[Federal Register: November 9, 2007 (Volume 72, Number 217)]
[Rules and Regulations]
[Page 63661-63704]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no07-15]
[[Page 63661]]
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Part II
Postal Regulatory Commission
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39 CFR Parts 3001, 3010, 3015 and 3020
Administrative Practice and Procedure, Postal Service; Final Rule
[[Page 63662]]
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POSTAL REGULATORY COMMISSION
39 CFR Parts 3001, 3010, 3015 and 3020
[Docket No. RM2007-1; Order No. 43]
Administrative Practice and Procedure, Postal Service
AGENCY: Postal Regulatory Commission.
ACTION: Final rule.
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SUMMARY: A recently-enacted federal law directs the Commission to
develop rules to implement a new postal ratemaking system. This
document responds to that directive by adopting rules addressing market
dominant and competitive products, including negotiated service
agreements, the regulatory calendar, and product lists. Adoption of the
rules allows the Postal Service and mailers to begin to exercise its
options under the new law.
DATES: Effective date: November 9, 2007.
November 20, 2007: deadline for the Postal Service to provide
information necessary for further development of the Mail
Classification Schedule.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel,
202-789-6820 and stephen.sharfman@prc.gov.
SUPPLEMENTARY INFORMATION:
Regulatory History
72 FR 5230, February 5, 2007
72 FR 29284, May 25, 2007
72 FR 33261, June 15, 2007
72 FR 50744, September 4, 2007
I. Introduction
This order marks the end of the first phase of the Commission's
efforts to develop the system of modern rate regulation contemplated by
the Postal Accountability and Enhancement Act (PAEA), Public Law 109-
435, 120 Stat. 3198, December 20, 2006. The Order adopts final rules
governing market dominant products, competitive products, and product
lists. It represents the Commission's initial attempt to fashion a
coherent set of regulations implementing the new rate-setting process,
an effort that has been guided by the PAEA's bedrock principles, namely
flexibility, accountability, and transparency.
Throughout this rulemaking process, which began in January 2007,
the parties' comments have been helpful, particularly in the latest
round, sharpening the issues and suggesting alternative resolutions.
The Commission appreciates the parties' contributions. The final rules
focus particularly on comments and reply comments received in response
to Order No. 26, which included proposed rules for regulating rates and
classes under the PAEA.\1\
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\1\ In this proceeding, the Commission has received more than
160 comments. In response to Order No. 26 alone, 58 sets of comments
were filed. The Commission has carefully reviewed these comments
and, where appropriate, addresses them in this Order.
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The final rules differ from the proposed rules in ways designed to
clarify the rules in response to these comments. Principal highlights
of the Order and final rules include: (1) Clarifying the intent of the
proposed rules by specifying the content of notices of proceedings
applicable to various types of filings, in lieu of uniform reliance on
existing rule 3001.17; (2) Clarifying the legal implications of
Commission findings in various proceedings; (3) Reaffirming the
application of the rate cap to market dominant products; (4) Adopting a
transition rule concerning the calculation of the annual limitation in
the event of a transitional rate filing; (5) Clarifying the content of
exigent rate requests; (6) Reaffirming that each negotiated service
agreement (NSA) is a separate product, but noting that functionally
equivalent NSAs may, upon proper showing, be grouped as one product;
and (7) Adopting initial lists of market dominant and competitive
products.
The final rules are issued almost 8 months before the statutory
deadline. The rules do not purport to address every issue that might
arise under the PAEA. Nonetheless, the benefits of implementing the
regulations on an accelerated basis outweigh potential refinements in
the rules that might be possible if the full 18-month period provided
by statute were used. See 39 U.S.C. 3622(a) and 3633(a). With
experience, the rules may be modified if deemed necessary.
With the first phase of implementing the PAEA at an end, the
Commission intends to turn as quickly as practicable to issuing
proposed regulations on related matters under the PAEA, including those
involving complaints, reporting requirements, and commercially
sensitive materials. With the basic framework now in place, the Postal
Service is free to utilize new flexible pricing approaches. Pending
implementation of regulations on these related matters, the
Commission's existing rules will continue to apply.
II. Regulation of Market Dominant Products: Part 3010
A. Overview
The Commission appreciates the commenters' thoughtful review of
proposed part 3010 and their reasoned observations. It concludes that
there is a broad consensus that the proposal's overall direction
comports with the PAEA's philosophy. However, it also acknowledges that
commenters identify aspects of the initial effort that would benefit
from clarification or correction.
A considered assessment of the commenters' suggestions results, in
some instances, in revisions to the rules.\2\ The Commission, on its
own accord, also makes editorial and conforming changes to improve the
clarity and readability of the rules or to conform them more closely to
official publication requirements.
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\2\ Discussion focuses primarily on comments suggesting the need
for changes. In instances where more than one commenter present
similar suggestions, the discussion sometimes focuses mainly on one
commenter's submission.
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1. Note on Due Process
Review of the comments indicates that there are two broad due
process concerns. One pertains to the Commission's issuance of rules
implementing only some aspects of the PAEA's new regulatory framework.
The other focuses on the approach reflected in specific rules in the
proposals that have been issued.
The Postal Service and most commenters addressing finalization of
part 3010 recognize that this is one of the first steps the Commission
is taking to implement the PAEA, and that it is developing
complementary regulations on related matters, such as annual reporting
requirements and complaint proceedings. The Commission appreciates that
commenters are being asked to assess the advisability of certain
procedures prior to issuance of a comprehensive set of regulations.
However, it finds that pragmatic considerations and the interest in
promptly implementing PAEA policies dictate serial issuance of new
rulemaking proposals, rather than a complete set. Moreover, the
Commission believes that issuance of the proposed regulations in parts
3010, 3015 and 3020 at the same time has provided commenters with an
adequate basis for assessing many essential initial issues. However, as
Advo observes with respect to all of the Order No. 26 proposals, * * *
the true measure of their success will come when they are applied * * *
to specific issues that arise in the future.'' Advo Comments,
[[Page 63663]]
September 24, 2007, at 1. The Commission recognizes this, and intends
to provide an opportunity to address concerns about conflicts, gaps, or
the need for other adjustments as the need arises.
As to the specific proposals, some are concerned that the approach
the Commission has adopted with respect to notices, public
participation, and Commission review either is not consistent with due
process considerations or does not make clear that the Commission
intends to honor pertinent requirements. See, for example, Valpak
Comments, September 24, 2007, at 3-16 and 20-27; Medco Comments,
September 24, 2007, at 4-10; OCA Comments, September 24, 2007, at 12-
15, and APWU Comments, September 25, 2007, at 1-4. In brief, the
Commission believes that the rules, as proposed, are consistent with
pertinent due process considerations. However, it appears that there
are several areas where improvements can be made to make the
Commission's intentions more clear, without imposing undue burden on
the Postal Service or the Commission or compromising the PAEA's new
regulatory approach. Accordingly, the Commission reconsiders its
approach to several matters and revises or clarifies affected rules to
reflect this decision. The Commission provides a single discussion of
the matter here.
2. The Role of the Administrative Procedure Act
As the Commission has noted in Order No. 26, there is a tension in
the PAEA between its goals of facilitating rapid and flexible
adjustments to rates and classifications, and increasing the
transparency and accountability of those processes.\3\ The regulations
that the Commission proposed to govern Postal Service notices of rate
adjustment for market dominant products, as well as changes to the Mail
Classification Schedule, were intended to afford opportunities for
public participation that meet the basic guarantees of public
participation provided for by the PAEA and the Administrative Procedure
Act (APA) (chapter 5 of title 5 of the United States Code), either
explicitly or implicitly.
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\3\ See PRC Order No. 26, ]] 3070, 3074. This tension is readily
apparent from 39 U.S.C. 3622(b)(6), which simultaneously calls for
reducing the administrative burden and increasing transparency
relative to the system that prevailed under the Postal
Reorganization Act.
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With respect to Type 1 rate adjustments, the essential features of
the proposed regulations were requirements that the public receive
notice of the proposed rate adjustment from both the Postal Service and
the Commission (proposed rule 3010.10(a)), a 20-day period for public
comment (proposed rule 3010.13(a)), and a 14-day period for the
Commission to evaluate the consistency of the rates proposed with the
relevant requirements of the PAEA and issue its findings (proposed rule
3010.13(c)).
Applicability of the APA. Medco concludes that Commission orders
that determine the status of the Postal Service's rate proposals are
``rulemakings'' subject to section 553 of the APA. See 5 U.S.C. 553. It
argues that rate adjustments provided for in the PAEA fall
unambiguously within the applicable definition of a rule for purposes
of the APA, citing 5 U.S.C. 551(4):
`[R]ule' means the whole or part of an agency statement of
general or particular applicability and future effect designed to
implement, interpret, or prescribe law or policy * * * and includes
the approval or prescription for the future of rates. * * *
Medco Comments, September 24, 2007, at 5.
Consequently, Medco notes, Commission review of rate adjustments,
such as those provided for in 39 U.S.C. 3622(d)(1)(C)(ii), is informal
``rulemaking'' that is subject to the notice and comment requirements
of 5 U.S.C. 553 of the APA. Id.
Because a ``rule'' can be of either ``general or particular
applicability,'' the definition covers the adjustments that the Postal
Service might propose to both Type 1 (general) and Type 2 (NSA) rates.
Section 503 of title 39 authorizes the Commission to make such rules as
are ``necessary and proper'' to carry out its duties. That section
states that Commission rules, are ``subject to chapters 5 and 7 of
title 5.'' (Section 553 of the APA is placed within chapter 5 of title
5.) Medco cites National Easter Seal Society v. USPS, 656 F.2d 754, 767
(D.C. Cir. 1981) as confirming this interpretation of what is now 39
U.S.C. 503. Because Commission orders that determine the status of
postal rates are ``rules,'' and are subject to the requirements of 5
U.S.C. 553, Medco explains, Commission review of the Postal Service's
rate adjustment proposals must satisfy the notice and public comment
requirements of section 553. Id., at 3.
5 U.S.C. 553 requires that an gency:
(1) Publish notice of the proposed rule in the Federal Register,
and that it include ``either the terms or substance of the proposed
rule or a description of the subjects and issues involved'';
(2) ``[G]ive interested persons an opportunity to participate in
the rulemaking through submission of written data, views, or
arguments * * *'';
(3) Consider ``the relevant matter presented''; and
(4) ``[I]ncorporate in the rules adopted a concise general
statement of their basis and purpose.''
Medco emphasizes that complying with these section 553 obligations is
mandatory unless an exception can be shown to apply. Id. at 7.
The public notice requirements of section 553. With respect to Type
1 notices of rate adjustment, Order No. 26 proposed that the Commission
``publish notice of the [Postal Service rate adjustment filing] in the
Federal Register'' and ``post the filing on its Website.'' See proposed
rule 3010.13(a)(1). The Commission intended that consistent with
existing rule 3001.17(d), APA notice requirements would be
satisfied.\4\ This pattern was followed in the remainder of the rules
proposed in Order No. 26 that address various forms of pre-
implementation review by the Commission. Valpak asserts that this set
of notice requirements would not have satisfied section 553 of the APA
because the proposed rules did not expressly require that they include
the terms of the proposal (e.g., proposed rates) or any supporting
detail. Valpak Reply Comments, October 9, 2007, at 9.
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\4\ Order No. 26 also proposed that the Postal Service
``[p]rovide public notice in a manner reasonably designed to inform
the mailing community and the general public that it intends to
change rates. * * *'' See proposed rule 3010.10(a)(1). This is
designed to fulfill the requirement of section 3622(d)(1)(C) of the
PAEA.
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Although the Commission fully expected to issue notices that
complied with the content requirement of section 553, it accepts that
uncertainty is diminished by specifying this intention in every
applicable regulation. The Commission revises its proposed regulations
governing public notices to explicitly include the categories of
information that section 553 requires. Under the final rules, the
public can be assured that such notices will contain summaries of the
Postal Service's proposed rate and classification-related changes in
sufficient detail to satisfy the notice requirements of the APA. See
final rules 3010.13(a), 3010.44(a), 3010.65(a), 3020.33, 3020.53, and
3020.73.\5\
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\5\ No party contested notice applicable to competitive
products.
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The public comment requirements of 5 U.S.C. 553. The regulations
proposed in Order No. 26 would have allowed the public 20 days from the
filing of a proposed Type 1 rate adjustment to comment on whether the
proposed rates
[[Page 63664]]
comply with the rate cap provisions of the Commission's proposed rules
and whether they comply ``with the policies of 39 U.S.C. 3622.'' See
proposed rule 3010.13(b)(2). The regulations proposed in Order No. 26
did not specifically provide for public comment on proposed Type 2 rate
adjustments. See proposed rule 3010.41.
Commenters' positions. Some commenters argue that the regulations
proposed in Order No. 26 provided opportunities for public comment
during the pre-implementation period that went beyond what the PAEA
intended. Advo Reply Comments, October 9, 2007, at 3; DFS Comments,
September 24, 2007, at 2-4; and PostCom Comments, September 24, 2007,
at 1-3. Another group of commenters argued that these opportunities
were inadequate to honor the PAEA's directive to increase transparency
and accountability in the rate-setting process, and inadequate to
satisfy even the minimum requirements of the APA. APWU Reply Comments,
October 9, 2007, at 1-2; Medco Comments, September 24, 2007, at 2-5;
McGraw-Hill Reply Comments, October 9, 2007, at 4-5; NAA Reply
Comments, October 9, 2007, at 1-5; OCA Reply Comments, October 9, 2007,
at 3-4; Valpak Comments, September 24, 2007, at 2-16, 20-23; and Valpak
Reply Comments, October 9, 2007, at 1-34.
Advo argues that Congress did not contemplate, and the Commission
should not allow, any public input prior to implementation of the Type
1 or Type 2 rates. It points out the PAEA provides for public comment
during pre-implementation review of proposed Type 3 rates (those
prompted by ``extraordinary'' circumstances), but makes no mention of
them in the context of pre-implementation review of Type 1 and Type 2
rates. From this Advo infers that Congress meant to prohibit public
participation in pre-implementation review wherever it did not
expressly require it. Advo Reply Comments, October 9, 2007, at 1-3.
DFS contends that no issues may be commented upon or considered by
the Commission at the pre-implementation stage except compliance with
the rate cap. It takes the view that the objectives and factors
governing postal rate setting set out in section 3622(b) and (c) are
relevant only to the process by which the Commission designs a ``modern
system of ratemaking'' for market dominant products. DFS Reply
Comments, October 9, 2007, at 5-7.
PostCom and the Postal Service offer another rationale for reaching
the conclusion that public comment on any compliance issue other than
the rate cap at the pre-implementation stage conflicts with the PAEA.
They argue that the scope of pre-implementation review is necessarily
limited by the changed role that the Commission plays in rate setting
under the PAEA. They assert that it is the role of the Postal Service
rather than the Commission to balance the elaborate list of largely
qualitative objectives and factors that apply to the modern system of
ratemaking when proposing changes in rates. They contend that
Commission review is relevant only where a clear violation of one of
those objectives or factors can be demonstrated. They argue that the
rate cap is the only section 3622 requirement that is concrete and
objective enough to be susceptible to such a finding. Therefore, in
their view, compliance with the cap is the only issue upon which public
comment might be relevant to Commission review.
They emphasize that the rate-setting apparatus described in 39
U.S.C. 3622(d) focuses on the rate cap and its administrative details.
In particular, they note that section 3622(d) provides for a feedback
mechanism to resolve only the issue of non-compliance with the rate
cap. This supports the conclusion that Congress intended the rate cap
and its administration to be the only concern of pre-implementation
review. PostCom Reply Comments, October 9, 2007, at 1-3; and Postal
Service Reply Comments, October 9, 2007, at 14-17. A number of other
commenters agree that pre-implementation public comment and Commission
review should be confined to the issue of rate cap compliance. See ANM/
MPA Comments, September 24, 2007, at 2; NPPC Comments, September 24,
2007, at 2; Pitney Bowes Comments, September 24, 2007, at 7-8; and Time
Warner Comments, September 24, 2007, at 4-5.
Another group of commenters take the opposing position, namely that
failing to provide an opportunity for public comment before rate or
classification changes take effect, or restricting the scope of the
issues that such comments may address, undermines the PAEA's objective
of increasing the transparency and accountability of the rate-setting
system (see 3622(b)(6)) and violates section 553 of the APA.\6\ They
note that section 553(c) requires an agency to allow interested persons
to ``participate'' in substantive rulemakings by submitting ``written
data, views, or arguments * * *'' They note that section 553(c) also
requires an agency order adopting a rule to include `` `a concise
general statement of the basis and purpose''' after considering the ``
`relevant matter''' that has been presented in the course of the
rulemaking. Medco Comments, September 24, 2007, at 3. These commenters
acknowledge that in addressing pre-implementation procedures in 39
U.S.C. 3622(d), the PAEA emphasizes compliance with the rate cap. But,
they point out, there is no language in section 3622(d) or elsewhere in
chapter 36 that excludes broader pre-implementation review by the
Commission. Therefore, they argue, there is no legal ground for
excluding either the objectives and factors listed in section 3622, or
the general policy provisions of title 39, from pre-implementation
review. Valpak Reply Comments, October 9, 2007, at 12, 20; Medco
Comments, September 24, 2007, at 7; and McGraw-Hill Reply Comments,
October 9, 2007, at 5.
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\6\ See generally Medco and Valpak comments, and the reply
comments of McGraw-Hill, NAA, the OCA, and Valpak.
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These commenters also acknowledge that expedition and flexibility
in rate setting are among the PAEA's goals, and that the Commission has
a good deal of discretion to set priorities with respect to which
compliance issues it will focus on in the limited time it has set aside
for pre-implementation review. They contend, however, that prohibiting
public comment outright on statutory policies, objectives, and
standards that would be affected by the rates under Commission review
would not allow some compliance issues to be evaluated by APA mandated
procedures. This, they suggest, would have the effect of selectively
reading section 503 of title 39 (which subjects substantive Commission
orders to the requirements of the APA) out of the statute. See Medco
Comments, September 24, 2007, at 4-5, 7.
It is certain, Medco and others argue, that barring public comment
altogether before adopting a substantive rule violates the notice and
comment guarantee of section 553 of the APA. They note that regulations
proposed in Order No. 26 do not explicitly assure an opportunity for
public comment with respect to amended notices of Type 1 rate
adjustments, all Type 2 rate adjustments, and significant
classification changes that do not require amendments to the market
dominant and competitive product lists. They argue that deferring
consideration of the public's views to various post hoc forms such as
the Commission's annual compliance report required by 39 U.S.C. 3653 or
a complaint filed under 3662 does not preserve the interests protected
by 5 U.S.C. 553. Those interests include
[[Page 63665]]
the chance for the public to be heard before a rule has been finalized
when its comments are more likely to influence the agency's rule. See
Valpak Reply Comments, October 9, 2007, at 6, 7, and 16.
Commission analysis. The tension between the groups interpreting
the PAEA as mandating little, if any, pre-implementation review of
proposed changes in postal rates and classes, and those interpreting it
as requiring that all issues be reviewable prior to implementation, is
clear. It is equally clear that the Commission can interpret its
responsibilities in a way that reconciles the flexibility and
expedition that the PAEA requires with the public participation
guarantees of the APA.
A statute should be construed ``so that effect is given to all its
provisions, so that no part will be inoperative or superfluous, void or
insignificant.'' Pennsylvania Medical Society v. Snider, 29 F.3d 886,
895 (3d Cir. 1994). The court observed in Citizens to Save Spencer
County v. EPA:
[i]f inconsistent provisions point generally in a common
direction, it is the task of an agency with requisite authority to
pursue a middle course that vitiates neither provision but
implements to the fullest extent possible directives of each, * * *
600 F.2d 844, 870 (D.C. Cir. 1979). This is particularly true if a
construction can be found that will give force to and preserve all the
provisions of the statute. FDA v. Brown and Williamson Tobacco Corp.,
529 U.S. 120, 133 (2000). Accordingly, the Commission reconciles those
provisions of the PAEA that promote flexible and expedited rate setting
with those that foster transparent and accountable rate setting.
To do this, it helps to clearly identify the statutory purposes
that need to be reconciled. The Commission concludes that one of
Congress's main motives in enacting the PAEA was to simplify and
expedite the setting of postal rates. It further concludes that
Congress intended to give the Postal Service wide latitude in designing
specific rates and rate relationships, expecting that the Commission
would alter those decisions only where disregard of particular
statutory standards is clear. Consequently, the Commission now plays a
different role in reviewing proposed rates prior to their
implementation than it has in the past.
The Commission also concludes that Congress expected that a modern
system for regulating rates and classes would afford the public and the
Commission only a limited period of pre-implementation comment and
review. This finding is supported primarily by the 45-day period of
advance notice of proposed changes in rates that is referenced in
section 3622(d)(1)(C). This provision indicates that Congress viewed 45
days as an adequate review period for the compliance issues that would
be raised prior to implementing new rates. This implies that the pre-
implementation issues with which Congress expected the Commission to
deal would be few enough, or the level of scrutiny would be light
enough, to allow the Commission to evaluate them adequately within 45
days. The inference is strong that Congress contemplated that
complicated or subjective compliance issues would be addressed during
the annual compliance review, or through the complaint procedures of
section 3662.
Even though Congress intended limited pre-implementation review of
postal rate changes, it must be presumed that Congress was aware of 5
U.S.C. 553 and the limits it sets on the extent to which public
participation can be deferred until after a rule is finalized. That APA
provision is designed to ensure that the opinion of those whose
interests will be affected by an agency's rules will be heard before a
rule is finalized, not after. Courts have emphasized the distinction:
The EPA overlooks, however, the crucial difference between
comments before and after rule promulgation. Section 553 is designed
to insure that [parties affected by an agency decision] have an
opportunity to participate in and influence agency decision-making
at an early stage, when the agency is more likely to give real
consideration to alternative ideas.
United States Steel Corp. v. EPA, 595 F.2d 207, 214 (5th Cir. 1979),
rehearing granted 598 F.2d 915.\7\
\7\ See also, City of New York v. Diamond, 379 F. Supp. 503, 517
(S.D.N.Y. 1974) (``Permitting the submission of views after the
effective date is no substitute for the right of interested persons
to make their views known to the agency in time to influence the
rule making process in a meaningful way * * *''). Accord, Maryland
v. EPA, 215, 222 (4th Cir. 1975); vacated on other grounds sub nom.
EPA v. Brown, 431 U.S. 99 (1977).
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The Commission notes that neither the PAEA nor its legislative
history explicitly define the scope of public input or Commission
review of proposed rates prior to their implementation. It concludes
that the weight of the inferences that may be drawn from the provisions
of the PAEA itself indicate that Congress intended to leave room for
Commission discretion in determining the degree of public input that
would be afforded in the pre-implementation period, the form that it
should take, and what priority the Commission would give to evaluating
the public input that it decided to elicit. Given this, the most likely
and most reasonable assumption is that Congress expected the Commission
to give as much consideration as it could to the issues most capable of
resolution in the brief period that the PAEA provides, without
violating the minimum guarantees that 5 U.S.C. 553 provides.
The Commission can give close scrutiny to only a limited number of
compliance issues in the time available before rate changes are
implemented, but it can not always predict in advance precisely which
issues will be of highest priority. In recognition of that fact, the
final rules adopted by the Commission require the Postal Service to
address a broad range of relevant issues in any notice of rate
adjustment, but clarify that the Commission focus must be primarily on
the requirements of 39 U.S.C. chapter 36, subchapter 1. See final rules
3010.13 and 3010.14.\8\
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\8\ Within the 45-day period contemplated for pre-implementation
review, the Commission is likely to be able to scrutinize and reach
definitive conclusions on compliance issues that are factually clear
and straightforward-such as rate cap compliance, or compliance with
formulas for calculating preferred rates. Commission review of more
complex or nuanced issues within that timeframe is likely to be
somewhat less thorough, and any conclusions that it reaches are
likely to be of a preliminary nature. For that reason, final rule
3010.13(j) distinguishes between the effect of the Commission's pre-
implementation findings concerning formula-determined caps and
rates, and other issues. The Commission will treat its findings
concerning the former as decided on the merits for purposes of
subsequent proceedings, but will not attach comparable presumptions
to findings concerning the consistency of a proposed change with
complex or subjective policy factors. Final rule 3010.13(j) responds
to a suggestion by GCA that this dichotomy be reflected in the
Commission's rules. See GCA Comments, September 24, 2007, at 5-6.
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PRC Order No. 26, ] 2029 commented that the Commission would not
entertain comments on costing methodology during the pre-implementation
period. Valpak and NNA infer from this that the Commission proposed to
prohibit public comments from discussing any issue that involves
attributable costs. Valpak Comments, September 24, 2007, at 5; Valpak
Reply Comments, October 9, 2007, at 29-34; and NNA Comments, September
24, 2007, at 8. Valpak argues that the requirement that classes and
services cover their attributable costs remains a requirement of the
PAEA (see 39 U.S.C. 3622(c)(2)), just as it was under the Postal
Reorganization Act. Valpak goes on to identify more than a dozen basic
policies, objectives, and factors in title 39 that have no force unless
attributable cost levels for the various classes and services are
known. Valpak argues that it is inconsistent for the rules proposed in
Order No. 26 to
[[Page 63666]]
allow comments of section 3622 requirements generally in the pre-
implementation review period, but single out costs for exclusion from
consideration.
The comment in Order No. 26 of which Valpak and NNA complain may
not have been adequately explained. The merits of one attribution
methodology relative to another is an example of an issue that is too
complex to be re-evaluated in a pre-implementation context. Cost
attribution methods should be reviewed in other rulemaking proceedings.
Whether rates properly reflect costs will be judged using the most
recently approved attribution methodologies.
Final rule 3010.13 retains the 20-day period for public comment
proposed in Order No. 26. Some commenters complain that Order No. 26
did not analyze the adequacy of this amount of time to afford a
meaningful opportunity to respond to the issues that proposed rates
might raise, as 5 U.S.C. 553 requires. Medco Comments, September 24,
2007, at 8; and Valpak Reply Comments, October 9, 2007, at 12. The
adequacy of the 20-day comment period must be viewed in the context of
the PAEA's goals. Major goals are to simplify and expedite the process
by which rates are adjusted. Routinely enlarging the public comment
period would reduce the time available to the Commission to evaluate
the comments received, if it is to provide the expedition that Congress
contemplated. Twenty days should be adequate to allow interested
persons to identify and explain perceived failures to conform to the
statutory requirements.
Type 1 and Type 2 rate adjustments compared. The notice and comment
guarantees of section 553 of the APA apply to both Type 1 and Type 2
rate adjustments. The Commission's final rules, however, still
distinguish between Type 1 and Type 2 review. Where the scope of public
comments and Commission orders addressing Type 1 rate adjustments
primarily focus on the requirements of 39 U.S.C. 3622(d), the scope of
comments and orders addressing Type 2 rate adjustments focus on
compliance with the requirements of 39 U.S.C. 3622(c)(10).
Similarly, where the period for public comments addressing Type 1
rate adjustments is 20 days from the Postal Service's filing, the
period for public comments addressing Type 2 adjustments is 10 days
from the Postal Service's filing. This reflects the narrower potential
compliance issues that Type 2 rate adjustments raise, and a lesser need
for review for such adjustments. Compare final rule 3010.13(c) with
final rule 3010.44.
Implementation dates under the APA. Section 553(d) of the APA
states that:
The required publication or service of a substantive rule shall
be made not less than 30 days before its effective date, except--
[A] substantive rule which grants or recognizes an exemption or
relieves a restriction;
[I]nterpretative rules and statements of policy; or
[A]s otherwise provided by the agency for good cause found and
published with the rule.
If one were to add the 20-day comment period to the 14-day period
that the Commission will allow itself for issuing an order regarding a
proposed rate adjustment, and add a 30-day waiting period before the
order could take effect, the total number of days required before a
proposed rate adjustment could take effect would exceed the 45 day pre-
implementation period provided for in section 3622(d)(1)(C).
Recognizing this possibility, DFS urges the Commission to routinely
accompany its rate adjustment orders with findings that there is good
cause to waive the 30-day waiting period. It argues that the Commission
could base its finding of good cause on the generalized notion that the
PAEA puts a high priority on allowing the Postal Service to change
rates quickly. DFS Reply Comments, October 9, 2007, at 4.
Finding good cause, however, requires a showing that a 30-day
waiting period is either ``impractical, unnecessary, or contrary to the
public interest.'' It is essentially an emergency procedure. See
Buschmann v. Schweiker, 676 F.2d 352, 357 (9th Cir. 1982).\9\ Since the
purpose of the section 553(d) waiting period is ``to give affected
parties a reasonable time to adjust their behavior before the final
rule takes effect'' (Omnipoint v. FCC, 78 F.3d 620, 630 (D.C. Cir.
1981)), it usually requires an analysis of specific interests that will
be hurt and those that will be helped by waiver of the waiting period.
See, for example, American Bankers Association v. National Credit
Union Administration, 38 F. Supp. 2d 114, 139,140 (D.D.C. 1999);
Buschmann v. Schweiker. Id. Accordingly, it would seem problematic for
the Commission to require itself, by rule, to routinely determine that
the factual circumstances surrounding a rate adjustment support a
finding of ``good cause'' for waiver. The Commission properly will
consider such a finding on a case-by-case basis.
---------------------------------------------------------------------------
\9\ The need to meet tight statutory deadlines has been rejected
as a justification for waiving the waiting period requirement. U.S.
Steel Corp. v. EPA, 595 F.2d 207, 214 (5th Cir. 1979).
---------------------------------------------------------------------------
Classification issues and the APA. Several commenters criticize the
rules proposed in Order No. 26 for failing to explicitly provide notice
and public comment opportunities before changes in the Mail
Classification Schedule are put into effect. They note the Commission's
proposed rules allow for public comment before the Mail Classification
Schedule is adopted, but make no provision for notice or public comment
for major classification changes unless they involve amendments to the
lists of market dominant or competitive products that the Commission is
required to maintain under 39 U.S.C. 3642. See proposed rules 3020.33,
3020.53, and 3020.73. This, they contend, violates the notice and
comment guarantees of section 553 of the APA. They also note that Order
No. 26 proposed rules that would require 15 days' notice from the
Postal Service prior to ``updating'' product descriptions in the Mail
Classification Schedule, but would not have provided an opportunity for
public comment on these changes. See proposed rules 3020.90 et seq.
They contend that major classification changes can potentially be
imposed through such updates. Medco Comments, September 24, 2007, at 9-
10; OCA Comments, September 24, 2007, at 15-17; McGraw-Hill Reply
Comments, October 9, 2007, at 2-3; and Valpak Comments, September 24,
2007, at 4, 15-16.
The Commission does not contemplate engaging in pre-implementation
review of the merits of any classification change. However, to preserve
Postal Service flexibility yet provide assurance that the Postal
Service will not misuse the system for correcting the Mail
Classification Schedule, additional opportunity for mailer comment is
provided in the final rules. The Postal Service notices of planned
classification changes will be posted on the Commission Web site and
interested persons will be afforded the opportunity to comment. See
chapter IV-B and rules 3020.91 through 3020.93.
3. Transparency Concerns
Several commenters assert that the rules proposed in Order No. 26
are inadequate to preserve, let alone increase, the transparency and
accountability of postal rate setting under the PAEA relative to the
regulatory regime under the Postal Reorganization Act. They make this
assertion, in large part, because the Commission has not published
proposed rules specifying the
[[Page 63667]]
information that the Postal Service will be required to provide to the
Commission as part of its periodic reporting under 39 U.S.C. 3652, and
the information and issues that will be covered by the Commission's
annual compliance report under 39 U.S.C. 3653. See, for example, Valpak
Comments, September 24, 2007, at 6; and Valpak Reply Comments, October
9, 2007, at 4. NAA observes that:
[I]t is difficult to comment on * * * the proposed ratesetting
rules without an understanding of how the Commission envisions the
interplay between annual reporting requirements, the data
submissions required to support notices of rate adjustments, and the
respective roles of the reporting requirements and the complaint
process.
