U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1

29–010

" SENATE ! 108TH CONGRESS

2d Session 

REPORT

2004

108–318

Calendar No. 674

POSTAL ACCOUNTABILITY AND 

ENHANCEMENT ACT

R E P O R T

OF THE

COMMITTEE ON GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

together with

ADDITIONAL VIEWS

TO ACCOMPANY

S. 2468

TO REFORM THE POSTAL LAWS OF THE UNITED STATES

AUGUST 25, 2004.—Ordered to be printed

Filed, under authority of the order of the Senate of July 22, 2004


E:\Seals\Congress.#13
(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

ARLEN SPECTER, Pennsylvania 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD C. SHELBY, Alabama 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

ANN C. FISHER, Deputy Staff Director 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

SUSAN E. PROPPER, Minority Counsel 

JOHN P. KILVINGTON, Legislative Assistant for Senator Carper 

AMY B. NEWHOUSE, Chief Clerk 

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CONTENTS 

Page 

I. Purpose and Summary .................................................................................. 1

II. Background .................................................................................................... 2

III. Legislative History ......................................................................................... 39

IV. Section by Section Analysis .......................................................................... 41

V. Evaluation of Regulatory Impact .................................................................. 62

VI. Congressional Budget Office Cost Estimate ................................................ 62

VII. Changes in Existing Law .............................................................................. 74

Calendar No. 674

108TH CONGRESS SENATE REPORT " ! 2d Session 108–318

POSTAL ACCOUNTABILITY AND ENHANCEMENT ACT

AUGUST 25, 2004.—Ordered to be printed

Filed, under authority of the order of the Senate of July 22, 2004

Ms. COLLINS, from the Committee on Governmental Affairs, 

submitted the following 

R E P O R T 

[To accompany S. 2468]

The Committee on Governmental Affairs, to whom was referred 

the bill (S. 2468) to reform the postal laws of the United States, 

having considered the same reports favorably thereon with amendments and recommends that the bill do pass.

I. PURPOSE AND SUMMARY

The purpose of S. 2468 is to reform the postal laws of the United 

States. Among other things, S. 2468 preserves the basic features of 

universal service-affordable rates, frequent delivery, and convenient community access to retail postal services. The bill also simplifies the pricing process for Postal Service products and services 

and replaces the current rate-setting process for market-dominant 

products with a rate-cap based structure. It gives the Postal Service the authority to set rates for competitive products, such as Express Mail and Parcel Post, as long as these prices do not result 

in cross-subsidy from the market-dominant products. S. 2468 

grants the new Postal Regulatory Commission the power to institute emergency price increases due to ‘‘unexpected and extraordinary circumstances.’’ It guarantees a higher degree of transparency to ensure fair treatment of customers of the Postal Service’s and those companies competing with the Postal Service’s competitive products. It requires the Postal Service to report to Congress with a strategy for how they intend to remove from the network excess processing capacity and space. Finally, the bill repeals 

a Civil Service Retirement System escrow fund provision from Public Law 108–18 and transfers a military pension obligation back to 

the U.S. Treasury, where it originated. 

2

II. BACKGROUND AND NEED FOR LEGISLATION

By most accounts, the 1970 Postal Reorganization Act (Public 

Law 91–375), which created the modern Postal Service, has been 

a success. Today, the Postal Service receives virtually no taxpayer 

support and the service its approximately 710,000 career employees 

provide to every American, every day is second to none. More than 

thirty years after its birth, the Postal Service now delivers to 141 

million addresses each day. It is also the anchor of a $900 billion 

per year mailing industry that, according to a study conducted by 

the Envelope Manufacturers Association Foundation, employs 

roughly 11.1 million Americans nationwide in virtually every segment of the economy. 

Recent years, however, have been difficult ones for the Postal 

Service. In late 2001, the Postal Service was projecting its third 

consecutive year of deficits, having lost $199 million in fiscal year 

2000 and $1.68 billion in fiscal year 2001. It was projecting losses 

of up to $4 billion in fiscal year 2002. Mail volume was falling, revenues were below projections and the Postal Service was estimating that it needed to spend $4 billion on security enhancements 

in order to prevent a repeat of the tragic anthrax attacks that took 

several lives in the Fall of 2001. The Postal Service was also perilously close to its $15 billion statutory debt ceiling. 

Recent years have also been difficult for postal customers. While 

rates have now temporarily stabilized, the combination of an economic recession, terrorism and poor mail volume forced the Postal 

Service to increase rates three times in less than two years. These 

increases exceeded the rate of inflation. On January 7, 2001, the 

price of postage increased by 4.7 percent on average, increasing the 

price of a First Class stamp from 33 cents to 34 cents. On July 1, 

2001, the price of a First Class stamp did not go up again but 

prices for other postal products increased by an additional 1.6 percent on average. On June 30, 2002, the price of postage increased 

by an additional 8.7 percent on average-raising the price of a First 

Class stamp from 34 cents to 37 cents. When mail-dependant businesses experience these kinds of price increases, they often begin 

mailing less and jobs can be lost. 

Things have turned around somewhat for the Postal Service 

since the last rate increase. Postmaster General John Potter has 

led a commendable effort to make the Postal Service more operationally efficient. Billions of dollars in costs have been taken out 

of the system, thousands of positions have been eliminated through 

attrition and voluntary retirement and successful automation programs have resulted in improved service and productivity, along 

with reduced costs. More dramatically, on November 1, 2002, the 

Postal Service learned that an unfunded pension liability related to 

the cost of its employees’ participation in the Civil Service Retirement System (CSRS) they once believed was as high as $32 billion 

was actually $5 billion. A study conducted by the Office of Personnel Management had found that, because pension investments 

have been earning interest at a higher rate than presumed in the 

statutory funding formula, the Postal Service would over-fund its 

CSRS obligation by $78 billion if it continued to make the same 

payments it had been making to that point. Chairman Collins and 

Senator Carper introduced legislation in early 2003, the Postal 

3

Civil Service Retirement System Funding Reform Act (P.L. 108–

18), which reduced the amount the Postal Service must pay into 

the Civil Service Retirement System each year by nearly $3 billion. 

P.L. 108–18, however, did not provide a permanent solution to 

the Postal Service’s problems. The lower pension payment, coupled 

with Postmaster General Potter’s aggressive cost cutting, averted 

the need for the Postal Service Board of Governors to seek an increase to their statutory debt limit. Aggressive cost cutting, however, cannot be sustained without affecting universal service and so 

will not solve the Postal Service’s long-term challenges. According 

to the Postal Service, the total volume of mail delivered by the 

Postal Service has declined by more than 5 billion pieces since 

2000. Over the same period, the number of homes and businesses 

the Postal Service delivers to increased by more than 5 million. 

First Class mail, the largest contributor to the Postal Service’s bottom line, is leading the decline in volume. Some of those disappearing First Class letters are being replaced by advertising 

mail, which earns significantly less revenue for the Postal Service. 

In addition, the Postal Service has noted that only 22 percent of 

the Postal Service’s current mail volume is comprised of letters 

originating in households. A large percentage of that 22 percent is 

being sent to businesses, non-profit organizations and governments. 

Bill presentment and payment, advertising mail and other commercial correspondence account for 93 percent of total mail volume. It 

is highly likely that, as Americans become more comfortable conducting commercial transactions over the Internet, the Postal Service will continue to see declines in First Class mail volume. 

Approximately one in four Americans today pay at least some of 

their bills online. Because processing an electronic payment made 

over the Internet costs one-third less than processing a check sent 

through the mail, businesses have an incentive to encourage more 

Americans to carry out more transactions online. In fact, many 

businesses no longer charge customers for the convenience of innovations like electronic bill payment but are instead offering incentives aimed at encouraging customers to give up the mail and move 

to the Internet. 

The electronic diversion of mail and its impact on the Postal 

Service are among the reasons why the Postal Service has been on 

the Government Accountability Office’s (GAO) ‘‘high-risk’’ list of 

troubled federal programs in need of reform since 2001. Electronic 

diversion also comes at a time when, on top of the costs related to 

serving a growing number of delivery points, the Postal Service is 

facing more than $90 billion in unfunded liabilities and obligations. 

These include $6.5 billion in debt to the U.S. Treasury, nearly $7 

billion for Workers’ Compensation claims, $5 billion for CSRS retirement costs, and as much as $45 billion to cover retiree health 

care costs. The rate increases that will be needed to finance these 

liabilities, maintain the Postal Service’s current infrastructure, pay 

for new letter carriers, and build retail and processing facilities in 

growing parts of the country will only further erode mail volume. 

GAO has warned that the Postal Service could be on the verge of 

a ‘‘death spiral’’ in which decreasing volume and increasing rates 

lead to further decreases in volume. 

To make matters worse, the rate and classification system created in the 1970 Postal Reorganization Act often forces the Postal 

4

Service to wait up to 18 months to change rates, giving management little flexibility to adjust its revenues to changing market 

conditions or to adapt to meet the unique and changing needs of 

its customers. The 1970 Act also gives the Postal Rate Commission 

limited oversight over the Postal Service and creates a Postal 

Board of Governors comprised of political appointees who sometimes do not have the management experience necessary to run an 

organization the size of the Postal Service. 

There have been a number of efforts in recent years to make 

some necessary reforms to the way the Postal Service does business. This Committee, led by former Chairman Fred Thompson, 

Ranking Member Lieberman and Senators Cochran and Akaka, 

former Chairman and Ranking Member of the Subcommittee on 

International Security, Proliferation, and Federal Services, asked 

GAO in March 2001 for a study of the Postal Service’s precarious 

financial situation and its ability to continue to fulfill its universal 

service obligation. This report identified many of the Postal Service’s serious long-term problems. Senators Thompson, Lieberman, 

Cochran and Akaka then sent a letter to the Postal Board of Governors then-Chairman Robert Rider in June 2001 for a report from 

the Postal Service on how it planned to reform itself to address the 

significant challenges it faced. In April of 2002, Postmaster General 

Potter delivered to Congress a comprehensive Transformation Plan 

designed to ‘‘ensure the continuation of affordable universal service 

and to prepare the organization for the challenges of change in a 

dynamic marketplace.’’ Creation of the Plan forced the Postal Service to determine what changes could be made, within existing constraints, that would result in improved operations, performance 

and finances. 

While the Transformation Plan was widely acknowledged as a 

good ‘‘first step, ‘‘it was also recognized that to truly transform the 

Postal Service, legislative change would be necessary. In an effort 

to take a fresh look at the issues, in July of 2002, Chairman Collins 

introduced a bill to establish a Presidential Postal Commission 

charged with examining the problems the Postal Service faces, and 

developing specific recommendations and legislative proposals that 

Congress and the Postal Service could implement. Five months 

later, in December of 2002, President Bush announced the creation 

of the President’s Commission on the United States Postal Service 

(hereafter referred to as ‘‘the President’s Commission’’), a bipartisan commission charged with identifying the operational, structural, and financial challenges facing the Postal Service. The President charged this commission with examining all significant aspects of the Postal Service with the goal of recommending legislative and administrative reforms to ensure its long-term viability. 

The President’s Commission conducted seven public hearings 

across the country at which they heard from numerous witnesses. 

On July 31, 2003, the Commission released its final report, making 

35 legislative and administrative recommendations for the reform 

of the Postal Service. In issuing their report, they sent a strong 

message to both Congress and the Postal Service:

. . . an incremental approach to Postal Service reform 

will yield too little, too late given the enterprise’s bleak fiscal outlook, the depth of current debt and unfunded obligations, the downward trend in First Class mail volumes and 

5

1The President’s Commission on the U.S. Postal Service, Embracing the Future: Making the 

Tough Choices to Preserve Universal Mail Service (July 31, 2003), Introduction, p. v.

the limited potential of its legacy postal network that was 

built for a bygone era.1

Beginning in September of 2003, the Committee held a series of 

seven hearings specifically to review the recommendations of the 

President’s Commission. The Committee heard from the President’s 

Commission’s Co-Chair James Johnson, Postmaster General Potter, 

Postal Service Board of Governors Chairman David Fineman, GAO 

Comptroller General David Walker, Postal Rate Commission Chairman George Omas, all four major postal unions, postmaster and 

supervisor associations, mail-dependent businesses, postal competitors, newspaper associations, and experts on the issues of collective 

bargaining and postal wages, among others. In addition, the Committee joined with the House Government Reform and Oversight 

Committee to hold an eighth hearing at which U.S. Department of 

Treasury Secretary John Snow testified. 

There appeared to be a broad, general, consensus in the diverse 

stakeholder community on what elements of reform were necessary, such as legislative changes to the rate-setting process to 

allow for a more streamlined system. Postal customers wanted this 

new rate-setting system to provide strong incentives to hold down 

costs and to provide predictable rates. Many witnesses also considered improved Postal Service transparency and accountability to be 

essential aspects of reform; along with pricing flexibility to enable 

the Postal Service to better respond to its customers. The Committee was also asked by countless stakeholders to reconsider two 

elements of the Postal Civil Service Retirement System Funding 

Reform Act of 2003. The Act changed the way the Postal Service 

funds its Civil Service Retirement System (CSRS) obligation. The 

Committee was specifically asked to repeal the escrow provision of 

the CSRS Funding Reform Act and to transfer the military pension 

obligation back to the U.S. Department of Treasury. These were 

just a few of many legislative proposals for the reform of the Postal 

Service that the Committee was asked to consider. 

These hearings culminated in Chairman Collins’ and Senator 

Carper’s May 20, 2004 introduction of The Postal Accountability 

and Enhancement Act of 2004, S. 2468. 

THE POSTAL ACCOUNTABILITY AND ENHANCEMENT ACT OF 2004

Postal Service mission 

Congress established the United States Postal Service ‘‘to bind 

the Nation together through the personal, educational, literary, 

and business correspondence of the people.’’ [39 U.S.C. 101(a)]. In 

this legislation, the Committee reaffirms the core mission of the 

Postal Service and limits the Postal Service to providing postal 

services which comprise the physical delivery of letters, printed 

matter or packages weighing up to seventy pounds and other ancillary services. By focusing on the business of processing, transporting and delivering physical mail pieces, the Postal Service will 

avoid the distractions and the associated financial costs that have 

arisen when the Postal Service has ventured away from its core 

business. To further this focus on core mail products, the Postal 

6

2 Ibid., 8.

3 U.S. Postal Service, TRANSFORMATION PLAN, (April 2002), 3.

Service will not be permitted to offer nonpostal products except in 

cooperation with other government agencies, for example, sale of 

federal migratory bird hunting and conservation stamps or acceptance of passport applications. 

The definition of postal services and the associated definitions of 

products and rates form a product framework within which the 

Postal Service will operate and for which the Postal Regulatory 

Commission will design a regulatory structure. These definitions do 

not direct the Postal Regulatory Commission or the Postal Service 

to adopt any specific costing or rate design methodologies. 

Regulatory structure 

The Postal Service currently operates under a regulatory structure created more than thirty years ago in the 1970 Postal Reorganization Act, a bill enacted at a time when nobody imagined that 

innovations like fax machines, cell phones and the Internet would 

one day compete with hard copy mail. The current structure offers 

the Postal Service little opportunity to innovate or even to quickly 

change the prices it charges for its products in response to changes 

in the market. It also gives the Postal Service little incentive to cut 

costs, even though the cost of a growing delivery network coupled 

with falling mail volume and massive debt demands greater efficiency. Meanwhile, the Postal Rate Commission is given limited 

authority to exercise oversight over the Postal Service. The President’s Commission acknowledged these concerns, stating in its report that the laws governing the way the Postal Service operates 

need to be updated to meet the challenges of the Internet age.2 The 

Postal Service acknowledged this itself in the Transformation Plan: 

While the basic charter of the Postal Service has remained static since its inception in 1970, the mailing industry and private sector delivery companies have evolved 

to meet the changing needs of the marketplace. Indeed, innovation and competition were not primary concerns of the 

1970 Act. The Act was designed to allow the Postal Service 

to do what it did in 1970 in a more businesslike manner. 

By definition and structure, a government entity has goals 

and mandates that the private sector does not have, and 

these inhibit the flexibility needed for direct competition. 

In the far different and more competitive environment of 

2002, a revision of the Postal Service’s 1970 charter is 

overdue.3

This legislation makes that long overdue revision by establishing 

a regulatory structure that balances the Postal Service’s need for 

increased pricing and product flexibility with the need for effective 

oversight and accountability. The Committee has considered that 

the Postal Service faces little or no competition in providing many 

products and, for some products, has been granted a legal monopoly which prohibits private sector firms from providing alternative 

services. Therefore, the Postal Service’s current products are divided into two categories: market-dominant products for which 

there is little or no competition and competitive products for which 

private sector alternatives exist. The regulatory structure grants 

7

the Postal Regulatory Commission enhanced review and oversight 

responsibilities for market-dominant products while streamlining 

the rate-making procedure for those products to allow a more rapid 

Postal Service response to changes in market conditions. In addition, the Postal Service’s Board of Governors is permitted to more 

directly manage and price the Postal Service’s competitive products; subject to minimal Regulatory Commission oversight to ensure that the Postal Service competes fairly with the private sector 

delivery services. 

