[Federal Register Volume 75, Number 221 (Wednesday, November 17, 2010)]
[Rules and Regulations]
[Pages 70132-70140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28412]


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POSTAL SERVICE

39 CFR Part 111


New Incentive Programs and Other Changes for Domestic Mailing 
Services

AGENCY: Postal Service.<SUP>TM</SUP>

ACTION: Final rule.

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SUMMARY: The Postal Service will revise Mailing Standards of the United 
States Postal Service, Domestic Mail Manual (DMM [supreg]) to 
incorporate standards for the two new Mailing Services incentive 
programs filed in November 2010 with the Postal Regulatory Commission 
(PRC). This final rule also includes DMM revisions related to Move 
Update standards, also in the November 2010 PRC filing.

DATES: January 2, 2011.

FOR FURTHER INFORMATION CONTACT: Bill Chatfield, 202-268-7278.

[[Page 70133]]


SUPPLEMENTARY INFORMATION: On July 9, 2010, the Federal Register 
published a Postal Service proposed rule, New Standards for Domestic 
Mailing Services (75 FR 39477-39492). We received comments from three 
mailer associations regarding the Reply Rides Free incentive program 
that was part of that filing and comments on the proposed changes to 
the Move Update tolerance. We have subsequently made a new filing with 
the PRC to implement the two incentive programs (Reply Rides Free and 
the Saturation/High Density) and changes to the Move Update tolerance. 
The other changes proposed in July will be addressed in a separate 
final rule to be published in the Federal Register.
    This final rule includes a recap of the two incentive programs and 
the Move Update changes, customer comments, our responses to the 
comments, and the mailing standards to implement the changes.

Reply Rides Free First-Class Mail Incentive Program

    The Postal Service encourages the growth of automation letter-size 
mail volume, particularly pieces that are part of full-service 
Intelligent Mail [supreg] automation mailings entered at PostalOne! 
[supreg] acceptance facilities. Accordingly, effective January 2, 2011, 
we will offer an option for First-Class Mail letters weighing over 1 
ounce up to and including 1.2 ounces to qualify for postage payment at 
the 1-ounce price when those letters include a reply card or reply 
envelope under specified conditions. Reply pieces must bear an 
Intelligent Mail barcode as of May 1, 2011.
    This new program provides an incentive for mailers to include more 
content in their automation First-Class Mail letters by providing a 
postage credit equal to the second ounce of postage for eligible 
letters as follows:
    <bullet> Eligible letters must qualify for automation letter prices 
and weigh more than 1 ounce up to 1.2 ounces. At the time of mailing, 
mailers pay the applicable 2-ounce price for these pieces. All 
commercial (presorted and automation) First-Class Mail letter-size 
volume counts towards meeting an overall mail volume threshold, but 
only those letters qualifying for automation letter prices will be 
eligible for postage credit. As of May 1, 2011, only those automation 
letters qualifying for and mailed at full-service automation letter 
prices will be eligible for postage credit under this incentive 
program.
    <bullet> Letters must include a reply card or envelope, either 
Business Reply Mail [supreg] or Courtesy Reply Mail <SUP>TM</SUP>. As 
of May 1, 2011, reply pieces must bear an accurate Intelligent Mail 
barcode corresponding to the delivery address on the piece. The reply 
piece may be in the form of a reusable envelope. Permit reply mail 
pieces are not eligible for this program.
    <bullet> The postage credit will be for the amount paid for the 
second ounce and is provided for those pieces mailed as automation 
letters during the 2011 program period (January 2, 2011 through 
December 31, 2011) when the mailer's volume of all commercial First-
Class Mail letter-size mailpieces mailed in this period is at least 2.5 
percent greater than the mailer's trend of all commercial First-Class 
Mail letter-size volume mailed during USPS [supreg] fiscal year (FY) 
2010 (October 1, 2009 through September 30, 2010) compared to volume 
mailed in USPS FY 2009 (October 1, 2008 through September 30, 2009). 
The threshold volume for program postage credit eligibility is the 
amount that is 2.5 percent greater than the mailer's projected volume 
based on the mailer's trend, except that mailers with a positive trend 
must mail at least 2.5 percent more letter volume during calendar year 
2011 than during fiscal year 2010. For example, if a mailer's letter-
size volume has declined from 100,000 to 95,000 pieces (a 5 percent 
decline) from FY 2009 to FY 2010, the projected volume for 2011 at the 
same trend would be 90,250 (95,000 times .95). That mailer's volume 
must be at least 92,507 (1.025 times 90,250) during the program period 
to meet the eligibility threshold. A mailer with a positive trend (for 
example, an increase from 90,000 to 100,000 letters) would have a 
threshold that is 2.5 percent more than their FY 2010 volume or 102,500 
(100,000 times 1.025).
    <bullet> Separate thresholds will be set for each of the first 
three quarters of calendar year 2011, based on the trend for each 
comparable quarter in FY 2010. Postage credit will be provided after 
the end of each quarter, upon calculation and verification of the mail 
volume data.
    <bullet> The threshold for quarter four of calendar year 2011 will 
be the yearly threshold, with all previous three quarters' volume being 
added to the volume for quarter four. Postage credit will be provided 
at the end of quarter four only when the annual volume threshold is 
met.
    <bullet> Mailers who do not meet the calendar year 2011 volume 
threshold are retroactively ineligible for any postage credit for this 
program.
    <bullet> Mailers who did not mail commercial First-Class Mail 
letters in FY 2009 may not participate in the Reply Rides Free program.
    <bullet> The program period will be from January 2, 2011 through 
December 31, 2011.
    Mail owners, but not mail service providers, who have mailed 
commercial First-Class Mail letters during USPS FY 2009 and 2010 may 
apply to participate in this incentive program by following 
instructions provided at: http://www.usps.com/firstclassmailincentive, 
no later than December 31, 2010. Mail owners must validate that they 
have mailed, or intend to mail, at least one commercial presorted or 
automation mailing of First-Class Mail letters during each of the 
fiscal years 2009 and 2010 and should state their intent to mail First-
Class Mail letters containing qualifying reply pieces weighing more 
than 1 ounce up to 1.2 ounces during the 2011 program period. After 
registration, mail owners must supply adequate proof of the total 
qualifying mail volume claimed for USPS FY 2009 and FY 2010 in order to 
be eligible for participation.

