Administrative Practice and Procedure, Postal Service

 
CONTENT

Federal Register: December 19, 2008 (Volume 73, Number 245)

Rules and Regulations

Page 77512-77517

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

DOCID:fr19de08-8

POSTAL REGULATORY COMMISSION 39 CFR Part 3020

Docket Nos. MC2009-8 and CP2009-9; Order No. 147

Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

SUMMARY: The Commission is adding a new international mail product to the Competitive Product List. This product is a contract between the

United States Postal Service and Canada Post for inbound competitive services. It modifies and extends an existing agreement. The

Commission's action is consistent with changes to applicable federal law and regulations and with a recent Postal Service request.

Republication of the lists of market dominant and competitive products is also consistent with requirements in the law.

DATES: Effective December 19, 2008.

ADDRESSES: Submit comments electronically via the Commission's Filing

Online system at http://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 202-789-6820 and stephen.sharfman@prc.gov.

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 70681 (November 21, 2008).

The Postal Service seeks to add a new product identified as Canada

Post-United States Postal Service Contractual Bilateral Agreement for

Inbound Competitive Services (MC2009-8 and CP2009-9) to the Competitive

Product List. For the reasons discussed below, the Commission approves the Request.

  1. Background

    On November 13, 2008, the Postal Service filed a formal request pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add the Canada

    Post-United States Postal Service Contractual Bilateral Agreement for

    Inbound Competitive Services (Bilateral Agreement) to the Competitive

    Product List.\1\ The Postal Service asserts that the Contractual

    Bilateral Agreement 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. MC2009-8.

    \1\ Request of United States Postal Service to Add Canada Post-

    United States Postal Service Contractual Bilateral Agreement for

    Inbound Competitive Services to the Competitive Product List, and

    Notice of Filing (Under Seal) the Enabling Governors' Decision and

    Agreement, November 13, 2008 (Request).

    The Postal Service contemporaneously filed notice, pursuant to 39

    U.S.C. 3632(b)(3) and 39 CFR 3015.5, that the Governors have established prices and classifications not of general applicability for inbound competitive services as reflected in the Bilateral Agreement.

    More specifically, the Bilateral Agreement, which has been assigned

    Docket No. CP2009-9, governs the exchange of Inbound Surface Parcel

    Post from Canada.

    In support of its Request, the Postal Service filed a redacted version of the Governors' Decision establishing prices for the

    Bilateral Agreement. Attached to the Governors' Decision are proposed

    Mail Classification Schedule language; a redacted version of management's analysis of the Bilateral Agreement; certification of compliance with 39 U.S.C. 3633(a); certification of the Governors' vote; \2\ and a Statement of Supporting Justification as required by 39

    CFR 3020.32.\3\ In addition, the Postal

    Page 77513

    Service indicates that it filed an unredacted copy of the Governors'

    Decision, the Bilateral Agreement, and other supporting documents designed to establish compliance with 39 CFR 3015.5 under seal. Request at 2, n.2.

    \2\ See Attachment 1 to the Request.

    \3\ See Attachment 2 to the Request.

    In the Statement of Supporting Justification, Lea Emerson,

    Executive Director, International Postal Affairs, asserts that ``[t]he addition of the [Bilateral] Agreement as a competitive product will enable the Commission to verify that the agreement covers its attributable costs and enables competitive products, as a whole, to make a positive contribution to coverage of institutional costs.'' Id. at 2. W. Ashley Lyons, Manager, Corporate Financial Planning, Finance

    Department, certifies that the contract complies with 39 U.S.C. 3633(a). Request, Attachment C. He observes that the Bilateral

    Agreement ``should not impair the ability of competitive products on the whole to cover an appropriate share of institutional costs.''Id.

    The Postal Service filed much of the supporting materials, including the Governors' Decision and the Bilateral Agreement, under seal. It maintains that the Bilateral Agreement, related financial information, and the Governor's Decision should remain under seal as they contain pricing, cost, and other information that are highly confidential. Request at 2.\4\

    \4\ The Postal Service indicates that the materials filed under seal constitute a subset of the overarching agreement between the parties, representing the parties' agreement concerning inbound competitive services. The Postal Service further indicates that the parties anticipate finalizing ``this and related agreements by mid-

    December, and any lingering details will not affect the rates, classification, or other fundamental basis for this Request and

    Notice.'' Request at 5, n.12.

    The Postal Service has an existing bilateral agreement with Canada

    Post which is set to expire December 31, 2008. Id. at 3. The new prices and classifications modify the current agreement, extend it for 1 year, and are scheduled to take effect January 1, 2009, or ``after filing with and review by the Postal Regulatory Commission, whichever, is later.'' Request, Attachment 1, at 2.

    In Order No. 134, the Commission gave notice of the two dockets, appointed a public representative, and provided the public with an opportunity to comment.\5\ Pursuant to 39 CFR 3015.6, Chairman's

    Information Request No.1 was issued November 24, 2008. The Postal

    Service filed its response on December 1, 2008 as requested.\6\

    \5\ PRC Order No. 134, Notice and Order Concerning Bilateral

    Agreement with Canada Post For Inbound Competitive Services,

    November 18, 2008 (Order No. 134).

