E8-27323. Administrative Practice and Procedure, Postal Service  

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    AGENCY:

    Postal Regulatory Commission.

    ACTION:

    Final rule.

    SUMMARY:

    The Commission is adding Priority Mail Contract 3 (MC2009-4 and CP2009-5) to the Competitive Product List. It is also noticing a related contract. These actions are consistent with changes in a recent law governing postal operations and a related Postal Service request. Republication of the lists of market dominant and competitive products is also consistent with new requirements in the law.

    DATES:

    Effective November 18, 2008.

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    FOR FURTHER INFORMATION CONTACT:

    Stephen L. Sharfman, General Counsel, 202-789-6820 and stephen.sharfman@prc.gov.

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    SUPPLEMENTARY INFORMATION:

    Regulatory History, 73 FR 66075 (November 6, 2008).

    The Postal Service seeks to add a new product identified as Priority Mail Contract 3 to the Competitive Product Start Printed Page 68346List. For the reasons discussed below, the Commission approves the Request.

    I. Background

    On October 27, 2008, the Postal Service filed a formal request pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Priority Mail Contract 3 to the Competitive Product List.[1] The Postal Service asserts that the Priority Mail Contract 3 product is a competitive product “not of general applicability” within the meaning of 39 U.S.C. 3632(b)(3). This Request has been assigned Docket No. MC2009-4.

    The Postal Service contemporaneously filed a contract related to the proposed new product pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5. The contract has been assigned Docket No. CP2009-5.

    In support of its Request, the Postal Service filed the following materials: (1) A redacted version of the Governors' Decision authorizing the new product which also includes an analysis of Priority Mail Contract 3 and certification of the Governors' vote; [2] (2) a redacted version of the contract which, among other things, provides that the contract will expire 1 year from the effective date, which is proposed to be 1 day after the Commission issues all regulatory approvals; [3] (3) requested changes in the MCS product list; [4] (4) a Statement of Supporting Justification as required by 39 CFR 3020.32; [5] and (5) certification of compliance with 39 U.S.C. 3633(a).[6]

    In the Statement of Supporting Justification, Kim Parks, Manager, Sales and Communications, Expedited Shipping, asserts that the service to be provided under the contract will cover its attributable costs, make a positive contribution to coverage of institutional costs, and will increase contribution toward the requisite 5.5 percent of the Postal Service's total institutional costs. Request, Attachment D, at 1. Ashley Lyons, Manager, Corporate Financial Planning, Finance Department, certifies, based on the financial analysis provided by the Postal Service, that the contract complies with 39 U.S.C. 3633(a). See id. Attachment E.

    The Postal Service filed much of the supporting materials, including the Governors' Decision and the specific Priority Mail Contract 3, under seal. In its Request, the Postal Service maintains that the contract and related financial information, including the customer's name and the accompanying analyses that provide prices, terms, conditions, and financial projections, should remain under seal. Id. at 2.

    In Order No. 123, the Commission gave notice of the two dockets, appointed a public representative, and provided the public with an opportunity to comment.[7]

    II. Comments

    Comments were filed by the Public Representative.[8] No filings were submitted by other interested parties. The Public Representative's comments focus principally on confidentiality and pricing under the contract. Public Representative Comments at 2-3.

    The Public Representative states that a sufficient rationale for maintaining the confidentiality of the documents under seal has been provided by the Postal Service. The Public Representative reviewed the cost savings measures for the purposes of this contract and determines that the contract is advantageous to the Postal Service and beneficial to the general public. Id. He concludes, inter alia, that the contract should generate sufficient revenue to cover the product's attributable costs and contribute to the recovery of total institutional costs assigned to competitive products. Id. at 3-4.

    III. Commission Analysis

    The Commission has reviewed the contract, the financial analysis provided under seal that accompanies it, and the comments filed by the Public Representative.

    Statutory requirements. The Commission's statutory responsibilities in this instance entail assigning Priority Mail Contract 3 to either the Market Dominant Product List or to the Competitive Product List. 39 U.S.C. 3642. As part of this responsibility, the Commission also reviews the proposal for compliance with the Postal Accountability and Enhancement Act (PAEA) requirements. This includes, for proposed competitive products, a review of the provisions applicable to rates for competitive products. 39 U.S.C. 3633.