Comments on Reply Rides Free Program

    All three mailer associations offering comments objected to the 
full-service (Intelligent Mail) automation letter requirement for 
mailpieces eligible for postage credit and our provision of postage 
credit being issued at the end of the program year. Due to the USPS 
commitment to continue to encourage participation in full-service 
Intelligent Mail, we are retaining the provision to provide postage 
credit only for full-service automation letters meeting the other 
requirements of the program, but we will postpone that requirement 
until May 1, 2011. Although the incentive goals are ultimately based on 
annual mail volumes, we will be providing quarterly reconciliations and 
postage credit after the end of each quarter when mail volumes meet 
pro-rated thresholds, but the mailer's eligibility for postage credit 
is still based on meeting the annual mail volume threshold.
    One association advocated charging additional postage equivalent to 
2/10 of the second-ounce price. We will not be implementing any changes 
to charge postage for First-Class Mail letters by tenths of an ounce.
    Two commenters noted the need for mailers to be able to determine 
an adequate return on investment and suggested that the program be 
extended to last 3 years. After the end of the program period, we will 
be evaluating the feasibility of extending or renewing this incentive 
program.
    Two associations suggested that we substitute volume requirements 
for returned reply pieces rather than have outgoing mail volume 
thresholds and

[[Page 70134]]

that we provide advance certification of eligible mailpieces to 
mitigate potential problems identifying eligible mailpieces in combined 
mailings of multiple mailpieces. We will evaluate the reply mail volume 
recommendation as a potential component for future incentive programs.
    Other issues/concerns noted by commenters were:
    <bullet> A clear definition of the ``mailer'' is needed;
    <bullet> The current restrictions on when mailers may apply to 
participate appears to be too limiting;
    <bullet> By excluding mail service providers, significant First-
Class Mail letter volume is omitted;
    <bullet> Mailers having to certify previous mail volumes may be at 
legal risk if the information is found to be inaccurate; and,
    <bullet> Software may not accommodate the recording of incremental 
weight volumes needed to distinguish pieces that weigh no more than 1.2 
ounces.
    Identification of the mailer is similar to previous incentive 
programs; the entity who is responsible for postage payment for 
mailpieces is considered to be the owner of that mail. Mail service 
providers are not considered mail owners for the purposes of this 
program.
    We do not consider the registration period for this program too 
restrictive. Mailers who register for this initiative have no further 
obligations if they decide at a later time that they would not be able 
to submit any mailings under this program.
    The exclusion of MSPs from direct participation is similar to the 
parameters for previous incentive programs, but we anticipate that MSPs 
will assist those mail owners (for whom they produce mailings) who may 
want to participate. Previous mail volume should be provided with 
accompanying documentation, which will lessen the risk of providing 
inaccurate information.
    Additionally, as part of the program administration, the Postal 
Service requires each program participant to certify the data used to 
calculate the participant's program threshold(s). This certification 
requirement is similar to that currently used on a postage statement 
and is designed to ensure that the data used by the Postal Service to 
calculate the threshold level(s) are accurate.
    We are working with software vendors to ensure that requirements 
will be effectively communicated. Upon completion of PRC review for 
this program, we will be making additional information available at 
http://www.usps.com//firstclassmailincentive.

2011 Saturation and High Density Incentive Program

    The Postal Service will implement an incentive program designed to 
increase the volume of Standard Mail and Nonprofit Standard Mail 
letters and flats mailed at saturation and high density prices, upon 
completion of PRC review.
    Mailers of Standard Mail or Nonprofit Standard Mail saturation or 
high density letters and/or flats (complete mailpieces) applying for 
participation in the program must meet the eligibility requirements for 
participation in the price category selected. Mailers meeting the 
eligibility criteria are able to participate in both the saturation and 
high density categories simultaneously. Participants have the option to 
demonstrate growth in total mailed volume or growth within a defined 
market. Mailers who participate only within defined market areas are 
required to demonstrate volume growth within a specific, or group of 
specific, USPS sectional center facility (SCF) service area(s) to 
qualify for the incentive. Participants have the option to select one 
or more, up to a maximum of 20, individual SCF areas or up to five 
metropolitan target markets (consisting of multiple contiguous SCFs) 
for participation in the program and must meet the eligibility 
requirements for each area selected. The USPS must approve all 
applicant-selected market areas prior to acceptance into the program.
    Franchisees that are not separate business entities cannot apply 
for an incentive independently of the parent organization. Applicants 
will receive a credit for volume mailed, within their selected growth 
area and price category, above their USPS-determined volume threshold. 
The program period will be from January 2, 2011 through December 31, 
2011.
    To participate, mailers must be the permit holder (i.e., owner) of 
a permit imprint advance deposit account(s) at a postal facility having 
PostalOne! capability or be the owner of qualifying mail volume entered 
through the permit imprint advance deposit account of a mail service 
provider at a postal facility having PostalOne! capability. Only the 
volume of the mail owner, defined as the entity paying for the postage, 
will be eligible within the program period to meet eligibility 
requirements. Mail service providers and customers supplying inserts, 
enclosures, or other components included in the saturation or high 
density mailings of another mailer are not eligible to participate in 
this program.
    Standard Mail or Nonprofit Standard Mail saturation or high density 
letters and/or flats (complete mailpieces) mailed through a permit 
imprint advance deposit account, precanceled stamp permit, or a postage 
evidencing system owned by a mail service provider may be included as 
volume within the program, and towards program eligibility, when 
adequate documentation demonstrates that the applicant is the owner of 
the mail.
    Participants must electronically submit postage statements and 
mailing documentation to the PostalOne! system for the duration of the 
program period. Mailers participating within a defined market area(s) 
must electronically submit postage statements and mailing documentation 
to the PostalOne! using Mail.dat[supreg] or Mail.XML[supreg]. All other 
mailers may submit postage statements through Postal Wizard.
    Applicants must demonstrate a combined minimum of six saturation or 
high density mailings within the period of October 1, 2009 to September 
30, 2010. Applicants meeting the other eligibility criteria may 
participate in both price categories simultaneously. Applicants who 
choose to participate only within defined market areas must meet the 
eligibility criteria independently for each selected SCF service area 
or selected metropolitan target market.
    Mail owners participating in the 2011 Saturation and High Density 
Incentive Program are not eligible for concurrent participation in any 
other Postal Service-sponsored volume incentive program that includes 
Standard Mail pieces in the saturation or high density price 
categories.
    Thresholds for the 2011 Saturation and High Density Incentive 
Program are set at 5 percent above the volume of Standard Mail or 
Nonprofit Standard Mail saturation and high density letters and flats 
recorded in the 2010 calendar year, within each participant-selected 
growth area and price category. Applicants electing to participate in 
both the saturation and high density price categories must exceed the 
combined thresholds of both categories before qualifying for an 
incentive payment in either category.
    Approved program participants demonstrating a volume increase above 
their threshold level, in their total Standard Mail or Nonprofit 
Standard Mail saturation and high density letters and flats volume 
within their total market area, selected SCF service areas, or 
metropolitan target market, qualify for a credit to a single designated 
permit imprint advance deposit account or Centralized Account Payments 
System

