New Postal Product

Federal Register: January 11, 2010 (Volume 75, Number 6)

Rules and Regulations

Page 1280-1284

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

DOCID:fr11ja10-8

POSTAL REGULATORY COMMISSION 39 CFR Part 3020

Docket Nos. MC2010-6 and CP2010-6; Order No. 360

New Postal Product

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

SUMMARY: The Commission is adding Express Mail Contract 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 January 11, 2010 and is applicable beginning December 15, 2009.

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

SUPPLEMENTARY INFORMATION: Regulatory History, 74 FR 57537 (November 6, 2009).

1. Introduction

2. Background

3. Comments

4. Commission Analysis

5. Ordering Paragraphs

1. Introduction

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

   Mail Contract 6 to the Competitive Product List. For the reasons discussed below, the Commission approves the Request.

2. Background

   At the end of October 2009, the Postal Service filed a formal request and associated supporting information pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30 et seq. to add Express Mail Contract 6 to the

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

   Express Mail Contract 6 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. MC2010-6.

   \1\ Request of the United States Postal Service to Add Express

   Mail Contract 6 to Competitive Product List and Notice of Filing

   (Under Seal) of Contract and Supporting Data, October 28, 2009

   (Request). On October 29, 2009, the Postal Service filed errata to its Request. See Notice of the United States Postal Service of

   Filing Errata to Request and Notice, October 29, 2009. Accordingly, the filing of the entire set of documents related to this Request was not completed until October 29, 2009.

   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. CP2010-6.

   In support of its Request, the Postal Service filed the following materials: (1) A redacted version of the Governors' Decision authorizing certain types of Express Mail contracts;\2\ (2) a redacted version of the contract;\3\ (3) a requested change in the Mail

   Classification Schedule product list;\4\ (4) a Statement of Supporting

   Justification as required by 39 CFR 3020.32;\5\ (5) a certification of compliance with 39 U.S.C. 3633(a);\6\ and (6) an application for non- public treatment of the materials filed under seal.\7\ The redacted version of the contract provides that the contract is terminable on 30 days' notice by either party, but could continue for 3 years from the effective date subject to annual price adjustments. Request, Attachment

   B.

   \2\ Attachment A to the Request, reflecting Governors' Decision

   No. 09-14, October 26, 2009.

   \3\ Attachment B to the Request.

   \4\ Attachment C to the Request.

   \5\ Attachment D to the Request.

   \6\ Attachment E to the Request.

   \7\ Attachment F to the Request.

   In the Statement of Supporting Justification, Mary Prince Anderson,

   Acting 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. W. Ashley Lyons, Manager,

   Regulatory Reporting and Cost Analysis, Finance Department, certifies that the contract complies with 39 U.S.C. 3633(a). Id., Attachment E.

   The Postal Service filed much of the supporting materials, including the supporting data and the unredacted contract, under seal.

   The Postal Service maintains that the contract and related financial information, including the customer's name and the accompanying analyses that provide prices, certain terms and conditions, and financial projections, should remain confidential. Id., Attachment F, at 2-3.\8\

   \8\ In its application for non-public treatment, the Postal

   Service requests an indefinite extension of non-public treatment of customer-identifying information. Id. at 7. For the reasons discussed in PRC Order No. 323, that request is denied. See, e.g.,

   Docket No. MC2010-1 and CP2010-1, Order Concerning Priority Mail

   Contract 19 Negotiated Service Agreement, October 26, 2009 (Order

   No. 323).

   Page 1281

   In Order No. 330, the Commission gave notice of the two dockets, appointed a public representative, and provided the public with an opportunity to comment.\9\ On November 2, 2009, Chairman's Information

   Request No. 1 (CHIR No. 1) was filed. The due date for responding to

   CHIR No. 1 was set as November 9, 2009. On November 13, 2009, the

   Postal Service filed a partial response to CHIR No. 1.\10\ Seeking clarification of information contained in the Postal Service's November 13, 2009 partial response, Chairman's Information Request No. 2 (CHIR

   No. 2) was filed on November 16, 2009.\11\ The Postal Service responded to CHIR No. 2 on November 19, 2009.\12\ On December 9, 2009, the Postal

   Service filed its response to the outstanding questions in CHIR No. 1.\13\

   \9\ PRC Order No. 330, Notice and Order Concerning Express Mail

   Contract 6 Negotiated Service Agreement, October 30, 2009 (Order No. 330).

   \10\ Notice of the United States Postal Service of Filing

   Responses to Chairman's Information Request No. 1, Question 1,

   Subparts (b)-(d), Under Seal, November 13, 2009 (Partial Response to

   CHIR No. 1). With its Partial Response to CHIR No. 1, the Postal

   Service also filed a motion for late acceptance which contained an explanation of the reason for the delay and the issues with responding to the remaining information requests. Motion of the

   United States Postal Service for Late Acceptance of Responses to

   Chairman's Information Request No. 1, November 13, 2009. The motion is granted.

   \11\ Notice of Filing of Chairman's Information Request No. 2

   Under Seal, November 16, 2009.

   \12\ Notice of the United States Postal Service of Filing

   Response to Chairman's Information Request No. 2, Under Seal,

   November 19, 2009.

   \13\ Notice of the United States Postal Service of Filing

   Response to Chairman's Information Request No. 1, Question 1(a),

   Under Seal, December 9, 2009 (Remaining Response to CHIR No. 1).

