U.S. Postal Service: Postal Activities and Laws Related to Electronic
Commerce (Letter Report, 09/07/2000, GAO/GGD-00-188).

Pursuant to a congressional request, GAO reviewed the U.S. Postal
Service's (USPS) electronic commerce (e-commerce) initiatives, focusing
on USPS': (1) e-commerce initiatives that have been implemented or are
being developed; (2) goals and strategies for the e-commerce area; (3)
processes for approving these initiatives; and (4) expected performance
and results to date related to e-commerce.

GAO noted that: (1) since the beginning of 2000, USPS has taken a number
of steps to develop and implement its e-commerce activities; (2) some
key actions included developing a definition of its e-commerce
initiatives, identifying its e-commerce and related initiatives,
outlining its overall goals and strategies, establishing expected
performance, and providing some information on results to date; (3) how
USPS defines its e-commerce activities is fundamental when determining
what USPS is doing in the e-commerce area; (4) USPS defined its
e-commerce initiatives to include products and services that: (a)
require the use of the Internet; and (b) generate revenues for USPS from
user charges of license fees; (5) USPS defines its e-commerce
initiatives as a subset of its broader eBusiness activities that involve
the use of new technology; (6) USPS identified seven e-commerce
initiatives that were either planned or implemented as of September
2000; (7) these seven initiatives are generally intended to facilitate
the movement of messages, merchandise, and money; (8) USPS outlined the
purpose and direction for its eBusiness and e-commerce areas and stated
that its overall goal is to use the best technology, including the
Internet, to provide customers with expanded universal access and
choices on how they do business with USPS; (9) USPS also explained that
the criteria for these initiatives are that they be universally
available, designed to fulfill customer and marketplace needs, offer
customers voluntary choices, be secure and private, provide financial
benefits to customers and USPS, and be consistent with the USPS'
mission; (10) USPS identified eight strategies for accomplishing its
eBusiness goal and its related e-commerce goal; (11) examples of these
strategies were using the Internet as a cost-effective channel,
providing security and privacy for customers, minimizing USPS
investments and risks, and pursuing partnerships and alliances with
industry; (12) in May 2000, USPS established a management process for
reviewing and approving e-commerce initiatives that is different from
the review and approval process for other new products; (13) the
e-commerce review process was designed to result in quicker approval of
initiatives than USPS' review and approval process for new products;
(14) the new process requires a business proposal and plan, a public
affairs/communication plan, periodic monitoring, and approval by top
management or USPS' Board of Governors; and (15) some e-commerce
initiatives were launched before the new process was introduced.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-00-188
     TITLE:  U.S. Postal Service: Postal Activities and Laws Related to
	     Electronic Commerce
      DATE:  09/07/2000
   SUBJECT:  Postal service
	     Competition
	     Customer service
	     Strategic planning
	     Computer networks
IDENTIFIER:  USPS E-commerce Program
	     Internet

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GAO/GGD-00-188
U. S. POSTAL SERVICE

Postal Activities and Laws Related to Electronic Commerce

United States General Accounting Office

GAO Report to Congressional Requesters

September 2000 GAO/ GGD- 00- 188

United States General Accounting Office General Government Division
Washington, D. C. 20548

Page 1 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

B- 285058 September 7, 2000

The Honorable Thad Cochran Chairman, Subcommittee on International Security,
Proliferation, and

Federal Services Committee on Governmental Affairs United States Senate

The Honorable John M. McHugh Chairman, Subcommittee on the Postal Service
Committee on Government Reform House of Representatives

This letter responds to your requests to review electronic commerce
(ecommerce) initiatives of the U. S. Postal Service (USPS). Members of
Congress and postal stakeholders have raised issues related to the merits of
USPS' development of nonpostal products and services, including those that
are e- commerce related. As USPS has recently developed and implemented a
number of e- commerce initiatives, you requested us to provide information
on the status of USPS' e- commerce activities and related legal and
regulatory matters. Specifically, our objectives were to describe USPS' (1)
e- commerce initiatives that have been implemented or are being developed,
(2) goals and strategies for the e- commerce area, (3) processes for
approving these initiatives, and (4) expected performance and results to
date related to e- commerce initiatives. During the course of our review, we
identified areas where USPS can improve its management of its e- commerce
activities, and this report discusses these areas as well. An additional
objective was to describe USPS' views on how major federal laws and
regulations apply to its e- commerce initiatives and to identify legal
issues that have been raised concerning its e- commerce activities.

USPS is in the early stages of developing its current e- commerce program.
We previously reported on USPS' new products and services, including several
e- commerce activities piloted or implemented during fiscal years 1993
through 1997. 1 Since then, USPS has discontinued its earlier ecommerce
activities, some of which have helped USPS develop new ecommerce- related
products and services.

1 U. S. Postal Service: Development and Inventory of New Products (GAO/ GGD-
99- 15, Nov. 24, 1998).

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Page 2 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

To address the objectives of this review, we reviewed USPS documents and the
information available on USPS' Internet site. We also held discussions with
USPS officials responsible for e- commerce activities. We reviewed the
material obtained for internal consistency and completeness, but we did not
verify the information provided by USPS. We also obtained legal information
and analysis from USPS on laws and regulations that may apply to USPS' e-
commerce activities. We did not verify or evaluate the legal information,
although we checked the citations to laws and regulations that were used in
this report. A more detailed description of our scope and methodology for
this review is included in appendix I.

We conducted our review at USPS headquarters in Washington, D. C., between
January 2000 and August 2000 in accordance with generally accepted
government auditing standards. We requested comments on a draft of this
report from the Postmaster General and from the Chairman of the Postal Rate
Commission (PRC). USPS' and PRC's written comments are discussed near the
end of this letter.

Since the beginning of 2000, USPS has taken a number of steps to develop and
implement its e- commerce activities. Some key actions included developing a
definition of its e- commerce initiatives, identifying its ecommerce and
related initiatives, outlining its overall goals and strategies,
establishing expected performance, and providing some information on results
to date.

How USPS defines its e- commerce activities is fundamental when determining
what USPS is doing in the e- commerce area. USPS defined its e- commerce
initiatives to include products and services that (1) require the use of the
Internet and (2) generate revenues for USPS from user charges or license
fees. USPS defines its e- commerce initiatives as a subset of its broader
eBusiness activities that involve the use of new technology. USPS identified
seven e- commerce initiatives that were either planned or implemented as of
September 2000. These seven initiatives are generally intended to facilitate
the movement of messages, merchandise, and money. For example, to facilitate
the movement of messages, USPS introduced the PosteCS initiative, an
Internet- based global document delivery system implemented in May 2000. To
facilitate the movement of merchandise, USPS introduced the Stamps Online
initiative in December 1998 that enables customers to purchase stamps,
philatelic products, and other USPS products. USPS also plans to expand this
initiative to include a Virtual Store that would offer USPS merchandise and
other stamp products for sale via the Internet. To facilitate the movement
of money, Results In Brief

B- 285058

Page 3 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

USPS introduced its eBillPay initiative, an electronic bill presentment and
payment service, in April 2000.

USPS also identified three initiatives that it refers to as gray area
initiatives. Gray area initiatives are related to e- commerce initiatives
but either would not generate revenues for USPS from user charges or license
fees or would not require use of the Internet. USPS is also developing other
initiatives, which it refers to as infrastructure initiatives, to support
its e- commerce and related initiatives. For example, USPS has identified an
electronic mailbox, which is a concept in the early development stage that
could link electronic and physical addresses, as an infrastructure
initiative.

USPS outlined the purpose and direction for its eBusiness and e- commerce
areas and stated that its overall goal is to use the best technology,
including the Internet, to provide customers with expanded universal access
and choices on how they do business with USPS. USPS also explained that the
criteria for these initiatives are that they be universally available,
designed to fulfill customer and marketplace needs, offer customers
voluntary choices, be secure and private, provide financial benefits to
customers and USPS, and be consistent with the USPS' mission. USPS
identified eight strategies for accomplishing its eBusiness goal and its
related e- commerce goal. Examples of these strategies were using the
Internet as a cost- effective channel, providing security and privacy for
customers, minimizing USPS investments and risks, and pursuing partnerships
and alliances with industry.

In May 2000, USPS established a management process for reviewing and
approving e- commerce initiatives that is different from the review and
approval process for other new products. The e- commerce review process was
designed to result in quicker approval of initiatives than USPS' review and
approval process for new products. The new process requires a business
proposal and plan, a public affairs/ communication plan, periodic
monitoring, and approval by top management or USPS' Board of Governors
(BOG). Some e- commerce initiatives were launched before the new process was
introduced and were therefore subject to USPS' former approval process. USPS
also provided information on its performance expectations and results
achieved for e- commerce initiatives implemented to date.

During our review, we identified a number of problems and inconsistencies in
the information provided by USPS. We are making recommendations to USPS that
address these issues. First, during the

B- 285058

Page 4 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

course of our review, USPS inconsistently applied its definition of
ecommerce in identifying its initiatives and provided inconsistent
information on the status of its initiatives. These inconsistencies made it
difficult to ensure we had a complete and accurate picture of USPS'
ecommerce activities. Second, USPS did not consistently adhere to its
process requirements and did not always document the review and approval of
its e- commerce initiatives. Consequently, it is not clear whether USPS
management properly reviewed and approved e- commerce initiatives to ensure
that they support USPS' overall mission and goals. Finally, we identified
deficiencies in the financial information USPS provided for its e- commerce
activities that raised concerns about the accuracy and completeness of USPS'
financial reporting for its ecommerce activities. Further, we do not believe
the e- commerce financial data that USPS provided was sufficiently complete
and reliable to be used to assess USPS' progress toward meeting its overall
financial performance expectation that revenues generated by e- commerce
products and services in the aggregate are to cover USPS' direct and
indirect costs as well as make a contribution to overhead.

USPS believes that it has broad statutory authority to offer e- commerce
products and services in ways that it finds appropriate to its assigned
functions and in the public interest. USPS also believes that the law
provides discretion to its BOG to determine whether particular new services
are appropriate and in the public interest. According to USPS, numerous
federal laws and regulations apply to its e- commerce products and services,
but it has a different legal status from its private sector competitors in
some respects. For example USPS has reported that federal privacy laws
afford USPS e- commerce customers greater protection than is provided for
customers of private sector providers. Further, USPS told us that public
interest, universal service, antidiscrimination, and other policy provisions
of the Postal Reorganization Act of 1970 2 provide consumer protections in
connection with its e- commerce products and services, but many other
federal consumer protection laws are inapplicable. However, some federal
consumer protection laws may apply to USPS in certain circumstances, and
others may apply to USPS contractors or financial institutions that help
USPS offer e- commerce products and services. Further, USPS reported that
the Postal Inspection Service, a part of USPS that is responsible for
enforcing postal laws, has authority and responsibility to investigate
violations of law that involve USPS e- commerce products and services. In
addition, USPS told us that the antitrust laws and general competition-
related statutes do not apply to

2 P. L. 91- 375.

B- 285058

Page 5 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

USPS, with the exception of the advertising and competition provisions of
the Lanham Act. 3 However, USPS stated that the Postal Reorganization Act of
1970 prescribes competition- related factors that must be considered with
regard to USPS e- commerce activities.

USPS also said that in some cases, major federal regulations apply to its
ecommerce products, including regulations adopted by USPS and other federal
agencies, such as Department of the Treasury and Federal Reserve regulations
related to USPS' eBillPay initiative. However, it also noted that the
ability to make generalizations about how regulations apply to USPS is
somewhat limited. Finally, USPS reported that its activities in the
ecommerce area are generally not subject to administration policies that
apply to other executive branch agencies.

We did not evaluate USPS' legal analysis or attempt to obtain others' views
within the scope of this review. However, we note that USPS, some
competitors, and other stakeholders have conflicting views on the extent of
USPS' legal authority to offer e- commerce products and services and under
what circumstances it should offer such services. The appropriate role of
USPS has been debated for many years and continues to be debated in the
context of proposals for comprehensive legislation to reform the nation's
postal laws. In addition, some specific concerns have been raised about USPS
e- commerce activities that also relate to emerging ecommerce issues, such
as the privacy of consumer information and what new e- commerce products are
subject to PRC review.

In commenting on our draft report, USPS generally agreed with the facts and
endorsed the report's recommendations. However, USPS noted differences in
perspectives related to some of the concerns we discussed. Specifically,
USPS stated that its senior management had reviewed and approved all of its
e- commerce initiatives before implementation. If so, such approvals were
not fully documented. PRC generally agreed with the report's analysis of the
issues and further commented on USPS' pricing policy for its e- commerce
initiatives.

We have reported that USPS may be nearing the end of an era as it faces
growing challenges from competition, notably from private delivery companies
and electronic communications alternatives such as the Internet. 4 USPS and
other stakeholders agree that growth in USPS' core

3 15 U. S. C. sect. 1125( a). 4 U. S. Postal Service: Challenges to Sustaining
Performance Improvements Remain Formidable on the Brink of the 21st Century
(GAO/ T- GGD- 00- 2, Oct. 21, 1999). Background

B- 285058

Page 6 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

business of delivering First- Class Mail has already been affected by the
rapid growth of the Internet, electronic communications, and electronic
commerce. USPS expects that competition will lead to substantial declines in
its First- Class Mail volume in the next decade and a consequent loss of
revenues. Should this occur, USPS will likely face unprecedented challenges
as it seeks to fulfill its primary mission of providing universal postal
service at reasonable rates while remaining self- supporting from postal
revenues.

Thus, USPS may be at a crossroads in its ability to meet its mission of
providing affordable, readily accessible, universal postal services over the
long term. Although USPS has achieved its best ever financial and service
performance over the past 5 years, it has fallen short of its revenue
targets for the first three quarters of fiscal year 2000. USPS recognizes
that it faces challenges from a dynamic and versatile marketplace, changing
customer demands, and more alternative delivery options that provide greater
choices for customers.

As an example of trends that have affected USPS' mail volumes, at the
federal level, government agencies are mandated to move as quickly as
possible to reduce paperwork and to adopt electronic billing and payment. Of
the 880 million Social Security checks, tax refunds, and other payments sent
by the Department of the Treasury in fiscal year 1999, 68 percent were sent
electronically, not mailed. According to USPS, this cost $180 million in
lost First- Class Mail revenue. Further, according to a postal operations
survey conducted by the American Bankers Association, the banking industry
reduced its mail volume in 1999 by almost 18 percent compared to its 1996
level.

Although it is difficult to predict the timing and magnitude of further mail
volume diversion and potential financial consequence, USPS has begun to plan
how it would address such a scenario. The Postmaster General recently
explained that USPS' strategy to deal with its competitive challenge is a
combination of aggressive cost- cutting and new revenue generation. 5
According to USPS, in addition to minimizing costs, the Internet offers
unparalleled opportunities to grow long- term revenue through enhanced and
new services.

5 The Annual Report of the Postmaster General, Hearing before the
Subcommittee on International Security, Proliferation, and Federal Services
of the Senate Committee on Governmental Affairs, July 13, 2000.

B- 285058

Page 7 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

The history of USPS' involvement in e- commerce related products and
services began with a brief foray in 1982 when it introduced its Electronic
Computer- Originated Mail (E- COM) service. 6 However, E- COM generated much
controversy and scrutiny from PRC, the Federal Communications Commission
(FCC), and Congress. In a report by the House Committee on Government
Operations, the oversight committee concluded that the rates charged did not
cover the cost for this initiative. 7 USPS discontinued ECOM service in
September 1985. More recently, during fiscal years 1993 through 1997, as
noted in our 1998 report, USPS engaged in research and development efforts
related to e- commerce activities. 8 Since our previous report was issued,
the exploratory e- commerce efforts have been discontinued or evolved into
more recent initiatives, which are discussed later in this report along with
other new e- commerce initiatives. 9

The nature of the competition that USPS faces in the e- commerce area is
broader than its competition in other service delivery areas, such as for
domestic letter mail and parcels. Not only does competition in the ecommerce
area include USPS' traditional competitors, such as the major private
express delivery companies- FedEx, and United Parcel Service (UPS)- it also
includes such competitors as technology companies, financial institutions,
and foreign postal administrations. Further, within the e- commerce area,
competitors may differ for different types of services, such as electronic
messaging, or e- mail, electronic bill presentment and payment services, and
electronic retail sales involving the purchase and return of goods. For
example, in the electronic bill presentment and payment area, competitors
are numerous and often include partnerships among financial institutions,
billers, consolidators, and technology companies.

In the retail area, on- line sales are expected to grow substantially over
the next few years, which would entail a dramatic rise in parcel shipments
and returns. Thus, although USPS expects more opportunities to expand in
this

6 This service preceded current hybrid mail services, such as Mailing
Online, and allowed mailers to transmit the text of letters over telephone
lines to computers located in 25 specially equipped post offices. The
letters were printed, stuffed into envelopes, and mailed as First- Class
mail so they could be delivered within 2 days.

7 Postal Service Electronic Mail: The Price Isn't Right, Forty- First Report
by the Committee on Government Operations, House Report No. 97- 919, 97th
Congress, 2d Session, Oct. 1, 1982. 8 Our previous report (GAO/ GGD- 99- 15)
discussed USPS e- commerce- related initiatives under which the Electronic
Postmark and Certificate Authority systems were developed. 9 Discontinued e-
commerce related initiatives that were described in our 1998 report included
the following: Deliver America, Electronic Commerce Services, Global ePost,
Post Office Online, and , WEB Interactive Network of Government Services
(WINGS).

B- 285058

Page 8 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

area, it also faces competition from its traditional competitors- FedEx and
UPS- and newly emerging alternative delivery options. For example, private
start- up dot. com companies are also competing for this retail delivery
business by providing same- day delivery, particularly on a regional basis,
for Internet purchases of goods, such as groceries, CDs, videos, and books.
The competitive landscape is very fluid in the ecommerce area, where new
competitors may rapidly appear and disappear.

Another challenge for USPS in the e- commerce area is keeping up with
changing customer demands. USPS' customers are generally categorized into
two major groups: households and businesses . Although businesses generate
most mail, households are the recipients of most of the mail generated by
businesses. 10 USPS recognizes that its customers are becoming more
demanding and selective and are interested in expanding their access to
choice, convenience, service, and value. For example, some mailers have
noted that mail- based billings and payments are more costly to process than
electronic versions.