Current Postal Service products classified in S. 2468 as marketdominant include First Class Mail Letters, First Class Mail Cards, 

Periodicals, Standard Mail, single-piece Parcel Post, media mail, 

bound printed matter, library mail, special services and singlepiece international mail. Current Postal Service products classified 

by this bill as competitive include Priority Mail, expedited mail, 

bulk parcel post, bulk international mail, and mailgrams. 

The Committee considered classifying single-piece Parcel Post as 

a competitive product. In many parts of the country where a number of private sector delivery services compete with the Postal Service in the package delivery market, classifying single-piece Parcel 

Post in this way would not be likely to have much of an impact on 

postal customers. However, the Committee decided to make singlepiece Parcel Post a market-dominant product because of the negative impact we feared a competitive classification would have on 

those postal customers who live in parts of the country with fewer 

package delivery options. The Postal Service has traditionally kept 

prices for single-piece Parcel Post low to facilitate universal access 

to affordable package delivery in all parts of the country. It charges 

the same rate for single-piece Parcel Post in rural communities as 

it does in urban or suburban communities with more competitive 

package delivery markets. If single-piece Parcel Post were made a 

competitive product subject to the language in new section 3633 of 

title 39 of the U.S. Code setting cost coverage requirements for all 

competitive products, it is possible that the Postal Service would be 

forced to increase the price it charges for the product. This could 

make single-piece Parcel Post unaffordable for some postal customers. That said, nothing in this bill prevents single-piece Parcel 

Post from one day being moved from the market-dominant to the 

competitive category under the new section 3642 of title 39. If the 

Postal Regulatory Commission considers making this change at 

any point in the future, the Committee urges them to pay particular attention during their deliberations to the impact their decision could have on the affordability and availability of package delivery services in those communities without a fully-developed competitive package delivery market. 

Regulation of market-dominant products 

The Postal Service currently operates under a regulatory structure that has changed little since it was established by the Postal 

Reorganization Act in 1970 (Public Law 91–375). However, the 

economy and the market place in which the Postal Service operates 

have changed in ways that could not have been foreseen more than 

thirty years ago. Today, electronic and other alternatives to mail 

have the potential to significantly reduce Postal Service mail volumes; volume reductions are already being seen. These market 

8

pressures combined with a continual growth of the Postal Service’s 

network and the number of postal delivery points threaten the ability of the Postal Service to provide universal service. In addition, 

a rigid, and overly litigious rate-setting process limits the Postal 

Service’s ability to adjust rates as needed and to adapt postal 

prices and products to a changing marketplace. This bill proposes 

needed reforms that will not only address these critical needs but 

will also enhance oversight ensuring that the Postal Service is accountable to the American people. 

In designing the regulatory structure for market-dominant products, the Committee carefully considered whether Congress itself 

should legislatively establish the details of the regulatory system. 

On balance, however, the Committee determined that relying on 

the Postal Regulatory Commission’s expertise to develop the price 

cap will result in a more flexible system that can be adapted to 

changing market conditions. In implementing this authority, the 

Postal Regulatory Commission should develop regulations that will 

give the Postal Service the maximum pricing flexibility possible 

consistent with the overarching financial and policy goals set forth 

in this legislation. Replacing one inflexible system with another 

will not address the needs of the postal community or ensure longterm survival of the American public’s postal system. 

For market-dominant products, the Postal Regulatory Commission is directed to design, within 12 months, a modern system for 

regulating rates and classes for market-dominant products. This 

regulatory system shall be designed to meet nine objectives. These 

objectives recognize the importance of the postal rate-setting process to both the Postal Service and its customers and the need to 

ensure that the Postal Service remains a financially viable institution capable of providing the mail services that the American public need. Specifically, these objectives direct the Postal Regulatory 

Commission to establish a more streamlined regulatory system 

which will reduce the time and resources needed to litigate and establish new postal rates while giving the Postal Service increased 

pricing flexibility (Objectives 1 and 5). In addition, the new regulatory system should address postal customers’ concerns that rate 

changes be both predictable and stable (Objective 2), that the mail 

system be secure and terrorism be deterred (Objective 4), and that 

an equitable distribution of the Postal Service’s institutional costs 

result (Objective 7). The long term financial viability of the Postal 

Service is addressed by requiring that the Postal Regulatory Commission maximize incentives for the Postal Service to reduce costs 

and increase efficiency (Objective 3) thus maintaining affordable 

and cost-effective postal services. Lastly, the Postal Regulatory 

Commission is directed to include a provision for the Postal Service 

to earn adequate revenues, including the ability to retain earnings, 

both to maintain the Postal Service’s financial stability and to meet 

established service standards (Objective 6). It is the Committee’s 

expectation that the new rate and classification system will be fair 

and equitable for mailers of all types of sizes. 

The Committee believes that the provision for retained earnings 

will address two concerns expressed during hearings conducted 

prior to the introduction of this bill. First, the ability to retain 

earnings will provide the Postal Service with revenues necessary to 

fund network expansion and necessary capital improvements. In 

9

the current environment the Postal Service faces the need to expand its network as the number of delivery points increases; however, if the concurrent downward trend in mail volumes continues, 

it will become increasingly difficult to fund this needed expansion. 

Retained earnings will provide a resource that can be used by the 

Postal Service to meet its universal service obligation. Secondly, 

the Committee’s determination that a rate cap mechanism is the 

appropriate regulatory structure is based on a determination that 

a rate cap can result in downward pressure on costs through restrictions on price changes. If retained earnings are not permitted, 

that is if revenues must equal costs, the incentive to control costs 

and thus generate funds for long-term capital investments, network 

growth or other needs will not exist. 

In designing the regulatory structure, the Postal Regulatory 

Commission shall take into account twelve factors. These factors 

encompass the current pricing and classification criteria [39 U.S.C. 

3622(b) and 3623(c)] used by the Postal Rate Commission to evaluate the Postal Service’s Governors’ rate and classification requests. 

The Committee believes that these factors have served a useful role 

in evaluating rate and classification changes under the current regulatory structure and will provide similar policy guidance for the 

development of the new regulatory system. 

Accurate attribution of costs 

The existing regulatory structure focuses considerable attention 

on ascertaining what postal costs could reliably be said to have 

been incurred to provide which specific postal services. Current law 

requires that the rates for each class of mail and type of service 

be set so as to recover the direct and indirect costs that were 

caused by that class or type, in addition to providing a reasonable 

contribution toward institutional costs. Institutional costs are those 

40 percent of the Postal Service’s costs, such as salaries for management and other overhead costs, that the Postal Service says 

cannot be attributed to any specific product. While considering this 

legislation the Committee heard testimony suggesting that currently accepted levels of cost attributions were both too low and too 

high, and that specific rules for cost attribution should be incorporated into law. The Committee has decided that the technical decision of what cost analysis methodologies are sufficiently reliable 

at any given time to form the basis for attribution should be left 

to the Postal Regulatory Commission, acting with benefit of counsel 

from all interested persons in open public proceedings. 

Identifying costs which can reliably be found to have been caused 

by each specific subclass and service is essential to maintaining 

economically efficient rates and avoiding inequitable cross-subsidization, which occurs when rates from one product are used to 

pay costs associated with another. Over the history of the Postal 

Reorganization Act the ability to accurately attribute costs has continually evolved, and the Committee expects that with greater 

transparency about the Postal Service’s operations, this process 

will continue. The current analysis has been guided by a Supreme 

Court decision, National Assoc. of Greeting Card Publishers v. 

USPS, 462 U.S. 810, 829–34, (1982), that carefully analyzed how 

the term attributable should be interpreted. This definition has 

been further refined by U.S. Courts of Appeals and is well underVerDate jul 14 2003 06:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00013 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
10

stood in the industry. The NAGCP Court rejected a contention that 

it was appropriate to make classes responsible for the recovery of 

costs for which an extended inference of causation was claimed. It 

emphasized the need for reliable indicators of causality without 

specifying any specific method for identifying causality. Governed 

by this ruling since 1982, the Postal Rate Commission must have 

reasonable assurance that any costs attributed to a class of mail 

are incurred as a result of providing that class of mail. The Committee finds no reason for changing this standard. 

Establishment of a regulatory system for market-dominant products 

In hearings, witnesses from the mailing industry cited the need 

for predictable and stable rates. Predictability and stability, the 

Committee learned, allows mailers to better plan their mailing and 

could allow them to increase the amount of business they do with 

the Postal Service. Of primary importance, then, is the establishment of a regulatory system that will provide for limits on the percentage changes in Postal Service rates. This system—frequently 

referred to as a rate or price cap—shall be designed to limit annual 

rate changes based on the level of inflation. While the Committee 

considered directing the use of a specific inflation measure as the 

basis for the rate cap, concern existed that such a determination 

would unreasonably restrict the flexibility of the Postal Regulatory 

Commission to establish the best and most effective rate cap mechanism. The Committee expects that the Postal Regulatory Commission, in public proceedings and with the input of all interested parties, will fully and carefully evaluate the merits of a wide range of 

rate cap structures. This consideration should include, but should 

not be limited to, the relative merits of different inflation indices 

including the Consumer Price Index, the Employment Cost Index, 

and the Gross Domestic Product Price Index; the definition of the 

product groupings to which the caps will be applied, and the use 

of productivity factors or offsets. In addition, the Postal Regulatory 

Commission should consider the experience gained and lessons 

learned from the construction and application of rate or price caps 

in other industries. Overall, the Committee believes that the rate 

cap structure established by the Postal Regulatory Commission 

should provide for the maximum possible pricing flexibility while 

maintaining adequate financial safeguards and incentives for cost 

control. 

To provide for predictable rate changes which will allow Postal 

Service customers to budget for postage expenditures, the Postal 

Regulatory Commission shall establish a schedule under which 

rates will change at regular intervals by predictable amounts. 

While the establishment of a rate cap per se will increase the predictability of postal rate changes by imposing a known cap, the 

Postal Regulatory Commission must consider whether additional 

requirements are necessary and appropriate. The Committee believes that the characteristics and relative sophistication of various 

customer groups may suggest differing rate change schedules are 

appropriate for specified product groupings. Similarly, market conditions and the relative speed with which market conditions change 

may also inform the Postal Regulatory Commission’s decision in establishing any rate change schedule. The Postal Regulatory Commission may determine that more or less frequent rate changes are 

11

appropriate for different product groupings. However, establishment of schedules for rate changes should be designed to provide 

a necessary and appropriate level of predictability; it should not be 

designed to unreasonably restrict the ability of the Postal Service 

to adjust prices within the rate cap. 

To provide for adequate review of any proposed changes in market-dominant product price, a 45-day prior review period is established. This period begins with the Postal Service’s public notice of 

a price adjustment affecting a market-dominant product or products and will provide the Postal Regulatory Commission an opportunity to review the adjustment. If the Postal Regulatory Commission finds that the price adjustment is not in compliance with the 

established statutory and regulatory requirements, it must notify 

the Postal Service within the 45-day notice period. In response to 

this notice, the Postal Service shall describe the actions to be taken 

to ensure that the rate change is in compliance with the statutory 

and regulatory requirements. While the Postal Service is expected 

to respond adequately to any Postal Regulatory Commission determination of noncompliance prior to the scheduled rate implementation, the burden is on the Postal Regulatory Commission to provide 

adequate notice of noncompliance permitting a Postal Service response prior to the expiration of the 45-day period. If either intentionally or inadvertently, the Postal Regulatory Commission does 

not notify the Postal Service of any noncompliance, the Committee 

believes that there would be no impediments to the Postal Service 

implementing the rate adjustment as noticed at the end of the 45-

day period. The Committee clearly recognizes that the 45-day review period is short and has determined that a short review period 

is consistent with the goals of increasing Postal Service pricing 

flexibility. To facilitate review of rate adjustments, the Committee 

presumes that extremely clear and well-defined standards will be 

established by regulation allowing the Postal Service and the Postal Regulatory Commission to make a rapid determination of whether a rate adjustment meets the applicable criteria. The review period is not intended to be used to evaluate the regulatory structure; 

if a full review of the regulatory structure is deemed to be necessary, the Committee expects that, during the period of any review of the regulatory structure, the Postal Service will be permitted to adjust rates under the regulatory requirements in effect 

as of the date of public notice of the adjustment. Therefore, any 

changes in the regulatory structure will be applicable only to rate 

adjustments noticed by the Postal Service after the date the new 

regulations are established. 

The Committee believes that the rate cap system to be established under this statute by the Postal Regulatory Commission 

should give the Postal Service the flexibility to respond to all circumstances it is likely to face in the normal course of business. 

However, the terrorist attacks of September 11, 2001 and the subsequent use of the mail to transmit anthrax highlight the need to 

address unexpected and extraordinary circumstances and their effect on the Postal Service and its financial requirements. Therefore, 

the Postal Regulatory Commission shall establish procedures under 

which the Postal Service can adjust rates on an expedited basis due 

to unexpected and extraordinary circumstances. The Committee 

hopes that these procedures will never be needed; however, it 

12

would be unwise not to recognize the potential need for rapid 

changes to the postal rate structure in the event of a national 

emergency. 

Workshare discounts 

The Committee has heard testimony from many parties describing the benefits of the Postal Service’s worksharing program. This 

program was developed by the Postal Service and the Postal Rate 

Commission to enable customers to pay lower rates when they perform mail preparation or transportation activities such as 

presorting, prebarcoding, and certain other mail handling activities 

that would otherwise be performed by the Postal Service. This 

worksharing program has induced mailers to invest in equipment 

and processes that facilitate the Postal Service’s automation program, has reduced mailing costs, and has otherwise made mail a 

more economically attractive medium. 

The Committee agrees with the principle, supported by the Postal Service, the Postal Rate Commission, and postal employees, that 

workshare discounts should generally not exceed the costs that the 

Postal Service avoids as a result of the worksharing activity. When 

discounts are kept below the costs saved by the Postal Service, 

mailers have a financial incentive to do work more efficiently than 

the Postal Service can do it, yielding savings to the participating 

mailers, to the Postal Service, and to other postal customers whose 

rates are kept down by the Postal Service’s savings under the program. 

However, there are four circumstances under which workshare 

discounts in excess of avoided costs have historically been allowed 

by the Postal Rate Commission and are warranted, and the Committee has codified these exceptions in the legislation: 

• The first exception applies when a discount is associated with 

a new or changed postal product and is needed, for up to 4 years, 

to induce mailer behavior that furthers the economically efficient 

operation of the Postal Service. Such a discount can encourage 

mailers to invest in new technologies or practices that will save the 

Postal Service money, and can then provide the Postal Service an 

opportunity to achieve the resulting efficiencies. For discounts already in effect on the date of enactment, the 4-year period begins 

on that date. 

• The second exception provides that a workshare discount may 

exceed costs avoided if a reduction in the discount would—(i) lead 

to a loss in volume of the affected category of mail and thereby reduce the aggregate contribution to institutional costs, (ii) result in 

a further increase in rates paid by mailers not able to take advantage of the discount, or (iii) impede the efficient operation of the 

Postal Service.

• The third exception allows a workshare discount to exceed 

costs avoided if that excess portion of the discount is necessary to 

mitigate rate shock and will be phased out over time. Discounts 

under this exception, like those under the first exception, are timelimited. 

• The fourth exception applies to discounts that are provided in 

connection with subclasses of mail consisting exclusively of material having educational, cultural, or scientific value. Discounts 

13

under this fourth exception, like those under the second, are not 

time-limited. 

To ensure that the economic rationale for workshare discounts is 

transparent and clearly understood, the Postal Service will be required to submit to the Postal Regulatory Commission a report 

whenever it establishes or maintains a workshare discount. This 

report must include an explanation of the Postal Service’s reasons 

for establishing or maintaining the rate and must set forth the 

data, economic analyses, and other information relied upon by the 

Postal Service to justify the rate. 

Service agreements for market-dominant products 

In the hearings, the Committee heard from numerous witnesses 

who argued that increased pricing and product flexibility was necessary to provide the Postal Service with the ability to respond 

quickly and effectively to customers’ needs. The current regulatory 

structure places roadblocks in the way of responsive and cost-effective pricing initiatives. For example, the Capital One service agreement required eight months of litigation, hundreds of pages of testimony, hearings, and extensive legal argument before being recommended by the Postal Rate Commission. The Committee fully 

supports the Postal Rate Commission’s determination that service 

agreements establishing customer-specific rates and classifications 

are legal and permissible under current law. In addition, the Committee believes that the regulatory structure established by this 

legislation, absent the provisions of this section, would permit customer-specific service agreements for both market-dominant and 

competitive products. However, in evaluating the concerns of postal 

stakeholders, the Committee has determined that the limited experience to date with service agreements suggests that prudent safeguards might reasonably be included in this legislation. While future review may determine that the requirements we have instituted are unnecessary, we believe these requirements will provide 

useful legislative guidance in evaluating future service agreements 

for market-dominant products. Consistent with the Committee’s determination that increased pricing discretion should be granted to 

the Governors, the requirements for service agreements for competitive products decisions for competitive products do not differ 

from those for any other competitive product rate change as set out 

in section 3631. 

