02-26162. Domestic Mail Manual Change To Revise the Five Percent Error Limit for Sequenced Mailings

AGENCY:

Postal Service.

ACTION:

Final rule.

SUMMARY:

This final rule adopts a proposal to revise Domestic Mail Manual (DMM) M050 to clarify how additional postage is assessed for Standard Mail Enhanced Carrier Route (ECR) and Periodicals carrier route mailings found to be out of sequence. Concurrent with the DMM amendment, the Postal Service will implement new policies and guidelines for assessing additional postage for Standard Mail and Periodicals carrier route mailings found to be out of sequence. Under the revised policies, for all mail required to be sequenced, no more than 5 percent of the total pieces in the entire carrier route portion of the mailing may be out of sequence.

EFFECTIVE DATE:

This final rule is effective November 14, 2002.

FOR FURTHER INFORMATION CONTACT:

Mary Bronson, [phone].

SUPPLEMENTARY INFORMATION:

As a result of classification reform (Postal Rate Commission Docket No. MC95-1), the Postal Service required that both Standard Mail items and Periodicals mail claiming the high density or saturation rates be in walk sequence within a tray or package. For Standard Mail items, basic carrier route rate mail was required to be in either walk-sequence or line-of-travel (LOT) order. With the implementation of Commission Docket No. 2000-1, a sequencing requirement (either walk-sequence or LOT) was added for Periodicals basic carrier route rates.

Current standards state that, for each carrier route receiving mail, no more than 5 percent of the total pieces for each carrier route may be out of sequence or sorted to the wrong carrier route. The standard establishing a 5 percent limit for missequenced or missorted mail to an individual carrier route may cause confusion because it appears that the Postal Service has established a separate standard of compliance for sequencing as compared to other eligibility requirements for ECR or carrier route rates. Actually, the Postal Service routinely uses tolerances when evaluating discounted mailings to ensure compliance with eligibility standards. This policy change will standardize the procedure for determining eligibility for carrier route rates with the procedures for determining eligibility for other workshare discounts.

In addition, the 5 percent limit for missequenced or missorted mail currently is applied to an individual carrier route because, until recently, the Postal Service was able to detect such errors only at the delivery unit and could not easily determine the percentage of error for the entire mailing. Due to advances in technology, this is no longer the case. Tools to assist postal employees when evaluating discounted mailings either during the acceptance process or when conducting audits are now available.

In view of the capabilities provided by these tools, the Postal Service is amending the current standards to apply the 5 percent limit for walk-sequence and LOT errors to the entire mailing, not to an individual carrier route.

One such tool is the Mailing Evaluation Readability and Look-up Instrument (MERLIN) currently being deployed to business mail entry units (BMEUs) and detached mail units (DMUs). The Postal Service will announce when it will start using MERLIN to determine sequencing accuracy at a future date. At that time, the Postal Service will use the established statistically valid sampling methods BMEU and DMU employees currently use when operating MERLIN to determine whether the 5 percent error limit for sequencing is exceeded.

On August 8, 2001, the Postal Service published a proposed rule in the Federal Register (66 FR 41485) amending the postal standards to clarify the application of the 5 percent error limit for carrier route sequenced mailings. The Postal Service received eight comments, all of which generally supported the proposal. Most of the comments also included questions and suggestions about how compliance with the sequencing standards would be determined and how any postage adjustments would be assessed. Because these administrative issues need not be addressed in the DMM standards, the Postal Service will clarify these policy issues in this notice and amend the DMM by deleting section M050.2.0, Accuracy, for out-of-sequence mail.

Six commenters asked that the Postal Service reconsider the proposed method for calculating additional postage on missequenced carrier route pieces. Most asserted that charging a non-carrier route presorted rate was too severe or “punitive.” Several also asked that the Postal Service clearly state what rate of postage a mailer would default to if errors exceeding the 5 percent tolerance were found. Two respondents argued that the resequencing option (in lieu of paying higher postage rates) is impractical and should not be considered as a way to mitigate the application of non-carrier route presorted rates. In response to these concerns, the Postal Service and mailing industry representatives jointly developed a process for determining the next higher rate for which missequenced carrier route pieces would be eligible.

Currently, an out-of-sequence carrier route mailing is charged the next higher non-carrier route rate for which the mail qualifies. This can often result in large assessments that do not reflect the value that the Postal Service receives from a tray or bundle of mail sorted to the carrier route, even if it is not appropriately sequenced within the route. The Postal Service and the mailing industry developed a policy that uses the current rate structure to promote effective sequencing while recognizing the value of mail sorted to the carrier route. The Postal Service has determined that this new policy is a reasonable application of existing rates to carrier route mailings for which the only problem is improper sequencing.

Effective November 14, 2002, the Postal Service will implement the following policy and guidelines for assessing additional postage for Standard Mail and Periodicals carrier route mailings found to be out of sequence.

For mail that meets all other requirements for high density or saturation rates, if the pieces are found to exceed the 5 percent sequencing error limit (including being found in reverse walk sequence), the number of pieces that are out of sequence will be determined by multiplying the error percentage by the total pieces in the mailing claimed at the carrier route rates. That portion of the mailing will be charged the basic carrier route rate. This rate is available only when the mailer can demonstrate that an approved sequencing product was used in preparing the mail.