[[Page 70135]]

(CAPS) account, following the close of the 2011 Saturation and High 
Density Incentive Program. The total postage paid for Standard Mail 
saturation and high density letters and flats within the program period 
will be identified for each participant and divided by the total number 
of recorded pieces to generate the average price per piece. 
Participants will receive a credit in the amount of a percentage of the 
average price per piece, for the total number of mailpieces of their 
incremental volume above their threshold level, recorded during the 
program period as follows:

------------------------------------------------------------------------
                                                             Nonprofit
           Participation level             Standard mail   standard mail
                                                (%)             (%)
------------------------------------------------------------------------
Saturation..............................              22               8
High Density............................              13               8
------------------------------------------------------------------------

Program Administration

    Those mailers identified by the Postal Service as being eligible to 
participate in the program will be sent an invitation letter after 
November 1, 2010. The invitation letter will direct mailers to apply 
for the program online at http://www.usps.com/SaturationHD. Mailers 
wishing to participate in the program, but who were not notified by 
letter, may request a review of their eligibility by contacting the 
USPS no later than December 10, 2010 at <a href="/cdn-cgi/l/email-protection#2d7e4c59585f4c59444243656964434e484359445b486d585e5d5e034a425b"><span class="__cf_email__" data-cfemail="04576570717665706d6b6a4c404d6a67616a706d726144717774772a636b72">[email protected]</span></a>. 
or by submitting an online application. Any mailer wishing to 
participate in the program must initially apply online no later than 
December 31, 2010.
    Mailers completing the online application process will receive an 
electronic response from the USPS that includes:
    <bullet> An individual volume threshold report.
    <bullet> A certification letter.
    <bullet> A threshold inquiry form.
    The individual threshold report will display the applicant's USPS-
recorded saturation and/or high density mail volume for the 2010 
calendar year. Applicants agreeing with their threshold volume(s) have 
the option to sign the provided certification letter and return a copy 
via e-mail or mail a hardcopy to Saturation Incentive Program Office, 
475 L'Enfant Plaza SW., RM 5500, Washington, DC 20260-5500, to register 
for the program. Applicants not agreeing with any portion of their 
USPS-calculated threshold(s) must complete the threshold inquiry form 
along with supporting evidence and return it via e-mail or hardcopy, no 
later than March 15, 2011.
    In addition to Standard Mail volume prepared and entered directly 
by the mailer (applicant), applicants will also be eligible to 
participate in the program with qualifying volume prepared by a mail 
service provider when entered through a permit owned by the applicant. 
Mail volume entered through a mail service provider's permit will also 
qualify for the program if adequate documentation, such as postage 
statements, PS Form 3602-R or PS Form 3602-N, identify the mail as 
being prepared on behalf of the applicant and demonstrates the 
applicant's 2010 mailing activity.
    Additionally, as part of the program administration, the Postal 
Service requires each program participant to certify the data used to 
calculate the participant's program threshold(s). This certification 
requirement is similar to that currently used on a postage statement 
(PS Form 3602-R or 3602-N) and is designed to ensure that the data used 
by the Postal Service to calculate the threshold level(s) are accurate.

Move Update Changes

    Following completion of the PRC review, the Postal Service is 
changing the tolerance for First-Class Mail and Standard Mail pieces, 
found through a Performance-Based Verification (PBV) procedure to be 
lacking an update via Move Update procedures, from the current 30 
percent to a 25 percent tolerance before we charge a 7-cent per piece 
assessment.
    The Move Update standards, applicable to commercial mailings of 
First-Class Mail and Standard Mail mailpieces, are designed to reduce 
the number of mailpieces that require forwarding, return, or disposal 
as waste, thus reducing Postal Service costs. The standards also help 
to assure that mail reaches its intended recipients in a timely manner.
    Performance-Based Verification procedures introduced in 2009 allow 
the Postal Service to sample mailings during the acceptance process to 
compare mailpiece addresses with the National Change of Address 
(NCOA[supreg]) database. For the Move Update portion of PBV, addresses 
on the verification sample are compared to the NCOA database and the 
ratio of the number of failed changes of address (COAs) (addresses that 
should have been updated per Postal Service records), to the number of 
actual COAs in the sample is calculated. Currently, if this ratio for 
the sample is sufficiently high (30 percent or more), pieces above that 
tolerance in a First-Class Mail or Standard Mail mailing are subject to 
additional postage (the Move Update assessment charge).
    In a final rule Federal Register notice published October 27, 2009 
(74 FR 55140-55142), we stated: ``We will analyze the results of the 
PBV samples periodically, and will adjust the tolerance as needed to 
ensure the effectiveness of mailers' Move Update processes.'' 
Accordingly, the Postal Service has filed with the PRC to change the 
current 30-percent tolerance to 25 percent before a Move Update 
assessment postage charge would be incurred.