    \6\ Response of United States Postal Service to Chairman's

    Information Request No. 1 and Notice of Filing of Responsive

    Materials (Under Seal) December 1, 2008 (Response).

  2. Comments

    Comments were filed by the Public Representative.\7\ 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 3-4.

    \7\ Public Representative Comments in Response to United States

    Postal Service Request to add Canada Post-United States Postal

    Service Contractual Bilateral Agreement for Inbound Competitive

    Services, to the Competitive Product List, and Notice of Filing

    (Under Seal) the Enabling Governors' Decision and Agreement,

    December 3, 2008 (Public Representative Comments).

    The Public Representative states that a sufficient rationale for maintaining the confidentiality of the documents under seal has been provided by the Postal Service. He reviewed the cost savings measures for the contract and determined that the contract is advantageous to the Postal Service and beneficial to the general public. Id. He notes that the Commission's 2007 Annual Compliance Determination (ACD) found that Inbound Surface Parcel Post under the bilateral agreement with

    Canada incurred a loss and the Postal Service is attempting to remedy this issue with this agreement.\8\ Additionally, he observes that the pay-for-performance standards will improve the performance of both postal administrations. He concludes, inter alia, that the contract appears to meet each element of 39 U.S.C. 3633(a). Id. at 2.

    \8\ In the ACD summary of International Mail, issued March 27, 2008, the Commission concludes that revenue for competitive Inbound

    Surface Parcel Post (at non-UPU rates) did not cover its corresponding attributable costs by a relatively small amount.

  3. Commission Analysis

    The Commission has reviewed the contract, the financial analysis provided under seal that accompanies it, the additional information filed by the Postal Service in response to the Chairman's Information

    Request, and the comments filed by the Public Representative.

    Statutory requirements. The Commission's statutory responsibilities in this instance entail assigning the Bilateral Agreement with Canada

    Post for Inbound Competitive Services 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 the

    Bilateral Agreement with Canada Post for Inbound Competitive Services 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 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).

    In Docket No. RM2007-1, Order No. 43, the Commission determined that Inbound Surface Parcel Post shipments tendered at negotiated rates are appropriately classified as competitive. The Canada Post Bilateral

    Agreement falls within this category.

    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 2, 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.

    Finally, the Postal Service states that the market for international parcel delivery services is highly competitive and that the agreement provides a benefit to Canada Post's and the Postal Service's small business customers by providing an additional option for shipping articles between the United States and Canada. It concludes that there should be little, if any negative impact on small business. Id. at 4.

    No commenter opposes the proposed classification of the Canada

    Post-United States Postal Service Contractual Bilateral Agreement for

    Inbound Competitive Services, as competitive.

    Page 77514

    Having considered the statutory requirements and the support offered by the Postal Service, the Commission finds that the Canada Post-United

    Postal Service Contractual Bilateral Agreement for Inbound Competitive

    Services 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 product for Inbound Surface Parcel Post from Canada. The Postal

    Service asserts the rates provide financial benefits for inbound competitive services which are better than those that would exist if the rates used are set by the Universal Postal Union (UPU) treaty.

    Request, Attachment 1B, at 1.

    The Postal Service contends, as mentioned in the comments of the

    Public Representative, adding the Canada Post-United States Postal

    Service Contractual Bilateral Agreement for Inbound Competitive

    Services product will result in better cost coverage for Inbound

    Surface Parcel Post and address the Commission's concern about cost coverage as expressed in the Annual Compliance Determination for Fiscal

    Year 2007. The Commission's summary and findings for International Mail concluded that revenues for corresponding competitive Inbound Surface

    Parcel Post at non-UPU rates did not provide revenues that covered attributable costs. The Postal Service states that its financial analysis of the new prices negotiated in this agreement shows that this contract covers its attributable costs, and does not result in subsidization of competitive products by market dominant products and should not impair the ability of competitive products on the whole to cover an appropriate share of institutional costs. Id., Attachment 1C, at 1.

    Based on the data submitted and the comments received, the

    Commission finds that Canada Post-United States Postal Service

    Contractual Bilateral Agreement for Inbound Competitive Services 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 Canada Post-United

    States Postal Service Contractual Bilateral Agreement for Inbound

    Competitive Services indicates that it comports with the provisions applicable to rates for competitive products.

    It is our understanding that this contract extension will terminate

    December 31, 2009. If this is not the case, 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 the Canada Post-United

    States Postal Service Contractual Bilateral Agreement for Inbound

    Competitive Services 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.

  4. Ordering Paragraphs

    It is Ordered: 1. Canada Post-United States Postal Service Contractual Bilateral

    Agreement for Inbound Competitive Services (MC2009-8 and CP2009-9) is added to the Competitive Product List as a new product under

    International Inbound Surface Parcel Post (at non-UPU) rates. 2. The Secretary shall arrange for the 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.

    Steven W. Williams,

    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 to read as follows:

    Appendix A to Subpart A of 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

    Page 77515

    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]

    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]

    Page 77516

    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)

    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 & Priority Mail Contract 1 (MC2009-6 and CP2009-7)

    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)

    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]

    Page 77517

    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]

    FR Doc. E8-30169 Filed 12-18-08; 8:45 am

    BILLING CODE 7710-FW-P