NAA Comments, September 24, 2007, at 13.
The Commission anticipates issuing proposed rules soon after the
close of this docket that specify the information that the Postal
Service will provide in its periodic reporting under section 3652 to
facilitate preparation of the annual compliance report that the
Commission will provide pursuant to section 3653. Interested persons
will have ample opportunity to identify the types of information that
will best inform the Commission and the public, and assure the level of
accountability and transparency contemplated by the PAEA. Data from the
Postal Service's periodic reports under section 3652 will be available
and provide the basis for pre-implementation analysis of the Postal
Service's proposed rate adjustments, and will inform any complaints
that might be filed by the public. The Commission is optimistic that
the combination of pre-implementation review of rate changes, periodic
reporting by the Postal Service, annual compliance reports by the
Commission, and the complaint mechanism, all supported by the
Commission's subpoena power, will serve to increase the level of
transparency and accountability of postal rate setting under the PAEA
relative to that which prevailed under the prior regulatory regime.
Ex parte communications. In PRC Order No. 26, ] 2026, the
Commission remarked that:
[t]he Commission does not propose formal discovery, Notices of
Inquiry, Presiding Officer's Information Requests, testimony, and
hearings. It anticipates handling resolution of discrepancies or
other matters through direct communication with the Postal Service.
Valpak criticizes these remarks, observing that:
PAEA-mandated transparency cannot be achieved by private
communications, such as meetings or briefings held behind closed
doors. Rather than achieving increased transparency, the result
would be much-reduced transparency.
Valpak Comments, September 24, 2007, at 11-12.
Valpak misinterprets the Commission intentions for fact gathering
during the pre-implementation review period. While the Commission does
envision direct communications as an important method of promptly
clarifying factual issues raised by the Postal Service's rate
adjustment filings, it intends that the substance of those
communications be made public in written memoranda placed in a public
file. The Commission is aware that in formulating informal rules, which
would include its orders determining compliance of proposed rate
adjustments with the requirements of the PAEA, it must inform the
public of the nature and substance of any exchanges with the Postal
Service or other interested persons that address the merits of the
proposed rate adjustment. The Commission anticipates issuing proposed
rules regularizing ex parte procedures in the context of informal
rulemakings soon after the conclusion of this docket. In the interim,
if the Commission initiates ex parte communications concerning the
merits of rate adjustment filings, including the accuracy of the data
that support the filing, it will summarize the ex parte contact and
place the summary in a public file shortly afterward.
4. Complaints
In the context of this rulemaking, several commenters have
expressed their views on certain aspects of the complaint process.
PostCom argues that the Commission should not hear complaints against
proposed rates during the 45-day notice period before a CPI increase
takes effect. PostCom also advocates limiting the hearing of complaints
under section 205 of the PAEA to the time of the annual compliance
review. PostCom acknowledges that the Commission will promulgate rules
governing the complaint process in the near future, yet it believes
that the Commission should ``nevertheless take the opportunity in this
proceeding to clarify this matter.'' PostCom Comments, September 24,
2007, at 2; see also MOAA Reply Comments, October 5, 2007, at 2, n.1.
Other commenters oppose PostCom's proposed limitations on the filing of
complaints on the grounds that they would unduly prejudice mail users
or that the proposed limitations are contrary to the PAEA. GCA Reply
Comments, October 9, 2007, at 2-5; NAA Reply Comments, October 9, 2007,
at 10-13.
NAA argues that the Commission should provide for expedited
consideration of post-implementation complaints that allege a failure
to meet the statutory conditions of 39 U.S.C. 3622(c)(10). Several
commenters contend that (1) the standard for setting a complaint for
proceedings should be construed generously, and (2) an expeditious
complaint procedure should be adopted.\10\ Other commenters believe
that the complaint procedures are outside the scope of this rulemaking
and these issues should be deferred to another rulemaking.\11\
---------------------------------------------------------------------------
\10\ GCA Comments, September 24, 2007, at 2-5 (incorporating by
reference: GCA Comments, April 6, 2007; Joint Comments of ABM, GCA,
and NAA, April 6, 2007; GCA Reply Comments, May 7, 2007; ABM, GCA,
NAA, and NNA Joint Reply Comments, May 7, 2007); see also NAA
Comments, September 24, 2007, at 11-12.
\11\ ANM and MPA Reply Comments, October 9, 2007, at 11; Advo
Reply Comments, October 9, 2007, at 10.
---------------------------------------------------------------------------
These comments on the complaint process raise important policy
considerations. They are, nonetheless, beyond the scope of this current
rulemaking proceeding. The Commission does not find it appropriate in
this proceeding to make any pronouncements on certain isolated aspects
of the complaint process. The Commission will shortly initiate a
separate rulemaking to consider modifications to the existing rules
governing complaints, see 39 CFR 3001.81 et seq., during which all
interested persons can address all such issues. The Commission believes
that the best way to make important policy decisions regarding the
complaint process is by dealing with all complaint related issues
together on a comprehensive basis.
In its comments, GCA asks the Commission to make it the ``next item
of business to propose and enact appropriate rules governing the
complaint process * * *'' GCA Comments, September 24, 2007, at 5.
Another commenter echoes this plea. See Valpak Comments, September 24,
2007, at 6-7. The Commission acknowledges that the complaint process is
of great importance to the PAEA's statutory scheme and will shortly
issue proposed rules for public comment.
5. Other Considerations
Free Press and The Nation, in joint comments, raise concerns about
the impact of the Commission's proposed implementation of a new
ratemaking system on Periodicals. They say they
[[Page 63668]]
strongly reject the notion that the Commission should take a ``light-
handed'' approach in pursuit of values ``held by the American people
that are embodied in a free press that cultivates new ideas and fosters
a robust political debate.'' Free Press and The Nation Comments,
September 25, 2007, at 1-2. They urge that Periodicals be considered
very carefully and that rate setting reflect the unique character of
publications in this subclass and their contribution to the nation.
They propose that the Commission reincorporate these values into its
proceeding. Id. at 2.\12\ They also provide a summary of views on
Docket No. R2006-1 to demonstrate why the Commission should ``inject
historical, democratic values back into its current work.'' Id. at 2-3.
This summary makes clear that they consider the outcome, for
Periodicals, a reversal of public policy.
---------------------------------------------------------------------------
\12\ Dow Jones opposes any revision of the rules based on the
comments of Free Press and The Nation. It notes: ``There is no place
in postal ratemaking to ignore proper cost-attribution, for
otherwise, inefficiencies will be encouraged, not discouraged.'' Dow
Jones Reply Comments, October 4, 2007, at 3.
---------------------------------------------------------------------------
Free Press and The Nation do not propose specific revision to the
proposed rules. The Commission does not revise the rules to effect any
additional preferences for Periodicals. The Commission notes that the
regulatory calendar should provide publishers and other mailers with an
increased degree of certainty about when changes will occur. Similarly,
the annual limitation on rate increases should provide insulation from
rate shock.
B. Basic Framework for Rules on Market Dominant Products
No commenter takes issue with the organizational structure the
Commission has proposed for rules on market dominant products. The
Commission has reviewed that structure, and finds it appropriate to
adopt this framework without change; however, it makes two minor
editorial revisions. One is a change in the caption of part 3010 from
``Rules Applicable to Rate Adjustments for Market Dominant Products''
to ``Regulation of Rates for Market Dominant Products.'' The other is a
change in the caption of subpart B.\13\ This entails revising the
reference to ``Type 1'' to the more inclusive and descriptive reference
to ``Type 1-A and 1-B.'' The intention is to make it readily apparent
from a reading of the caption that the text addresses both types of
filings.
---------------------------------------------------------------------------
\13\ Two commenters address other potential changes in
terminology. NPMHU takes issue with the Commission's use of the term
``exigent.'' NPMHU Comments, September 24, 2007, at 8-10. MOAA notes
that the Service's use of ``customized agreement'' may be more
accurate than ``negotiated service agreement.'' MOAA Reply Comments,
October 5, 2007, at 2. The Commission generally finds these points
well taken, but retains the terms used in the proposed rules. They
lack precision, but have met with wide acceptance in the postal
community.
---------------------------------------------------------------------------
Accordingly, part 3010, organized into five subparts, houses the
text of the final rules regulating rates for market dominant products.
The Commission emphasizes that although the overall organization
remains the same at the part and subpart level, the number,
designation, and text within the five subparts differ in some respects
from the proposal, based on revisions associated with comments,
Commission decisions, or on publication requirements. For example, in
subpart C as adopted, a new rule 3010.29 is added to address
transitional filings. This change, and others, are identified and
discussed within.
Based on the foregoing considerations, the Commission adopts the
following organization and captions for the final set of regulations on
market dominant products in its final rules:
Part 3010--Regulation of Rates for Market Dominant Products
Subpart A--General Provisions
Subpart B--Rules for Rate Adjustments for Rates of General
Applicability (Type 1-A and 1-B Rate Adjustments)
Subpart C--Rules for Applying the Price Cap
Subpart D--Rules for Rate Adjustments for Negotiated Service Agreements
(Type 2 Rate Adjustments)
Subpart E--Rules for Rate Adjustments in Exigent Circumstances (Type 3
Rate Adjustments)
C. Subpart A--General Provisions
1. Overview
Subpart A, as originally proposed, consists of a set of seven
general provisions. These provisions include a standard statement (in
rule 3010.1) noting that the rules in this subpart implement provisions
in the PAEA related to market dominant products. They also provide that
advance notice-and-review period for planned rate adjustments consists
of a minimum of 45 days for adjustments other than those based on an
exigency. They establish that exigency-based rate adjustments require
the Postal Service to file a formal request with the Commission and
state that they entail special procedures.
There is more detailed development of these general points in
subsequent rules.
2. Issues
Rule 3010.1. In Order No. 26, the Commission said that the crux of
the debate that had emerged over the length of time for Commission
review was whether 45 days constitutes the statutory maximum or
minimum. It noted that the Postal Service interpreted the language in
the statute as establishing a maximum, but also had acknowledged that
some changes, as a matter of good business practice, will entail
considerable implementation, and that it intended to provide additional
notice in these instances. PRC Order No. 26, ]] 2019-21. Some
commenters viewed the wording in the statute as establishing an
absolute minimum, and therefore clearly authorizing the Commission to
explicitly require the Postal Service to provide more notice.
The Commission concluded that the appropriate way to implement the
PAEA was to require that the Postal Service provide notice of rate
adjustments no later than 45 days before the intended implementation
date. Rule 3010.1, as proposed, reflects this assessment.
Commenters' positions. Most commenters addressing this point agree
with or accept the Commission's disposition.\14\ Some, however,
continue to express concerns about the impact of a short notice period
on adjustments on mailers. The NPPC, for example, emphasizes ``that the
minimum notice period needed for mailers and third-party vendors to
implement rate changes will often be considerably longer, particularly
when classification changes require substantial rewriting of
software.'' NPPC Comments, September 24, 2007, at 5. (Emphasis in
original.) Similarly, MMA considers the Postal Service's promised 90
days' notice insufficient, given implementation requirements. MMA
Comments, September 24, 2007, at 5. It suggests addressing this problem
by limiting index and exigent rate adjustments to rate changes, and not
permitting other changes, such as new mail preparation requirements and
transportation requirements, to be part of the proceedings. Id. at 6.
---------------------------------------------------------------------------
\14\ NNA suggests consideration be given to requiring notice in
public media. NNA Comments, September 24, 2007, at 5-6.
---------------------------------------------------------------------------
Commission analysis; final rule. The Commission agrees that both
the 45 days provided in the rule and the 90 days' notice the Postal
Service intends to issue allows only a brief period for
[[Page 63669]]
assessing the Postal Service's notice and implementing the changes, but
continues to believe that the proposed approach comports with the
statutory language and strikes an appropriate initial balance between
Postal Service flexibility and Commission review responsibilities. The
Commission appreciates mailers' concerns in this regard, but considers
revisions that would explicitly extend the period inappropriate at this
time as they would reduce the flexibility the PAEA intends the Postal
Service to have. Thus, MMA's suggestion is not accepted, although minor
changes to improve clarity are made.
Rules 3010.2 through 3010.6. This series of rules codify ``type''
and address general aspects of the PAEA-authorized scenarios for
addressing rate changes for market dominant products. As explained in
Order No. 26, the rationale for assigning types to the various
scenarios is to facilitate future reporting and general discussion, and
the proposal generally tracks an approach that has been successfully
employed for filing library references since Docket No. RM98-2. PRC
Order No. 26, ] 2017.
Suggested revisions. No commenter takes issue with the overall
approach in this series. However, OCA suggests, in the nature of a
clarification, that the Commission revise rule 3010.2(b) by adding
references to ``service'' and ``by class of service.'' It suggests the
inclusion of similar references in other rules for consistency.\15\ OCA
Comments, September 24, 2007, at 23-24. The Commission does not find
that this clarification will assist administration of the new
ratemaking process.
---------------------------------------------------------------------------
\15\ OCA identifies the following rules as candidates for
similar treatment: rules 3010.3(a); 3010.4(a) and (b); 3010.11(b);
3010.14(b)(4); 3010.26(b); 3010.27; 3010.28; and 3010.63(a) and (b).
Id.
---------------------------------------------------------------------------
Commenters propose two revisions in proposed rule 3010.4. The
Postal Service points out that the reference to ``a rate'' in the
second sentence of paragragh (a) of this section is not consistent with
the language in the relevant provision in the PAEA. It suggests that
substituting the phrase ``an increase for the class'' for the original
wording would achieve this consistency. In addition, DMA expresses
concern that the Commission has not adequately addressed the limit on
application of unused rate authority for Type 1-B adjustments filed
within 12 months of each other, and suggests adding language that
clarifies this point. DMA Comments, September 24, 2007, at 3. The
Postal Service considers this concern adequately addressed by operation
of rule 3010.7. Postal Service Reply Comments, October 9, 2007, at 40.
Commission analysis; final rule. The Commission finds proposed
rules 3010.2 and 3010.3 achieve their intended objective and adopts
them without change. The Commission finds that several revisions to
rule 3010.4 are warranted, based on commenters' observations. One
simply reflects redesignation of proposed paragraph (b) as final
paragraph (c) to accommodate a new provision. The other revisions are
substantive. The first adopts the Postal Service's suggested revision
to the second sentence of rule 3010.4(a). In final form, this now reads
as follows: ``A rate adjustment using unused rate adjustment authority
may not result in an increase for the class that exceeds the applicable
annual limitation plus 2 percentage points.'' The second change, based
on DMA's suggestion, entails the addition of a new paragraph (b), which
reads as follows: ``Type 1-B rate adjustments filed within 12 months of
each other may not apply more than 2 percentage points of unused rate
authority to any class.'' The Commission adopts rule 3010.4 as revised
and explained above.
The Commission adopts rule 3010.5 as proposed, without change, as
no commenter took issue with it and it achieves the intended objective
of providing a basic statement defining Type 2 rate adjustments.
Rule 3010.6: general information about Type 3 proceedings. This
provision consists of three paragraphs. The text provides in general
terms for public participation in Type 3 cases and Commission review in
90 days. Subpart E addresses Type 3 requests in considerably more
detail.
Suggested revisions. OCA proposes revision of proposed rule
3010.6(c) to address its due process concerns and consistency with the
PAEA. It suggests adding an explicit reference to notice and an
opportunity for a public hearing and comment. OCA Comments, September
24, 2007, at 24-25.
Commission analysis; final rule. The Commission is revising other
rules in subpart E of part 3010 to make clear its intentions with
respect to due process. As this rule is only a general statement, the
Commission does not find that OCA's proposed revision, even if modified
to reflect the Commission's approach, appropriate. Accordingly, it
adopts proposed rule 3010.6 without change.
Rule 3010.7. This proposed rule consists of six paragraphs
addressing the regulatory calendar, which the Commission refers to as a
schedule in the rules. The text provides, among other things, for
development, maintenance and posting of the calendar.
Suggested revisions. The Commission's proposed treatment of issues
related to the regulatory calendar did not generate proposals for
revisions, but Valpak expresses a concern about how exigent requests
will mesh with the regulatory calendar and poses several potential
scenarios. Valpak Comments, September 24, 2007, at 26-27.
Commission analysis; final rule. The Commission agrees that in the
event of an exigent request, it is likely the points NNA usefully
raises will need to be addressed. At the same time, the Commission
notes that in the interest of getting a basic framework in place for
the new system, it is not practical to attempt to address every
eventuality. This is especially the case with respect to exigent
requests, which the Commission (and presumably most others) hope does
not materialize in the near future. Accordingly, it adopts proposed
rule 3010.7 without change.
D. Subpart B--Rules for Rate Adjustments for Rates of General
Applicability (Type 1-A and 1-B Rate Adjustments)
1. Overview
Subpart B, as proposed, consists of five sections covering basic
matters related to Type 1-A and Type 1-B rate adjustments. There was no
objection to the proposed organization of this set of rules; therefore,
the Commission carries it over into the final rules.
2. Summary
The rules in this subpart, as proposed, reflect a broad range of
considerations related to rate adjustments for Type 1-A and Type 1-B
filings. These include, among others, the procedures to be followed by
the Postal Service and the Commission (including each agency's notice
requirements), the public's role, technical matters related to limits
on adjustments, and the scope of Commission review. Several rules are
affected by the Commission's decision on due process considerations.
The impact mainly affects the text of rule 3010.13.
3. Issues
Rule 3010.10: procedures. This rule, as proposed, consists of two
paragraphs that set out the basic procedures associated with Type 1-A
and Type 1-B rate adjustments. Paragraph (a) establishes the minimum
requirements regarding the timing and nature of notices of these two
types of adjustments, as well as the filing thereof
[[Page 63670]]
with the Commission. The notice is to be provided in a manner
reasonably designed to inform the mailing community and the general
public that the Postal Service intends to change rates not later than
45 days prior to the intended implementation date. Transmission of a
notice of rate adjustment to the Commission is also to occur no later
than 45 days prior to the intended rate implementation date.
Paragraph (b) encourages the Postal Service to provide public
notice and to submit its notice of rate adjustment as far in advance of
the 45-day minimum as practicable, especially in instances where the
intended price changes include classification changes or operations
changes likely to have material impact on mailers.
Suggested revisions. McGraw-Hill suggests that the Commission
should allow for an extension of the 45-day review period, of its own
accord, or at the request of any interested party for good cause shown
to the extent reasonably necessary under the circumstances. McGraw-Hill
Comments, September 24, 2007, at 5.
Commission analysis; final rule. The Commission has considered the
suggestion that it should impose more explicit or extensive notice
requirements on the Postal Service. At this point, it continues to
believe that leaving the Postal Service with the flexibility to
determine the most effective way to distribute information about
planned rate adjustments is the more appropriate course. This approach
can be revisited if there are serious shortcomings in the Postal
Service's practice.
The Commission makes one minor editorial revision to rule
3010.10(a)(2). This consists of deleting the word ``rate'' in the
phrase ``intended rate implementation date.'' This deletion makes this
reference consistent with rule 3010.10(a)(1). Accordingly, the
Commission adopts rule 3010.10 as proposed, with the referenced
editorial revision.
Rule 3010.11: limit on size of rate increases. This rule, as
proposed, consists of an introductory phrase and three paragraphs. The
introductory statement provides that rate increases for each class of
market dominant products in any 12-month period are limited. Paragraph
(a) notes that rates of general applicability are subject to an
inflation-based limitation computed using the CPI-U values as detailed
in section 3010.12. Paragraph (b) recognizes that the PAEA authorizes
an exception to the inflation-based limitation by allowing the Postal
Service to make a limited annual recapture of unused rate adjustment
authority. It further provides that the amount of unused rate authority
is measured separately for each class of mail. Paragraph (c) provides
that in any 12-month period the inflation-based limitation combined
with the allowable recapture of unused rate authority equals the price
cap applicable to each class of mail. OCA suggests revising paragraph
(c) to conform it to the description of the price cap in proposed rule
3010.28. OCA Comments, September 24, 2007, at 25.
Commission analysis; final rule. The Commission has considered
OCA's suggestion, but finds such a change unnecessary. Accordingly, it
adopts the language of rule 3010.11 as proposed without change;
however, it designates the introductory statement as paragraph (a) to
conform the format to other rules, and redesignates the remaining
paragraphs.
Proposed addition to rate increase limitation. Some commenters
pursue the Commission's decision not to attempt to develop an
adjustment to CPI-U, based on service deterioration or other
considerations such as mail makeup requirements. ANM/MPA and NPPC
observe that there is broad consensus among mailers that an index
adjustment is necessary. They note that the principle involved is
straightforward, even if a method has not been presented yet. They
suggest adding to the weighted average change in rates for each class
the additional costs imposed by changes in Postal Service mail
preparation requirements and the diminution of economic value caused by
changes in the quality of service. They assert that the magnitude of
the adjustment (if any) could depend on evidence developed in a
complaint or annual compliance proceeding. They recognize that fleshing
out the details of an adjustment mechanism will become more practical
once service standards and performance measurement systems are in
place. They therefore urge that the issue be revisited as soon as
possible after that occurs. ANM/MPA Comments, September 24, 2007, at 4-
6; and NPPC Comments, September 24, 2007, at 7-8.
Pitney Bowes notes that in addition to the need for an adjustment
factor to account for service degradation and additional mail
preparation requirements, the Postal Service could also unfairly charge
mailers for technological or other innovative enhancements to mail that
increase its value, but impose no costs on the Postal Service. It
asserts that charging for ``value added'' by mailers is equivalent to a
tax on innovation and should be discouraged. It notes that either path
would frustrate the purpose of the annual limitation and undercut the
intended discipline of the price cap on operational efficiency. Pitney
Bowes Comments, September 24, 2007, at 11-12.
DMA seeks inclusion of a general, but clear, statement that the CPI
number upon which annual increases will be based assumes no change in
service standards, actual performance, or make-up requirements, and
that any such change will result in an adjustment to that number. DMA
Comments, September 24, 2007, at 8-9. McGraw-Hill also seeks an
affirmative indication from the Commission, to affirm in its rules that
its remedial authority after an annual compliance review extends to
rolling back the price cap or any unused rate adjustment authority if
and as appropriate, to mitigate any wide and sustained deterioration in
service (or cost shifting to mailers). McGraw-Hill Comments, September
24, 2007, at 8-9. NNA suggests that this proposal be considered in a
future service standards rulemaking. NNA Comments, September 24, 2007,
at 10.
The Postal Service opposes any revision in the rules to address
these concerns not only on the grounds the Commission expressed in
Order No. 26 (relating to lack of a method and the need to develop
rules on this issue), but also on grounds that the PAEA provides no
legal foundation for such an adjustment. It urges the Commission to
adhere to this position as well, and let experience determine whether
additional regulations in this area prove necessary. USPS Reply
Comments, October 9, 2007, at 45-46.
Commission analysis. The Commission recognizes that this is of
conern to mailers. Nevertheless, the Commission continues to conclude
that any attempt to develop an adjustment factor based on service
performance could be premature at this time.
Rule 3010.12: source of CPI-U data. This rule, as proposed,
consists of a two-sentence paragraph explaining that the source of the
monthly CPI-U values for the calculation of the annual limitation is
the Bureau of Labor Statistics (BLS) Consumer Price Index--All Urban
Consumers, U.S. All Items, Not Seasonally Adjusted, Base Period 1982-84
= 100. It also identifies the current series identification number. No
commenter suggested any revision to this rule. The Commission adopts
proposed rule 3010.12 without revision.
Rule 3010.13: Type 1-A and Type 1-B proceedings. This rule, as
proposed, consists of five paragraphs addressing proceedings for the
two referenced types of adjustment filings. It addresses a
[[Page 63671]]
considerable range of responsibilities on the part of the Postal
Service and the Commission, and identifies the rights of the public in
terms of public participation.
The discussion at the outset of this order noted and addressed many
commenter suggestions regarding notice and public comments. There are
some additional suggestions not directly addressed in the earlier
discussion. For example, OCA proposes revising rule 3010.13(b)(1) to
make it clear that comments may address planned rate adjustments that
exceed the annual limitation. Id. NAA suggests a revision in this same
rule to include a reference to 39 U.S.C. 403(c). NAA Comments,
September 24, 2007, at 13-15. MOAA opposes NAA's suggestion on grounds
of redundancy. MOAA Reply Comments, October 5, 2007, at 4-5. The
Commission does not adopt these suggestions.
Commission analysis; final rule. Most of the revisions in rule
3010.13 flow from the Commission's decision to make its intentions with
respect to ensuring adequate due process more clear. The Commission
concludes that the approach it adopts is consistent with the PAEA.
Proposed paragraph (a) provides that the Commission will establish
a docket for each rate adjustment filing, promptly publish notice of
the filing in the Federal Register, post the filing on its Web site,
and allow 20 days from the date of the filing for public comment. The
Commission revises this rule to make its intentions with respect to due
process and related considerations more clear, based on the rationale
set out previously. This paragraph, as revised and adopted, provides
that the Commission's notice shall include the general nature of the
proceeding; a reference to legal authority to which the proceeding is
to be conducted; a concise description of the planned changes in rates,
fees, and the Mail Classification Schedule; identification of an
officer of the Commission to represent the interests of the general
public in the docket; a period of 20 days from the date of the filing
for public comment; and such other information as the Commission deems
appropriate.
Rules 3010.13(b) and (c) will be discussed together. Proposed rule
3010.13(b) invites public comments on whether planned rate adjustments
are consistent with the annual limitation on increases (in subpart (1))
and the policies of 39 U.S.C. 3622 (in subpart (2)). Proposed rule
3010.13(c) then provided for a Commission order on whether the planned
rate adjustments were consistent with the annual limitations on rate
increases established in 39 U.S.C. 3622(d).
Consistent with the previous discussion on APA requirements, and
upon consideration of the extensive arguments presented on the proper
scope of public comments and Commission action under these two rules,
the Commission has determined to clarify its expectations by redrafting
subparts (b) and (c) of the rule. Rule 3010.13(b) now makes more clear
that the primary focus of public comment should be on the mandatory
requirements of the PAEA subchapter detailing provisions relating to
market dominant products. The two subparts now accurately cross-
reference rules implementing the two mandatory annual limitations on
rate increases established in 39 U.S.C. 3622(d).
Rule 3010.13(c), as redrafted, continues to provide for a
Commission decision within 14 days, and now specifies that the
Commission will address the statutory requirements related to the
annual limitation on rate increases, the limits on the recapture of
unused rate authority, and certain statutory rate preferences codified
in that subchapter.
Rule 3010.13(c) is further clarified by changing ``and issue a
notice and order announcing its findings'' to ``an order announcing its
findings.'' An identical conforming change is made in rule 3010.13(g).
The text of new paragraph (d), which was formerly a subpart under
paragraph (c), in addition to reflecting the clarified scope of the
Commission's review, is also revised to provide that rate adjustments
that are in compliance may take effect ``pursuant to appropriate action
by the Governors''. See 39 U.S.C. 404(a). Former paragraph (d) is
similarly clarified and retained as new paragraph (h).
New paragraph (f) reflects the Commission's decision to post any
amended notice of rate adjustment on its Web site and allow a period of
10 days from the date of the filing for public comment. This reflects
the Commission's decision to more clearly specify potential procedural
processes. In paragraph (g), the text is revised to affirmatively note
that the Commission will review the public comments, as well as the
amended notice.
The Commission adds a new paragraph (j) to clarify that for
purposes of subsequent proceedings, certain Commission conclusions with
respect to the planned adjustments will be considered findings on the
merits, and others provisional and subject to challenge. Conclusive
findings are those related to compliance with the annual limitation set
forth in rule 3010.11; the limitations set forth in rule 3010.28; and
the requirements of 39 U.S.C. 3626, 3627, and 3629. The Commission
rejects the suggestion to disallow complaint filings related to the
planned adjustments during the pendency of compliance reviews. This is
based, in part, on the conclusion that 39 U.S.C. 3662 does not include
any restriction or limitation on filing time. While a limitation may
not be strictly prohibited, the Commission finds it should be hesitant
to foreclose complaints. In addition, it is developing complaint rules
that will provide a better forum for considering this issue. The
Commission declines to adopt NAA's suggestion that an explicit
reference be added in this rule to 39 U.S.C. 403(c). The same
considerations are already covered in the rule.
Rule 3010.14: contents of rate adjustment notice. This section, as
proposed, consists of three paragraphs. Paragraph (a) is a general
provision requiring a Postal Service notice of rate adjustment to
include a schedule of proposed rates; the planned effective date(s) of
the proposed rates; a representation or evidence that public notice of
the planned changes has been issued or will be issued at least 45 days
before the effective date(s) for the proposed new rates; and the
identity of a responsible Postal Service official who will be available
to provide prompt responses to requests for clarification from the
Commission.
Paragraph (b) requires and describes supporting technical
information and justifications that are to accompany the notice of rate
adjustment. This pertains to CPI-U calculation; a schedule showing
unused rate authority available for each class of mail displayed by
class and available amount for each of the preceding five years; the
percentage change in rates for each class of mail calculated as
required by the Commission; the amount of new unused rate authority, if
any, that will be generated by the rate adjustment calculated as
required by the Commission; and, if new unused rate authority will be
generated for a class of mail that is not expected to cover its
attributable costs, an explanation of the rationale underlying this
rate adjustment.
It also requires a schedule of the workshare discounts included in
the proposed rates; a companion schedule listing the avoided costs that
underlie each such discount; a separate justification for all proposed
workshare discounts that exceed avoided costs; identification and
explanation of discounts that are set substantially
[[Page 63672]]
below avoided costs focusing on any relationship between discounts that
are above and those that are below avoided costs; a discussion
addressing how the planned rate adjustments will help achieve the
objectives listed in 39 U.S.C. 3622(b) and properly take into account
the factors listed in 39 U.S.C. 3622(c); and such other information as
the Postal Service believes will assist the Commission to issue a
timely determination of whether the requested increases are consistent
with applicable statutory policies.
Proposed paragraph (c) addresses new workshare discounts. It
provides that whenever the Postal Service establishes a new workshare
discount rate, it must include with its filing a statement explaining
its reasons for establishing the discount; all data, economic analyses,
and other information believed to justify the discount; and a
certification based on comprehensive, competent analyses that the
discount will not adversely affect either the rates or the service
levels of users of postal services who do not take advantage of the
discount.
Proposed paragraph (d) addresses the type of information that is
required to be provided when only Type 1-B rate adjustments are
proposed. It provides that the notice of rate adjustment shall identify
for each affected class how much existing unused rate authority is used
in the proposed rates calculated as required by rule 3010.27. It states
that all calculations are to be shown, including citations to the
original sources.
Suggested revisions. Suggestions related to this proposal differ on
the amount and type of information the Postal Service should provide in
its notice of adjustment, and run in opposite directions. Some say
workshare information should not be required, or language should be
revised to be less sweeping. Others, based either on due process
considerations or on a general interest in more information and
explanation, suggest adding more requirements to rule 3010.14. One of
these is a proposal to require a schedule identifying every change in
the Mail Classification Schedule that will be needed to implement the
planned adjustments.
OCA asserts that proposed rule 3010.14(b)(4) may not sufficiently
ensure that rates will satisfy the ``requirement'' of 39 U.S.C.
3622(c)(2) that each class or type of mail service bear its direct and
indirect attributable costs. It expresses concern that the proposed
rule may allow the requirement to be ``explained away[.]'' It proposes
that the Postal Service be required to increase rates the full amount
possible under the CPI-U cap, plus any allowable banked authority, for
any class that fails to cover its attributable costs. OCA Comments,
September 24, 2007, at 18-22. Valpak argues that the proposed rule
should go further to require the Postal Service to provide more detail
as to how the rates will move towards eliminating any cross-subsidy.
Valpak Comments, September 24, 2007, at 17-20.
