02-11310. Realignment of Buffalo and Pittsburgh Postal Facilities for Deposit of DBMC Rate Standard Mail and Package Services Machinable Parcels

AGENCY:

Postal Service.

ACTION:

Final rule.

SUMMARY:

This final rule sets forth the Domestic Mail Manual (DMM) standards adopted by the Postal Service requiring mailers to deposit, at the Pittsburgh Bulk Mail Center (BMC), Standard Mail machinable parcels and Package Services machinable parcels, currently required to be taken to the Buffalo, New York, Auxiliary Service Facility (ASF), in order to claim destination bulk mail center (DBMC) rates. This mail, where applicable, will be required to be zoned from the Pittsburgh BMC.

DATES:

Effective. Compliance is optional as of May 7, 2002. Compliance will be required on January 5, 2003.

FOR FURTHER INFORMATION CONTACT:

OB Akinwole, [phone] or Cheryl Beller [phone].

SUPPLEMENTARY INFORMATION:

On January 17, 2002, the Postal Service published, for public comment, a notice in the Federal Register (67 FR 2388), proposing to realign permissible points for mailer deposit of Standard Mail machinable parcels and Package Services machinable parcels currently required, by DMM Standard, to be entered at the Buffalo, New York, Auxiliary Service Facility (ASF) in order to be claimed at destination bulk mail center (DBMC) rates.

Mailers will now be required to enter mail, addressed for delivery within the ZIP Code range of the Buffalo ASF service area, as defined for the appropriate class of mail in DMM Exhibit E650.5.1 and Exhibit E751.1.3, at the Pittsburgh BMC to claim the DBMC rates. As part of this final rule, all machinable and nonmachinable parcels (Parcel Post, Parcel Select, and Bound Printed Matter) deposited at the Pittsburgh BMC are also required to be zoned from Pittsburgh using Postal Service zone chart 150. As an option, mailers may also deposit nonmachinable parcels for the Buffalo ASF service area ZIP Codes listed in DMM labeling list L602 at the Pittsburgh BMC, provided that these nonmachinable parcels are commingled in bedloads with the DBMC rate machinable parcels. These nonmachinable parcels would also be eligible for the DBMC rates. Otherwise, nonmachinable parcels must continue to be deposited at the Buffalo ASF in order to be eligible for the DBMC rates. Barcoded machinable parcels for the Buffalo ASF service will be eligible for the parcel barcode discount when entered at the Pittsburgh BMC. Under this final rule, entry of Standard Mail, Parcel Select, and Bound Printed Matter machinable parcels sorted to the 5-digit ZIP Codes within the Buffalo sectional center facility (SCF) service area, as defined in DMM L005, would continue to be required to be deposited at the Buffalo SCF in order to qualify for the destination sectional center facility (DSCF) rate. Standard Mail machinable parcels claimed at DSCF rates and entered at Buffalo will continue to be eligible for a parcel barcode discount.

Currently, all machinable parcels entered at the Buffalo ASF are sorted manually by the Postal Service to the first three digits of the delivery address ZIP Codes. Those parcels destined to addresses within the Buffalo ASF service are either further sorted to the Buffalo SCF or transported to SCFs in Rochester, Syracuse, Elmira, and Utica. At the SCFs, the parcels are sorted by 5-digit ZIP Code to the associated delivery offices and subsequently transported to those delivery offices.

In contrast to this manual operation in Buffalo, the Pittsburgh BMC sorts machinable parcels on parcel sorting machines (PSMs) and finalizes the parcels to 5-digit ZIP Codes in one or two passes. Parcels destined for the Buffalo ASF service area are then transported directly from the Pittsburgh BMC to the appropriate SCFs. This rule change will minimize more costly and slower manual processing and provide more direct transportation of such parcels. The Postal Service believes that this realignment of ZIP Codes for DBMC rate eligibility between between the Pittsburgh BMC and the Buffalo ASF will provide consistent customer service by eliminating at least one step in the transportation process.

This rule change will eliminate any confusion concerning the applicable standards for the deposit of DBMC machinable parcels in the affected service areas. This final rule contains the DMM standards adopted by the Postal Service after review of the comments that were submitted.

Evaluation of Comments From the Proposed Rule

The Postal Service received written comments on the January 17 proposed rule from three mailers and one mailer association.

One commenter questioned the accuracy of the statement in the proposed rule that “current records indicate that more than three years have passed since the Buffalo ASF has received any drop shipments.”

The Postal Service acknowledges that the statement should have read “current records indicate that more than three years have passed since the Buffalo ASF has received any drop shipments of machinable parcels.”

The same commenter suggested that the exception to allow mailers to divert machinable parcels from the Buffalo ASF to the Pittsburgh BMC is the real issue to be addressed. According to this commenter, mailers not party to the exception should not be penalized.

This final rule formally designates the Pittsburgh BMC as the appropriate deposit point for machinable parcels claimed at DBMC rates destined for the Buffalo ASF service area. Moreover, the Postal Service believes that this change will ensure a fair and uniform rate application to all mailers depositing machinable parcels at the Pittsburgh BMC. Many of those mailers have been depositing machinable parcels destined for the Buffalo ASF service area and zoning and rating those parcels from the Pittsburgh BMC.