Comments on Move Update

    We received comments about the change in the Move Update tolerance 
change from three mailer associations.
    Two commenters objected to placement of the Move Update assessment 
charge in Notice 123[boxh]Price List as inappropriate to include 
because the assessment is not a product which mailers choose to 
purchase. While we agree that the assessment charge is not a price that 
mailers choose to pay as a mailer might choose to pay an additional fee 
to mail a First-Class Mail letter as Certified Mail, inclusion of the 
fee assists in publicizing it so that mailers are more aware of it.
    One association questioned the appearance of a Move Update 
noncompliance charge for Standard Mail and noted that more information 
is needed about the application of the charge. This charge was not 
mentioned in the previous proposed rule; applicability of this charge 
would be a subject of a separate and future Federal Register notice.
    Two associations asked for more rationale behind changing the 
tolerance percentage. The change to the tolerance percentage used 
within the formula to calculate the Move Update Assessment Charge for 
mailings that fail the quality standard for correcting addresses after 
a customer move is reasonable based on the demonstrated performance 
currently being achieved by the mailing industry.

[[Page 70136]]

    One association asserted that applying Move Update standards to 
Standard Mail has not resulted in any lessening of the percentage of 
undeliverable-as-addressed (UAA) mail, and two other associations asked 
for more data gleaned from the PBV process. An evaluation of 45,589 
mailings during a two-month period showed that overall, 98.8 percent of 
all sampled mailings passed the Move Update verification with an 
average score of 99.7%. For the 546 mailings that fell into the 1.2 
percent that failed the Move Update verification reviews, the average 
score was 64.4 percent. These data indicate that the vast majority of 
the mailing industry will not be affected by a change in the tolerance.
    One association suggested that the assessment charges would more 
appropriately apply to the total volume of UAA mailpieces in a mailing, 
instead of applying charges to the whole mailing based on the 
percentage of UAA mailpieces. Where mailers are currently allowed to 
have up to 30 percent of the addresses (in a mailing) with an outdated 
address more than 95 days following a customer's move, the new 
tolerance will be reduced to 25 percent. This is a minimal tightening 
of the quality standard that is necessary to continue to reduce the 
percentage of poorly-addressed commercial mail that is produced by 
mailers and delivered by the Postal Service.
    One association implied that the Postal Service is using the 
tightening of the tolerance as a means to generate money via fines. 
This is not substantiated by the data. Using the data described 
previously, the 546 mailings that failed at the 30-percent threshold 
tolerance incurred approximately $47,000 in additional charges, or 
approximately $86 per mailing on average. Tightening the tolerance 
further incents mailers to improve their processes to update customer 
address information. The Postal Service has advised the mailing 
industry of its intent to continue to modify the tolerance in each of 
the next 2 years. In anticipation of these changes, mailers should 
continually review their processes. The Postal Service will continue to 
monitor the data and share the information with the mailing industry 
through the Mailer's Technical Advisory Committee. Our focus will be to 
ensure that the current high level of performance is maintained within 
the mailing industry.
    In accordance with the Postal Accountability and Enhancement Act, 
on November 2, 2010, the Postal Service filed a Notice with the Postal 
Regulatory Commission (PRC) regarding the incentive programs and the 
change in the Move Update tolerance. Regulatory review will take up to 
45 days from that date.
    The Postal Service adopts the following changes to the Mailing 
Services of the United States Postal Service, Domestic Mail Manual 
(DMM), which is incorporated by reference in the Code of Federal 
Regulations. See 39 CFR Part 111.1.

List of Subjects in 39 CFR Part 111

    Administrative practice and procedure, Postal Service.

0
Accordingly, 39 CFR Part 111 is amended as follows:

PART 111--[AMENDED]

0
1. The authority citation for 39 CFR Part 111 continues to read as 
follows:

    Authority:  5 U.S.C. 552(a); 13 U.S.C 301-307; 18 U.S.C. 1692-
1737; 39 U.S.C. 101, 401, 403, 404, 414, 416, 3001-3011, 3201-3219, 
3403-3406, 3621, 3622, 3626, 3632, 3633, and 5001.


0
2. Revise the following sections of Mailing Standards of the United 
States Postal Service, Domestic Mail Manual (DMM), as follows:
* * * * *

200 Commercial Letters and Cards

* * * * *

230 First-Class Mail

233 Prices and Eligibility

* * * * *

3.0 Basic Standards for First-Class Mail Letters

* * * * *

3.5 Move Update Standard

* * * * *

3.5.4 Basis for Move Update Assessment Charge

[Revise the introductory text of 3.5.4 to read as follows:]
    Mailings are subject to a Move Update assessment charge if more 
than 25 percent of addresses with a change-of-address (COA) are not 
updated, based on the error rate found in USPS sampling at acceptance 
during Performance-Based Verification. Specifically, mailings for which 
the sample contains greater than 25 percent failed COAs out of the 
total COAs in the sample are subject to additional postage charges as 
follows:

[Revise item 3.5.4a as follows:]
    a. The percentage of the mailing paying the charge is based on the 
percentage of failed pieces above 25 percent (%).
* * * * *
[Revise item 3.5.4c as follows:]
    c. As an example, if 35% of COAs in the sample are not updated, 
then the charge is applied to 10% (=35%-25%) of the total mailing.
* * * * *
[Add new 7.0 to read as follows:]

7.0 First-Class Mail Incentive Programs

7.1 General Description

    First-Class Mail incentive programs are designed to encourage mail 
volume growth and retention.

