[Federal Register Volume 74, Number 142 (Monday, July 27, 2009)]
[Rules and Regulations]
[Pages 36940-36943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17842]
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POSTAL REGULATORY COMMISSION
39 CFR Part 3020
[Docket Nos. MC2009-27 and CP2009-37; Order No. 231]
Priority Mail Contract
AGENCY: Postal Regulatory Commission.
ACTION: Final rule.
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SUMMARY: The Commission is adding Priority Mail Contract 11 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 July 27, 2009 and is applicable beginning July 1,
2009.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel,
202-789-6824 or [email protected].
SUPPLEMENTARY INFORMATION: Regulatory History, 74 FR 30179 (June 24,
2009).
I. Background
II. Comments
III. Commission Analysis
IV. Ordering Paragraphs
I. Background
The Postal Service seeks to add a new product identified as
Priority Mail Contract 11 to the Competitive Product List. For the
reasons discussed below, the Commission approves the Request.
On June 11, 2009, the Postal Service filed a notice, pursuant to 39
U.S.C. 3632(b)(3) and 39 CFR 3015.5, announcing that it has entered
into an additional contract (Priority Mail Contract 11), which it
attempts to classify within the previously proposed Priority Mail
Contract Group product.\1\ In support, the Postal Service filed the
proposed contract and referenced Governors' Decision 09-6 filed in
Docket No. MC2009-25. Id. at 1. The Notice has been assigned Docket No.
CP2009-37.
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\1\ Notice of Establishment of Rates and Class Not of General
Applicability (Priority Mail Contract 11), June 11, 2009 (Notice).
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In response to Order No. 222,\2\ and in accordance with 39 U.S.C.
3642 and 39 CFR 3020 subpart B, the Postal Service filed a formal
request to add Priority Mail Contract 11 to the Competitive Product
List as a separate product.\3\ The Postal Service asserts that the
Priority Mail Contract 11 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. MC2009-27.
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\2\ PRC Order No. 222, Notice and Order Concerning Filing of
Priority Mail Contract 11 Negotiated Service Agreement, June 17,
2009 (Order No. 222).
\3\ Request of the United States Postal Service to Add Priority
Mail Contract 11 to Competitive Product List, June 23, 2009
(Request).
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In support of its Notice and Request, the Postal Service filed the
following materials: (1) A redacted version of the contract which,
among other things, provides that the contract will expire 3 years from
the effective date, which is proposed to be the day that the Commission
issues all regulatory approvals; \4\ (2) requested changes in the Mail
Classification Schedule product list; \5\ (3) a Statement of Supporting
Justification as required by 39 CFR 3020.32; \6\ and (4) certification
of compliance with 39 U.S.C. 3633(a).\7\
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\4\ Attachment A to the Notice.
\5\ Attachment A to the Request.
\6\ Attachment B to the Request.
\7\ Attachment B to the Notice.
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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 B, at 1. W. Ashley Lyons, Manager, Corporate
Financial Planning, Finance Department, certifies that the contract
complies with 39 U.S.C. 3633(a). Notice, Attachment B.
The Postal Service filed much of the supporting materials,
including the unredacted contract, under seal. In its Notice, the
Postal Service maintains that the contract and related financial
information, including the customer's name and the accompanying
analyses that provide prices, terms, conditions, and financial
projections, should remain confidential. Notice at 2-3.
[[Page 36941]]
In Order No. 222, the Commission gave notice of the two dockets,
requested supplemental information, appointed a public representative,
and provided the public with an opportunity to comment.\8\ On June 22,
2009, Chairman's Information Request No. 1 was filed.\9\ On June 23,
2009, the Postal Service filed the supplemental information
requested.\10\ The Postal Service filed its response to the Chairman's
Information Request on June 26, 2009.\11\
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\8\ Order No. 222 at 1-4.
\9\ Chairman's Information Request No. 1 and Notice of Filing of
Question Under Seal, June 22, 2009. A portion of the Chairman's
Information Request was filed under seal.
\10\ Response of the United States Postal Service to
Commission's Request for Supplemental Information in Order No. 222,
June 23, 2009.
