[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Rules and Regulations]
[Pages 79396-79400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30736]
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POSTAL REGULATORY COMMISSION
39 CFR Part 3020
[Docket Nos. MC2009-9, CP2009-10, CP2009-11; Order No. 153]
International Mail Contracts
AGENCY: Postal Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Commission is adding Global Direct Contracts to the
Competitive Product List and announcing the Postal Service's execution
of two related contracts. These actions are consistent with changes in
a recent law governing postal operations and a recent Postal Service
request. Republication of the lists of market dominant and competitive
products is also consistent with new requirements in the law.
DATES: Effective December 29, 2008.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel,
202-789-6820 and [email protected].
SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 74213 (December 5,
2008).
I. Background
The Postal Service seeks to add a new product identified as Global
Direct Contracts to the Competitive Product List. For the reasons
discussed below, the Commission approves the Request.
On November 17, 2008, the Postal Service filed a formal request
pursuant to 37 U.S.C. 3642 and 39 CFR 3020 et seq. to add Global Direct
Contracts to the Competitive Product List.\1\ The Postal Service
indicates that Governors' Decision No. 08-10, July 16, 2008,
establishes prices and classifications not of general applicability for
Global Direct Contracts.\2\ The Request has been assigned Docket No.
MC2009-9.
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\1\ Request of the United States Postal Service to Add Global
Direct Negotiated Service Agreements to the Competitive Products
List, and Notice of Filing (Under Seal) Two Functionally Equivalent
Agreements, November 17, 2008 (Request).
\2\ See Docket No. MC2008-7, Decision of the Governors of the
United States Postal Service on the Establishment of Prices and
Classifications for Global Direct, Global Bulk Economy, and Global
Plus Contracts, July 16, 2008 (Governors' Decision No. 08-10),
establishing prices and classifications not of general applicability
for Global Direct and Global Bulk Economy Contracts, as well as for
Global Plus Contracts 2, which combines Global Direct and Global
Bulk Economy services. In that proceeding, the Postal Service
indicated that until it entered into contracts with customers for
Global Direct, it would not ask the Commission to establish an
individual classification for Global Direct Contracts. See Id. at 1,
n.1.
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[[Page 79397]]
The Postal Service contemporaneously filed two agreements related
to the proposed new product pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR
3015.5. Request at 1. The agreements have been assigned Docket Nos.
CP2009-10 and CP2009-11.
In support of its Request, the Postal Service filed the following
materials: (1) A Statement of Supporting Justification as required by
39 CFR 2020.32; \3\ (2) certifications of compliance with 39 U.S.C.
3633(a); \4\ (3) two Global Direct Contracts agreements (under seal);
and (4) supporting financial data tables (under seal). The Request
incorporates by reference Governors' Decision No. 08-10 and the record
of proceedings in Docket No. MC2008-7.\5\
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\3\ Attachment 1 to the Request.
\4\ Attachments 2 and 3 to the Request.
\5\ The Public Representative raises an important point that for
completeness, copies of all documents relevant to Docket No. MC2009-
9 should be filed within this docket. See Public Representative
Comments in Response to Order No. 137, December 2, 2008, at 6
(Public Representative Comments).
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In the Statement of Supporting Justification, Frank Cebello,
Executive Director, Global Business Management, asserts that each
contract will cover its attributable costs, make a positive
contribution to institutional costs, and increase contribution toward
the requisite 5.5 percent of the Postal Service's total institutional
costs. Request, Attachment 1, at 2. Thus, Mr. Cebello contends there
will be no issue of subsidization of competitive products by market
dominant products as a result of these agreements. Id.
The Postal Service filed much of the supporting materials,
including Governors' Decision 08-10 (in Docket No. MC2008-7), the two
Global Direct Contracts agreements at issue, and the financial data
tables supporting those agreements, under seal. In its Request, the
Postal Service maintains that the agreements and related financial
information, including the customers' names and the accompanying
analyses that provide prices, terms, conditions, and financial
projections, should remain under seal. Id. at 2-4.
In Order No. 137, the Commission gave notice of the three dockets,
appointed a public representative, and provided the public with an
opportunity to comment.\6\ The Postal Service, in response to
Chairman's Information Request No. 1,\7\ filed supplemental materials
on December 5, 2008.\8\
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\6\ PRC Order No. 137, Notice and Order Concerning Global Direct
Contracts Negotiated Service Agreements, November 20, 2008 (Order
No. 137).
\7\ Chairman's Information Request No. 1 and Notice of Filing of
Questions Under Seal, December 1, 2008.
\8\ Notice of United States Postal Service of Filing of
Responses to Chairman's Information Request No. 1, December 5, 2008.