As the dynamic development of electronic commerce continues to unfold,
consumers, businesses, and governments are working hard to understand and
adapt to the many benefits and challenges associated with the Internet and
related new technology. For USPS, the challenges include providing more
convenient access to its products and services and thus rethinking how to
change the organization to adapt old processes and practices to new
technology, as well as addressing new customer expectations and greater
competition in providing customer services. Congress is closely monitoring
how government organizations adapt in this new environment and has held
numerous oversight hearings to discuss emerging issues, such as privacy,
consumer protection, open access, and competition.

USPS has taken a number of steps since the beginning of 2000 to develop and
implement its e- commerce activities. Some key actions taken include
developing a definition of its e- commerce initiatives, identifying its
ecommerce and related initiatives, outlining overall goals and strategies,
establishing processes for approving and implementing e- commerce
initiatives, and providing some information on expected performance and
results to date. How USPS defines its e- commerce activities is fundamental
when determining what USPS is doing in the e- commerce area and what

10 In 1998, in the United States about 53 percent of mail traffic was from
businesses to households, 5 percent from households to businesses, 3 percent
between households, and 38 percent between businesses, according to USPS.
USPS Activities in the

E- Commerce Area

B- 285058

Page 9 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

process is to be followed in reviewing and approving e- commerce
initiatives. The development of goals and strategies is key to understanding
what USPS expects to achieve in this area. The review and approval processes
are to establish accountability for management and oversight of the e-
commerce initiatives. Information on performance targets and results is to
provide a basis for determining if the actual performance of the e- commerce
initiatives is meeting intended targets.

USPS' definition of its e- commerce initiatives has two components- those
products or services that (1) require the Internet to do business and (2)
generate revenue to USPS through user charges or licensing fees. USPS
defined its e- commerce initiatives as a subset of its broader
“eBusiness” environment, which included other categories of
related initiatives that may involve use of new technology. For example,
related initiatives include “eService” initiatives that are to
be value- added services or enhancements to existing services, and for which
revenues are to be reported with existing products and services. Other
related initiatives referred to as “gray area” initiatives did
not meet the requirements of the ecommerce definition. Another category
called “infrastructure” initiatives included information
technology systems and other technology initiatives that are required to
support eBusiness initiatives. USPS' distinctions among these categories
illustrate that USPS activities involving the Internet include more than
just its designated e- commerce initiatives.

In May 2000, USPS provided us the following information on how its ecommerce
initiatives relate to its broader eBusiness activities and strategy:

“Our eBusiness strategy is voluntary and is intended to improve
capabilities not only for our customers, but also for our 800,000 employees,
business partners, and suppliers, too. Our eBusiness initiatives will have
an ePeople, eService, and eCommerce component. ePeople efforts will keep
employees better informed, provide a full range of ‘self- services, '
reduce administrative tasks, and increase access to development
opportunities. eService initiatives will enhance features, access, and
information about core products and services. eCommerce initiatives are new,
Internet- based products and services for consumers, businesses, and
government entities. All will be supported using an infrastructure that will
link our core production processes, equipment and complete the development
of a common information platform.”

In a July 14, 2000, letter to us, the Deputy Postmaster General explained
the category referred to as gray area initiatives as initiatives that
“have a current revenue model or financial arrangement that does not
accurately meet today's definition for eCommerce.” He stated that
“These initiatives that fall into the ‘gray area' today may, in
response to the changing needs USPS Definition of ECommerce

Initiatives

B- 285058

Page 10 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

of our customers and the marketplace, become clearer as to direct financial
contribution in the future.”

USPS does not consider products and services to be e- commerce initiatives
if they involve use of the Internet but either do not generate revenues or
the revenues generated are related to existing core products and services.
USPS considers these products and services to be valueadded services or
enhancements to existing services. For example, customers can use the
Internet to access information about USPS products and services, look up ZIP
codes and post office locations, download labels for mailing packages, and
check the status of certain items mailed without paying any fees. Customers
can also use the Internet as an alternative channel to access existing core
products and services, such as Priority and Express Mail, to confirm
delivery or arrange for package return. The revenues from these enhancements
are to be reported with those from existing core products and services.

USPS also identified another category of initiatives related to Internet
activities- infrastructure initiatives- which includes information
technology systems or services that are required to support eBusiness
initiatives. One example of a proposed infrastructure initiative would be an
electronic mailbox that could link electronic and physical addresses. This
initiative is currently in the early development stage and is identified by
USPS as an infrastructure, not an e- commerce, initiative. USPS explained
that its proposed electronic mailbox would not generate revenues as a free-
standing service, but it may be offered in conjunction with other ecommerce
services in the future.

USPS identified seven e- commerce initiatives as well as three gray area
initiatives planned or implemented as of September 2000 to facilitate the
movement of messages, merchandise, and money in ways that require the use of
the Internet and generate revenues for USPS. Table 1 provides a list and
descriptions of USPS' e- commerce initiatives as well as gray area
initiatives. As discussed later, however, it appears that USPS may not have
consistently applied its e- commerce definition in identifying those
initiatives. USPS Identified Seven

Current E- Commerce Initiatives

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Page 11 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Initiative Description of initiative Intended customers Status E- Commerce
initiatives

Electronic Postmark (EPM)

Creates a secure electronic time and date stamp for electronic
communications and provides evidence of any tampering. USPS is seeking
business partners to integrate EPM into their products, services, and
systems. Revenue to date has been generated from businesses that
incorporated EPM with their services. EPM also has been used with the
PosteCS initiative.

Financial, legal, medical, governmental, and educational organizations

Implemented 4/ 00. ePayments Provides integrated ePayment solutions:

(1) eBillPay- consumers paying bills, (2) businesses sending bills, (3)
consumers paying each other, and (4) consumers receiving financial
statements. eBillPay services are currently offered through a partnership
with a private company. The eBillPay service is to be offered to new
customers at no charge for the first 6 months. Revenue is to be generated by
user fees.

Consumers and businesses eBillPay was

implemented 4/ 00. The rest of the services are in the planning stage.

Internet Change of Address and Move Related Products and Services
(MoversNet)

MoversNet includes three products and services: the hard copy publications-
Movers Guide and Welcome Kit- and the Internet application called MoversNet.
com. Currently MoversNet. com allows downloading a form for customers to
submit changes of physical addresses and is accessible via the USPS Web site
and via direct link. It is offered through a strategic alliance with a
private company. Future MoversNet enhancements, which are to involve
integration into a proposed MoversGuide Web site, are to allow additional
services, such as electronic changes to physical addresses, e- mail
addresses, and electronic accounts; ordering various services (e. g., power,
electric, water, cable, newspaper, and long- distance telephone service);
and new security features, such as credit card verification. Revenue to date
has been generated by commissions from USPS' partner.

All postal customers MoversNet was implemented summer 1996. Enhancements to
MoversNet were scheduled for implementation in 9/ 00.

NetPost. Certified Is to provide confidential, ensured delivery of
electronic documents to the government. A completed electronic delivery is
to be certified back to the sender via an electronic receipt containing a
USPS electronic postmark that provides legal proof of filing. Revenue is to
be generated from transaction fees from government agencies.

Organizations that file information with the government

Not implemented. NetPost Mailing Online Is to allow mailers to
electronically transmit their documents,

correspondence, newsletters, and other First- Class Mail and Standard A mail
(primarily advertising mail), along with mailing lists, to USPS. Electronic
files would then be securely distributed to printing contractors who print
documents, insert them into addressed envelopes, sort the mailpieces, and
transport the mailing to post offices for processing and delivery. Revenue
is to be generated by printing and mailing fees paid by users.

Small Office and Home Office (SOHO) customers To be implemented

9/ 00.

Table 1: USPS E- Commerce and Gray Area Initiatives as of September 2000

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Page 12 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Initiative Description of initiative Intended customers Status

PosteCS Provides a secure, private, Internet- based document delivery
system. Users establish secure links using Secure Socket Layer (SSL)
protocol. They then upload a file( s) to the PosteCS server using desktop
software. To receive PosteCS messages, the recipients need only to have
access to e- mail and an Internet browser. USPS has joined with Canada Post
and LaPoste of France to provide this service globally. Also, the EPM
initiative was used as part of PosteCS. Revenue is to be generated by user
fees.

Large to medium- size businesses and SOHOs

Implemented 5/ 00. Stamps Online/ Virtual Store Stamps Online allows the
purchase of stamps and other

existing USPS products. After the Virtual Store is implemented, postal
customers are to be able to purchase stamps, philatelic products, phone
cards, and other USPS merchandise via the Internet, including new products
not currently available. Revenue to date has been generated from the face
value of postage stamps and from other existing USPS products ordered via
the Internet.

All postal customers Stamps Online implemented 12/ 98; Virtual Store
implementation planned in 2000.

Gray area initiatives

Returns@ ease Enables customers to return Internet- purchased merchandise.
Using a Merchandise Return Application Program Interface, businesses can
authorize customers to download a postagepaid label directly from their
Internet sites. The program is designed to make returning items bought via
the Internet, through catalogs, and by phone easier for both buyers and
sellers. Revenue is generated from user fees and postage.

Online merchants Implemented 11/ 99. Dinero Seguro™ Allows electronic
fund transfers from the U. S. to Mexico.

Dinero Seguro™, which means “Sure Money,” is a money-
bywire service that can be used to transfer money from designated U. S.
postal locations to more than 1,300 Bancomer Bank branches in Mexico. This
initiative uses telephone lines instead of the Internet and is to become
part of a planned Sure Moneyï¿½ service. a Revenue is generated by Dinero
Seguro™ through money- wire transfer fees.

Americans of Mexican origin, most recently immigrants

Implemented 6/ 96. PC Postage Allows customers of private companies to
purchase and print

stamps onto labels and envelopes using their computers and the Internet.
Private companies sell PC Postage products after USPS certifies that these
products meet USPS standards. USPS receives revenue from the face value of
postage stamps.

SOHO market Implemented 8/ 99. a USPS has identified additional target
countries, which it plans to include in an expansion effort to this
initiative, referred to as Sure Moneyï¿½. Source: USPS documents.

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USPS provided several reasons for its involvement in e- commerce activities.
Some of these reasons are echoed in the overall goals and strategies that
USPS has developed for its eBusiness and e- commerce areas. To carry out
these goals and strategies, USPS has established an eBusiness Integration
team that is responsible for eBusiness implementation planning and for
developing an eBusiness strategic plan. In addition, the eBusiness
Opportunity Board (e- BOB) was established to provide operational oversight
in the eBusiness area and to review the performance of e- commerce
initiatives.

Many postal stakeholders are interested in how USPS sees its e- commerce
activities relating to overall USPS mission and goals. To better understand
USPS' purpose and expectations for the e- commerce area, we asked postal
officials why USPS is involved in the e- commerce area. USPS officials and
documents cited the following reasons for its participation in the ecommerce
area:

“USPS involvement in eCommerce is responsive to its obligations as a
public service. Like other government agencies, it must use information
technologies to provide traditional services to the citizens of the United
States more effectively and efficiently.”

“USPS involvement follows from the mission of the United States Postal
Service, as established by the Postal Reorganization Act of 1970 . . . The
use of modern communications technology such as the Internet to provide
traditional postal services such as delivery of bills or messages is little
different from adopting the new technologies of the railroad or the airplane
to provide prompt, reliable and efficient delivery services.”

“In addition to gaining new efficiencies, our eCommerce initiatives
seek to grow the revenue of the USPS to replace some of the revenues from
traditional mail volume lost to the competition from technological
substitutes. This revenue is essential to maintaining the ability of the
USPS to support the infrastructure developed to provide universal
service.”

“USPS participation in this market is seen by many as critical to
addressing the issue of the ‘digital divide', or the significant
portion of the American population that will not have complete access to the
Internet. This is the core of the USPS mission of binding the nation
together and providing services to all communities.”

“The Postal Service is a national institution, known and trusted by
Americans; it is a neutral party with a universally understood public
service mandate; it protects the privacy of customer's information; it is a
long- lived, stable institution that can be relied on for the long term as
an EBP [electronic bill payment] provider; and it is known for providing
value.”

“The Postal Service is uniquely positioned to preserve the security
and privacy of confidential information. The Postal Service has in- house
law enforcement personnel who can investigate criminal or civil offenses
that occur in connection with transactions sponsored by the Postal
Service.” USPS Goals and Strategies

for E- Commerce Area

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To better understand USPS' direction for its e- commerce activities, we
asked USPS officials about their goals and strategies for the e- commerce
area. In response, USPS provided us with some general guidance that eBOB had
recently approved for the eBusiness and e- commerce areas. In a June 21,
2000, internal memorandum, the Deputy Postmaster General outlined the
overall criteria, goals, and strategies for USPS' eBusiness area as follows:

ï¿½ USPS eBusiness Criteria: “New USPS initiatives will be universally
available, designed to fulfill customer/ marketplace needs, offer customers
voluntary choices, be secure and private, provide financial benefits to our
customers and the USPS, and be consistent with the mission of the Postal
Service.”

ï¿½ USPS eBusiness Goal: “To increase the value, availability, and
affordability of our products and services for all customers (both senders
and receivers) by continuing to use the best available and emerging
technologies, including the Internet. Provide customers with expanded
universal access and choices on how they elect to interface and do business
with the U. S. Postal Service.”

ï¿½ USPS eCommerce Goal: “Use the internet channel to offer new and
enhanced products and services that provide the U. S. Postal Service with
revenue such as license fees and user charges.”

ï¿½ USPS eBusiness Strategies: 1. Develop and implement a customer interface/
channel to the USPS,

which provides seamless physical and electronic mailbox coverage. 2. Use the
Internet as a cost effective communications channel for

customers, suppliers, business “partners,” and employees. 3.
Capitalize on USPS' tradition of providing security and privacy for

customers. 4. Leverage USPS' brick and “motor” assets, i. e.,
38,000 postal facilities

and 200,000 vehicles, as well as USPS' daily delivery infrastructure. 5.
Pursue eCommerce and eService opportunities that meet USPS criteria

and have the potential for business growth. 6. Minimize (especially in the
short term) USPS investments and

financial/ business risks.

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7. Pursue partnerships/ alliances with industry leaders having
“unique” technology, management, marketing, and sales skills and
resources necessary to be successful in this marketplace, including
“Quick to Market” capabilities.

8. Establish structures to assure that costs and revenues associated with
electronic services and products are tracked and allocated.

To better understand how USPS is implementing and managing its ecommerce
activities, we asked how responsibilities were assigned. The Postmaster
General explained organizational responsibilities in a memorandum dated
February 24, 2000, in which he announced that e- BOB would be responsible
for the following:

ï¿½ reviewing eBusiness opportunities and approving those that meet a set of
established criteria;

ï¿½ allocating resources against approved eBusiness pursuits;

ï¿½ ensuring that complete, cross- functional implementation plans are in
place;

ï¿½ providing oversight by measuring performance against established goals;
and

ï¿½ seeing that the organization reacts rapidly to changes in the marketplace.
The Postmaster General also announced that the Deputy Postmaster General
would chair e- BOB, and the Chief Technology Officer would serve as vice
chairperson. Several other postal officers with direct e- commerce
responsibilities included the E- Commerce Vice President, the Corporate/
Business Development Senior Vice President, and the Chief Financial Officer/
Finance Executive Vice President. According to USPS, other USPS officers
with responsibilities for core products and services may also be involved in
certain cross- functional activities related to the e- commerce area.

In May 2000, USPS established an approval and implementation process for its
eBusiness initiatives called the eBusiness Development Review and Approval
process (e- BOB process). This process covers e- commerce initiatives and is
different from the New Products and Service Review and Approval (New
Products) process that is to be used for other new USPS products and
services. The new e- BOB process was established in recognition of the fast-
paced changes in eBusiness and in the e- commerce marketplace. USPS
Processes for

Approving E- Commerce Initiatives

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The e- BOB review and approval process was set up as an expedited 120day,
four- step process under which a sponsoring officer guides the proposed
initiative through the process. The sponsoring officer, in conjunction with
a cross- functional team, is required to develop a business proposal and
business plan for each initiative. The business proposal is to be reviewed
and approved by the sponsoring officer and e- BOB. The business plan is to
be approved by e- BOB and the Management Committee 11 and, when considered
necessary, the Board of Governors (BOG). Final approval of the initiative is
determined by e- BOB and the Management Committee and, when considered
necessary, by BOG. In instances in which a project contains significant
capital investments, the initiative is also to be subject to the
headquarters review and approval process for capital projects, which
involves approval, if appropriate, by area officials, the headquarters
Capital Investment Committee, and final approval by BOG. 12

The New Products process was to be used to review and approve new products,
including initiatives to develop new e- commerce products and services,
prior to the establishment of the e- BOB approval process. According to USPS
officials, the principles of USPS' CustomerPerfect! Annual Management Cycle
guided the development of new e- commerce initiatives. 13 The New Products
process required initiatives to have a business proposition statement-
reviewed and approved by the Chief Marketing Officer (CMO)- and a business
plan- reviewed and approved by the BOG Strategic Planning Committee and the
full BOG. Under this process, initiatives were to undergo a market test. The
results of the market test were to be reviewed by the CMO, the Management
Committee, the BOG Strategic Planning Committee, and the full BOG before the
initiative was implemented.

11 The Management Committee includes the Postmaster General, Chief Executive
Officer; Deputy Postmaster General; Vice President, General Counsel; Senior
Vice President, Human Resources; Chief Financial Officer and Executive Vice
President,; Senior Vice President, Government Relations and Public Policy;
Senior Vice President, Chief Technology Officer; Senior Vice President,
Chief Marketing Officer; Chief Operating Officer and Executive Vice
President; Senior Vice President, Operations; and the Inspector General.

12 Applies to all capital projects exceeding $10 million in total project
costs. 13 The CustomerPerfect! Annual Management Cycle is USPS' Malcolm
Baldrige Award criteria- based management system. The CustomerPerfect!
management cycle of planning, implementation, and review consists of
activities intended to give direction to the organization and to build and
sustain improved performance against set goals. The CustomerPerfect! process
is intended to ensure effective management control through a formalized
system of checks and balances that require top management buy- in at four
critical stages: (1) concept stage, (2) business plan stage, (3) test stage,
and (4) implementation stage.