In contrast to its opposition to proposals that would allow 39
U.S.C. 3622(c)(2) to trump the rate cap, ANM/MPA find OCA's proposal to
require the rates for a class that is below attributable cost to
increase by the maximum amount of the CPI-U cap, plus banked authority
``quite reasonable.'' ANM/MPA Reply Comments, October 9, 2007, at 7.
The Postal Service sees the styling of 39 U.S.C. 3622(c)(2) as a
``requirement'' as an indication that its importance is elevated above
that of the other factors of 39 U.S.C. 3622(c). It concludes that
``Sec. 3622(c)(2) should be interpreted as requiring that each `class'
of market-dominant mail cover its attributable costs.'' Postal Service
Reply Comments, October 9, 2007, at 46-47. Time Warner discusses the
issue at length and concludes that, at least for the time being, the
proposed rules adequately address it. Time Warner Reply Comments,
October 9, 2007, at 11-23.
APWU recommends that the Commission establish procedures for making
a finding of compliance or non-compliance for workshare discounts prior
to the annual compliance review. APWU acknowledges that the 45-day
review period associated with notices of rate adjustments does not lend
itself to an in-depth review of workshare discounts, but it recommends
that the Commission ``evaluate workshare discounts early in the
process[.]'' APWU Comments, September 25, 2007, at 5. On reply, several
commenters oppose this suggestion on the grounds that it would
undermine the streamlined rate-setting process contemplated in the
PAEA. Advo Reply Comments, October 9, 2007, at 4; ANM/MPA Reply
Comments, October 9, 2007, at 4; and NAPM Reply Comments, October 9,
2007, at 3. The Postal Service claims that additional procedures are
not necessary because it intends to compare workshare discounts with
cost avoidance numbers from the previous annual review and provide the
required justifications. Postal Service Reply Comments, October 9,
2007, at 54-55.
Commission analysis; final rule. The Commission does not find it
necessary to develop separate procedures at this time. Rule 3010.14
will assure that interested persons can evaluate workshare discounts in
a timely fashion, and the Postal Service has committed to preparing and
providing appropriate justifications. If this system proves inadequate,
the Commission will elicit specified suggested remedies.
39 U.S.C. 3622(e)(2)(B) provides that any discount above cost
avoided must be phased out over time. Therefore, according to APWU, the
regulations should require the Postal Service to explain how it will
eliminate any passthroughs that are above 100 percent. APWU Comments,
September 25, 2007, at 6. NAPM opposes this assertion, claiming that
such a requirement would effectively ignore the limited exceptions
allowed in 39 U.S.C. 3622(e)(2)(A)-(D). NAPM Comments, October 9, 2007,
at 3. See also Pitney Bowes Reply Comments, October 9, 2007, at 4.
The Commission views the provisions in 39 U.S.C. 3622 as a means to
foster pricing flexibility, reduce burden, and facilitate swift rate
changes. Requiring the Postal Service to plan specifically how it
intends to reduce excess discounts in the future is inconsistent with
this purpose.
NPPC notes ``the Commission should clarify that the cap on
worksharing discounts established by 39 U.S.C. 3622(e)(2) has five
exceptions, not just the four listed in Order No. 26 ] 2037 n.10.''
NPPC Comments, September 24, 2007, at 3. Footnote 10 of Order No. 26
was intended to summarize the four specific exceptions to 39 U.S.C.
3622(e)(2):
(2) Scope.--The Postal Regulatory Commission shall ensure that
such discounts do not exceed the cost that the Postal Service avoids
as a result of workshare activity, unless--
(A) the discount is--
(i) associated with a new postal service, a change to an
existing postal service, or with a new work share initiative related
to an existing postal service; and
(ii) necessary to induce mailer behavior that furthers the
economically efficient operation of the Postal Service and the
portion of the discount in excess of the cost that the Postal
Service avoids as a result of the workshare activity will be phased
out over a limited period of time;
(B) the amount of the discount above costs avoided--
(i) is necessary to mitigate rate shock; and
(ii) will be phased out over time;
(C) the discount is provided in connection with subclasses of
mail consisting exclusively of mail matter of educational, cultural,
scientific, or informational value; or
(D) reduction or elimination of the discount would impede the
efficient operation of the Postal Service.
39 U.S.C. 3622(e)(2)(A)-(D).
[[Page 63673]]
The Commission is quite aware that 39 U.S.C. 3622(e)(3) includes a
limitation on reducing worksharing discounts that are already in place.
Presumably, this limitation is the fifth exception that NPPC refers to:
(3) Limitation.--Nothing in this subsection shall require that a
work share discount be reduced or eliminated if the reduction or
elimination of the discount would--
(A) lead to a loss of volume in the affected category or
subclass of mail and reduce the aggregate contribution to the
institutional costs of the Postal Service from the category or
subclass subject to the discount below what it otherwise would have
been if the discount had not been reduced or eliminated; or
(B) result in a further increase in the rates paid by mailers
not able to take advantage of the discount.
Proposed rule 3010.14(b)(6) makes specific reference to the
limitations contained in both 39 U.S.C. 3622(e)(2) and (3). No further
clarification of this area is required.
Proposed rule 3010.14(b)(6) requires the Postal Service to
``identify and explain discounts that are set substantially below
avoided costs.'' Pitney Bowes suggests that the word ``substantially''
be removed from this section. It claims that this modification would
encourage the use of efficient component pricing as a guiding principle
and promote productive efficiency. Pitney Bowes also notes that the
word ``substantially'' is open to interpretation and removing it would
avoid uncertainty. Pitney Bowes Comments, September 24, 2007, at 2-3.
On reply, Stamps.com concurs with Pitney Bowes while APWU and the
Postal Service oppose the suggestion. Stamps.com Reply Comments,
October 9, 2007, at 4; and APWU Reply Comments, October 9, 2007, at 3-
6. The Postal Service explains:
[T]he Postal Service has some concerns about the Commission's
proposal to require an explanation of any discounts ``substantially
below'' avoided costs. * * * Understanding, however, that the
Commission is attempting to navigate through a wide variety of
competing concerns in developing an entirely new system, the Postal
Service was willing [to] accept the rule as proposed as a practical
compromise, which would still allow the Postal Service to achieve a
workable balance for rate design purposes. If, however, the word
``substantially'' were removed as Pitney Bowes advocates, this
balance would be upset. A system designed to presumptively lock-in
all workshare passthroughs at exactly 100 percent of avoided costs
would remove much of the flexibility that a price cap system is
intended to achieve.
Postal Service Reply Comments, October 9, 2007, at 50.
The Commission purposefully included the word ``substantially'' in
the rule so that the Postal Service would not be required to explain
reasonable passthroughs of less than 100 percent that were due to
rounding, or other similar rate design goals. Therefore, the wording
will remain in the rules. If in the future the word ``substantially''
requires clarification, a more detailed and precise definition can be
crafted.
Pitney Bowes suggests that efficient component pricing concepts
should be extended to cost differences not strictly related to
worksharing. It suggests that when the Postal Service departs from
cost-based rate design, it should be required to explain its reasons
for doing so. Pitney Bowes Comments, September 24, 2007, at 4. The
Commission has used efficient component pricing as a guiding principle
in rate design; however, the PAEA does not specifically require it for
rate differences not related to worksharing.
NPPC suggests the Commission clarify that the term ``workshare
discounts'' refers solely to presorting, prebarcoding, handling, and
transportation. It argues that some discounts for cost saving
activities performed by mailers should not be subject to worksharing
rules. NPPC Comments, September 24, 2007, at 2-3. Pitney Bowes and NAPM
support this suggestion. Pitney Bowes Reply Comments, October 9, 2007,
at 3; and NAPM Reply Comments, October 9, 2007, at 2. APWU opposes this
suggestion on the grounds that the suggestion seems to be designed to
avoid appropriate scrutiny for some types of discounts. This could have
detrimental effects on the Postal Service and other users of the mail.
APWU Reply Comments, October 9, 2007, at 7. In its explanation of the
proposed rules the Commission acknowledges that the PAEA defines
worksharing as activities related to four broad areas. However, the
Commission finds that it is unnecessary and premature to explicitly
decide what types of justification beyond those provided for in rule
3010.14(b), if any, would be necessary to support other rate
distinctions.
In rule 3010.14(c), the Commission proposes a procedure for
establishing new workshare discounts. This rule directs the Postal
Service to provide certain information including the reasons for
establishing the new discount, analysis supporting establishment of the
new discount, and certification that the discount will not adversely
affect other mailers.
Section 3010.14(c)(2) requires the Postal Service to provide, ``all
data, economic analysis, and other information believed to justify the
discount.'' Stamps.com Comments, September 24, 2007, at 4 finds this
language to be overbroad and contends that the Postal Service should
only be required to provide the data that it formally relied on in
developing the discount. The Commission did not contemplate that the
Postal Service would have to provide a laundry list of possible
justifications. Rather, the Postal Service should provide only the
information it relied on in developing the discount. The word
``believed'' has been changed to ``relied on'' to clarify the intent of
this subsection.
NPPC asserts that the Postal Service should not be required to
certify that the new worksharing discount will not adversely affect
other mailers. In making this assertion, NPPC argues that nothing in
the PAEA supports this regulation. It claims that new worksharing
discounts are often designed to correct existing cross-subsidies and
therefore do have negative impacts on other mailers' rates. NPPC
Comments, September 24, 2007, at 4. See also Stamps.com Reply Comments,
October 9, 2007, at 1-2. To illustrate its point, NPPC cites a
discussion in the Commission's Second Opinion and Recommended Decision
on Reconsideration in Docket No. R2006-1 related to the letter/flat
differential. This reference is of limited value as workshare
discounts, as defined in the PAEA, do not include shape-based
differences.
The intent of proposed rule 3010.14(c)(3) is to ensure that the
Postal Service complies with 39 U.S.C. 3622(e)(4)(C) when designing new
worksharing discounts. This section requires the Postal Service to
certify ``that the discount will not adversely affect rates or services
provided to users of postal services who do not take advantage of the
discount rate.'' GCA correctly describes the intent of the rule:
The phrase ``workshare discount,'' properly understood, refers
to a price concession reflecting (ideally at 100 percent
passthrough) cost savings to the Postal Service generated by
substitution of mailer activity for work that the Postal Service
would otherwise have had to perform. If the discount is properly
designed, and does pass through 100 percent of the savings, then a
mailer who does not take advantage of it is not enjoying an
``internal cross-subsidy.'' So far as the workshared mail is
concerned, the Postal Service is shedding costs precisely equal to
the revenue it gives up by reason of the discount. In other words,
the Service is (as it should be under efficient component pricing)
indifferent as to whether it or the mailer performs the function on
which the discount is based.
GCA Reply Comments, October 9, 2007, at 6. (Footnotes omitted; emphasis
in original.)
[[Page 63674]]
Commission analysis; final rule. The Commission retains rule
3010.14 largely as proposed, but makes several revisions in response to
commenters' suggestions on other matters.
The first change is to rule 3010.14(b)(4). The Commission revises
this provision by changing the words ``should explain'' in the last
sentence to ``must provide.'' As adopted in final form, the last
sentence now reads: ``If new unused rate authority will be generated
for a class of mail that is not expected to cover its attributable
costs, the Postal Service must provide the rationale underlying this
adjustment.'' This does not precisely track OCA's suggestion that the
Postal Service should be required to make an adjustment in
circumstances where attributable costs are not covered, but strengthens
the existing approach.
The Commission anticipates that the Postal Service will make every
effort to ensure that classes of mail recover their attributable costs
including, if necessary, using its full authority to increase rates
under the cap. The final rule allows the Postal Service to provide an
explanation should it somehow not be possible to do so.
The second change is to rule 3010.14(b)(7), where the Commission
conforms the language to its decision on the scope of the compliance
review. Accordingly, this paragraph, as adopted, reads as follows: ``A
discussion that demonstrates how the planned rate adjustments are
designed to help achieve the objectives listed in 39 U.S.C. 3622(b) and
properly take into account the factors listed in 39 U.S.C. 3622(c).'' A
related change, also consistent with the decision on scope of review,
is the addition of new rule 3010.14(b)(8). This provision reads as
follows: ``A discussion that demonstrates the planned rate adjustments
are consistent with 39 U.S.C. 3626, 3627 and 3629.''
The next change is the addition of a new requirement, rule
3010.14(b)(9), that the Postal Service provide a schedule identifying
every change to the Mail Classification Schedule that will be necessary
to implement the planned rate adjustments. This addition responds to
Valpak's suggestion.
The addition of these provisions requires redesignating proposed
rule 3010.14(b)(8) as rule 3010.14(b)(10). This affects only the
paragraph designation, not the text.
The Commission retains paragraph (c) largely as proposed, but
revises rule 3010.14(c)(2) as discussed above.
Accordingly, the Commission adopts proposed rule 3010.14 as final,
with the referenced revisions.
E. Subpart C--Rules for Applying the Price Cap
Subpart C, as proposed, consists of nine rules focused primarily on
essential aspects of price cap administration. These rules are more
technical than the others in part 3010, as most involve calculations.
The Commission has attempted to make the rules understandable to lay
readers.
Structure. There was no opposition to the proposed format of this
subpart. However, the Commission, in response to a suggestion, adds a
new rule 3010.29 to address the possibility of a transitional filing
using Postal Reorganization Act procedures.
Rule 3010.20: test for compliance with the annual limitation. This
rule, as proposed, addresses how to calculate the statutory price cap
mechanism. It resolves a debate over whether the moving average method
or the point to point method should be used. The rule reflected
adoption of the moving average method. It did not reflect a requested
adjustment for service degradation or costs associated with mail
preparation and related activities.
Suggested revisions. Several commenters continue to express concern
about the absence of an adjustment factor to account for the impact of
certain developments. See, for example, DMA Comments, September 24,
2007, at 8-9; NPPC Comments, September 24, 2007, at 6; Pitney Bowes
Comments, September 24, 2007, at 11-12; and ANM/MPA Comments, September
26, 2007, at 4-5. ANM/MPA further suggests a that could be used to make
such an adjustment, thereby addressing one consideration the Commission
mentioned in Order No. 26. Id. at 5. DMA also believes the cap should
reflect any degradation in service. It proposes that the Commission
state that the CPI number that forms the basis for the planned changes
assumes no change in service standards, actual performance, or makeup
requirements, and that any such changes will result in an adjustment to
that factor. DMA Comments, September 6, 2007, at 7-8.
Commission analysis; final rule. The Commission continues to
believe that it is not appropriate to include the requested adjustment
in its rules at this time. It reiterates that the statute establishes a
system of accountability through increased transparency, and that an
anticipated rulemaking on annual reporting requirements will include
data on service achievement. It also notes that if experience shows
that additional regulations are needed to achieve the objectives of the
legislation, the Commission is obligated to develop appropriate
regulations or recommend legislative changes to Congress.
Rule 3010.21: Calculation of annual limitation. This rule, as
proposed, consists of two paragraphs explaining how the annual
limitation is calculated and setting out the formula.
On behalf of Advo, Antoinette Crowder and William C. Miller present
an alternative method of calculating the annual inflation cap
(cap).\16\ Crowder and Miller calculate the cap by first computing the
percentage change in the CPI-U for each of the 12 preceding months over
the same period last year (SPLY), and then take the simple average of
these percentages. The Commission's proposed rule calculates the cap by
first computing two sequential, 12-month simple averages of the CPI-U
that are 12 months apart (referred to as Recent and Base Averages), and
then takes the percentage change in these averages. See rule 3010.21.
Both methods utilize the preceding 24 monthly values of the CPI-U. The
Crowder and Miller method can be characterized as a month-SPLY method,
while the Commission's method can be characterized as a year-SPLY
method.
---------------------------------------------------------------------------
\16\ Statement of Antoinette Crowder and William C. Miller in
Response to Commission Order No. 26, September 24, 2007 (Crowder and
Miller).
---------------------------------------------------------------------------
Commission analysis. Crowder and Miller contend that the
Commission's method yields a biased measure of inflation and that their
method is statistically superior to the Commission's method. Crowder
and Miller at 11. The Commission does not find the criticism of Crowder
and Miller sufficiently compelling to change its proposed cap
calculation for the following reasons.
First, the Commission uses the same as the Bureau of Labor
Statistics to calculate the annual percentage change in the CPI-U so it
is officially accepted for this purpose.\17\ Until the Commission finds
that this method of calculating annual percentage changes in the CPI-U
is faulty in some meaningful fashion, the Commission concurs with the
Bureau of Labor Statistics on the appropriate method.
---------------------------------------------------------------------------
\17\ See ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.
Note that the percentage change in the CPI-U in the ``avg-avg''
column for 2005-2006 is 3.2 percent. This is calculated as the 2006
annual average CPI-U divided by the 2005 annual average CPI-U minus
1, which is the Commission's method.
---------------------------------------------------------------------------
Second, the Commission finds the basis of the assertion by Crowder
and Miller that the Commission's inflation cap calculation formula is
biased to be theoretically limited. Crowder and Miller arrive at this
conclusion by expressing the Commission's year-SPLY
[[Page 63675]]
method in month-SPLY terms. In order to do this, they must multiply
their own month-SPLY terms by monthly weights they have derived.
Because these monthly weights are correlated with the month-SPLY
inflation terms, Crowder and Miller conclude that the Commission's
method yields a biased measure of inflation.\18\ While it is true that
the weights needed to express the Commission's formula in month-SPLY
terms are correlated with those month-SPLY terms, this does not prove
that the year-SPLY method is a biased measure of inflation and the
month-SPLY method is not. That would be the case only if the month-SPLY
method used by Crowder and Miller was an unbiased measure of inflation.
Crowder and Miller attempt to show this is the case, but they are able
to do this only by assuming that month-SPLY inflation is constant
across months.\19\ This unrealistic assumption undermines Crowder and
Miller's claim that their method is unbiased and therefore superior to
the Commission's method. All that can be said is that the Commission's
method of calculating the annual inflation cap is not identical to the
method used by Crowder and Miller.
---------------------------------------------------------------------------
\18\ Crowder and Miller specifically attribute the cause of the
bias to the interaction in month-SPLY CPI indices and a monthly
weight, because they share a common term, namely. See Crowder and
Miller at 14.
\19\ See Crowder and Miller at 13 where they assume that the ``*
* * expected value of any month-to-SPLY adjustment factor is one
plus the expected value of the inflation rate, a constant (r).''
---------------------------------------------------------------------------
Third, the method used by Crowder and Miller yields no material
difference in the measurement of inflation compared to the Commission's
method. Employing monthly CPI-U data from the Bureau of Labor
Statistics from 1962 through 2006 (a total of 540 monthly CPI-U
values), the Commission calculated 516 annual percentage changes in
inflation using each of the two methods. The method used by Crowder and
Miller yields cumulative percentage changes in inflation just over 1
percent greater than the Commission's method for the entire 43-year
period. If anything, the method used by Crowder and Miller seems to
favor a higher cap on average. Moreover, there is no material
difference in any one of the 516 annual percentage changes calculated
by the two methods. The Commission found that there was not a single
month in which the absolute inflation difference between the two
methods exceeded one-tenth of one percent (0.1%).\20\
---------------------------------------------------------------------------
\20\ The Bureau of Labor Statistics has recently started to
report the CPI-U index to three decimal places. For this reason, the
cap is rounded to three decimal places before being expressed as a
percentage change, and to one decimal place when expressed as a
percentage change.
---------------------------------------------------------------------------
The Postal Service reaches the same conclusions about the method
used by Crowder and Miller. The Postal Service first states that the
method used by Crowder and Miller appears to have de minimis practical
consequences. Further, the Postal Service is unconvinced that the
method used by Crowder and Miller can be considered to be statistically
superior to the Commission's method. Postal Service Reply Comments,
October 9, 2007, at 40, n.96.
Final rule. Final rule 3010.21 remains largely as initially
proposed. The Commission revises the last sentence of paragraph (a) to
eliminate a potential source of confusion. The revision clarifies that
rounding of the percentage referred to is to one decimal place.
Rule 3010.22: Calculation of less than annual limitation. This
rule, as proposed, consists of three paragraphs addressing situations
where a calculation of a less than annual limitation is required.
Rule 3010.23: Calculation of percentage change in rates. This rule
contains four paragraphs.
Commenters' positions. In discussing proposed rules 3010.22 and
3010.23, several commenters raise concerns that the proposed rules may
allow the Postal Service to implement rate increases that exceed the
intended limits of the cap over time. Advo Comments, September 24,
2007, at 5-6; DMA Comments, September 24, 2007, at 6-8; Pitney Bowes
Comments, September 24, 2007, at 10-11; and MOAA Reply Comments,
October 5, 2007, at 4. One topic of discussion is whether the cap
should be applied to average revenue or to rates. DMA and Advo describe
potential scenarios whereby more frequent rate increases would result
in higher average revenue than what would be achieved with annual rate
increases.
Advo supplements its comments with a detailed technical analysis of
the Commission's proposed rule 3010.22 governing Type 1 rate
adjustments filed less than one year apart. The statement interprets
the purpose of the rule for a partial year limitation, demonstrates
that it does not achieve that purpose, concludes that it would permit
excessive increases in average revenue, and proposes an alternative
formulation to achieve the perceived intent of the rule. Crowder and
Miller at 2-11.
The Postal Service responds to these concerns with a discussion of
the difference between a cap on average revenue and a cap on rates.
Postal Service Reply Comments, October 9, 2007, at 30-35. It argues
that the proposed rules appropriately identify the ``percentage
differences between sets of rates, and not * * * total revenue or
revenue per piece for particular time periods.'' Id. at 32. It applies
the same logic to address the concerns of DMA and Advo that more
frequent rate increases may allow the Postal Service to collect excess
revenue. The Postal Service concludes that the Commission's proposed
rules correctly place the restriction on rates, rather than revenue. It
also points out that proposed rule 3010.7 requires the Postal Service
to provide a schedule of regular rate changes, and prevents it from
deviating from the schedule without some articulated rationale. Id. at
35-40.
Commission analysis. The Commission finds that, by applying the
CPI-U cap as a limitation on the percentage change in rates, its
proposed rules are consistent with 39 U.S.C. 3622(d)(1)(A). While more
frequent rate increases may produce higher revenue, other components of
the rules and the PAEA, as well as practical operational and market
considerations, constrain the frequency with which rates can be
adjusted. The Commission also believes that its clarification of the
treatment of rates of limited duration (e.g., seasonal or temporary) in
rule 3010.23 may address some of the concerns of commenters who urge
the use of average revenue in the application of the cap.
Crowder and Miller's critique of the partial-year rate adjustment
rule (3010.22) mistakenly assumes that the cap is based on the
estimated increase in CPI-U for the next year. Crowder and Miller at 2.
The historical increase in CPI-U that establishes the allowable
increase is not assumed to be a forecast proxy. Accordingly, the
partial-year rate adjustment rule is not designed to account for the
difference between actual increases in CPI-U and those estimated at the
beginning of the year. The rule is intended to give the Postal Service
flexibility in the timing of rate adjustments. Therefore, the
alternative calculation suggested in the statement is not adopted.
Also, the suggested alteration to the rules for applying the cap to
a subsequent adjustment is unnecessary. The Commission's proposed rule
3010.22 takes into account rate adjustments (including partial-year
adjustments) within the previous year to determine the allowable
increase.
Commission analysis; final rule. The Commission makes one revision
to this rule. It adds, in the last sentence of paragraph (b), the same
limit on rounding that now appears in final rule 3010.21(a). The
rationale is the same:
[[Page 63676]]
Eliminating a potential source of confusion.
The Commission does perceive a need for a slight modification of
other proposed rules governing notices of rate adjustment filed less
than a year apart. The language of rules 3010.4 and 3010.28 are
clarified to better reflect 39 U.S.C. 3622(d)(2)(C)(iii)(IV).
The Commission remains sensitive to concerns that its untested
rules successfully implement the requirements of the PAEA as intended.
It will monitor and evaluate the effectiveness of the rules as they are
utilized and consider modifications.
Rule 3010.23: Calculation of percentage change in rates. Several
commenters found the proposed language in rule 3010.23 addressing rates
of limited duration (e.g., seasonal or temporary) to be potentially
confusing. DMA Comments, September 24, 2007, at 7; NPPC Comments,
September 24, 2007, at 6; ANM/MPA Comments, September 24, 2007, at 3-4;
and GCA Reply Comments, October 9, 2007, at 12. Specifically, there is
concern that the third sentence of rule 3010.23(b) may conflict with
the last sentence in rule 3010.23(a) and unintentionally lead to rate
increases that violate the intent of the cap. The commenters suggest
either deleting the third sentence of rule 3010.23(b) or revising it to
make it more clearly consistent with the last sentence in rule
3010.23(a).
In its reply comments, the Postal Service suggests an
interpretation of the rules whereby the third sentence of rule
3010.23(b) creates an exception to the last sentence in rule
3010.23(a). It proposes alternative wording for the third sentence of
rule 3010.23(b) that would codify an exception for rates that are not
``in effect at the time of notice of proposed rate changes, and there
is no expectation that [the rates] will necessarily be offered again in
subsequent years[.]'' Postal Service Reply Comments, October 9, 2007,
at 41.
Commission analysis. To clarify the intent of the rules, the
Commission deletes the third sentence of proposed rule 3010.23(b). The
Postal Service's interpretation and suggested language is not
consistent with the Commission's intent for the treatment of seasonal
or temporary rates. Such an interpretation could imply that the
introduction of a seasonal discount would be included in the test for
compliance with the cap, while the subsequent elimination of the
discount might not be included (depending on the timing of the notice).
The intent of rule 3010.23(a) is for each rate that is either
current (even if it is not available at the time of year of the notice)
or planned, or both, to be treated as a rate cell and thus included in
the formula in rule 3010.23(c). If a seasonal or temporary rate is to
be eliminated, the volume for the rate cell will be applied to the
applicable planned permanent or year-round rate in the numerator of the
rule 3010.23(c) formula, and the same volume will be applied to the
current seasonal or temporary rate in question in the denominator. This
is to be done without regard to the timing of the notice within a
calendar year.
A simplified example may be helpful. Suppose a class consists of a
single type of mail, with one rate (10 cents) applied from January
through June and another (9 cents) applied from July through December.
Further suppose that the Postal Service files a notice of rate
adjustment in which the July though December rate is eliminated (making
the current January through June the new year-round rate) with no other
changes. Assume the volumes from the most recent available 12 months of
billing determinants are 50 million pieces for each of the two rates,
for a total of 100 million pieces in the class.
Regardless of the time of year of the notice, the method for
calculating the percentage change in rates is the same. The first step
is to sum the products of the planned rates and volumes ((50,000,000 x
.10 = 5,000,000) + (50,000,000 x .10 = 5,000,000) = 10,000,000)). The
second step is to sum the products of the current rates and volumes
((50,000,000 x .10 = 5,000,000) + (50,000,000 x .09 = 4,500,000) =
9,500,000)). The final step is to divide the results of the first step
by the results of the second step and subtract 1 from the quotient
((10,000,000 x 9,500,000 = 1.0526)-1 = 0.0526 = 5.26%)). The
elimination of the July through December rate would therefore result in
a 5.26 percent increase in rates for the class.
Selection of volumes for weights. Time Warner proposes to add
before-rates subscripts to the volume variable (V) in the formula in
rule 3010.23(c), to clarify that a Laspeyres index will be used to test
for compliance with the cap. Time Warner Comments, September 24, 2007,
at 10. The Postal Service asserts that rule 3010.23(d) adequately
identifies the volume weights to be used in the calculation. Postal
Service Reply Comments, October 9, 2007, at 33-34.
The Commission finds that the language of rule 3010.23(d)
sufficiently defines the weights to be applied. Moreover, referring to
the weights as ``before-rates'' would not be a completely accurate
description, as 3010.23(d) instructs the Postal Service to adjust the
billing determinants to account for classification changes. Using Time
Warner's proposed language, if a new rate is introduced, its ``before-
rates'' volume would be zero, and the effects of introducing it would
be improperly excluded from the calculation of the percentage change in
rates. For these reasons, the Commission does not incorporate the
suggested modification.
Commission analysis; final rule. The Commission agrees that
clarification is warranted. It finds this can be achieved by deleting
the third sentence in paragraph (b). The Commission, on its own accord,
adds the term ``where,'' in paragraph (c) immediately after the
presentation of the formula and before the key. The Commission makes no
other changes in this rule.
Rule 3010.24: Treatment of volume associated with negotiated
service agreements. This rule, as proposed, generally provides that
mail volumes sent at non-tariff rates under negotiated service
agreements are to be included in the calculation of percentage change
in rates as though they paid the appropriate rates of general
applicability. It also requires supporting explanations and the
rationale for assumptions.
There were no suggested revisions to this rule. The Commission
adopts the rule with one editorial change. It eliminates the
superfluous term ``non-tariff''.
Rule 3010.25: Limitation on unused rate adjustment authority rate
adjustments. This rule, as proposed, addresses certain limits on unused
rate adjustment authority. There were no suggested revisions to this
rule. The Commission adopts it as proposed.
Rule 3010.26: Calculation of unused rate adjustment authority. This
rule, as proposed, consists of four paragraphs addressing several
matters related to the calculation of unused rate adjustment authority.
Commission analysis; final rule. The Commission makes several
clarifying revisions in rule 3010.26. In paragraph (a), it adds the
words ``notices of'' before ``Type 1 rate adjustment'' to assist in
determining the accrual period. In paragraph (b), it adds the words
``Type 1'' before rate adjustment for consistency with the previous
reference. It also revises the phrase ``or .22(b)'' to ``or
3010.22(b)'' to conform to publication requirements. It makes no other
revisions to this rule.
Rule 3010.27: Application of unused rate adjustment authority. This
rule, as proposed, consists of one paragraph addressing application of
unused rate
[[Page 63677]]
adjustment authority. The Commission adopts it as proposed.
Rule 3010.28: Maximum size of Type 1-B adjustments. This rule, as
proposed, describes the limitations on size of the adjustment based on
unused rate adjustment authority.
Commission analysis; final rule. The Commission makes minor
editorial changes in the introductory portion of this rule to improve
clarity and readability and conform to publication requirements. It now
reads as follows: ``Unused rate adjustment authority exercised in
notices of rate adjustments for any class in any 12-month period may
not exceed the applicable limitations described in rules 3010.21 or
3010.22 plus the lesser of:''. The Commission makes no changes in the
following two paragraphs. The Commission adopts this rule as revised.
New rule 3010.29: Transitional filings. New rule 3010.29 addresses
the fact that 39 U.S.C. 3622(f) explicitly allows the Postal Service to
file an omnibus rate case through December 19, 2007. The addition of
this rule responds to OCA's apt assertion that neither the Commission's
Order No. 26 discussion nor the accompanying proposed rules addressed
the possibility of a Postal Service filing PAEA-type rate adjustments
during an omnibus rate case, or the potential impact of another omnibus
rate case on a rate adjustment filing. A transitional filing would have
an impact on subsequent calculation of the annual limitation.
Accordingly, the new rule provides: ``If the Postal Service initial
exercise of its authority to file a Type 1-A notice of rate adjustment
is preceded by a transitional rate case filing under 39 U.S.C. 3622(f):
(a) The annual limitation as calculated in rule 3010.21 is applicable
if the notice of rate adjustment is 12 months or more after the date of
the Decision of the Governors approving rate changes associated with
the transitional filing; and (b) The annual limitation as calculated in
rule 3010.22 is applicable if the notice of rate adjustment is less
than 12 months after the date of the Decision of the Governors
approving rate changes associated with the transitional filing. In such
circumstances, the date of the Decision of the Governors approving rate
changes associated with the transitional filing is the most recent
notice of rate adjustment.''
Commission analysis; final rule. The Commission agrees that the
rules should be supplemented to address the consequences associated
with a transitional filing. It adopts new rule 3010.29, as set out
above, to address the impact on key aspects of rate adjustment filings.