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II. Comments
Initial comments were filed by the Public Representative.\9\
William Gensburg filed comments in his capacity as Joint Managing
Director, International Transport Solutions, Inc. (International
Transport) and subsequently in his capacity as Postal Committee Chair,
Express Delivery and Logistics Association (XLA).\10\ The Postal
Service and the Public Representative filed reply comments.\11\
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\9\ Public Representative Comments in Response to Order No. 137,
December 2, 2008 (Public Representative Comments).
\10\ Comments of William Gensburg of International Transport
Solutions, Inc. Pursuant to the PRC Order 137, December 4, 2008
(International Transport Comments); Comments of Express Delivery and
Logistics Association Reflecting Comments by the USPS and Public
Representative Pursuant to the PRC Order 137, December 11, 2008 (XLA
Comments).
\11\ Reply of United States Postal Service to Comments in
Response to Order No. 137, December 9, 2008 (Postal Service Reply
Comments). Reply Comments by the Public Representative in Response
to Order No. 137, December 9, 2008 (Public Representative Reply
Comments).
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The Public Representative Comments include discussion of the Global
Direct Contracts product in general, and the adequacy of cost coverage
in the CP2009-10 and CP2009-11 agreements. Public Representative
Comments at 2-7. The Public Representative expresses concern that the
Postal Service can use Universal Postal Union terminal dues rates \12\
for competitive products like Global Direct Contracts, while Universal
Postal Union terminal dues rates are not available to competitors. Id.
at 7. The Public Representative believes that use of Universal Postal
Union terminal dues rates may allow the Postal Service to hinder
competition in the market for these types of competitive products. Id.
at 8.
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\12\ The Universal Postal Union is a specialized agency of the
United Nations that facilitates the exchange of international mail
among its 191 member countries. Terminal dues are payments made
between postal administrations for the costs incurred by the
destination administration to deliver international letter mail
weighing up to 4.4 pounds.
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International Transport echoes the Public Representative's concerns
regarding the Postal Service's use of Universal Postal Union terminal
dues rates for a competitive product, and believes such an advantage
does not comport with the PAEA. International Transport Comments at 1.
Both ask the Commission to open a public inquiry into appropriateness
of accessing Universal Postal Union terminal dues rates for competitive
products. Public Representative Reply Comments at 2, International
Transport Comments at 2. XLA comments that the Postal Service enjoys a
competitive advantage as it is represented at the State Department,
which is responsible for overall formulation of international postal
policy. XLA Comments. However, XLA acknowledges that its comments
concerning the Postal Service's representation at the State Department
may be beyond than the issues addressed in Docket No. MC2009-9. Id.
The Public Representative states that these agreements ``overtly
comport with the requirement that they will generate sufficient revenue
to cover attributable costs for the services provided,'' and add to the
5.5 percent minimum institutional cost coverage. Public Representative
Comments at 5. The Public Representative acknowledges that, based on a
review of the materials the Postal Service filed under seal, these
agreements are functionally equivalent. Id. at 6. The Public
Representative also encourages the Commission's approval of these
agreements. Public Representative Reply Comments at 2.
III. Commission Analysis
In reaching its findings and conclusions, the Commission has
reviewed the Request, the agreements and the financial analyses
provided under seal, and all comments.
Statutory requirements. The Commission's statutory responsibilities
in this instance entail assigning Global Direct Contracts 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, including a review of the
provisions applicable to rates for competitive products. 39 U.S.C.
3633.
Product list assignment. In determining whether to assign Global
Direct Contracts 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.
[[Page 79398]]
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).
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 1, at 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 international shipping services. Id.
Finally, the Postal Service states that there are multiple market
options for international shipping services including private
consolidators, freight forwarders and integrators, all which offer
services analogous to the agreements at issue. Id. at 4. Accordingly,
the Postal Service states that since the market for international
shipping services similar to Global Direct Contracts is highly
competitive, and served by large shipping companies, it will not likely
have any negative impact on small business concerns. Id. at 4-5.
The Public Representative supports the proposed classification of
Global Direct Contracts as a competitive product. Public Representative
Reply Comments at 2. International Transport and XLA do not believe
that classification of Global Direct Contracts as a competitive product
comports with the PAEA, yet they do not propose an alternative
classification. International Transport Comments at 1, XLA Comments.
The Public Representative and International Transport both express
concern that the Postal Service may be able to access Universal Postal
Union terminal dues for competitive products. Public Representative
Comments at 7-10, International Transport Comments.