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Table 2 compares the e- BOB process with the New Products process. Both
approval processes are similar in that they require preliminary proposals
for e- commerce initiatives to be presented for approval by USPS officers
before further action can be taken on the initiatives. Differences between
the two processes are primarily in the business plan and market testing
stages. For example, as shown in table 2, under the New Products process,
the preliminary business plan is to be approved by the Management Committee,
the CMO, and finally sequentially by the BOG's Strategic Planning Committee
and the full BOG. However, under the e- BOB process the preliminary
eBusiness plan is to be reviewed first by a cross- functional team, the
sponsoring officer, and e- BOB, which is to determine whether Management
Committee or BOG action is necessary. In addition, the New Products process
has a formal market testing stage- involving approvals by the CMO,
Management Committee, and BOG- which is not included in the e- BOB approval
process. 14

14 USPS may conduct research and pilot tests and incorporate the results
into the business plan, but these steps are not required under the e- BOB
process.

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eBusiness Development Review and Approval process (5/ 00) (e- BOB process)
New Products and Service Review and Approval process

(New products process) Stage Requirements Approval Stage Requirements
Approval eBusiness proposal ï¿½Present proposal and

supporting documentation (e. g., financial statements/ preliminary break-
even analysis) for review and approval.

ï¿½Present proposal and any recommendations for approval.

Sponsoring officer

e- BOB a

Business proposition statement

ï¿½Present proposition for new initiative to Chief Marketing Officer (CMO) for
review and approval.

CMO

eBusiness plan ï¿½Cross- functional team reviews preliminary business plan,
includes independent analysis/ external consultant review, if appropriate.

ï¿½Plan and supporting documentation are then revised and submitted for
approval by (1) the sponsoring officer and (2) e- BOB.

ï¿½As necessary, the Management Committee reviews business plan, supporting
documentation, and e- BOB minutes and determines whether BOG consideration
is warranted.

Sponsoring officer

Sponsoring officer and e- BOB b

Management Committee/ BOG c

Business plan ï¿½Present preliminary business plan (with Management Committee
feedback) for review and approval to Management Committee.

ï¿½Conduct proof of operations test to validate initiative/ present results to
CMO for review and approval.

ï¿½Present preliminary plan, including test results, for sequential review and
approval by BOG's Strategic Planning Committee (SPC) and the full BOG.

Management Committee

CMO SPC/ BOG Not Applicable Market testing ï¿½Present results of limited
market

test to CMO for approval to proceed with major market test.

ï¿½Present proposal to proceed with major market test for sequential review
and approval.

ï¿½Submit major market test results for CMO review and approval to move to
initiative implementation.

CMO Management Committee/ SPC/ BOG

CMO

Public affairs/ communications event plan

ï¿½Follow event planning guide if announcement or event is to announce new
initiative. (Minimum of 6 weeks is required for effective and properly
handled announcement.)

Public Affairs/ e BOB Implementation

roll out ï¿½Finalize plan using market test results and Management

Committee feedback.

ï¿½Present plan, including test results, for sequential review and approval to
implement/ roll out.

Management Committee

Management Committee/ SPC/ BOG

Table 2: USPS' Processes for Review and Approval of E- Commerce Initiatives

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eBusiness Development Review and Approval process (5/ 00) (e- BOB process)

New Products and Service Review and Approval process (New products process)
Stage Requirements Approval Stage Requirements Approval Initiative
monitoring ï¿½Track quarterly (or more

frequently if directed by e- BOB); resulting suggestions and recommendations
will affect initiative's future direction.

Initiative monitoring ï¿½Track continuously against the

business plan, perform annual reviews, and improve initiative as indicated.

a Approval by e- BOB at proposal stage authorizes seed funding for testing,
if applicable, and business plan development. b e- BOB is to (1) approve the
plan (2) defer for additional information, or (3) disapprove the plan.

c Generally, eBusiness initiatives, including e- commerce initiatives, are
within management's approval authority. Therefore, unless specified in the
bylaws, these initiatives require only BOG notification or consideration
from an advisory standpoint prior to their contractual commitment or
implementation.

Source: USPS documents.

The Deputy Postmaster General explained to us how resource allocation for e-
commerce initiatives was unlike that for all other areas in the USPS budget.
He said that all of the funding for USPS e- commerce activities was budgeted
and kept in one overall fund. He said these funds were not allocated to
specific managers until program managers justified the use of funds for
specific projects.

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USPS provided some information on the performance targets and results of its
e- commerce initiatives to date. USPS also gave us the following explanation
in July 2000 of why performance targets for fiscal year 2001 were not
provided:

“It is important to recognize that performance targets provided in
business plans, DARs [decision analysis reports], and business proposals are
projections. They are dependent on Board of Governors' approval of the FY
2001 budget in October 2000, as well as on approval of the business plans,
where annotated. Until approval occurs, we think that it is premature to
publicly report quantitative plans or targets for the specific initiatives.
However, the aggregate FY 2001 planned revenue for eCommerce initiatives
that is being submitted for approval and to PRC totals $104. 0 million.
Projected expenses specific to eCommerce initiatives total $67.2 million.
This does not include infrastructure and other costs associated with
eCommerce, which will be calculated as part of our ongoing obligation to
appropriately report those incurred costs. Similarly, it will differ from
the total estimate of $146 million, provided to the Postal Rate Commission,
which encompasses our other eBusiness initiatives.”

Evaluation of the results of USPS' e- commerce initiatives, according to
USPS, is generally based on the service performance provided to consumers
and businesses and on the basis of revenue, cost, and contribution to
financial performance. Postal officials explained that the eBOB, Management
Committee, and depending on the level of investment or potential liability,
the Headquarters Investment Committee and BOG, are responsible for
evaluating the USPS e- commerce program as a whole as well as the individual
initiatives. A BOG resolution adopted in June 2000 specifies that
“significant new types of e- commerce initiatives, which have not been
previously presented to the Board [of Governors] for review, shall be
presented to the Board before being launched.” Initiative reviews by
e- BOB are to be conducted on at least a quarterly basis, and quarterly
status reports are to be sent to BOG.

Table 3 includes information on the performance targets and results, when
applicable, for USPS e- commerce initiatives. Performance Expectations

and Results

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Targets and Performance by Fiscal Year Initiative Status of

initiative 1996 1997 1998 1999 2000 a

Electronic Postmark (EPM)

Target Performance

Implemented 4/ 00

Not applicable Not applicable Not applicable

Not applicable Not applicable Not applicable Not applicable

Not applicable $60,000 b $30,000 b ePayments

Target Performance

(eBillPay) Target Performance

Not implemented (except eBillPay)

Implemented 4/ 00 Not applicable

Not applicable Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Number of users Proprietary MoversNet c

Target Performance

Enhancements to MoversNet

Target Performance

Implemented 1996

To be implemented 9/ 00

Not provided Not provided d

Not applicable Not applicable

Net contribution $6,107,000 de

Not applicable Not applicable

Net contribution $2,720,000 e

Not applicable Not applicable

Net contribution $5,458,000 e

Not applicable Not applicable

Net contribution $11,104,000 e

Not applicable Not applicable NetPost Mailing Online

Target Performance

To be implemented 9/ 00

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable NetPost. Certified

Target Performance

Not implemented Not applicable Not applicable Not applicable

Not applicable Not applicable Not applicable Not applicable

Not applicable Not applicable Not applicable PosteCS Target Performance

Implemented 5/ 00 Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

$493,000 b Not provided Stamps Online

Target Performance

Virtual Postal Store Target Performance

Implemented 12/ 98

Not implemented Not applicable

Not applicable Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

Not applicable Not applicable

$4,000,000 f $5,710,000 f

Not applicable Not applicable

$10,158,000 f $10,561,000 f

Not applicable Not applicable

Note: “Not applicable” means that the initiative was not
implemented. a Through February 2000.

b Revenue. c Internet Change of Address and Move- Related Products/ Services
(MoversNet) included the Movers Guide, Welcome Kit, and Moversnet. com. d
Contribution for fiscal year 1996 was included in data for fiscal year 1997.

e Revenues toward net contribution were generated from two hard copy
publications: the Movers Guide and the Welcome Kit.

Table 3: Targets and Performance of E- Commerce Initiatives, Fiscal Years
1996 Through 2000

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f Revenues generated from postage stamps and other existing USPS products
ordered via the Internet. Source: USPS documents.

During our review, we identified a number of inconsistencies and other
problems in the information provided by USPS that indicated areas in which
it can improve implementation of its e- commerce initiatives. These
deficiencies indicate that more effective management and oversight is needed
in this area. First, during the course of our review, USPS inconsistently
applied its definition of e- commerce in identifying its initiatives and
provided inconsistent information on the status of its initiatives. These
inconsistencies made it difficult to ensure we had a complete and accurate
picture of USPS' e- commerce activities. Second, USPS had not consistently
adhered to its process requirements and did not always document the review
and approval of its initiatives. Consequently, it is not clear that USPS
management properly reviewed and approved ecommerce initiatives to ensure
that they would support USPS' overall mission and goals. Finally, we
identified deficiencies in the financial information provided for the e-
commerce activities that raised concerns about the accuracy and completeness
of USPS' financial reporting for its ecommerce activities.

As a result of inconsistencies in the information provided by USPS, we are
not sure that USPS provided complete and accurate information on the
identification and status of its e- commerce initiatives. Throughout this
review, USPS provided numerous documents related to its e- commerce
initiatives that included conflicting information about the identification
and status of its e- commerce initiatives. USPS was able to reconcile some
of the inconsistencies, but consistency across the organization will be
necessary for USPS to provide accurate and complete information on the
status of its e- commerce initiatives. As previously mentioned, BOG is to
receive quarterly status reports on USPS' e- commerce initiatives.

USPS has struggled to properly classify its e- commerce and other
initiatives that relate to its broader eBusiness environment. The initial
list of e- commerce and associated infrastructure initiatives that USPS
provided to us in April 2000 included 28 initiatives. As of July 2000, the
list had been reduced to seven e- commerce initiatives. Some of the
initiatives on the initial list were dropped because they were identified as
infrastructure or enhancements to core products and services, and others are
now called gray area initiatives because they did not fit the definition of
e- commerce initiatives. In addition, some initiatives are in various stages
of development, and their classification may change as their Opportunities
for

Improving Implementation of ECommerce Initiatives

Inconsistencies in Identifying E- Commerce and Related Initiatives

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product features evolve. As we discussed the rationale for the
classification of specific initiatives with USPS officials, we noted several
apparent inconsistencies where initiatives that seemed to have similar
characteristics were not treated similarly. Some examples of apparent
inconsistencies in the application of USPS' e- commerce definition- for
products and services that (1) require the Internet to do business and (2)
generate revenue to USPS through user charges or licensing fees- that we
brought to the attention of USPS officials were as follows:

ï¿½ GAO: Advertising revenue generated by MoversNet does not appear to be a
user charge or a licensing fee- the two kinds of revenue specifically listed
in USPS' definition of e- commerce.

ï¿½ USPS Response: MoversNet is a part of the strategic alliance between USPS
and its partner. The net contribution generated by the strategic alliance,
which is split between USPS and its partner, is treated as revenue to USPS.
USPS currently views and treats this form of revenue as commissions received
from USPS' partner for this service, which could be classified as a
licensing fee for the use of USPS' infrastructure, name, and good will. It
has seemed to make sense to manage this initiative as a part of the e-
commerce management process.

ï¿½ GAO: According to the explanation provided, MoversNet includes the Movers
Guide and the Welcome Kit- traditional hard copy postal products that do not
require use of the Internet. Thus, these components would not appear to fit
the e- commerce definition.

ï¿½ USPS Response: MoversNet also includes the MoversNet. com application. The
components of all three aspects of MoversNet are related and are being
managed in conjunction with the electronic application. USPS has found it
useful to manage together various aspects of some of these ecommerce
initiatives, which are being developed as part of the same effort, even
though some of the subparts might not independently fit the definition of e-
commerce initiatives if considered independently. It makes internal business
sense to proceed in this way. USPS recognizes that where charges need to be
set and revenues and costs reported and evaluated, care is needed to
attribute costs and revenues to the proper activity.

ï¿½ GAO: The Stamps Online component of the Stamps Online/ Virtual Store
initiative appears to fit the definition of an enhancement- that is,
providing front- end or back- end Internet access to core or existing USPS

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products and services. Revenues from enhancements are to be reported with
core or existing products.

ï¿½ USPS Response: StampsOnline revenue was previously reported as revenue
diverted from other channels. However, USPS plans to expand both product
lines and product markets through launch of the Virtual Store. Therefore,
USPS continues to include StampsOnline/ Virtual Store with listed e-
commerce initiatives.

ï¿½ GAO: USPS sold philatelic collectibles on the Internet via eBay from July
7 to July 16, 2000. This initiative appears to fit the definition of a USPS
ecommerce initiative in that it required use of the Internet and generated
revenue to USPS.

ï¿½ USPS Response: These are regarded as asset sales rather than user charges.
This program has more in common with other philatelic initiatives than with
electronic commerce initiatives. Accordingly, it is managed in tandem with
other philatelic programs, rather than passing through the e- BOB and
related processes for the management of ecommerce initiatives.

Our questions and comments and USPS' responses to them illustrate the
potential for differences in interpretation that may occur. In some cases,
it was difficult to understand the rationale for the identification of the
initiatives without more clarification from USPS on how it intended to treat
the revenue from these initiatives. Also, some initiatives were provided in
conjunction with other products and services, and it was not clear how the
revenues would relate to e- commerce versus other core products or services.
Finally, some initiatives were not currently generating revenues, such as
eBillPay, but USPS planned to generate revenues from these initiatives in
the future. USPS' consistent application of its e- commerce definitions is
important so that it can maintain complete and accurate information about
its e- commerce and related activities.

USPS also provided conflicting information related to the status of certain
e- commerce activities that made it difficult for us to determine when some
of the e- commerce initiatives had been implemented. For example, USPS
documents provided in April 2000 reported that the Electronic Postmark (EPM)
and MoversNet initiatives had been implemented, that is, were made publicly
available. USPS documents provided in July 2000 showed that EPM had not been
implemented, but USPS has since reported that it was implemented in April
2000. Likewise, the July 2000 USPS documents showed that MoversNet was
scheduled to be implemented in July 2000.

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USPS documents provided on August 4, 2000, stated that MoversNet had been
implemented in the summer of 1996. USPS officials explained that the
MoversNet implemented in the summer of 1996 consisted of access via the
MoversNet Internet site to a form that could be used to order the hard copy
Movers Guide and Welcome Kit and that enhancements to MoversNet were
scheduled to be implemented in September 2000. The July 2000 documents
showed that of the seven e- commerce initiatives, only two- eBillPay and
PosteCS- had been implemented. The August 4, 2000, USPS documents stated
that five of its seven initiatives- eBillPay, EPM, MoversNet, PosteCS, and
Stamps Online/ Virtual Store- had been fully or partially implemented.
Subsequently, BOG approved implementation for NetPost Mailing Online to take
effect in September 2000. We recognize that activities in this area continue
to evolve. However, USPS has had difficulty providing complete and accurate
information on initiatives that have been ongoing for some time.

USPS has not consistently followed its current or former processes for
approving and reviewing e- commerce initiatives. Based on information
provided by USPS, none of the five e- commerce initiatives fully or
partially implemented to date have had all of the required documents or
formal approvals from appropriate officials. Without business plans and
documented approvals, USPS cannot ensure that its e- commerce initiatives
are being appropriately planned and reviewed so that they will support USPS'
overall mission and goals.

Based on the documentation provided by USPS, USPS did not follow all of the
requirements of either the applicable e- BOB or New Products review and
approval processes. USPS initiatives introduced before the new e- BOB review
and approval process was finalized in May 2000 were subject to the New
Products process. Thereafter, the initiatives were subject to the eBOB
review and approval process. For example, USPS reported that its PosteCS
initiative was launched on May 9, 2000. The required documents to approve
this initiative prior to implementation, and thus prior to the eBOB review
and approval process, should have included a business proposition statement,
preliminary business plan, market test results, and a finalized business
plan. However, the documentation USPS provided to us for this initiative was
a business proposition statement to the CMO in May 1998, a preliminary
business plan in March 1999, and a business proposal presented to e- BOB for
approval in July 2000- after the initiative was publicly launched in May
2000. Likewise, USPS launched its Electronic Postmark initiative in April
2000 and provided a business proposal that was presented to e- BOB in July
2000. Table 4 shows the USPS Has Not Consistently

Followed its Processes for Approving E- Commerce Initiatives

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documentation and approvals USPS provided to us for each of its ecommerce
initiatives. However, we did not assess the substance of these documents.

Initiative (Date implemented) Business proposition

statement a Business plan Market test Implementation approval

Electronic Postmark (Implemented 4/ 00)

Yes – business proposal 7/ 00

Not provided Not provided b Not provided ePayments

ï¿½ (eBillPay) (Implemented 4/ 00)

Not provided Yes – draft business plan – 3/ 00 Not provided Yes
– BOG – 4/ 00 Internet Change of Address and MoveRelated
Products and Services

ï¿½ (MoversNet) (Implemented 1996);

ï¿½ Enhancements to MoversNet (To be implemented 9/ 00)

Not provided Yes - business proposal presentation to e- BOB – 4/ 00

Not provided Not provided

Not provided Not applicable c

Not provided Not implemented

NetPost. Certified (Not implemented)

Yes – 3/ 00 Not provided Not applicable c Not implemented NetPost
Mailing Online (To be implemented 9/ 00) Not provided Yes –
preliminary

business plan – 12/ 96 Not applicable c Yes – BOG – 8/ 00
PosteCS (Implemented 5/ 00)

Yes – business proposition statement to CMO – 5/ 98; business
proposal to e- BOB – 7/ 00

Yes – preliminary business plan – 3/ 99; plan approved by e- BOB
– 8/ 00

Not provided b Not provided Stamps Online (Implemented 12/ 98) Virtual Store
(Not implemented)

Not provided Not provided

Not provided Not provided

Yes –12/ 97, 7/ 98, 9/ 98 Not applicable c

Not provided Not implemented a Business proposition statement required under
the New Products process; business proposal required under the new e- BOB
process. b No individual market testing was done on EPM, other than USPS
offering it in conjunction with

PosteCS. USPS provided an Electronic Commerce Services Product Market Study
dated June 1997 prepared by an outside consultant that focused primarily on
examining the market potential for an electronic postmark as well as other
electronic commerce services under consideration. According to USPS' 1998
Comprehensive Statement on Postal Operations, p. 70, EPM was integrated into
one messaging service and both fully functional services were then to be
used in limited market tests. c The e- BOB process was applicable in May
2000; thus, market testing was not required for this

initiative. Source: USPS documents.