7.2 Reply Rides Free Program

    The Reply Rides Free program provides an incentive for mailers to 
include additional contents in their automation First-Class Mail 
letters by providing a postage credit for letters weighing over 1 ounce 
but no more than 1.2 ounces. Applicants are required to review and 
certify the accuracy of the data used by the USPS to calculate their 
threshold level (see 7.2.1); and, upon request, may be required to 
provide documentation of their mailing activity in fiscal years 2009 
and 2010 and during the 2011 program period.

7.2.1 Basic Mailpiece Eligibility

    Letter-size mailpieces mailed by an approved program participant 
are eligible for a postage credit under all of the following 
conditions:
    a. Eligible automation letters must weigh more than 1 ounce but no 
more than 1.2 ounces. Mailers pay the applicable 2-ounce price for 
these pieces. As of May 1, 2011, automation letters must be eligible 
for and mailed at full-service (see 705.22) Intelligent Mail prices.
    b. Letters must include a reply card or envelope, either Business 
Reply Mail or Courtesy Reply Mail. The reply piece may be part of a 
reusable envelope prepared according to 601.6.4 or 601.6.5. Mailers 
must provide a sample of the reply card or envelope at the time of 
mailing. Reply pieces must be automation-compatible and must bear the 
correct Intelligent Mail barcode corresponding to the address as of May 
1, 2011.
    c. The postage credit is for the amount paid for the second ounce 
for eligible letters that meet the standards in 7.2, that are mailed 
during the 2011 program period, and that meet or exceed their USPS-
determined threshold volume for 2011. To be eligible for program 
participation, a mailer must have mailed at least one mailing of 500 or 
more presorted or automation First-Class Mail letters during USPS 
fiscal years (FY) 2009 and 2010 (October 1 through

[[Page 70137]]

September 30). The threshold volume is determined as follows:
    1. The USPS determines a mailing volume trend for mailers with all 
commercial First-Class Mail letter volume mailed during both USPS FY 
2009 and USPS FY 2010. To qualify for postage credit, the mailing 
volume in 2011 must be at least 2.5 percent greater than the projected 
mail volume based on the volume trend percentage from FY 2009 to FY 
2010. For example, if a mailer's letter-size volume has declined from 
100,000 to 95,000 pieces (a trend of 5 percent decline) from USPS FY 
2009 to USPS FY 2010, that mailer's projected volume for 2011 would be 
95,000 pieces times 0.95 (90,250). The actual volume mailed during 
calendar year 2011 must be at least 92,507 pieces (the threshold 
volume, which is 1.025 times the projected volume of 90,250) during the 
program period.
    2. However, mailers with a positive volume trend will have a 
threshold of 2.5 percent more than their FY 2010 volume, rather than 
2.5 percent more than their trend. For example, a mailer's whose volume 
rose from 90,000 in FY 2009 to 100,000 in FY 2010 would have a 
threshold for the 2011 calendar year of 102,500 (1.025 times 100,000).
    d. In addition to an annual volume threshold, separate thresholds 
will be set for each of the first three quarters of calendar year 2011, 
based on the trend for each comparable quarter in FY 2010. Quarterly 
thresholds for mailers with a positive mail volume trend will be set at 
2.5 percent more than the volume in the comparable quarter of FY 2010. 
Postage credit will be provided after the end of each quarter, upon 
calculation and verification of the mail volume data.
    e. The threshold for quarter four of calendar year 2011 will be the 
yearly threshold, with all previous three quarters' volume being added 
to the volume for quarter four. Postage credit will be provided at the 
end of quarter four only when the annual volume threshold is met.
    f. Credit is provided to the mail owner's CAPS account, upon USPS 
calculation and verification of the mail volume data after the end of 
each quarter.
    g. The program period for eligible mail volume is from January 2, 
2011 through December 31, 2011. To be eligible for any postage credit, 
the participant must ensure that the total volume of First-Class Mail 
commercial letters paid at presorted or automation letter prices mailed 
during the 2011 program period meets or exceeds the USPS-determined 
threshold volume, as determined under 7.2.1.
    h. Mailers who do not meet the calendar year 2011 volume threshold 
are ineligible for any postage credit for this program. Any quarterly 
credits provided to mailers for quarters one through three must be 
returned to the Postal Service if the calendar year 2011 volume 
threshold is not met.

7.2.2 Mailer Participation Eligibility and Documentation

    Mail service providers are not eligible to participate in this 
program. Mail owners are considered eligible for the program as 
follows:
    a. Applicants must have mailed at least one presorted or automation 
First-Class Mail mailing of 500 letters or more during both USPS FY 
2009 and FY 2010. Applicants must be able to document their total 
mailed volume of commercial First-Class Mail letters for FY 2009 and 
2010, as follows:
    1. Volume through one or more permit imprint advance deposit 
accounts, precanceled stamp permits, or postage meter permits owned by 
the applicant, or
    2. Volume prepared by a mail service provider when entered through 
a permit owned by the applicant, or
    3. Volume mailed under a mail service provider's permit that can be 
specifically identified as being mailed on behalf of the applicant.
    b. Approved participants must be able to document the total mailed 
volume of letters that are eligible, under 7.2, for postage credit. 
Accordingly, pieces must be presented for mailing under either of the 
following conditions:
    1. A separate mailing of identical weight pieces, all of which 
weigh more than 1 ounce up to 1.2 ounces.
    2. A mailing of nonidentical weight pieces, supported by 
documentation under the manifest mailing standards in 705.2.0, with 
individual piece weight listings substantiating that participant pieces 
weigh more than 1 ounce but no more than 1.2 ounces. The manifest 
listing must also provide a total of eligible pieces.
    c. At the end of the 2011 program period, approved participants 
must be able to document their total mailed volume of commercial First-
Class Mail letters during the program period, the total mail volume 
eligible for postage credit under 7.2.2b, and meet the following 
conditions:
    1. Letters mailed in the 2011 program period that meet the USPS-
determined mail volume threshold, as provided in 7.2.1, must weigh more 
than 1 ounce up to a maximum of 1.2 ounces.
    2. Letters mailed during the 2011 program period must contain a 
reply card or reply envelope. Reply pieces must be automation-
compatible and barcoded. As of May 2011, the barcode on reply pieces 
must bear the correct Intelligent Mail barcode corresponding to the 
address on the reply piece.
    3. Credit applies only to automation letters; as of May 1, 2011 
credit will apply only for automation letters mailed under the full-
service automation option described in 705.22.
    d. Fluctuations in mailing activity resulting from the merger or 
acquisition of one or more program participants, prior or subsequent to 
the beginning of the program period, are subject to review, possible 
recalculation of thresholds, and approval by the USPS.
    e. Mailers participating in the Reply Rides Free incentive program 
are not eligible for simultaneous participation in any other USPS-
sponsored volume incentive program that includes First-Class Mail 
commercial letters during the 2011 program period.