In response to the Public Representative's and International
Transport's concern, the Postal Service contends that is not accessing
Universal Postal Union terminal dues rates for the Global Direct
Contracts product. Postal Service Reply Comments at 2. The Postal
Service maintains that it is in the same position as any private entity
that wishes to negotiate rates with the foreign posts for similar
services. Id.
The Public Representative's and International Transport's objection
that the Postal Service has regulatory advantages is beyond the scope
of this proceeding. The issues presented by the Postal Service's filing
are whether the proposed agreements are consistent with the policies of
sections 3632, 3633, and 3642 of title 39. The issues raised by the
Public Representative, XLA, and International Transport concerning
competitive advantages enjoyed by the Postal Service are beyond the
scope of this proceeding.
Having considered the statutory requirements, the support offered
by the Postal Service, and all comments, the Commission finds that
Global Direct Contracts is appropriately classified as a competitive
product and should be added to the Competitive Product List.\13\
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\13\ In Docket No. RM2007-1, the Commission previously accepted
and considered comments from multiple parties (XLA included) on the
categorization of classes of products, including outbound
international mail. See PRC Order No. 43, Order Establishing
Ratemaking Regulations For Market Dominant and Competitive Products,
October 29, 2007. In that docket, XLA argued that outbound and
inbound international mail should be categorized as competitive. Id.
at 85.
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Functional equivalence. The Postal Service claims the agreements in
Docket Nos. CP2009-10 and CP2009-11 are functionally equivalent in that
they share similar cost and market characteristics, encompass customers
who send mail directly to foreign destinations and desire that their
mail bear the indicia of the foreign country, and cover the same
services to the same foreign destination. Request at 5-6. The Postal
Service requests that the Commission classify these agreements as one
product on the Competitive Products List in the Mail Classification
Schedule. Id. at 2, 5. The Public Representative agrees that these
agreements are functionally equivalent. Public Representative Comments
at 6.
Having evaluated the nature of these agreements, the comments, and
the supporting financial analyses, the Commission finds that the
agreements submitted in Docket Nos. CP2009-10 and CP2009-11 are
functionally equivalent, and are properly included within the Global
Direct Contracts product on the Competitive Product List.
Cost considerations. The agreements are predicated on unit costs
for major mail functions, e.g., acceptance costs, mail processing, and
transportation. The Postal Service believes that the financial analyses
submitted in support of the agreements show that the prices charged for
pieces subject to Global Direct Contracts cover their attributable
costs, do not result in subsidization of competitive products by market
dominant products, and increase contribution from competitive products.
See Request, Attachments 2 and 3.
Based on the data submitted and the Commission's analysis, the
Commission finds that both agreements should cover their 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 agreements indicates that they comport
with the provisions applicable to rates for competitive products.
Mail Classification Schedule. As part of Governors' Decision No.
08-10, the Postal Service submitted a description of Global Direct
Contracts which it describes as
Contracts giving a rate for mail acceptance within the United
States and transportation to a receiving country with the addition
by the customer of appropriate foreign postage charged by the
receiving country.
The Mail Classification Schedule language proposed by the Postal
Service implies that customers using a Global Direct Contracts product
would pay the foreign postage directly. However, according to the
agreements, the customers affix an image of the appropriate foreign
post indicia, while the Postal Service pays the appropriate postage or
settlement charge to the foreign post. The draft Mail Classification
Schedule language will be modified to reflect the actual payment
practice under these agreements.
The Postal Service shall promptly notify the Commission of the
scheduled termination dates of these agreements. If either agreement
terminates earlier than anticipated, the Postal Service shall inform
the Commission prior to the new termination date. The Commission will
then remove the product from the Mail Classification Schedule at the
earliest possible opportunity.
In conclusion, the Commission approves Global Direct Contracts as a
new product. The agreements specified within Docket Nos. CP2009-10 and
CP2009-11 fall within the Global Direct Contracts product. The revision
to the Competitive Product List is shown below the signature of this
Order and is effective upon issuance of this Order.
It is Ordered:
1. Global Direct Contracts (MC2009-9, CP2009-10, and CP2009-11) are
added to the Competitive Product List as a new
[[Page 79399]]
product under Negotiated Service Agreements, Outbound International.
2. The Postal Service shall notify the Commission of the scheduled
termination date, and update the Commission if the termination date
changes for either contract as discussed in this Order.
3. 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
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]
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)
[[Page 79400]]
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)
Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009-
14)
Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)
Parcel Return Select & Parcel Return Service Contract 1 (MC2009-
11 and CP2009-13)
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)
Global Direct Contracts (MC2009-9, CP2009-10 and CP2009-11)
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]
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. E8-30736 Filed 12-24-08; 8:45 am]
BILLING CODE 7710-FW-P