    Product list assignment. In determining whether to assign Priority Mail Contract 3 as a product to the Market Dominant Product List or the Competitive Product List, the Commission must consider whether

    the Postal Service exercises sufficient market power that it can effectively set the price of such product substantially above costs, raise prices significantly, decrease quality, or decrease output, without risk of losing a significant level of business to other firms or offering similar products.

    39 U.S.C. 3642(b)(1). If so, the product will be categorized as market dominant. The competitive category of products shall consist of all other products.

    The Commission is further required to consider the availability and nature of enterprises in the private sector engaged in the delivery of the product, the views of those who use the product, and the likely impact on small business concerns. 39 U.S.C. 3642(b)(3).

    The Postal Service asserts that its bargaining position is constrained by the existence of other shippers who can provide similar services, thus precluding it from taking unilateral action to increase prices without the risk of losing volume to private companies. Request, Attachment D, at 2-3. The Postal Service also contends that it may not decrease quality or output without risking the loss of business to competitors that offer similar expedited delivery services. Id. It further states that the contract partner supports the addition of the contract to the product list to effectuate the negotiated contractual terms. Id. at 3. Finally, the Postal Service states that the market for expedited delivery services is highly competitive and requires a substantial infrastructure to support a national network. It indicates that large carriers serve this market. Accordingly, the Postal Service states that it is unaware of any small business concerns that could offer comparable service for this customer. Id.

    No commenter opposes the proposed classification of Priority Mail Contract 3 as competitive. Having considered the statutory requirement and the support offered by the Postal Service, the Commission finds that Priority Mail Contract 3 is appropriately classified as a competitive product and should be added to the Competitive Product List.

    Cost considerations. The Postal Service's filing seeks to establish a new domestic Priority Mail product. The Start Printed Page 68347contract is predicated on unit costs for major mail functions, e.g., window service, mail processing, and transportation, based on the shipper's mail characteristics.

    The Postal Service contends that adding the Priority Mail Contract 3 product will result in processing Priority Mail pieces that are less costly for the Postal Service than the average Priority Mail piece. See Id. Attachment A. It believes that its financial analysis shows that these cost savings can be accomplished while ensuring that the contract covers its attributable costs, does not result in subsidization of competitive products by market dominant products, and increases contribution from competitive products. Id., Attachment E, at 1.

    Based on the data submitted and the comments received, the Commission finds that Priority Mail Contract 3 should cover its attributable costs (39 U.S.C. 3633(a)(2)), should not lead to the subsidization of competitive products by market dominant products (39 U.S.C. 3633(a)(1)), and should have a positive effect on competitive products' contribution to institutional costs (39 U.S.C. 3633(a)(3)). Thus, an initial review of the proposed Priority Mail Contract 3 indicates that it comports with the provisions applicable to rates for competitive products.

    The Postal Service shall promptly notify the Commission when the contract terminates but no later than the actual termination date. The Commission will then remove the contract from the Mail Classification Schedule at the earliest possible opportunity.

    In conclusion, the Commission approves Priority Mail Contract 3 as a new product. The revision to the Competitive Product List is shown below the signature of this Order and is effective upon issuance of this Order.

    It Is Ordered:

    1. Priority Mail Contract 3 (MC2009-4 and CP2009-5) is added to the Competitive Product List as a new product under Negotiated Service Agreements, Domestic.

    2. The Postal Service shall notify the Commission of the termination date of the contract as discussed in this order.

    3. The Secretary shall arrange for the publication of this order in the Federal Register.

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    List of Subjects in 39 CFR Part 3020

    • Administrative practice and procedure; Postal Service
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    By the Commission.

    Steven W. Williams,

    Secretary.

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    For the reasons stated in the preamble, under the authority at 39 U.S.C. 503, the Postal Regulatory Commission amends 39 CFR part 3020 as follows:

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    PART 3020—PRODUCT LISTS

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    1. The authority citation for part 3020 continues to read as follows:

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    Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.

