Postage meters: Manufacture and distribution; authorization,

[Federal Register: November 18, 2002 (Volume 67, Number 222)]

[Rules and Regulations]

[Page 69478-69479]

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

[DOCID:fr18no02-4]

POSTAL SERVICE

39 CFR Part 501

Authorization To Manufacture and Distribute Postage Meters

AGENCY: Postal Service.

ACTION: Final rule.

SUMMARY: This final rule amends the regulations for inspecting postage meter production facilities that are located outside the continental United States. This rule requires the manufacturer to reimburse the Postal Service for certain costs incurred by required inspections of production facilities located outside the continental United States.

DATES: The rule is effective November 18, 2002.

FOR FURTHER INFORMATION CONTACT: Wayne Wilkerson, manager of Postage Technology Management, at 703-292-3782, or by fax at 703-292-4050.

SUPPLEMENTARY INFORMATION: Title 39, Code of Federal Regulations (CFR) part 501, Authorization to Manufacture and Distribute Postage Meters, requires the Postal Service to inspect meter production facilities to determine if the facilities satisfy Postal Service requirements for meter and component security and production quality. A manufacturer may have valid business reasons for selecting a particular location for its production facilities. However, when a manufacturer chooses to locate these facilities outside the continental United States, conducting the required inspections of such facilities places an undue cost burden on the Postal Service. The Postal Service is requiring the manufacturer to reimburse the travel-related costs.

The proposed rule was published in the Federal Register on May 9, 2002 [Vol. 67, No. 90, page 31168], with a request for submission of comments by June 10, 2002. We received two submissions from postage meter manufacturers in response to the solicitation of public comments. The Postal Service gave thorough consideration to the comments it received, modified the proposed rule as appropriate, and now announces the adoption of the final rule.

Discussion of Comments

1. Both commenters opposed having the provider become responsible for the costs incurred by the Postal Service when it conducts required inspections of provider facilities located outside the continental U.S. One commenter claimed that this requirement is both unfair and unreasonable, since it puts an undue burden on a company with production facilities outside the U.S., and therefore places non-U.S.- based companies at a disadvantage. The commenter also noted that in the global economy, it is unreasonable to expect products to be sourced from a single country. The other commenter noted that even though providers have maintained facilities in Europe for years, the Postal Service has not asked that the providers pay postal expenses for travel to these European locations. The commenter requested that European production facilities be exempt from the new rule.

   The Postal Service understands the concern about having providers pay the costs incurred for Postal Service personnel who travel outside the continental United States to inspect production facilities. The initially approved foreign manufacturing and production facilities were located in Europe. The Postal Service was able to minimize its cost by conducting periodic, routine, security inspections of multiple production locations on a single trip. Ongoing routine inspections of these long-established locations have resolved many of the security issues that can arise during facility startup. Although the final rule includes no exemption from the requirement for manufacturers to pay for Postal Service inspections of European production facilities, the Postal Service plans to continue its policy of funding the cost of certain inspection trips, as it has in the past, at its discretion. Postal Service funding will be limited to trips for routine inspections when the Postal Service can conduct multiple inspections and costs are not excessive. The Postal Service must limit its cost exposure by requiring manufacturers to pay the travel-related costs for inspections outside the continental United States whenever the costs are associated with particular security issues related to the manufacturer's products, or with the startup or implementation of a new plant or of a new or substantially changed manufacturing process. The Postal Service revised the proposed rule in response to this comment.

2. One commenter noted that when the Postal Service inspected overseas facilities in the past, the inspection team often visited more than one manufacturer or facility on a given trip. The other commenter noted that it is unreasonable to require the provider to pay travel expenses for inspections, which are conducted in the interests of the Postal Service. The commenter suggested that each organization consider whether the expense of travel is justified by the benefit gained. If it is not, then the trip should be postponed and not billed to another organization. The commenter noted that requirement for providers to reimburse the Postal Service also raises the issue of who is to decide the specifics of travel, including the number of Postal Service representatives.

   Although the decision on where to locate production facilities for meter products or components is not one in which the Postal Service would expect to participate, such decisions may have the effect of increasing Postal Service costs incurred in the administration of the postage meter program. Given the financial constraints under which the Postal Service must operate, and our determination to avoid additional revenue security issues, the Postal Service cannot allow the business decisions of providers to determine the security of Postal Service revenues or to increase Postal Service costs indiscriminately. However, in recognition of the concerns expressed, the Postal Service is adding paragraph 501.2(c)(i) to clarify the final rule by defining how the Postal Service will control the costs allocated to the manufacturer. For example, the Postal Service will combine trips to more than one facility whenever possible and will limit the number of Postal Service representatives on the inspection team to the minimum number required to conduct the inspection.

3. It has come to the attention of the Postal Service that companies are considering using production facilities in certain foreign countries where political or other impediments may prevent the Postal Service from conducting security evaluations of these facilities. Postal Service approval to distribute meters produced in such facilities may be suspended until such time as satisfactory inspections may be conducted. In recognition of this concern, the Postal Service is adding paragraph 501.2(c)(ii) to clarify the final rule.

   [[Page 69479]]

   List of Subjects in 39 CFR Part 501

   Administrative practice and procedure, Postal Service.

   The Amendment

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

   PART 501--AUTHORIZATION TO MANUFACTURE AND DISTRIBUTE POSTAGE METERS

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

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

2. Amend Sec. 501.2 by revising the introductory text and paragraphs (c) and (d) to read as follows:

   Sec. 501.2 Manufacturer qualification.

   Any concern wanting authorization to manufacture and/or lease postage meters for use by licensees under Domestic Mail Manual P030 must: * * * * *

   (c) Have, or establish, and keep under its supervision and control, adequate production facilities suitable to carry out the provisions of Sec. Sec. 501.15 through 501.21 to the satisfaction of the Postal Service. The production facilities must be subject to unannounced inspection by representatives of the Postal Service. If the provider's production facilities are located outside the continental United States, the provider will be responsible for all reasonable and necessary travel-related costs incurred by the Postal Service to conduct the inspections. Travel-related costs are determined in accordance with Postal Service Handbook F-15, Travel and Relocation. At its discretion, the Postal Service may continue to fund routine inspections outside the continental United States as it has in the past, provided the costs are not associated with particular security issues related to a manufacturer's product, or with the start-up or implementation of a new plant or of a new or substantially changed manufacturing process.

   (i) When conducting an inspection outside the continental United States, the Postal Service will make every effort to combine the inspection with other inspections in the same general geographic area in order to enable affected manufacturers to share the costs. The Postal Service team conducting such inspections will be limited to the minimum number necessary to conduct the inspection. All air travel will be contracted for at the rates for official government business, when available, under such rules respecting class of travel as apply to those Postal Service representatives inspecting the facility at the time the travel occurs.

   (ii) If political or other impediments prevent the Postal Service from conducting security evaluations of meter manufacturing facilities in foreign countries, Postal Service approval to distribute meters produced in those facilities may be suspended until such time as satisfactory inspections may be conducted.

   (d) Have, or establish, and keep under its active supervision and control adequate facilities for the control, distribution, and maintenance of meters and their replacement or secure disposal or destruction when necessary.

   Stanley F. Mires, Chief Counsel, Legislative.

   [FR Doc. 02-29097 Filed 11-15-02; 8:45 am]

   BILLING CODE 7710-12-P