7.2.3 Application

    Mail owners wishing to participate may apply at http://www.usps.com/firstclassmailincentive no later than December 31, 2010. 
Following registration, mailers are required to provide documentation 
demonstrating their total commercial First-Class Mail letter volume 
mailed during USPS FY 2009 and FY 2010 (as described in 7.2.1). The 
USPS reviews the documentation provided for adequacy and provides an 
electronic response that includes:
    a. Notification of approval (or of the need for additional 
documentation) for participation in the program.
    b. Applicant's verified mail volume for USPS FY 2009 and FY 2010.
    c. Applicant's 2011 mail volume threshold for program and postage 
credit eligibility.
    d. A certification letter. Mailers must present a printed copy of 
the certification letter to a postal acceptance employee with the first 
mailing under this program, at each mailing office.

7.2.4 Mailer Response

    Mailers wishing to dispute the USPS-verified mail volume or USPS-
determined threshold (see 7.2.1) may request a review by following the 
procedure outlined at http://www.usps.com/firstclassmailincentive no 
later than February 15, 2011.

7.2.5 Program Credits

    Approved participants that can demonstrate an increase in their 
mailed volume of commercial First-Class Mail letters in the 2011 
program period, meeting or exceeding the threshold volume as determined 
under 7.2.1,

[[Page 70138]]

qualify for a credit, after the end of the program period, to their 
designated Centralized Account Payment System (CAPS) permit imprint 
account, as follows:
    a. The letter-size pieces for which the credit is claimed must 
weigh more than 1 ounce but no more than 1.2 ounces and be mailed under 
all standards in 7.2.
    b. Participants that meet or exceed their threshold volume receive 
a credit in the amount of the postage paid for the second ounce for 
each eligible piece meeting all the conditions in 7.2 that are mailed 
during the 2011 program year from January 2, 2011 through December 31, 
2011.
* * * * *

240 Standard Mail

243 Prices and Eligibility

1.0 Prices and Fees for Standard Mail

* * * * *
    [Delete section 1.7 in its entirety to remove reference to the 2009 
Saturation Mail Volume Incentive Program.]
* * * * *

3.0 Basic Standards for Standard Mail Letters

* * * * *

3.9 Move Update Standards

* * * * *

3.9.4 Basis for Move Update Assessment Charges

    [Revise the introductory text of 3.9.4 to read as follows:]
    Mailings are subject to a Move Update assessment charge if more 
than 25 percent of addresses with a change-of-address (COA) are not 
updated, based on the error rate found in USPS sampling at acceptance 
during Performance-Based Verification. Specifically, mailings for which 
the sample contains greater than 25 percent failed COAs out of the 
total COAs in the sample are subject to additional postage charges as 
follows:
    [Revise item 3.9.4a as follows:]
    a. The percentage of the mailing paying the charge is based on the 
percentage of failed pieces above 25 percent (%).
* * * * *
    [Revise item 3.9.4c as follows:]
    c. As an example, if 35% of COAs in the sample are not updated, 
then the charge is applied to 10% (=35%-25%) of the total mailing.
* * * * *
    [Add new section 8.0 to read as follows:]

8.0 Incentive Programs for Standard Mail Letters

8.1 General Description

    Incentive programs for Standard Mail letters are designed to 
encourage mail volume growth and retention.

8.2 Saturation and High Density Incentive Program

    The Saturation and High Density Incentive Program provides postage 
credits for qualified mail owners of Standard Mail, or Nonprofit 
Standard Mail, letters and flats mailed at saturation and high density 
carrier route prices that can document mail volumes exceeding their 
individual USPS-recorded threshold level, during the 2011 program 
period, from January 2, 2011 through December 31, 2011. Participating 
mail owners documenting volumes above their threshold level receive a 
credit, for each piece exceeding their threshold level, to a designated 
permit imprint advance deposit account or Centralized Account Payment 
System (CAPS) account after the end of the program period. Refer to 
343.8.2 for program details.
* * * * *

300 Commercial Mail Flats

* * * * *

330 First-Class Mail

333 Prices and Eligibility

* * * * *

3.0 Eligibility Standards for First-Class Mail Flats

* * * * *

3.5 Move Update Standard

* * * * *

3.5.4 Basis for Move Update Assessment Charge

    [Revise text of 3.5.4 to read as follows:]
    Mailings are subject to a Move Update assessment charge if more 
than 25 percent of addresses with a change-of-address (COA) are not 
updated, based on the error rate found in USPS sampling at acceptance 
during Performance-Based Verification. Specifically, mailings for which 
the sample contains greater than 25 percent failed COAs out of the 
total COAs in the sample are subject to additional postage charges as 
follows:
    a. The percentage of the mailing paying the charge is based on the 
percentage of failed pieces above 25 percent (%).
    b. Each of the assessed pieces is subject to the $0.07 per piece 
charge.
    c. As an example, if 35% of COAs in the sample are not updated, 
then the charge is applied to 10% (= 35%-25%) of the total mailing.
    d. Mailings for which the sample has five or fewer pieces that were 
not updated for a COA are not subject to the assessment, regardless of 
the failure percentage.
* * * * *