Another commenter implied that the proposed changes stem from possible mismanagement of operational resources at the Buffalo ASF, including inappropriate mail processing equipment. The commenter further states that the Postal Service is imposing increased DBMC rates on customers because of its own inadequacies. The commenter believes that the proposed changes are tantamount to a “poorly concealed rate increase.”

The changes announced in this final rule are not the result of mismanagement or inappropriate resource allocation but rather a reflection of effective cost management for mailers and the Postal Service. In addition, the changes in this final rule are not an attempt to increase rates by use of a technical regulatory change. Part of this management is the long-term strategy of realigning the Postal Service processing and transportation networks as a viable means to raise productivity, stabilize costs, and minimize postage rate increases.

The diversion to the Pittsburgh BMC of machinable parcels destined for the Buffalo ASF service area is not the outcome of recent redirection of that volume by the Buffalo ASF. Almost from the inception of the DBMC entry rates on February 24, 1991, the majority of dropship parcel mailers have been depositing at the Pittsburgh BMC machinable parcels and some nonmachinable parcels destined for the Buffalo ASF. In fact, about 31 percent of the current parcel volume processed at the Pittsburgh BMC is destined for the Buffalo ASF. This large percentage is not surprising because western New York is not an originating area for large parcel shippers. As a result, the majority of parcel shippers who have parcels destined for the Buffalo ASF are also likely to have parcels destined for the Pittsburgh BMC service area.

Based on the expected additional costs that the commenters or their clients may incur, all four commenters objected to the realignment, particularly the requirement to zone mail entered at the Pittsburgh BMC using the Pittsburgh zone chart instead of the Buffalo zone chart. Alternatives suggested included extending the effective date, either to the end of calendar year 2002, or the beginning of calendar year 2003, and developing an optional sort rate for packages presorted and containerized by 3-digit ZIP Codes prefixes and entered at the Buffalo ASF for cross-docking to SCFs. The comment suggesting the development of an optional sort rate for packages presorted and containized by 3-digit ZIP Code prefixes and entered at the Buffalo ASF for cross-docking to SCFs is beyond the scope of this rulemaking and is not addressed in this final rule.

The Postal Service is indeed concerned about any financial burden that this final rule will place on parcel shippers. As a consequences, the Postal Service will delay required implementation of these changes to January 5, 2003. This delay should reduce any financial impact on mailers this year and, at the same time provide sufficient time to plan for significant or individual changes that would affect their current operations.

One commenter noted that zoning Buffalo Parcel Select from Pittsburgh will raise customer rates by $0.89 per parcel. This commenter implied that DBMC rates as a whole are going up faster than DSCF and DDU rates frequently used by large package consolidators, leading the commenter to believe that the intent of the Postal Service is to drive customers to competitors.

On one hand, the Postal Service does acknowledge that there will be some adjustments in postage paid because of the requirement that mailers zone machinable parcels destined for the Buffalo ASF from the Pittsburgh BMC. Not all increased costs, however, are attributed solely to postage. Depending on the size, weight, and distance of the parcel as well as associated transportation costs, mailers can benefit from the changes in this final rule because they are permitted to use one facility rather than two for the deposit of their mail for the same geographic area. In essence, they can benefit from reduced transportation costs.

Although both the DDU and the DSCF rates for Parcel Select will have increases effective with the June 30, 2001, implementation of R2001-1 as announced in the Federal Register on April 16, 2001, adjustments were made to the DBMC rates to reflect increased postal costs for handling. The Postal Service introduced a separate 1-pound Parcel Post rate to mitigate increases in rates for lighter weight parcels. Increases in the DBMC rates are not part of any strategy to drive customers to competitors but to provide universal service within the guidelines of the standards that govern the Postal Service. Furthermore, customers who use package consolidators actually pay those consolidators higher rates for these services than the published DDU and DSCF rates.

After full consideration of the comments received the Postal Service believes it appropriate to adopt, without revisions, the proposed changes in eligibility requirements.

The Domestic Mail Manual is revised as follows: These changes are incorporated by reference in the Code of Federal Regulations. See 39 CFR part 111.

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, 3001-3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

2. Amend Domestic Mail Manual (DMM) modules E and L as follows:

Domestic Mail Manual (DMM)

E Eligibility

* * * * *

E600 Standard Mail

* * * * *

E650 Destination Entry

* * * * *

5.0 DBMC DISCOUNT

5.1 Definition

[Amend Exhibit 5.1 by showing realignment of eligible destination ZIP Codes for machinable parcels for the Buffalo ASF and Pittsburgh BMC entry facilities to read as follows:]

Eligible destination ZIP Codes	Entry facility
*         *         *         *         *         *
130-136, 140-149 [Except machinable parcels]	ASF BUFFALO NY 140
150-168, 260-266, 439-447 [Except machinable parcels]	BMC PITTSBURGH PA 15195
130-136, 140-168, 260-266, 439-447 [Machinable parcels only or machinable parcels combined with bedloaded nonmachinable parcels]	BMC PITTSBURGH PA 15195
*         *         *         *         *         *