Table 4: USPS Documentation of Its Review and Approval of E- Commerce
Initiatives

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We requested available data on financial results for fiscal years 1995
through 2000 for USPS e- commerce initiatives as part of our work to report
on results from these initiatives. In response to our request, USPS provided
information on revenues and expenses generated by its ecommerce initiatives,
although some did not have reported revenues because they had not been
implemented by USPS' cut- off date of February 2000. 15 In April 2000, USPS
provided data on its revenues and expenses to date for its current e-
commerce initiatives, based on USPS' list of ecommerce initiatives that was
provided at that time. We did not independently verify or audit the overall
integrity of USPS' data. However, we examined the data to see whether they
appeared to be consistent with USPS' e- commerce definition and criteria,
clear as to what was included, and complete. We notified USPS of several
concerns we had with the April 2000 data; USPS acknowledged our concerns and
provided revised data for some of its current e- commerce initiatives as
well as its discontinued ecommerce initiatives on June 15 and June 27, 2000.
We advised USPS of similar problems with the June data, and USPS provided
another set of substantially revised data in July. However, our review of
the July data continued to raise concerns about their consistency, clarity,
and completeness.

Due to the data deficiencies, we do not have confidence that the revenue and
expense data USPS provided for its individual e- commerce initiatives are
accurate and complete. Consequently, we do not believe the financial data
that USPS provided could be used to reliably assess USPS' progress toward
meeting its overall financial performance expectation that revenues
generated by e- commerce products and services in the aggregate are to cover
their direct and indirect costs as well as make a contribution to overhead.

We recognize that USPS has recently implemented many of its current
ecommerce initiatives; thus, it may be premature to assess its progress
against its financial goal. As we noted in our 1998 report on new postal
products, it may not be reasonable to expect all new products to become
profitable in their early years, because new products generally take several
years to become established and recover their start- up costs. 16 In this
regard, several e- commerce initiatives, such as the Electronic Postmark,

15 USPS provided data for current and discontinued initiatives from
inception, which predated fiscal year 1995, through fiscal year 1999 and
partial results for fiscal year 2000. The cut- off date in fiscal year 2000
appeared to vary for some initiatives for the data that USPS provided to us
in April 2000. In July 2000, USPS provided revised data with a February 2000
cut- off date for revenues and expenses generated by each e- commerce
initiative.

16 GAO/ GGD- 99- 15. Problems and

Inconsistencies in USPS Reported Financial Results for E- Commerce Area

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eBillPay, and PosteCS, were launched earlier this year. USPS' Virtual Store
and its NetPost. Certified initiatives were not implemented as of August
2000. Nonetheless, without accurate and complete information on the revenues
and expenses associated with USPS' e- commerce initiatives, USPS and other
stakeholders will not be able to assess progress toward meeting USPS'
financial goal in the e- commerce area.

We noted apparent inconsistencies in the e- commerce expense data that USPS
provided. For example, problems included apparent inconsistencies between
the data USPS provided to us and to PRC for its Mailing Online initiative.
In July 2000:

ï¿½ USPS reported to us about $2.2 million in Mailing Online expenses through
fiscal year 1998, up from about $112,000 that was reported to us in April
and June 2000. USPS also reported that there was no available breakdown of
Mailing Online expenses from inception through fiscal year 1998, although
such breakdowns were made for other e- commerce initiatives (i. e., expenses
through fiscal year 1997 and for fiscal year 1998).

ï¿½ USPS clarified that data for Mailing Online expenses (and revenues) did
not include associated expenses under USPS' discontinued PostOffice Online
initiative to develop and conduct the first test of Mailing Online. In this
regard, USPS provided data to us on PostOffice Online expenses that differed
from the expense data USPS reported to PRC. For example, on June 15 and June
27, 2000, and on July 2000, USPS reported to us expenses for PostOffice
Online of $0. 8 million for fiscal year 1997, $4.5 million in fiscal year
1998, and $0 in fiscal year 1999. In comparison, USPS reported to PRC in
April 2000 expenses of $0 for fiscal year 1997, $9.6 million for fiscal year
1998, and $18.2 million for fiscal year 1999.

ï¿½ USPS reported to us that capital commitment data were not available for
Mailing Online before fiscal year 2000. Yet, on June 15 and June 27, 2000,
USPS reported to us that its capital commitment for Mailing Online in fiscal
year 1999 was $3.5 million.

Also, in April and June 2000, USPS reported to us that there were no
expenses in some years for certain e- commerce initiatives, even though it
reported that USPS staff had been working on those initiatives in the same
time periods. Conversely, USPS reported no USPS staff had worked on certain
e- commerce initiatives in some years, even though it reported operating
expenses in the same years.

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With respect to revenues, as the examples that follow indicate, we also have
continuing concerns with the completeness and accuracy of these data, partly
because of the substantial revisions that were made from one report to
another. For example:

ï¿½ USPS substantially lowered reported revenues for its MoversNet initiative
from $41.0 million in its April 2000, June 15, 2000, and June 27, 2000,
reports to $25.4 million in July 2000. USPS provided no explanation for this
revision.

ï¿½ USPS reported Electronic Postmark (EPM) revenues for fiscal year 2000 of
$90,000 in April 2000, $0 on June 15, 2000, $60,000 on June 27, 2000, and $0
in July 2000. In July 2000, USPS also reported that EPM generated revenues
of $30,000 after the February 2000 cut- off date for fiscal year 2000 data.

ï¿½ USPS revised reported revenues from its ePayments initiative from $3.8
million in its April and June 2000 reports to $0 in July, apparently because
the revenues that were initially provided for fiscal year 2000 were based on
expected revenues instead of actual revenues.

Without reliable revenue and expense data, USPS and others will not be able
to assess USPS' progress toward its goal that USPS e- commerce products and
services are to cover their direct and indirect costs. In addition, in order
for such an assessment to be made, additional data would be needed. For
example, data would be needed on expenses associated with its e- commerce
initiatives, such as (1) expenses related to information systems required to
support e- commerce initiatives and (2) some expenses for other
infrastructure initiatives that supported ecommerce initiatives. As USPS
recognized in its July 20, 2000, letter to us, it plans to calculate
“infrastructure and other costs associated with eCommerce . . . as
part of our ongoing obligation to appropriately report those incurred
costs.”

USPS provided us in July 2000 with a “Summary of e- Commerce
Initiatives” that included “Total Revenue” of $41.8
million from USPS' current e- commerce initiatives, “Total
Expenses” of $21.1 million from these initiatives, and “Capital
Commitment” of $5. 2 million from these initiatives. However, such
data would not be sufficient to tally all revenues and the direct and
indirect expenses needed to calculate the net contribution to date from USPS
e- commerce initiatives. First, these data do not include $37.4 million in
expenses and $1. 2 million in capital commitment reported in July 2000 for
discontinued e- commerce

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initiatives. 17 Second, 99.8 percent of USPS' revenues for e- commerce
initiatives reported to us in July 2000- specifically, revenues from Stamps
Online and Movers Net-- appeared to be based on revenue that fit the
definition of revenues generated by core and existing postal products and
services or Internet enhancements to provide front- end or back- end access
to these products and services. As USPS had told us on June 15, 2000, such
revenues are to be included with revenues from the core and existing
products. Specifically:

ï¿½ Stamps Online: USPS reported in April 2000 that this initiative had
generated $16.3 million in “existing revenue diverted from other USPS
channels,” such as revenue from the on- line sale of hard copy stamps.
However, as we noted to postal officials in July, such revenue appeared to
fit the USPS definition of “our web presence through ‘front-
end' or ‘backend' internet access to our core or existing USPS service
or products that . . . do not fall within the Postal Service's definition of
‘electronic commerce initiatives. ' The resources for these functions
are reported with other core or existing US Postal Services.” In July,
USPS revised its data for Stamps Online to report $16.1 million in
“re- channeled” revenue that was included from hard copy stamps
ordered via the Internet in the $41.8 million in total revenues generated
from current e- commerce initiatives. According to USPS officials, the other
$163,000 in Stamps Online revenue was generated through the sale of existing
USPS products ordered via the Internet.

ï¿½ MoversNet: USPS reported in April and June 2000 that this initiative
generated $41.0 million in revenues from advertising fees paid by commercial
enterprises to have products and services included in MoversNet. When we
questioned the inclusion of the hard copy- Movers Guide and Welcome Kit-
publications, USPS told us that the three components of this initiative are
related and are being managed in conjunction with the electronic
application. However, USPS also said that these components “might not
fit the definition of eCommerce initiatives if they were considered
independently.” In July, USPS reduced revenues from this initiative to
$25.4 million. In August, USPS clarified that these revenues were generated
exclusively by the hard copy publications, which could either be picked up
at postal locations or ordered via the Internet. In our opinion, revenues
generated by hard copy publications that do not require use of the Internet
would be inconsistent with USPS' definition of e- commerce. If these
publications were ordered via the Internet, they

17 These discontinued e- commerce initiatives included Electronic Commerce
Services R& D, PostOffice Online, WEB Interactive Network of Government
Services (WINGS), Deliver America, and Global ePost. See GAO/ GGD- 99- 15
for a description of these initiatives. USPS reported expenses through
fiscal year 1998 for these initiatives in June and July 2000. USPS reported
no revenues from these initiatives.

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would fit USPS' definition of front- end or back- end access to an existing
product.

USPS has a unique status as an independent establishment of the executive
branch, and, as such, some laws and regulations may apply differently to
USPS from how they apply to other federal agencies or private sector
companies involved in similar e- commerce activities. To provide Congress
with information on USPS' legal authority in this complex and emerging area,
we asked USPS a series of questions about how it views the application of
certain laws and regulations to its ecommerce activities. USPS' General
Counsel provided written responses to our questions. Other postal
stakeholders or competitors may have interpretations different from those of
USPS. We did not evaluate USPS' legal analysis or attempt to obtain others'
views within the scope of this review.

USPS believes it has broad statutory authority to offer e- commerce products
and services in ways that USPS finds appropriate to its assigned functions
and in the public interest. USPS believes this authority is grounded in
several provisions of the Postal Reorganization Act of 1970, not just the
provision relating to its specific power to offer nonpostal services.
According to USPS, numerous federal laws and regulations apply to its e-
commerce products and services, but it has a legal status that differs in
some respects from the status of its competitors in the private sector.
Appendix II summarizes USPS- provided information on laws, regulations, and
policies, including information in such areas as (1) USPS statutory
authority to offer e- commerce products and services, (2) privacy, (3)
consumer protection, (4) criminal statutes, (5) the application of
regulations, and (6) the possible application of administration policy.

USPS competitors and others have raised questions on the extent of USPS'
legal authority to offer e- commerce products and services and under what
circumstances it should offer such services. To put these concerns into
context, the appropriate role of USPS has been debated for many years and
continues to be debated in the context of proposals for comprehensive
legislation to reform the nation's postal laws. In addition, some specific
concerns have been raised about USPS e- commerce activities that also relate
to emerging e- commerce issues, such as the privacy of consumer information.
USPS Views of its

Authority in the E- Commerce Area

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We have issued reports in three areas that may relate to the application of
laws and regulations to USPS e- commerce activities: (1) USPS' authority to
develop and market new products; (2) applicable federal privacy laws that
relate to change- of- address information reported by USPS customers; and
(3) proposed postal reform legislation that would change USPS' current
statutory authority to develop, test, approve, and market new products in a
number of ways. As noted in appendix I, due to time constraints, we did not
update this past work for the purposes of this review, which pertains to
specific USPS e- commerce activities.

We reported in 1998 that “The statutory and regulatory authorities
governing the Postal Service provide the Service provide broad latitude to
develop and market a wide variety of new products, including both postal and
nonpostal products. Under these broad authorities, USPS has developed an
array of new products . . . .” 18 However, we also reported that
“Our analysis shows that the Service is subject to at least three
constraints in developing and marketing new products.” These
constraints were:

ï¿½ First, because it is the underlying statutory mission of USPS to provide
postal services to bind the nation together, USPS needs to be able to
explain how any new product it develops will further that mission. Citing 39
U. S. C. sect. 101, we reported that USPS' basic mission is to provide postal
services to bind the nation together and provide those services in a prompt,
reliable, and efficient manner, at reasonable rates, to all communities and
patrons.

ï¿½ Second, under its statutory authority, before marketing (including test
marketing) a new domestic postal product, which necessarily involves
classification 19 of mail, USPS must request a recommended decision from PRC
regarding the propriety of USPS' proposed classification, rates, or fees for
the new product. Prior to issuing its recommended decision, PRC is required
to hold hearings on USPS' proposal. The Postal Board of Governors, however,
may reject or modify PRC's recommended decision. USPS is not required to
request a recommended decision from PRC in the case of nonpostal products,
such as telephone cards and retail merchandise.

18 GAO/ GGD- 99- 15. 19 Classification refers to a grouping of mail matter
for assigning it a specific rate or method of handling. Prior GAO Reports
That

Discussed USPS Legal Authority

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ï¿½ Third, USPS' ability to market new products can be constrained or
influenced by congressional oversight, restrictions imposed during the
appropriations process, or other legislative actions.

We also reported in 1996 and 1999 that we and USPS have differing
interpretations of federal privacy protections that relate to change-
ofaddress information reported by USPS customers. 20

ï¿½ In 1996 and 1999, we reported that through its National Change of Address
(NCOA) program, USPS collects and widely disseminates change- ofaddress
information reported by postal customers to a number of private firms
licensed by USPS to provide address correction services. We reported that
postal customers' change- of- address data are protected from inappropriate
release or use under applicable federal privacy laws. However, in our view,
USPS collects change- of- address information from postal customers for the
limited purposes of address list correction and mail forwarding, not for the
purpose of creating and maintaining newmovers lists. Thus, in our view, use
of NCOA- linked data to create or maintain new- movers lists by USPS
licensees, who are viewed under the Privacy Act as if they were USPS
employees, would not be consistent with the limitations imposed by the
Privacy Act.

USPS disagreed with our assessment. USPS officials told us:

ï¿½ USPS does not provide names to be included on any licensee or customer
lists. NCOA information provided to licensees, and by licensees to their
customers, is limited to the new addresses of persons whose names and
addresses are already on the licensee's or the customer's list. Thus, the
NCOA program does not violate the prohibition in the Privacy Act against
unauthorized disclosure of an individual's name and address.

ï¿½ Neither the Privacy Act nor the Postal Reorganization Act of 1970 limit in
any way licensees' and customers' use of address data that have been
properly updated or corrected through the NCOA service. Releasing the NCOA
file to licensees to provide address- correction services and licensees'
subsequent release of new addresses of postal customers- whose names and old
addresses are already on a licensee's or its customer's lists- is lawful
when done in accordance with the provisions and conditions of the licensing
agreement. After a licensee performs

20 See U. S. Postal Service: Improved Oversight Needed to Protect Privacy of
Address Changes (GAO/ GGD- 96- 119, Aug. 13, 1996); and U. S. Postal
Service: Status of Efforts to Protect Privacy of Address Changes (GAO/ GGD-
99- 102, July 30, 1999).

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address correction services as a USPS agent, it is then free under the
Privacy Act to use NCOA- linked data to create or maintain new- movers
lists. With regard to the licensees' customers, USPS has no responsibility
to attempt to restrict the use of NCOA- linked data by a private business
with which it has no legal relationship. Our 1999 report disagreed with this
assessment. It raised as a matter for congressional consideration that
Congress may wish to amend the Postal Reorganization Act of 1970 to (1)
expressly prohibit the use of change- ofaddress data by licensees and their
customers in the creation or maintenance of new- movers lists; or (2)
specifically require USPS to have its licensees and their customers
acknowledge in writing that they have been informed and understand that
change- of- address data may not be used for any purpose not authorized by
law, including the creation and maintenance of new- movers lists. As of
August 2000, Congress had not acted on this matter.

Finally, our 1998 report on new postal products discussed how proposed
comprehensive legislation known as postal reform legislation would have
amended USPS' current statutory authority to develop, test, approve, and
market new products in a number of ways. 21 The legislation, H. R. 22,
introduced by the Chairman of the Subcommittee on the Postal Service, House
Committee on Government Reform, was based on the premise that USPS
participation in competitive markets should be, to the maximum extent
possible, on the same terms and conditions as those faced by its private
sector competitors. As of July 2000, H. R. 22 was pending in the House
Committee on Government Reform.

USPS told us that it has broad statutory authority to offer e- commerce
products and services in ways that USPS finds appropriate to its assigned
functions and in the public interest. According to USPS, several provisions
of federal law individually and collectively provide the necessary legal
authority for it to offer e- commerce products and services. In exercising
its authority in the e- commerce area, USPS told us that the law provides
discretion to BOG to determine whether particular new services are
appropriate and in the public interest. USPS told us that several provisions
of title 39 of the U. S. Code, which establishes the basic legal framework
for USPS, give it the authority to offer e- commerce products and services.
Specifically:

ï¿½ Under Section 401, which provides USPS with “general powers”
that USPS described as “broad businesslike powers,” USPS may
enter into

21 GAO/ GGD- 99- 15. USPS Reported It Has

Broad Statutory Authority to Offer E- Commerce Products and Services

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agreements, make expenditures, obtain property rights, or perform other
transactions useful to accomplish its functions, such as the authority to
contract, expend resources, acquire property, or perform other transactions
useful to accomplish its functions, whether or not involving the Internet in
some respect.

ï¿½ Section 404 states that without limiting its more general powers, USPS may
exercise certain specific powers, such as handing mail, prescribing how
postage is paid, selling postage, and providing special nonpostal or similar
services. According to USPS, “These provisions are stated in the
language of broad inclusion, rather than of narrow constraint. Where the
Internet would be useful to the Postal Service and its customers in the
performance of its functions, this section does not limit access to that
medium along with other methods for getting the job done.”

ï¿½ Section 403, relating to “general duties,” outlines mandatory
USPS functions to which USPS may apply its general and specific powers. USPS
stated that most of the Internet- related services that it has considered to
date fall inarguably within the scope of its mandatory general duties. For
the most part, these services involve channels or avenues intended to make
postal services more accessible or convenient for customers who use the
Internet.

USPS specifically stated that three subsections of title 39 are each broad
enough to empower USPS to provide any service, conduct, or activity (not
prohibited elsewhere) that appropriately serves its purposes as reflected in
title 39:

ï¿½ subsection 401( 3), which gives USPS the authority to determine the
character of, and necessity for, its expenditures;

ï¿½ subsection 401( 10), which gives USPS “all other powers incidental,
necessary, or appropriate to the carrying on of its functions or the
exercise of its specific powers;” and

ï¿½ subsection 404( a)( 6), which authorizes USPS “to provide,
establish, change, or abolish special nonpostal or similar services.”