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    2. Revise Appendix A to subpart A of part 3020—Mail Classification to read as follows:

    End Amendment Part Start Appendix

    Appendix A to Subpart A of Part 3020—Mail Classification Schedule

    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

    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

    Negotiated Service Agreements

    HSBC North America Holdings Inc. Negotiated Service Agreement

    Bookspan Negotiated Service Agreement

    Bank of America corporation Negotiated Service Agreement

    The Bradford Group Negotiated Service Agreement

    Market Dominant Product Descriptions

    First-Class Mail

    [Reserved for Class Description]

    Single-Piece Letters/Postcards

    [Reserved for Product Description]

    Bulk Letters/Postcards

    [Reserved for Product Description]

    Flats

    [Reserved for Product Description]

    Parcels

    [Reserved for Product Description]

    Outbound Single-Piece First-Class Mail International

    [Reserved for Product Description]

    Inbound Single-Piece First-Class Mail International

    [Reserved for Product Description]

    Standard Mail (Regular and Nonprofit)

    [Reserved for Class Description]

    High Density and Saturation Letters

    [Reserved for Product Description]

    High Density and Saturation Flats/Parcels

    [Reserved for Product Description]

    Carrier Route

    [Reserved for Product Description]

    Letters

    [Reserved for Product Description]

    Flats

    [Reserved for Product Description]

    Not Flat-Machinables (NFMs)/Parcels

    [Reserved for Product Description]

    Periodicals

    [Reserved for Class Description]

    Within County Periodicals

    [Reserved for Product Description]

    Outside County Periodicals

    [Reserved for Product Description]

    Package Services

    [Reserved for Class Description]

    Single-Piece Parcel Post

    [Reserved for Product Description]

    Inbound Surface Parcel Post (at UPU rates)

    [Reserved for Product Description]

    Bound Printed Matter Flats

    [Reserved for Product Description]

    Bound Printed Matter Parcels

    [Reserved for Product Description]

    Media Mail/Library Mail

    [Reserved for Product Description]

    Special Services

    [Reserved for Class Description]

    Ancillary Services

    [Reserved for Product Description]

    Address Correction Service

    [Reserved for Product Description]

    Applications and Mailing Permits

    [Reserved for Product Description]

    Business Reply Mail

    [Reserved for Product Description]

    Bulk Parcel Return Service

    [Reserved for Product Description]

    Certified Mail

    [Reserved for Product Description]

    Certificate of Mailing

    [Reserved for Product Description]

    Collect on Delivery

    [Reserved for Product Description]

    Delivery Confirmation

    [Reserved for Product Description]

    Insurance

    [Reserved for Product Description]

    Merchandise Return Service

    [Reserved for Product Description]

    Parcel Airlift (PAL)

    [Reserved for Product Description]

    Registered Mail

    [Reserved for Product Description]

    Return Receipt

    [Reserved for Product Description]

    Return Receipt for Merchandise

    [Reserved for Product Description]Start Printed Page 68348

    Restricted Delivery

    [Reserved for Product Description]

    Shipper-Paid Forwarding

    [Reserved for Product Description]

    Signature Confirmation

    [Reserved for Product Description]

    Special Handling

    [Reserved for Product Description]

    Stamped Envelopes

    [Reserved for Product Description]

    Stamped Cards

    [Reserved for Product Description]

    Premium Stamped Stationery

    [Reserved for Product Description]

    Premium Stamped Cards

    [Reserved for Product Description]

    International Ancillary Services

    [Reserved for Product Description]

    International Certificate of Mailing

    [Reserved for Product Description]

    International Registered Mail

    [Reserved for Product Description]

    International Return Receipt

    [Reserved for Product Description]

    International Restricted Delivery

    [Reserved for Product Description]

    Address List Services

    [Reserved for Product Description]

    Caller Service

    [Reserved for Product Description]

    Change-of-Address Credit Card Authentication

    [Reserved for Product Description]

    Confirm

    [Reserved for Product Description]

    International Reply Coupon Service

    [Reserved for Product Description]

    International Business Reply Mail Service

    [Reserved for Product Description]

    Money Orders

    [Reserved for Product Description]

    Post Office Box Service

    [Reserved for Product Description]

    Negotiated Service Agreements

    [Reserved for Class Description]

    HSBC North America Holdings Inc. Negotiated Service Agreement

    [Reserved for Product Description]

    Bookspan Negotiated Service Agreement

    [Reserved for Product Description]

    Bank of America Corporation Negotiated Service Agreement

    The Bradford Group Negotiated Service Agreement

    Part B—Competitive Products

    Competitive Product List

    Express Mail

    Express Mail

    Outbound International Expedited Services

    Inbound International Expedited Services

    Inbound International Expedited Services 1 (CP2008-7)

    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

    Special Services

    Premium Forwarding Service

    Negotiated Service Agreements

    Domestic

    Express Mail Contract 1 (MC2008-5)

