears the ultimate responsibility to ensure 
customer information will not be compromised at any domestic or off 
shore locations (including third-party locations), and bears the 
responsibility to ensure its agents or contractors operating domestic 
or off shore locations do not compromise this information. The provider 
shall notify its customer that data relating to its systems is being 
housed at a third-party location, and shall provide a copy thereof to 
the Postal Service of such notice to its customers. To the extent that 
any unauthorized release takes place, the provider shall notify the 
Postal Service immediately upon discovery of any unauthorized use or 
disclosure of data or any other breach or improper disclosure of data 
of this agreement by the provider (as well as its agent operating the 
third-party location) and will cooperate with the Postal Service in 
every reasonable way to help the Postal Service regain possession of 
the data and prevent its further unauthorized use or disclosure. In the 
event that the Postal Service cannot regain possession of the data or 
prevent its further unauthorized use or disclosure, the provider shall 
indemnify the Postal Service from damages resulting from its (or such 
third-party) actions.
* * * * *
0
5. Amend Sec.  501.6 by revisnig paragraphs (c)(1), (2), and (3) and 
paragraph (e) to read as follows:


Sec.  501.6   Suspension and revocation of authorization.

* * * * *
    (c) * * *
    (1) Upon determination by the Postal Service that a provider is in 
violation of provisions of this part, or that its Postal Evidencing 
System poses an unreasonable risk to postal revenue, Commercial 
Payment, acting on behalf of the Postal Service, shall issue a written 
notice of proposed suspension citing the specific conditions or 
deficiencies for which suspension of authorization to manufacture and/
or distribute a specific Postage Evidencing System or class of Postage 
Evidencing Systems may be imposed. Except in cases of willful 
violation, the provider shall be given an opportunity to correct 
deficiencies and achieve compliance with all requirements within a time 
limit corresponding to the potential risk to postal revenue.
    (2) In cases of willful violation, or if the Postal Service 
determines that the provider has failed to correct cited deficiencies 
within the specified time limit, Commercial Payment shall issue a 
written notice of suspension setting forth the facts and reasons for 
the decision to suspend, and the effective date if a written defense is 
not presented as provided in paragraph (d) of this section.
    (3) The notice shall also advise the provider of its right to file 
a response under paragraph (d) of this section. If a written response 
is not presented in a timely manner the suspension may go into effect. 
The suspension shall remain in effect for ninety (90) calendar days 
unless revoked or modified by Commercial Payment.
* * * * *
    (e) After receipt and consideration of the defense, Commercial 
Payment shall advise the provider of its decision, and the facts and 
reasons for it. The decision shall be effective upon receipt unless it 
provides otherwise. The decision shall also advise the provider that it 
may be appealed within thirty (30) calendar days of receipt (unless a 
shorter time frame is deemed necessary). If an appeal is not filed in a 
timely manner, the decision of Commercial Payment shall become a final 
decision of the Postal Service. The appeal may be filed with the Chief 
Information Officer of the Postal Service and must include all 
supporting evidence and state with specificity the reasons the provider 
believes that the decision is erroneous. The decision of the Chief 
Information Officer shall constitute a final decision of the Postal 
Service.
* * * * *
0
6. Amend Sec.  501.7 by revising paragraph (a) to read as follows:


Sec.  501.7   Postage Evidencing System requirements.

    (a) A Postage Evidencing System submitted to the Postal Service for 
approval must meet the requirements of the Intelligent Mail Indicia 
Performance Criteria (IMIPC) published by Commercial Payment. Copies of 
the current IMIPC may be requested via mail to the address in Sec.  
501.2(f).
* * * * *
0
7. Amend Sec.  501.8 by revising paragraph (a) to read as follows:

[[Page 6841]]

Sec.  501.8   Postage Evidencing System test and approval.

    (a) To receive Postal Service approval, each Postage Evidencing 
System must be submitted by the provider and evaluated by the Postal 
Service in accordance with the Intelligent Mail Indicia Performance 
Criteria (IMIPC) published by Commercial Payment. Copies of the current 
IMIPC may be requested via mail to the address in Sec.  501.2(f). These 
procedures apply to all proposed Postage Evidencing Systems regardless 
of whether the provider is currently authorized by the Postal Service 
to distribute Postage Evidencing Systems. All testing required by the 
Postal Service will be an expense of the provider.
* * * * *
0
8. Amend Sec.  501.10.by revising paragraph (a) introductory text and 
paragraph (b) to read as follows:


Sec.  501.10   Postage Evidencing System modifications.

    (a) An authorized provider must receive prior written approval from 
the director, Commercial Payment, of any and all changes made to a 
previously approved Postage Evidencing System. The notification must 
include a summary of all changes made and the provider's assessment as 
to the impact of those changes on the security of the Postage 
Evidencing System and postage funds. Upon receipt of the notification, 
Commercial Payment will review the summary of changes and make a 
decision regarding the need for the following:
* * * * *
    (b) Upon receipt and review of additional documentation and/or test 
results, Commercial Payment will issue a written acknowledgement and/or 
approval of the change to the provider.
0
9. Amend Sec.  501.14 by revising paragraph (c) introductory text, 
paragraph (c)(8), and paragraph (d) introductory text to read as 
follows:


Sec.  501.14   Postage Evidencing System inventory control processes.

* * * * *
    (c) To ensure adequate control over Postage Evidencing Systems, 
plans for the following subjects must be submitted for prior approval, 
in writing, to the Office of Commercial Payment.
* * * * *
    (8) Postage meter destruction--when required, the postage meter 
must be rendered completely inoperable by the destruction process and 
associated postage; printing dies and components must be destroyed. 
Manufacturers or distributors of meters must submit the proposed 
destruction method; a schedule listing the postage meters to be 
destroyed, by serial number and model; and the proposed time and place 
of destruction to Commercial Payment for approval prior to any meter 
destruction. Providers must record and retain the serial numbers of the 
meters to be destroyed and provide a list of such serial numbers in 
electronic form in accordance with Postal Service requirements for 
meter accounting and tracking systems. Providers must give sufficient 
advance notice of the destruction to allow Commercial Payment to 
schedule observation by its designated representative who shall verify 
that the destruction is performed in accordance with a Postal Service-
approved method or process. To the extent that the Postal Service 
elects not to observe a particular destruction, the provider must 
submit a certification of destruction, including the serial number(s), 
to the Postal Service within 5 calendar days of destruction. These 
requirements for meter destruction apply to all postage meters, Postage 
Evidencing Systems, and postal security devices included as a component 
of a Postage Evidencing System.
    (d) If the provider uses a third party to perform functions that 
may have an impact upon a Postage Evidencing System (especially its 
security), including, but not limited to, business relationships, 
repair, maintenance, and disposal of Postage Evidencing Systems, 
Commercial Payment must be advised in advance of all aspects of the 
relationship, as they relate to the custody and control of Postage 
Evidencing Systems and must specifically authorize in writing the 
proposed arrangement between the parties.
* * * * *

Brittany M. Johnson,
Attorney, Federal Compliance.
[FR Doc. 2020-01120 Filed 2-5-20; 8:45 am]
 BILLING CODE P