In this context, USPS discussed how it sees e- commerce products and
services as appropriately serving its purposes:

ï¿½ USPS' understanding is that section 101( a) of title 39, in describing the
“basic function” of USPS as an “obligation to provide
postal services to

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bind the Nation together,” by “postal services” means the
postal system as a whole, not a select group of discrete service offerings
in isolation. USPS uses many means to perform the collection of statutory
functions described in title 39. It has both the “basic
function” generally summarized in section 101( a), and a myriad of
supportive functions necessary or appropriate to its work. All of its
functions and activities in concert should help to “bind the Nation
together.”

ï¿½ Since “binding the Nation together” is part of the basic
function of the postal system as a whole, this is also an appropriate
objective to be served by supporting functions in their own right, where
feasible, even though section 101( a) itself only specifically enunciates
this goal in terms of a “basic function.”

ï¿½ Technological improvements associated with the Internet offer many
opportunities for improved interaction between the postal system and its
customers. USPS makes no claim that all- electronic products and services,
or any kind of eCommerce products and services, are becoming the
“basic function” of USPS. USPS does consider that the particular
electronic services being introduced have been carefully configured to serve
as logical, supporting, ancillary, incidental enhancements of the postal
system for the benefit of USPS customers, in ways that comport well with
USPS' basic function. These services help USPS to meet the needs of USPS
customers within the context of the kinds of personal and business
correspondence that USPS has traditionally facilitated for them. USPS
considers that these services are necessary and appropriate incidents to the
performance of postal functions, and are thus within the authority of USPS.

ï¿½ The remainder of section 101 and scattered other portions of title 39,
such as Section 2010, 22 further define the mission and methods of USPS in
terms emphasizing service, accessibility, efficiency, modernization, and
essential relevance to the needs of customers. Nothing in the law gives any
indication that USPS is intended to neglect any developing new medium,
methods, or technology, or to allow itself to become outmoded, antiquated,
difficult to use, too expensive, or irrelevant to its customers. To the
contrary, any of these outcomes would seem to be inconsistent with the broad
imperatives of service to the public written into the law.

ï¿½ The Nation's current postal services are both deeply rooted in the
traditions of this country and embedded in the current economic and

22 39 U. S. C. sect. 2010 states that USPS shall promote modern and efficient
operations, among other things.

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social fabric. USPS' challenge is to improve and build upon the services,
capability, role, and customer relationships that it already maintains, in
sensible, businesslike, appropriate, evolutionary steps. Its authority is to
take advantage of electronic commerce, like other methods and technology, in
ways it finds appropriate to the performance of its functions and in the
public interest.

According to USPS, it has been delegated considerable discretion to apply
its experience and judgment in evaluating what seems appropriate for its job
and in the public interest. USPS reported that there is no bright- line test
of the furthest extent of its authority, but federal law offers a number of
useful indicators or points of reference in this regard. According to USPS,
a product or service is more likely to be appropriate or in the public
interest if the product or service:

ï¿½ relates to personal, educational, literary, or business correspondence and
communication;

ï¿½ improves or updates an existing or previous USPS service through use of
more modern evolving methods or technology;

ï¿½ improves the efficiency, economy, simplicity, speed, consistency,
security, equity, or any other characteristic of its mail or philatelic
services so as to add value for customers;

ï¿½ enables customers to use mail or philatelic services more efficiently,
economically, or in greater volume, or to any other advantage to them, to
other customers, or to the postal system as a whole;

ï¿½ is similar, supplementary, integrated or in some way connected to or an
extension of a service USPS already provides or has provided;

ï¿½ is derived in a logical way from an existing service, property interest,
stamp design, or other attribute belonging to or identified with USPS;

ï¿½ as a matter of economic reality or good business practice, is well
performed in a multipurpose way in combination with some existing USPS
service or operation;

ï¿½ makes fuller or more efficient use of property or resources, such as using
excess or unused capacity so that the addition of some lesser, secondary
application would enable the property or resources to be used more
productively;

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ï¿½ adds a particular new service to USPS' menu of offerings, where good
business practice demonstrably counsels such an addition;

ï¿½ reflects demonstrated demand from the postal customer base;

ï¿½ is supported by private or international experience in combining or
integrating particular services;

ï¿½ assists another federal agency to perform its functions; or

ï¿½ advances the policies of the United States. USPS stated that none of the
above factors would necessarily be the sole basis for determining whether an
e- commerce product or service would be appropriate or in the public
interest. However, USPS noted that the fact that a service is different from
previous services, or is nonpostal, is not in itself a bar to USPS offering
the service, “although we do not think that means unrelated or
inappropriate services are permitted.”

USPS has reported that federal privacy laws afford USPS e- commerce
customers greater protection than is provided for customers of private
sector providers. First, USPS reported that the Privacy Act, 23 which
applies to USPS and restricts disclosures of private information maintained
about individuals to third parties without their consent, does not apply to
private providers of e- commerce services. Second, under the Electronic
Communications Privacy Act, 24 a “remote computing service” 25
-a description that USPS reported applies to itself and its contractors- may
not disclose stored electronic communications to a governmental entity
without either a search warrant or, under limited circumstances, certain
subpoenas. USPS told us that “The combined effect of the Privacy Act
and the Electronic Communications Privacy Act is to afford customers greater
protection from invasions of privacy than they could expect with a private
sector provider.”

USPS noted that the Privacy Act prohibits it from identifying USPS customer
information to other private companies, such as for marketing or market
research. In addition, USPS told us that its contractors, such as its

23 5 U. S. C. sect. 552a. 24 18 U. S. C. sect. 2701 et seq. 25 A remote computing
service entails providing computer storage or processing services to the
public by means of an electronic communications system. 18 U. S. C. sect. 2711(
2). Privacy Laws Reportedly

Protect the Privacy of USPS E- Commerce Customers More Than They Protect
Customers of Private Sector Competitors

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business partner in offering eBillPay, are bound by contract to the same
nondisclosure requirements that apply to USPS.

USPS also reported that the Trade Secrets Act 26 generally precludes USPS
from releasing certain confidential, business- sensitive information about a
customer from its computer files without the customer's express permission.
USPS reported that although it is subject to the Freedom of Information Act
(FOIA), 27 and private providers of e- commerce products are not, several
specific exemptions to mandatory FOIA disclosures protect USPS e- commerce
information from disclosure.

USPS reported it has adopted specific postal regulations that limit and
govern possible disclosure of its e- commerce customer information under the
Privacy Act. According to USPS, information protected by the Privacy Act may
not be disclosed except in accordance with this act and postal regulations,
which allow disclosure pursuant to “routine uses” for the system
of records as published in the Federal Register. 28 USPS said it discloses
such routine uses to its e- commerce customers through Privacy Act
statements placed on its Internet site so they can read the statements
before transmitting information to USPS. For example, USPS eBillPay customer
information could be provided to a payee, a financial institution, or a
credit bureau when necessary to, and as an integral part of, the eBillPay
service being provided, according to USPS.

However, USPS told us that although it is subject to FOIA requests for
information, USPS would not release information collected from ecommerce
customers. USPS said that FOIA does not compel disclosure that is otherwise
prohibited by law. Also, FOIA does not compel disclosure of names and
addresses of USPS customers prohibited by law. 29 USPS said that FOIA does
not require the disclosure of information of a commercial nature, whether or
not obtained from a person outside USPS, that under good business practice
would not be disclosed. 30 In this regard, USPS told us that “in our
opinion, it would not be good business practice to disclose private
information obtained in the provision of electronic services.”

26 18 U. S. C. sect.1905. 27 5 U. S. C. sect. 552. 28 According to USPS,
“Routine uses are those situations in which information may be
disclosed to third parties without the written consent of the subject of the
records, but only for a purpose compatible with the purpose for which the
information was collected.”

29 39 U. S. C. sect. 410( c)( 1). 30 39 U. S. C. sect. 410( c)( 2).

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Further, USPS stated that title 39 prohibits USPS and its employees from
making any mailing or other list of names or addresses of postal patrons or
other persons available to the public. 31 On the matter of possible use of
USPS customer change- of- address information, which we have reported on and
is discussed earlier in this report, USPS provided us with this response:

“USPS will not use address information obtained from its electronic
commerce products and services to compile new movers lists, nor will its
contractors or consultants be authorized to do so. However, change of
address information may be submitted electronically for mail forwarding and
address correction purposes in the near future; this information will be
added to the National Change of Address File in the same way as changes of
address that are submitted in the conventional manner. USPS adds change of
address information to the NCOA file for forwarding and address correction
purposes only when the customer submits a change of address order for that
purpose.” 32

USPS told us that the public interest, universal service,
antidiscrimination, and other policy provisions of the Postal Reorganization
Act of 1970 provide consumer protections in connection with its e- commerce
products and services, 33 while many other federal consumer protection laws
are inapplicable. However, some federal consumer protection laws may apply
to USPS in certain circumstances, and others may apply to USPS contractors
or financial institutions that help USPS offer e- commerce products and
services. Further, USPS said it administers certain consumer protection laws
relating to U. S. mail, and these laws may be applicable in some
circumstances to USPS e- commerce products and services.

31 39 U. S. C. sect. 412. 32 In July 2000, the USPS Internet site for MoversNet
contained a form for customers to submit changes to physical addresses and
also referenced the following: “Privacy Act Note: Filing this form is
voluntary. However, your mail cannot be forwarded without an order. If
filed, your new permanent address will be provided to individuals and
companies who request it, but this will occur only when the requester is
already in possession of your name and old mailing address. Use Form 3576 to
tell correspondents and publishers of address changes. Authorized 39 U. S.
C. 404.”

33 USPS stated that the Postal Reorganization Act of 1970 is the principal
federal consumer protection law relating to its e- commerce products and
services. USPS noted that 39 U. S. C. sect. 202( a) specifies that the USPS
Governors are appointed by the President to represent the public interest
generally; and 39 U. S. C. sect. 403( a) states, among other provisions, that
USPS “shall serve as nearly as practicable the entire population of
the United States.” USPS views of how its public interest, universal
service obligations, and other postal policy provisions of the Postal
Reorganization Act of 1970 relate to its ecommerce activities are discussed
further in the section of this report on USPS statutory authority in the e-
commerce area. USPS views on the applicability of antidiscrimination
provisions are discussed in the section of this report on competition-
related laws. USPS Reported That Many

Consumer Protection Laws Do Not Apply to its E- Commerce Initiatives

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Like other federal activities under the control of presidential appointees,
34 many consumer protection laws that address the activities of
organizations outside the controls of federal management do not apply to
USPS ecommerce products and services, according to USPS. For example, USPS
noted that some consumer protection laws dealing with debt and credit do not
apply because USPS does not extend credit. However, USPS said that some
federal consumer protection laws might apply to USPS contractors or
financial institutions that work with USPS to help provide USPS ecommerce
products and services.

USPS told us that it is charged with enforcing consumer protection laws
known as the “nonmailability laws,” 35 which include false
representation and lottery laws, and which incorporate the criminal
nonmailability statutes. 36 USPS told us it would be responsible for
enforcing the nonmailability laws to the extent that any USPS e- commerce
product or service could be used to violate them. USPS provided the
following three examples:

ï¿½ If a USPS e- commerce product or service is the means to promote a
“solicitation of money or property through the mail by means of false
representations” or a lottery (e. g., if remittances were solicited
electronically and received through the U. S. mail), then the nonmailability
laws would apply.

ï¿½ If a physical product is ordered and paid for electronically, and then
delivered by USPS, the nonmailability provisions relating to hazardous
materials, as well as other restrictions, would apply.

ï¿½ If a postal e- commerce product is used to both promote and deliver a
product or service that would violate the written, printed, or graphic
matter restrictions, it does not seem that the USPS civil consumer
protection statutes would apply. However, an entirely electronic scheme

34 The Board of Governors is the governing body of USPS. It consists of 11
members, including 9 Governors appointed by the president, with the advice
and consent of the Senate; the Postmaster General (PMG), who is appointed by
the Governors; and the Deputy Postmaster General, who is appointed by the
Governors and the PMG. By law, Governors are chosen to represent the public
interest and can not be representatives of special interests. See U. S.
Postal Service: Issues Related to Governance of the Postal Service (GAO/
GGD- 97- 141, Aug. 14, 1997).

35 39 U. S. C. sect.sect. 3001- 3017. 36 USPS said that, in general, these laws
limit using the U. S. mail to solicit money or property through the mails by
means of false representation; the conduct of illegal lotteries,
sweepstakes, or skill contests involving written, printed, or graphic
matter; or the promotion or distribution of various physical items, such as
hazardous or dangerous items, that are unfit by law to be sent through the
mail.

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or device with the fraudulent attributes of a false representations or
lottery scheme would fall under the criminal statutes prohibiting wire
fraud. 37

USPS reported that the Postal Inspection Service, a part of USPS that is
responsible for enforcing postal laws, has the authority and responsibility
to investigate violations of law that involve USPS e- commerce products and
services. USPS discussed two interrelated matters: (1) which federal laws
define and apply to unlawful activity involving USPS e- commerce products
and services, and (2) how the authority of the Inspection Service and other
federal law enforcement agencies is defined with respect to enforcing those
laws. In addition, USPS reported that the Inspection Service also has an
interest in other crimes that make use of the Internet.

First, USPS reported that a large number of federal statutes, regulations,
and policies are in place to ensure that USPS provides secure and reliable
services that are free of fraud, waste, and abuse. These federal laws
reportedly apply not only to U. S. mail, but also to USPS operations,
equipment, and employees.

Concerning specific USPS e- commerce offerings, USPS told us:

ï¿½ The USPS Electronic Postmark (EPM) is protected by postal laws and
regulations. Thus, interfering with or misusing the EPM or electronic
documents handled by a private company that incorporates the EPM would
violate the law. However, the EPM does not have the same legal status as the
physical postmark on U. S. mail, which is a byproduct of USPS processing and
indicates USPS possession of an item for handling and delivery. As evidence
that an item is “mail,” the physical postmark may trigger a
number of criminal statutes in the case of obstruction or theft. To the
extent a physical postmark has additional legal significance, such as
indicating the date when an item is deemed to have been delivered, that
effect is the result of nonpostal federal and state laws and regulations, as
well as contracts between private parties.

ï¿½ PosteCS communications do not have the same legal status as U. S. mail,
because they are not physical mail. Thus, although a number of laws apply to
and protect such messages, other laws applicable only to physical U. S. mail
do not.

ï¿½ The electronic portion of hybrid mail- which includes the electronic
portion of Mailing Online communications- does not have the same legal

37 18 U. S. C. sect. 1343. USPS Said It Investigates

Violations Relating to Its E- Commerce Offerings

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status as physical U. S. mail because it is not yet physical mail. Once it
is converted to physical mail, it would have the same status as physical
mail. While a number of laws apply to and protect such electronic messages,
other laws applicable to physical mail do not.

ï¿½ If USPS offered a universal “electronic mailbox,” which postal
officials have said might be done in conjunction with some of its e-
commerce initiatives, the electronic mailbox would not have the same legal
status as a physical mailbox because is not a physical mailbox. Thus,
although a number of laws apply to, and protect, an electronic mailbox,
others applicable to physical mailboxes would not apply. 38

ï¿½ If eBillPay bills are presented only electronically, laws protect them in
a different manner from the protections afforded to physical mail. Legal
protections relating to electronic communications would apply. Laws and
regulations that apply specifically to physical U. S. mail, and only to such
mail, would not apply.

USPS told us that the Inspection Service has broad authority to investigate
any criminal or civil offenses that affect the use or delivery of mail,
occur on USPS property, or otherwise impair the efficient operation of USPS.
The authority of the Inspection Service was further enhanced in 1998 by a
delegation of authority from the U. S. Attorney General and MOUs with the
Federal Bureau of Investigation (FBI) and the U. S. Secret Service that gave
the Inspection Service limited jurisdiction to investigate certain crimes
such as wire fraud. 39 USPS told us that the Inspection Service's role in
investigations concerning postal e- commerce products and services promotes
efficient law enforcement and eliminates duplication of efforts, which was
one of the primary purposes of the delegation and the MOUs. USPS also said
that the basis for the delegation and the MOUs was uncertainty concerning
whether the mail fraud statute would apply to USPS e- commerce products and
services, which had not been addressed in court, but that the wire fraud
statute could be assumed to apply on the

38 USPS reported that the specific statutes relating to the theft,
tampering, or misuse of physical mailboxes, generally 18 U. S. C. sect.sect. 1705,
1707, and 1708, would presumably not apply. In their place, the criminal
statutes prohibiting electronic tampering, 18 U. S. C. sect.sect. 1029 (access
device fraud); 1030 (computer fraud and abuse); 1343 (wire fraud); and 2701(
unlawful access to stored communications) would appear to apply.

39 The delegation of authority gave the Inspection Service a limited
delegation of jurisdiction to investigate violations of 18 U. S. C. sect.sect. 1029,
1030, 1343, and 2701. The delegation of authority recognized the concurrent
jurisdiction of the FBI and the U. S. Secret Service as the principal law
enforcement agencies responsible for the enforcement of 18 U. S. C. sect.sect. 1029
and 1030, and the FBI as the principal enforcement agency responsible for
the enforcement of 18 U. S. C. sect.sect. 1343 and 2701.

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basis of existing case law. The delegation and the MOUs covered the
following:

ï¿½ criminal conduct in which USPS is an actual or intended victim;

ï¿½ conduct that directly affects electronic messages conveyed by USPS and the
counterfeiting or misuse of any Electronic Postmarks used by USPS; and

ï¿½ criminal conduct directed against any computer, computer system,
communication system, delivery system, payment system, or other similar
property owned or leased by or provided to USPS.

For example, USPS told us that under its recent delegation of authority from
the Attorney General, the Inspection Service would investigate illegal
interception or tampering involving the USPS electronic postmark (EPM),
including cases where the USPS EPM is used by a private company that
recently purchased the EPM for inclusion with some of its electronic
communications. Any such efforts would be based on the provision in this
delegation that specifically defines “criminal conduct that has a
detrimental effect upon the operations of the Postal Service” to mean
“conduct that directly affects the counterfeiting or misuse of any
electronic postmarks used by the Postal Service.” In this regard, USPS
told us that the Inspection Service has no authority to investigate
electronic communications that do not “have a postal nexus.”
Finally, USPS said that violations of federal law relating to electronic
communications without the EPM would be investigated by other federal law
enforcement agencies.