F. Subpart D--Rules for Rate Adjustments for Negotiated Service
Agreements (Type 2 Rate Adjustments)
In Order No. 26, the Commission proposes rules for evaluating and
approving negotiated service agreements for both market dominant and
competitive products. The proposed rules include procedures, filing
requirements, and data collection requirements. Several parties have
commented on these rules. Advo, Pitney Bowes, NPPC, and Time Warner
find the filing requirements to be too stringent while Valpak,
Newspaper Association of America (NAA), National Newspaper Association
(NNA), APWU, and the Office of Consumer Advocate (OCA) believe more
rigorous requirements are necessary.\21\ These commenters offer valid
and compelling arguments, often in stark contrast to one another. This
highlights the need for a regulatory process that balances the
divergent interests of mailers. The Commission recognizes that although
its rules attempt to strike this balance, modifications may be
necessary as experience under the new system is gained.
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\21\ The Postal Service, Parcel Shippers Association (PSA),
Discover Financial Services (DFS), and Amazon.com also provided
comments on negotiated servie agreement rules.
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Order No. 26 classified negotiated service agreements, both market
dominant and competitive, as separate products. PRC Order No. 26, ]
3073, n.75 and ] 3079. Several parties contend that negotiated service
agreements should not be classified as separate products. The Postal
Service and PSA claim that negotiated service agreements do not meet
the definition of separate products because they will typically involve
the provision of existing products. Postal Service Comments, September
24, 2007, at 11; and PSA Comments, September 24, 2007, at 10-11.
Advo, the Postal Service, and DFS contend that classifying
negotiated service agreements as separate products will lengthen the
review process and subject the agreements to procedural requirements
beyond the specific negotiated service agreement rules in sections
3010.40 et seq. and 3015.5. The Postal Service claims this is
unnecessary. It contends that rules 3010.4 and 3010.5 provide
sufficient transparency.
DFS asserts this extra burden will discourage negotiated service
agreements. It states:
It is important for the Commission to realize that the fear of *
* * indeterminate pre-implementation NSA review procedures has been
one of the primary factors that has scared off mailers from entering
into NSA negotiations over the last several years. The overlay of
rule 3642 procedures on top of the NSA procedures 3010.40-3010.43 or
3015.5 confuses and unnecessarily complicates the NSA process and
has the potential to continue that chilling effect. It also creates
a procedural loophole that opponents of pricing flexibility could
use to impede the development of the new system and the development
of NSAs.
DFS Comments, September 24, 2007, at 2-3.
Advo also argues that ``[t]o the extent that the Commission's
concern is that negotiated service agreements must cover attributable
costs, that requirement can be achieved without designating an NSA as a
separate product.'' Advo Comments, September 24, 2007, at 2.
On reply, several parties agree that negotiated service agreements
should not be considered separate products. Valpak, however, asserts
that negotiated service agreements are separate products under the
definition of ``product'' in the PAEA. See 39 U.S.C. 102(6). Valpak
argues that negotiated service agreements have distinct cost and market
demand characteristics and are charged rates not of general
applicability. Valpak Reply Comments, October 9, 2007, at 22. NAA and
UPS contend that the question of whether or not a negotiated service
agreement is a product should be considered on a case-by-case basis.
NAA Reply Comments, October 9, 2007, at 4; and UPS Reply Comments,
October 9, 2007, at 2.
Commission analysis. The Commission finds that negotiated service
agreements meet the definition of separate products. To date, every
proposed negotiated service agreement filed with the Commission was
premised either on distinct market characteristics, distinct cost
characteristics, or both.\22\ This is true even though they were
applied to existing products. In the future, it may be appropriate to
group functionally equivalent negotiated service agreements as a single
product if it can be shown that they have similar cost and market
characteristics. However, as a starting point, it is appropriate to
assume new negotiated service agreements will be separate products as
defined by the PAEA.
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\22\ International Customized Mailing Agreements have not yet
been filed with the Commission.
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The rules regarding negotiated service agreements, rules 3010.42
and 3015.5, are intended to operate in harmony with
[[Page 63678]]
subpart B of part 3020. A single filing, pursuant to rule 3020.31, is
sufficient when the Postal Service proposes to add a new negotiated
service agreement to either the market dominant or competitive product
list.\23\ If the Postal Service proposes changes in the rates of an
existing negotiated service agreement, the filing would be made
pursuant to rule 3010.42 or rule 3015.5, as appropriate. The Commission
does not anticipate that the review process for new negotiated service
agreements will cause implementation of such negotiated service
agreements to be delayed appreciably. As stated in Order No. 26:
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\23\ Assuming the Postal Service indicates a preference that the
negotiated service agreement be classified as market dominant or
competitive, it would comply with the filing requirements of rule
3010.42 or 3015.5, as appropriate.
The primary focus of the review will be on compliance with the
statutory requirements for proper categorization of the Postal
Service product as either market dominant or competitive. Review of
the operational parameters of the product and the financial basis of
---------------------------------------------------------------------------
the product typically will be minimal.
PRC Order No. 26, ] 4026.
Pitney Bowes is concerned that the data collection and production
requirements outlined in rules 3010.42 and 3010.43 will be prohibitive
to small-volume mailers. It suggests that the Commission consider
allowing exceptions to these requirements for small volume mailers. The
data in question-mailer specific volume, cost, and revenue data--to
date, have been largely compiled from billing determinants maintained
by the Postal Service and budgeting and planning data held by the co-
proponents. Data of this type should be readily available regardless of
the company's mail volume. Allowing mailers of any size to enter into
negotiated service agreements without providing this data would hinder
the Commission's ability to determine compliance with the PAEA as
provided for in rule 3010.40. Therefore, at the present time, the
Commission will not develop procedures for granting exceptions to its
rules regarding negotiated service agreements. It should be noted that
the Commission has long been concerned that negotiated service
agreements be available to small mailers. Consequently, it developed a
model for structuring volume-based negotiated service agreements that
was designed to streamline the negotiation process.\24\ Persons
interested in negotiated service agreements are encouraged to explore
application of this model.
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\24\ Docket No. MC2004-3, library reference PRC-LR-2.
---------------------------------------------------------------------------
Pitney Bowes also contends that ``the proposed rules are incomplete
insofar as they fail to address the need to protect * * * commercially
sensitive information.'' Pitney Bowes Comments, September 24, 2007, at
13. As is currently the case, parties to negotiated service agreements
may seek protective conditions where appropriate.
Time Warner requests that the Commission consider removing rule
3010.42(d)(3) from the final rule. Rule 3010.42(d) requires the
projection of change in the net financial position of the Postal
Service as a result of each negotiated service agreement, which
includes ``[a]n analysis of the effects of the negotiated service
agreement on the contribution to institutional costs from mailers not
party to the agreement.'' Rule 3010.42(d)(3).
Time Warner contends that the PAEA requires negotiated service
agreements to not cause unreasonable harm to the marketplace. It argues
that the PAEA does not require that no other mailer be disadvantaged as
a consequence of a negotiated service agreement, as applicable under
the Postal Reorganization Act. Time Warner Comments, September 24,
2007, at 11-13; see also, Advo Comments, September 24, 2007, at 3-4;
Pitney Bowes Reply Comments, October 9, 2007, at 6-7; and Postal
Service Reply Comments, October 9, 2007, at 21-22.
APWU supports retention of rule 3010.42(d)(3). APWU Reply Comments,
October 9, 2007, at 3. APWU contends that the requirement to not cause
unreasonable harm to the marketplace is applicable to every negotiated
service agreement. It argues that individual mailers may be harmed by
negotiated service agreements, and this can adversely impact the
overall marketplace.
The intent of rule 3010.42(d)(3) requires clarification. Rule
3010.42(d)(3) facilitates evaluation of the 39 U.S.C. 3622(c)(10)(A)(i)
factor that negotiated service agreements ``improve the net financial
position of the Postal Service through reducing Postal Service costs or
increasing the overall contribution to the institutional costs of the
Postal Service.'' This is one of two alternative criteria for entering
into a negotiated service agreement. Rule 3010.42(d)(3) does not
directly address the 39 U.S.C. 3622(c)(10)(B) factor which requires
that negotiated service agreements ``do not cause unreasonable harm to
the marketplace.'' This factor is addressed separately in rule
3010.42(f).
NAA correctly explains why rule 3010.42(d)(3) allows computation of
the net financial position of the Postal Service resulting from
implementation of a negotiated service agreement:
Advo and Time Warner overlook that when the Postal Service
chooses to rely on the ``increasing the overall contribution to the
institutional costs of the Postal Service'' alternative in (A)(i),
the analysis necessarily must include an evaluation of lost
contribution from non-parties to an NSA. This is because subsection
(A)(i) refers to improving the net financial position of the Postal
Service by increasing the overall institutional cost contribution.
Ignoring the effect on contribution from other mailers would limit
consideration to merely the gross effect from the NSA mailer and
ignore the net impact on the Postal Service.
NAA Reply Comments, October 9, 2007, at 6-8. (Emphasis in original.)
Valpak and NAA contend that the proposed rules do not indicate that
filings under subpart D will be publicly available and suggest the
Commission make clear in its rules that the negotiated service
agreement filings, including the terms of the agreement, will be made
available to the public. Valpak Comments, September 24, 2007, at 21;
and NAA Comments, September 24, 2007, at 5.
Several parties express concern that subpart D does not provide
sufficient transparency or accountability. Comments fall generally into
three categories: (1) Lack of explicit procedures for public comment;
(2) no assurance regarding compliance with all PAEA requirements; and
(3) lack of procedures if the Commission finds the negotiated service
agreement is not in compliance.
Valpak, APWU, NNA, and NAA assert that the regulations should
provide the opportunity for public comment. They argue that public
comment would provide valuable insight into negotiated service
agreement compliance with statutory requirements, particularly the
provision that negotiated service agreements not cause undue harm to
the marketplace. Id. at 8; NNA Comments, September 24, 2007, at 11;
Valpak Comments, September 24, 2007, at 22; and APWU Comments,
September 25, 2007, at 6.
Valpak and APWU contend that the proposed rules do not ensure that
negotiated service agreements meet statutory requirements. They argue
that negotiated service agreement filings should comport with all
provisions of the PAEA, including the objectives and factors in
sections 3622(b) and (c). Valpak Comments, September 24, 2007, at 23;
and APWU Comments, September 25, 2007, at 6.
Valpak and NAA request that the Commission include procedures for
[[Page 63679]]
dealing with negotiated service agreement filings that do not comply
with the provisions of the PAEA. They maintain that such procedures are
necessary to protect non-negotiated service agreement mailers and the
marketplace from potentially unlawful negotiated service agreements.
NAA Comments, September 24, 2007, at 10; and Valpak Comments, September
24, 2007, at 23.
On reply, many commenters oppose increased filing requirements and
pre-implementation review arguing that ``Congress intended that the
process for considering negotiated service agreements be greatly
simplified.'' Advo Reply Comments, October 9, 2007, at 6. See also NPPC
Reply Comments, October 9, 2007, at 11-12; PSA Reply Comments, October
9, 2007, at 1-2; DMA Reply Comments, October 9, 2007, at 4-6; and
Postal Service Reply Comments, October 9, 2007, at 22.
The focus of subpart D is to provide pricing flexibility while
maintaining accountability and transparency for negotiated service
agreements. See NPPC Comments, September 24, 2007, at 8-10. The rules
outlined in rules 3010.40 et seq. and 3015.5 minimize the
administrative and economic burden of implementing agreements and
enhance the Postal Service's pricing flexibility. At the same time,
rules 3010.40 et seq. require the co-proponents of negotiated service
agreements to submit copies of the agreement, as well as specific data
related to cost, revenue, volume, operational enhancements, and
marketplace impacts. Filings will be publicly available unless subject
to protective conditions. A period for public comment will be
available.\25\ In addition, it is the Commission's intent to review
actual performance of these agreements in the annual compliance report.
Interested persons may comment and suggest appropriate Commission
findings as part of that process. Taken as a whole, rules 3010.40 et
seq. and 3015.5 strike a reasonable, initial balance to foster pricing
flexibility, transparency, and accountability.
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\25\ For the reasons discussed above, the Commission adds rule
3010.44 to provide APA notice and a specified opportunity for
comment.
---------------------------------------------------------------------------
The Commission recognizes that the 45-day review period does not
lend itself to in-depth analysis; however, the complaint process will
allow for further review where necessary. NAA expresses some concern
about the adequacy of the complaint process to prevent irreparable harm
to non-negotiated service agreement mailers and suggests that the rules
provide for expedited review of complaints that aver the negotiated
service agreement does not meet statutory requirements. See NAA
Comments, September 24, 2007, at 4. The Commission intends to initiate
a rulemaking in the immediate future to allow for evaluation and
improvement of the complaint process. In the meantime, it is the
expectation of the Commission that the Postal Service will balance
increased flexibility with increased diligence in negotiating sound
agreements.
OCA proposes that the ``suggested framework'' outlined in library
reference PRC-LR-1 of the Commission's decision in Docket No. MC2004-3
be modified to cover all negotiated service agreements--not just volume
discount ones--and incorporated into section 3010.40 of the proposed
rules. OCA believes that incorporating this framework would ``increase
Commission and public confidence that implementation of future
negotiated service agreements will improve the net financial position *
* * of the Postal Service.'' OCA Comments, September 24, 2007, at 4.
The Commission initially suggested this framework in the hope it might
serve as a useful tool for evaluating the financial impact of
individual negotiated service agreements. However, the statute seeks to
provide the Postal Service with greater pricing flexibility for
negotiated service agreements coupled with enhanced transparency and
accountability. Requiring a specific formula or model for evaluating
agreements is contrary to that intent. Proposed rules 3010.42 and
3010.43 require pre- and post-implementation submission of mailer-
specific data that the Commission, and interested parties, can use to
evaluate the expected and actual performance of a negotiated service
agreement. The Commission finds, at least initially, that these data
should be sufficient to provide necessary transparency and
accountability.
Three additional clarifications to proposed subpart D will be made
by the Commission. First, APWU and NAA suggest that the word
``increases'' in rule 3010.42(g) be changed to either ``adjustments''
or ``changes'' to reflect the fact that changes can either be upward or
downward. The Commission agrees. The revised rule shall read:
Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
requested changes are consistent with applicable statutory policies.
Second, APWU sought clarification of the sentence in rule 3010.43
which reads, ``This shall include, at a minimum, a plan for providing
the following annualized information on a yearly basis within 60 days
of the date of implementation of a proposed agreement.'' This section
requires the Postal Service to provide, when it files a notice of rate
adjustment, a plan for providing various types of information. The
information required is to be reported each year that the agreement is
in effect and is to span each 12-month period following implementation.
The Postal Service will have 60 days after each anniversary date to
compile the data report. The revised rule shall read:
The data report is due 60 days after each anniversary date of
implementation and shall include, at a minimum, the following
information for each 12-month period the agreement has been in
effect.
Finally, NAA suggests that the statutory language regarding
similarly situated mailers be included in rule 3010.40. NAA Comments,
September 24, 2007, at 12. On reply, the Postal Service states ``[i]f
the Commission decides * * * to continue treating market-dominant
customized agreements as being separate `products,' then distinguishing
between baseline and functionally-equivalent agreements would probably
be important.'' Postal Service Reply Comments, October 9, 2007, at 21.
NAA also suggests that procedures similar to the existing rules
regarding functionally equivalent negotiated service agreements be
carried forward into the rules. The intent of the rules regarding
functionally equivalent negotiated service agreements was to streamline
the litigation process. Given the 45-day review contemplated in subpart
D, retaining these rules seems unnecessary. Moreover, although the
Commission contemplates that negotiated service agreements will be
initially classified as separate products, it has not foreclosed the
possibility that some functionally equivalent negotiated service
agreements may be considered one product. The language from 39 U.S.C.
3622(c)(10) of the statute which reads ``available on public and
reasonable terms to similarly situated mailers'' will be added to
clarify the availability of negotiated service agreements provided by
rule 3010.40.
G. Subpart E--Rules for Rate Adjustments in Exigent Circumstances (Type
3 Rate Adjustments)
1. Overview
Subpart E, as proposed, addresses implementation of the PAEA's
requirement, in 39 U.S.C 3622(d)(1)(E), that the modern regulatory
system for market dominant products include
[[Page 63680]]
procedures whereby rates may be adjusted on an expedited basis due to
exceptional or extraordinary circumstances. The Commission refers to
these as exigent requests and classifies them as Type 3 filings. This
subpart consists of seven proposed sections. These sections, in keeping
with a formal distinction in the PAEA, establish more elaborate
procedures for such requests, relative to Type 1-A and Type 1-B, which
follow ``notice'' requirements.
Structure. There was no opposition to the proposed format; the
Commission adopts it without change. Text and designation of some
paragraphs within individual sections differs in some instances from
the proposal, based on revisions adopted in response to comments.
Issues. The Commission intends its subpart E provisions to
establish a functional and flexible framework for Type 3 cases. The
assumption is that the approach will accommodate associated
uncertainties, such as what events might give rise to a filing and how
much additional revenue the Postal Service might seek. In particular,
the proposal reflects a decision to forgo attempting to identify with
specificity circumstances on either side of the question of qualifying
circumstances. Thus, the proposal not only excluded definitions of
``triggering events'' for Type 3 filings, but also excluded defining,
in advance, circumstances that would not qualify. This decision, which
reflected consideration of earlier comments, is the focus of suggested
revisions in this round.
The Commission also proposed streamlined proceedings for Type 3
adjustments, which it viewed as consistent with the 90-day review
period and due process considerations. This decision gained widespread
support, but some have criticized it as either inconsistent with the
APA or insufficiently clear on how the Commission intends to satisfy
due process requirements. MMA, for example, generally agrees with the
Commission's overall direction, but expresses reservations about the
specific procedures, such as the limitation to submission of written
comments. MMA Comments, September 24, 2007, at 4. See also APWU
Comments, September 24, 2007, at 9.
Note on use of the term ``exigent''.
The Commission acknowledges NPMHU's point that the use of the
term exigent as shorthand or as a synonym for Type 3 filings is not
precise. NPMHU Comments, September 24, 2007, at 10. However, it
continues to believe that the sense of the rule is not seriously
compromised by this lack of precision, and that the term serves
satisfactorily as shorthand for this type of filing. Accordingly,
the Commission uses this term in its final rules.
2. Review
Rule 3010.60: applicability. This rule, as proposed, establishes
that the Postal Service may request rate increases for market dominant
products in excess of the annual limitation due to extraordinary or
exceptional circumstances. It states that such requests shall be known
as exigent requests.
Suggested revisions. Most commenters addressing this issue agree
with the Commission's decision to track the language of the PAEA by
referring only to ``extraordinary or exceptional'' circumstances, and
not define the type of event or circumstances that would be deemed to
justify an exigent filing, or define those that would not be deemed to
qualify. See, for example, NPPC Comments, September 24, 2007, at 10;
NPMHU Comments, September 24, 2007, at 1-2; and NAPUS Reply Comments,
October 10, 2007, at 2. NNA, however, qualifies its general support for
this approach by asserting that the regulations should clearly indicate
that circumstances giving rise to a Type 3 filing must have taken shape
outside the ambit of both management and labor, making ``neither unwise
investments nor excessive compensations'' a rationale for exceeding the
cap. NNA Comments, September 24, 2007, at 12. (Emphasis in original.)
Commission analysis; final rule. The Commission has considered
suggestions that this rule be revised to make clear that certain events
or developments will not constitute the basis for an exigent request,
including NNA's specific proposal for adoption of language foreclosing
unwise investments or excessive compensation as triggers. This
suggestion, like others that seek more specificity, reflects
understandable concern that the Postal Service will take undue
advantage of its statutory authorization to seek increases beyond the
annual limitation. The Commission appreciates this concern, but finds
that the better solution at this time is to avoid identifying events on
either side of the coin. Accordingly, the Commission declines to revise
the proposed rule, and adopts it as final.
Rule 3010.61: Contents of exigent requests. This rule, as proposed,
consists of two paragraphs addressing the contents of an exigent
request. Paragraph (a) consists of eight subparagraphs detailing the
contents. Paragraph (b) is a one-sentence provision requiring the
Postal Service to identify responsible officials who can reply to
Commission inquiries on each topic specified in rule 3010.61(a).
Commenters' suggested revisions focus primarily on subparagraphs 6
and 7 of rule 3010.61(a). They seek clarification with respect to
rescission of exigent requests and clarification of the Commission's
use of the terms ``foreseeable'' and ``avoidable.'' At issue in
proposed rule 3010.61(a)(6) is language directing the Postal Service to
explain ``when, or under what circumstances, the Postal Service expects
to be able to rescind the exigent increases in whole or in part.'' Some
assert that the PAEA does not require that an exigent increase be
temporary, and are therefore concerned about the wording. NPMHU, for
example, asserts that to the extent this rule may be read to imply that
a rate adjustment under 39 U.S.C. 3622(d)(1)(E) can only be temporary,
it is without support in the statute. It asserts:
Nowhere in the PAEA is there any indication that a rate
adjustment under Sec. 3622(d)(1)(E) must be temporary. Nor is there
any provision in the statute for rescind[ing] such rate adjustments.
Rather, to the extent that the circumstances necessitating the rate
* * * adjustment no longer exist, it is to be expected that the
Postal Service would take account of these changed circumstances by
foregoing, or reducing the magnitude of, subsequent rate adjustments
it otherwise would have made.
NPMHU Comments, September 24, 2007, at 7.
It also suggests curing the problem by including the qualifying
term ``whether'' in this provision. Id. at 8. The Postal Service
endorses this revision. Postal Service Reply Comments, October 9, 2007,
at 7. Others seek more specific assurance that exigent increases will
be rolled back, and are concerned that the wording does not make this
clear. ANM/MPA Comments, September 24, 2007, at 6-7; APWU Comments,
September 25, 2007, at 9; and DMA Comments, September 24, 2007, at 9.
Commission analysis; final rule. The Commission agrees that the
PAEA does not include a requirement that exigent increases, by
definition, must be temporary. This means that adding an explicit
requirement for rollback would not be fully consistent with the
statute. It has considered NPMHU's suggested revision, but concludes
that the original formulation is neither inaccurate nor misleading.
Accordingly, the Commission adopts proposed rule 3010.61(a)(6) without
change.
Commission references to circumstances warranting an exigent
request in rule 3010.61(a)(7). NPMHU and Time Warner observe that the
[[Page 63681]]
Commission's Order No. 26 discussion and the proposal refer to an
exigent filing in terms of unforeseeable and unavoidable events. Both
briefly review the legislative history on exigent filings, and point
out that although there were variations on what would constitute
grounds for a Type 3 case in legislative proposals leading up to the
PAEA, the legislation as enacted does not include any reference to
unforeseeablity or avoidability of circumstances. NPMHU Comments,
September 24, 2007, at 1-2; and Time Warner Reply Comments, September
24, 2007, at 7-11. See also, NAPUS Reply Comments, October 10, 2007, at
2-3.
The Commission agrees with these observations. The text of Order
No. 26 and the related rule were inexact in this respect. However, the
Commission continues to believe that it is reasonable to require the
Postal Service to address these considerations, as the discussion is
likely to shed light on matters of considerable concern to mailers. To
accommodate this interest and to recognize the commenters' point, the
Commission revises rule 3010.61(a)(7) essentially along the lines
suggested by Time Warner to read as follows:
An analysis of the circumstances giving rise to the request,
which should, where applicable, include a discussion of whether the
circumstances were foreseeable or could have been avoided by
reasonable prior action[.]
With the inclusion of this revision, the Commission adopts the
other provisions in rule 3010.61(a).
Rule 3010.61(b) requires the Postal Service to identify one or more
knowledgeable Postal Service official(s) who will be available to
provide prompt responses to Commission requests for clarification
related to each topic specified in rule 3010.61(a). There was no
objection to this proposal. The Commission recognizes that this
provision places an administrative burden on the Postal Service, but
considers it slight in terms of the overall importance of ensuring
ready reference to a list of officials in a position to provide prompt
responses to Commission requests for clarification. This requirement
will also facilitate expeditious consideration of a Type 3 request. The
Commission adopts proposed rule 3010.61(b) without change.
Rules 3010.62 through 3010.64. Proposed rule 3010.62 provides that
the Commission may require the Postal Service to clarify its request;
proposed rule 3010.63 addresses how unused rate adjustment authority is
to be handled; and proposed rule 3010.64 states that the Commission's
policy is to provide expeditious treatment of exigent requests,
consistent with statutory requirements and procedural fairness.
Specific procedures are not spelled out in this provision, but appear
in rule 3010.65.
Commission analysis; final rules. Commenters do not suggest any
specific revisions to these provisions, which cover relatively
straightforward matters connected with administration of exigent cases.
The Commission notes, with respect to rule 3010.62, that it intends to
make public any supplemental information it requires the Postal Service
to provide under this rule, to require a written response, and to
ensure that the response is posted on the Commission's Web site. At
this time, however, the Commission does not find it essential to
include a provision detailing these points in its rules. The Postal
Service has cooperated with these types of requests in the past, and it
fully anticipates that this cooperation will continue under the new
system. The Commission does not find any need for changes to rules
3010.63 and 3010.64. Accordingly, it adopts proposed rules 3010.62,
3010.63 and 3010.64 without change.
Rule 3010.65: Special procedures applicable to exigent requests.
This rule, as proposed, sets out various provisions related to
procedures for exigent hearings. Accordingly, it is affected by the
Commission's decision to revise the rules to more fully address due
process concerns.
Suggested revisions. Commenters asserting the need for revisions to
this rule suggest changes that would expand notice, public
representation, and public participation, including at the hearing
stage. See generally Valpak Comments, September 24, 2007, at 3-16 and
20-27; Medco Comments, September 24, 2007, at 4-10; OCA Comments,
September 24, 2007, at 12-15; and APWU Comments, September 25, 2007, at
1-4.
Commission analysis; final rules. The Commission adopts the
rationale set out previously in support of its decision to revise rule
3010.65(a). The changes parallel, with only minor adaptation to reflect
Type 3 filings, the language of final rule 3010.13. Thus, in place of
proposed paragraph (a), which provides no detail about the contents of
the Commission's notice, there are six paragraphs. One refers to
identification of an officer of the Commission; another provides that
the Commission will specify a period of time for comment. The last is a
``catchall'' provision allowing the Commission to include any other
information it deems appropriate. The Commission believes that this
adds useful clarity about what the Commission will address in its
notice.
The Commission appreciates the commenters' interest in more
extensive opportunities to probe the Postal Service's request. However,
at this time, it has decided not to revise its public comment and
hearing procedures. It believes the approach it has proposed strikes an
acceptable accommodation to the hearing called for under the PAEA. The
statutory deadline gives cause to question the Commission's ability to
complete action on the Postal Service's request if trial-type hearings
and related measures were deemed the only approach consistent with due
process. Furthermore, depending on circumstances, an exigent request
may require action in an even more truncated timeframe. Given that the
PAEA clearly commits the Commission to issuing a decision in 90 days,
the Commission believes that the comment approach provides an
appropriate for public participation. The Commission adopts proposed
rule 3010.65, with revisions limited to paragraph (a).
Rule 3010.66: Deadline for Commission decision. This rule, as
proposed, provides that the Commission will act expeditiously on an
exigent request, will consider all written comments, and will issue its
decision within 90 days of the filing of a request. The deadline is
identical to the one established in 39 U.S.C. 3622(d)(1)(E). No
commenter objects to the adoption of this rule. The Commission adopts
the proposed rule without change.
Additional considerations on scope of subpart E. Several commenters
seek expansion of the rates governing exigent rate increases to address
specific aspects related to interpretation and administration of 39
U.S.C. 3622(d)(1)(E). ANM/MPA urges the Commission to require uniform
increases, and opposes the suggestion that non-uniform increases should
be used to account for revenue shortfalls in a particular class. It
contends non-uniform changes could mark a return to cost-of-service
ratemaking. See ANM/MPA Comments, September 24, 2007, at 6-7 and ANM/
MPA Reply Comments, October 9, 2007, at 9-10 (citing OCA Comments,
September 24, 2007, at 21 and Valpak Comments, September 24, 2007, at
19-20 and 23-26). GCA opposes the suggestion for requiring uniform
application, taking issue with the assertion that non-uniform rates
would mark a return to cost of service ratemaking. GCA Reply Comments,
October 9, 2007, at 12-13.
ANM/MPA also ask that the Commission require rollback of exigent
[[Page 63682]]
increases as soon as the costs that purportedly justify the exigent
increases recede or are reflected in the CPI itself. It also asks the
Commission to clarify that cost increases associated with an exigent
increase may not be recovered anew through a subsequent CPI index
adjustment. ANM/MPA Comments, September 24, 2007, at 7-8. NPPC and DMA
seek the same type of changes. NPPC Comments, September 24, 2007, at
10-11; and DMA Comments at 9.
APWU suggests there may be circumstances where exigency increases
need not be rescinded, such as when inflation has caught up with the
exigency. It questions whether the Postal Service must rescind an
exigent increase. APWU Comments, September 24, 2007, at 9. See also
NPMHU Comments, September 24, 2007, at 7-8, seeking clarification that
exigent increases need not be temporary.
PostCom opposes revisions that would prevent double recovery. It
suggests addressing this concern on a case-by-case basis. PostCom Reply
Comments, October 9, at 6. DFS asserts that the question of whether
exigent rate increases should be permanent or temporary should not be
addressed in rules, but developed in response to concrete facts and
specific requests. DFS Reply Comments, October 9, 2007, at 8. The
Postal Service asserts, more broadly, that the record in this
proceeding is not developed to the point where the Commission can
reasonably resolve the issues that have been raised, nor does anything
require that it do so at this time. Postal Service Reply Comments,
October 9, 2007, at 43.
Commission analysis. The Commission acknowledges the interest some
commenters express in resolution of several issues related to
interpretation and administration of the PAEA's provision for an
exigent increases, including adoption of definitive interpretations on
rescission, application of increases, and impact on unused rate
adjustment authority and the attributable cost floor. It declines at
this time to adopt to either policy statements or specific regulations
on these points. The state of the record on these issues, as the Postal
Service points out, makes such actions premature.
III. Competitive Products
In Order No. 26, the Commission, among other things, identified the
initial list of competitive products and proposed regulations
applicable to them. Parties commenting on these matters raise issues
regarding negotiated service agreements, international mail, and
modifications to the proposed rules. Several parties argue that
competitive negotiated service agreements should not be classified as
separate products, contending, inter alia, that the proposed rules
require sufficient information to demonstrate compliance with the
statutory criteria and that negotiated service agreements are analogous
to rate cells within products of general applicability such as Priority
Mail or Parcel Select, rather than separate products themselves. See,
e.g., Postal Service Comments, September 24, 2007, at 5-12; PSA
Comments, September 24, 2007, at 9-11, and Advo Comments, September 24,
2007, at 2-3. Similar claims are made with respect to market dominant
negotiated service agreements. As discussed in chapter II-F, the
Commission is not persuaded that negotiated service agreements are not
separate products.
In this chapter, the Commission addresses parties' comments
advocating changes to the classification of products as market dominant
or competitive, an issue that largely affects international mail. In
addition, the Commission addresses the relatively few suggestions that
the proposed rules be modified. As discussed below, upon review of the
parties' comments, the Commission has revised or otherwise clarified
certain of the rules.
A. International Mail
Under the PAEA, international mail is categorized as market
dominant or competitive depending on whether it is single piece or
bulk. See 39 U.S.C. 3621(a)(10), and 3631(a)(4). Additional competitive
categories of mail include priority mail, expedited mail, and bulk
parcel post. 39 U.S.C. 3631(a). In Order No. 26, the Commission
classified domestic and international priority mail and expedited mail
as competitive. PRC Order No. 26, August 15, 2007, ] 3010. In addition,
the Commission defined bulk international mail by reference to bulk
commercial services, including International Priority Airmail Service
(IPA), International Surface Airlift Service (ISAL), direct sacks of
printed matter sent to a single foreign address (M-bags), and
Individual Customized Mailing Agreements (ICMs). Id., ] 3019. The
Commission distinguished between inbound and outbound international
mail, suggesting that inbound international mail or a subset thereof,
i.e., Letter Post, may be classified as market dominant. Indicating
that it lacked sufficient information to determine the proper
classification for inbound international mail, the Commission requested
that interested parties address the issue. Id., ]] 3021-22. Several
parties, including the Postal Service, FedEx, XLA, and UPS, did. The
issues raised by the parties' comments are addressed below.