\11\ Response to Chairman's Information Request No. 1, Question
2 and Notice of Filing Responses to Questions 1 and 3 Under Seal,
June 26, 2009.
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II. Comments
Comments were filed by the Public Representative.\12\ No comments
were submitted by other interested parties. The Public Representative
states that the Postal Service's filing complies with applicable
Commission rules of practice and procedure, and concludes that the
Priority Mail Contract 11 agreement comports with the requirements of
title 39 and is appropriately classified as competitive. Id. at 3.
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\12\ Public Representative Comments in Response to United States
Postal Service Notice of Establishment of Rates and Class Not of
General Applicability (Priority Mail Contract 11), June 26, 2009
(Public Representative Comments).
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The Public Representative believes that the Postal Service has
provided adequate justification for maintaining confidentiality in this
case. Id. at 2-3. He indicates that the contractual provisions are
mutually beneficial to the parties and the general public. Id. at 4.
III. Commission Analysis
The Commission has reviewed the Notice, the Request, the contract,
the financial analysis provided under seal that accompanies it, the
Postal Service's responses to Chairman's Information Request No. 1, the
Postal Service's response to the Commission's request for supplemental
information, and the comments filed by the Public Representative.
Statutory requirements. The Commission's statutory responsibilities
in this instance entail assigning Priority Mail Contract 11 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 Priority
Mail Contract 11 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).
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 B, 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. at 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. at para. (h).
No commenter opposes the proposed classification of Priority Mail
Contract 11 as competitive. Having considered the statutory
requirements and the support offered by the Postal Service, the
Commission finds that Priority Mail Contract 11 is appropriately
classified as a competitive product and should be added to the
Competitive Product List.
Cost considerations. The Postal Service presents a financial
analysis showing that Priority Mail Contract 11 results in cost savings
while ensuring that the contract covers its attributable costs, does
not result in subsidization of competitive products by market dominant
products, and increases contribution from competitive products. Order
No. 222 and Chairman's Information Request No. 1 sought additional
support and justification for particular cost saving elements. The
Postal Service's responses did not persuade the Commission that certain
cost savings elements were appropriate here.
Accordingly, the Commission's analysis of the proposed contract is
based on alternative cost estimates of certain mail functions. The
Commission employed this analysis to determine whether changed cost
inputs would materially affect the contract's financial analysis.\13\
The Commission concludes that the changed inputs do not have a material
effect on the underlying financial analysis of the contract.
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\13\ The Commission's analysis is set forth in Library Reference
PRC-CP2009-37-NP-LR-1, which, because it contains confidential
information, is being filed under seal.
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Based on the data submitted and the Commission's alternative
analysis, the Commission finds that Priority Mail Contract 11 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 Priority Mail Contract
11 indicates that it comports with the provisions applicable to rates
for competitive products.
The electronic files submitted in support of the Notice did not
include all supporting data. Future requests must provide all
electronic files showing calculations in support of the financial
models associated with the request. A failure to provide such
information may delay resolution of requests in the future.
Other considerations. The Postal Service shall promptly notify the
Commission of the scheduled termination date of the agreement. If the
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 Priority Mail Contract 11 as
a new product. The revision to the Competitive Product List is shown
[[Page 36942]]
below the signature of this order and is effective upon issuance of
this order.
IV. Ordering Paragraphs
It is ordered:
1. Priority Mail Contract 11 (MC2009-27 and CP2009-37) is added to
the Competitive Product List as a new product under Negotiated Service
Agreements, Domestic.
2. The Postal Service shall notify the Commission of the scheduled
termination date and update the Commission if the termination date
occurs prior to that date, 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.
Issued: July 1, 2009.
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 Service 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 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
[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
[[Page 36943]]
[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)
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 & 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)
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)
Outbound International
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 Plus Contracts
Global Plus 1 (CP2008-9 and CP2008-10)
Global Plus 2 (MC2008-7, CP2008-16 and CP2008-17)
Inbound International
Inbound Direct Entry Contracts With Foreign Postal
Administrations (MC2008-6, CP2008-14 and CP2008-15)
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. E9-17842 Filed 7-24-09; 8:45 am]
BILLING CODE 7710-FW-P