In addition to these activities, USPS told us that it has enforcement
interests in other crimes making use of the Internet. For example, USPS
noted its longstanding relationship with the Federal Trade Commission (FTC)
to protect consumers, in which the Inspection Service has jurisdictional
responsibility regarding traditional mail fraud schemes that originate with
an Internet solicitation and result in the mailing of a payment or
merchandise. USPS estimated that currently, roughly 45 percent of Inspection
Service consumer fraud cases in which the underlying offense is mail fraud
originate on the Internet.

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USPS told us that the antitrust laws and general competition- related
statutes do not apply to USPS, with the exception of the advertising and
competition provisions of the Lanham Act. 40 However, USPS told us that the
Postal Reorganization Act of 1970 prescribes other competition- related
factors that must be considered. Specifically, USPS told us:

ï¿½ In ratemaking for postal services, the effect of rate increases on
competition is among the statutory factors for consideration, and
competitors have a formal opportunity to question and contest USPS rate and
classification proposals- a right not ordinarily available to USPS with
respect to the prices and services of its competitors.

ï¿½ Some provisions of the Postal Reorganization Act of 1970 prescribe certain
requirements for USPS that relate to competition, which would apply to some
USPS e- commerce products and services. Specifically, USPS stated that with
respect to “postal” services such as Mailing Online, USPS is
specifically prohibited under 39 U. S. C. sect. 403( c) from making undue or
unreasonable discrimination among mail users or from granting undue or
unreasonable preferences.

ï¿½ USPS does not think it could be seriously contended that the public
interest would support the provision of nonpostal services having
unreasonable objectives or applying irrational methods. Accordingly, while
section sect. 403( c) of title 39 in terms seems inapplicable to nonpostal
services, USPS assumes that general principles akin to those underlying that
section are implicit in the policies of title 39 and thus should be applied
to nonpostal services.

ï¿½ Competition concerns are taken into account by USPS and its Board of
Governors, who are appointed by the president and who are required by law to
represent the public interest. This control mechanism, which is not present
in private firms, brings to bear in USPS a standard of fairness both broader
and stricter than any fair competition legislation applicable to private
firms. USPS does not conceive of a situation in which the Governors would
let stand a USPS offering of a service on terms legitimately shown to be
contrary to unfair competition requirements applied in the private sector.
In practice, opponents of USPS introduction of particular new services
rarely attempt to establish a violation of particular fair competition
requirements applicable to themselves. Instead, broad policy arguments are
advanced concerning the degree to which

40 The Lanham Act, among other things, protects businesses from such
anticompetitive acts as false advertising and false representation about a
product or service. 15 U. S. C. sect. 1125( a). USPS Reported That

Antitrust and Competition Laws Generally Do Not Apply to USPS

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USPS, uniquely, should refrain from direct competition with private firms.
It is this kind of basic policy issue that the Board of Governors finds it
necessary to evaluate in considering whether to approve a particular
initiative or how it should be structured. In some cases the Board has found
it appropriate and in the public interest, for policy or prudential reasons,
to hold USPS' activities well short of any considerations that private firms
would observe.

Further, PRC decisions on proposed rates for USPS e- commerce products that
are domestic postal products, such as Mailing Online, are subject to the
requirement that each class of mail or type of mail service bear the direct
and indirect postal costs attributable to it plus that portion of all other
costs reasonably assignable to such class or type. 41 Concerning nonpostal
and e- commerce products and services, USPS told us:

ï¿½ For nonpostal services, failure to cover costs could unfairly shift costs
to users of other services. Further, while section 101( d) of title 39 deals
specifically with mail services, the cost apportionment policy reflected in
that provision 42 seems appropriately applied to nonpostal services as well.
USPS believes that it must seek to price its nonpostal services in a fair
and reasonable way, including coverage of attributable costs plus a
reasonable contribution to overhead.

ï¿½ In providing eCommerce products and services, USPS will ensure that in the
aggregate, the revenues generated by such products and services will cover
their direct and indirect costs as well as make a contribution to overhead.
Further, eCommerce products and services in the aggregate are to cover their
incremental costs and thus not be cross- subsidized. Also, it is intended
that each eCommerce product and service should cover its costs.

USPS told us that, in some cases, major federal regulations apply to its
ecommerce products, including regulations adopted by USPS and other federal
agencies. However, USPS said that the ability to make generalizations about
how the regulations apply to USPS is somewhat limited. According to USPS, as
a general matter, legal relations between USPS and other agencies are
governed by provisions of the Postal Reorganization Act of 1970. These
provisions specify, among other things, the application of laws to USPS,
cooperation between USPS and other

41 39 U. S. C. sect. 3622( b)( 3). 42 39 U. S. C. sect. 101( d) states that
“Postal rates shall be established to apportion the costs of all
postal operations to all users of the mail on a fair and equitable
basis.” Major Federal Regulations

Apply to USPS E- Commerce Offerings in Some Cases, But Not in Others

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government agencies, and the relationship between USPS and the Department of
the Treasury. 43 Further, USPS reported that it has authority to issue
regulations pertaining to its own e- commerce products and services.

USPS provided the following examples of how the regulatory authority of
other federal agencies applies or does not apply to its e- commerce products
and services:

ï¿½ USPS eBillPay is generally subject to the jurisdiction of the Department
of the Treasury and the Federal Reserve, because the jurisdiction in
question applies to USPS, its private contractor, or both. The regulations
are extensive and complex.

ï¿½ Laws and regulations governing Automated Clearinghouse (ACH) transactions
do not apply to USPS, except when USPS chooses to make financial
transactions using the National Automated Clearinghouse Association (NACHA).
In those cases, the NACHA rules apply to the transactions.

ï¿½ USPS' participation in NetPost Mailing Online apparently does not invoke
the jurisdiction of the Federal Communications Commission (FCC). Postal
electronic services do not involve USPS directly in common carriage of basic
electronic information, which is regulated by FCC. Instead, these services
can be classified as “enhanced” services, which currently are
not regulated by the FCC.

ï¿½ There are no written regulations or guidelines that require USPS to comply
with FTC guidelines. USPS' established practice is for advertising
initiatives to be reviewed by attorneys within its law department for legal
and public policy advice. USPS may refer to various FTC regulations, for
instance, the use of the word “free” (16 C. F. R. sect. 251.1) and
on pricing comparisons (16 C. F. R. sect. 233.1 – 233.5). Also, USPS may
go beyond what is required by FTC guidelines where it seems appropriate to
assure fairness or avoid controversy.

USPS made the following points concerning its regulatory authority:

ï¿½ Title 39 gives USPS the general power “to adopt, amend, and repeal
such rules and regulations as it deems necessary to accomplish the
objectives of

43 39 U. S. C. sect.sect. 410( a), 411, and 2006.

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this title.” 44 This general power applies to the exercise of all USPS
functions, including any use made of e- commerce.

ï¿½ USPS has the authority to issue regulations that define the terms of its
ecommerce offerings in the Domestic Mail Manual as appropriate, such as for
Mailing Online, or in other directives.

ï¿½ USPS' authority to adopt regulations defining the terms and conditions of
its own nonpostal e- commerce services is functionally similar in most
respects to the authority that any private company would exercise to
prescribe the terms on which it is prepared to deal with its customers and
suppliers.

ï¿½ USPS has “no authority to act as a regulator over economic activity
in general or over the Internet in particular.”

USPS reported that its activities in the e- commerce area are generally not
subject to administration policies that apply to other executive branch
agencies. USPS observed that:

ï¿½ According to President Nixon, one of the objectives of the Postal
Reorganization Act of 1970 was that USPS be insulated from the direct
control of the president and the Bureau of the Budget, the predecessor
agency to OMB. USPS is, nevertheless, sensitive to broad administration
policies in this area. President Clinton's 1999- 2001 budget submissions
have included general policy discussions encouraging USPS' cooperative
efforts with the private sector in promoting the emergence of secure and
reliable electronic messaging networks, and in leveraging its capabilities
to help promote universal access. USPS' new service offerings are consistent
with those statements.

ï¿½ The objective of insulating USPS from political control was reportedly
implemented by organizing USPS as an independent establishment of the
executive branch, headed by nine presidentially appointed Governors whose
terms extend 9 years, beyond the term of any single administration. Since
1970, USPS has consistently maintained the view that executive orders and
OMB instructions, unless grounded in separate statutory authorization
covering USPS or by national security powers, do not apply as a matter of
law, although the Governors, as representatives of the public interest, may
find it appropriate to be guided by certain of them.

44 39 U. S. C. sect. 401( 2). USPS Reported That its ECommerce

Activities Are Generally Not Subject to Administration Policies

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ï¿½ By and large, other federal authorities have respected USPS' independence,
and USPS has also respected the responsibilities of those authorities and
worked closely with them.

ï¿½ None of the provisions of OMB Circular A- 76 regarding “contracting
out” of government services have been adopted. USPS has broad
authority to enter into contracts, and follows the government policies in
the Postal Reorganization Act of 1970 and other authorities incorporated
therein.

ï¿½ With regard to e- commerce, the President has included in his last three
budget submissions a statement of general encouragement for USPS'
cooperation with the private sector in promoting the emergence of secure and
reliable electronic messaging networks and in leveraging its capabilities to
help promote universal access. These presidential statements do not mention
particular services or more specific policies for which USPS has
responsibility. 45

USPS competitors and others have raised concerns regarding USPS ecommerce
activities. Some of these concerns relate to the broad statutory authority
that USPS asserts it has to offer e- commerce products and services in ways
that USPS finds appropriate to its assigned functions and in the public
interest. Also, some USPS competitors and others have recently raised
concerns that USPS has an unfair competitive advantage because it is subject
to different legal and regulatory requirements than are its competitors in
the e- commerce area. The appropriate role and mission of USPS continues to
be debated, including the extent of USPS legal authority to offer e-
commerce products and services, and under what circumstances it should offer
such services.

Related concerns have been raised in the past. CRS has reported that “
. . . since early in its post- 1970 history, the USPS has been charged with
overstepping its mandate by offering retail and service products that are
not directly related to its primary mission- delivering the mail to all
parts of the country at uniform rates.” 46 We previously reported that
some Members of Congress and some private sector companies have said that
USPS is unfairly expanding its product line to compete in nonpostalrelated
markets, and they have manifested their concerns in various

45 Budget of the United States Government, Fiscal Year 2001, Appendix, 1195-
96 (2000); Fiscal Year 2000, Appendix, 1191 (1999); Fiscal Year 1999,
Appendix, 1126 (1998). 46 Postal Service Diversification into Non- Mail
Activities, Congressional Research Service, May 1, 2000 (RS20567). Concerns
Have Been Raised

About USPS E- Commerce Activities

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forms. 47 Concerns have continued to be raised with respect to USPS
ecommerce products and services. For example:

ï¿½ Participants in the recent PRC case on USPS' proposal for a Mailing Online
experiment largely focused their attention on whether USPS' status as a
statutory nationwide monopoly gave it an unfair advantage as it enters the
mixed electronic/ hard copy communications market, and on whether USPS
accurately identified Mailing Online costs. 48 During the case, several
participants reached a settlement agreement with USPS, under which USPS will
allow functionally equivalent, competing electronic/ hard copy services to
mail their products at the same postage rates USPS intends to charge for
Mailing Online. According to PRC, this settlement alleviated much of the
concern about unfair competition. However, PRC found that competition
considerations and antitrust laws were relevant to its decision. On this
matter, PRC found that Mailing Online, as recommended by the terms of PRC
decision, would not constitute unfair competition or result in an unfair
competitive advantage for USPS.

ï¿½ In October 1998, United Parcel Service (UPS) filed a complaint with PRC
that PosteCS has constituted unfair competition and is a class of mail or
type of mail service and thus a domestic postal service that USPS could
legally establish only by requesting a PRC decision on its classification
and rates. USPS disagreed with both charges. USPS stated that PosteCS is a
totally electronic service for documents; does not use USPS' physical
retail, mail processing, and delivery networks; conducts all transactions
through electronic communications; and is an international service. USPS
also said that PRC had no authority to review USPS' categorization of
PosteCS as a nonpostal service. However, PRC ruled that it has the authority
to consider the claim that PosteCS is a postal service 49 and directed the
complaint case to initially focus on the issue of whether PosteCS is a
postal service. In August 2000, this case remained under consideration. USPS
also told us that PRC does not have authority to review USPS decisions of
what services are postal and nonpostal. In USPS' view, hybrid service
offerings that combine electronic communications and hard copy mail, such as
Mailing Online, are “postal services” that

47 GAO/ GGD- 99- 15. 48 Opinion and Recommended Decision, Mailing Online
Experiment, Docket No. MC2000- 2, Postal Rate Commission, June 21, 2000. 49
PRC stated that it had the discretionary authority to consider a wide range
of rate and service complaints and thus was obliged to interpret the Postal
Reorganization Act of 1970 and its applicability as part of the complaint
process. Order Denying Motion of United States Postal Service to Dismiss
Complaint and Notice of Formal Proceedings, PRC Order No. 1239, Docket No.
C- 99- 1, May 3, 1999.

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involve aspects of the acceptance, processing, or delivery of mail.
Conversely, USPS stated that electronic service offerings that do not
involve an aspect of the acceptance, processing, or delivery of mail are not
“postal services” for purposes of PRC review.

ï¿½ Concerns have been raised that USPS' dual role as a competitor and an
entity with law enforcement responsibilities for its e- commerce products
and services is inconsistent with fair competition. The Chairman of the
House Subcommittee on the Postal Service has raised concerns that the
Department of Justice (DOJ) delegation of authority to the Inspection
Service in the e- commerce area gave USPS an unfair competitive advantage
over private sector providers of electronic products and services who lack
similar authority. DOJ defended its delegation of authority as not
inconsistent with current law and stated the consideration of the issues did
not negate the Attorney General's responsibility to ensure that the
Inspection Service has the enforcement tools it needs to carry out its
federal law enforcement mandate. However, DOJ also said that it
“understands the potential for abuse that exists as a result of the
law enforcement powers and protections assigned to the Postal Service, and
we concede that support for the enforcement activities of the Postal
Inspection Service may be viewed as somewhat incongruous with this
concern.” DOJ said that the drafters of the Postal Reorganization Act
of 1970 did not provide safeguards against the possibility of conflicts
between USPS' goals in managing the Inspection Service and the law
enforcement goals of the federal government.

ï¿½ In a May 8, 2000, letter to Representative Christopher Cox that was also
circulated to other Members, the Executive Director of the U. S. Internet
Industry Association (USIIA) 50 expressed a number of concerns, including
the view that given the entry of USPS into e- commerce, its historic role as
a regulator and its current exemption from antitrust considerations, it
remains to be resolved whether USPS should be permitted to dominate services
it may also seek to regulate. On May 17, 2000, USPS responded in a letter to
Representative John McHugh, Chairman of the House Subcommittee on the Postal
Service, and other House Members rebutting the USIIA concerns, stating that
USPS is not in a position of regulating any portion of electronic services
offered by USPS competitors, nor does it seek to do so.

50 USIIA is a nonprofit trade association that reported its mission is to
foster the growth and development of Internet commerce, content, and
connectivity.

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ï¿½ The President and CEO of the Computer & Communications Industry
Association (CCIA) 51 has recently objected to USPS offering competitive
ecommerce products and services on the grounds that with an infrastructure
established through taxpayer subsidies and its governmentsponsored postal
monopoly, USPS' entrance into these markets would be unfair and detrimental
to competition and innovation. Similarly, the Chairman and CEO of UPS has
also reportedly said that USPS wants to dominate the communications end of
the e- commerce revolution, doing things like bill presentment and payment,
but that a government monopoly should not be allowed to use the benefits of
its government standing to attack the private sector.

In addition to these competition- related concerns, some specific concerns
have been raised concerning USPS e- commerce products and services that
relate to emerging e- commerce issues, such as consumer privacy. For
example, USPS' Privacy Act statement for eBillPay was criticized this spring
by the PRC's Chairman for permitting overly broad disclosure of customer
information. USPS subsequently revised its eBillPay Privacy Act Statement to
further restrict disclosure of customer information. In explaining the
revisions, USPS noted that it had not provided, and did not intend to
provide, information under its former Privacy Act statement.

During oversight hearings and in the debate over whether the nation's postal
laws should be reformed, some in Congress have continued to raise questions
about USPS' e- commerce activities and related legal authority, due in part
to the conflicting views of USPS and some of its competitors and other
stakeholders. Many of the competition- related concerns stem from the
current USPS legal framework, which among other things, grants USPS a legal
monopoly over the delivery of letter mail and requires USPS to provide
service to all patrons in all communities and operate on a breakeven basis.

In addition, USPS stated that this framework allows USPS to develop new
products and enter into markets currently being served by the private sector
but exempts it from some of the laws and regulations that apply to private
sector businesses. Consequently, some private sector businesses claim they
are placed at a competitive disadvantage. On the basis of these concerns,
some competitors and others contend that USPS should refrain from entering
markets currently being served by the private sector and should limit its
activities to providing hard copy delivery services. In

51 CCIA reported that it is an international, nonprofit association of
computer and communications firms as represented by their most senior
executives.

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addition, some stakeholders assert that if USPS is to compete in these
markets, the laws should be changed so that USPS must participate on the
same terms and conditions as those faced by its private sector competitors.

On the other hand, the Postmaster General and some other stakeholders have
said that current laws put USPS at a competitive disadvantage and have
called for changes to give USPS increased flexibility to compete. He and
other stakeholders have called for granting USPS greater pricing flexibility
and more authority to introduce new products. The issue of USPS' authority
to offer nonpostal products and services and its specific authority to offer
e- commerce products and services continues to be raised in Congress.

USPS is in the early stages of implementing its current e- commerce program.
Since the beginning of 2000, USPS has taken a number of steps to develop and
implement its e- commerce activities, including developing a definition of
its e- commerce initiatives, identifying its e- commerce and related
initiatives, and establishing an organizational process for approving its e-
commerce initiatives. USPS has identified seven e- commerce initiatives
involving products and services that facilitate the movement of messages,
merchandise, and money in ways that require the use of the Internet and
generate revenues for USPS. USPS has also recently outlined overall goals
and strategies for the e- commerce area and developed some performance
targets for its e- commerce initiatives.

Despite these steps, we have identified three problem areas in which USPS
needs to improve its management of its e- commerce area. These are:

ï¿½ inconsistencies in identifying e- commerce and related initiatives and in
reporting the status of these activities that made it difficult for us to
ensure we had a complete and accurate picture of USPS' e- commerce
activities;

ï¿½ inconsistencies in following the required process for reviewing and
approving its e- commerce initiatives; and

ï¿½ deficiencies in the financial information USPS provided for its e-
commerce activities that raised concerns about the accuracy and completeness
of the financial reporting for e- commerce activities.