For basic carrier route rate mailings only, reverse sequencing will not disqualify a mailing from the basic rates as long as the mailer used an approved sequencing product in preparing the mail. Therefore, no additional postage is assessed for basic carrier route mailings found to be in reverse sequence. If the 5 percent sequencing error limit is exceeded for other reasons, the percentage of error will be assessed against the carrier route portion of the mailing. That percentage of the carrier route portion of the mailing will be charged the next higher rate for which the mail qualifies. For example, if a basic carrier route mailing is found to be 30 percent out of sequence, 30 percent of the pieces in the mailing claimed at the carrier route rates will be charged the next higher rate for which the pieces qualify. The remaining 70 percent of the basic carrier route rate pieces are not considered out of sequence and are charged the basic carrier route rate.

Two commenters asked whether the application of a barcode to carrier route pieces would make any difference in determining the next higher rate. The presence of a barcode may make a difference, since the next higher rate may be an automation rate if the pieces meet automation standards and are properly barcoded.

One respondent asked whether the Postal Service would take into consideration the work done by the mailing industry to ensure that errors are minimized and quality is maintained. The new policies take these efforts into consideration. The Postal Service included the provision to allow mailers who demonstrate that an approved sequencing product was used in preparing the mail to pay the basic carrier route rates for missequenced carrier route pieces originally claimed at high density and saturation rates. In addition, basic carrier route rate pieces found to be in reverse LOT order may still be considered eligible for that rate as long as the mailer can demonstrate that an approved sequencing product was used in preparing the mail.

One commenter expressed concern about how the new rule will be interpreted with respect to carrier route mailings containing mail eligible for different carrier route rates. The writer suggests that LOT and walk-sequence prepared pieces in the same mailing should be evaluated separately with respect to the 5 percent rule. The Postal Service does not concur with the writer's suggestion. Mailings containing pieces claimed at different carrier route rates are similar to mailings containing pieces claimed at different presorted rates. A verification is conducted on a portion of the mailing to determine whether the entire mailing is properly presorted and the results are applied across the entire mailing.

Four commenters asked for clarification regarding how errors are determined for missequenced versus missorted carrier route pieces. Several writers wanted to know whether there would be two separate 5 percent tolerance levels for missequenced and missorted pieces. One writer asked, “Are there different error percentages for sorting (that is, to the appropriate carrier route) and sequencing (that is, in proper line of travel)?” Under this policy, sortation and sequencing are evaluated separately and each has a 5 percent tolerance level for errors.

Two respondents asked whether mailers would have access to the same “technological innovations” that the Postal Service now has to detect errors. The MERLIN machines used by the Postal Service to evaluate mailings are commercially available. Mailers may contact the Business Mail Acceptance office at Postal Service Headquarters for information about where to purchase MERLIN machines. Information regarding other tools used by postal employees when conducting audits or reviews of ECR and carrier route rate mailings will be announced in a future Federal Register notice.

The following table shows some examples of the cost differential between the carrier route rate and the next higher rate in the event that the pieces are found to be out of sequence. The rates shown are for pieces for which no destination rate is claimed. The table does not include every possible rate combination.

Standard mail letters	ECR rate	Next higher non-auto rate	Difference
Basic 4	$0.194	$0.248 (PRST 3/5 rate) 1	$0.054
High Density	0.164	$0.194 (Basic ECR letter rate)	0.030
Saturation	0.152	$0.194 (Basic ECR letter rate)	0.042
Standard mail nonletters (3.3 oz. or less) 2	ECR rate	Next higher rate	Difference
Basic 4	$0.194	$0.288 (PRST 3/5 rate) 1	$0.094
High Density	0.169	$0.194 (Basic ECR nonletter)	0.025
Saturation	0.160	$0.194 (Basic ECR nonletter)	0.034
Periodicals (Outside-County)	CR rates	Next higher rate	Difference
Basic	$0.163	$0.256 (5-digit nonauto) 3	$0.093
High Density	0.131	$0.163 (Basic CR rate)	0.032
Saturation	0.112	$0.163 (Basic CR rate)	0.051
Periodicals (In-County)	CR rates	Next higher rate	Difference
Basic	$0.050	$0.087 (5-digit nonauto) 3	$0.037
High Density	0.034	$0.050 (Basic CR rate)	0.016
Saturation	0.028	$0.050 (Basic CR rate)	0.022
1 For ECR basic rate pieces, the next higher rate may also be the Presorted basic rate or an automation rate for which the mail qualifies.
2 Standard Mail letters and nonletters weighing more than 3.3 ounces are subject to both a per-piece charge and a pound rate. The cost differential between the applicable carrier route rate and the applicable next higher rate for pieces weighing more than 3.3 ounces is not shown on this chart.
3 For Periodicals carrier route basic rate pieces, the next higher rate may also be the 3-digit rate or an applicable automation rate for which the mail qualifies.
4 The nonmachinable surcharge that is assessed on Standard Mail letter-size pieces meeting the criteria in DMM C050.2.2 does not apply to pieces mailed at the ECR or automation letter rates. When pieces claimed at the ECR basic rates are found to be ineligible for that rate, the pieces may be subject to the nonmachinable surcharge in addition to the applicable presort rate, depending upon the physical characteristics of the pieces. The nonmachinable surcharge is $0.04 per piece for Standard Mail regular Presorted rate pieces and $0.02 for nonprofit Presorted rate pieces.

List of Subjects in 39 CFR Part 111

• Administrative practice and procedure
• Postal Service

PART 111—[AMENDED]

1. The authority citation for 39 CFR Part 111 continues to read as follows:

Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 414, 3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

2. Amend the following section of the Domestic Mail Manual (DMM) as set forth below:

M Mail Preparation and Sortation

M000 General Preparation Standards

* * * * *

M050 Delivery Sequence

* * * * *

2.0 ACCURACY

[Delete 2.0 in its entirety; renumber 3.0 and 4.0 as 2.0 and 3.0.]

We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes.

Stanley F. Mires,

Chief Counsel, Legislative.