Specifically, the Postal Service is authorized to negotiate service 

agreements with individual customers or groups of customers for 

market-dominant products. These agreements would provide for 

the provision of postal services under terms, conditions, or service 

standards that differ from those generally available to other users 

of the mails. Service agreements will, therefore, serve as a vehicle 

by which the Postal Service and its customers can evaluate unique 

opportunities to reduce costs, change product offerings to meet specific customer needs or undertake other actions that will provide a 

benefit to the participating customer. While many view service 

agreements as a way for the participating customer to reduce its 

costs (through lowered rates or acceptance of reduced services), the 

Committee encourages the Postal Service to investigate opportunities that may provide additional or premium (possibly at a higher 

price) services that would not otherwise be available to customers. 

14

We do not intend for service agreements to be a limited substitute 

for more broadly applicable classifications. The Postal Service 

should continue to make every effort to provide products and services of value available to as many customers as possible. 

In fact, the conditions established in this legislation will ensure 

that no one is made worse off as a result of a customer-specific 

service agreement. Every service agreement must provide sufficient 

total revenue to ensure that all Postal Service costs attributable to 

the agreement are covered and that the contribution to the Postal 

Service’s institutional costs from the mail covered by the agreement 

will not decline; therefore, no other customer will bear an increased 

institutional cost burden because the Postal Service has entered 

into the service agreement. In addition, rates or fees for other mailers cannot increase as a result of the agreement. Lastly, the Postal 

Service will be required to enter into agreements on the same (or 

substantially similar) conditions with customers who are not party 

to the agreement; this will result in the benefits from a service 

agreement being made accessible to any customers who can meet 

the requirements of the service agreement. Lastly, the Postal Regulatory Commission may suspend, cancel or prevent an agreement 

if it does not meet the requirements of this section, or following review under the same procedures used for other rate and service 

complaints as established in section 3662. 

Administrative requirements are also established by this legislation that will ensure that the terms and conditions of any service 

agreements are publically known and to permit the open evaluation 

of the agreements by both the Postal Regulatory Commission and 

any customer who may want to determine whether it could benefit 

under the terms of the agreement. The Postal Service is required 

to publish the terms of a service agreement in the Federal Register 

at least thirty days before the service agreement is to take effect. 

This publication must describe the postal services the agreement 

involves and the functions the Postal Service and the customer respectively must perform, and the rates and fees payable by the customer during the term of the agreement. In addition, the notice 

must provide sufficient information (based to the extent practicable 

on customer specific data) to demonstrate the bases for the Postal 

Service’s view that the agreement meets the legislatively established conditions for a permissible service agreement. As a safeguard for regional or local businesses who may not routinely review 

Federal Register notices, the Postal Service shall publish this information in a manner that would provide reasonable notice to persons within any geographic area if the agreement pertains to that 

area specifically. 

Pricing of competitive products 

This bill establishes a flexible system of pricing the Postal Service’s competitive products which reduces regulatory burdens and 

permits more customer- and market-responsive pricing. It does this 

while establishing appropriate safeguards to ensure that a level 

playing field is maintained and that the Postal Service does not unfairly compete. The competitive products are defined as priority 

mail, expedited mail, bulk parcel post, bulk international mail and 

mailgrams. As appropriate, the Postal Regulatory Commission may 

adjust the list of competitive products in response to changes in 

15

market conditions such as a significant increase in the number or 

type of non-postal alternatives for a specific product. In the market 

for each of these products, substantial private sector competition 

exists giving customers alternatives to Postal Service products. Unlike market-dominant products, where a lack of competition leads 

the Committee to specify a rate cap mechanism to ensure that costs 

and prices are controlled; for the competitive products the Committee believes that the open and fair competition with private sector firms will encourage the cost-effective provision of Postal Service competitive products. 

The regulatory structure established by the Postal Reorganization Act does not distinguish between market-dominant and competitive products. See 39 U.S.C. 3622. Regardless of the availability 

of competitive alternatives to postal products, the same litigious 

and lengthy postal rate-making process is applied to all products. 

Under this legislation, the Presidentially-appointed Postal Service 

Governors are permitted to establish rates and classes for competitive products as needed under a streamlined review process. 

To protect both customers and competitors of the Postal Service, 

this legislation establishes a prior review process to ensure that the 

Postal Service is not pricing competitive products inappropriately 

and to ensure that the Postal Regulatory Commission and all interested parties have the opportunity to review the proposed competitive products prices and to determine that the requirements of this 

act are met. The public notice and concurrent Postal Regulatory 

Commission review period for competitive product price change is 

limited to thirty days. As compared to current statute, which allows the Postal Rate Commission up to ten months to review all 

Postal Service price requests, the limited thirty day review period 

should substantively increase the ability of the Postal Service to 

adjust its competitive pricing and products to react to market 

changes and customer needs. If the Postal Regulatory Commission 

finds that any proposed competitive product price change does not 

meet the requirements of the regulatory structure, it is required to 

notify the Governors of the noncompliance and the Governors are 

required to respond to this notice by describing the actions to be 

taken to comply. 

The Postal Regulatory Commission is required, within 180 days 

of enactment, to promulgate regulations that prohibit the crosssubsidization of competitive products by market-dominant products, ensure that each competitive product covers its attributable 

costs, and that all competitive products collectively cover their 

share of the Postal Service’s institutional costs. These regulations 

are intended to ensure that the Postal Service competes fairly in 

the provision of competitive products. However, the Committee 

feels that the regulation of competitive products should be constructed to result in the minimum possible regulatory burden and 

to facilitate a short and limited review of proposed competitive 

product price changes. As a result, established regulations are expected to be clear and easily interpreted to facilitate the short prior 

review process established by this legislation. The Governors, in 

turn, are expected to provide a clear and concise explanation of 

how and why the proposed rate changes meet the established requirements to facilitate Postal Regulatory Commission review. The 

review process is intended to ensure that the Governors’ proposed 

16

competitive price adjustments meet the established requirements, 

not to serve as an evaluation of the merits of each proposed rate 

as compared to any other alternative rates. 

Experimental and new products 

The Committee recognizes that, to remain financially viable and 

to continue to meet the evolving needs of its customers, the Postal 

Service must innovate and develop new products and services. 

While this legislation limits the scope of the Postal Service’s product offerings to ‘‘postal products,’’ we do not intend for this limitation to restrict the Postal Service’s ability to develop new postal 

products. In fact, developing an organizational culture of innovation and market responsiveness, can help the Postal Service to address its financial difficulties by increasing the attractiveness of 

mail to both new and existing customers. Therefore, this legislation 

sets out procedures under which the Postal Service can offer experimental and new postal products. 

Under the provisions of the Postal Reorganization Act, the Postal 

Service must request a recommended decision from the Postal Rate 

Commission prior to offering any new product or service. While the 

Postal Rate Commission has established rules to expedite consideration of experimental and market test classification requests, the 

Postal Service and other stakeholders have often observed that the 

current regulatory structure does not offer sufficient flexibility to 

innovate and offer new products and services. To increase flexibility and to facilitate a more entrepreneurial approach to product 

development, the Committee believes that the Postal Service 

should be granted additional flexibility permitting it to market test 

experimental products without extensive prior review by the Postal 

Regulatory Commission. Therefore, for market tests of experimental products for which Postal Service revenues are expected not 

to exceed $10 million annually, no prior review will be required. In 

addition, these market tests will be limited to 24 months in duration. However, if it is necessary to determine the feasibility or desirability of the product being tested, the Postal Regulatory Commission may, upon receiving an application from the Postal Service, extend the revenue limits to $50 million annually and the duration of the market test for an additional 12 months. The Postal 

Regulatory Commission shall approve any application to increase 

the revenue limit or duration of the market test for an experimental product if it determines that the product is likely to benefit 

the public and meet an expected customer demand, the product is 

likely to contribute to the financial stability of the Postal Service 

and the product is not likely to result in unfair or inappropriate 

competition. The ability to modestly expand the market test revenue and duration limits with Postal Regulatory Commission concurrence, will give the Postal Service additional flexibility if it finds 

that a more limited test will not provide sufficient information to 

evaluate the market demand and the financial potential of a product. 

To ensure that proper safeguards exist at the outset of a market 

test of an experimental product, the Postal Service will be required 

to file with the Postal Regulatory Commission and publish in the 

Federal Register a notice describing the test’s nature and scope and 

explaining why it believes the experiment should be classified as 

17

a market test. Products eligible for provision as a market test for 

an experimental product must be sufficiently different from all 

products offered by the Postal Service in the prior two years, thus 

protecting against the use of the market test rules to adjust or 

change the rates charged for existing products outside the ratemaking processes established in sections 3622 and 3623. However, 

this limitation is not intended to foreclose the use of the market 

tests of experimental products authority for enhancements to existing products. The test used to determine whether the market test 

provisions can be applied is a judgement that the proposed product 

is, from the point of view of mail users, different from those offered 

in the prior two years. These new products could include ancillary 

services that were not previously offered, product enhancements 

that provide services of value that differ in some respect to currently offered products, re-introductions of products that had been 

previously discontinued, and adjustments to product offerings 

under the experimental rules that change the nature or type of 

service provided. The intent of the market test rules is not to severely limit the type and scope of products that can be offered 

under these provisions, it is rather to encourage the Postal Service 

to expand the scope of its products to maintain the attractiveness 

of the mails generally. 

To protect both customers and competitors of the Postal Service, 

the Postal Service should not be permitted to offer a product under 

the market tests of experimental products provisions if it would 

create an unfair or otherwise inappropriate competitive advantage 

for either the Postal Service or any mailer, especially small business concerns. In addition, if a market test for an experimental 

competitive product is undertaken, the protections offered for confidential business information under the new Postal Regulatory 

Commission subpoena powers will also apply. To ensure consistency and preserve the distinctions made under the rate-making 

provisions applicable to market-dominant and competitive products, costs and revenues attributable to competitive experimental 

products will be included in the determination of the Postal Service’s compliance with the provisions applicable to competitive products generally. To prevent a potential anomaly that might otherwise permit an enhancement to a competitive product to be classified as a market-dominant product, any product developed under 

the market test rules that only affects competitive products or provides services ancillary to competitive products will also be classified as a competitive product even if a similar ancillary product is 

available for one or more market-dominant products. Lastly, as a 

final safeguard, the Postal Regulatory Commission may order the 

cancellation of a test or take other appropriate action, if it determines that a market test does not meet the requirements of the 

section. The Committee established this provision as an ultimate 

safeguard for customers and competitors of the Postal Service; however, we do not intend this safeguard to result in a de facto prior 

review of market tests of experimental products through the establishment of rules that institute requirements for provision of extensive information or data before the Postal Service can begin a market test. 

While the bill establishes procedures setting out a simplified 

process allowing the Postal Service to conduct market tests of exVerDate jul 14 2003 06:54 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00021 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
18

perimental products, the Committee does not intend to limit the 

Postal Service’s product development initiatives to small-scale 

product enhancements. Instead, we strongly encourage the Postal 

Service to review its product offerings on an ongoing basis to ensure that they continue to meet the needs of the American people 

including customers of all sizes. Because it is not unlikely that 

these reviews may result in proposed product changes exceeding 

the scope of changes permitted under the market test for experimental products provisions, this legislation establishes a process 

whereby the Postal Service can adjust its product lines and respond 

to the market place while ensuring that the Postal Regulatory 

Commission can provide appropriate regulatory oversight. 

As has been well demonstrated in public hearings both before 

this Committee and before the President’s Commission on the 

United States Postal Service, the postal marketplace is changing, 

perhaps more rapidly than at any time in our nation’s history. 

Therefore, while the Committee divided existing postal products 

and services into the market-dominant and competitive product 

groupings in this legislation, over time, we expect that these product groupings will need review and revision as circumstances 

change. Therefore, the Postal Regulatory Commission is given the 

authority to change the lists of market-dominant and competitive 

products by adding or removing products from the lists or by transferring products between the two lists. The Postal Service or users 

of the mails may request changes in the product lists and the Postal Regulatory Commission may also, upon its own initiative, 

change the product lists. Under current law, the Postal Service has 

the sole ability to request changes in the classification schedule, 

and absent such a request, the Postal Rate Commission has little 

ability to initiate classification changes even if the change would be 

beneficial. However, we do not intend for these provisions to result 

in Postal Regulatory Commission management of the Postal Service’s product offerings. The goal of increased flexibility and increased responsiveness to customers’ needs requires that the Postal 

Service manage its product offerings. But, in a changing environment, the Postal Regulatory Commission must be able to make 

needed alterations to the regulatory structure, including the classification of products as market-dominant or competitive, to ensure 

that the regulatory structure continues to meet the goals established by Congress. Consequently, any changes to the product listings should be well-reasoned and clearly justified based on changing market conditions.

To guide Postal Regulatory Commission decisions on the classification of products as either market-dominant or competitive, 

‘‘market-dominant products’’ have been defined as including each 

product for which the Postal Service exercises sufficient market 

power that it can effectively set prices above costs, raise prices significantly, and decrease quality or output without risk of losing 

substantial business to other firms offering similar products. Because this legislation establishes regulatory limits on, for example, 

price changes, the evaluation of whether ‘‘sufficient market power’’ 

exists must recognize the potential for price, quality, or output 

changes and associated market effects in the absence of established 

regulatory constraints. All products not defined as market-dominant under these criteria shall be categorized as competitive prodVerDate jul 14 2003 06:54 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00022 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
19

ucts. Generally, this definition adopts the Federal Communications 

Commission definition of a dominant carrier. 

Furthermore, in recognition that some customers have no nonPostal Service alternatives because of the Congressionally-established restrictions on the carriage of letters outside the mail, [18 

U.S.C. 1696 subject to the same exception set forth in the last sentence of section 409(e)(1)] this legislation requires that any product 

subject to this monopoly remain within the market-dominant category. In making any decision to transfer products under this section, the Postal Regulatory Commission should give due regard to 

the availability and nature of services in the private sector engaged 

in the delivery of the product, the views on the appropriateness of 

the proposed action of those who use the product and the likely effect on any small business concerns. This will allow for a balanced 

evaluation of the merits of any proposed transfer of a product between the market-dominant and competitive product categories. 

Because changes in the market place may not equally affect all of 

the subclasses or other subordinate units or a class of mail or type 

of postal service, nothing in this title shall be considered to prevent 

transfers under this section from being made because they only affect some (but not all) of the subclasses or other subordinate units 

of a class of mail or type of mail service. To facilitate the effective 

operation of the regulatory structure, the Postal Service cannot 

offer any product involving the physical delivery of letters, printed 

matter or packages unless it has been assigned to the market-dominant or competitive category of mail. 

Reporting requirements 

In establishing the postal regulatory structure in the bill, the 

Committee has attempted to balance the Postal Service’s need for 

additional flexibility with the public and mailing community’s need 

for increased financial transparency and established safeguards to 

protect against unreasonable use of the Postal Service’s statutorilygranted monopoly. We are also establishing reporting requirements 

for both the Postal Regulatory Commission and the Postal Service 

to ensure that Congress, the Postal Regulatory Commission and 

postal stakeholders have sufficient information to determine the 

ongoing effectiveness of the regulatory structure established in this 

legislation as well as to provide for ongoing audits of the Postal 

Service by the Commission. Specifically, the Postal Regulatory 

Commission is required to report to Congress annually on the operations of the Commission under the provisions of this title including the extent to which regulations are achieving the objectives of 

the rate-making requirements of sections 3622 (market-dominant 

products) and section 3623 (competitive products), and the service 

standard provisions of section 3691. 

To facilitate application of the rate-making requirements of this 

title and to provide a basis for the evaluation of the Postal Service’s 

compliance with these requirements, the Postal Service shall (within 90 days of the end of each year) submit a report to the Postal 

Regulatory Commission that analyzes costs, revenue, rates, and 

quality of service in sufficient detail to demonstrate that all products complied with all applicable requirements. In addition, for 

each market-dominant product provided, this report shall include 

product information, and measures of service for that product. This 

20

information will allow the Postal Regulatory Commission and all 

interested parties to evaluate the provision of market-dominant 

products. To ensure that workshare discounts are appropriately established, the report shall include data on a per-item basis for each 

workshare discount including the costs-avoided, the percent of the 

discount that the cost-avoided represents and the contribution 

made to institutional costs. The Postal Service may provide summary data by service agreement and market test but must report 

the data that the Postal Regulatory Commission requires. This report shall be audited by the Inspector General. The results of the 

Inspector General’s audit will be submitted with the Postal Service’s report. 

The Postal Regulatory Commission shall prescribe by regulation 

the content and form of the Postal Service’s report. In doing so the 

Postal Regulatory Commission must give due consideration to the 

need to balance the requirements of full and open access to postal 

information against the need to avoid unnecessary or unwarranted 

administrative effort and expense on the part of the Postal Service 

and the importance of protecting the confidentiality of commercially sensitive information. The reporting requirements are intended to provide an opportunity for the Postal Regulatory Commission to review and evaluate the compliance with the rate-making provisions of this title and to evaluate the level of service provided to customers; they are not intended to impose an excessive 

burden on the Postal Service. 

