New Postal Product
Federal Register: October 5, 2009 (Volume 74, Number 191)
Rules and Regulations
Page 51078-51082
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DOCID:fr05oc09-5
POSTAL REGULATORY COMMISSION 39 CFR Part 3020
Docket No. CP2009-62; Order No. 296
New Postal Product
AGENCY: Postal Regulatory Commission.
ACTION: Final rule.
SUMMARY: The Commission is adding Inbound Direct Entry Contracts with
Foreign Postal Administrations (MC2008-6) to the Competitive Product
List. This action is consistent with changes in a recent law governing postal operations. Republication of the lists of market dominant and competitive products is also consistent with new requirements in the law.
DATES: Effective October 5, 2009 and is applicable beginning September 4, 2009.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 202-789-6820 or stephen.sharfman@prc.gov.
SUPPLEMENTARY INFORMATION: Regulatory History, 74 FR 44880 (August 31, 2009).
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Introduction
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Background
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Comments
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Commission Analysis
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Ordering Paragraphs
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Introduction
The Postal Service requests to add a new Inbound Direct Entry (IDE) contract to the Inbound Direct Entry Contracts with Foreign Postal
Administrations product established in Docket No. MC2008-6.\1\ In its filing, the Postal Service also requests to have the instant contract designated as the new baseline agreement for purposes of determining the functional equivalence of future IDE contracts. Id. at 2. For the reasons discussed below, the Commission approves the addition of the instant contract to the Competitive Product List as a new product,
Inbound Direct Entry Contracts with Foreign Postal Administrations 1
(referred to hereinafter as IDE 1).
\1\ Notice of United States Postal Service of Filing
Functionally Equivalent Inbound Direct Entry Contracts Negotiated
Service Agreement, August 21, 2009 (Notice).
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Background
On August 21, 2009, the Postal Service filed a notice pursuant to 39 U.S.C. 3633 and 39 CFR 3015.5 announcing that it has entered into an
Inbound Direct Entry (IDE) contract with New Zealand Post Limited
(NZP), the public postal operator of New Zealand. It states that the
NZP agreement is functionally equivalent to previously established IDE contracts filed in Docket Nos. CP2008-14, CP2008-15 and CP2009-41. Id. at 1. The IDE product allows the Postal Service to provide foreign postal administrations with the ability to ship sacks of parcels that are pre-labeled for direct entry into the Postal Service's mailstream in exchange for applicable domestic postage plus a sack handling fee.
The core of the service is the sack handling and entry as domestic mail.
The Postal Service also publicly filed a redacted version of the contract, an application for non-public treatment of supporting materials, a certified statement required by 39 CFR 3015(c)(2), a redacted version of the Governors' Decision that authorizes IDE contracts, and a redacted version of the supporting financial information. The contract and supporting financial information were filed under seal.
The Notice states that the instant contract is functionally equivalent to the IDE contracts previously submitted, fits within the
Mail Classification Schedule (MCS) language included in Attachment A to
Governors' Decision No. 08-6, and should be included within the IDE contracts product. Id. at 2. In Order No. 105, the Commission approved the individual IDE contracts in Docket No. MC2008-6 as functionally equivalent and added the contracts to the Competitive Product List as one product under the IDE classification.\2\
\2\ See Docket Nos. MC2008-6, CP2008-14 and CP2008-15, Order
Concerning Prices Under Inbound Direct Entry Contracts With Certain
Foreign Postal Administrations, September 4, 2008, at 8 (Order No. 105).
Page 51079
The Postal Service includes by reference its arguments regarding the functional equivalence to the IDE contracts as indicated in Docket
Nos. CP2008-14 and CP2008-15, with three noted exceptions. Notice at 3
(footnote omitted). The instant IDE contract, it claims, resembles the contracts in Docket Nos. CP2008-14 and CP2008-15, except as to the provisions on the term, confidentiality, and payment account details.
Id. at 3-4.
The Postal Service maintains that some materials should remain under seal including certain portions of the contract and certified statement required by 39 CFR 3015.5(c)(2), related financial information, portions of the certified statement which contain costs and pricing, as well as the accompanying analyses that provide prices, terms, conditions, and financial projections. Id. at 2-3.