340 Standard Mail

343 Prices and Eligibility

1.0 Prices and Fees for Standard Mail

* * * * *
    [Delete section 1.6 in its entirety to remove reference to the 2009 
Saturation Mail Volume Incentive Program.]
* * * * *

3.0 Basic Standards for Standard Mail Flats

* * * * *

3.9 Move Update Standards

* * * * *
    [Revise title and text of 3.9.4 to read as follows:]

3.9.4 Basis for Move Update Assessment Charges

    Mailings are subject to a Move Update assessment charge if more 
than 25 percent of addresses with a change-of-address (COA) are not 
updated, based on the error rate found in USPS sampling at acceptance 
during Performance-Based Verification. Specifically, mailings for which 
the sample contains greater than 25 percent failed COAs out of the 
total COAs in the sample are subject to additional postage charges as 
follows:
    a. The percentage of the mailing paying the charge is based on the 
percentage of failed pieces above 25 percent (%).
    b. Each of the assessed pieces is subject to the $0.07 per piece 
charge.
    c. As an example, if 35% of COAs in the sample are not updated, 
then the charge is applied to 10% (= 35%-25%) of the total mailing.
    d. Mailings for which the sample has five or fewer pieces that were 
not updated for a COA are not subject to the assessment, regardless of 
the failure percentage.
* * * * *
    [Add new 8.0 as follows:]

8.0 Incentive Programs for Standard Mail Flats

8.1 General Description

    Incentive programs for Standard Mail flats are designed to 
encourage mail volume growth and retention.

[[Page 70139]]

8.2 Saturation and High Density Incentive Program

8.2.1 Program Description

    The Saturation and High Density Incentive Program provides postage 
credits for qualified mail owners of Standard Mail, or Nonprofit 
Standard Mail, letters and flats (complete mailpieces) mailed at 
saturation and high density carrier route prices that can document mail 
volumes exceeding their individual USPS-recorded threshold level, 
during the 2011 program period, from January 2, 2011 through December 
31, 2011. Participating mail owners documenting volumes above their 
threshold level receive a credit, for each piece exceeding their 
threshold level, to a single designated permit imprint advance deposit 
account or Centralized Account Payment System (CAPS) account after the 
end of the program period. Applicants are required to review and 
certify the accuracy of the data used by the USPS to calculate their 
threshold level(s); and, upon request, may be required to provide 
documentation of their mailing activity in the 2010 calendar year, the 
2009-2010 eligibility period and during the program period.

8.2.2 Eligibility Standards

    Mail service providers are not eligible to participate in this 
program. Mail owners are eligible for the program as follows:
    a. Mailers must be the owner of a permit imprint advance deposit 
account, precanceled stamp permit, or postage meter permit at a USPS 
facility having PostalOne! capability; or the owner of qualifying 
mailpiece volume entered through the account(s) of a mail service 
provider at a USPS facility having PostalOne! capability, when adequate 
documentation demonstrates that the applicant is the owner of the 
mailpieces.
    b. Applicants must electronically submit postage statements and 
mailing documentation to the Postal One! system. Applicants 
participating within a defined market area(s) must electronically 
submit postage statements and mailing documentation using Mail.dat or 
Mail.XML. All other applicants may optionally submit postage statements 
via Postal Wizard.
    c. Only the volume of the mail owner, defined as the entity paying 
for the postage, is eligible within the program period.
    d. Mail service providers and customers supplying inserts, 
enclosures or other components included in the mailings of another 
mailer are not eligible to participate in this program.
    e. For either the saturation or high density incentives, applicants 
must demonstrate a combined minimum of six saturation or high density 
mailings of Standard Mail letters and/or flats within the qualification 
period of October 1, 2009 to September 30, 2010.
    f. Applicants meeting the eligibility criteria in 8.2.2a through 
8.2.2d may participate within both the saturation and high density 
price categories simultaneously.
    g. Applicants who participate only within defined market areas must 
meet the eligibility criteria independently for each selected SCF 
service area or selected metropolitan target market.
    h. Mailers participating in the 2011 Saturation and High Density 
Incentive Program are not eligible for concurrent participation in any 
other USPS-sponsored volume incentive program that includes Standard 
Mail pieces in the saturation or high density price categories.

8.2.3 Program Threshold Level

    Threshold level figures are calculated independently for each 
applicant as follows:
    a. Thresholds are set at 5 percent (5%) above (or 105% of) the 
volume, within the participant-selected growth area and price category, 
of Standard Mail or Nonprofit Standard Mail saturation and high density 
letters and flats recorded in the 2010 calendar year.
    b. Applicants participating in both the saturation and high density 
price categories must exceed the combined thresholds of both categories 
before qualifying for an incentive payment in either category.