In establishing regulations implementing this section, the Postal 

Regulatory Commission should carefully weigh the need for and 

utility of any data it may request against the expected benefit in 

increased transparency of postal operations and finances. The reporting requirements are not intended to serve as an unlimited opportunity to access any and all Postal Service data including that 

which may be, at best, tangentially-related to evaluating compliance with the rate and service provisions of this title. However, in 

recognition that circumstances and data needs may change over 

time, the Postal Regulatory Commission may (on its own motion or 

upon request of an interested party) initiate proceedings to improve 

the quality, accuracy, or completeness of data provided it appears 

that costs or revenue attribution data or service quality data has 

become significantly inaccurate or can be significantly improved or 

if revisions are necessitated by the public interest. If the Postal 

Service determines that any information provided in a nonpublic 

annex to a report under this section contains information as described in 39 U.S.C. 410(c) or exempt from disclosure under 5 

U.S.C. 552(b) including commercially sensitive information which 

under good business practice would not be publically disclosed, the 

Postal Service shall notify the Postal Regulatory Commission of its 

determinations and describe the documents for which confidentiality is sought and the reasons for this determination. Lastly, to 

ensure that the Postal Regulatory Commission has access to up-todate Postal Service data to facilitate its statutory mission, the Postal Service shall also provide copies of its most recent comprehensive statement, strategic plan, performance plan and program performance reports. 

After receiving the required annual reports, the Postal Regulatory Commission shall provide an opportunity for public comment 

21

and shall determine within 90 days whether the rates and fees in 

effect were not in compliance with the applicable provisions of this 

chapter or whether any service standards were not met. This compliance determination will serve as a check on the Postal Service’s 

rate-setting decisions and provide a safeguard ensuring that the 

rate-making requirements of this legislation have been met. However, this compliance assessment is not intended to serve as an 

after-the-fact review of the appropriateness of each individual rate 

in comparison with any other possible alternative rates; the review 

is intended to ensure that the rates for market-dominant products 

meet the requirements of the established rate cap at the time the 

rates were implemented and that the competitive products meet 

the rate requirements established to ensure that inappropriate 

cross-subsidy or competition does not occur. If noncompliance is 

found, the Postal Regulatory Commission is required to take appropriate remedial action by, for example, ordering that a cross subsidy be ended or that a rate that has exceeded the Commission-established price cap be lowered. To avoid the potential for duplicative review of prior Postal Service and Postal Regulatory Commission decisions, once the Postal Regulatory Commission determines 

that the Postal Service was in compliance with the applicable 

standard for any year, this shall establish a rebuttable presumption of compliance by the Postal Service for the purpose of any rate 

or service complaint. 

Rate and service complaints 

Under current statute, rate and service complaints can be filed; 

however, relatively little recourse is available if the complaint is 

found to be justified. This legislation strengthens the authority of 

the Postal Regulatory Commission to act on a complaint and to require the Postal Service to take action if the complaint is found to 

be justified. Any person who believes that the Postal Service is not 

operating in conformance with the statute may lodge a complaint 

with the Postal Regulatory Commission which then is required 

(within 90 days) to either begin proceedings on the complaint or 

issue an order dismissing the complaint. If the Postal Regulatory 

Commission does not act on a complaint in a timely manner it 

shall be treated as if it were dismissed. If, after open proceedings 

the Postal Regulatory Commission finds that the complaint is justified, this act gives the Commission broad authority to correct violations by ordering the Postal Service to take whatever steps the 

Commission considers appropriate. In cases of deliberate noncompliance with the law, the Commission is authorized to levy 

fines based on the seriousness of the noncompliance. To ensure 

that customers using market-dominant products are not unfairly 

penalized, fines resulting from unlawful provision of competitive 

products must be paid using revenues from the Postal Service’s 

competitive products. All fines will be paid into the U.S. Treasury’s 

General Fund. 

Appellate review and enforcement of orders 

The Committee recognizes that persons, including the Postal 

Service, may be adversely affected or aggrieved by decisions of the 

Postal Regulatory Commission. If this occurs, within thirty days 

after a Postal Regulatory Commission decision becomes final, any 

22

person, including the Postal Service may petition for judicial review 

of a Postal Regulatory Commission decision. These petitions shall 

be filed in the United States Court of Appeals for the District of 

Columbia. In addition, the district courts shall have jurisdiction to 

enforce, and to enjoin and restrain the Postal Service from violating any order issued by the Postal Regulatory Commission. 

Modern service standards 

The bill also requires the Postal Regulatory Commission to establish by regulation a set of modern service standards for the Postal 

Service’s market-dominant products. These regulations, and the revised regulations the Regulatory Commission would be authorized 

to issue from time to time, would in effect serve as the Regulatory 

Commission’s interpretation of universal service as defined in sections 101(a), 101(b) and 403 of title 39 of the United States Code. 

The Committee believes that sections 101(a), 101(b) and 403 of 

title 39 fully define the universal service obligation. Section 101(a) 

states that the Postal Service shall ‘‘bind the Nation together 

through the mail’’ and serve ‘‘all patrons’’ in ‘‘all communities.’’ Section 101(b) elaborates on these requirements, stating that ‘‘effective 

and regular postal services’’ shall be provided to ‘‘rural areas, communities, and small towns where post offices are not self-sustaining.’’ Section 403 further elaborates on the requirements of Section 101(a), stating generally that the Postal Service ‘‘shall serve 

as nearly as practicable the entire population of the United States’’ 

and ‘‘establish and maintain postal facilities of such character and 

in such locations, that postal patrons throughout the Nation will, 

consistent with reasonable economies of postal operations, have 

ready access to essential postal services.’’ Section 403 states further 

that the Postal Service shall not ‘‘make any undue or unreasonable 

discrimination among users of the mails, nor shall it grant any 

undue or unreasonable preferences to any such user. 

The Committee’s main intent in giving the Regulatory Commission the authority to interpret universal service through regulation 

is to ensure that the service the Postal Service provides its customers is consistent with the statutory definition of universal service. The service standards established by the Regulatory Commission, however, should be reasonable. They should not force the 

Postal Service to charge higher rates or make dramatic changes to 

its retail and mail processing networks in order to meet them. In 

establishing and revising such standards, the Regulatory Commission should take into account the level of service the Postal Service 

provides now and how successfully that service has met the needs 

of its customers. The Regulatory Commission should also take into 

account the fact that many Americans now use other forms of communication, such as e-mail, electronic bill pay, and fax machines, 

to conduct business and keep in touch with friends and family. 

Over the years, the service standards established by the Regulatory 

Commission should reflect the fact that more and more Americans 

are likely to turn to these, and other, electronic forms of communication. They should also reflect the cost to the Postal Service of 

providing universal service as the number of addresses they must 

serve grows at the same time that mail volume is declining. 

The other major goal in giving the Regulatory Commission the 

authority to interpret universal service through regulation is to 

23

preserve, and where possible enhance, the value of the various 

market-dominant products offered by the Postal Service. The Committee believes this is especially important at a time when poor 

mail volume is having a major impact on postal finances and there 

may be some temptation to erode service quality in an effort to cut 

costs. On April 3, 2001 the Postal Service’s Board of Governors requested a study from postal management of the cost savings associated with eliminating the Saturday delivery of mail. While the 

Committee is strongly supportive of any effort on the part of the 

Postal Service to cut costs, we believe postal management should 

do all it possibly can to find efficiencies before using cuts in service 

to find savings. We were pleased, then, when the Board of Governors announced in July 2001 that they would maintain six-day 

delivery. Making the Regulatory Commission the body responsible 

for determining the appropriate minimum delivery speed and frequency for market-dominant products as mail volume and the Postal Service’s financial condition change will ensure that postal customers receive an appropriate level of service for the rates they 

pay. It also ensures that those parts of the country with post offices 

and delivery routes that are not profitable continue to receive a 

level of service consistent with the definition of universal service 

contained in sections 101(a), 101(b) and 403 of title 39, even when 

mail volume and revenues are poor. 

The service standards established by the Regulatory Commission 

should also serve as a benchmark for measuring the Postal Service’s performance. The Postal Service should strive to exceed the 

standards set by the Regulatory Commission, but the Regulatory 

Commission should regularly measure the Postal Service’s performance to ensure that these standards are met. The Regulatory Commission is required to inform Congress in the annual reports required of them under section 204 of the bill whenever the Postal 

Service has failed to meet any existing service standards. The Committee expects the Postal Service to provide the Regulatory Commission with the data the Regulatory Commission believes necessary to determine whether or not service standards are being 

met. We also expect the Regulatory Commission to make use of the 

new information gathering authority made available to them in the 

bill to collect this data should the Postal Service be unwilling to 

provide it. 

There is some concern that the authority given the Regulatory 

Commission to establish service standards would allow that body 

to micromanage the Postal Service and involve itself in product design. This is not the Committee’s intent. One of the overarching 

goals of S. 2468 is to give the Postal Service the flexibility necessary to act more like a private business. The bill, in section 203, 

gives the Postal Service streamlined authority to introduce new 

and experimental products. The Committee believes, then, that the 

Postal Service should be free to innovate and to do what it needs 

to do to make the products it offers valuable to its customers. We 

have no intention through the service standards authority given 

the Regulatory Commission to restrict the Postal Service’s commercial freedom, only to ensure that it lives up to its universal service 

obligation and the obligation it has to its captive customers to give 

them the service they pay for. 

24

4 Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, 77.

5 Ibid., 12. 

6Transformation Plan, 30. 

Processing facilities 

The establishment by the Regulatory Commission of a set of 

modern service standards for market-dominant products will give 

the Postal Service a once-in-a-generation opportunity to realign its 

operations, from its processing and retail facilities to its delivery 

and transportation network, in a way that allows it to most efficiently carry out its universal service obligation. Section 302 of S. 

2468 gives the Postal Service six months from the establishment of 

the Regulatory Commission’s first set of service standards to put 

its realignment plan in writing through a report to the Regulatory 

Commission and Congress. The report will be a plan for how the 

Postal Service intends to meet the service standards and will include performance goals along with discussion of any changes that 

need to be made to the way the Postal Service operates. 

The Committee is particularly interested in learning through this 

report some key information on any plans the Postal Service has 

to change its network of processing and retail facilities, a network 

that currently includes 446 processing facilities and more than 

37,000 retail facilities. In its report, the President’s Commission on 

the United States Postal Service found that the Postal Service’s facilities network, particularly its network of processing facilities, is 

outdated and not closely related to its current mission. At one 

point, the Commissioners argue that ‘‘the legacy postal network is 

not what would be built from scratch if the Postal Service were created in the 21st Century.’’ They go on to say: ‘‘Without question, 

the Postal Service has far more facilities than it needs and those 

facilities it does require are often not used in the most efficient 

manner.’’ 4

In addition, the President’s Commission found that productivity 

often varies from facility to facility. They argue that ‘‘much of the 

Postal Service’s legacy network could be retired.’’ Those that remain, they say, could be ‘‘standardized, modernized and given a 

common footprint.’’ 5 While processing facilities should not be closed 

for the sake of closing them, or simply as a way to cut costs, it will 

certainly be possible for the Postal Service to close and consolidate 

some facilities in the coming years without jeopardizing its ability 

to meet the service standards that will be established by the Regulatory Commission. In fact, as both the number of addresses the 

Postal Service must serve and the pace of electronic diversion of 

mail continues to grow, the Committee believes it will no longer be 

possible for the Postal Service to continue to operate inefficient or 

unnecessary processing facilities. 

The Postal Service appears to recognize the need to modernize its 

processing network. In the Transformation Plan it submitted to 

Congress in April 2002, the Postal Service rightly pointed out: ‘‘The 

Postal Service’s present financial position coupled with rapid advances in supply chain management technology make this the ideal 

time to initiate sweeping logistics changes in transportation and 

distribution processes throughout the organization.’’ 6 In order to 

seize this opportunity, the Postal Service launched the Network Integration and Alignment (NIA) initiative. According to the TransVerDate jul 14 2003 06:54 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00028 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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7 Ibid., 31. 

8 Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, 75–

76. 

formation Plan, the NIA would be an effort to create a long-term 

blueprint for operations management at the Postal Service. It was 

billed as an opportunity to look at future service needs and logistics 

costs and build a new, more modern processing network. By the 

Postal Service’s own estimates, it would affect $5 billion in transportation costs and $20 billion in processing and distribution 

costs.7

In its report, the President’s Commission praised the Postal 

Service for pursuing the NIA.8 The Transformation Plan stated 

that the strategy to be used in the NIA would be announced by the 

Fall of 2002 along with plans for plant consolidations. Nearly two 

years later, however, no details on the NIA have been forthcoming. 

The plan the Postal Service will submit pursuant to section 302 

will give Congress and the public the information necessary to understand how the NIA, or whatever other facilities realignment 

strategy the Postal Service intends to use, will work. The Committee does not believe it is necessary for the Postal Service to include in this plan a list of facilities it intends to close. But the report must include the information necessary to understand the 

strategy the Postal Service will be using in its facilities realignment, the methods that will be used to involve the public and policy makers in the process, and the impact the process will have on 

the Postal Service’s workforce and on other Postal Service initiatives, such as ongoing automation efforts. 

The Committee recognizes that closing or consolidating processing facilities will be difficult for the Postal Service to do. No 

community will want to lose the jobs associated with a large processing facility. No Senator, Member of Congress or local elected official will ever want to have a postal facility in their state or district close on their watch. This is why we believe it is vitally important that the Postal Service go about its facilities realignment in 

the most transparent manner possible. Transparency will not prevent communities and elected officials from raising concerns about 

the Postal Service’s actions. It will, however, make it possible for 

those affected by the Postal Service’s actions to see the connection 

between those actions and the need to preserve the vital services 

the Postal Service provides. 

Post Offices 

S. 2468 maintains the current prohibition on closing post offices 

solely because they operate at a deficit, ensuring that rural and 

inner-city communities where post offices do not earn a profit continue to have access to retail services. It also in no way makes it 

any easier for the Postal Service to close a post office for any reason. However, the report the Postal Service will submit pursuant 

to section 302 should include a detailed discussion of the Postal 

Service’s plans to expand access to alternate retail options, such as 

vending machines and contract stations. 

The President’s Commission on the United States Postal Service 

found that postal customers today can access the products and 

services offered by the Postal Service at about 5,000 locations, such 

as grocery stores and banks, where they conduct other necessary 

26

9 Ibid., 83. 

business each day. They can also buy stamps, the Commission 

found, over the Internet, at 17,000 vending machines and from 

20,000 private retailers. While the vast majority of postal transactions still take place in post offices, the Commission found that 

it is substantially cheaper to conduct a postal transaction via alternate retail than at a post office. According to the Commission’s report, about eighty percent of stamp sales still occur in the post office. However, the eight percent of sales that occur through Automatic Teller Machines (ATMs) or at grocery stores, drug stores and 

other large retailers are nearly seven times cheaper to conduct.9

The Committee is not suggesting that the Postal Service close 

post offices and replace them with alternate retail. It is not even 

clear it would be possible to close a post office and fully replace the 

services it provides with a vending machine or a window in a private retailer. It is even less clear that postal customers would be 

pleased with such an effort. Just as with inefficient processing facilities, however, it will no longer be possible for the Postal Service 

to continue to operate low-activity post offices as both the number 

of addresses it must serve and the pace of electronic diversion of 

mail continue to grow. As it found when it examined the Postal 

Service’s processing facilities, the President’s Commission found 

that ‘‘many of the nation’s post offices are no longer necessary to 

the fulfillment of its universal service obligation.’’ The Committee, 

however, believes that most of the nation’s post offices are vital 

parts of their communities and need to remain open for the Postal 

Service to be able to fulfill its obligations under title 39, and meet 

the service standards to be established by the Regulatory Commission, to provide all parts of the country reasonable access to essential postal services. 

That said, the Committee believes it is vitally important that the 

Postal Service begin expanding access to alternate retail options. It 

is equally important, we believe, that the Postal Service also begin 

to more aggressively market alternate retail options so that more 

postal customers are aware that they exist and grow more comfortable making use of them. Because transactions conducted in alternate retail settings do appear to be less expensive than transactions conducted in post offices, it is possible that the Internet, 

vending machines, contract stations and other innovations could be 

reasonable and efficient replacements for post offices at a time in 

the future when the demand for postal services is not as great as 

it is today. It is also possible that alternate retail options could 

serve as a substitute for a post office, but possibly only a temporary 

one, in growing communities where it may be necessary to construct additional post offices or expand existing ones at some point. 

The Committee is certain, however, that the aggressive expansion 

and marketing of alternate retail will benefit all postal customers, 

regardless of how accessible postal services are to them right now. 

The convenience and often 24-hour-a-day, seven-day-a-week access 

some alternate retail options offer will only make postal services 

more valuable. 