   With its Remaining Response to CHIR No. 1, the Postal Service filed a motion for late acceptance of that response. Motion of the United

   States Postal Service for Late Acceptance of Response to Chairman's

   Information Request No. 1, Question 1(a), December 9, 2009. The motion is granted, although the Postal Service should be aware that the significant delay in the Commission's decision in this case is directly related to the delay in the Postal Service's filing of this response.

3. Comments

   Comments were timely filed by the Public Representative on November 9, 2009.\14\ No comments were submitted by other interested parties.

   The Public Representative states that the Postal Service's filing meets the pertinent provisions of title 39 and the relevant Commission rules.

   Id. at 1-3. He further states that the agreement is fair to the parties and employs pricing terms favorable to the customer, the Postal

   Service, and thereby, the public. Id. at 4-5. The Public Representative also believes that the Postal Service has provided appropriate justification for maintaining confidentiality in this case. Id. at 3.

   \14\ Public Representative Comments in Response to United States

   Postal Service Request to Add Express Mail Contract 6 to the

   Competitive Product List, November 9, 2009 (Public Representative

   Comments).

4. Commission Analysis

   The Commission has reviewed the Request, the contract, the financial analysis provided under seal that accompanies the Request, the responses to CHIR Nos. 1 and 2, and the comments filed by the

   Public Representative.

   Statutory requirements. The Commission's statutory responsibilities in this instance entail assigning Express Mail Contract 6 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 Express

   Mail Contract 6 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 consists 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, para. (d). 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 Competitive Product List to effectuate the negotiated contractual terms. Id., para. (g). 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., para. (h).

   No commenter opposes the proposed classification of Express Mail

   Contract 6 as competitive. Having considered the statutory requirements and the support offered by the Postal Service, the Commission finds that Express Mail Contract 6 is appropriately classified as a competitive product and should be added to the Competitive Product

   List.

   Cost considerations. In its initial filings, the Postal Service presented an incomplete financial analysis of Express Mail Contract 6.

   The incomplete initial filings did not allow the Commission to undertake the required analysis of Express Mail Contract 6 until the

   Postal Service fully responded to CHIR Nos. 1 and 2. Because the Postal

   Service did not fully respond to CHIR No. 1 until December 9, 2009, the

   Commission could not begin its analysis until that time. Even then, further informal follow-up to the Postal Service's responses to CHIR

   No. 1 were necessary for a complete understanding of the data.

   Based on the data and explanations submitted, the Commission finds that Express Mail Contract 6 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 proposed Express Mail Contract 6 indicates that it comports with the provisions applicable to rates for competitive products. The

   Commission's analysis is provided in Library Reference PRC-CP2010-6-NP-

   LR1 which is being filed under seal.

   Other considerations. The Postal Service shall notify the

   Commission if termination occurs prior to the scheduled termination date. Following the scheduled termination date of the agreement, the

   Commission will remove the product from the Competitive Product List.

   Further, while the Commission currently believes that the contract is expected to comply with the applicable requirements of 39 U.S.C. 3633, the

   Page 1282

   Commission seeks to ensure that it is provided with the proper level of detail to make appropriate findings in the FY 2010 Annual Compliance

   Determination (ACD) with respect to this contract. To that end, the

   Postal Service should view Library Reference PRC-CP2010-6-NP-LR1 as illustrative of the granularity of the information to be reported with respect to this contract.

   In conclusion, the Commission approves Express Mail Contract 6 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.

5. Ordering Paragraphs

   It is ordered: 1. Express Mail Contract 6 (MC2010-6 and CP2010-6) is added to the

   Competitive Product List as a new product under Negotiated Service

   Agreements, Domestic. 2. The Postal Service shall notify the Commission if termination occurs prior to the scheduled termination date. 3. The Postal Service shall view Library Reference PRC-CP2010-6-NP-

   LR1 as illustrative of the level of detail of information that the

   Commission seeks with respect to this contract in connection with the

   FY 2010 Annual Compliance Determination proceeding. 4. 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.

   Shoshana M. Grove,

   Secretary. 0

   For the reasons discussed in the preamble, the Postal Regulatory

   Commission amends chapter III of title 39 of the Code of Federal

   Regulations as follows:

   PART 3020--PRODUCT LISTS 0 1. The authority citation for part 3020 continues to read as follows:

   Authority: 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*COM041*

   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

   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 Forward

   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

   Page 1283

   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 Contract 5 (MC2010-5 and CP2010-5)

   Express Mail Contract 6 (MC2010--6 and CP2010-6)

   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 1 (MC2009-11 and

   CP2009-13)

   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)

   Priority Mail Contract 18 (MC2009-42 and CP2009-63)

   Priority Mail Contract 19 (MC2010-1 and CP2010-1)

   Priority Mail Contract 20 (MC2010-2 and CP2010-2)

   Priority Mail Contract 21 (MC2010-3 and CP2010-3)

   Priority Mail Contract 22 (MC2010-4 and CP2010-4)

   Priority Mail Contract 23 (MC2010-9 and CP2010-9)

   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, 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)

   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

   Page 1284

   Reserved for Group Description

   International

   Reserved for Group Description

   International Priority Airlift (IPA)

   Reserved for Product Description

   International Surface Airlift (ISAL)

   Reserved for Prduct 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. 2010-178 Filed 01-08-10; 8:45 am

   BILLING CODE 7710-FW-S