04-10497. Authorization to Manufacture and Distribute Postage Meters

AGENCY:

Postal Service.

ACTION:

Proposed rule.

SUMMARY:

This proposed rule amends the regulations that define a postage meter and its components and a manufacturer and/or distributor of postage meters. The proposed rule also puts forth the responsibilities of any authorized person or entity to notify the Postal Service upon a change in ownership or control, or bankruptcy or insolvency, and identifies factors the Postal Service will consider in acting upon requests for changes of approval or ownership or control of an approved manufacturer or distributor.

DATES:

Comments must be received on or before July 9, 2004.

FOR FURTHER INFORMATION CONTACT:

Wayne Wilkerson, manager of Postage Technology Management, by fax at 703-292-4050.

SUPPLEMENTARY INFORMATION:

Title 39, Code of Federal Regulations (CFR) Part 501, Authorization to Manufacture and Distribute Postage Meters, expands the definition of a postage meter and its components to include all postage evidencing systems that produce evidence of prepayment of postage by any method other than postage stamps or permit imprints. This part also expands the activities of persons or entities that must be approved by the Postal Service. These changes are required to address the evolution in postage evidencing technology in recent years. The events requiring notification to the Postal Service are hereby expanded to include changes in the financial condition of the authorized party, such as bankruptcy and insolvency as well as a change in ownership or control.

List of Subjects in 39 CFR Part 501

• Administrative practice and procedure
• Postal Service

The Amendment

For the reasons set out in this document, the Postal Service is proposing to amend 39 CFR part 501 as follows:

PART 501—AUTHORIZATION TO MANUFACTURE AND DISTRIBUTE POSTAGE METERS

1. The authority citation for part 501 continues to read as follows:

Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 410, 2601, 2605; Inspector General Act of 1978, as amended (Pub. L. 95-452, as amended), 5 U.S.C. App. 3.

2. Amend § 501.1 by replacing the title and all text to read as follows:

§ 501.1

Postage evidencing system/infrastructure authorization.

a. Postage evidencing systems produce evidence of prepayment of U.S. postage by any method other than postage stamps or permit imprint. They include but are not limited to postage meters and PC Postage® systems.

b. Due to the potential for adverse impact upon Postal Service revenue, the following activities may not be engaged in by any person or concern without prior, written approval of the Postal Service:

i. Producing or distributing any postage evidencing system that generates U.S. postage.

ii. Repairing, distributing, refurbishing, remanufacturing or destroying any component of a postage evidencing system that accounts for or authorizes the printing of U.S. postage.

iii. Owning or operating an infrastructure that maintains operating data for the production of U.S. postage; maintains data concerning users or use of a postage evidencing systems; or accounts for U.S. postage purchased for distribution through a postage evidencing system.

iv. Owning or operating an infrastructure that maintains operating data or data concerning existing or proposed users of a postage evidencing system that is used to facilitate licensing or registration with the Postal Service of users of a postage evidencing system.

c. Any person or entity seeking authorization to perform any activity described in b must submit a request to the Postal Service in person or in writing.

d. Approval shall be based upon satisfactory evidence of the applicant's integrity and financial responsibility and a determination that disclosure to the applicant of the Postal Service customer, financial, or other data of a commercial nature necessary to perform the function for which approval is sought would be appropriate and consistent with good business practices within the meaning of 39 U.S.C. 410(c)(2).

e. Qualification and approval may be based upon conditions agreed to by the Postal Service and the applicant. The applicant is approved in writing to engage in the function(s) for which authorization was sought and approved.

3. Amend § 501.3 by replacing the title and all text to read as follows:

§ 501.3

Changes in ownership or control, bankruptcy, or insolvency.

a. Any person or entity authorized under 501.1 must promptly notify the Postal Service when it has a reasonable expectation that there may be a change in its ownership or control including changes in the ownership of an affiliate which exercises control over its postage evidencing system operations in the United States. A change of ownership or control within the meaning of this section includes entry into a strategic alliance or other agreement under which a third party may gain access to Postal Service customer or financial data. Any person or entity seeking to acquire ownership or control of a person or entity authorized under 501.1 must provide the Postal Service satisfactory evidence that it satisfies the conditions for approval stated in 501.1. Early notification of a proposed change in ownership or control will facilitate expeditious review of an application to acquire ownership or control under this section.

b. Any person or entity authorized under 501.1 must promptly notify the Postal Service when it has a reasonable expectation that there may be a change in the status of its financial condition either through bankruptcy, insolvency, assignment for the benefit of creditors, or other similar financial action. Any person or entity authorized under 501.1 who experiences a change in the status of its financial condition may, at the discretion of the Postal Service, have its authorization under 501.1 modified or terminated.

Neva Watson,

Attorney, Legislative.