The Committee believes it is also important that the Postal Service consult with stakeholders and its customers when pursuing any 

initiatives that would change its retail network. The Government 

27

10Government Accountability Office, USPS Needs to Clearly Communicate How Postal Services May Be Affected by Its Retail Optimization Plan, GAO–04–803 (July 2004), 31–32. 11Transformation Plan, 13–18. 12GAO–04–803, 36. 13 Embracing the Future: Making the Touch Choices to Preserve Universal Mail Service, 93. 

Accountability Office (GAO) says in a recent report that, despite 

surveys showing that the vast majority of the Postal Service’s customers are generally satisfied with the services it provides, those 

same customers have expressed concerns about such issues as long 

lines at post offices and post office closings.10 Efforts have been 

made in the past, through a 1976 amendment to the 1971 Postal 

Reorganization Act and later a set of regulations issued by the 

Postal Service in 1998, to give customers and local officials more 

of a role in shaping the Postal Service’s retail network. The Postal 

Service has also taken steps, described in the Transformation Plan, 

to create new low-cost retail alternatives, to move stamp-only 

transactions out of post offices and to close redundant or low-activity post offices.11 Concerns remain, however, about the details of 

these strategies. It is not clear, according to GAO, if the Postal 

Service has consulted its customers in developing its retail plans. 

It is also not clear, GAO points out, how the Postal Service’s stated 

goal of closing redundant or low-activity post offices will work within the existing process for closing post offices.12 Just as it must do 

when realigning its processing network, the Postal Service must be 

as transparent as possible when pursuing its retail strategy and 

must give customers, local officials and other stakeholders the information they need to fully understand how that strategy will affect their communities. 

Fair competition 

S. 2468 contains a number of provisions the Committee believes 

are necessary to ensure that the Postal Service competes fairly 

with the private sector, particularly when offering products and 

services classified as competitive. The Postal Service, in our view, 

plays an important role in offering competitive products, even 

though a number of private sector businesses provide alternative 

services. We also believe, however, that steps need to be taken to 

level the playing field between the Postal Service and its competitors in the competitive product market. This is especially important 

now that this legislation gives the Postal Service significant new 

commercial flexibilities, particularly in the area of pricing. The language in Title IV ensures that the benefits the Postal Service gets 

by virtue of its status as a government entity do not give it an opportunity to abuse its new commercial freedom. 

As the President’s Commission points out in its report, the Postal 

Service’s competitors are not able to borrow from the U.S. Treasury. They do not benefit from a monopoly market that provides a 

vast majority of their operating revenues. They are not exempt 

from most taxes and laws imposed on private businesses, as the 

Postal Service is, and they do not have the rulemaking powers Congress has granted the Postal Service in some areas.13 The Committee strongly believes that the Postal Service should operate 

more like a private business but, when competing head to head 

with a private business, we believe just as strongly that the advanVerDate jul 14 2003 06:54 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00031 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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tages the Postal Service has as a government entity should be 

blunted. 

This legislation provides a clear separation between market-dominant and competitive products by creating a new Postal Service 

Competitive Products Fund. The Postal Service will deposit in this 

fund any revenue it earns from its competitive products. The Postal 

Service will use that revenue to pay all costs related to providing 

competitive products. Any judgment against the Postal Service or 

the federal government related to the Postal Service’s competitive 

products will also be paid out of the fund. The Postal Service will 

be free to invest any surplus revenue deposited in the fund, subject 

to regulations issued by the Department of the Treasury, and to 

borrow money against any assets related to competitive products. 

Receipts into and disbursements from the Postal Service Competitive Products Fund will be treated the same way as receipts and 

disbursements of the existing Postal Service Fund pursuant to section 2009a of title 39. Like the Postal Service Fund, then, the Postal Service Competitive Products Fund will not be included in either 

the budget submitted by the President or the congressional budget, 

will not be factored into the calculation of the federal budget deficit 

and will be exempt from any statutory budget limitation or deficit 

control measures. 

The legal advantages the Postal Service enjoys over its private 

sector competitors are also erased in this legislation. The Postal 

Service will be required to pay an annual ‘‘assumed Federal income 

tax’’ on income earned by its competitive products. The amount of 

the tax each year would equal the income tax a corporation would 

pay if its only activities were those activities conducted by the Postal Service that are related to competitive products. The Postal 

Service will compute its ‘‘assumed Federal income tax’’ itself and 

pay it by January 15. Instead of paying the tax to the Treasury, 

the tax will be deposited into the Postal Service Fund.

This legislation makes clear that the Postal Service is barred 

from using its rulemaking authority to put itself at a competitive 

advantage or put another party at a competitive disadvantage. In 

addition it is put on the same legal ground as its private sector 

competitors in seven key ways. First, all Postal Service activities 

are subjected to those provisions in federal laws prohibiting fraudulent business conduct. Second, all Postal Service activities outside 

the postal monopoly are subjected to federal antitrust laws and all 

prohibitions on unfair competition. Third, the Postal Service Competitive Products Fund is made a ‘‘person’’ for purposes of federal 

bankruptcy laws. Fourth, the Postal Service is required to consider 

local zoning, planning or land use regulations and building codes 

when constructing new buildings. Fifth, U.S. customs law and any 

other laws related to the import and export of postal services are 

applied to the Postal Service’s international postal products classified as competitive in the same manner that they apply to items 

shipped by the Postal Service’s private sector competitors. Sixth, 

the Postal Service’s sovereign immunity protection from suits in 

Federal Court for violations of Federal law is eliminated. Seventh, 

and finally, the Postal Service is required to represent itself in 

most legal proceedings permitted under this legislation as well as 

in cases involving administrative subpoenas issued by the Postal 

29

14 Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, 93. 15Transformation Plan, 4. 16 Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, 93. 

Regulatory Commission and appeals of decisions by the Commission or the Postal Service’s Board of Governors. 

The Committee recognizes that the Postal Service may enjoy 

other advantages in the competitive product market that are not 

addressed in this legislation. For this reason, we require in section 

703 that the Federal Trade Commission submit a report to the 

President, Congress and the Postal Regulatory Commission within 

one year of the enactment of this Act identifying any federal and 

state laws that apply differently to the Postal Service than they do 

to the Postal Service’s private sector competitors. If any discriminatory laws are identified, the Trade Commission’s report will include 

recommendations for either ending the discrimination or accounting for them in some way through the rates the Postal Service 

charges for its competitive products. The Regulatory Commission 

will take the Trade Commission’s recommendations into account 

when revising the regulations on rates for competitive products required under section 3633 of title 39. 

Improved accounting 

To make the financial separation between the Postal Service’s 

market-dominant and competitive products even clearer, S. 2468 

also calls on the Secretary of the Treasury to develop recommended 

accounting practices and principles for the Postal Service. The Secretary will consult with the Postal Service and an independent certified public accounting firm in making these recommendations. 

The recommendations, which will also include guidance on how the 

Postal Service should determine its ‘‘assumed Federal income tax’’, 

which will be submitted to the Postal Regulatory Commission within one year of enactment. The Regulatory Commission will then establish a set of rules on accounting and the calculation of the tax 

after giving the Postal Service and other groups an opportunity to 

comment. 

The goal of this process is to prevent the subsidization of competitive products by market-dominant products by better identifying the costs incurred by the Postal Service in providing competitive products. The President’s Commission points out that the Postal Service today is able to attribute less than 60 percent of its costs 

among its various products. This means that more than 40 percent 

of costs are labeled as institutional.14 The Postal Service itself admits that a disproportionate amount of these so-called institutional 

costs are paid for with revenue generated by First-Class mail, 

which is covered by the postal monopoly and, under this Act, will 

be classified as market-dominant. According to the Transformation 

Plan, First-Class mail comprises roughly half of the Postal Service’s mail volume but pays more than two-thirds of the Postal Service’s institutional costs.15 The Committee agrees with the President’s Commission when they say that this situation should be improved.16 The Postal Service should be able to attribute a greater 

percentage of its costs. If they do this, it is likely that a greater 

share of costs can be attributed to competitive products and, to the 

30

extent that they can be, should be reflected in the rates charged 

for those products. 

The fact that the Committee believes the Postal Service can improve on its 60 percent attribution rate does not mean we believe 

the Postal Service should strive to attribute 100 percent of its 

costs, or any other arbitrary percentage. We also do not believe 

that the Postal Service should be forced to attribute such a large 

percentage of its costs to competitive products that those products 

will no longer be affordable and will no longer be made available 

to the customers who need them, particularly those customers living in parts of the country that are not well-served by the Postal 

Service’s private sector competitors. We do believe, however, that 

Treasury, the Postal Service and the Postal Regulatory Commission should partner with private sector accounting experts and 

postal stakeholders in an open, transparent and continuous process 

to improve cost accounting and cost attribution at the Postal Service, especially as it applies to competitive products. 

International postal arrangements 

This legislation also makes it clear that the Department of State, 

not the Postal Service, is the federal agency that will take the lead 

in formulating U.S. foreign policy related to international postal 

services. The Secretary of State is given the authority to lead U.S. 

delegations in intergovernmental meetings devoted to postal matters and is barred from concluding agreements that, with respect 

to any competitive product, give preference to any entity, including 

the Postal Service. In carrying out his responsibilities during international postal negotiations, the Secretary is required to maintain 

appropriate liaison with other federal agencies, with the Postal 

Service, and with affected members of the public. He or she is also 

required to establish an advisory committee under the Federal Advisory Committee Act to help perform the necessary coordination 

and liaison with entities in the public and private sectors as U.S. 

foreign policy related to international postal services is developed. 

Before concluding an international agreement establishing a rate 

or classification for a postal product subject to regulation by the 

Postal Regulatory Commission, the Secretary will request the Commission to submit views on whether the terms of the agreement are 

consistent with the rate and classification system they will establish. 

This language does nothing to prevent the Postal Service from 

entering into commercial or operational contracts related to providing international postal services. Any such agreement involving 

an agency of a foreign government, however, must be solely contractual in nature and must apply only to the Postal Service and 

those agencies party to the contract. No contracts entered into by 

the Postal Service will be treated as binding international law. 

USPS Board of Governors 

At present, the U.S. Postal Service Board of Governors is comprised of nine Governors who serve with the PMG and Deputy 

PMG on an 11 member Board of Governors. The Governors are appointed by the President and confirmed by the Senate. They serve 

staggered nine year terms, and by law, no more than five members 

may belong to the same political party. The President’s CommisVerDate jul 14 2003 06:54 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00034 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
31

17 Ibid., 23. 

sion recommended that the Postal Service Board of Governors be 

comprised of 12 individuals—eight independent members, three 

Presidential appointees, and the Postmaster General (who would 

be selected by the 11 other members). The Commission felt strongly that an independent, depoliticized Board is crucial to the future 

success of the Postal Service. 

The President’s Commission proposed that the President appoint 

the first three members of the Board. Initially, these three appointees would select the first eight independent Board members 

whose selection would be dependent on the concurrence of the Secretary of the Treasury. Thereafter, independent members would be 

selected by the Board as a whole. 

The Commission further recommended that all Board members 

be selected based on business acumen and other experience necessary to manage an enterprise of the Postal Service’s size and significance. They recommend three year terms for all members with 

a mandatory minimum retirement age of seventy. 

The Committee felt strongly that the Senate’s role of ‘‘advise and 

consent’’ must be retained for all nominees to the Board. The Committee also believed that a five year term seemed more practical 

than a three year term, and would allow Board members to be perceived as less partisan by serving across Presidential terms of office. Finally, the Committee agreed with the President’s Commission that qualifications are appropriate, therefore S. 2468 requires 

that future Board members be chosen solely on the basis of their 

demonstrated ability in managing organizations or corporations (in 

either the public or private sector) of substantial size. 

Private carriage of letters 

This legislation reduces the Postal Service’s monopoly over the 

carriage of letters by permitting private carriage when the amount 

paid for the private carriage is at least six times the rate charged 

for the first-ounce of a single-piece First Class Mail letter or when 

the letter weighs at least twelve-and-one-half ounces. Under the existing statute, the scope of the postal monopoly is defined by content and may not be readily understood. By establishing a clear 

price- and weight-based monopoly definition, both customers and 

competitors will be able easily to determine when a mail piece is 

subject to monopoly protections. 

The Committee adopts the price-weight monopoly definition 

based, in part, on the recommendation of the President’s Commission.17 While the Commission recommended a 12 ounce weight 

limit, the Committee has adopted a twelve-and-one-half ounce 

weight restriction that is closely correlated with the monopoly definition (350 grams or 12.5 ounces) adopted by the European Union 

in 1997. Linking the price limit to the first-ounce, First Class Mail 

stamp rate permits automatic adjustments of the price-based monopoly definition as stamp prices change. In addition, as in the 

case of the weight limit, the price limit is similar to that established by the European Union in 1997 (five times the stamp rate); 

but less than the current European Union threshold. While both 

the weight and price limits are greater than the current limits established by the European Union, the Committee believes that the 

32

higher thresholds are appropriate, and provides significant additional competition in the marketplace. Given the scope and size of 

the postal marketplace as well as the number of American jobs 

that depend, directly or indirectly, on the provision of postal services, we are reluctant to move towards a narrower monopoly definition (such as the current European Union definition) without additional experience with a more flexible Postal Service. 

In addition, the postal monopoly definition is revised to explicitly 

incorporate those Postal Service regulations (in effect as of July 1, 

2001) which permit the private carriage of letters by suspension of 

the postal monopoly. Doubt exists as to the Postal Service’s current 

legal authority to suspend the Congressionally-granted postal monopoly; however, under its interpretation of existing law, the Postal 

Service has voluntarily suspended the private carriage of letters in 

a number of instances (sections 310.1 and 320.2–320.8 of title 39 

of the Code of Federal Regulations). The Committee believes that 

defining the extent of the postal monopoly falls within the purview 

of Congress, not the Postal Service, and in this legislation strikes 

current 39 U.S.C. 601(b) (which has been used by the Postal Service to justify unilateral suspensions of restrictions on the private 

carriage of letters) and replaces it with language codifying the current postal monopoly suspensions thus permitting continued private sector provision of services to these markets. To ensure the 

consistent and objective application of the postal monopoly, the 

Postal Regulatory Commission shall promulgate any necessary regulations. 

Rulemaking authority 

By revision of 39 U.S.C. 401(2), the Postal Service is granted authority to adopt, amend and repeal rules and regulations that are 

necessary for the execution of its functions under this title or assigned under any provisions of law outside this title. However, 

these rules and regulations must not be inconsistent with the provisions of this title. This provision clarifies that the Postal Service’s 

rulemaking authority extend to rules and regulations ‘‘necessary’’ 

to carry out its statutorily-defined functions not to rules and regulations that the Postal Service, in its judgement, ‘‘deems necessary.’’

Enhanced Regulatory Commission 

Under current law, the Postal Rate Commission has very narrow 

authority. They issue recommended decisions on mail rates and 

classifications, and fees for postal services. Their other job is to review changes in postal services that would generally affect service 

on a nationwide basis and offer advisory opinions. In their final report, the President’s Commission concluded that, ‘‘The Postal Service’s need for oversight today is as broad as the Postal Rate Commission’s authority is narrow.’’ On the basis of this assessment, the 

President’s Commission recommended that a Postal Regulatory 

Board be vested with substantially expanded regulatory authority. 

The Committee agreed. 

S. 2468 requires the new Postal Regulatory Commission to develop—with appropriate input from the postal community—a new, 

highly streamlined, rate-setting process. This new process should 

apply rigorous standards to rate-setting, but at the same time, give 

33

postal officials the ability to manage and lead. The process should 

also proactively encourage the Postal Service to improve productivity and efficiency and not rely solely on rate increases to secure 

its fiscal health. Although S. 2468 specifies that market dominant 

products would be subject to a rate cap, the actual design of the 

rate cap mechanism, including choice of inflator, is left to the Regulatory Commission. The Regulatory Commission would be required 

to pre-approve any rate increases that exceed the rate ceilings. The 

legislation also requires the Regulatory Commission to engage in 

prior review periods for both market-dominant and competitive 

products. In addition, the Regulatory Commission will ensure that 

retained earnings are accumulated at an appropriate level, and 

consistent with the public interest. 

S. 2468 places the Regulatory Commission in charge of overseeing Postal Service cost distribution, ensuring that the Service is 

appropriately allocating costs across its competitive and non-competitive products and services. In addition to verifying that crosssubsidies between products are not occurring, such analysis is necessary for assessing the fairness of the rates the Postal Service is 

currently charging, or proposes to charge. The Regulatory Commission would also exercise a new form of oversight regarding services 

the Postal Service provides. It would monitor the types of products 

and services offered by the Postal Service to ensure it does not exceed its core mission. 

S. 2468 grants to the Regulatory Commission the role of ensuring 

the financial transparency of the Postal Service, obtaining information from the Service—if need be—through the use of subpoena 

power. The bill also requires strong enforcement of financial transparency by the Regulatory Commission, in part by requiring the 

Postal Service to report periodically on allocation of costs among 

mail products and services for auditing purposes. 