Without reliable information, it is difficult to obtain a complete and
accurate picture of USPS' e- commerce activities. According to documents
provided to us by USPS, some e- commerce initiatives were implemented
Conclusions

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without required business plans and documented approvals, which raises
questions as to whether the initiatives were appropriately planned and
reviewed. Finally, we do not believe the financial data that USPS provided
could be used to assess USPS' progress toward meeting its overall financial
performance expectation that revenues generated by e- commerce products and
services in the aggregate are to cover their direct and indirect costs as
well as make a contribution to overhead. We are making several
recommendations to USPS that address these key management deficiencies.

In the legal area, USPS has provided legal information and analysis that
should be a valuable reference to Congress and other stakeholders interested
in the application of laws and regulations to USPS' e- commerce activities.
USPS reports that its unique status as an independent establishment of the
executive branch gives it broad legal authority and discretion to offer e-
commerce products and services in ways that USPS finds appropriate to its
assigned functions and in the public interest. USPS, some competitors, and
other stakeholders have conflicting views on the extent of USPS' legal
authority to offer e- commerce products and services, and under what
circumstances it should offer these services. The appropriate role of USPS
has been debated for many years and continues to be debated in the context
of proposals for comprehensive legislation to reform the nation's postal
laws.

We recommend that the Postmaster General take the following actions to help
ensure more effective management and oversight of USPS' ecommerce
activities:

ï¿½ take appropriate actions to help ensure that e- commerce and related
initiatives are appropriately identified and maintain accurate and complete
information related to the status of these initiatives;

ï¿½ follow processes and controls that have been established for developing
and approving e- commerce initiatives; and

ï¿½ provide complete and accurate information on costs and revenues for the
financial data on e- commerce initiatives.

USPS provided comments on a draft of this report in a letter from the Deputy
Postmaster General dated August 29, 2000. These comments are summarized
below and included as appendix III. We also incorporated technical comments
provided by USPS officials into the report where appropriate. The Postal
Rate Commission (PRC) provided comments on a Recommendations

Agency Comments and Our Evaluation

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draft of this report in a letter from the Chairman dated August 25, 2000;
these comments are also summarized below and included as appendix IV.

USPS said that the draft report generally described its e- commerce program
at the time of our review accurately and captured the normal growing pains
that most organizations go through in developing and beginning to implement
something not done before. Further, USPS stated that it accepted and
endorsed the report's recommendations. However, USPS noted some differences
in perspective, which we discuss below.

USPS said it appreciated our draft report's candid evaluation and
identification of opportunities to improve how it manages its e- commerce
activities. USPS said that it is already taking the necessary actions to
implement our recommendations within a management structure that will
provide long- term as well as day- to- day oversight of the e- commerce
program. Specifically, USPS said it would more precisely identify its new e-
commerce initiatives and more completely document their review and approval.
USPS also said it will require that complete and accurate cost, revenue, and
performance data be tracked and periodically reported to senior management
so USPS can assess whether its e- commerce program is meeting its goal in
this area.

With respect to USPS' characterization of differences in perspectives on the
administrative history of USPS' e- commerce initiatives, this apparently
refers to our concerns about USPS' inconsistencies in applying its ecommerce
definition. We recognize that this is an evolving area and some differences
in interpretation of USPS' definition of e- commerce initiatives can exist.
However, in some cases, it was difficult to understand the rationale for the
identification of e- commerce initiatives without more clarification from
USPS on how it intended to treat the revenues from these initiatives. Also,
some initiatives were provided in conjunction with other products and
services, and it was not clear how the revenues would relate to e- commerce
versus other core products or services. USPS' consistent application of its
e- commerce definitions is important so that it can maintain complete and
accurate information about its e- commerce and related activities and has
implications for how USPS accounts for its revenues and expenses from
various e- commerce initiatives.

Concerning USPS' statement that all of its e- commerce initiatives were
thoroughly reviewed and approved by senior management before implementation;
if so, such approvals were not fully documented. Without documented
approvals, USPS management cannot ensure that its e-

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commerce initiatives are being appropriately reviewed so that they will
support USPS' overall mission and goals.

USPS commented that it has been challenged by a new and extremely dynamic
marketplace and that its e- commerce efforts are still in the early stages.
USPS noted that its e- commerce program's most substantial progress so far
has occurred while our review was being conducted this year. In that regard,
USPS commented that even with its more accelerated approval process for its
e- commerce intiatives, it is still carefully evaluating projects,
controlling their use of resources, defining how it will measure success,
and continually measuring performance against those standards. We believe
that these are important steps that need to be fully and effectively
implemented. In this regard, we believe that effective implementation of our
recommendations should aid USPS in improving its management and oversight in
the e- commerce area.

USPS also noted, and agreed with our report, that it needed better
mechanisms to track and report the revenues and expenses of its ecommerce
initiatives. Accordingly, USPS said it is already instituting a standard
financial reporting procedure that will allow it to better assess the
progress of each e- commerce initiative toward meeting its expected
performance goals. We believe that the financial data deficiencies we
reported are significant. The steps USPS has reported taking in this area
are important and need to be effectively implemented.

In the comments provided by PRC, the Chairman stated that overall, the draft
report's analysis of the issues was thorough, well- documented, and
objective in its presentation of USPS views and those of other interested
parties. In addition, PRC commented on one specific feature of our draft
report dealing with USPS' pricing policy.

As we reported, USPS told us that it must seek to price its nonpostal
services in a fair and reasonable way, including coverage of attributable
costs plus a reasonable contribution to overhead. Also, USPS said that in
providing e- commerce products and services, it will ensure that in the
aggregate the revenues generated by such products and services will cover
their direct and indirect costs as well as make a contribution to overhead.
However, PRC commented that setting fees for e- commerce or other nonpostal
services to achieve a revenue criterion of recovery of direct and indirect
costs, plus some non- zero contribution to overhead, provides no assurance
that the fees would satisfy the incremental cost test, either

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individually or collectively, and thus generate revenues sufficient to be
free of cross- subsidy. 52

PRC also stated that even undertaking to satisfy the incremental cost test
in the aggregate rather than individually could allow some e- commerce
products to be cross- subsidized. Further, PRC said that it is not clear
that it is good policy for a federal agency to offer any competitive product
that is cross- subsidized. In this regard, USPS officials provided
clarification during its review of our draft report that “eCommerce
products and services in the aggregate are to cover their incremental costs
and thus not be cross- subsidized. Also, it is intended that each eCommerce
product and service should cover its costs.”

Although we did not address this issue within this review, these comments
further illustrate the need for accurate financial information. In addition,
some postal stakeholders have raised concerns about the potential for cross-
subsidization of postal e- commerce products from the revenues of other USPS
products and thus are likely to focus attention on USPS' financial
performance in the e- commerce area.

We are sending copies of this report to Senator Daniel Akaka, Ranking
Minority Member, Subcommittee on International Security, Proliferation, and
Federal Services, Senate Committee on Governmental Affairs; Representative
Chaka Fattah, Ranking Minority Member, Subcommittee on the Postal Service,
House Committee on Government Reform; Mr. William J. Henderson, Postmaster
General and Chief Executive Officer, U. S. Postal Service; Mr. Edward
Gleiman, Chairman, Postal Rate Commission; and other interested parties. We
will also make copies available to others on request.

52 PRC defined the following criteria for the incremental cost test:
“The revenues collected from any service (or group of services) must
be at least as large as the additional (or incremental) cost of adding that
service (or group of services) to the enterprise's other offerings.”

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Staff acknowledgments are listed in appendix V. If you have any questions
about this report, please contact me on (202) 512- 8387.

Bernard L. Ungar Director, Government Business

Operations Issues

Page 59 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Page 60 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Contents 1 Letter 62 Appendix I Objectives, Scope, and Methodology

65 Appendix II Selected Federal Laws, Regulations, and Policies That May
Relate to USPS ECommerce Initiatives According to USPS

73 Appendix III Comments From USPS

75 Appendix IV Comments From PRC

77 GAO Contact 77 Acknowledgments 77 Appendix V

GAO Contacts and Staff Acknowledgements

Table 1: USPS E- Commerce and Gray Area Initiatives as of September 2000

11 Table 2: USPS' Processes for Review and Approval of E Commerce
Initiatives

18 Table 3: Targets and Performance of E- Commerce

Initiatives, Fiscal Years 1996 Through 2000 21 Tables

Table 4: USPS Documentation of Its Review and Approval of E- Commerce
Initiatives

26

Contents Page 61 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Table II. 1: Selected Federal Statutes, Regulations, and Policies That May
Relate to USPS E- Commerce Initiatives According to USPS

65

Abbreviations

DOJ Department of Justice ACH Automated Clearinghouse BOG Board of Governors
CCIA Computer & Communications Industry Association CMO Chief Marketing
Officer CRS Congressional Research Service eBillPay Electronic Bill Payment
Service eBOB eBusiness Opportunity Board E- COM Electronic Computer-
Originated Mail EPM Electronic Postmark FBI Federal Bureau of Investigation
FOIA Freedom of Information Act FTC Federal Trade Commission FTCA Federal
Tort Claims Act MOU memorandum of understanding NACHA National Automated
Clearing House Association NCOA National Change of Address (program) OMB
Office of Management and Budget PosteCS Postal Electronic Courier Service
PRC Postal Rate Commission SOHO Small Office and Home Office SPC Strategic
Planning Committee SSL Secure Sockets Layer UPS United Parcel Service USIIA
US Internet Industry Association USPS U. S. Postal Service

Appendix I Objectives, Scope, and Methodology

Page 62 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

For this report, our objectives were to describe the U. S. Postal Service's
(USPS) (1) e- commerce initiatives that have been implemented or are being
developed; (2) goals and strategies for the e- commerce area, (3) processes
for approving these initiatives, and (4) expected performance and results to
date related to e- commerce initiatives. During the course of our review, we
identified areas where USPS can improve its management of its e- commerce
activities, and this report discusses these areas as well. An additional
objective was to describe USPS' views on how major federal laws and
regulations apply to its e- commerce initiatives and to identify legal
issues that have been raised concerning its e- commerce activities.

To describe USPS e- commerce initiatives, we obtained a definition from USPS
of what it considered to be an electronic commerce initiative; USPS' listing
of e- commerce initiatives that was to correspond to this definition; and a
description of each initiative, along with available supporting
documentation. USPS reported e- commerce initiatives that were planned,
piloted, or implemented as of September 2000. We obtained additional
information on USPS e- commerce initiatives from Postal Rate Commission
(PRC) proceedings and other public sources, such as the USPS Internet site.
Further, we attended USPS press conferences on its e- commerce initiatives
and attended a conference that included presentations by USPS officials that
discussed USPS e- commerce initiatives.

We also obtained documentation from USPS on its goals and strategies,
expected performance, and results to date relating to its e- commerce
initiatives. The documentation included, for example, preliminary
performance plans for fiscal year 2001; available performance measures,
targets, and results; documentation of the processes applicable to USPS
ecommerce initiatives and the approval of specific initiatives under these
processes; minutes of the USPS eBusiness Opportunity Board and relevant
meetings of the USPS Board of Governors; and available staffing and
financial data. We interviewed USPS officials responsible for USPS ecommerce
initiatives including the Deputy Postmaster General, the Chief Technology
Officer, and e- commerce program officials. The USPS General Counsel and
other USPS legal officials also participated in these interviews. In all
cases, we obtained, when possible, documentation to corroborate oral
statements.

In the area of financial results, in response to our request, USPS provided
information on revenues and expenses generated by its e- commerce
initiatives, although some did not have reported revenues because they

Appendix I Objectives, Scope, and Methodology

Page 63 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

had not been implemented by USPS' cut- off date of February 2000. 1 In April
2000, USPS provided data on its revenues and expenses to date for its
current e- commerce initiatives, based on USPS' list of e- commerce
initiatives that was provided at that time. We did not independently verify
or audit the overall integrity of USPS' data. However, we examined the data
to see whether they appeared to be consistent with USPS' ecommerce
definition and criteria, clear as to what was included, and complete. We
notified USPS of several concerns we had with the April 2000 data; USPS
acknowledged our concerns and provided revised data for some of its current
e- commerce initiatives as well as its discontinued ecommerce initiatives on
June 15 and June 27, 2000. We advised USPS of similar problems with the June
data, and USPS provided another set of substantially revised data in July.
As with the data previously provided, we did not independently verify USPS'
data, but examined its consistency, clarity, and completeness.

Concerning how major federal laws and regulations apply to USPS ecommerce
initiatives and relate to emerging e- commerce issues, we did preliminary
research on applicable sections of the U. S. Code, USPS regulations, federal
regulations, PRC decisions and proceedings, relevant court decisions, Office
of Management and Budget (OMB) Circulars, and administration policies
relating to electronic commerce. We also reviewed information on USPS e-
commerce initiatives and other relevant literature, such as our related
reports, stakeholder correspondence and press releases, and other articles
in the trade press. We then obtained written responses from USPS regarding
the applicability of federal laws, regulations, and policies to USPS e-
commerce products and services. We also summarized our past findings on how
relevant federal laws apply to USPS from our 1998 report on USPS new
products and services 2 and our 1996 and 1999 reports that discussed federal
privacy protections that relate to change- of- address information reported
by USPS customers. 3 Due to time constraints, we did not update this past
work for the purposes of this review. We also reviewed our 1995 report on
government corporations 4 as

1 USPS provided data for current and discontinued initiatives from
inception, which predated fiscal year 1995, through fiscal year 1999 and
partial results for fiscal year 2000. The cut- off date in fiscal year 2000
appeared to vary for some initiatives for the data that USPS provided to us
in April 2000. In July 2000, USPS provided revised data with a February 2000
cut- off date for revenues and expenses generated by each e- commerce
initiative.

2 GAO/ GGD- 99- 15. 3 GAO/ GGD- 96- 119, GAO/ GGD- 99- 102. 4 Government
Corporations: Profiles of Existing Government Corporations (GAO/ GGD- 96-
14, Dec. 13, 1995).

Appendix I Objectives, Scope, and Methodology

Page 64 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

it related to the descriptions cited in appendix II of selected laws,
regulations, and policies that may apply to USPS e- commerce activities.
Further, we determined the views of some stakeholders on legal issues
relating to USPS e- commerce initiatives based on public materials such as
relevant PRC decisions.

We conducted our review at USPS headquarters in Washington, D. C., between
January 2000 and August 2000 in accordance with generally accepted
government auditing standards.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS ECommerce Initiatives According to USPS

Page 65 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments Selected statutes relating to USPS
authority to offer e- commerce products and services Postal Reorganization
Act

39 U. S. C. sect. 101( a) Directs that USPS be operated as a basic and

fundamental service provided to the people. Provides generalized guidance
about what USPS is intended to accomplish and is not intended as a
comprehensive statement of powers and limitations. States that the basic
function of USPS is the provision of postal services to bind the nation
together through the personal, educational, literary, and business
correspondence of the people.

The postal system as a whole is to bind the nation together. This includes
the basic function of the carriage of goods, as well as supporting,
ancillary, and nonpostal services.

Directs USPS to provide prompt, reliable, and efficient services to patrons
in all areas and render postal services to all communities.

This subsection applies to the postal system as a whole. USPS services
should collectively provide services to all areas and communities.

Postal Reorganization Act

39 U. S. C. sect. 401( 3) Grants USPS powers to enter into and perform

contracts, execute instruments, and determine the character and necessity of
expenditures.

In conjunction with sect.sect. 401( 10), 403( a), and 404( a)( 6), this subsection
provides sufficient authority for USPS to offer e- commerce products and
services.

This subsection and sect.sect. 401( 10) and 404( a)( 6) are each broad enough to
empower USPS to provide whatever service or conduct whatever activity (not
prohibited elsewhere) that appropriately serves the purposes set forth in
law for USPS.

Postal Reorganization Act

39 U. S. C. sect. 401( 10) Grants USPS all other powers incidental,

necessary, or appropriate to the carrying on of its functions or the
exercise of its specific powers.

In conjunction with sect.sect. 401( 3), 403( a), and 404( a)( 6), this subsection
provides sufficient authority for USPS to offer e- commerce products and
services.

This subsection and sect.sect. 401( 3) and 404( a)( 6) are each broad enough to
empower USPS to provide whatever service or conduct whatever activity (not
prohibited elsewhere) that appropriately serves the purposes set forth in
law for USPS.

Postal Reorganization Act

39 U. S. C. sect. 403( a) Directs USPS to provide other services, as it

finds appropriate to its functions and in the public interest, incidental to
the receipt, transmittal and delivery of mail.

In conjunction with sect.sect. 401( 3), 401( 10), and 404( a)( 6), this subsection
provides sufficient authority for USPS to offer e- commerce products and
services.

However, this subsection is a summary of USPS duties rather than its
authority.

Table II. 1: Selected Federal Statutes, Regulations, and Policies That May
Relate to USPS E- Commerce Initiatives According to USPS

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 66 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments Postal Reorganization Act

39 U. S. C. sect. 403( b) Directs USPS to maintain an efficient

system of collection, sorting, and delivery of the mail.

A service ordinarily will be appropriate to the functions of USPS if it will
aid USPS to improve, among other things, the efficiency or any other
characteristic of one or more of its mail or philatelic services so as to
add value for customers.

Postal Reorganization Act

39 U. S. C. sect. 404( a)( 6) Grants USPS the power to provide, establish,

change, or abolish special nonpostal or similar services.

In conjunction with sect.sect. 401( 3), 401( 10), and 403( a), this subsection
provides sufficient authority for USPS to offer e- commerce products and
services.

This subsection and sect.sect. 401( 3) and 401( 10) are each broad enough to empower
USPS to provide whatever service or conduct whatever activity (not
prohibited elsewhere) that appropriately serves the purposes set forth in
law for USPS.

Postal Reorganization Act

39 U. S. C. sect. 404( a)( 5) Grants USPS the authority to provide philatelic

services. The USPS provision of services other than the carriage of
“letters” does not signify that such other services are
necessarily outside the scope of the postal laws. As an example, philatelic
services are not mail but have the protection of some postal laws.

Postal Reorganization Act

39 U. S. C. sect. 2010 Directs USPS to promote modern and efficient

operations, and refrain from engaging in any practice that restricts the use
of new equipment or devices that may reduce the cost or improve the quality
of postal services.