The Postal Service will notify the customer of the effective date of the contact within 30 days after receiving all regulatory approvals.
The contract term is 1 year from the effective date, but will be renewed automatically until terminated by the parties.
In Order No. 289, the Commission gave notice of this docket, appointed a Public Representative, and provided the public with an opportunity to comment.\3\
\3\ PRC Order No. 289, Notice and Order Concerning Filing of
Functionally Equivalent Inbound Direct Entry Contracts Negotiated
Service Agreement, August 25, 2009 (Order No. 289).
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Comments
Comments were filed by the Public Representative.\4\ No other interested persons submitted comments. The Public Representative states that ``[e]ach pertinent element of 39 U.S.C. 3632, 3622, and 3642 appears to be met by this contract.'' Id. at 1. He also notes that each element of 39 U.S.C. 3633(a) appears to be met by this additional IDE contract. Id. at 5. The pricing, in light of supporting documentation filed under seal, appears adequate and compliant.\5\ Id. The Public
Representative concludes that the contract appears to be functionally equivalent to the other contracts within the IDE contract product
(MC2008-6) classification, and the contract contains pricing incentives and other provisions beneficial to both the Postal Service and the general public.\6\ Without opposing the proposal to treat the NZP agreement as a new baseline, he does question why a functionally equivalent agreement should create a new baseline. Id. at 4. He underscores that the MCS must retain precision to preclude erosion of accountability and transparency. Id. As a safeguard, he proposes that the Postal Service outline in its future notices of any functionally equivalent agreement material distinctions and similarities. Id.
\4\ Public Representative Comments in Response to United States
Postal Service Request to Add Inbound Direct Entry Contract to the
Competitive Products List, September 3, 2009 (Public Representative
Comments). The Public Representative filed an accompanying Motion of the Public Representative for Late Acceptance of Comments in
Response to United States Postal Service Request to Add Inbound
Direct Entry Contract to the Competitive Product List, September 3, 2009. The motion is granted.
\5\ The Public Representative determines that the Postal Service has provided adequate justification for maintaining confidentiality in this case. Id. at 2. He affirms that his review of the materials filed under seal indicates that the instant contract complies with the pricing formula for IDE contracts.
\6\ Id. at 1 and 3. He also concurs that the agreement appears to satisfy costing requirements, but seeks clarity in the process.
Id. at 4-5, citing 39 CFR 3020.13(b)(3).
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Commission Analysis
The three main issues in this proceeding are whether the agreement satisfies 39 U.S.C. 3633, and the interrelated issue of whether the instant contract is functionally equivalent with previously filed IDE contracts; and whether it should be classified as a baseline for future
IDE contracts.\7\ In reaching its conclusions, the Commission has reviewed the Notice, the agreement and the financial analyses provided under seal, and the Public Representative's comments.
\7\ Previously, the Commission found the Inbound Direct
Contracts product to be properly classified as a competitive product. See Order No. 105 at 7; see also 36 U.S.C. 3642(d).
Statutory requirements. The Postal Service contends that the instant agreement and supporting documents filed in this docket establish compliance with the statutory provisions applicable to rates for competitive products (39 U.S.C. 3633). Notice at 2. It asserts that
Governors' Decision No. 08-6 supporting this agreement establishes a pricing formula and classification that ensures each contract meets the criteria of 39 U.S.C. 3633 and the regulations promulgated thereunder.
It further states that the previously proposed IDE MCS language requires each contract to cover its attributable costs. Id. at 3.
During the review of the Postal Service's financial supporting documentation, the Commission found discrepancies between (a) the supporting financial material, and (b) the contract rate provisions.
The financial supporting documentation uses rates in effect prior to the May 11, 2009 increase in prices for market dominant products.\8\
The contract, however, contains the rates currently in effect.
Additionally, the contract is based on Priority Mail commercial rates; however, the financial supporting documentation uses Priority Mail retail rates. These discrepancies did not adversely affect cost coverage for the contract. The Commission found these same discrepancies in Docket No. CP2009-41 and highlighted them in Order No. 248.\9\
\8\ See Docket No. R2009-2, Order Approving Revisions in Amended
Notice of Market Dominant Price Adjustment, April 9, 2009. The
Postal Service filed rates to become effective May 11, 2009.