8.2.4 Application

    Mail owners identified by the Postal Service as being eligible to 
participate in the program will be sent an invitation letter after 
November 1, 2010. Mail owners may apply for the program as follows:
    a. The invitation letter directs mail owners to apply for the 
program online at http://www.usps.com/SaturationHD no later than 
December 31, 2010.
    b. Applicants participating with Standard Mail saturation and/or 
high density mail volume destinating only within defined market areas 
must select the sectional center facility (SCF) service areas for 
participation in the program, up to a maximum of 20 individual SCF 
areas or up to five metropolitan target markets (consisting of multiple 
contiguous SCFs). The USPS must approve all applicant-selected market 
areas prior to acceptance into the program.
    c. Mail owners completing the online application process receive an 
electronic response from the USPS that includes:
    1. An individual volume threshold report, with the applicant's 
recorded saturation and/or high density volume for the 2010 calendar 
year.
    2. A certification letter.
    3. A threshold inquiry form.
    d. Applicants agreeing with their threshold volume(s) can sign the 
certification letter and return a copy via email to: 
<a href="/cdn-cgi/l/email-protection#f9aa988d8c8b988d909697b1bdb0979a9c978d908f9cb98c8a898ad79e968f"><span class="__cf_email__" data-cfemail="184b796c6d6a796c717776505c51767b7d766c716e7d586d6b686b367f776e">[email protected]</span></a> or mail hardcopy to Saturation Incentive 
Program Office, 475 L'Enfant Plaza SW., Room 5500, Washington, DC 
20260-5500, to be registered for the program.
    e. Applicants not agreeing with any portion of their USPS-
calculated threshold(s) must complete the threshold inquiry form and 
return it along with supporting evidence, via email, or mail hardcopy 
to Saturation Incentive Program Office, 475 L'Enfant Plaza SW., Room 
5500, Washington, DC 20260-5500, no later than March 15, 2011.
    f. Mail owners wishing to participate in the program, but who were 
not notified by letter, may request a review of their eligibility by 
contacting the USPS at <a href="/cdn-cgi/l/email-protection#7b281a0f0e091a0f12141554333f3215181e150f120d1e3b0e080b08551c140d">Saturation/<span class="__cf_email__" data-cfemail="9fd7dbd6f1fcfaf1ebf6e9fadfeaecefecb1f8f0e9">[email protected]</span></a> or submitting an 
online application at www.usps.com/SaturationHD no later than December 
31, 2010.

8.2.5 Program Participation

    Mail owners may participate in the program with qualifying letters 
and flats mailpieces mailed at saturation or high density prices as 
follows:
    a. Standard Mail, or Nonprofit Standard Mail, mailpieces mailed by 
the participant through the participant's own permit imprint advance 
account, precanceled stamp permit(s), or postage meter permit(s);
    b. Standard Mail, or Nonprofit Standard Mail, mailpieces prepared 
by a mail service provider, when entered through a permit owned by the 
participant;
    c. Standard Mail, or Nonprofit Standard Mail, mailpieces mailed 
through a mail service provider's permit, only when the pieces can be 
identified as being prepared for the participant and when the 
applicant's prior mailing activity through the mail service provider's 
permit can be validated.
    d. Fluctuations in mailing activity resulting from the merger or 
acquisition of one or more program participants, prior or subsequent to 
the beginning of the program period, are subject to

[[Page 70140]]

review and approval by the USPS for inclusion in reported volume.

8.2.6 Incentive Program Credits

    Approved participants demonstrating an increase in Standard Mail, 
or Nonprofit Standard Mail, saturation and high density letters and 
flats volume above their threshold level qualify for a credit to a 
single designated permit imprint advance deposit account or CAPS 
account as follows:
    a. The total postage paid for Standard Mail, or Nonprofit Standard 
Mail, letters and flats mailed at saturation and high density prices, 
recorded during the program is identified for each participant.
    b. The total postage paid during the program period is divided by 
the total number of recorded mailpieces to determine the average price 
per piece for the program period.
    c. Participants receive a credit, based on the percentages of the 
average price per piece, for the number of mailpieces of incremental 
volume above their threshold level, recorded during the program period, 
as follows:
    1. Saturation letters and flats: 22 percent for Standard Mail, 8 
percent for Nonprofit Standard Mail pieces.
    2. High density letters and flats: 13 percent for Standard Mail, 8 
percent for Nonprofit Standard Mail pieces.
* * * * *

400 Commercial Parcels

* * * * *

430 First-Class Mail

433 Prices and Eligibility

* * * * *

3.0 Basic Standards for First-Class Mail Parcels

* * * * *

3.5 Move Update Standards

* * * * *

3.5.4 Basis for Move Update Assessment Charge

    [Revise text of 3.5.4 to read as follows:]
    Mailings are subject to a Move Update assessment charge if more 
than 25 percent of addresses with a change-of-address (COA) are not 
updated, based on the error rate found in USPS sampling at acceptance 
during Performance-Based Verification. Specifically, mailings for which 
the sample contains greater than 25 percent failed COAs out of the 
total COAs in the sample are subject to additional postage charges as 
follows:
    a. The percentage of the mailing paying the charge is based on the 
percentage of failed pieces above 25 percent (%).
    b. Each of the assessed pieces is subject to the $0.07 per piece 
charge.
    c. As an example, if 35% of COAs in the sample are not updated, 
then the charge is applied to 10% (=35%-25%) of the total mailing.
    d. Mailings for which the sample has five or fewer pieces that were 
not updated for a COA are not subject to the assessment, regardless of 
the failure percentage.
* * * * *

440 Standard Mail

443 Prices and Eligibility

* * * * *

3.0 Basic Standards for Standard Mail Parcels

* * * * *

3.5 Move Update Standards

* * * * *
    [Revise title and text of 3.5.4 to read as follows:]

3.5.4 Basis for Move Update Assessment Charges

    Mailings are subject to a Move Update assessment charge if more 
than 25 percent of addresses with a change-of-address (COA) are not 
updated, based on the error rate found in USPS sampling at acceptance 
during Performance-Based Verification. Specifically, mailings for which 
the sample contains greater than 25 percent failed COAs out of the 
total COAs in the sample are subject to additional postage charges as 
follows:
    a. The percentage of the mailing paying the charge is based on the 
percentage of failed pieces above 25 percent (%).
    b. Each of the assessed pieces is subject to the $0.07 per piece 
charge.
    c. As an example, if 35% of COAs in the sample are not updated, 
then the charge is applied to 10% (=35%-25%) of the total mailing.
    d. Mailings for which the sample has five or fewer pieces that were 
not updated for a COA are not subject to the assessment, regardless of 
the failure percentage.
* * * * *
    We will publish an appropriate amendment to 39 CFR Part 111 to 
reflect these changes.

Stanley F. Mires,
Chief Counsel, Legislative.
[FR Doc. 2010-28412 Filed 11-16-10; 8:45 am]
BILLING CODE 7710-12-P


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