* * * * *

5.5 Additional Standards for Machinable Parcels

[Amend 5.5a by adding the phrase “except as shown in Exhibit 5.1” to the second sentence to explain when sortation of parcels to ASFs is optional to read as follows:]

* * * * *

a. Destination BMC/ASF Containers. Machinable parcels pallelized under M045 or sacked under M610 may be sorted to destination BMCs under L601 or to destination BMCs and ASFs under L601 and L602. When machinable parcels are sorted to both destination BMCs and ASFs under L601 and L602, they qualify for DBMC rates under 5.2. Except as provided in Exhibit 5.1, sortation of machinable parcels to ASFs is optional but is required for the ASF mail to be eligible for DBMC rates. * * *

* * * * *

E700 Package Services

* * * * *

E750 Destination Entry

E751 Parcel Select

* * * * *

1.0 BASIC STANDARDS

* * * * *

1.3 Definition

[Amend Item and Exhibit 1.3 by showing realignment of eligible destination ZIP Codes for machinable parcels for the Buffalo ASF and Pittsburgh BMC entry facilities to read as follows:]

* * * * *

b. Except as provided in Exhibit 1.3, pieces deposited at each BMC or ASF must be addressed for delivery within the ZIP Code range of that facility.

Eligible destination ZIP Codes	Entry facility
*         *         *         *         *         *
130-136, 140-149 [Except machinable parcels]	ASF BUFFALO NY 140
150-168, 260-266, 439-447 [Except machinable parcels]	BMC PITTSBURGH PA 15195
130-136, 140-168, 260-266, 439-447 [Machinable parcels only or machinable parcels combined with bedloaded nonmachinable parcels]	BMC PITTSBURGH PA 15195
*         *         *         *         *         *

* * * * *

E752 Bound Printed Matter

* * * * *

2.0 Destination Bulk Mail Center (DBMC) Rates

* * * * *

2.3 Presorted Machinable Parcels

[Amend 2.3 by adding the phrase “except as shown in Exhibit E751.1.3” to the third sentence to read as follows:]

Presorted machinable parcels in sacks or on pallets at all sort levels may claim DBMC rates Machinable parcels palletized under M045 or sacked under M722 maybe sorted to destination BMCs under L601 or to destination BMCs and ASFs under L601 and L602. Except as provided in Exhibit E751.1.3, sortstation of machinable parcels to ASFs its optional but is required for the ASF mail to be eligible for DBMC rates. * * *

* * * * *

L Labeling Lists

* * * * *

L600 Standard Mail and Package Services

L601 BMCs

[Amend L601 by revising items to read as follows:]

* * * * *

a. Standard Mail machinable parcels except ASF mail (other than mail for the Buffalo ASF service area) prepared and claimed at DBMC rates. Machinable parcels for the Buffalo ASF service area prepared and claimed at DBMC rates must be sorted to the Pittsburgh BMC.

* * * * *

c. Bound Printed Matter machinable parcels except ASF mail (other than mail for the Buffalo ASF service area) prepared and claimed at DBMC rates. Machinable parcels for the Buffalo ASF service area prepared and claimed at DBMC rates must be sorted to the Pittsburgh BMC.

e. Parcel Post except for ASF mail (other than mail for the Buffalo ASF service area) prepared and claimed at DBMC rates and nonmachinable BMC Presort or OBMC Presort rate mail. Machinable parcels for the Buffalo ASF service area prepared and claimed at DBMC rates must be sorted to the Pittsburgh BMC. Nonmachinable parcels for the Buffalo ASF service area claimed at DBMC rates may be sorted to the Pittsburgh BMC if bedloaded and presented with machinable parcels.

* * * * *

L602 ASFs

Amend L602 by revising L602a, L602c, and L602e to read as follows:]

L602 defines the service area by individual 3-digit ZIP Code prefix for Standard Mail and Package Services mail that must be sorted to ASFs.

Use this list for:

a. Standard Mail machinable parcels if ASF mail (other than mail for the Buffalo ASF service area) is prepared and claimed at DBMC rates. Machinable parcels for the Buffalo ASF service area prepared and claimed at DBMC rates must be sorted to the Pittsburgh BMC under L601.

* * * * *

c. Bound Printed Matter machinable parcels if ASF mail (other than mail for the Buffalo ASF service area) is prepared and claimed at DBMC rates. Machinable parcels for the Buffalo ASF service area prepared and claimed at DBMC rates must be sorted to the Pittsburgh BMC under L601.

* * * * *

e. Parcel Post machinable parcels if ASF mail (other than mail for the Buffalo ASF service area) is prepared and claimed at DBMC rates. Machinable parcels for the Buffalo ASF service area prepared and claimed at DBMC rates must be sorted to the Pittsburgh BMC under L601. Nonmachinable parcels for the Buffalo ASF service area claimed at DBMC rates may be sorted to the Pittsburgh BMC under L601 if bedloaded and presented with machinable parcels.

* * * * *

[An appropriate amendment to 39 CFR part 111.3 will be published to reflect these changes.]

Stanley F. Mires,

Chief Counsel, Legislative.