    Express Mail Contract 2 (MC2009-3 and CP2009-4)

    Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)

    Priority Mail Contract 1 (MC2008-8 and CP2008-26)

    Priority Mail Contract 2 (MC2009-2 and CP2009-3)

    Priority Mail Contract 3 (MC2009-4 and CP2009-5)

    Outbound International

    Global Expedited Package Services (GEPS) Contracts

    GEPS 1 (CP2008-5, CP2008-11, CP2008-12, and CP2008-13, CP2008-18, CP2008-19, CP2008-20, CP2008-21, CP2008-22, CP2008-23, and CP2008-24)

    Global Plus Contracts

    Global Plus 1 (CP2008-9 and CP2008-10)

    Global Plus 2 (MC2008-7, CP2008-16 and CP2008-17)

    Inbound Direct Entry Contracts with Foreign Postal Administrations (MC2008-6, CP2008-14 and CP2008-15)

    Competitive Product Descriptions

    Express Mail

    [Reserved for Group Description]

    Express Mail

    [Reserved for Product Description]

    Outbound International Expedited Services

    [Reserved for Product Description]

    Inbound International Expedited Services

    [Reserved for Product Description]

    Priority

    [Reserved for Product Description]

    Priority Mail

    [Reserved for Product Description]

    Outbound Priority Mail International

    [Reserved for Product Description]

    Inbound Air Parcel Post

    [Reserved for Product Description]

    Parcel Select

    [Reserved for Group Description]

    Parcel Return Service

    [Reserved for Group Description]

    International

    [Reserved for Group Description]

    International Priority Airlift (IPA)

    [Reserved for Product Description]

    International Surface Airlift (ISAL)

    [Reserved for Product Description]

    International Direct Sacks—M-Bags

    [Reserved for Product Description]

    Global Customized Shipping Services

    [Reserved for Product Description]

    International Money Transfer Service

    [Reserved for Product Description]

    Inbound Surface Parcel Post (at non-UPU rates)

    [Reserved for Product Description]

    International Ancillary Services

    [Reserved for Product Description]

    International Certificate of Mailing

    [Reserved for Product Description]

    International Registered Mail

    [Reserved for Product Description]

    International Return Receipt

    [Reserved for Product Description]

    International Restricted Delivery

    [Reserved for Product Description]

    International Insurance

    [Reserved for Product Description]

    Negotiated Service Agreements

    [Reserved for Group Description]

    Domestic

    [Reserved for Product Description]

    Outbound International

    [Reserved for Group Description]

    Part C—Glossary of Terms and Conditions [Reserved]

    Part D—Country Price Lists for International Mail [Reserved]

    End Appendix End Supplemental Information

    Footnotes

    1.  Request of the United States Postal Service to Add Priority Mail Contract 3 to Competitive Product List and Notice of Establishment of Rates and Class Not of General Applicability, October 27, 2008 (Request).

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    2.  Attachment A to the Request. The analysis that accompanies the Governors' Decision notes, among other things, that the contract is not risk free, but concludes that the risks are manageable. See also Errata to Request of the United States Postal Service to Add Priority Mail Contract 3 to Competitive Product List and Notice of Establishment of Rates and Class Not of General Applicability, October 30, 2008.

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    3.  Attachment B to the Request.

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    4.  Attachment C to the Request.

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    5.  Attachment D to the Request.

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    6.  Attachment E to the Request.

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    7.  PRC Order No. 123, Notice and Order Concerning Priority Mail Contract 3 Negotiated Service Agreement, October 31, 2008 (Order No. 123).

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    8.  Public Representative Comments in Response to United States Postal Service Request to Add Priority Mail Contract 3 to Competitive Product List, November 6, 2008 (Public Representative Comments).

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    [FR Doc. E8-27323 Filed 11-17-08; 8:45 am]

    BILLING CODE 7710-FW-P

Document Information

Comments Received:
0 Comments
Effective Date:
11/18/2008
Published:
11/18/2008
Department:
Postal Regulatory Commission
Entry Type:
Rule
Action:
Final rule.
Document Number:
E8-27323
Dates:
Effective November 18, 2008.
Pages:
68345-68348 (4 pages)
Docket Numbers:
Docket Nos. MC2009-4 and CP2009-5, Order No. 131
Topics:
Administrative practice and procedure, Postal Service
PDF File:
e8-27323.pdf
CFR: (1)
39 CFR 3020