1. Exceptional Treatment for Inbound International Mail
The Postal Service advocates that inbound international mail not be
classified as either market dominant or competitive, but rather should
be treated on an exceptional basis.\26\ The exceptional treatment
sought is that ``inbound international mail should not be `classified'
in the [Mail Classification Schedule], and that inbound charges should
not be subject to the same regulations as other Postal Service
products.'' Id. at 22 (footnote omitted).
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\26\ Postal Service Comments, September 24, 2007, at 13-22.
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In support of its position, the Postal Service advances two
principal arguments.\27\ First, it argues that inbound services are not
offered or priced by the Postal Service in the same manner as outbound
products and services, concluding that prices for inbound mail are
largely beyond the Postal Service's control. Id. at 13-15. For example,
it notes that Letter Post terminal dues are set by the Universal Postal
Union (UPU) Congress, and that for inbound Parcel Post, inward land
rates are set pursuant to a prescribed rate-setting formula adopted by
the Postal Operations Council (POC). Id. at 14.\28\
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\27\ The Postal Service also contends that practical
considerations justify exceptional treatment for inbound
international mail. Its arguments, however, largely reiterate points
made in support of its two principal arguments, e.g., the
problematic application of the price cap to inbound international
mail. Id. at 20-22.
\28\ In addition, the Postal Service contends that inbound
international mail is distinguishable from outbound mail because it
has no relationship with the originator of inbound mail. Id. at 15.
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Second, it asserts that section 407 of title 39 ``establishes a
separate scheme for transparency and oversight of inbound international
mail charges,'' which warrants not classifying inbound international
mail as either market dominant or competitive. Id. at 16. It contends
that sections 407(c)(1) and (c)(2) create a unique regulatory scheme
for inbound charges established through the UPU, with the State
Department responsible for the development of international postal
policy, while the Commission is responsible for developing and applying
pricing rules.\29\ Characterizing the
[[Page 63683]]
Commission's role as one of oversight, the Postal Service further
contends that the ``oversight mechanism recognizes the incompatibility
of applying a price cap to inbound charges.'' Id. at 17.
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\29\ Id. at 16-17. Section 407(c)(1) requires the Secretary of
State to solicit the Commission's views prior to concluding any
postal treaty, convention, or amendment establishing a rate or
classification for a market dominant product. Section 407(c)(2)
requires the Secretary of State to ensure that each such treaty,
convention, or amendment is consistent with the Commission's views,
unless the Secretary of State makes a written determination that it
is not in the foreign policy or national security interest of the
United States to ensure consistency with the Commission's views.
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In addition, the Postal Service references section 407(d), which,
with certain limitations, permits the Postal Service to enter into
commercial and operational contracts relating to international postal
services and international delivery services. Id. at 18-20. The Postal
Service acknowledges that the Commission has no oversight role under
section 407(d), but asserts that transparency is assured because a copy
of the contract must be filed with the Commission and the Secretary of
State. Aside from that, the Postal Service emphasizes that reciprocity
influences the outcome of bilateral contracts and thus has a
considerable influence on inbound charges.\30\
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\30\ The Postal Service would exempt what it calls ``specialized
arrangements,'' which provide for the entry of mail overseas bearing
domestic postage indicia, from the exceptional treatment it espouses
for all other inbound international mail. Id. at 22, n.36.
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For financial reporting purposes, the Postal Service proposes that
the costs and revenues of single-piece inbound mail be reported as
market dominant or competitive based on considerations such as the
content of the mailpiece and whether the inbound charges are negotiated
or not.\31\ Taking these considerations into account, the Postal
Service proposes that the costs and revenues for inbound single-piece
international mail be recorded as follows:
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\31\ Id. at 22. The omission of bulk inbound mail is not
explained.
Market dominant, consisting of Letter Post tendered under UPU
terminal dues, Letter Post tendered under bilateral contract
arrangements, and Parcel Post tendered at UPU inward land rates, and
Competitive, consisting of Parcel Post tendered at negotiated
charges and EMS.
Id. at 23-24.\32\
\32\ Pitney Bowes endorses the Postal Service's proposal to
treat inbound international mail on an exceptional basis, but
alternatively suggests that, if it is classified, inbound
international mail be classified as competitive. Pitney Bowes Reply
Comments, October 9, 2007, at 8.
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Commission analysis. The notion that sections 407(c) and (d) create
a ``different system of regulation for inbound international mail''
based on considerations of transparency and oversight is unsustainable.
Id. at 19. Had Congress intended to exempt inbound international mail
from the requirement that all products be categorized as either market
dominant or competitive, it would have done so explicitly, as it did by
specifically exempting experimental products from the requirements of
section 3642.\33\ Unambiguously, the PAEA requires international mail
to be classified as either market dominant or competitive. See FedEx
Reply Comments, October 10, 2007, at 2-14.
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\33\ Because the Commission rejects the proposal that inbound
international mail be treated in exceptional fashion, there is no
need to address the Postal Service's related but contingent proposal
to report single-piece inbound costs and revenues as market dominant
or competitive based on various factors.
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None of the rationales offered by the Postal Service in support of
its request that inbound international mail be accorded exceptional
treatment, e.g., that prices for inbound services are largely beyond
its control or that section 407 establishes a different system of
regulation for inbound mail, is persuasive. As explained in Order No.
26 in this proceeding, the Commission will, inter alia, identify the
initial market dominant and competitive product lists required by
section 3642. See Order No. 26, ]] 3072-76. International mail is
comprised of one or more postal products,\34\ which depending on their
characteristics may be categorized as market dominant or competitive.
See 39 U.S.C. 3621(a) and 3631(a). By its express terms, section
3642(e) prohibits the Postal Service from offering any product, except
an experimental product, involving the physical delivery of letters,
printed matter, or packages that has not been assigned by the
Commission to either the market dominant or competitive category of
mail. This directive even extends to the provision of nonpostal
services.\35\ Thus, that inbound services may be priced in a manner
different from outbound mail does not exempt inbound international mail
from the requirement that it be categorized as a product.
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\34\ The term ``product'' is defined as ``a postal service with
a distinct cost or market characteristic for which a rate or rates
are, or may reasonably be, applied[.]'' 39 U.S.C. 102(6). The term
``postal service'' is defined as ``the delivery of letters, printed
matter, or mailable packages, including acceptance, collection,
sorting, transportation, or other functions ancillary thereto[.]''
39 U.S.C. 102(5).
\35\ See 39 U.S.C. 404(e)(5) (``the Postal Regulatory Commission
shall designate whether the [continuing nonpostal] service shall be
regulated under this title as a market dominant product, a
competitive product, or an experimental product.'').
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Section 407 does not establish a different system of regulation for
inbound mail. Rather, that section delineates, inter alia, the
Secretary of State's responsibilities regarding international postal
arrangements, the Commission's role with respect to certain
arrangements, and the Postal Service's authority to execute bilateral
contracts. Nothing in sections 407(c) or (d) create an express or
implied exemption for inbound international mail from the requirement
that it be categorized as a market dominant or competitive product.
Nothing in section 407(c) suggests a unique regulatory scheme for
inbound international mail. Section 407(c) applies only to market
dominant products. It requires the Secretary of State, prior to
concluding any treaty or convention establishing a rate or
classification for a market dominant product, to request the
Commission's views ``whether such rate or classification is consistent
with the standards and criteria established by the Commission under
section 3622.'' As FedEx observes, rather than establishing a separate
regulatory scheme, ``Sec. 407(c) explicitly references the broader
regulatory framework applicable to market dominant products: `a product
subject to subchapter I of chapter 36.' '' FedEx Reply Comments,
October 10, 2007, at 11 (emphasis omitted). The subject matter of
section 407(c) concerns market dominant products, requiring, in the
first instance, a determination that the product be categorized as
market dominant. The Postal Service's interpretation renders the phrase
``rate or classification for a product subject to subchapter I of
chapter 36'' largely meaningless since inbound market dominant mail
would not be categorized as a product.\36\ A cardinal rule of statutory
construction is that each word, phrase, sentence and part of a statute
be given effect.\37\ The Postal Service's proposal that inbound
international mail be given exceptional treatment violates this basic
principle.
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\36\ Implicitly, the Postal Service recognizes the requirement
that each product be categorized as market dominant or competitive
as evidenced by its proposal to use financial data as a surrogate
means for distinguishing between market dominant and competitive
products.
\37\ See 2A Sutherland Statutory Construction Sec. 47.21 (7
thed. 2007).
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Section 407(d) authorizes the Postal Service to enter into
bilateral contract agreements, subject to certain limitations,
concerning international postal services. As the Postal Service notes,
its authority extends to market dominant and competitive international
postal services. Postal Service Comments, September 24, 2007, at 18. By
definition, 39 U.S.C. 102(6), international postal services are
products, and as such, must be categorized by the Commission as either
market dominant or competitive before the Postal Service may offer the
service.
[[Page 63684]]
39 U.S.C. 3642(e). In sum, sections 407(c) and (d) do not create a
different system of regulation that exempts inbound international mail
from the requirement that it be categorized as a market dominant or
competitive product.
2. Outbound and Inbound International Mail
Section 3631(a) lists priority mail, expedited mail, bulk parcel
post, and bulk international mail as being within the competitive
category of mail. Section 3621(a) lists single-piece international mail
and single-piece parcel post as being in the market dominant category
of mail. The classification of these categories of mail as either
market dominant or competitive would appear to be relatively
straightforward. That assumption holds true for domestic mail. It is
problematic for international mail, particularly inbound international
mail, which is complicated by the fact that the UPU's designation of
three types of service does not neatly correspond with existing Postal
Service outbound services.
XLA and FedEx argue that postal services classified as competitive
for outbound shipments should likewise be classified as competitive for
inbound shipments. XLA is explicit, although its discussion is somewhat
cryptic.\38\ FedEx's discussion is more expansive; its conclusion,
however, is the same. For example, it argues that the Commission's
conclusion classifying outbound priority mail and expedited mail as
competitive should be extended to inbound shipments as well. FedEx
Comments, September 25, 2007, at 6-8. It also argues that inbound
international parcel post mail should be classified as ``bulk parcel
post'' and that inbound international letter post mail should be
classified as ``bulk international mail'' if such mail meets the
definition of ``bulk'' applicable to outbound international mail. Id.
at 8-14.\39\
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\38\ XLA Comments, September 24, 2007, at 4. XLA interprets
Order No. 26 as classifying all inbound postal products as market
dominant. It discusses the implications of such a finding on customs
and other border-related requirements, arguing, among other things,
that it would preserve preferential treatment for inbound postal
products to the detriment of private carriers. Id. at 1-3.
\39\ Preliminarily, two additional points raised by FedEx merit
brief mention. In its comments, FedEx provides an extended
discussion of section 407(e)(2) concerning the interplay between the
Commission's findings in this proceeding and the responsibilities of
other federal agencies concerning customs regulations. In addition,
FedEx comments on the scope of the letter monopoly, offering its
preliminary views on the Commission's responsibilities under section
601, and noting an apparent anomaly concerning the inclusion of
``bulk international mail'' as a competitive category of mail
(interpreted as applicable to bulk international letters)
notwithstanding the letter monopoly. Id. at 14-29. In its reply
comments, the Postal Service responds to each of these arguments.
Postal Service Reply Comments, October 9, 2007, at 64-72. While the
parties' comments are instructive, the Commission finds it
unnecessary, for purposes of this proceeding, to address the issues
substantively.
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The Postal Service takes issue with the parties' position and, as
noted above, proposes that inbound costs and revenues be used to
categorize inbound shipments as market dominant or competitive based on
factors such as the content of the mail and whether the charges are
negotiated or not. Postal Service Comments, September 24, 2007, 22-24;
Postal Service Reply Comments, October 9, 2007, at 60-64.
Commission analysis. The UPU identifies three types of inbound
international mail: Letter Post, Parcel Post, and EMS (express mail
service). Each is addressed below.
EMS is an express service for documents and merchandise. It is an
optional service which postal administrations may provide. Order No. 26
classified outbound expedited mail as competitive. FedEx, XLA, and UPS
argue that inbound express mail service should likewise be categorized
as competitive.\40\ The Postal Service agrees with the characterization
of inbound EMS as competitive.\41\
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\40\ See FedEx Comments, September 25, 2007, at 6-8; XLA
Comments, September 24, 2007, at 1-4, and UPS Reply Comments,
October 9, 2007, at 5-6.
\41\ Postal Service Reply Comments, October 9, 2007, at 61. The
Postal Service's agreement is qualified in terms of its proposed
treatment of inbound costs and revenues for this mail. Id., n.161.
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EMS is a service offered by postal administrations in competition
with private carriers. Although an optional service posts may offer,
EMS is currently available in at least 191 countries worldwide. EMS is
administered by the EMS Cooperative, which was established by the UPU's
POC approximately 10 years ago. EMS postal administration charges are
not established by the UPU, but instead are established through
bilateral or multilateral negotiations. Outbound rates charged to
customers are set by each national postal administration. The
Commission concurs with the parties, concluding that inbound EMS is
properly categorized as competitive.
Letter Post consists of letters, postcards, printed papers, and
small packets weighing up to 2 kilograms; priority and non-priority
items weighing up to 2 kilograms; literature for the blind up to 7
kilograms; and M-bags (special bags containing newspapers, periodicals,
books and similar matter mailed to a single address).\42\ UPU member
countries are required to ``ensure the acceptance, handling, conveyance
and delivery of letter-post items.'' Id.
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\42\ Universal Postal Union Convention, Article 12, section 2.
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FedEx argues that inbound international Letter Post mail should be
classified as ``bulk international mail'' if such mail meets the
definition of ``bulk'' applicable to outbound international mail. FedEx
Comments, September 25, 2007, at 12-14. In an effort to define the term
``bulk,'' FedEx endorses, in principle, an earlier suggestion by the
Postal Service that ``bulk international mail'' be interpreted as
multi-item mailings tendered by a single mailer. FedEx argues that this
definition would appear to be serviceable for inbound international
Letter Post, noting that the Postal Service employed it to identify
outbound bulk international Letter Post and Parcel Post mail. Id. at
13.\43\ XLA's position is not clear, although it appears to argue that
``bulk letters'' should be categorized as competitive. XLA Comments,
September 24, 2007, at 2.
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\43\ FedEx also discusses the UPU's characterization of the term
``bulk,'' suggesting that the Commission could adopt that standard
for inbound bulk Letter Post mail. Id. at 13-14.
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The Postal Service opposes FedEx's proposal, arguing that
determining which shipments from foreign posts would qualify as
``bulk'' would be problematic for several reasons, e.g., inability to
verify foreign posts' classifications for accuracy. Postal Service
Reply Comments, October 9, 2007, at 63.\44\ The Postal Service also
notes that FedEx's proposal to classify inbound bulk letter mail as
competitive appears to disregard the applicability of the Private
Express Statutes, including the new price and weight tests applicable
to letters in section 601(b) of title 39. Id. at 64. The Postal Service
proposes that, for financial reporting purposes, Letter Post be
categorized as market dominant. Postal Service Comments, September 24,
2007, at 23.
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\44\ The Postal Service dismisses the possibility of using the
UPU's definition of ``bulk'' mail, arguing that the definition is
designed to address concerns involving remail arbitrage, and further
that no UPU post dispatches its international letters to the Postal
Service using UPU's bulk mail provisions. Id. at 63-64.
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UPS agrees with the Postal Service that inbound mail subject to the
letter monopoly should be classified as market dominant. UPS Reply
Comments, October 9, 2007, at 7.
Letter Post items include matter subject to the Postal Service's
monopoly over letter mail. It may also include items that, if mailed
domestically, would qualify as Priority Mail,
[[Page 63685]]
applicable to First-Class Mail weighing more than 13 ounces. In its
proposed Mail Classification Schedule, the Postal Service has
classified First-Class International Mail weighing more than 13 ounces
as market dominant. It indicates, however, that such mail would more
appropriately be viewed as competitive. The Postal Service states its
intent to seek a transfer of outbound First-Class International Mail
above 13 ounces to the competitive products list, advocating that, if
the transfer occurs, inbound Letter Post costs and revenues for such
mail should be categorized as competitive as well. Postal Service
Initial Mail Classification Schedule, September 24, 2007, at 22-23.
Letter mail is subject to the Postal Service's letter monopoly. Thus,
it is properly categorized as market dominant. The Postal Service's
current inbound data collection system does not distinguish Letter Post
items by weight or content. Thus, as a practical matter, the Postal
Service could not identify mail that is not subject to the monopoly.
The Postal Service's plan to transfer First-Class International Mail
above 13 ounces to the competitive products list should resolve that
issue. In the interim, for purposes of establishing the initial product
lists, the Commission concludes that Letter Post should be classified
as market dominant. Moreover, as there is no incoming bulk
international Letter Post, this conclusion is consistent with section
3621(a)(10), which categorizes single-piece international mail as
market dominant.
UPU member countries' duties with respect to Parcel Post include
ensuring the acceptance, handling, conveyance and delivery of parcels
weighing up to 20 kilograms pursuant to the UPU Convention or through
bilateral agreements.\45\ For financial reporting purposes, the Postal
Service proposes to classify inbound Parcel Post shipments tendered by
foreign posts at inward land rates set by the POC as market dominant,
with inbound shipments tendered at negotiated charges classified as
competitive.
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\45\ UPU Convention, Article 12, section 5. Higher weight limits
optionally apply for certain Parcel Post items pursuant to the
Parcel Post Regulations. Id., section 6.
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FedEx makes essentially the same argument regarding inbound bulk
Parcel Post as it did regarding inbound bulk international mail, i.e.,
that inbound international Parcel Post should be classified as ``bulk
parcel post'' if it meets the definition of ``bulk'' applicable to
outbound international mail. FedEx Comments, September 25, 2007, at 8-
12. XLA argues that ``bulk packages'' should be classified as
competitive. XLA Comments, September 24, 2007, at 2. UPS also argues
that inbound international parcels are properly classified as
competitive. UPS Reply Comments, October 9, 2007, at 6.
The Postal Service's response to FedEx's arguments is largely the
same as its response to FedEx's arguments concerning ``bulk
international mail.'' Postal Service Reply Comments, October 9, 2007,
at 61-62. In addition, however, the Postal Service notes that inward
land rates are set by the POC, that the rates may not be cost
remunerative, and that UPU member countries must provide Parcel Post
service. Further, it states that no special ``bulk'' rate exists for
inbound parcels. Id. at 62-63.
The parcels market is by all accounts competitive. The statute,
however, distinguishes between single-piece and bulk Parcel Post. Other
than Global Bulk Economy, available only by contract, the Postal
Service does not offer outbound surface Parcel Post service. Pursuant
to UPU requirements, it accepts both inbound surface and air Parcel
Post shipments. There is no specific inbound bulk Parcel Post rate.
To give effect to the statute while recognizing the competitive
realities, the Commission finds it appropriate to distinguish between
the Parcel Post shipments based on two factors: The mode of
transportation and whether the rate is negotiated or not. To that end,
the Commission concludes that air Parcel Post shipments are
appropriately classified as competitive. This classification treats air
Parcel Post as equivalent to Priority Mail, a competitive category of
mail, and recognizes the reality that the international air parcels
market is competitive.\46\
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\46\ The Postal Service's discussion of its bilateral
contracting authority emphasizes the role of reciprocity in such
negotiations. Postal Service Comments, September 24, 2007, at 18-19.
That discussion, however, also acknowledges the competitive nature
of the international mail market. Id. at 19.
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Surface Parcel Post shipments are distinguishable by the rate paid
by the shipper. Surface Parcel Post shipments tendered at UPU rates are
appropriately classified as market dominant, while surface Parcel Post
shipments tendered at negotiated rates are appropriately classified as
competitive. This bifurcation is consistent with both section
3621(a)(5), which categorizes single-piece Parcel Post as market
dominant, and section 3631(a)(3), which categorizes bulk Parcel Post as
competitive. While there may be no generally available inbound bulk
Parcel Post rate, any agreements for surface Parcel Post service are
likely to be for bulk quantities. Moreover, classifying surface Parcel
Post shipments tendered at UPU rates as market dominant assures
universal access to Parcel Post services.
3. Outbound Mail Is Subject to the Price Cap
In its reply comments, the Postal Service proposes a new rule
regarding adjustments to the price cap for market dominant classes of
outbound international mail. Postal Service Reply Comments, October 9,
2007, at 72.\47\ Under the proposed rule, the Postal Service would
calculate a modified cap based on a comparison of international mail
cost data reported in the most recent annual compliance report with
that reported in the previous year's annual compliance report. The
Postal Service indicates that the modified cap is intended to reflect
the change between the prior year's total unit costs and the sum of
actual unit delivery costs in the most recent year ``plus what all
other unit costs would have been had they changed precisely by the
applicable CPI-U change.'' Postal Service Reply Comments, October 9,
2007, at 74.
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\47\ The Postal Service notes that it discussed its concerns
regarding outbound international mail in its initial comments,
indicating that it would present a proposed rule in the near term.
See Postal Service Comments, September 24, 2007, at 20, n.35.
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More specifically, the Postal Service would calculate the
``adjusted total unit costs'' by: (1) Identifying the actual ``unit
destination delivery charges'' reported in the most recent annual
compliance report; (2) identifying the ``unit other costs'' reported in
the previous year's annual compliance report and increasing that amount
by the annual limitation percentage (CPI-U) calculated pursuant to rule
3010.21; and (3) summing the results of the first two steps, yielding
the ``adjusted total unit costs.'' The ``adjusted annual limitation for
a class of [outbound] international mail,'' the modified cap, is
calculated by dividing the adjusted total unit costs by the ``base
total unit cost'' (the total unit costs reported in the previous year's
annual compliance filing) and subtracting 1 from the quotient. The
result, expressed as a percentage, represents the ``adjusted annual
limitation'' which, along with any allowable recapture of unused rate
authority, would equal the modified
[[Page 63686]]
price cap applicable to each class of international mail.\48\
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\48\ For a more complete discussion of the Postal Service's
proposal, see id. at 72-76. Attachment A to the Postal Service's
Reply Comments sets forth the proposed rule.
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Commission analysis. The Postal Service takes the position that the
Commission may, in its discretion, modify the price cap applicable to
outbound mail because section 3622(d)(2)(A) applies only to domestic
mail. Id. at 20, n.35. The Commission declines the invitation to
exercise its discretion in this fashion. Pursuant to section
3622(d)(2)(A), the price cap applies to each class of mail listed in
the Domestic Mail Classification Schedule (DMCS) in effect on the date
of enactment of the PAEA. To be sure, the DMCS does not include
international mail. Nonetheless, the conclusion that ``Sec.
3622(d)(2)(A) applies only to domestic mail'' does not necessarily
follow. Id.
First, section 3622(d)(2)(A) does not preclude application of the
price cap to single-piece international mail. Second, regarding
international postal arrangements, section 407(c) specifically
references rates and classes of market dominant products; it does not,
however, exempt such arrangements from application of the price cap.
When it is intended that a specific statutory provision be waived, the
PAEA is explicit. See 39 U.S.C. 3641(a)(2), exempting experimental
products from application of sections 3622, 3633, and 3642.
Finally, the PAEA creates a new system of rate regulation for
market dominant products that is keyed to the price cap. The inclusion
of single-piece international mail in section 3621(a) as market
dominant addresses the needs of individual consumers, particularly as
it relates to letter mail. Thus, for purposes of implementing the
initial system of modern rate regulation, the Commission finds that the
price cap is applicable to outbound single-piece international mail.
The Commission notes that Letter Post is the international counterpart
to First-Class Mail. Inbound Letter Post is categorized as market
dominant. The PAEA classifies single-piece international mail as market
dominant. As the name suggests, single-piece international mail is
intended for use by individual customers, particularly for
correspondence, since competitive alternatives exist for other
international mail services. Consequently, for purposes of applying the
price cap, the Commission concludes that it is appropriate to list
single-piece international mail as a product within First-Class
Mail.\49\
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\49\ This process should afford the Postal Service flexibility
to address cost issues that may arise regarding such mail. Other
options may be available as well, including bilateral or
multilateral agreements. Moreover, while the Commission has declined
to exercise its discretion at this time, should circumstances change
the Postal Service may request that the issue be revisited.
---------------------------------------------------------------------------
The PAEA also classifies single-piece Parcel Post as market
dominant. Earlier this year, however, the Postal Service consolidated
its international non-express parcel services under one umbrella
labeled Priority Mail International (PMI). 72 FR 16604 (April 4, 2007).
PMI is an airmail service and is provided in compliance with the UPU's
parcel provisions. With the change, the Postal Service discontinued
offering international (outbound) single-piece surface Parcel Post
service.\50\ Thus, in terms of service, all PMI parcels are equivalent
to air Parcel Post, which, for inbound shipments, the Commission
classifies as competitive. Since the Postal Service provides no
outbound single-piece surface Parcel Post service, only domestic
single-piece Parcel Post is classified as market dominant.
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\50\ The Postal Service offers Global Bulk Economy, an outbound
service for mail deposited in bulk and shipped via surface
transportation, which is classified as competitive. If the
Commission's understanding that the Postal Service no longer
provides non-bulk surface Parcel Post service is inaccurate, the
Postal Service should so advise and, if appropriate, seek to modify
the product lists accordingly.
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B. Appropriate Share of Institutional Costs
The PAEA requires that competitive products collectively cover an
``appropriate share'' of the Postal Service's institutional costs. 39
U.S.C. 3633(a)(3). In Order No. 26, the Commission proposed to set the
initial contribution at 5.5 percent of the Postal Service's total
institutional costs. Order No. 26, ]] 3049-61. Several parties address
the proposed contribution level, but only one, PSA, urges its
modification.
PSA recommends that proposed rule 3015.7(c) be modified in two
respects. First, it proposes that the appropriate share requirement be
reduced to 4.5 percent of total institutional costs, arguing that
lowering the contribution would provide a margin of safety against
factors unrelated to postal pricing and beyond the Postal Service's
control.\51\ Second, PSA proposes that, for purposes of the Postal
Service's compliance with section 3633(a)(3), the appropriate share
requirement be implemented on a multi-year, as opposed to annual,
basis. PSA contends that a multi-year requirement would afford the
Postal Service pricing flexibility and smooth economic cycles. PSA
Comments, September 24, 2007, at 7.
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\51\ PSA Comments, September 24, 2007, at 6. PSA notes that
under the proposed 5.5 percent appropriate share, as contrasted with
a minimum percentage markup, the contribution from competitive
products is highly dependent on their volumes, particularly higher
margin products. Id. at 3. In reply comments, DMA touches on the
issue of competitive volumes and, in a roundabout manner, appears to
endorse PSA's 4.5 percent recommendation. DMA Reply Comments,
October 9, 2007, at 6-8. From that apparent endorsement, DMA segues
to the suggestion that the final rule should explicitly provide an
opportunity to revisit the issue of appropriate share based on
changed circumstances. Id. at 8-9. APMU also comments on PSA's
recommendation, contending that the 4.5 percent ``is the absolutely
highest level that can be imposed on all competitive products during
a transitional period.'' APMU Reply Comments, October 9, 2007, at 1.
APMU comments on the parcels market, including contributions from
competitive products, and cautions the Commission about the
consequences of setting an excessive minimum contribution level. Id.
at 2-4.
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Recognizing ``the transitional needs of the Postal Service[,]'' UPS
does not object to the 5.5 percent contribution level. UPS Comments,
September 24, 2007, at 1. Looking to the future, it advocates that the
appropriate share be established as a fixed percentage of institutional
costs with the percentage reflecting competitive products' historic
contribution levels over a period longer than two years.\52\
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\52\ Id. at 2-6. The Postal Service and PSA respond to UPS's
vision of what the appropriate share should represent in the future.
Postal Service Reply Comments, October 9, 2007, at 57-58; PSA Reply
Comments, October 9, 2007, at 2-5. While it appreciates the parties'
comments, the Commission finds it unnecessary to address them since
what the contribution level should be in the future is not ripe for
decision.
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In its reply comments, the Postal Service endorses the
reasonableness of the 5.5 percent contribution level, characterizing it
as a challenging, but attainable, benchmark. Postal Service Reply
Comments, October 9, 2007, at 55-57. Referencing Order No. 26, the
Postal Service also comments that ``if circumstances so require'' the
contribution level may be revisited. Id. at 56-57.
Commission analysis. The Commission rejects PSA's proposals to
modify rule 3015.7(c). In Order No. 26, the Commission explained in
detail the basis for establishing 5.5 percent as the appropriate
initial contribution level. Order No. 26, ]] 3052-61. PSA has not made
a compelling case for lowering the contribution level.\53\ PSA argues
that the Postal Service's ability to achieve a specified contribution
level from competitive products is, compared to a
[[Page 63687]]
minimum percentage markup requirement, heavily dependent on volume,
which, it says, is of concern in two respects. First, PSA makes the
point that competitive product volumes are dependent on exogenous
factors, such as economic conditions and competitors' prices, over
which the Postal Service has no control.\54\ Second, although
acknowledging the recent increases in Priority Mail and Express Mail
volumes, PSA suggests that longer term competitive product volumes may
be declining. Id. at 4.
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\53\ UPS opposes PSA's proposal to reduce the contribution level
to 4.5 percent. UPS Reply Comments, October 9, 2007, at 4.
\54\ Id. PSA cites Priority Mail elasticity estimates from
Docket No. R2006-1, which it says suggest ``a dependency on the
pricing decisions of USPS competitors that seems entirely
inappropriate.'' Id. at 3-4. To the extent this conclusion has
merit, PSA does not explain how its proposal would make it less so.
In any event, the predicate for the conclusion appears to be
problematic. The elasticity estimates from Docket No. R2006-1
predate passage of the PAEA. Thus, they do not reflect the new,
flexible pricing regime under the PAEA.
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PSA's first argument is that competitive markets are risky. Its
solution seeks simply to reduce the Postal Service's risks without
consideration of any factors relevant to establishing the contribution
level at 5.5 percent.\55\ Fluctuation of volumes is an inherent market
risk. PSA's speculation about competitive volume trends does not take
into account the regulatory changes brought about by the PAEA, which,
at a minimum, afford the Postal Service substantial pricing
flexibility.
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\55\ That solution differs from PSA's earlier comments
suggesting a basis for setting the contribution level. See PSA
Comments, June 18, 2007, at 7.
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PSA's proposal to calculate compliance over a three-year period is
rejected. Proposed rule 3015.7(c) imposes an annual compliance
requirement associated with the 5.5 percent contribution level, a
standard that is fully consistent with the statute. PSA does not
contend otherwise, but notes that section 3633(a)(3) ``is silent as to
the time period over which the appropriate share requirement be met.''
PSA Comments, September 24, 2007, at 7. The ``omission'' of any such
time period in section 3633(a)(3) does not support PSA's proposal that
compliance be measured over three-year periods. Rather, the
``omission'' supports the annual compliance requirement.
Section 3652 requires the Postal Service to file certain annual
reports with the Commission. Section 3653 requires the Commission to
issue annual compliance reports addressing, among other things, the
Postal Service's compliance with section 3633. Plainly, compliance is
to be determined on an annual basis. Had Congress intended a different
standard for competitive products, it would have stated so explicitly.
C. Filing Requirements for Competitive Product Rate Decreases
Proposed rule 3015.3 prescribes filing requirements for decreases
in rates of general applicability. PSA requests clarification of the
proposed rule, contending that it should apply only to decreases in the
average rate of a product, ``not when the rate in a particular rate
cell will decrease.'' Id. at 8. PSA argues that the filing requirements
should not apply below the product level because ``the rate offered in
a particular rate cell has no direct effect on compliance.'' \56\
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\56\ Id. The Postal Service and Stamps.com agree that rule
3015.3 should apply only when the average rate for a competitive
product decreases, not to decreases in individual rate cells. Postal
Service Reply Comments, October 9, 2007, at 59; and Stamps.com Reply
Comments, October 9, 2007, at 3-4.