The President’s Commission recommended that the Regulatory 

Commission be comprised of three members who are appointed by 

the President and confirmed by the Senate. Members would be selected solely on the basis of their demonstrated experience and professional standing. At present, the Postal Rate Commission is comprised of five presidentially-appointed members who serve six year 

terms. Given the significantly expanded authority S. 2468 grants 

to the Regulatory Commission, the Committee felt it was appropriate to maintain the current size of the Commission. The Committee, however, agreed with the President’s Commission that the 

Regulatory Commission would benefit from strengthened qualification requirements. S. 2468 requires that all new Commissioners 

shall be chosen solely on the basis of their technical qualifications, 

professional standing, and demonstrated expertise in economics, accounting, law, or public administration. 

S. 2468 also changes the manner in which the Postal Rate Commission’s annual budget is approved. Under current law, the Commission submits their budget request to the Board of Governors. By 

unanimous agreement, the Board may adjust the total amount of 

money requested in the budget. Funding for the PRC’s budget 

comes from the Postal Service Fund, established under title 39 of 

the U.S. Code. S. 2468 directs the PRC to instead submit their annual budget request to Congress, through the appropriations process. Funding will continue to be paid out of the Postal Service 

34

Fund. The budget, however, will no longer be subject to disapproval 

by the Governors. This will ensure the financial independence of 

the new Regulatory Commission. 

USPS retirement and health benefit funding and military pension 

obligation 

On April 23, 2003, President Bush signed into law the Postal 

Civil Service Retirement System Funding Reform Act of 2003, P.L. 

108–18. The Act was originally introduced by Chairman Collins 

and Senator Carper. It changed the way the Postal Service funds 

its Civil Service Retirement System (CSRS) obligation. According to 

a 2003 GAO report, the Postal Service had overfunded its pension 

obligation and, without this legislation, was on course to overfund 

by approximately $73 billion. This overfunding was due to higher 

than assumed historical interest earnings and lower than assumed 

outlays, plus other factors. 

The Act also transferred to the Postal Service from the U.S. 

Treasury the responsibility for funding the costs of CSRS benefits 

that current and former Postal Service employees have earned 

through military service. Thus, the Act transferred $27 billion in 

cost from U.S. taxpayers to postal ratepayers. The Committee had 

reservations about making the Postal Service the only agency to 

bear these costs. The Administration, however, felt differently. In 

a January 30, 2004 letter to Chairman Collins, OPM Director Kay 

Coles James described the Administration’s reason for making the 

Postal Service responsible for this military pension cost:

One of the primary goals for the reorganization of the 

Post Office into the USPS was to ensure that all the costs 

associated with the organization be paid through stamp 

revenue and not through taxpayer dollars. Therefore, all 

pension costs for employees that are attributable to service 

after the reorganization should be borne by the Postal 

Service.

The Act provided an opportunity for the Committee to reconsider 

this transfer by requiring the Postal Service, the Department of the 

U.S. Treasury and OPM to submit proposals detailing whether and 

to what extent the Department of the Treasury or the Postal Service should be responsible for the funding of benefits attributable to 

the military service of current and former employees of the Postal 

Service. In a September 30, 2003 letter to Chairman Collins, Postmaster General Potter recommended that the responsibility for 

these costs should be returned to the U.S. Treasury, in part, because the military service had no connection with Postal Service 

functions or operations. The Postal Service also notes that the 

funding of these costs has been the responsibility of the Treasury 

since 1969 and Treasury has already paid the great majority of this 

$27 billion in costs. Therefore, charging the Postal Service for these 

past payments of the U.S. Treasury would be a retroactive cost 

transfer to postal ratepayers. 

The President’s Commission reviewed the recommendations 

made by the Postal Service, the U.S. Treasury Department and 

OPM. While the Commission understood the stance taken by the 

Administration, they did not agree with it. In their final report, 

they concluded:

35

18 Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, 125, 

126.

No other Federal agency is required to pay such costs for 

its retirees under CSRS. In the Commission’s view, it is inappropriate to require the Postal Service, as a self-financing entity that is charged with operating as a business, to 

fund costs that would not be borne by a private-sector corporation (costs associated with benefits earned while the 

retiree was employed by another employ). . . . It asks 

those who use the nation’s postal system to subsidize the 

U.S. military every time they use the mail. . . . The Commission supports returning responsibility for this portion 

of retiree benefits to the Department of Treasury, where it 

resided before the recent legislation, and where this liability can be financed through funds generated by taxpayers.18

Having had the opportunity to reconsider the issue, the Committee agreed with the President’s Commission and included language in S. 2468 to repeal this requirement, thereby returning the 

military pension obligation to the U.S. Treasury. It is important to 

point out that over ninety percent of the financial obligation related 

to military retirees is the result of military service performed before the creation of the Postal Service in 1971. Besides being unrelated to postal operations, the Committee does not believe the Postal Service should be held responsible for paying a component of 

their employees’ military service that was performed before the 

Postal Service was even created. 

P.L. 108–18 placed additional requirements on the Postal Service. Specifically, the Act identified as ‘‘savings’’ the difference between the contributions the Postal Service would have made to the 

CSRS Fund if the Act had not been enacted and the contributions 

the Postal Service makes under the Act. In 2003 and 2004, the Act 

required USPS to use the ‘‘savings’’ to reduce their outstanding 

debt to the U.S. Treasury. The Committee made clear, through 

‘‘Sense of Congress’’ language, that the Postal Service should also 

use the ‘‘savings’’ to hold postal rates unchanged until at least 

2006; to pay some portion of its postretirement health benefit obligation for current and future employees; and that none of the ‘‘savings’’ should be used to pay bonuses to Postal Service executives. 

It also required the Postal Service to begin making payments into 

an escrow account beginning in fiscal year 2006 in an amount 

equal to the annual ‘‘savings’’. The amount of the payments into 

the escrow account would have to be included in the Postal Service’s rate base. Under P.L. 108–18, the Postal Service cannot use 

the funds in the escrow account unless Congress eliminates the escrow requirement or specifies by law how the escrow funds may be 

used. The legislation also required the Postal Service to report to 

Congress by September 30, 2003, on how it proposed to use those 

pension savings. 

The Postal Service provided a report to Congress predicated on 

the assumption that the Postal Service is relieved of responsibility 

for military service costs. Specifically, the Postal Service recommended making annual payments to cover one of its major operating costs—postretirement health benefits—for all employees and 

36

retirees, currently estimated at $47 to $57 billion. Under this proposal, the Postal Service would be the only federal agency to fully 

pay all pension and postretirement health benefits for its employees and retirees. S. 2468 sets up within the U.S. Treasury, a ‘‘Postal Service Retiree Health Benefits Fund’’. This fund shall be administered by OPM. Beginning in fiscal year 2006, the Postal Service will be required to pre-fund its post-retirement health benefits 

costs for all employees on a current basis and to fund one-fortieth 

of the unfunded post-retirement health benefits obligations each 

year through 2031 after which one-fifteenth would be funded each 

year. Any remaining ‘‘savings’’ will be used to pay down the outstanding debt to Treasury and for operating expenses—thereby 

holding down rate increases as well. 

During the Committee’s eight hearings on postal reform, many 

disparate voices were heard from—the Postal Service unions and 

associations; the CEOs of major companies; representatives of the 

newspaper and direct marketing associations—and the two things 

they all had in common were the desire to see the escrow account 

requirement repealed and the return of the military pension obligation to the Treasury Department. 

The amount due from postal ratepayers for the first annual es- crow payment in FY 2006 will be $3.2 billion. The cost to fund the 

military pension obligations will cost postal ratepayers, roughly, 

another $2 billion in FY 2006. Should the military pension obligation remain with the Postal Service, and the escrow fund fail to be 

released, according to the Postal Service, mailers could potentially 

incur rate increases 5–6 percent higher in 2006 than they otherwise would be—at a time when American businesses can ill afford 

it. 

Based on its impact on postage rates and its effects on the mailing industry, the general public and the economy as a whole, the 

Committee chose to incorporate into S. 2468 the repeal of the escrow requirement. Though S. 2468 does not specify a percentage of 

the escrow account that must be used to pay down obligations such 

as retiree health care benefits, with approximately $90 billion in 

unfunded liabilities and obligations, the Committee believes it is 

critical to the Postal Service’s future viability that it work aggressively to pay down all outstanding liabilities and obligations. 

Workers’ compensation reforms 

The Federal Employees’ Compensation Act (FECA), enacted in 

1916, is a comprehensive workers’ compensation law designed to 

provide medical and death benefits, income replacement, and other 

services to employees with work-related injuries. FECA does not 

place age or time limitations on an injured worker’s receipt of 

workers’ compensation benefits. Employees who fully or partially 

recover from their injuries are expected to return to work. 

The President’s Commission found that under FECA, the Postal 

Service has maintained a broad and effective workers’ compensation program and acknowledged recent efforts that have lowered 

injury rates considerably. The Commission, however, also concluded that the Service, given its unique status, should be provided 

relief from FECA provisions that are creating costly unintended 

consequences. The Commission recommended making the Service’s 

workers’ compensation program more comparable to State-run proVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00040 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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19Williams, David C., Inspector General, U.S. Postal Service, Semiannual Report to Congress 

(April 1, 2004), 28. 20 U.S. Postal Service Office of Inspector General, Audit Report—Comparison of Retirement 

Benefits to Workers’ Compensation Benefits for Employee on the Periodic Roll (Report No. HM–

AR–04–001) (December 12, 2003), 2. 21 Ibid., 8. 22 Embracing the Future: Making the Tough Choices to Preserve Universal Mail Service, 134.

grams in order to control costs, provide adequate benefits, and address the Service’s unfunded liability in this area. A similar stance 

was taken by Postal Service Inspector General David Williams, 

who wrote in his semi-annual report to Congress that, ‘‘Given the 

Postal Service’s current $7.2 billion liability for workers’ compensation, there is an urgent need to reconsider the Postal Service’s obligations under FECA.’’ 19

The Postal Service is self-insured for workers’ compensation 

costs, and these costs have continued to escalate. According to a 

March 2003 audit by the Postal Service Office of Inspector General, 

21 percent (2,819) of the approximately 13,400 postal employees on 

the periodic workers’ compensation roll were classified as totally 

disabled, and, as a result, not expected to return to work. (Employees on the periodic roll have injuries or disabilities that have lasted 

or are expected to last for periods over one year.) Approximately 89 

percent of those 2,819 employees were age 55 or older as of September 30, 2003 and likely to be, for the most part, retirement-eligible. The Postal Service’s rolls include 81 cases that originated 40 

to 50 years ago; 778 cases that originated 30 to 39 years ago; and 

1,189 cases that originated 20 to 29 years ago.20 The IG’s audit 

also noted that if an employee dies from a non-work related injury 

while receiving Workers’ Compensation benefits and has not applied for disability with the Office of Personnel Management, their 

survivors receive no benefits.21

With no maximum dollar cap on FECA payments, employees 

often opt not to retire, staying permanently on the more generous 

workers’ compensation rolls. All State plans, on the other hand, 

apply either a cap or a maximum limitation, which is usually defined in law as a percentage of the State average weekly wage. In 

their report, the Commission provided an example of the disparity 

in pay between those employees who retire and those who choose 

to stay on the more lucrative workers’ compensation rolls:

Over a nine year period, a retirement eligible EAS–13 

level postal employee with dependents could earn $434,000 

by not retiring and continuing to collect workers’ compensation (75% of pre-injury salary plus COLAs, tax free). 

If that same employee were to retire, their CSRS retirement net pay over that same period would be $249,000 

(56% of High 3, taxable)—a difference of $185,000.22

S. 2468 converts workers’ compensation benefits for total or partial disability to a retirement annuity when the affected employee 

reaches retirement age as defined by the Social Security Act (SSA). 

The annuity would equal fifty percent of the monthly pay of the 

employee. This change reflects the fact that disabled postal employees would likely retire at some point were they not on the rolls of 

the Office of Workers’ Compensation Programs. It will also help to 

ensure continued benefits for survivors of workers’ compensation 

recipients who may die from a non-work related injury. Enactment 

38

23Lewis, Elliot P., Assistant Inspector General for Audit, Office of Inspector General, U.S. Department of Labor, before the Subcommittee on Workforce Protections, Committee on Education 

and the Workforce, U.S. House of Representatives (May 13, 2004), 5. 24 Embracing the Future: Making Tough Choices to Preserve Universal Services, 63.

of this provision would change neither the time at which an employee would become eligible for regular or disability retirements 

benefits under the Civil Service Retirement System (CSRS) or the 

Federal Employees Retirement System (FERS) nor the amount of 

the benefit for which he or she would be eligible under CSRS or 

FERS. 

Unlike most State-run plans, FECA also imposes no waiting period before benefits begin. Instead, FECA has a provision that allows employees who sustain disabling job-related traumatic injuries 

to receive continuation of their regular pay for 45 calendar days 

after the injuries—a benefit unique to the federal program—with 

a three-day waiting period at the end of the continuation of pay 

(COP) period. A primary purpose of the waiting period is to discourage the filing of frivolous claims. According to Elliot Lewis, Assistant Inspector General for Audit at the Department of Labor’s 

Office of Inspector General, placing the waiting period at the end 

of the COP period does nothing to discourage frivolous claims.23 S. 

2468, therefore, places the three-day waiting period at the beginning of the COP period. 

In addition, S. 2468 allows the three days of annual leave, sick 

leave, or leave-without-pay used by the injured employee to be reimbursed, should the employee be out of work due to injury for a 

period no less than 15 days (beginning on day one of the injury). 

This ‘‘qualifying period’’ is standard practice in State workers’ compensation plans. The average qualifying period for State plans is 

between 14 and 16 days. 

Both the President’s Commission and the Postal Service recommended that any changes to FECA should be made on a prospective basis. The Committee agreed. By lowering the workers’ 

compensation payments for retirement-eligible employees (as defined by the SSA), the Congressional Budget Office estimates the 

Postal Service will save $50 million over the 2005–2014 period. 

Report on universal service and the postal monopoly 

The President’s Commission believed that the Regulatory Commission would be the appropriate body to regularly review, and refine if necessary, the Postal Service’s universal service obligation. 

(The ‘‘universal service obligation’’ refers, in general, to regular delivery at uniform rates across the country.) With steadily declining 

volumes of First Class mail, it is clear that the nation’s correspondence needs are changing. The President’s Commission recommended, therefore, that an independent entity—the Regulatory 

Commission—be charged with, ‘‘refining key aspects of universal 

service as circumstances require/permit.’’ 24 Similarly, the President’s Commission recommended that the Regulatory Commission 

be granted the authority to refine the scope of the mail monopoly 

[generally believed to cover all First Class and Standard (mostly 

advertising) Mail], noting that, 

. . . the nation’s postal monopoly law predates not only 

the computer, e-mail and the fax machine, but also the 

radio, the telephone and the electric light bulb. . . . SevVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00042 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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25 Ibid., 22.

eral years into the nation’s Information Revolution, it is 

clear that these archaic laws should be clarified and modernized.25

From the perspective of the Committee, both the postal monopoly 

and universal service are issues of broad public policy—not regulatory issues. For that reason, the Committee decided that the 

power to refine either the monopoly or the universal service obligation should remain in the hands of Congress. However, the Committee thought it would be helpful to hear from the Regulatory 

Commission what potential changes to either the monopoly or the 

universal service obligation they believed made sense. Congress 

would then have the option to enact any of the Regulatory Commission’s recommendations with which they agreed. Therefore, S. 2468 

requires that the Regulatory Commission, at least every three 

years, submit a report to Congress detailing any recommended 

changes to universal service and the postal monopoly they consider 

appropriate, with estimated effects of the recommendations on the 

service, financial condition, rates, and security of mail provided by 

the Postal Service. 

Bulk fuel program 

The Committee notes that the U.S. Postal Service has instituted 

a program to require vendors to purchase fuel from designated 

sources. To insure that the program is generating the maximum 

possible savings and is not burdening contractors with unfair costs, 

the Committee expects the Postal Service to periodically re-examine the Bulk Fuel program it has instituted for Highway Contract 

Route (HCR) contracts under Section 5005 of title 39. The Committee suggests that the Postal Service confer with the GAO when 

conducting these periodic reviews. 

III. LEGISLATIVE HISTORY

S. 2468 was introduced on May 20, 2004 by Chairman Collins 

and Senator Carper. Senators Lieberman, Stevens, Akaka, 

Voinovich, Durbin and Sununu were original cosponsors. S. 2468 

was referred to the Committee on Governmental Affairs. On June 

2, 2004, the Committee took up S. 2468.

A manager’s amendment in the nature of a substitute, offered by 

Chairman Collins, was adopted by voice vote. The manager’s 

amendment provided for the following: (1) established an Officer of 

the Postal Regulatory Commission to represent the general public 

in proceedings; (2) required reporting on postal workplace safety 

and workplace-related injuries to ensure that postal employees’ 

health and personal safety are protected while they serve the nation’s postal customers; (3) provided for employment of postal police 

officers in connection with the protection of property owned or occupied by the Postal Service; (4) expanded Postal Service transportation contracting authority to permit the Postal Service to better 

manage costs; (5) provided for payments for the first three days following an injury for those employees who are on leave due to injury for a minimum of 14 days; and (6) established as an objective 

of the new ratemaking system, that interested parties be afforded 

40

a reasonable opportunity to participate in the new process designed 

by the Postal Regulatory Commission. 