Efficiency is one factor for consideration when determining if a service is
appropriate to USPS functions.

Selected Privacy Related Statutes and Regulations Privacy Act of 1974

5 U. S. C. sect. 552a Limits the collection, maintenance, use, and

dissemination of personal information by agencies and grants individuals
access to information about themselves.

Applies to USPS, including USPS e- commerce products and services.

Freedom of Information Act (FOIA)

5 U. S. C. sect. 552 Provides persons with the right of access to a

broad range of records and materials related to the performance of agency
activities, other than those specifically excluded by the act.

Applies to USPS, with some exceptions, such as those stated in 39 U. S. C. sect.
410( c)( 1) and (2).

Right to Financial Privacy Act

12 U. S. C. sect. 3401 et seq. Prohibits federal agencies from accessing

financial institution customer records unless authorized by the individual
or authorized under the law for specific judicial and law enforcement
purposes.

USPS does not act as a financial institution within the meaning of this
statute.

Children's Online Privacy Protection Act of 1998

15 U. S. C. sect. 6501 et seq. Prohibits unfair and deceptive acts and

practices in connection with the collection and use of personal information
from and about children on the Internet.

USPS considers that it should follow the standards adopted by the Federal
Trade Commission for child- oriented Web pages.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 67 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments Trade Secrets Act

18 U. S. C. sect.1905 Prohibits disclosure of information by federal

employees made with knowledge that information is confidential and its
disclosure is forbidden by official agency policy, regulation, or law.

Applies to USPS, including USPS e- commerce products and services.

Generally precludes USPS from releasing certain confidential, business-
sensitive information about a customer from its computer files without the
customer's express permission.

Electronic Communications Privacy Act

18 U. S. C. sect. 2701 et seq. Prohibits the disclosure by certain computer

storage or processing service providers of private electronic communications
to a governmental entity without a search warrant or certain subpoenas.

Applies to USPS, including USPS e- commerce products and services.

Applies to USPS- maintained e- commerce information prohibiting its
disclosure to other federal agencies, including the Bureau of the Census and
the National Archives and Records Administration.

Postal Reorganization Act

39 U. S. C. sect. 410( c)( 1) Exempts from FOIA disclosure the name or

address, past or present, of any postal patron. Applies to USPS, including
USPS e- commerce

products and services.

Postal Reorganization Act

39 U. S. C. sect. 410( c)( 2) Exempts from FOIA disclosure information of a

commercial nature that would not be disclosed under good business practice.

Applies to USPS, including USPS e- commerce products and services.

Postal Reorganization Act

39 U. S. C. sect. 412 Prohibits the disclosure of lists of postal patrons

or other persons by USPS employees or officers.

Applies to USPS, including USPS e- commerce products and services.

Selected Consumer Protection Related Statutes Fair Credit Reporting Act

15 U. S. C. sect. 1681 et seq. Protects individuals from inaccurate or arbitrary

information in credit reports that is used to determine eligibility for
credit, insurance, or employment.

This statute does not apply on its own terms since USPS is not a consumer
reporting agency within the definition of the act.

Equal Credit Opportunity Act

15 U. S. C. sect. 1691 et seq. Prohibits the denial of credit based on race,

color, religion, national origin, sex or marital status, age, or because the
applicant receives public assistance.

Since USPS does not extent credit, this act does not apply to USPS e-
commerce products and services. However, USPS considers itself bound not to
discriminate in its programs.

Fair Debt Collection Practices Act

15 U. S. C. sect. 1692 et seq. Prohibits abusive debt collection practices by

debt collectors. This act is meant for debt collection agencies and excludes
debt collection by government employees. Since USPS does not extend credit,
this act does not apply.

Electronic Fund Transfer Act

15 U. S. C. sect. 1693 et seq. Establishes a framework of rights, liabilities,

and responsibilities for consumers and other participants in electronic fund
transfers.

Given the current form of USPS e- commerce programs, most of the act does
not apply to USPS because fund transfers for USPS ecommerce services are
currently not done by USPS or its agent.

Magnuson- Moss Act

15 U. S. C. sect. 2301 et seq. Sets federal minimum standards and rules for

the content and disclosure of warranties. This act probably does not apply
to USPS and

USPS e- commerce products and services, which under this act do not seem to
be consumer products. Under the act, “consumer product” means
any tangible personal property which is distributed in commerce and which is
normally used for personal, family, or household purposes.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 68 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments Gramm – Leach – Bliley
Act

(also referred to as Financial Services Modernization Act) Pub. L. No. 106-
102, Nov. 12, 1999, to be codified at 15 U. S. C. sect. 6801 et seq.

Obligates financial institutions to protect and preserve the confidentiality
of customers' nonpublic personal information.

Any financial institutions contracting to assist USPS in the provision of
any of its services would be covered by this legislation.

Title III of the Omnibus Crime Control and Safe Streets Act of 1968

18 U. S. C. sect. 2510 et seq. Prohibits electronic surveillance by the federal

government except under carefully defined circumstances and only after
securing judicial authority.

Applies to USPS, including USPS e- commerce products and services.

Bank Secrecy Act

31 U. S. C. sect. 5311 et seq. Requires financial institutions to report the

import and export of monetary instruments for purposes of acquiring
information for criminal investigations.

Applies to USPS, including USPS e- commerce products and services.

However, none of USPS e- commerce products and services currently trigger
the reporting requirements in the act, except for Dinero Seguro, involving
money sent to Mexico. (See table 1 for more information on this initiative.)

Postal Reorganization Act

39 U. S. C. sect. 101( d), 202( a), 403( a) Establishes postal policies, such as
apportioning

postal costs to all mail users on a fair and equitable basis; provides that
USPS shall be directed by Board of Governors chosen to represent the public
interest; and mandates USPS to provide postal services to all communities
and serve as nearly as practicable the entire population of the United
States.

Incorporates elements of consumer protection through issues of postal
policy, the appointment of a Board of Governors that represents the public
interest, and the mandate to provide universal service.

Postal Reorganization Act

39 U. S. C. sect.sect. 3001- 3017 In general, limits “solicitation of money or

property through the mails by means of false representations”; the
conduct of illegal lotteries, sweepstakes or skill contests; or the
promotion or distribution of various items that are
“nonmailable” by statute.

Specifically applicable to USPS e- commerce initiatives (1) if the offered
service is used to solicit money or property through the U. S. mail by false
pretenses or (2) if a physical product is ordered and paid for
electronically and then delivered by USPS.

Selected Contract and Procurement Related Statutes The Rehabilitation Act of
1973

29 U. S. C. sect. 701, et seq. Prohibits discrimination against disabled

individuals in programs receiving federal financial assistance.

Applies to USPS, including USPS e- commerce products and services.

The Vietnam Era Veterans Readjustment Assistance Act of 1972

38 U. S. C. sect. 4212 Requires federal contractors and subcontractors

to take affirmative action to employ certain veterans.

Applies to USPS, including USPS e- commerce products and services.

Postal Reorganization Act

39 U. S. C. sect.410( b)( 2), (4), and (5) Cites contracting and labor laws that
apply to

USPS. Applies to USPS.

National Labor Relations Act

29 U. S. C. sect. 151 et seq. Governs labor management relations. To the extent
that it is not inconsistent with 39

U. S. C. sect.sect. 1201- 1209, this act applies to USPS.

The Javits – Wagner – O'Day Act

41 U. S. C. sect.sect. 46- 48 Establishes policies for government

procurement from qualified agencies for the blind.

Applies to USPS, including USPS e- commerce products and services.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 69 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments The Contract Disputes Act of 1978

41 U. S. C. sect. 601 et seq. Establishes rules for initiating and adjudicating

contract claims against the U. S. government. Applies to USPS, including
USPS e- commerce

products and services.

Title III of The Federal Property and Administrative Services Act

41 U. S. C. sect. 251 et seq. Provides that federal agencies are to make

purchases and contracts for property and services through full and open
competition.

Does not apply to USPS.

The National Environmental Policy Act

42 U. S. C. sect. 4321 et seq. Requires federal agencies to consider possible

environmental consequences when performing their functions.

Applies to USPS, including USPS e- commerce products and services.

Selected Criminal Statutes

18 U. S. C. sect. 201 Prohibits bribery of public officials and witnesses.

Applies to USPS, including USPS e- commerce products and services.

Employees who accepted bribes or gratuities in exchange for information
about postal customers would be subject to prosecution under this statue. 18
U. S. C. sect. 641 Prohibits the theft or embezzlement of public

money, property, or records. Applies to USPS, including USPS e- commerce

products and services. The taking, conversion, or destruction of USPS
tangible property would be a violation of this statute. 18 U. S. C. sect. 1029
Prohibits fraud and related activity in connection

with access devices. USPS investigative authority relating to this

section is derived from 18 U. S. C. sect. 3061( b)( 2) and a delegation of
authority from DOJ. 18 U. S. C. sect. 1030 Prohibits fraud and related activity
in connection

with computers. USPS investigative authority relating to this

section is derived from 18 U. S. C. sect. 3061( b)( 2) and a delegation of
authority from DOJ. 18 U. S. C. sect. 1341 Prohibits frauds and swindles
involving the use

of the mails. No court has yet addressed the issue of whether this statute
would be applicable to USPS e commerce products and services. 18 U. S. C. sect.
1343 Prohibits fraud by wire, radio, or television. USPS investigative
authority relating to this

section is derived from 18 U. S. C. sect. 3061( b)( 2) and a delegation of
authority from DOJ. Based on existing case law, it can be assumed that this
law would apply to certain USPS e- commerce products and services. 18 U. S.
C. sect.sect. 1691- 1738 Prohibits theft, delay, and obstruction of mails,

among other things Applies to USPS, but does not apply to e

commerce products and services that do not involve hard copy mail.

USPS believes that enforcement of these criminal statutes is limited to
hard- copy mail, although no cases have addressed the issue.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 70 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments

18 U. S. C. sect. 2701 Prohibits unlawful access to stored communications.

USPS investigative authority relating to this section is derived from 18 U.
S. C. sect. 3061( b)( 2) and a delegation of authority from DOJ.

Selected Statutes Relating to Ratesetting and the Postal Rate Commission
(PRC) Postal Reorganization Act

39 U. S. C. sect. 101( d) Postal rates shall be established to apportion

the costs of all postal operations to all users of the mail on a fair and
equitable basis.

USPS believes that while this subsection deals specifically with mail
services, the cost apportionment policy reflected in this provision seems
appropriately applied to nonpostal services as well.

Postal Reorganization Act

39 U. S. C. sect. 401( 2) Grants USPS the power to adopt, amend, and

repeal rules and regulations. This subsection applies to the exercise of all

USPS functions, including any use made of electronic commerce.

Postal Reorganization Act

39 U. S. C. sect. 403( c) Prohibits USPS from making any undue or

unreasonable discrimination among users of the mails, and also from granting
any undue or unreasonable preferences to any such user.

While USPS believes this subsection on its terms seems inapplicable to
nonpostal services, USPS assumes that general principles akin to those
underlying that subsection are implicit in the policies of title 39 and thus
should be applied.

Postal Reorganization Act

39 U. S. C. sect.sect. 3621 and 407( b)( 2) Grants BOG authority to establish
reasonable

and equitable classes of domestic mail and reasonable and equitable rates
and fees for domestic postal services except as otherwise provided by this
statute.

Courts have regarded postal services in this context as those services
involving aspects of the acceptance, processing, or delivery of mail. In
USPS' view, the term “mail” involves hard copy and not
electronic transmissions.

Postal Reorganization Act

39 U. S. C. sect.sect. 3622 and 407( b)( 2) Establishes a system for USPS to request
and

the PRC to provide recommendations for changes in rates of postage and fees
for domestic postal services.

Courts have regarded postal services in this context as those services
involving aspects of the acceptance, processing or delivery of mail. In
USPS' view, the term “mail” involves hard copy and not
electronic transmissions.

Postal Reorganization Act

39 U. S. C. sect.sect. 3623 and 407( b)( 2) Establishes a system for USPS to request
and

the PRC to provide recommendations for changes in domestic mail
classification.

Courts have regarded postal services in this context as those services
involving aspects of the acceptance, processing or delivery of mail. In
USPS' view, the term “mail” involves hard copy and not
electronic transmissions.

Postal Reorganization Act

39 U. S. C. sect. 3625 Establishes actions BOG may take upon

receiving a recommended decision from PRC. BOG actions would apply to PRC
decisions on

USPS e- commerce products and services that are subject to PRC decisions.

Postal Reorganization Act

39 U. S. C. sect. 3662 Enables parties to file complaints to PRC

charging that USPS rates and fees do not comply with the policies and
guidelines contained in the Postal Reorganization Act.

USPS does not know of any provision for direct review or modification by PRC
of any determination by USPS about whether it regards particular services as
“postal.” In the course of PRC's own proceedings under chapter
36, however, which may depend upon a service being “postal” for
purposes of that chapter, PRC asserts the authority to form its own position
on that subject for that purpose. The final determination in a particular
case or controversy may rest with the courts.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 71 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments Selected Patent and Trademark Related
Statutes Lanham Act or Trademark Act of 1946

15 U. S. C. sect. 1051 et seq. Allows owners of trademarks to register them

with the Patent and Trademark Office and prohibits others from using that
trademark.

Applies to USPS, including USPS e- commerce products and services.

Thus, as with other products and services, USPS can acquire trademark rights
in the names used with e- commerce products and services and can register
those names in the U. S. Patent and Trademark Office. 28 U. S. C. sect.1498
Allows patent and copyright holders to enforce

patent rights against the federal government. Applies to USPS, including
USPS e- commerce products and services.

Patent Act of 1952

35 U. S. C. sect. 1 et seq. Provides for the application for and enforcement

of patent rights. Applies to USPS, including USPS e- commerce

products and services.

Other Selected Statutes Federal Tort Claims Act

28 U. S. C. sect. 2671 et seq. Subjects the federal government to liability for

injury or loss to the extent an individual would be liable under the law of
the state in which the injury occurs.

Like the rest of the federal government, USPS is, for the most part, subject
to tort liability only to the extent that immunity has been waived by this
act.

In 28 U. S. C. sect. 2680( b), the Federal Tort Claims Act (FTCA) excepts the
loss, miscarriage, or negligent transmission of letters or postal matter.
While application of this provision to electronic commerce services of
various descriptions has not been litigated, to the extent that such
services may involve “mail matter,” the FTCA would bar tort
liability in that arena. USPS has, with respect to specific guaranteed
products, essentially waived that exception to a limited extent. Such
specialized waivers would also be possible in the electronic commerce
context.

The Paperwork Reduction Act of 1995

44 U. S. C. sect. 3501 et seq. Sets policies and rules for minimizing the

paperwork burden resulting from the collection of information by or for the
federal government.

Does not apply to USPS.

The Government Paperwork Elimination Act of 1998

44 U. S. C. sect. 3504 note Sets requirements for federal agencies to

develop capabilities to permit, where practicable, electronic maintenance,
submission, or disclosure of information, including the use of electronic
signatures.

Does not apply to USPS.

The Chief Financial Officers Act of 1990

31 U. S. C. sect.sect. 901- 903 Establishes a Chief Financial Officer in each

executive agency. Sets expectations for design, development, and deployment
of modern financial systems, better performance and cost measures, and
results- oriented reports on the government's operating performance.

Does not apply to USPS.

Appendix II Selected Federal Laws, Regulations, and Policies That May Relate
to USPS E- Commerce Initiatives According to USPS

Page 72 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Citation( s) Description USPS Comments Selected Executive Orders,
Regulations, and Directives

Executive Order No. 11, 246 Prohibits discrimination and establishes equal
employment opportunity requirements for federal employers and contractors.

Applies to USPS, including USPS e- commerce products and services.

However, USPS maintains that executive orders and Office of Management and
Budget (OMB) instructions generally do not apply to USPS, although it may
choose to be guided by certain of them. 39 C. F. R. sect. 211.3 States that
certain executive orders, and other

executive pronouncements and certain circulars, bulletins, and other
issuances of the OMB or particular provisions thereof, or requirements
therein, apply to USPS and certain others do not apply.

USPS maintains that executive orders and OMB instructions generally do not
apply to USPS, although it may choose to be guided by certain of them.

16 C. F. R. sect.sect. 233.1, 233. 5, and 251.1

Federal Trade Commission (FTC) regulations concerning marketing and
advertising.

Does not apply to USPS. There are no written guidelines or regulations that
require USPS to comply with FTC guidelines. 39 C. F. R. 266 Establishes USPS
Privacy Act regulations

governing information collected about individuals through USPS operations.

Applies to USPS, including USPS e- commerce products and services.

The terms in this regulation allow disclosure pursuant to a “routine
use” for the system of records published in the Federal Register. OMB
Circular A- 76 Establishes federal policy regarding the

performance of commercial activities and implements the statutory
requirements; the supplement to the circular states the procedures for
determining whether commercial activities should be performed under contract
with commercial services or in- house using government facilities and
personnel.

Does not apply to USPS. USPS maintains that executive orders and OMB
instructions generally do not apply to USPS, although it may choose to be
guided by certain of them.

OMB Circular No. A- 130 Establishes uniform government- wide information
resource management policies.

Does not apply to USPS. The Postal Reorganization Act requires USPS to
manage its information resources in an appropriate manner. OMB Memorandum
M99- 18 Directs executive branch departments and

agencies to post clear privacy policies on federal web sites and provides
guidance for doing so.

USPS has published on its Internet home page a generic privacy policy that
it believes is in accordance with OMB guidance.

Source: USPS.

Appendix III Comments From USPS

Page 73 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Discussed on p. 56. Discussed on p. 56. Discussed on p. 55.

Appendix III Comments From USPS

Page 74 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Now on p. 54. Discussed on p. 55. Discussed on p. 56.

Discussed on p. 56.

Appendix IV Comments From PRC

Page 75 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Now on p. 46. Discussed on pp. 56- 57. Discussed on p. 56.

Appendix IV Comments From PRC

Page 76 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Discussed on pp. 56- 57.

Appendix V GAO Contacts and Staff Acknowledgements

Page 77 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Bernard L. Ungar (202) 512- 8387 Teresa L. Anderson, Kenneth E. John, Angela
S. Davis, Casey L. Brown, Hazel J. Bailey, Alan N. Belkin, and Victor B.
Goddard made key contributions to this report. GAO Contact

Acknowledgments

Page 78 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

Page 79 GAO/ GGD- 00- 188 USPS' E- Commerce Activities and Laws

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