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PSA also contends that the rule 3015.3 filing requirements should
apply only to the product subject to the decrease, not to all
competitive products, because the cost coverage requirement, section
3633(a)(2), only applies to the specific product. The Postal Service
agrees with PSA's interpretation on this issue. Postal Service Reply
Comments, October 9, 2007, at 59.
Commission analysis. As proposed, rule 3015.2, concerning increases
in rates of general applicability, and rule 3015.3, concerning
decreases in rates of general applicability, are designed to operate in
concert, i.e., whenever the Postal Service changes rates of general
applicability, notice must be filed pursuant to rules 3015.2 and/or
3015.3. PSA notes that rule 3015.3 is unclear regarding the
circumstances which trigger the filing requirements. PSA asks whether
the rule is to be invoked for any rate decrease, even a rate cell, or
only when the average rate of a product decreases. PSA Comments,
September 24, 2007, at 8. PSA contends that rule 3015.3 should be
applied only when the average rate for a product will decrease. Id.
PSA's request for clarification is reasonable; it is granted. Whenever
the Postal Service decreases the average rate of a product, notice must
be filed pursuant to rule 3015.3.\57\
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\57\ Accordingly, rule 3015.3(a) is modified as follows:
(a) When the Postal Service determines to change a rate or rates
of general applicability for any competitive product that results in
a decrease in the average rate of that product, it shall file notice
of the change with the Commission no later than the date of
publication of the decision in the Federal Register concerning such
change, but at least 30 days before the effective date of the
change.
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To ensure that the rules continue to operate in concert as
intended, this clarification requires that rule 3015.2(a) be modified
to address rate changes, not merely increases.\58\ Thus, whenever the
Postal Service changes any competitive product rates of general
applicability, notice must be filed pursuant to rule 3015.2. If,
however, the average rate of a product decreases, notice must be filed
pursuant to rule 3015.3.
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\58\ Rule 3015.2 is revised as follows: Sec. 3015.2 Changes in
rates of general applicability. (a) When the Postal Service
determines to change a rate or rates of general applicability, it
shall file notice of the change with the Commission no later than
the date of publication of the decision in the Federal Register
concerning such change, but at least 30 days before the effective
date of the change.
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PSA also commented on the interrelationship between rules 3015.2
and 3015.3, suggesting that a decrease in the rate of one product would
trigger only rule 3015.3 filing requirements, not for all competitive
products. The Commission clarifies that whenever the Postal Service
changes rates of general applicability notice is to be filed pursuant
to rule 3015.2. Thus, for example, if the Postal Service changes the
rates of three competitive products, including decreasing the average
rate of one, it would file notice of the changes pursuant to rule
3015.2 and, for the product with the average rate decrease, would file
notice pursuant to rule 3015.3. Notice regarding the remaining
competitive products for which rates are unchanged would not be
required.
D. Filing Requirements for Rate or Class Not of General Applicability
Proposed rule 3015.5 governs the filing requirements when the
Postal Service determines to add or change a rate or class not of
general applicability, i.e., competitive negotiated service agreements.
PSA suggests two changes to the rule.
Proposed rule 3015.5(c)(1) requires the Postal Service to file
``[s]ufficient annualized revenue and cost data to demonstrate that
each affected competitive product will be in compliance with 39 U.S.C.
Sec. 3633(a)(2).'' PSA interprets this provision as requiring the
Postal Service to file ``total cost and revenue data by year associated
with the contract rate.'' PSA Comments, September 24, 2007, at 11
(emphasis in original). PSA argues that this provision may hinder the
Postal Service's ability to execute negotiated service agreements in
instances where it is unable to estimate the contract volumes and thus
could not estimate total costs and revenues. PSA suggests that unit
revenue and cost data are reasonable proxies for compliance
[[Page 63688]]
with section 3633(a)(2). PSA proposes that rule 3015.5(c)(1) be revised
by deleting the phrase ``annualized revenues and cost'' to read as
follows: ``[s]ufficient data to demonstrate that each affected
competitive product will be in compliance with 39 U.S.C. Sec.
3633(a)(2).''
Second, PSA proposes deleting the rule 3015.5(c)(2) requirement
that the Postal Service explain ``why, following the change,
competitive products in total will be in compliance with 39 U.S.C.
Sec. Sec. 3633(a)(1) and (3).'' PSA argues that sections 3633(a)(1)
and (3) apply to competitive products as a whole, not individual
products. It contends that whether the Postal Service complies with
section 3633(a)(1) and (3) will generally not depend on individual
contract rates (rates not of general applicability). PSA, therefore,
suggests that the provision is redundant. Id. at 13.
Commission analysis. The Commission will not adopt PSA's suggestion
that rule 3015.5(c)(1) be modified. The predicate for the proposal,
that the Postal Service ``is unable to estimate mail volumes associated
with the deal,'' is unrealistic. Id. at 2. In evaluating whether to
execute a competitive negotiated service agreement, the Postal Service
must have a reasonable estimate of the contract's economic value, a
calculation dependent, in part, on either a reasonably reliable volume
estimate or other type of annual guarantee. Moreover, PSA's suggestion
that unit cost and revenue data may serve as reasonable proxies for
compliance purposes is not well taken in circumstances where the
negotiated service agreement involves multiple products or mail mix
options. For example, if the negotiated service agreement involved
Parcel Select, the costs and revenues under the agreement would be
contingent on, among other things, volumes by dropship destination,
i.e., DBMC, DSCF, and DDU.
PSA's proposal focuses attention on proposed rule 3015.5(c)(1) and,
upon reconsideration, the Commission finds it appropriate to clarify
the proposed rule. The proposed rule used the phrase ``annualized
revenue and cost data.'' The term ``annualized'' is ambiguous and may
be at odds with the annual compliance reporting requirements of
sections 3652 and 3653. Thus, to clarify the filing requirements, the
Commission will modify rule 3015.5(c)(1) to read as follows:
``Sufficient revenue and cost data for the 12-month period following
the effective date of the rate or class to demonstrate that each
affected competitive product will be in compliance with 39 U.S.C.
3633(a)(2)''.\59\
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\59\ Rule 3015.3(c)(1), which used the same language concerning
decreases in rates of general applicability, will also be modified
similarly: ``Sufficient revenue and cost data for the 12-month
period following the effective date of the rate to demonstrate that
each affected competitive product will be in compliance with 39
U.S.C. 3633(a)(2)''.
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The Commission will not adopt PSA's proposal that rule 3015.5(c)(2)
be modified to eliminate the requirement that the Postal Service
include an explanation that, following the change in the rate (or
rates) not of general applicability, competitive products will be in
compliance with sections 3633(a)(1) and (3). The assumption that the
Postal Service's compliance with sections 3633(a)(1) and (3) will not
be dependent on individual negotiated service agreements is untested
and, thus, premature. International mail excepted, no competitive
negotiated service agreements exist. Consequently, their impact is
uncertain. The limited review contemplated by the rules is intended to
provide some assurance that, at least preliminarily, the rates not of
general applicability satisfy section 3633. Once experience under the
PAEA is gained, including with rates not of general applicability, the
rules can be revisited and modified as deemed appropriate.
E. Parcel Select
In Order No. 26, the Commission identified three bulk Parcel Post
products, consisting of Parcel Select, Parcel Return Service, and
Parcel Post mail qualifying for OBMC, BMC, and barcode discounts. Order
No. 26, ] 3012.
The Postal Service proposes that OBMC, BMC, and barcode discounts
be included as price categories within Parcel Select. Postal Service
Initial Mail Classification Schedule, September 24, 2007, at 7-8. The
Postal Service cites common characteristics between mailers using these
rates and those using Parcel Select rates as a basis for consolidation.
Both involve commercial mailers; some Parcel Select mailers also enter
mail in the OBMC, BMC, and barcode discount categories. In addition,
the Postal Service notes that the minimum volume requirements are the
same as for Parcel Select. Id. at 8.
Commission analysis. The Commission will adopt the Postal Service's
proposal, notwithstanding having some concerns about the sufficiency of
the rationale offered in support of consolidation, i.e., similarities
between mailers. This decision is influenced by several considerations.
First, the proposal generated no controversy, as evidenced by the
fact that no party commented it. Second, consolidating the discounts
with Parcel Select has a plausible basis; both involve parcels and are
subject to the same volume requirements. Third, timing is not
unimportant. This proceeding represents the initial attempt to develop
rules implementing the modern system of rate regulation under the PAEA.
Granting the Postal Service's proposal at the outset may enable the
Postal Service to market Parcel Select in new ways. Experience,
however, may demonstrate that Parcel Select and OMBC, BMC, and barcode
discounts should be classified as separate products. Consolidation now
does not preclude such a result later.
IV. Product Lists
A. Subpart A--Mail Classification Schedule
Initially, section 3020.11 required the Postal Service to propose a
Mail Classification Schedule within 30 days of enactment of the final
rule. At the same time, Order No. 26 requested that the Postal Service
prepare a draft Mail Classification Schedule in expedited fashion. The
Postal Service complied with the request for expedition and filed a
draft Mail Classification Schedule on September 24, 2007.\60\ Order No.
26 also requested initial comments from interested persons on the
Postal Service's draft Mail Classification Schedule. Specific comments
were received from Advo, APWU, Carlson, DFS, MOAA, NAPUS, OCA, Pitney
Bowes, Popkin, and PostCom.
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\60\ United States Postal Service Submission of Initial Mail
Classification Schedule in Response to Order No. 26, September 24,
2007.
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The Postal Service's commendable efforts will allow publication of
a complete Mail Classification Schedule as anticipated. However,
additional work remains. In this order, the Commission reaffirms that
negotiated service agreements initially will be treated as individual
products. To implement this finding, the Commission requests further
information from the Postal Service. The Commission requests the Postal
Service to develop and file with the Commission the descriptive
information necessary to identify and explain each market dominant and
competitive negotiated service agreement (including each International
Customized Mail Agreement). For both market-dominant and competitive
agreements, consideration should be given to grouping agreements with
identical or very similar terms and conditions. This
[[Page 63689]]
information is to be provided to the Commission by November 20, 2007.
The Commission also has integrated several international products
under the classifications of their domestic counterparts. Single-piece
First-Class Mail International has been subdivided into Outbound
Single-piece First-Class Mail International and Inbound Single-piece
First-Class Mail International, and assigned to the First-Class Mail
class. International Ancillary Services, International Reply Coupon
Service, and International Business Reply Mail Service have been
included with Special Services. A product described as Inbound Surface
Parcel Post (at UPU rates) has been assigned to the Package Services
class.
Classes of Express Mail and Priority Mail have been assigned to the
competitive products list. The ``class'' terminology within the
competitive products list is used merely as an organizational aid to
group products with similar characteristics and is not meant to imply
ratemaking significance. The Express Mail class is to include Express
Mail (Domestic), Outbound International Expedited Services, and Inbound
Expedited Services. The Priority Mail class is to include Priority Mail
(Domestic), Outbound Priority Mail International, and Inbound Air
Parcel Post. As discussed above, DBMC, BMC, and barcode discount
parcels have been consolidated with Parcel Select as one product.
Parcel Return Service remains as proposed by the Postal Service. A
product described as Inbound Surface Parcel Post (at non-UPU rates) has
been assigned to the competitive products list international class. The
above changes will either require modification to the Postal Service's
proposed Mail Classification Schedule, or additional information from
the Postal Service to accurately describe these products. This
information is to be provided to the Commission by November 20, 2007.
While the Commission is comfortable in most instances with the
Postal Service naming its own products, the Commission's preference is
for product names that appropriately identify the characteristics of
the products. In this respect, the term ``bulk'' as used in First-Class
Mail ``Bulk Letters/Postcards'' is not helpful because large quantities
of what might commonly be thought of as ``bulk'' mail also is mailed at
single-piece rates. Furthermore, bulk mail can not be entered at Bulk
Letters/Postcards rates unless it is also presorted. The Commission
asks the Postal Service to consider whether another descriptive term
other than bulk might be more appropriate, such as ``presorted'' or
``workshared''.
The Commission will develop a comprehensive Mail Classification
Schedule for incorporation into its rules after thorough review of the
Postal Service's proposals and the comments already provided. Notice
and the opportunity for comment on the Mail Classification Schedule
developed by the Commission will be provided.
The Postal Service suggests that product descriptions be omitted
from the Mail Classification Schedule when published as Commission
regulations in the Code of Federal Regulations. Postal Service Reply
Comments, October 9, 2007, at 26-27. The Postal Service contends that
since changes to provisions for existing products are made by the
Postal Service in the Domestic Mail Manual, it may be confusing also to
have to revise the Mail Classification Schedule. In addition, the
Postal Service questions whether such treatment would conform with the
Governors' ability to enact classification changes for competitive
products under 39 U.S.C. 3632.
The Commission previously explained that:
The Commission is charged with maintaining accurate product
lists. 39 U.S.C. Sec. 3642. The Commission views the Mail
Classification Schedule as the vehicle for presenting the product
lists with necessary descriptive content. The explanatory
information included with the product lists will inform participants
in Commission proceedings of the nature and scope of Postal Service
products and must be sufficiently detailed to allow the Commission
to verify that the rates and categorization of products are in
compliance with the PAEA. Thus, the Mail Classification Schedule is
important in that it will provide for the transparent and accurate
maintenance of the product lists.
PRC Order No. 26 at ] 4003.
The explanatory information performs an important function in the
Commission's responsibility to establish and maintain ``a modern system
for regulating rates and classes for market-dominant products.'' See 39
U.S.C. 3622(a). Furthermore, the explanatory information facilitates
the Commission's understanding of the Postal Service's products when
reviewing service standards under 39 U.S.C. 3691.
With the Commission's role in maintaining the product lists,
regulating rates and classes for market dominant products, and
reviewing service standards, the explanatory information provides a
baseline for the Commission in undertaking its important
responsibilities. The rules require only minimal descriptive
information to be included in the Mail Classification Schedule.\61\ The
level of detail that the Postal Service provided in its proposed Mail
Classification Schedule, with some minor adjustments, appears adequate.
The rules also specify an expeditious and unburdensome approach to
updating the Mail Classification Schedule that is consistent with
providing the Postal Service with great flexibility to manage its
products. Thus, the Postal Service's suggestion to omit the descriptive
information from the CFR will not be adopted.
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\61\ This is to be contrasted against the detailed product
information provided by the Postal Service in the Domestic Mail
Manual. The Postal Service has great flexibility in developing the
detailed requirements in the Domestic Mail Manual, consistent with
the general descriptions provided in the Mail Classification
Schedule.
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Initially, rule 3020.12 was written to incorporate by reference the
Mail Classification Schedule into the Federal Register. This method of
publication requires the approval of the Director of the Federal
Register. At this time, the Commission has not received approval.
Because the initial Mail Classification Schedule is a required
component of this final rule, rule 3020.12 has been revised to publish
the Mail Classification Schedule in the Federal Register as an
appendix.
The final rule establishes an initial framework for operating under
the PAEA. This requires at a minimum publication of the market dominant
and competitive product lists. Section 3020.11 has been modified to
provide for publication of an abbreviated Mail Classification Schedule
which provides these product lists. The rule indicates that the
additional descriptive material will be added in a subsequent
rulemaking.
An initial Mail Classification Schedule has been prepared as
Appendix A to these rules. It provides a skeleton of the Mail
Classification Schedule that indicates the general format of the
document and reserves space for including the individual product
descriptions in the near future. The Mail Classification Schedule
includes the complete market dominant and competitive product lists
which allows the Postal Service and the Commission to operate under the
PAEA. The product lists generally are consistent with the product lists
proposed by the Postal Service in its draft Mail Classification
Schedule, except for the modifications discussed in this Order.
APWU opposes the Postal Service's proposal to create separate
products for Single-piece Letters/Postcards and Bulk Letters/Postcards
within First-Class Mail. It expresses concern that the
[[Page 63690]]
separation may lead to rates that violate the workshare provision of
the PAEA and fail to encourage efficiency. APWU MCS Comments, October
9, 2007, at 1-4. In its comments supporting the Postal Service's
proposed Mail Classification Schedule, Advo argues that the separation
of single-piece and bulk letters and postcards is ``imminently
reasonable.'' Advo MCS Comments, October 9, 2007, at 2.
The Postal APWU opposes the Postal Service's proposal to create
separate products for Single-piece Letters/Postcards and Bulk Letters/
Postcards within First-Class Mail. It expresses concern that the
separation may lead to rates that violate the workshare provision of
the PAEA and fail to encourage efficiency. APWU MCS Comments, October
9, 2007, at 1-4. In its comments supporting the Postal Service's
proposed Mail Classification Schedule, Advo argues that the separation
of single-piece and bulk letters and postcards is ``imminently
reasonable.'' Advo MCS Comments, October 9, 2007, at 2.
The Postal Service has the flexibility to initially describe its
product lines in conformance with the statutory requirements of the
PAEA. A product is defined as ``a postal service with a distinct cost
or market characteristic for which a rate or rates are, or may
reasonably be, applied.'' 39 U.S.C. 102(6). It is possible to apply
this definition and categorize First-Class Mail postal services into
products in several different ways. The selections made by the Postal
Service comply with the definition, and represent postal services with
distinct cost or market characteristics. The product lines are subject
to adjustments in the future as conditions change. The Commission finds
that the Postal Service has appropriately described product lines
applicable to First-Class Mail.
The Postal Service has the flexibility to initially describe its
product lines in conformance with the statutory requirements of the
PAEA. A product is defined as ``a postal service with a distinct cost
or market characteristic for which a rate or rates are, or may
reasonably be, applied.'' 39 U.S.C. 102(6). It is possible to apply
this definition and categorize First-Class Mail postal services into
products in several different ways. The selections made by the Postal
Service comply with the definition, and represent postal services with
distinct cost or market characteristics. The product lines are subject
to adjustments in the future as conditions change. The Commission finds
that the Postal Service has appropriately described product lines
applicable to First-Class Mail.
The public had an opportunity to comment on the product lists as
provided in Order No. 26. OCA, and others, express opinions on the
content and level of detail of the product lists. See OCA MCS Comments,
October 10, 2007. The Commission acknowledges that these comments raise
important issues applicable to many mailers. The Commission finds that
the product lists specified in the initial Mail Classification Schedule
provide mailers, the Postal Service, and the Commission a legally
sufficient starting point for operating under the PAEA. Rules to modify
the product lists are specified in this final rule, and the Commission
anticipates that these rules will be put to use.
B. Requests to Modify the Product Lists
The Commission has identified an error in the Federal Register
notice. Rule 3020.31(b) should read ``Provide a copy of the Governor's
decision supporting the request, if any;''. Order No. 26 includes the
correct text. The correct language is included in the final rule.
The Commission has made conforming changes to docket and notice
rules 3020.33, 3020.53, and 3020.73, which make the language
consistent, wherever possible, with the provisions applicable to
notices of Type 1 rate adjustments for market dominant products.
Suggested revisions. PostCom suggests combining part 3020 subparts
B, C, and D. PostCom Comments, September 24, 2007, at 7. PostCom
contends that the subparts contain identical procedures for reviewing
product list modifications depending on the party that initiates a
request. The Commission will not adopt PostCom's suggestion. There are
differences in requirements based on the filing party, and the
Commission anticipates further variations as the rules develop over
time.
PostCom further suggests making the requirements of part 3020
inapplicable for product list modifications associated with CPI rate
increases. PostCom Comments, September 24, 2007, at 5-7. PostCom has
not made a persuasive argument that there should be an exception to the
requirements of 39 U.S.C. 3642 when CPI rate adjustments are made.
GCA suggests that explicit language be included in rules 3020.30,
3020.50, and 3020.70 to prohibit the transfer of products between
product lists that are subject to the private express statutes. GCA
Comments, September 24, 2007, at 6-7. This prohibition is specified in
39 U.S.C. 3642(b)(2). The Commission's rules as proposed require the
Postal Service to demonstrate that this requirement is met. See rules
3020.32(e), 3020.52(e), and 3020.72(e). Thus, the rules adequately
address GCA's concern.
Pitney Bowes suggests incorporating a 45-day time limit into the
rules for the initial review of proposals to add, delete, or transfer
products between product lists. See rules 3020.34, 3020.55, and
3020.75. Pitney Bowes further suggests incorporating a 90-day time
limit into the rules when further proceedings are required to review
these proposals. See rules 3020.35, 3020.56, and 3020.76. Pitney Bowes
Comments, September 24, 2007, at 14-15.
The Commission will handle requests to add, delete, or transfer
products between product lists in an expedient manner consistent with
due process and procedural fairness. When the proposals appear to meet
statutory requirements, the proposals should receive prompt approval.
However, when there is a demonstration by a party submitting comments
or when it is independently apparent to the Commission that there may
be compliance issues with the proposal, the Commission will allow
adequate time on a case-by-case basis to evaluate the issues and review
statutory compliance. Establishing an artificial time constraint will
not facilitate resolving identified compliance issues, and it may
prolong resolution of the issues by requiring parties to initiate
litigious complaint proceedings.
Final rules. With the exception of the changes identified at the
beginning of this section, the rules for requests to modify product
lists initiated by the Postal Service, users of mail, and the
Commission (part 3020, subparts B, C, and D), are adopted without
change.
C. Subpart E--Requests Initiated by the Postal Service To Change the
Mail Classification Schedule
Suggested revisions. McGraw-Hill is concerned that the Postal
Service will use part 3020 subpart E, which does not provide for
Commission review or allow for public comment, to make what it
considers major classification changes. McGraw-Hill Comments, September
24, 2007, at 2-5. McGraw-Hill requests prospective review and the
opportunity for comment on Postal Service proposed major classification
changes that do not involve modifications to the product lists. Valpak
expresses similar concerns and seeks an alternative way of handling
major classification changes. Valpak Comments, September 24, 2007, at
12-16.
[[Page 63691]]
Commission analysis. Commenters correctly infer that there is a
continuum of possible classification changes from those only requiring
the Postal Service to inform the Commission of a classification change
to those triggering the requirements of 39 U.S.C. 3642. The Postal
Service asserts that it will initially provide an opportunity for
formal public comment on important and complex changes to its processes
and products. Postal Service Reply Comments, October, 9, 2007, at 27-
29. Thus, it contends, the public will have notice and an opportunity
for comments on proposed changes provided by the Postal Service.
Parties also have the opportunity to utilize the Commission's
complaint procedures whenever compliance with the statutory
requirements becomes an issue. Further opportunities for public comment
will be available during the annual compliance process, and also may be
available when the Commission evaluates service standards.
The rules proposed in subparts B, C, and D establish formal
procedures for classification changes triggering the requirements of 39
U.S.C. 3642. For classification changes below this level, the proposed
rules provide the Postal Service with great flexibility to manage
Postal Service products, as long as the products conform to the
statutory requirements of the PAEA. Neither the PAEA nor sound public
policy suggests that the Commission exercise pre-implementation
authority at this time.
The purpose of subpart E is to keep the Mail Classification
Schedule up to date when product changes are made below the 39 U.S.C.
3642 level. This facilitates the Commission's maintenance of the
product lists and makes it possible for the Commission to undertake its
other statutory responsibilities. Subpart E was not intended to provide
an avenue for comprehensive pre-implementation review of classification
changes.
The Commission will provide notice and the opportunity for comment
on Mail Classification Schedule changes under subpart E. Comments can
be beneficial in assuring that proposals are properly filed under the
correct rules, and not inadvertently filed under subpart E. For these
limited purposes, it will be sufficient to provide notice of Postal
Service submissions under rule 3020.91 on the Commission's Web site and
allow a period for public comment on whether the changes are
inconsistent with 39 U.S.C. 3642.
A new rule, 3020.92, Public Input, is added. That rule will provide
for the Commission publishing Postal Service submissions pursuant to
rule 3020.91 on its Web site and give interested members of the public
an opportunity to comment.
Proposed rule 3020.92, Implementation, is renumbered as rule
3020.93, and modified to reflect consideration of public comments.
No participant commented on the proposed rules in part 3020,
subpart F, and they are adopted without change.
V. Ordering Paragraphs
It is ordered:
1. The Postal Service shall provide the information necessary for
further development of the Mail Classification Schedule as specified in
chapter IV, ]] 4002 through 4004 of this Order by November 20, 2007.
2. The Commission hereby adopts final rules amending the
definitions of terms appearing in rule 3001.5 that follow the
Secretary's signature into the Commission's Rules of Practice and
Procedure appearing in 39 CFR 3001.
3. The Commission hereby adopts final rules establishing new rules
applicable to Regulation of Market Dominant Products (part 3010),
Competitive Products (part 3015), and Product Lists (part 3020) that
follow the Secretary's signature into the Commission's Rules of
Practice and Procedure to appear in 39 CFR 3010, 3015, and 3020
respectively.
4. The Commission hereby adopts final rules establishing a Mail
Classification Schedule, appearing as Appendix A to subpart A of new
rule 3020 that follow the Secretary's signature into the Commission's
Rules of Practice and Procedure to appear in 39 CFR 3020.
5. The Secretary shall arrange for publication of this Order
amending the definitions of terms, establishing rules applicable to
Regulation of Market Dominant Products, Competitive Products, and
Product Lists, and establishing a Mail Classification Schedule in the
Federal Register. These changes will take effect 30 days after
publication in the Federal Register.
6. The Secretary shall arrange for publication of this order in the
Federal Register.
List of Subjects
39 CFR Part 3001
Administrative practice and procedure; Confidential business
information, Freedom of information, Sunshine Act.
39 CFR Part 3010
Administrative practice and procedure; Postal Service.
39 CFR Part 3015
Administrative practice and procedure; Postal Service.
39 CFR Part 3020
Administrative practice and procedure; Postal Service.
By the Commission.
Steven W. Williams,
Secretary.
0
For the reasons stated in the preamble, under the authority at 39
U.S.C. 503, the Postal Regulatory Commission amends 39 CFR chapter III
as follows:
PART 3001--RULES OF PRACTICE AND PROCEDURE
0
1. Revise the authority citation for part 3001 to read as follows:
Authority: 39 U.S.C. 404(d); 503; 3622; 3633; 3661, 3652.
Subpart A--Rules of General Applicability
0
2. Amend Sec. 3001.5 as follows:
0
a. Revise paragraphs (r) and (s); and
0
b. Add paragraphs (t) and (u).
Sec. 3001.5 Definitions.
* * * * *
(r) Negotiated service agreement means a written contract, to be in
effect for a defined period of time, between the Postal Service and a
mailer, that provides for customer-specific rates or fees and/or terms
of service in accordance with the terms and conditions of the contract.
A rate associated with a negotiated service agreement is not a rate of
general applicability.
(s) Postal service refers to the delivery of letters, printed
matter, or mailable packages, including acceptance, collection,
sorting, transportation, or other functions ancillary thereto.
(t) Product means a postal service with a distinct cost or market
characteristic for which a rate or rates are, or may reasonably be,
applied.
(u) Rate or class of general applicability means a rate or class
that is available to all mailers equally on the same terms and
conditions.
0
3. Add part 3010 to read as follows:
PART 3010--REGULATION OF RULES FOR MARKET DOMINANT PRODUCTS
Subpart A--General Provisions
Sec.
3010.1 Applicability.
3010.2 Types of rate adjustments for market dominant products.
3010.3 Type 1-A rate adjustment--in general.
3010.4 Type 1-B rate adjustment--in general.
[[Page 63692]]
3010.5 Type 2 rate adjustment--in general.
3010.6 Type 3 rate adjustment--in general.
3010.7 Schedule of regular rate changes.
Subpart B--Rules for Rate Adjustments for Rates of General
Applicability (Type 1-A and 1-B Rate Adjustments)
3010.10 Procedures.
3010.11 Limit on size of rate increases.
3010.12 Source of CPI-U data for purposes of annual limitation.
3010.13 Proceedings for Type 1-A and Type 1-B rate adjustment
filings.
3010.14 Contents of notice of rate adjustment.
Subpart C--Rules for Applying the Price Cap
3010.20 Test for compliance with the annual limitation.
3010.21 Calculation of annual limitation.
3010.22 Calculation of less than annual limitation.
3010.23 Calculation of percentage change in rates.
3010.24 Treatment of volume associated with negotiated service
agreements.
3010.25 Limitation on unused rate adjustment authority rate
adjustments.
3010.26 Calculation of unused rate adjustment authority.
3010.27 Application of unused rate adjustment authority.
3010.28 Maximum size of unused rate adjustment authority rate
adjustments.
3010.29 Transition rule.
Subpart D--Rules for Rate Adjustments for Negotiated Service Agreements
(Type 2 Rate Adjustments)
3010.40 Negotiated service agreements.
3010.41 Procedures.
3010.42 Contents of notice of agreement in support of a negotiated
service agreement.
3010.43 Data collection plan.
3010.44 Proceedings for Type 2 rate adjustments.
Subpart E--Rules for Rate Adjustments for Exigent Circumstances (Type 3
Rate Adjustments)
3010.60 Applicability.
3010.61 Contents of exigent requests.
3010.62 Supplemental information.
3010.63 Treatment of unused rate adjustment authority.
3010.64 Expeditious treatment of exigent requests.
3010.65 Special procedures applicable to exigent requests.
3010.66 Deadline for Commission decision.
Authority: 39 U.S.C. 503; 3622.
Subpart A--General Provisions
Sec. 3010.1 Applicability.
The rules in this part implement provisions in the Postal
Accountability and Enhancement Act (PAEA) establishing ratesetting
policies and procedures for market dominant products. With the
exception of exigency-based rate adjustments, these procedures allow a
minimum of 45 days for advance public notice of the Postal Service's
planned rate adjustments. Exigency-based rate adjustments require the
Postal Service to file a formal request with the Commission and are
subject to special procedures.
Sec. 3010.2 Types of rate adjustments for market dominant products.
(a) There are four types of rate adjustments for market dominant
products. A Type 1-A rate adjustment, authorized under 39 U.S.C.
3622(d)(1)(D), is based on the statutory annual limitation. A Type 1-B
rate adjustment, authorized under 39 U.S.C. 3622(d)(2)(C), is based on
an exception to the annual limitation, and is referred to as unused
rate adjustment authority. A Type 2 rate adjustment, authorized under
39 U.S.C. 3622(c)(10), is based on a negotiated service agreement. A
Type 3 rate adjustment, authorized under 39 U.S.C. 3622(d)(1)(E), is
based on exigent circumstances.
(b) Upon the establishment of unused rate adjustment authority in
any class, the Postal Service shall devise and maintain a schedule that
tracks the establishment and subsequent use of unused rate adjustment
authority.
(c) The Postal Service may combine Types 1-A, 1-B and 2 rate
adjustments for purposes of filing with the Commission.
Sec. 3010.3 Type 1-A rate adjustment--in general.
(a) A Type 1-A rate adjustment represents the usual type of
adjustment to rates of general applicability.
(b) A Type 1-A rate adjustment may result in a rate adjustment that
is less than or equal to the annual limitation, but may not exceed the
annual limitation.
(c) A Type 1-A rate adjustment for any class that is less than the
applicable change in CPI-U results in unused rate adjustment authority
associated with that class. Part or all of the unused rate adjustment
authority may be used in a subsequent adjustment for that class,
subject to the expiration terms in Sec. 3010.26(d).
Sec. 3010.4 Type 1-B rate adjustment--in general.
(a) A Type 1-B rate adjustment is a rate adjustment which uses
unused rate adjustment authority in whole or in part. A rate adjustment
using unused rate adjustment authority may not result in an increase
for the class that exceeds the applicable annual limitation plus 2
percentage points.
(b) Type 1-B rate adjustments filed within 12 months of each other
may not apply more than 2 percentage points of unused rate authority to
any class.
(c) Unused rate adjustment authority in each class may be applied
to rate adjustments in the same class for up to 5 years.
Sec. 3010.5 Type 2 rate adjustment--in general.