By a vote of 9–8, the Committee voted to pass a worksharing 

amendment by Senator Lieberman. The Lieberman amendment 

limited to four years workshare discounts that exceed costs avoided 

when associated with a new postal service or with a change to an 

existing postal service that is necessary to induce mailer behavior 

that furthers the economically efficient operation of the Postal 

Service. The amendment also struck language from S. 2468 that 

granted the Postal Regulatory Commission the authority to approve discounts in excess of avoided costs for situations outside of 

the following four exceptions: (1) any discount associated with a 

new postal service or with a change to an existing postal service 

that is necessary to induce mailer behavior that furthers the economically efficient operation of the Postal Service; (2) if a reduction 

in the discount would (i) lead to a loss in volume of the affected 

category of mail and reduce the aggregate contribution to institutional costs, (ii) result in a further increase in rates paid by mailers 

not able to take advantage of the discount, or (iii) impede the efficient operation of the Postal Service; (3) if the amount above the 

costs avoided (i) is necessary to mitigate rate shock, and (ii) will 

be phased out over time; and (4) if the discount is provided in connection with subclasses of mail consisting exclusively of mail matter of educational, cultural, or scientific value. 

Yeas: Lieberman, Levin, Akaka, Durbin, Carper, Dayton, Lautenberg, Pryor, Specter. 

Nays: Collins, Stevens, Voinovich, Coleman, Bennett, Fitzgerald, 

Sununu, Shelby. 

The Committee adopted by voice vote an amendment offered by 

Senator Durbin that calls for a study by GAO and submission of 

a report, including recommendations for legislative action and administrative action, to Congress, the Postal Service Board of Governors, and the Postal Regulatory Commission. The report will address the economic and environmental efficacy of establishing rate 

incentives for mailers linked to the use of recycled paper, what initiatives the Postal Service has undertaken during the past five 

years to use recycled paper and other products and to provide for 

recycling of undeliverable and discarded mail, including revenue 

generated and savings achieved as a result, and what additional 

opportunities may be available for enhanced recycling of paper and 

other products and the projected costs and revenues of such opportunities. The report is due within one year of enactment of the Act. 

Senators present were Collins, Voinovich, Coleman, Bennett, 

Fitzgerald, Sununu, Lieberman, Levin, Akaka, Durbin, Carper, 

Lautenberg and Pryor. 

The Committee also adopted by voice vote an amendment offered 

by Senator Sununu. The Sununu amendment requires the Secretary of the U.S. Treasury, in consultation with the Postal Service, 

a certified public accounting firm, and other advisors, to develop 

recommendations regarding the accounting practices and principles 

that should be followed by the Postal Service when doing the following: (1) identifying and valuing the assets and liabilities of the 

Postal Service associated with providing, and the capital and operating costs incurred by the Postal Service in providing competitive 

products; and (2) preventing the cross-subsidization of competitive 

41

products by market-dominant products. The Treasury Department 

would also consult with the Postal Service on the rules that should 

be followed in determining the Postal Service’s assumed Federal income tax on competitive products income. Treasury will submit 

their final recommendations to the Postal Regulatory Commission. 

After hearing from all interested parties, the Regulatory Commission shall make a final decision as to which rules the Postal Service will be required to incorporate into their current accounting 

practices. 

Senators present were Collins, Voinovich, Coleman, Bennett, 

Fitzgerald, Sununu, Lieberman, Levin, Akaka, Durbin, Carper, 

Lautenberg and Pryor. 

The Committee then ordered the bill reported by voice vote, with 

no members present dissenting. Senators present were Collins, 

Voinovich, Coleman, Bennett, Fitzgerald, Sununu, Lieberman, 

Levin, Akaka, Durbin, Carper and Lautenberg. 

IV. SECTION BY SECTION ANALYSIS

TITLE I—DEFINITIONS; POSTAL SERVICES

Section 101—Definitions 

Section 101 proposes, for the first time, a clear definition of 

‘‘postal services.’’ A ‘‘postal service’’ is defined as ‘‘the physical delivery of letters, printed matter, or packages weighing up to 70 

pounds, including physical acceptance, collection, sorting, transportation, and other services ancillary thereto.’’ This definition clarifies the jurisdiction of the Postal Rate Commission (renamed the 

‘‘Postal Regulatory Commission’’) and the scope of commercial activities that the Postal Service is authorized to pursue. In addition, 

the term ‘‘product’’ is defined to mean ‘‘any postal service with a 

distinct cost or market characteristic’’ which thus encompasses all 

classes, subclasses, and rate categories that comprise the mail classification system. Section 101 further defines ‘‘market-dominant 

product’’ to refer to ‘‘a product subject to subchapter I of chapter 

36’’ and ‘‘competitive product’’ to refer to ‘‘a product subject to subchapter II of chapter 36.’’

Section 102—Postal Services 

Section 102 limits the Postal Service to offering ‘‘postal services.’’ 

If the Postal Service unlawfully offers a non-postal service or product, the Postal Regulatory Commission may order that the Postal 

Service cease providing the product under the complaint procedures 

outlined in section 202 of the bill. 

TITLE II—MODERN RATE REGULATION

In the new regulatory regime proposed in the bill, the classes of 

mail and services are classified as either market-dominant or competitive products. In general, Title II requires the Postal Regulatory Commission to design, within 12 months, a new rate cap system of rate regulation for market-dominant products. With respect 

to competitive products, the Postal Service is given pricing flexibility comparable to that exercised by private competitors. 

To prevent abuse, the new regulatory regime proposed in the bill 

substantially enhances the authority of the Regulatory Commission 

42

to define, audit, and remedy cross-subsidization of competitive 

products from revenues earned from market-dominant products. 

Section 201—Provisions relating to market-dominant products 

Section 201 of the bill establishes a new, modern system for regulation of market-dominant products. In the current title 39, chapter 36 deals with regulation of postal rates. The bill re-designates 

subchapter I of chapter 36 (establishing the Postal Regulatory 

Commission) as chapter 5 (see section 501, below). Section 201 revises subchapter II, which currently sets out the process of rate 

regulation, and re-designates it as subchapter I. As amended, subchapter I relates only to the regulation of market-dominant products. Section 201(a) adds three new provisions to title 39, sections 

3621, 3622 and 3623, as follows. 

Section 3621—Applicability; definitions 

Section 3621 lists the postal products to be regulated as marketdominant products immediately after enactment: First-Class Mail 

Letters, First-Class Mail Cards, Periodicals, Standard Mail, singlepiece Parcel Post, media mail, bound printed matter, library mail, 

special services and single-piece international mail. After enactment, the Commission may revise the list of market dominant 

products under new section 3642 set out in section 203 of the bill. 

Section 3622—Modern rate regulation 

Subsection 3622(a) requires the Commission to design, within 12 

months of enactment, a modern system for regulating postage rates 

and classes for market-dominant products. 

Subsection 3622(b) provides that the objectives of the new system 

shall be: (1) to reduce the administrative burden of the ratemaking 

process; (2) to create predictability and stability in rates; (3) to 

maximize incentives to reduce costs and increase efficiency; (4) to 

enhance mail security and deter terrorism by promoting secure, 

sender-identified mail; (5) to allow the Postal Service pricing flexibility, including the ability to use pricing to promote intelligent and 

encourage increased mail volume during non-peak periods; (6) to 

assure adequate revenues, including retained earnings, to maintain 

financial stability and meet the service standards the Regulatory 

Commission will establish under section 301 of the bill; and (7) to 

allocate institutional costs equitably. 

Subsection 3622(c) requires that the Commission consider the 

rate and classification factors found in sections 3622 and 3623 of 

current law in addition to other factors when developing the new 

system. 

Subsection 3622(d) requires the Postal Regulatory Commission to 

establish a rate cap system setting annual limitations, based on 

measures of inflation as chosen by the Commission, on percentage 

changes in rates. The rate-setting system should establish a schedule whereby rates, when necessary and appropriate, would increase 

at regular intervals by predictable amounts. In addition, this subsection establishes a 45-day Postal Regulatory Commission review 

and approval process for rate changes for market-dominant products. If the Postal Regulatory Commission notifies the Postal Service of any noncompliance with the established rate cap mechanism, 

the Postal Service shall respond to the notice and describe the acVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00046 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
43

tions to be taken to comply with the rate cap mechanism. Lastly, 

the Postal Regulatory Commission shall establish procedures 

whereby rates may be adjusted on an expedited basis due to unexpected or extraordinary circumstances such as the September 11, 

2001 terrorist attacks or the use of the mails to transmit anthrax. 

Subsection 3622(e) defines a ‘‘workshare discount’’ as a rate discount provided to mailers for presorting, prebarcoding, handling, or 

transportation of mail. These are activities that would ordinarily be 

performed by the Postal Service. The Postal Regulatory Commission is required to establish rules for workshare discounts that ensure that these discounts do not exceed the cost that the Postal 

Service avoids as a result of the worksharing activities performed 

by the mailers, subject only to four exceptions. Those exceptions 

authorize workshare discounts that exceed the costs avoided—(1) 

when a discount is associated with a new or changed postal product 

and is needed, for up to 4 years, to induce mailer behavior that furthers the economically efficient operation of the Postal Service; (2) 

if a reduction in the discount would—(i) lead to a loss in volume 

in the affected category of mail and thereby reduce the aggregate 

contribution to institutional costs, (ii) result in a further increase 

in rates paid by mailers not able to take advantage of the discount, 

or (iii) impede the efficient operation of the Postal Service; (3) if the 

discount is necessary to mitigate rate shock and will be phased out 

over time; or (4) if the discounts are provided in connection with 

subclasses of mail consisting exclusively of material having educational, cultural, or scientific value. Whenever the Postal Service 

establishes or maintains a workshare discount, the Postal Service 

shall, at the time it publishes the workshare discount rate, submit 

a report to the Postal Regulatory Commission explaining the reasons for establishing or maintaining the rate and setting forth the 

data, economic analyses and other information relied on by the 

Postal Service to justify the rate. 

Subsection 3622(f) provides that, until regulations under this section take effect, the rate making and classification provisions of 

current law shall remain in effect. 

Section 3623—Service agreements for market-dominant products 

Section 3623(a) authorizes the Postal Service to negotiate service 

agreements with individual mailers or groups of mailers of marketdominant products. Service agreements authorized under this section could involve the contracting mailer performing additional 

functions, such as the preparation, processing, and transportation 

of the mail; the Postal Service performing additional mail preparation, processing, transportation, or other functions; or other terms 

and conditions that meet the requirements of this section. 

Subsection 3623(b) requires that the revenues generated under 

any service agreement: (1) cover all costs attributable to the postal 

services covered by the agreement and result in no less contribution to the institutional costs of the Postal Service; (2) not result 

in higher rates or fees for other mailers; (3) pertain exclusively to 

market-dominant products; and (4) not preclude or hinder any 

similarly-situated mailer from entering into an agreement with the 

Postal Service. 

44

Subsection 3623(c) limits the service agreements to no more than 

three years in duration and makes any service agreement subject 

to the cancellation authority of the Commission. 

Subsection 3623(d) requires that the Postal Service notify the 

Regulatory Commission at least 30 days prior to a service agreement taking effect and publish the terms of the agreement in the 

Federal Register. This notice shall include a description of the 

agreement, the rates and fees payable by the customer under the 

agreement, and sufficient information to demonstrate the basis for 

the Postal Service’s view that the agreement meets the requirements of sections 3623(b). If the agreement is less-than-national in 

scope, this information shall also be published in a manner designed to afford reasonable notice to persons within that geographic 

area. 

Subsection 3623(e) requires the Postal Service to make any service agreement available to similarly-situated mailers on functionally-equivalent terms and conditions provided that any distinctions 

based on mailer profiles would not render the agreement uneconomic or impractical. 

Subsection 3623(f) permits persons who believe that a service 

agreement is not in compliance with the requirements of this section to file a complaint with the Postal Regulatory Commission 

under section 3662. 

Subsection 3623(g) defines the Postal Regulatory Commission’s 

role with respect to service agreements. The Postal Regulatory 

Commission may promulgate regulations regarding service agreements. In addition, the Postal Regulatory Commission may review 

any agreement under section 3623, and may suspend or cancel any 

service agreement that does not meet the requirements of this section. 

Subsection 3623(h) requires that the determination of whether a 

service agreement meets the requirements of subsection (b) be 

based, to the extent practicable, on the actual contribution of the 

mail involved, not on the average contribution of the mail classification most similar to the services performed under the agreement. If mailer-specific data is not available, the Postal Service 

shall provided the bases for the determination that the revenue 

generated will meet the requirements of subsection (b) and shall 

discuss the suitability of the data used to make this determination 

in accordance with regulations established by the Postal Rate Commission. 

Section 201(b) repeals §§ 3624, 3625,and 3628 of title 39 United 

States Code. 

Section 201(c) redesignates Chapter 36 of title 39 United States 

Code as by striking the heading for Subchapter II and inserting 

‘‘Subchapter I—Provisions relating to market-dominant products’’

Section 202—Provisions relating to competitive products 

Section 202 of the bill adds a new subchapter II to chapter 36 

of title 39. Subchapter II establishes a flexible system for regulation of competitive products. Section 202 adds three new sections 

to title 39, as follows. 

45

Section 3631—Applicability; definitions and updates 

Section 3631 lists the postal products to be regulated as competitive products immediately after enactment: Priority Mail, Expedited Mail, bulk parcel post, bulk international mail, and 

mailgrams. After enactment, the Regulatory Commission may revise the list of competitive products under new section 3642 set out 

in section 203 of the bill. 

Section 3632—Action of the Governors 

Subsection 3632(a) provides that the Governors of the Postal 

Service may establish rates and classes for all products in the competitive category of mail. 

Subsection 3632(b) requires the Governors to give notice in the 

Federal Register of changes in competitive products rates and 

classes no later than 30 days before implementation and to provide 

an opportunity for review by the Postal Regulatory Commission. 

Following this notice, the Postal Regulatory Commission shall notify the Governors of any noncompliance with requirements of section 3633 and the Governors shall respond to the notice describing 

the actions to be taken to comply with section 3633. 

Subsection 3632(c) provides that, until regulations under section 

3633 take effect, the rate making and classification provisions of 

current law shall remain in effect. 

Section 3633—Provisions applicable to rates for competitive products 

Section 3633 requires the Commission to promulgate regulations 

within 180 days of enactment prohibiting subsidization of competitive products by market-dominant products; ensuring that each 

competitive product covers its attributable costs; and ensuring that 

all competitive products collectively cover their share of the institutional costs of the Postal Service. 

Section 203—Provisions relating to experimental and new products 

Section 203 of the bill adds a new subchapter III to chapter 36 

of title 39. Subchapter III provides rules for market tests of experimental products and for transferring products between the marketdominant and competitive product categories. The new subchapter 

III replaces, and thus repeals, the current subchapter III dealing 

with temporary rates and classes. Section 203 adds two new provisions to title 39 as follows. 

Section 3641—Market tests of experimental products 

Section 3641 authorizes the Postal Service to conduct limited 

market tests that are exempt from most specific pricing requirements. Market tests under this section can last no longer than two 

years and must earn less than $10 million annually. 

Subsection 3641(b) states that, a market test must involve a 

product ‘‘significantly different from all products offered by the 

Postal Service within the 2-year period preceding the start of the 

test’’ and may not be conducted under this section if it will ‘‘create 

an unfair or otherwise inappropriate competitive advantage for the 

Postal Service or any mailer, particularly in regard to small business concerns.’’ In addition, the Postal Service must identify the 

product as either market-dominant or competitive. Any product 

46

that solely affects competitive products or only provides services 

ancillary to competitive products shall be presumed to be competitive even if a similar product exists within the market-dominant 

category. 

Subsection 3641(c) requires that the Postal Service notify the 

Regulatory Commission at least 30 days prior to the start of a test 

and publish the details of the test in the Federal Register including 

the basis for the Postal Service’s determination that it meets the 

requirements of this section. 

Paragraph 3641(c)(2) extends the right the Postal Service currently has to protect certain commercially sensitive information to 

any competitive product tested this section. 

Subsection 3641(d) limits tests to two years in duration but permits the Postal Service to seek a 12-month extension. Subsection 

3641(e) requires that the test result in additional annual revenue 

of no more than $10 million. The Commission shall raise the earnings limit to $50 million upon the Postal Service’s request and 

upon a determination that the product is (1) likely to benefit the 

public and meet an expected demand; (2) likely to contribute to the 

financial stability of the Postal Service; and, (3) not likely to result 

in unfair or inappropriate competition. 