\9\ Docket No. CP2009-41, Order Concerning Filing of
Functionally Equivalent Inbound Direct Entry Contracts Negotiated
Service Agreement, July 15, 2009 (Order No. 248).
Based on the data submitted and its analysis, the Commission finds that the agreement 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 agreement indicates that it comports with the provisions applicable to rates for competitive products.
Functional equivalence/baseline treatment. The Postal Service asserts that the instant contract is functionally equivalent to the IDE contracts filed previously because it shares similar cost and market characteristics, and therefore the contract should be classified as a single product. Notice at 3. The Postal Service notes, however, that the instant contract includes provisions not contained in the earlier
IDE contracts. Id. These differences include: (1) Renewal can result automatically, without the parties' mutual agreement; (2) confidentiality duties that comport with the Commission's new confidentiality rules, and are governed in the text of the agreement rather than under an annex; and (3) the payment methods that are comparable to the terms in Docket No. CP2008-15, but not other prior
IDE contracts.\10\ Id. at 4.
\10\ The present contract differs from Docket No. CP2008-14, which did not use the Centralized Trust Account payment method, and
Docket No. CP2009-41, which included an annex based on foreign financial regulatory requirements.
The Postal Service also requests that the instant contract be considered a new baseline for future functional equivalent comparisons
``[b]ecause future IDE Contracts are likely to resemble this contract in form and substance. Notice at 2. The Postal Service also explains
Page 51080
that the text of the earlier IDE contracts contain different extension terms, confidentiality, and payment account detail provisions, and it intends to incorporate the new provisions into subsequent IDE contracts. Thus, it expects ``future IDE Contracts to resemble the instant contract more closely than those in Docket Nos. CP2008-14 and
CP2008-15.'' Id. at 4.
In lieu of ruling on the functional equivalence of the instant contract to those previously filed, the Commission concludes, for reasons of accountability and transparency as suggested by the Public
Representative, that the more appropriate outcome is to add the instant contract to the Competitive Product List as a new product, IDE 1. In approving the initial IDE contract, it was the Commission's expectation that it would be followed by additional IDE contracts that may exhibit sufficient variation from the initial contract to warrant being classified as a new product, e.g., IDE 2, IDE 3, etc. Given the Postal
Service's intent to use the instant contract as a template for future
IDE contracts and that it contains provisions not included in the earlier IDE contracts, the Commission will label the instant contract as a new product, IDE 1. To the extent that future IDE contracts with foreign posts are (substantially) based on the instant contract, the
Postal Service may seek to have them classified as functionally equivalent. To the extent that such future contracts differ substantially, the Postal Service should file a request, pursuant to 39
CFR 3020.1 et seq., to add a new product to the Competitive Product
List.\11\
\11\ As the Commission recently noted in Order No. 290,
`[f]uture requests to implement a new baseline agreement should be filed as an MC docket since it will result in adding a new product to the product list and may result in removing a product from the product list.'' Docket No. CP2009-50, Order Granting Clarification and Adding Global Expedited Package Services 2 to the Competitive
Product List, August 28, 2009 (Order No. 290).
Following the current practice, the Postal Service shall identify all significant differences between any new IDE contract and the IDE 1 product. Such differences would include terms and conditions that impose new obligations or new requirements on any party to the contract. In addition, and consistent with the current practice, a redacted copy of Governors' Decision No. 08-6 should be included in the new filing.
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Ordering Paragraphs
It is ordered: 1. A new subcategory titled ``Inbound Direct Entry Contracts with
Foreign Postal Administrations'' shall be created under the Inbound
International category appearing in the Competitive Product list. This subcategory will include all individual Inbound Direct Entry Contracts with Foreign Postal Administrations products. 2. The existing product titled ``Inbound Direct Entry Contracts with Foreign Postal Administrations (MC2008-6, CP2008-14 and CP2008- 15)'' shall appear under the subcategory Inbound Direct Entry Contracts with Foreign Postal Administrations until each of the individual contracts within this product has expired. 3. The IDE contract filed in Docket No. CP2009-62 is added to the
Competitive Product List as a new product, ``Inbound Direct Entry
Contracts with Foreign Postal Administrations 1 (MC2008-6, CP2009-62)'' and shall appear under the subcategory Inbound Direct Entry Contracts with Foreign Postal Administrations. 4. The Postal Service shall notify the Commission of the scheduled effective date and termination date and update the Commission if the contract terminates at an earlier date. 5. The Secretary shall arrange for publication of this order in the
Federal Register.