A negotiated service agreement rate adjustment entails a rate
adjustment negotiated between the Postal Service and a customer or
group of customers.
Sec. 3010.6 Type 3 adjustment--in general.
(a) A Type 3 rate adjustment is a request for an exigency-based
rate adjustment. It is authorized only when justified by exceptional or
extraordinary circumstances.
(b) An exigency-based rate adjustment is not subject to the
inflation-based limitation or the restrictions on the use of unused
rate adjustment authority, and does not implement a negotiated service
agreement.
(c) A Postal Service request for a Type 3 rate adjustment is
subject to public participation and Commission review within 90 days.
Sec. 3010.7 Schedule of regular rate changes.
(a) The Postal Service shall maintain on file with the Commission a
Schedule for Regular and Predictable Rate Changes. The Commission shall
display the Schedule for Regular and Predictable Rate Changes on the
Commission Web site, http:// www.prc.gov.
(b) The Schedule for Regular and Predictable Rate Changes shall
provide mailers with estimated implementation dates for future Type 1-A
rate changes for each separate class of mail, should such changes be
necessary and appropriate. Rate changes will be scheduled at specified
regular intervals.
(c) The Schedule for Regular and Predictable Rate Changes shall
provide an explanation that will allow mailers to predict with
reasonable accuracy the amounts of future scheduled rate changes.
(d) The initial Schedule for Regular and Predictable Rate Changes
must be filed within 90 days of the effective date of this rule. The
Postal Service should balance its financial and operational needs with
the convenience of mailers of each class of mail in developing the
schedule.
(e) Whenever the Postal Service deems it appropriate to change the
Schedule for Regular and Predictable Rate Changes, it shall file a
revised schedule and explanation with the Commission.
(f) The Postal Service may, for good cause shown, vary rate
adjustments from those estimated by the Schedule
[[Page 63693]]
for Regular and Predictable Rate Changes. In such case, the Postal
Service should provide a succinct explanation for such variation with
its Type 1-A filing. No explanation is required for changes involving
smaller than predicted rate adjustments.
Subpart B--Rules for Rate Adjustments for Rates of General
Applicability (Type 1-A and 1-B Rate Adjustments)
Sec. 3010.10 Procedures.
(a) The Postal Service, in every instance in which it determines to
exercise its statutory authority to make a Type 1-A or Type 1-B rate
adjustment for a market dominant postal product shall:
(1) Provide public notice in a manner reasonably designed to inform
the mailing community and the general public that it intends to change
rates not later than 45 days prior to the intended implementation date;
and
(2) Transmit a notice of rate adjustment to the Commission no later
than 45 days prior to the intended implementation date.
(b) The Postal Service is encouraged to provide public notice and
to submit its notice of rate adjustment as far in advance of the 45-day
minimum as practicable, especially in instances where the intended
price changes include classification changes or operations changes
likely to have material impact on mailers.
Sec. 3010.11 Limit on size of rate increases.
(a) Rate increases for each class of market dominant products in
any 12-month period are limited.
(b) Rates of general applicability are subject to an inflation-
based limitation computed using CPI-U values as detailed in Sec.
3010.12.
(c) An exception to the inflation-based limitation allows a limited
annual recapture of unused rate authority. The amount of unused rate
authority is measured separately for each class of mail.
(d) In any 12-month period the inflation-based limitation combined
with the allowable recapture of unused rate authority equals the price
cap applicable to each class of mail.
Sec. 3010.12 Source of CPI-U data for purposes of annual limitation.
The monthly CPI-U values needed for the calculation of the annual
limitation under this part shall be obtained from the Bureau of Labor
Statistics (BLS) Consumer Price Index--All Urban Consumers, U.S. All
Items, Not Seasonally Adjusted, Base Period 1982-84 = 100. The current
Series ID for the index is ``CUUR0000SA0.''
Sec. 3010.13 Proceedings for Type 1-A and Type 1-B rate adjustment
filings.
(a) The Commission will establish a docket for each rate adjustment
filing, promptly publish notice of the filing in the Federal Register,
and post the filing on its Web site. The notice shall include:
(1) The general nature of the proceeding;
(2) A reference to legal authority to which the proceeding is to be
conducted;
(3) A concise description of the planned for changes in rates,
fees, and the Mail Classification Schedule;
(4) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(5) A period of 20 days from the date of the filing for public
comment; and
(6) Such other information as the Commission deems appropriate.
(b) Public comments should focus primarily on whether planned rate
adjustments comply with the following mandatory requirements of 39
U.S.C. chapter 36, subchapter 1:
(1) Whether the planned rate adjustments measured using the formula
established in Sec. 3010.23(b) are at or below the annual limitation
established in Sec. 3010.11; and
(2) Whether the planned rate adjustments measured using the formula
established in Sec. 3010.23(b) are at or below the limitations
established in Sec. 3010.28.
(c) Within 14 days of the conclusion of the public comment period
the Commission will determine, at a minimum, whether the planned rate
adjustments are consistent with the annual limitation set forth in rule
3010.11; the limitations set forth in rule 3010.28; and 39 U.S.C. 3626,
3627, and 3629, and issue an order announcing its findings.
(d) If the planned rate adjustments are found consistent with
applicable law by the Commission, they may take effect pursuant to
appropriate action by the Governors.
(e) If planned rate adjustments are found inconsistent with
applicable law by the Commission, the Postal Service will submit an
amended notice of rate adjustment and describe the modifications to its
planned rate adjustments that will bring its rate adjustments into
compliance. An amended notice of rate adjustment shall be accompanied
by sufficient explanatory information to show that all deficiencies
identified by the Commission have been corrected.
(f) The Commission will post any amended notice of rate adjustment
filing on its Web site and allow a period of 10 days from the date of
the filing for public comment. Comments in the amended notice of rate
adjustment should address the subjects identified in rule 3010.13(b).
(g) The Commission will review any amended notice of rate
adjustment together with any comments filed for compliance and within
14 days issue an order announcing its findings.
(h) If the planned rate adjustments as amended are found to be
consistent with applicable law, they may take effect pursuant to
appropriate action by the Governors. However, no rate shall take effect
until 45 days after the Postal Service files a notice of rate
adjustment specifying that rate.
(i) If the planned rate adjustments in an amended notice of rate
adjustment are found to be inconsistent with applicable law, the
Commission shall explain the basis of its determination and suggest an
appropriate remedy.
(j) For purposes of subsequent Commission proceedings, findings
that a planned Type 1 rate adjustment is in compliance with the annual
limitation set forth in Sec. 3010.11; the limitations set forth in
Sec. 3010.28; and 39 U.S.C. 3626, 3627, and 3629 are decided on the
merits. A Commission finding that a planned Type 1 rate adjustment does
not contravene other policies of 39 U.S.C. chapter 36, subchapter 1 is
provisional and subject to subsequent review.
Sec. 3010.14 Contents of notice of rate adjustment.
(a) General. The Postal Service notice of rate adjustment must
include the following information:
(1) A schedule of the proposed rates;
(2) The planned effective date(s) of the proposed rates;
(3) A representation or evidence that public notice of the planned
changes has been issued or will be issued at least 45 days before the
effective date(s) for the proposed new rates; and
(4) The identity of a responsible Postal Service official who will
be available to provide prompt responses to requests for clarification
from the Commission.
(b) Supporting technical information and justifications. The notice
of rate adjustment shall be accompanied by:
(1) The amount of the applicable change in CPI-U calculated as
required by Sec. 3010.21 or Sec. 3010.22, as appropriate. This
information must be supported by workpapers in which all calculations
are shown, and all input values including all relevant CPI-U
[[Page 63694]]
values are listed with citations to the original sources;
(2) A schedule showing unused rate authority available for each
class of mail displayed by class and available amount for each of the
preceding 5 years. This information must be supported by workpapers in
which all calculations are shown;
(3) The percentage change in rates for each class of mail
calculated as required by Sec. 3010.23. This information must be
supported by workpapers in which all calculations are shown, and all
input values including current rates, new rates, and billing
determinants are listed with citations to the original sources;
(4) The amount of new unused rate authority, if any, that will be
generated by the rate adjustment calculated as required by Sec.
3010.26. All calculations are to be shown with citations to the
original sources. If new unused rate authority will be generated for a
class of mail that is not expected to cover its attributable costs, the
Postal Service must provide the rationale underlying this rate
adjustment;
(5) A schedule of the workshare discounts included in the proposed
rates, and a companion schedule listing the avoided costs that underlie
each such discount. The avoided cost figures must be developed from the
most recent PRC Annual Compliance Report. This information must be
supported by workpapers in which all calculations are shown, and all
input values are listed with citations to the original sources;
(6) Separate justification for all proposed workshare discounts
that exceed avoided costs. Each such justification shall reference
applicable reasons identified in 39 U.S.C. 3622(e)(2) or (3). The
Postal Service shall also identify and explain discounts that are set
substantially below avoided costs and explain any relationship between
discounts that are above and those that are below avoided costs;
(7) A discussion that demonstrates how the planned rate adjustments
are designed to help achieve the objectives listed in 39 U.S.C. 3622(b)
and properly take into account the factors listed in 39 U.S.C. 3622(c);
(8) A discussion that demonstrates the planned rate adjustments are
consistent with 39 U.S.C. 3626, 3627, and 3629;
(9) A schedule identifying every change to the Mail Classification
Schedule that will be necessary to implement the planned rate
adjustments; and
(10) Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
requested increases are consistent with applicable statutory policies.
(c) New workshare discounts. Whenever the Postal Service
establishes a new workshare discount rate, it must include with its
filing:
(1) A statement explaining its reasons for establishing the
discount;
(2) All data, economic analyses, and other information relied on to
justify the discount; and
(3) A certification based on comprehensive, competent analyses that
the discount will not adversely affect either the rates or the service
levels of users of postal services who do not take advantage of the
discount.
(d) Information required only when Type 1-B rate adjustments are
proposed. The notice of rate adjustment shall identify for each
affected class how much existing unused rate authority is used in the
proposed rates calculated as required by Sec. 3010.27. All
calculations are to be shown, including citations to the original
sources.
Subpart C--Rules for Applying the Price Cap
Sec. 3010.20 Test for compliance with the annual limitation.
The appropriate annual limitation shall be applied to a measure of
the rates paid by mail sent in each class for which rate adjustments
are to be made to determine whether planned rates are consistent with
the annual limitation.
Sec. 3010.21 Calculation of annual limitation.
(a) The calculation of an annual limitation involves three steps.
First, a simple average CPI-U index is calculated by summing the most
recently available 12 monthly CPI-U values from the date the Postal
Service files its notice of rate adjustment and dividing the sum by 12
(Recent Average). Then, a second simple average CPI-U index is
similarly calculated by summing the 12 monthly CPI-U values immediately
preceding the Recent Average and dividing the sum by 12 (Base Average).
Finally, the annual limitation is calculated by dividing the Recent
Average by the Base Average and subtracting 1 from the quotient. The
result is expressed as a percentage, rounded to one decimal place.
(b) The formula for calculating an annual limitation is as follows:
Annual Limitation = (Recent Average/Base Average)-1.
Sec. 3010.22 Calculation of less than annual limitation.
(a) If a notice of rate adjustment is filed less than 1 year after
the last Type 1-A or Type 1-B notice of rate adjustment applicable to
an affected class of mail, then the annual limitation will recognize
the rate increases that have occurred during the preceding 12 months.
When the effects of those increases are removed, the remaining partial
year limitation is the applicable restriction on rate increases.
(b) The applicable partial year limitation is calculated in two
steps. First, a simple average CPI-U index is calculated by summing the
12 most recently available monthly CPI-U values from the date the
Postal Service files its notice of rate adjustment and dividing the sum
by 12 (Recent Average). The partial year limitation is then calculated
by dividing the Recent Average by the Recent Average from the most
recent previous notice of rate adjustment (Previous Recent Average)
applicable to each affected class of mail and subtracting 1 from the
quotient. The result is expressed as a percentage, rounded to one
decimal place.
(c) The formula for calculating the partial year limitation for a
notice of rate adjustment filed less than 1 year after the last notice
is as follows: Partial Year Limitation = (Recent Average/Previous
Recent Average)-1.
Sec. 3010.23 Calculation of percentage change in rates.
(a) The term rate cell as applied in the test for compliance with
the annual limitation shall apply to each and every separate rate
identified in any applicable notice of rate adjustment for rates of
general applicability. Thus, seasonal or temporary rates, for example,
shall be identified and treated as rate cells separate and distinct
from the corresponding non-seasonal or permanent rates.
(b) For each class of mail, the percentage change in rates is
calculated in three steps. First, the volume of each rate cell in the
class is multiplied by the planned rate for the respective cell and the
resulting products are summed. Then, the same set of rate cell volumes
are multiplied by the corresponding current rate for each cell and the
resulting products are summed. Finally, the percentage change in rates
is calculated by dividing the results of the first step by the results
of the second step and subtracting 1 from the quotient. The result is
expressed as a percentage.
(c) The formula for calculating the percentage change in rates for
a class described in paragraph (b) of this section is as follows:
Percentage change in rates =
[[Page 63695]]
[GRAPHIC] [TIFF OMITTED] TR09NO07.000
Where,
N = number of rate cells in the class
i = denotes a rate cell (i = 1, 2, ..., N)
Ri,n = planned rate of rate cell i
Ri,c = current rate of rate cell i
Vi = volume of rate cell i
(d) The volumes for each rate cell shall be obtained from the most
recent available 12 months of Postal Service billing determinants. The
Postal Service shall make reasonable adjustments to the billing
determinants to account for the effects of classification changes such
as the introduction, deletion, or redefinition of rate cells. Whenever
possible, adjustments shall be based on known mail characteristics. The
Postal Service shall identify and explain all adjustments. All
information and calculations relied upon to develop the adjustments
shall be provided together with an explanation of why the adjustments
are appropriate.
Sec. 3010.24 Treatment of volume associated with negotiated service
agreements.
(a) Mail volumes sent at rates under negotiated service agreements
are to be included in the calculation of percentage change in rates as
though they paid the appropriate rates of general applicability. Where
it is impractical to identify the rates of general applicability (e.g.,
because unique rate categories are created for a mailer), the volumes
associated with the mail sent under the terms of the negotiated service
agreement shall be excluded from the calculation of percentage change
in rates.
(b) The Postal Service shall identify and explain all assumptions
it makes with respect to the treatment of negotiated service agreements
in the calculation of the percentage change in rates and provide the
rationale for its assumptions.
Sec. 3010.25 Limitation on unused rate adjustment authority rate
adjustments.
Unused rate adjustment authority rate adjustments may only be
applied together with inflation-based limitation rate adjustments or
when inflation-based limitation rate adjustments are not possible.
Unused rate adjustment authority rate adjustments may not be used in
lieu of an inflation-based limitation rate adjustment.
Sec. 3010.26 Calculation of unused rate adjustment authority.
(a) Unused rate adjustment authority accrues during the entire
period between notices of Type 1 rate adjustments.
(b) When notices of Type 1 rate adjustments are filed 12 months
apart or less, either the annual or partial year limitation (developed
pursuant to Sec. 3010.21(a) or Sec. 3010.22(b) respectively) is used
to measure the accrued unused rate authority. In either circumstance,
the new unused rate authority for each class is equal to the difference
between the maximum allowable percentage change in rates under the
applicable rate limitation and the actual percentage change in rates
for that class.
(c) When a notice of rate adjustment is filed more than 12 months
after the previous notice of rate adjustment, unused rate authority is
computed in three steps:
(1) The unused rate authority for the 12 months represented by the
annual limitation is computed as described in paragraph (b) of this
section;
(2) The additional unused rate authority accrued is measured by
dividing the Base Average applicable to the instant notice of rate
adjustment (as developed pursuant to Sec. 3010.21(a)) by the Recent
Average utilized in the previous notice of rate adjustment (as
developed pursuant to Sec. 3010.21(a)) and subtracting 1 from the
quotient. The result is expressed as a percentage; and
(3) The results from step 1 and step 2 are added together.
(d) Unused rate adjustment authority lapses 5 years after the date
of filing of the notice of rate adjustment leading to its computation.
Sec. 3010.27 Application of unused rate adjustment authority.
When the percentage change in rates for a class is greater than the
applicable annual limitation, then the difference between the
percentage change in rates for the class and the price cap shall be
subtracted from the existing unused rate authority for the class, using
a first-in, first-out (FIFO) method, beginning 5 years before the
instant notice.
Sec. 3010.28 Maximum size of unused rate adjustment authority rate
adjustments.
Unused rate adjustment authority exercised in notices of rate
adjustments for any class in any 12-month period may not exceed the
applicable limitations described in Sec. Sec. 3010.21 or 3010.22 plus
the lesser of:
(a) 2 percent; or
(b) The sum of any unused rate adjustment authority for that class.
Sec. 3010.29 Transition rule.
If the Postal Service initial exercise of its authority to file a
Type 1-A notice of rate adjustment is preceded by a transitional rate
case filing under 39 U.S.C. 3622(f):
(a) The annual limitation as calculated in Sec. 3010.21 is
applicable if the notice of rate adjustment is 12 months or more after
the date of the Decision of the Governors approving rate changes
associated with the transitional filing; and
(b) The annual limitation as calculated in Sec. 3010.22 is
applicable if the notice of rate adjustment is 12 months or more after
the date of the Decision of the Governors approving rate changes
associated with the transitional filing. In such circumstances, the
date of the Decision of the Governors approving rate changes associated
with the transitional filing is the most recent previous notice of rate
adjustment.
Subpart D--Rules for Rate Adjustments for Negotiated Service
Agreements (Type 2 Rate Adjustments)
Sec. 3010.40 Negotiated service agreements.
(a) In administering this subpart, it shall be the objective of the
Commission to allow implementation of negotiated service agreements
that satisfy the statutory requirements of 39 U.S.C. 3622(c)(10).
Negotiated service agreements must either:
(1) Improve the net financial position of the Postal Service (39
U.S.C. 3622(c)(10)(A)(i)); or
(2) Enhance the performance of operational functions (39 U.S.C.
3622(c)(10)(A)(ii)).
(b) Negotiated service agreements may not cause unreasonable harm
to the marketplace (39 U.S.C. 3622(c)(10)(B)).
(c) Negotiated service agreements must be available on public and
reasonable terms to similarly situated mailers.
Sec. 3010.41 Procedures.
The Postal Service, in every instance in which it determines to
exercise its statutory authority to make a Type 2 rate adjustment for a
market dominant postal product shall provide public notice in a manner
reasonably designed to inform the mailing community and the general
public that it intends to change rates not later than 45 days prior to
the intended implementation date; and transmit a notice of agreement to
the Commission no later than 45 days prior to the intended
implementation date.
Sec. 3010.42 Contents of notice of agreement in support of a
negotiated service agreement.
(a) Whenever the Postal Service proposes to establish or change
rates or fees and/or the Mail Classification
[[Page 63696]]
Schedule based on a negotiated service agreement, the Postal Service
shall file with the Commission a notice of agreement that shall include
at a minimum:
(1) A copy of the negotiated service agreement;
(2) The planned effective date(s) of the proposed rates;
(3) A representation or evidence that public notice of the planned
changes has been issued or will be issued at least 45 days before the
effective date(s) for the proposed new rates; and
(4) The identity of a responsible Postal Service official who will
be available to provide prompt responses to requests for clarification
from the Commission.
(b) A statement identifying all parties to the agreement and a
description clearly explaining the operative components of the
agreement.
(c) Details regarding the expected improvements in the net
financial position or operations of the Postal Service. The projection
of change in net financial position as a result of the agreement shall
include for each year of the agreement:
(1) The estimated mailer-specific costs, volumes, and revenues of
the Postal Service absent the implementation of the negotiated service
agreement;
(2) The estimated mailer-specific costs, volumes, and revenues of
the Postal Service which result from implementation of the negotiated
service agreement;
(3) An analysis of the effects of the negotiated service agreement
on the contribution to institutional costs from mailers not party to
the agreement; and
(4) If mailer-specific costs are not available, the source and
derivation of the costs that are used shall be provided, together with
a discussion of the currency and reliability of those costs and their
suitability as a proxy for the mailer-specific costs.
(d) An identification of each component of the agreement expected
to enhance the performance of mail preparation, processing,
transportation or other functions in each year of the agreement, and a
discussion of the nature and expected impact of each such enhancement.
(e) Details regarding any and all actions (performed or to be
performed) to assure that the agreement will not result in unreasonable
harm to the marketplace.
(f) Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
requested changes are consistent with applicable statutory policies.
Sec. 3010.43 Data collection plan.
The Postal Service shall include with any notice of agreement a
detailed plan for providing data or information on actual experience
under the agreement sufficient to allow evaluation of whether the
negotiated service agreement operates in compliance with 39 U.S.C.
3622(c)(10). The data report is due 60 days after each anniversary date
of implementation and shall include, at a minimum, the following
information for each 12-month period the agreement has been in effect:
(a) The change in net financial position as a result of the
agreement. This calculation shall include for each year of the
agreement:
(1) The actual mailer-specific costs, volumes, and revenues of the
Postal Service;
(2) An analysis of the effects of the negotiated service agreement
on the net overall contribution to the institutional costs of the
Postal Service; and
(3) If mailer-specific costs are not available, the source and
derivation of the costs that are used shall be provided, including a
discussion of the currency and reliability of those costs, and their
suitability as a proxy for the mailer-specific costs.
(b) A discussion of the changes in operations of the Postal Service
that have resulted from the agreement. This shall include, for each
year of the agreement, identification of each component of the
agreement known to enhance the performance of mail preparation,
processing, transportation, or other functions in each year of the
agreement.
(c) An analysis of the impact of the negotiated service agreement
on the marketplace, including a discussion of any and all actions taken
to protect the marketplace from unreasonable harm.
Sec. 3010.44 Proceedings for Type 2 rate adjustments
(a) The Commission will establish a docket for each Type 2 rate
adjustment filing, promptly publish notice of the filing in the Federal
Register, and post the filing on its Web site. The notice shall
include:
(1) The general nature of the proceeding;
(2) A reference to legal authority to which the proceeding is to be
conducted;
(3) A concise description of the planned changes in rates, fees,
and the Mail Classification Schedule;
(4) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(5) A period of 10 days from the date of the filing for public
comment; and
(6) Such other information as the Commission deems appropriate.
(b) The Commission shall review the planned Type 2 rate adjustments
and the comments thereon, and issue an order announcing its findings.
So long as such adjustments are not inconsistent with 39 U.S.C. 3622,
they may take effect pursuant to appropriate action by the Governors.
However, no rate shall take effect until 45 days after the Postal
Service files a notice of rate adjustment specifying that rate.
(c) Commission findings that a planned Type 2 rate adjustment is
not inconsistent with 39 U.S.C.3622 are provisional and subject to
subsequent review.
Subpart E--Rules for Rate Adjustments in Exigent Circumstances
(Type 3 Rate Adjustments)
Sec. 3010.60 Applicability.
The Postal Service may request to increase rates for market
dominant products in excess of the annual limitation on the percentage
changes in rates described in Sec. 3010.11(d) due to extraordinary or
exceptional circumstances. Such requests will be known as exigent
requests.
Sec. 3010.61 Contents of exigent requests.
(a) Each exigent request shall include the following:
(1) A schedule of the proposed rates;
(2) Calculations quantifying the increase for each affected product
and class;
(3) A full discussion of the extraordinary or exceptional
circumstance(s) giving rise to the request, and a complete explanation
of how both the requested overall increase, and the specific rate
increases requested, relate to those circumstances;
(4) A full discussion of why the requested increases are necessary
to enable the Postal Service, under best practices of honest, efficient
and economical management, to maintain and continue the development of
postal services of the kind and quality adapted to the needs of the
United States;
(5) A full discussion of why the requested increases are reasonable
and equitable as among types of users of market dominant products;
(6) An explanation of when, or under what circumstances, the Postal
Service expects to be able to rescind the exigent increases in whole or
in part;
(7) An analysis of the circumstances giving rise to the request,
which should,
[[Page 63697]]
if applicable, include a discussion of whether the circumstances were
foreseeable or could have been avoided by reasonable prior action; and
(8) Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
requested increases are consistent with applicable statutory policies.
(b) The Postal Service shall identify one or more knowledgeable
Postal Service official(s) who will be available to provide prompt
responses to Commission requests for clarification related to each
topic specified in Sec. 3010.61(a).
Sec. 3010.62 Supplemental information.
The Commission may require the Postal Service to provide
clarification of its request or to provide information in addition to
that called for by Sec. 3010.61 in order to gain a better
understanding of the circumstances leading to the request or the
justification for the specific rate increases requested.
Sec. 3010.63 Treatment of unused rate adjustment authority.
(a) Each exigent request will identify the unused rate authority
for each class of mail as of the date of the request.
(b) Pursuant to an exigent request, increases may use accumulated
unused rate adjustment authority in amounts greater than the limitation
described in Sec. 3010.28.
(c) Exigent increases will exhaust all unused rate adjustment
authority for each class of mail before imposing additional rate
increases in excess of the price cap for any class of mail.
Sec. 3010.64 Expeditious treatment of exigent requests.
Requests under this subpart seek rate relief required by
extraordinary or exceptional circumstances and will be treated with
expedition at every stage. It is Commission policy to provide
appropriate relief as quickly as possible consistent with statutory
requirements and procedural fairness.
Sec. 3010.65 Special procedures applicable to exigent requests.
(a) The Commission will establish a docket for each request for
exigent rate adjustments, promptly publish notice of the request in the
Federal Register, and post the filing on its Web site. The notice shall
include:
(1) The general nature of the proceeding;
(2) A reference to legal authority to which the proceeding is to be
conducted;
(3) A concise description of the proposals for changes in rates,
fees, and the Mail Classification Schedule;
(4) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(5) A specified period for public comment; and
(6) Such other information as the Commission deems appropriate.
(b) The Commission will hold a public hearing on the Postal Service
request. During the public hearing, responsible Postal Service
officials will appear and respond under oath to questions from the
Commissioners or their designees addressing previously identified
aspects of the Postal Service's request and the supporting information
provided in response to the topics specified in Sec. 3010.61(a).
(c) Interested persons will be given an opportunity to submit to
the Commission suggested relevant questions that might be posed during
the public hearing. Such questions, and any explanatory materials
submitted to clarify the purpose of the questions, should be filed in
accordance with Sec. 3001.9, and will become part of the
administrative record of the proceeding.
(d) The timing and length of the public hearing will depend on the
nature of the circumstances giving rise to the request and the clarity
and completeness of the supporting materials provided with the request.
(e) If the Postal Service is unable to provide adequate
explanations during the public hearing, supplementary written or oral
responses may be required.
(f) Following the conclusion of the public hearings and submission
of any supplementary materials interested persons will be given the
opportunity to submit written comments on:
(1) The sufficiency of the justification for an exigent rate
increase;
(2) The adequacy of the justification for increases in the amounts
requested by the Postal Service; and
(3) Whether the specific rate adjustments requested are reasonable
and equitable.
(g) An opportunity to submit written reply comments will be given
to the Postal Service and other interested persons.
Sec. 3010.66 Deadline for Commission decision.
The Commission will act expeditiously on the Postal Service
request, taking into account all written comments. In every instance a
Commission decision will be issued within 90 days of a Postal Service
request for an exigent rate increase.
0
4. Add part 3015 to read as follows:
PART 3015--REGULATION OF RATES FOR COMPETITIVE PRODUCTS
Sec.
3015.1 Scope.
3015.2 Changes in rates of general applicability.
3015.3 Decrease in rates of general applicability.
3015.4 Change in class of general applicability.
3015.5 Rate or class not of general applicability.
3015.6 Sufficiency of information.
3015.7 Standards for compliance.
Authority: 39 U.S.C. 503; 3633.
Sec. 3015.1 Scope.
Rules in this part are applicable to competitive products.
Sec. 3015.2 Changes in rates of general applicability.
(a) When the Postal Service determines to change a rate or rates of
general applicability, it shall file notice of the change with the
Commission no later than the date of publication of the decision in the
Federal Register concerning such change, but at least 30 days before
the effective date of the change.
(b) The notice filed with the Commission shall include an
explanation and justification for the change, the effective date, and a
schedule of the changed rates.
Sec. 3015.3 Decrease in rates of general applicability.
(a) When the Postal Service determines to change a rate or rates of
general applicability for any competitive product that results in a
decrease in the average rate of that product, it shall file notice of
the change with the Commission no later than the date of publication of
the decision in the Federal Register concerning such change, but at
least 30 days before the effective date of the change.
(b) The notice filed with the Commission shall include an
explanation and justification for the change, the effective date, and a
schedule of the changed rates.
(c) In addition to the notice, the Postal Service shall file with
the Commission:
(1) Sufficient revenue and cost data for the 12-month period
following the effective date of the rate to demonstrate that each
affected competitive product will be in compliance with 39 U.S.C.
3633(a)(2); and
(2) A certified statement by a representative of the Postal Service
attesting to the accuracy of the data submitted, and explaining why,
following the change, competitive
[[Page 63698]]
products in total will be in compliance with 39 U.S.C. 3633(a)(1) and
(3).
Sec. 3015.4 Change in class of general applicability.
(a) In the case of a change in class of general applicability, the
Postal Service shall file notice of the change with the Commission no
later than the date of publication of the decision in the Federal
Register, but at least 30 days before the effective date of the
increase.
(b) The notice filed with the Commission shall include an
explanation and justification for the change, the effective date, and
the record of proceedings regarding such decision.
Sec. 3015.5 Rate or class not of general applicability.
(a) When the Postal Service determines to add or change a rate or
class not of general applicability, it shall file notice of its
decision with the Commission at least 15 days before the effective date
of the change.
(b) The notice filed with the Commission shall include an
explanation and justification for the change, the effective date, the
rate and class decision, and the record of proceedings regarding such
decision.
(c) In addition to the notice, the Postal Service shall file with
the Commission:
(1) Sufficient revenue and cost data for the 12-month period
following the effective date of the rate or class to demonstrate that
each affected competitive product will be in compliance with 39 U.S.C.
3633(a)(2); and
(2) A certified statement by a representative of the Postal Service
attesting to the accuracy of the data submitted, and explaining why,
following the change, competitive products in total will be in
compliance with 39 U.S.C. 3633(a)(1) and (3).
Sec. 3015.6 Sufficiency of information.
If, after review of the information submitted pursuant to this
part, the Commission determines additional information is necessary to
enable it to evaluate whether competitive products will be in
compliance with 39 U.S.C. 3633(a), it may, in its discretion, require
the Postal Service to provide additional information as deemed
necessary.
Sec. 3015.7 Standards for compliance.
For purposes of determining competitive products' compliance with
39 U.S.C. 3633, the Commission will apply the following standards:
(a) Incremental costs will be used to test for cross-subsidies by
market dominant products of competitive products. To the extent that
incremental cost data are unavailable, the Commission will use
competitive products' attributable costs supplemented to include
causally related, group-specific costs to test for cross-subsidies.
(b) Each competitive product must recover its attributable costs as
defined in 39 U.S.C. 3631(b).
(c) Annually, on a fiscal year basis, the appropriate share of
institutional costs to be recovered from competitive products
collectively is, at a minimum, 5.5 percent of the Postal Service's
total institutional costs.
0
5. Add part 3020 to read as follows:
PART 3020--PRODUCT LISTS
Subpart A--Mail Classification Schedule
Sec.
3020.1 Applicability.
3020.10 General.
3020.11 Initial Mail Classification Schedule.
3020.12 Publication of the Mail Classification Schedule.
3020.13 Contents of the Mail Classification Schedule.
3020.14 Notice of change.
Appendix A to Subpart A of Part 3020--Mail Classification Schedule
Subpart B--Requests Initiated by the Postal Service To Modify the
Product Lists Described Within the Mail Classification Schedule
3020.30 General.
3020.31 Contents of a request.
3020.32 Supporting justification.
3020.33 Docket and notice.
3020.34 Review.
3020.35 Further proceedings.
Subpart C--Requests Initiated by Users of Mail To Modify the Product
Lists Described Within the Mail Classification Schedule
3020.50 General.
3020.51 Contents of a request.
3020.52 Supporting justification.
3020.53 Docket and notice.
3020.54 Postal Service notice and reply.
3020.55 Review.
3020.56 Further proceedings.
Subpart D--Proposal of the Commission To Modify the Product Lists
Described Within the Mail Classification Schedule
3020.70 General.
3020.71 Contents of a proposal.
3020.72 Supporting justification.
3020.73 Docket and notice.
3020.74 Postal Service notice and reply.
3020.75 Review.
3020.76 Further proceedings.
Subpart E--Requests Initiated by the Postal Service To Change the Mail
Classification Schedule
3020.90 General.
3020.91 Modifications.
3020.92 Public input.
3020.93 Implementation.
Subpart F--Size and Weight Limitations for Mail Matter
3020.110 General.
3020.111 Limitations applicable to market dominant mail matter.
3020.112 Limitations applicable to competitive mail matter.
Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.
Subpart A--Mail Classification Schedule
Sec. 3020.1 Applicability.
(a) The rules in this part provide for establishing product lists.
The product lists shall categorize postal products as either market
dominant or competitive. As established, the market dominant and
competitive product lists will be specified in the Mail Classification
Schedule and shall be consistent with the market dominant products
identified in 39 U.S.C. 3621(a) and the competitive products identified
in 39 U.S.C. 3631(a).
(b) Once established, the Mail Classification Schedule may be
modified subject to the procedures specified in this part.
Sec. 3020.10 General.
The Mail Classification Schedule shall consist of two parts. Part
One shall specify the list of market dominant products and include the
explanatory information specified in Sec. 3020.13(a). Part Two shall
specify the list of competitive products and include the explanatory
information specified in Sec. 3020.13(b).
Sec. 3020.11 Initial Mail Classification Schedule.
The initial Mail Classification Schedule shall specify the market
dominant and competitive product lists. The Mail Classification
Schedule product lists shall reflect the market dominant and
competitive product lists identified in 39 U.S.C. 3621(a) and 39 U.S.C.
3631(a) respectively. The explanatory detailed descriptive information
specified in Sec. 3020.13(a) and Sec. 3020.13(b) shall be
incorporated by subsequent rulemaking.
Sec. 3020.12 Publication of the Mail Classification Schedule.
(a) The Mail Classification Schedule established in accordance with
subchapters I, II, and III of chapter 36 of title 39 of the United
States Code and this subpart shall appear as Appendix A to this
subpart.
(b) Availability of the Mail Classification Schedule. Copies of the
Mail Classification Schedule, both current and previous issues, are
available during regular business hours
[[Page 63699]]
for reference and public inspection at the Postal Regulatory
Commission's Reading Room located at 901 New York Avenue, NW., Suite
200, Washington, DC 20268-0001. The Mail Classification Schedule, both
current and previous issues, also is available on the Internet at
http://www.prc.gov.
Sec. 3020.13 Contents of the Mail Classification Schedule.
The Mail Classification Schedule shall provide:
(a) The list of market dominant products, including:
(1) The class of each market dominant product;
(2) The description of each market dominant product;
(3) A schedule listing for each market dominant product the current
rates and fees;
(4) Where applicable, the identification of a product as a special
classification within the meaning of 39 U.S.C. 3622(c)(10) for market
dominant products;
(5) Where applicable, the identification of a product as an
experimental product undergoing a market test; and
(6) Where applicable, the identification of a product as a non-
postal product.
(b) The list of competitive products, including:
(1) The description of each competitive product;
(2) A schedule listing for each competitive product of general
applicability the current rates and fees;
(3) The identification of each product not of general applicability
within the meaning of 39 U.S.C. 3632(b)(3) for competitive products;
(4) Where applicable, the identification of a product as an
experimental product undergoing a market test; and
(5) Where applicable, the identification of a product as a non-
postal product.
Sec. 3020.14 Notice of change.
Whenever the Postal Regulatory Commission modifies the list of
products in the market dominant category or the competitive category,
it shall cause notice of such change to be published in the Federal
Register. The notice shall:
(a) Include the current list of market dominant products and the
current list of competitive products appearing in the Mail
Classification Schedule;
(b) Indicate how and when the previous product lists have been
modified; and
(c) Describe other changes to the Mail Classification Schedule as
necessary.
Appendix A to Subpart A of Part 3020--Mail Classification Schedule
Table of Contents
Part A--Market Dominant Products
Sec.
1000 Market Dominant Product List
1001 Market Dominant Product Descriptions
1100 First-Class Mail
1105 Single-piece Letters/Postcards
1110 Bulk Letters/Postcards
1115 Flats
1120 Parcels
1125 Outbound Single-Piece First-Class Mail International
1130 Inbound Single-Piece First-Class Mail International
1200 Standard Mail (Regular and Nonprofit)
1205 High Density and Saturation Letters
1210 High Density and Saturation Flats/Parcels
1215 Carrier Route
1220 Letters
1225 Flats
1230 Non Flat-Machinables (NFMs)/Parcels
1300 Periodicals
1305 Within County Periodicals
1310 Outside County Periodicals
1400 Package Services
1405 Single-Piece Parcel Post
1410 Inbound Surface Parcel Post (at UPU rates)
1415 Bound Printed Matter Flats
1420 Bound Printer Matter Parcels
1425 Media Mail/Library Mail
1500 Special Services
1505 Ancillary Services
1505.1 Address Correction Service
1505.2 Applications and Mailing Permits
1505.3 Business Reply Mail
1505.4 Bulk Parcel Return Service
1505.5 Certified Mail
1505.6 Certificate of Mailing
1505.7 Collect on Delivery
1505.8 Delivery Confirmation
1505.9 Insurance
1505.10 Merchandise Return Service
1505.11 Parcel Airlift (PAL)
1505.12 Registered Mail
1505.13 Return Receipt
1505.14 Return Receipt for Merchandise
1505.15 Restricted Delivery
1505.16 Shipper-Paid Forwarding
1505.17 Signature Confirmation
1505.18 Special Handling
1505.19 Stamped Envelopes
1505.20 Stamped Cards
1505.21 Premium Stamped Stationery
1505.22 Premium Stamped Cards
1510 International Ancillary Services
1510.1 International Certificate of Mailing
1510.2 International Registered Mail
1510.3 International Return Receipt
1510.4 International Restricted Delivery
1515 Address List Services
1520 Caller Service
1525 Change-of-Address Credit Card Authentication
1530 Confirm
1535 International Reply Coupon Service
1540 International Business Reply Mail Service
1545 Money Orders
1550 Post Office Box Service
1555 Premium Forwarding Service (Experiment)
1600 Negotiated Service Agreement
1605 Discover Financial Services Negotiated Service Agreement
1610 Bank One Negotiated Service Agreement
1615 HSBC North America Holdings Inc. Negotiated Service
Agreement
1620 Bookspan Negotiated Service Agreement
Part B--Competitive Products
Sec.
2000 Competitive Product List
2001 Competitive Product Descriptions
2100 Express Mail
2105 Express Mail
2110 Outbound International Expedited Services
2115 Inbound International Expedited Services
2200 Priority Mail
2205 Priority Mail
2210 Outbound Priority Mail International
2215 Inbound Air Parcel Post
2300 Parcel Select
2400 Parcel Return Service
2500 International
2505 International Priority Airlift (IPA)
2510 International Surface Airlift (ISAL)
2515 International Direct Sacks--M-Bags
2520 Global Customized Shipping Services
2525 Inbound Surface Parcel Post (at non-UPU rates)
2530 International Money Transfer Service
2535 International Ancillary Services
2535.1 International Certificate of Mailing
2535.2 International Registered Mail
2535.3 International Return Receipt
2535.4 International Restricted Delivery
2535.5 International Insurance
2600 Negotiated Service Agreements
2605 Domestic
2610 Outbound International
Glossary of Terms and Conditions
Country Price Lists for International Mail
Part A--Market Dominant Products
1000 Market Dominant Product List
First-Class Mail
Single-piece Letters/Postcards
Bulk Letters/Postcards
Flats
Parcels
Outbound Single-Piece First-Class Mail International
Inbound Single-Piece First-Class Mail International
Standard Mail (Regular and Nonprofit)
High Density and Saturation Letters
High Density and Saturation Flats/Parcels
Carrier Route
Letters
Flats
Not Flat-Machinables (NFMs)/Parcels
Periodicals
Within County Periodicals
Outside County Periodicals
Package Services
Single-Piece Parcel Post
Inbound Surface Parcel Post (at UPU rates)
Bound Printed Matter Flats
Bound Printed Matter Parcels
Media Mail/Library Mail
[[Page 63700]]
Special Services
Ancillary Services
International Ancillary Services
Address List Services
Caller Service
Change-of-Address Credit Card Authentication
Confirm
International Reply Coupon Service
International Business Reply Mail Service
Money Orders
Post Office Box Service
Premium Forwarding Service (Experiment)
Negotiated Service Agreements
Discover Financial Services Negotiated Service Agreement
Bank One Negotiated Service Agreement
HSBC North America Holdings Inc. Negotiated Service Agreement
Bookspan Negotiated Service Agreement
1001 Market Dominant Product Descriptions
Sec.
1100 First-Class Mail [Reserved for Class Description]
1105 Single-Piece Letters/Postcards [Reserved for Product
Description]
1110 Bulk Letters/Postcards [Reserved for Product Description]
1115 Flats [Reserved for Product Description]
1120 Parcels [Reserved for Product Description]
1125 Outbound Single-Piece First-Class Mail International
[Reserved for Product Description]
1130 Inbound Single-Piece First-Class Mail International
[Reserved for Product Description]
1200 Standard Mail (Regular and Nonprofit) [Reserved for Class
Description]
1205 High Density and Saturation Letters [Reserved for Product
Description]
1210 High Density and Saturation Flats/Parcels [Reserved for
Product Description]
1215 Carrier Route [Reserved for Product Description]
1220 Letters [Reserved for Product Description]
1225 Flats [Reserved for Product Description]
1230 Not Flat-Machinables (NFMs)/Parcels [Reserved for Product
Description]
1300 Periodicals [Reserved for Class Description]
1305 Within County Periodicals [Reserved for Product
Description]
1310 Outside County Periodicals [Reserved for Product
Description]
1400 Package Services [Reserved for Class Description]
1405 Single-Piece Parcel Post [Reserved for Product Description]
1410 Inbound Surface Parcel Post (at UPU rates) [Reserved for
Product Description]
1415 Bound Printed Matter Flats [Reserved for Product
Description]
1420 Bound Printed Matter Parcels [Reserved for Product
Description]
1425 Media Mail/Library Mail [Reserved for Product Description]
1500 Special Services [Reserved for Class Description]
1505 Ancillary Services
1505.1 Address Correction Service [Reserved for Product
Description]
1505.2 Applications and Mailing Permits [Reserved for Product
Description]
1505.3 Business Reply Mail [Reserved for Product Description]
1505.4 Bulk Parcel Return Service [Reserved for Product
Description]
1505.5 Certified Mail [Reserved for Product Description]
1505.6 Certificate of Mailing [Reserved for Product Description]
1505.7 Collect on Delivery [Reserved for Product Description]
1505.8 Delivery Confirmation [Reserved for Product Description]
1505.9 Insurance [Reserved for Product Description]
1505.10 Merchandise Return Service [Reserved for Product
Description]
1505.11 Parcel Airlift (PAL) [Reserved for Product Description]
1505.12 Registered Mail [Reserved for Product Description]
1505.13 Return Receipt [Reserved for Product Description]
1505.14 Return Receipt for Merchandise [Reserved for Product
Description]
1505.15 Restricted Delivery [Reserved for Product Description]
1505.16 Shipper-Paid Forwarding [Reserved for Product
Description]
1505.17 Signature Confirmation [Reserved for Product
Description]
1505.18 Special Handling [Reserved for Product Description]
1505.19 Stamped Envelopes [Reserved for Product Description]
1505.20 Stamped Cards [Reserved for Product Description]
1505.21 Premium Stamped Stationery [Reserved for Product
Description]
1505.22 Premium Stamped Cards [Reserved for Product Description]
1510 International Ancillary Services
1510.1 International Certificate of Mailing [Reserved for
Product Description]
1510.2 International Registered Mail [Reserved for Product
Description]
1510.3 International Return Receipt [Reserved for Product
Description]
1510.4 International Restricted Delivery [Reserved for Product
Description]
1515 Address List Services [Reserved for Product Description]
1520 Caller Service [Reserved for Product Description]
1525 Change-of-Address Credit Card Authentication [Reserved for
Product Description]
1530 Confirm [Reserved for Product Description]
1535 International Reply Coupon Service [Reserved for Product
Description]
1540 International Business Reply Mail Service [Reserved for
Product Description]
1545 Money Orders [Reserved for Product Description]
1550 Post Office Box Service [Reserved for Product Description]
1555 Premium Forwarding Service (Experiment) [Reserved for
Product Description]
1600 Negotiated Service Agreements [Reserved for Class Description]
1605 Discover Financial Services Negotiated Service Agreement
[Reserved for Product Description]
1610 Bank One Negotiated Service Agreement [Reserved for Product
Description]
1615 HSBC North America Holdings Inc. Negotiated Service
Agreement [Reserved for Product Description]
1620 Bookspan Negotiated Service Agreement [Reserved for Product
Description]
Part B--Competitive Products
2000 Competitive Product List
Express Mail
Express Mail
Outbound International Expedited Services
Inbound International Expedited Services
Priority Mail
Priority Mail
Outbound Priority Mail International
Inbound Air Parcel Post
Parcel Select
Parcel Return Service
International
International Priority Airlift (IPA)
International Surface Airlift (ISAL)
International Direct Sacks-M-Bags
Global Customized Shipping Services
Inbound Surface Parcel Post (at non-UPU rates)
International Money Transfer Service
International Ancillary Services
Negotiated Service Agreements
Domestic
Outbound International
2001 Competitive Product Descriptions
Sec.
2100 Express Mail [Reserved for Group Description]
2105 Express Mail [Reserved for Product Description]
2110 Outbound International Expedited Services [Reserved for
Product Description]
2115 Inbound International Expedited Services
2200 Priority [Reserved for Product Description]
2205 Priority Mail [Reserved for Product Description]
2210 Outbound Priority Mail International [Reserved for Product
Description]
2215 Inbound Air Parcel Post [Reserved for Product Description]
2300 Parcel Select [Reserved for Group Description]
2400 Parcel Return Service [Reserved for Group Description]
2500 International [Reserved for Group Description]
2505 International Priority Airlift (IPA) [Reserved for Product
Description]
2510 International Surface Airlift (ISAL) [Reserved for Product
Description]
2515 International Direct Sacks--M-Bags
2520 Global Customized Shipping Services [Reserved for Product
Description]
2525 International Money Transfer Service [Reserved for Product
Description]
2530 Inbound Surface Parcel Post (at non-UPU rates) [Reserved
for Product Description]
[[Page 63701]]
2535 International Ancillary Services [Reserved for Product
Description]
2535.1 International Certificate of Mailing [Reserved for
Product Description]
2535.2 International Registered Mail [Reserved for Product
Description]
2535.3 International Return Receipt [Reserved for Product
Description]
2535.4 International Restricted Delivery [Reserved for Product
Description]
2535.5 International Insurance [Reserved for Product
Description]
2600 Negotiated Service Agreements [Reserved for Group
Description]
2605 Domestic [Reserved for Product Description]
2610 Outbound International [Reserved for Group Description]
Glossary of Terms and Conditions [Reserved]
Country Price Lists for International Mail [Reserved]
Subpart B--Requests Initiated by the Postal Service To Modify the
Product Lists Described Within the Mail Classification Schedule
Sec. 3020.30 General.
The Postal Service, by filing a request with the Commission, may
propose a modification to the market dominant product list or the
competitive product list appearing in the Mail Classification Schedule.
For purposes of this part, modification shall be defined as adding a
product to a list, removing a product from a list, or moving a product
from one list to the other list.
Sec. 3020.31 Contents of a request.
A request to modify the market dominant product list or the
competitive product list shall:
(a) Provide the name, and class if applicable, of each product that
is the subject of the request;
(b) Provide a copy of the Governor's decision supporting the
request, if any;
(c) Indicate whether the request proposes to add a product to the
market dominant list or the competitive list, remove a product from the
market dominant list or the competitive list, or transfer a product
from the market dominant list to the competitive list or from the
competitive list to the market dominant list;
(d) Indicate whether each product that is the subject of the
request is:
(1) A special classification within the meaning of 39 U.S.C.
3622(c)(10) for market dominant products;
(2) A product not of general applicability within the meaning of 39
U.S.C. 3632(b)(3) for competitive products; or
(3) A non-postal product.
(e) Provide all supporting justification upon which the Postal
Service proposes to rely; and
(f) Include a copy of the applicable sections of the Mail
Classification Schedule and the proposed changes therein in legislative
format.
Sec. 3020.32 Supporting justification.
Supporting justification shall be in the form of a statement from
one or more knowledgeable Postal Service official(s) who sponsors the
request and attests to the accuracy of the information contained within
the statement. The justification shall:
(a) Demonstrate why the change is in accordance with the policies
and the applicable criteria of chapter 36 of title 39 of the United
States Code;
(b) Explain why, as to market dominant products, the change is not
inconsistent with each requirement of 39 U.S.C. 3622(d), and that it
advances the objectives of 39 U.S.C. 3622(b), taking into account the
factors of 39 U.S.C. 3622(c);
(c) Explain why, as to competitive products, the addition,
deletion, or transfer will not result in the violation of any of the
standards of 39 U.S.C. 3633;
(d) Verify that the change does not classify as competitive a
product over which the Postal Service exercises sufficient market power
that it can, without risk of losing a significant level of business to
other firms offering similar products:
(1) Set the price of such product substantially above costs;
(2) Raise prices significantly;
(3) Decrease quality; or
(4) Decrease output.
(e) Explain whether or not each product that is the subject of the
request is covered by the postal monopoly as reserved to the Postal
Service under 18 U.S.C. 1696 subject to the exceptions set forth in 39
U.S.C. 601;
(f) Provide a description of the availability and nature of
enterprises in the private sector engaged in the delivery of the
product;
(g) Provide any information available on the views of those who use
the product on the appropriateness of the proposed modification;
(h) Provide a description of the likely impact of the proposed
modification on small business concerns; and
(i) Include such information and data, and such statements of
reasons and bases, as are necessary and appropriate to fully inform the
Commission of the nature, scope, significance, and impact of the
proposed modification.
Sec. 3020.33 Docket and notice.
The Commission will establish a docket for each request to modify
the market dominant list or the competitive product list, promptly
publish notice of the request in the Federal Register, and post the
filing on its Web site. The notice shall include:
(a) The general nature of the proceeding;
(b) A reference to legal authority to which the proceeding is to be
conducted;
(c) A concise description of the proposals for changes in the Mail
Classification Schedule;
(d) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(e) A specified period for public comment; and
(f) Such other information as the Commission deems appropriate.
Sec. 3020.34 Review.
The Commission shall review the request and responsive comments.
The Commission shall either:
(a) Approve the request to modify the market dominant and
competitive product lists;
(b) Institute further proceedings to consider all or part of the
request if it finds that there is substantial likelihood that the
modification is inconsistent with statutory policies or Commission
rules, and explain its reasons for not approving the request to modify
the market dominant and competitive product lists;
(c) Provide an opportunity for the Postal Service to modify its
request; or
(d) Direct other action as the Commission may consider appropriate.
Sec. 3020.35 Further proceedings.
If the Commission determines that further proceedings are
necessary, a conference shall be scheduled to consider the concerns
expressed by the Commission. Written statements commenting on the
Commission's concerns shall be requested, to be filed 7 days prior to
the conference. Upon conclusion of the conference, the Commission shall
promptly issue a ruling to:
(a) Provide for a period of discovery to obtain further
information;
(b) Schedule a hearing on the record for further consideration of
the request;
(c) Explain the reasons for not going forward with additional
proceedings and approve the request to modify the market dominant and
competitive product lists; or
(d) Direct other action as the Commission may consider appropriate.
[[Page 63702]]
Subpart C--Requests Initiated by Users of the Mail To Modify the
Product Lists Described Within the Mail Classification Schedule
Sec. 3020.50 General.
Users of the mail, by filing a request with the Commission, may
propose a modification to the market dominant product list or the
competitive product list appearing in the Mail Classification Schedule.
For purposes of this part, modification shall be defined as adding a
product to a list, removing a product from a list, or transferring a
product from one list to the other list.
Sec. 3020.51 Contents of a request.
A request to modify the market dominant product list or the
competitive product list shall:
(a) Provide the name, and class if applicable, of each product that
is the subject of the request;
(b) Indicate whether the request proposes to add a product to the
market dominant list or the competitive list, remove a product from the
market dominant list or the competitive list, or move a product from
the market dominant list to the competitive list or from the
competitive list to the market dominant list;
(c) Indicate whether each product that is the subject of the
request is:
(1) A special classification within the meaning of 39 U.S.C.
3622(c)(10) for market dominant products;
(2) A product not of general applicability within the meaning of 39
U.S.C. 3632(b) for competitive products; or
(3) A non-postal product.
(d) Provide all supporting justification upon which the proponent
of the request proposes to rely; and
(e) Include a copy of the applicable sections of the Mail
Classification Schedule and the proposed changes therein in legislative
format.
Sec. 3020.52 Supporting justification.
Supporting justification shall be in the form of a statement from a
knowledgeable proponent of the request who attests to the accuracy of
the information contained within the statement. The justification
shall:
(a) Demonstrate why the change is in accordance with the policies
and the applicable criteria of chapter 36 of 39 U.S.C.;
(b) Explain why, as to market dominant products, the change is not
inconsistent with each requirement of 39 U.S.C. 3622(d), and that it
advances the objectives of 39 U.S.C. 3622(b), taking into account the
factors of 39 U.S.C. 3622(c);
(c) Explain why, as to competitive products, the addition,
deletion, or transfer will not result in the violation of any of the
standards of 39 U.S.C. 3633.
(d) Verify that the change does not classify as competitive a
product over which the Postal Service exercises sufficient market power
that it can, without risk of losing a significant level of business to
other firms offering similar products:
(1) Set the price of such product substantially above costs;
(2) Raise prices significantly;
(3) Decrease quality; or
(4) Decrease output.
(e) Explain whether or not each product that is the subject of the
request is covered by the postal monopoly, as reserved to the Postal
Service under 18 U.S.C. 1696 subject to the exceptions set forth in 39
U.S.C. 601;
(f) Provide a description of the availability and nature of
enterprises in the private sector engaged in the delivery of the
product;
(g) Provide any information available on the views of those who use
the product on the appropriateness of the proposed modification;
(h) Provide a description of the likely impact of the proposed
modification on small business concerns; and
(i) Include such information and data, and such statements of
reasons and bases, as are necessary and appropriate to fully inform the
Commission of the nature, scope, significance, and impact of the
proposed modification.
Sec. 3020.53 Docket and notice.
The Commission will establish a docket for each request to modify
the market dominant list or the competitive product list, promptly
publish notice of the request in the Federal Register, and post the
filing on its Web site. The notice shall include:
(a) The general nature of the proceeding;
(b) A reference to legal authority to which the proceeding is to be
conducted;
(c) A concise description of the proposals for changes in the Mail
Classification Schedule;
(d) The identification of an Office of the Commission to represent
the interests of the general public in the docket;
(e) A specified period for public comment; and
(f) Such other information as the Commission deems appropriate.
Sec. 3020.54 Postal Service notice and reply.
The Secretary of the Commission shall forward to the Postal Service
a copy of the request. Within 28 days of the filing of the request, the
Postal Service shall provide its preliminary views in regard to the
request. The Postal Service may include suggestions for appropriate
Commission action in response to the request.
Sec. 3020.55 Review.
The Commission shall review the request, the Postal Service reply,
and any public comment to determine whether the proposed modification
to the market dominant and competitive product lists complies with
applicable statutory requirements and the Commission's rules, and
whether the proposed modification is consistent with the position of
the Postal Service as expressed in its reply. The Commission shall
either:
(a) Approve the request to modify the market dominant and
competitive product lists, but only to the extent the modification is
consistent with the position of the Postal Service;
(b) Reject the request;
(c) Institute further proceedings to consider the request to modify
the market dominant and competitive product lists; or
(d) Direct other action as the Commission may consider appropriate.
Sec. 3020.56 Further proceedings.
If the Commission determines that further proceedings are
necessary, a conference shall be scheduled to consider the merits of
going forward with the request. Upon conclusion of the conference, the
Commission shall promptly issue a ruling to:
(a) Provide for a period of discovery to obtain further
information;
(b) Schedule a hearing on the record for further consideration of
the request;
(c) Explain the reasons for not going forward with formal
proceedings; or
(d) Direct other action as the Commission may consider appropriate.
Subpart D--Proposal of the Commission To Modify the Product Lists
Described Within the Mail Classification Schedule
Sec. 3020.70 General.
The Commission, of its own initiative, may propose a modification
to the market dominant product list or the competitive product list
provided within the Mail Classification Schedule. For purposes of this
part, modification shall be defined as adding a product to a list,
removing a product from a list, or transferring a product from one list
to the other list.
[[Page 63703]]
Sec. 3020.71 Contents of a proposal.
A proposal to modify the market dominant product list or the
competitive product list shall:
(a) Provide the name, and class if applicable, of each product that
is the subject of the proposal;
(b) Indicate whether the proposal would add a product to the market
dominant list or the competitive list, remove a product from the market
dominant list or the competitive list, or move a product from the
market dominant list to the competitive list or from the competitive
list to the market dominant list;
(c) Indicate whether each product that is the subject of the
proposal is:
(1) A special classification within the meaning of 39 U.S.C.
3622(c)(10) for market dominant products;
(2) A product not of general applicability within the meaning of 39
U.S.C. 3632(b) for competitive products; or
(3) A non-postal product.
(d) Provide justification supporting the proposal; and
(e) Include a copy of the applicable sections of the Mail
Classification Schedule and the proposed changes therein in legislative
format.
Sec. 3020.72 Supporting justification.
Supporting justification shall:
(a) Provide an explanation for initiating the docket;
(b) Explain why, as to market dominant products, the change is not
inconsistent with each requirement of 39 U.S.C. 3622(d), and that it
advances the objectives of 39 U.S.C. 3622(b), taking into account the
factors of 39 U.S.C. 3622(c);
(c) Explain why, as to competitive products, the addition,
subtraction, or transfer will not result in the violation of any of the
standards of 39 U.S.C. 3633;
(d) Verify that the change does not classify as competitive a
product over which the Postal Service exercises sufficient market power
that it can, without risk of losing a significant level of business to
other firms offering similar products:
(1) Set the price of such product substantially above costs;
(2) Raise prices significantly;
(3) Decrease quality; or
(4) Decrease output.
(e) Explain whether or not each product that is the subject of the
request is covered by the postal monopoly as reserved to the Postal
Service under 18 U.S.C. 1696 subject to the exceptions set forth in 39
U.S.C. 601;
(f) Provide a description of the availability and nature of
enterprises in the private sector engaged in the delivery of the
product;
(g) Provide any information available on the views of those who use
the product involved on the appropriateness of the proposed
modification;
(h) Provide a description of the likely impact of the proposed
modification on small business concerns; and
(i) Include such information and data, and such statements of
reasons and bases, as are necessary and appropriate to fully inform the
Postal Service and users of the mail of the nature, scope,
significance, and impact of the proposed modification.
Sec. 3020.73 Docket and notice.
The Commission will establish a docket for each request to modify
the market dominant list or the competitive product list, promptly
publish notice of the request in the Federal Register, and post the
filing on its Web site. The notice shall include:
(a) The general nature of the proceeding;
(b) A reference to legal authority to which the proceeding is to be
conducted;
(c) A concise description of the proposals for changes in the Mail
Classification Schedule;
(d) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(e) A specified period for public comment; and
(f) Such other information as the Commission deems appropriate.
Sec. 3020.74 Postal Service notice and reply.
The Secretary of the Commission shall forward to the Postal Service
a copy of the notice of proposal. Within 28 days of the filing of the
proposal, the Postal Service shall provide its preliminary views in
regard to the proposal. The Postal Service may include suggestions for
appropriate further procedural steps.
Sec. 3020.75 Review.
The Commission shall review the Postal Service reply and public
comment. The Commission shall either:
(a) Approve the proposal to modify the market dominant and
competitive product lists, but only to the extent the modification is
consistent with the position of the Postal Service;
(b) Withdraw the proposal;
(c) Institute further proceedings to consider the proposal,
identifying relevant issues that may require further development; or
(d) Direct other action as the Commission may consider appropriate.
Sec. 3020.76 Further proceedings.
If the Commission determines that further proceedings are
appropriate, a conference shall be scheduled to consider the merits of
going forward with the proposal. Upon conclusion of the conference, the
Commission shall promptly issue a ruling to:
(a) Provide for a period of discovery to obtain further
information;
(b) Schedule a hearing on the record for further consideration of
the proposal;
(c) Explain the reasons for not going forward with formal
proceedings; or
(d) Direct other action as the Commission may consider appropriate.
Subpart E--Requests Initiated by the Postal Service to Change the
Mail Classification Schedule
Sec. 3020.90 General.
The Postal Service shall assure that product descriptions in the
Mail Classification Schedule accurately represent the current offerings
of Postal Service products and services.
Sec. 3020.91 Modification.
The Postal Service shall submit corrections to product descriptions
in the Mail Classification Schedule that do not constitute a proposal
to modify the market dominant product list or the competitive product
list as defined in Sec. 3020.30 by filing notice of the proposed
change with the Commission no later than 30 days prior to the effective
date of the proposed change.
Sec. 3020.92 Public input.
The Commission shall publish Postal Service submissions pursuant to
Sec. 3020.91 on its Web site and provide interested persons with an
opportunity to comment on whether the planned changes are inconsistent
with 39 U.S.C. 3642.
Sec. 3020.93 Implementation.
(a) The Commission shall review the proposed changes to product
descriptions, and the comments thereon. So long as such changes are not
inconsistent with 39 U.S.C. 3642, the Commission shall, subject to
editorial corrections, change the Mail Classification Schedule to
coincide with the effective date of the proposed change.
(b) The Commission's finding that changes to the market dominant
product descriptions are not inconsistent with 39 U.S.C. 3642 is
provisional and subject to subsequent review.
[[Page 63704]]
Subpart F--Size and Weight Limitations for Mail Matter
Sec. 3020.110 General.
Applicable size and weight limitations for mail matter shall appear
in the Mail Classification Schedule as part of the description of each
product.
Sec. 3020.111 Limitations applicable to market dominant mail matter.
(a) The Postal Service shall inform the Commission of updates to
size and weight limitations for market dominant mail matter by filing
notice with the Commission 45 days prior to the effective date of the
proposed update. The notice shall include a copy of the applicable
sections of the Mail Classification Schedule and the proposed updates
therein in legislative format.
(b) The Commission shall provide notice of the proposed update in
the Federal Register and seek public comment on whether the proposed
update is in accordance with the policies and the applicable criteria
of chapter 36 of title 39 of the United States Code.
(c) If the Commission finds the proposed update in accordance with
the policies and the applicable criteria of chapter 36 of 39 U.S.C.,
the Commission shall review the proposed Mail Classification Schedule
language for formatting and conformance with the structure of the Mail
Classification Schedule, and subject to editorial changes, shall change
the Mail Classification Schedule to coincide with the effective date of
the proposed update.
(d) If the Commission finds the proposed update not in accordance
with the policies and the applicable criteria of chapter 36 of title 39
of the United States Code, the Commission may direct other action as
deemed appropriate.
Sec. 3020.112 Limitations applicable to competitive mail matter.
The Postal Service shall notify the Commission of updates to size
and weight limitations for competitive mail matter pursuant to subpart
E of this part.
[FR Doc. E7-21596 Filed 11-8-07; 8:45 am]
BILLING CODE 7710-FW-P