List of Subjects in 39 CFR Part 3020
Administrative practice and procedure; Postal Service.
By the Commission.
Judith M. Grady,
Acting 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 part 3020 as follows:
PART 3020--PRODUCT LISTS 0 1. The authority citation for part 3020 continues to read as follows:
Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682. 0 2. Revise Appendix A to Subpart A of Part 3020--Mail Classification
Schedule to read as follows:
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
Inbound International
Canada Post--United States Postal Service Contractual Bilateral
Agreement for Inbound Market Dominant Services
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
Page 51081
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
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 2000 Competitive Product List
Express Mail
Express Mail
Outbound International Expedited Services
Inbound International Expedited Services
Inbound International Expedited Services 1 (CP2008-7)
Inbound International Expedited Services 2 (MC2009-10 and
CP2009-12)
Priority Mail
Priority Mail
Outbound Priority Mail International
Inbound Air Parcel Post
Royal Mail Group Inbound Air Parcel Post Agreement
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)
Canada Post--United States Postal Service Contractual Bilateral
Agreement for Inbound Competitive Services (MC2009-8 and CP2009-9)
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)
Express Mail Contract 3 (MC2009-15 and CP2009-21)
Express Mail Contract 4 (MC2009-34 and CP2009-45)
Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7)
Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009- 14)
Express Mail & Priority Mail Contract 3 (MC2009-13 and CP2009- 17)
Express Mail & Priority Mail Contract 4 (MC2009-17 and CP2009- 24)
Express Mail & Priority Mail Contract 5 (MC2009-18 and CP2009- 25)
Express Mail & Priority Mail Contract 6 (MC2009-31 and CP2009- 42)
Express Mail & Priority Mail Contract 7 (MC2009-32 and CP2009- 43)
Express Mail & Priority Mail Contract 8 (MC2009-33 and CP2009- 44)
Parcel Select & Parcel Return Service Contract 2 (MC2009-40 and
CP2009-61)
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)
Priority Mail Contract 4 (MC2009-5 and CP2009-6)
Priority Mail Contract 5 (MC2009-21 and CP2009-26)
Priority Mail Contract 6 (MC2009-25 and CP2009-30)
Priority Mail Contract 7 (MC2009-25 and CP2009-31)
Priority Mail Contract 8 (MC2009-25 and CP2009-32)
Priority Mail Contract 9 (MC2009-25 and CP2009-33)
Priority Mail Contract 10 (MC2009-25 and CP2009-34)
Priority Mail Contract 11 (MC2009-27 and CP2009-37)
Priority Mail Contract 12 (MC2009-28 and CP2009-38)
Priority Mail Contract 13 (MC2009-29 and CP2009-39)
Priority Mail Contract 14 (MC2009-30 and CP2009-40)
Priority Mail Contract 15 (MC2009-35 and CP2009-54)
Priority Mail Contract 16 (MC2009-36 and CP2009-55)
Priority Mail Contract 17 (MC2009-37 and CP2009-56)
Outbound International
Direct Entry Parcels Contracts
Direct Entry Parcels 1 (MC2009-26 and CP2009-36)
Global Direct Contracts (MC2009-9, CP2009-10, and CP2009-11)
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 Expedited Package Services 2 (CP2009-50)
Global Plus Contracts
Global Plus 1 (CP2008-8, CP2008-46 and CP2009-47)
Global Plus 2 (MC2008-7, CP2008-48 and CP2008-49)
Inbound International
Inbound Direct Entry Contracts with Foreign Postal
Administrations
Inbound Direct Entry Contracts with Foreign Postal
Administrations (MC2008-6, CP2008-14 and MC2008-15)
Inbound Direct Entry Contracts with Foreign Postal
Administrations 1 (MC2008-6 and CP2009-62)
Page 51082
International Business Reply Service Competitive Contract 1
(MC2009-14 and CP2009-20)
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]
FR Doc. E9-23895 Filed 10-2-09; 8:45 am
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