Subsection 3641(f) provides that the Postal Regulatory Commission may order the cancellation of a test at any time if it does not 

meet the requirements of this section. Subsection 3641(g) provides 

that the dollar amounts contained in this section be adjusted for 

the changes in the Consumer Price Index. Subsection 3641(h) defines a small business concern for the purposes of this section. Subsection 3641(i) establishes that market tests under this subchapter 

may be conducted in any year beginning with the first year in 

which the Postal Service’s first report under section 3652(a) to the 

Postal Regulatory Commission occurs.

Section 3642—New products and transfers of products between the 

market-dominant and competitive categories of mail 

Subsection 3642(a) authorizes the Regulatory Commission to 

classify new products as either market-dominant or competitive 

and to transfer existing products between the two categories upon 

the request of the Postal Service, users of the mails or upon its own 

initiative. 

Subsection 3642(b) adopts criteria for the two categories that reflect the Federal Communications Commission’s (FCC) approach to 

defining ‘‘dominant’’ carriers for the purpose of regulation. Paragraph 3642(b)(1) provides that: ‘‘The market-dominant category of 

products shall consist of each product in the sale of which 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 business to other firms offering similar products. The competitive category of products shall embrace all postal products not 

in the market-dominant category.’’ Paragraph 3642(b)(2) states that 

the products covered by the postal monopoly may not be transferred to the competitive category. Paragraph 3642(b)(3) requires 

the Postal Regulatory Commission to consider three other factors 

when deciding whether a product should be classified as marketdominant or competitive: (1) the availability of private sector alterVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00050 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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natives to the product in question; (2) the views of those who use 

the product; and (3) the impact the decision will have on small 

businesses. 

Subsection 3642(c) permits the transfer of some but not all of the 

subclasses or ‘‘subordinate units’’ of a class of mail. 

Subsection 3642(d) requires that any change in the lists of products in the market-dominant and competitive categories requested 

by the Postal Service be published in the Federal Register and that 

the Postal Regulatory Commission, whenever it changes the list of 

products in the market-dominant or competitive category, publish 

new lists in the Federal Register. 

Subsection 3642(e) prohibits the Postal Service from offering any 

product involving the physical delivery of letters, printed matter, or 

packages until it is categorized as either a market-dominant or a 

competitive product. 

Section 204—Reporting requirements and related provisions 

Section 204 of the bill adds a new subchapter IV to chapter 36 

of title 39. In general, subchapter IV provides for annual audits of 

Postal Service operations by the Commission to ensure compliance 

with the ratemaking criteria of the act. Section 204 adds three new 

provisions to title 39 as follows. 

Section 3651—Annual reports by the Commission 

Section 3651 requires the Regulatory Commission to submit a report to the President and Congress each year detailing its activities 

and the extent to which regulations are achieving the objectives set 

forth for the new rate and classification system to be established 

under section 201 and the service standards to be established 

under section 301. Section 3651 also requires that the Postal Service provide the Commission any information that the Commission, 

in its judgment, believes it needs to prepare its report. 

Section 3652—Annual reports to the Commission 

Subsection 3652(a) requires the Postal Service to submit information to the Commission no later than three months after the last 

day of each fiscal year demonstrating that the rates in effect for all 

products during the year are in compliance with the requirements 

of this title and that established service standards are being met. 

The report will include information on mail volume, service quality 

and customer satisfaction and must be audited by the Inspector 

General. Subsection 3652(b) requires annual reporting on the extent of cost savings reflected in worksharing discounts. Subsection 

3652(c) requires that the Postal Service provide in its annual report such data as the Commission requires on service agreements 

and market tests. 

Subsection 3652(d) requires that the Commission have access to 

all the working papers and supporting materials of the Postal Service and the Inspector General in connection with the required reports. Subsection 3652(e) requires that the Commission, in developing regulations prescribing the content and form of the required 

annual reports, consider the need to provide the public with adequate information to justify the lawfulness of rates charged, the 

need to avoid unnecessary or unwarranted administrative effort or 

expense on the part of the Postal Service, and the need to protect 

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the confidentiality of commercially sensitive information. As a result, the section authorizes the Commission to specify what information will be provided as either public reports or to accommodate 

the confidentiality protections in subsection 3652 (f), which allows 

the Postal Service to obtain confidential treatment for commercially 

sensitive information that is protected from disclosure under current law, in accordance with provisions outlined in sections 502 

and 504 of the bill. Subsection 3652 (d) also allows the Commission, on its own motion or at the request of an interested party, to 

initiate a proceeding to improve the quality, accuracy, or completeness of Postal Service data. 

Subsection 3652(g) requires the Postal Service to provide the 

Commission, as part of the information to be examined in the annual audit, specific reports that are submitted to Congress, including the comprehensive statement required under section 2401 and 

the performance plan and program reports required under the Government Performance and Results Act. The Postal Service is also 

required to provide reports detailing the operations of the Competitive Products Fund created in section 301 of the bill. 

Section 3653—Annual determination of compliance 

Section 3653 requires the Commission to provide an opportunity 

for public comment after receiving annual reports from the Postal 

Service. The Commission will then, within 90 days, make a written 

determination as to whether any rates or fees were not in compliance with the law or whether any service standards were not met. 

If noncompliance is found, the Commission is required to take appropriate action under the revised complaint procedure in new section 3662 laid out in section 205 of the bill. A determination of 

compliance creates a rebuttable presumption of compliance in any 

complaint proceeding. 

Section 205—Rate and service complaints 

Section 402 of the bill revises the complaint and appellate review 

provisions set out in subchapter V of chapter 36, title 39 as re-designated by the bill. In general, the bill strengthens the authority 

of the Regulatory Commission to act on a complaint in lieu of the 

current reliance on Rate Commission review of postage rates prior 

to implementation. Section 205 repeals current sections 3662 and 

3663 and adds three sections to title 39 as follows. 

Section 3662—Rate and service complaints 

Section 3662 provides the Regulatory Commission with enhanced 

authority to respond to complaints of pricing, service, or other actions by the Postal Service in violation of law. As revised, this section requires the Commission to investigate or dismiss complaints 

within 90 days. Subsection 3662(c) gives the Commission broad authority to correct violations by ordering the Postal Service to take 

whatever steps the Commission considers appropriate. For instance, the Commission may order the Postal Service to adjust the 

rates of competitive products to lawful levels if they are set below 

attributable costs. The current Rate Commission has no such authority under current law. In cases of deliberate noncompliance 

with the law, the Commission is authorized to levy fines based on 

the seriousness of the noncompliance. Fines resulting from unlawVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00052 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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ful provision of competitive products must be paid out of the Competitive Products Fund. All fines will be paid into the U.S. Treasury. 

Section 3663—Appellate review 

Section 3663 provides for appeals of any order or decision by the 

Commission to the United States Court of Appeals for the District 

of Columbia Circuit in accordance with chapter 706 of title 5 and 

chapter 158 and section 2112 of title 28. 

Section 3664—Enforcement of orders 

Section 3664 gives any United States District Court the authority to enforce orders from the Commission. 

Section 206—Clerical amendment 

Section 206 of the bill revises the analysis of chapter 36, title 39, 

in accordance with the changes made by the bill. 

TITLE III—MODERN SERVICE STANDARDS

Title II of the bill requires the Postal Regulatory Commission to 

design, within 12 months, a new system of rate regulation for market-dominant products. Title III requires the Commission to establish, within 12 months, a set of service standards for market-dominant products. The Postal Service currently sets its own service 

standards. Title III also requires the Postal Service to submit a 

plan for how it will meet the new standards established by the 

Commission. The Postal Service’s plan will include a list of facilities that can be closed and consolidated without hindering their 

ability to meet the new service standards. Title III maintains the 

universal service requirements included in sections 101(a), 101(b) 

and 403 of title 39 and the post office closing procedures in section 

404(b) of title 39. 

Section 301—Establishment of modern service standards 

Section 301 creates a new section 3691 in title 39. Section 3691 

requires the Regulatory Commission to design, within 12 months, 

a set of new service standards for market-dominant products. The 

new standards shall be consistent with the requirements in sections 101(a), 101(b), and 403 of title 39 requiring that the Postal 

Service ‘‘bind the Nation together through the mail’’ and serve all 

parts of the country in a non-discriminatory fashion. Subsection 

3691(b) provides that the objectives of the new system shall be: (1) 

to increase the value of postal services to both senders and recipients; (2) to provide a benchmark for Postal Service performance 

goals; and (3) to guarantee Postal Service customers delivery speed 

and frequency consistent with reasonable rates and best business 

practices. 

Subsection 3691(c) requires that, as they develop the new service 

standards, the Commission take into consideration: (1) actual level 

of service under any service standards previously established by 

the Postal Service; (2) customer satisfaction with Postal Service 

performance; (3) mail volume and revenues projected in future 

years; (4) the projected growth in the number of addresses the 

Postal Service will be required to serve in future years; (5) the current and projected future cost of serving Postal Service customers; 

50

(6) the effect of changes in technology, demographics and population distribution on the efficient and reliable operation of the 

postal delivery system; and, (7) the policies of this title and such 

other factors as the Commission determines appropriate. 

Section 302—Postal Service plan 

Section 302 requires the Postal Service to submit to Congress, 

within 6 months of the establishment of the new service standards 

for market-dominant products, a plan for meeting the new standards. The Postal Service will develop the plan in consultation with 

the Regulatory Commission. Subsection 302 (b) requires that the 

plan: (1) establish performance goals; (2) describe any changes to 

the Postal Service’s processing, transportation, delivery and retail

networks necessary to allow the Postal Service to meet the new 

performance goals; and (3) describe any changes to planning and 

performance documents previously submitted to Congress to reflect 

the new performance goals. 

Subsection 302(c) requires that the Postal Service’s plan also include a description of its long-term vision for rationalizing its infrastructure and workforce and its plan for implementing that vision, 

including (1) a strategy for how it intends to rationalize the postal 

facilities network and remove excess processing capacity and space 

from the network, (2) an update on how postal decisions related to 

mail changes, security, automation initiatives, worksharing, information technology systems and other areas will affect network rationalization plans; (3) a discussion of what impact any facility 

changes may have on the postal workforce and whether the Postal 

Service has sufficient flexibility to make needed workforce changes; 

and, (4) an identification of anticipated costs, cost savings and 

other benefits associated with the infrastructure rationalization alternatives discussed in the plan. 

Subsection 302(d) requires that the Postal Service include plans 

to provide retail postal services by other means, including vending 

machines, the Internet and retail facilities in which overhead costs 

can be shared with private businesses and other government agencies. Subsection 302(e) requires that the Postal Service include 

plans to provide re-employment assistance or early retirement benefits to employees displaced as a result of automation or the closing 

and consolidation of facilities. 

Subsection 302(f) requires that the Postal Service’s plan be submitted to the Postal Service Inspector General for study before it 

is submitted to Congress. The Inspector General will then issue a 

report detailing the extent to which the plan is consistent with the 

Postal Service’s obligations under title 39 and the degree to which 

the plan allows them to meet the new service standards. 

TITLE IV—PROVISIONS RELATED TO FAIR COMPETITION

Section 401—Postal Service Competitive Products Fund 

Section 401 adds a new section 2011 to title 39. Section 2011 establishes an off-budget fund within the Treasury for revenues and 

expenditures associated with competitive products. The ‘‘Competitive Products Fund’’ is in addition to the current Postal Service 

Fund. The intent of this section is to level the playing field for the 

Postal Service and its competitors in the competitive product marVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00054 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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ket by requiring the Postal Service to keep separate financial accounts for market-dominant and competitive products. Separation 

of accounts also protects taxpayers and the interests of postal consumers in the market-dominant category. 

Section 2011—Provisions relating to competitive products 

Section 2011 establishes the rules under which the Postal Service will manage the Competitive Products Fund. The Postal Service 

may invest money from the new fund in accordance with rules that 

the Secretary of Treasury shall prescribe within 12 months after 

the date of enactment. The Postal Service may also borrow against 

any assets related to its competitive products. The Postal Service 

must regularly report to the Secretary of the Treasury and the 

Postal Regulatory Commission on the operation of the Fund. The 

Secretary of the Treasury in consultation with the Postal Service, 

and independent, certified public accounting firm and other appropriate advisors shall, within 12 months of enactment, develop recommendations regarding the accounting practices and principles to 

be used by the Postal Service with the intent of preventing crosssubsidy of market-dominant products by competitive products. In 

addition, the Secretary of the Treasury shall develop recommendations for the computation of the Postal Service’s assumed Federal 

income tax on competitive products income. The Postal Regulatory 

Commission shall review these recommendations and following consideration of recommendations of interested parties, shall issue 

rules on the Postal Service’s accounting practices and principles 

and the method of computing the assumed Federal income tax. 

Section 402—Assumed Federal income tax on competitive products 

income 

Section 402 adds a new section 3634 to title 39. Section 3634 requires the Postal Service to compute an assumed Federal income 

tax on income from competitive products each year and to transfer 

from the Competitive Products Fund to the Postal Service Fund the 

amount of that assumed tax. 

Section 403—Unfair competition prohibited 

Section 403 adds a new section 404(a) to title 39. The new section 404(a) prohibits the Postal Service from: (1) establishing rules 

or regulations which preclude competition or give the Postal Service an unfair competitive advantage; (2) compelling disclosure, 

transfer, or licensing of intellectual property; or (3) offering any 

product or service that makes use of information obtained from a 

person that provides or seeks to provide a product to the Postal 

Service unless the person has consented to such use or the information can be obtained from another source. The Regulatory Commission is required to prescribe regulations to carry out the purposes 

of this section, and the prohibitions will be enforced through the 

Commission’s strengthened complaint process and remedies, which 

include ordering rescission of any regulation. 

Section 404—Suits by and against the Postal Service 

Section 404 amends section 409 of title 39 to make the Postal 

Service subject to other laws regulating the conduct of commercial 

activities. First, the amendment subjects all Postal Service activiVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00055 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
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ties to federal laws prohibiting the conduct of business in a fraudulent manner. Second, the amendment subjects all Postal Service activities outside the postal monopoly to federal antitrust laws and 

unfair competition prohibitions and eliminates sovereign immunity 

protection from suits in Federal Court for violations of Federal law. 

Third, the amendment makes the Postal Service’s Competitive 

Products Fund a ‘‘person’’ for purposes of federal bankruptcy laws.

Fourth, the amendment requires the Postal Service to consider 

local zoning, planning, environmental, or land use regulations and 

building codes when constructing new buildings. 

Section 409 as amended further requires the Postal Service to 

represent itself in most legal proceedings permitted by the amendment as well as in cases involving administrative subpoenas issued 

by the Regulatory Commission and appeals of decisions by the 

Commission or the Governors. The amendment requires that judgments arising out of violations of law involving competitive products be paid out of revenues earned from competitive products. 

Section 405—International postal arrangements 

Section 405 amends section 407 of title 39, United States Code. 

Paragraph 407(a) states that it is the policy of the United States 

to promote and encourage communications between peoples by efficient operation of international postal services and other international delivery services for cultural, social, and economic purposes; to promote and encourage unrestricted and undistorted competition in the provision of international postal services and other 

international delivery services except where provision of those services by private companies may be prohibited by U.S. law; to promote and encourage a clear distinction between governmental and 

operational responsibilities with respect to the provision of international postal services; and to participate in multilateral and bilateral agreements with other countries to accomplish the objective. 

Paragraph 407(b) provides that the Secretary of State shall be 

responsible for the formulation, coordination, and oversight of foreign policy related to international postal services. However, the 

Secretary cannot conclude any postal treaty or convention that 

would grant an undue or unreasonable preference for the Postal 

Service with respect to any competitive product. The Secretary of 

State shall coordinate with other agencies having authority vested 

by law such as the Postal Regulatory Commission, the Department 

of Commerce, the Department of Transportation, and the Office of 

the United States Trade Representative. In addition, the Secretary 

shall maintain continuing liaison with other executive branch agencies concerned with postal and delivery issues; the Committee on 

Governmental Affairs of the Senate and the Committee on Government Reform of the House of Representatives; and the Postal Service and representatives of users and private providers of international postal and delivery services. 

Paragraph 407(c) requires that, before concluding any treaty or 

convention that establishes a rate or classification for a marketdominant product, the Secretary of State shall request that the 

Postal Regulatory Commission submit its views on whether such a 

rate is consistent with section 3622. 

Paragraph 407(d) states that the Postal Service can enter into 

commercial or operational contracts related to international postal 

53

services as long as they are solely contractual and do not purport 

to be binding under international law. A copy of each contract shall 

be forwarded to the Secretary of State and the Postal Regulatory 

Commission. 

Paragraph 407(e) requires that the customs laws of the United 

States be applied in the same manner to both shipments of the 

Postal Service and private companies and that to the extent practicable, the Secretary of State shall encourage governments of other 

countries to make available a range of nondiscriminatory customs 

procedures. 

Subsection 405(b) permits the Postal Service to establish postage 

rates for international mail until regulations under section 3622 

and 3633 are promulgated by the Postal Regulatory Commission 

for market-dominant products and competitive products respectively. 

TITLE V—GENERAL PROVISIONS

Section 501—Qualification requirements for Governors 

Section 501 amends section 202 of title 39. As revised, section 

202 provides that the nine members of the Board of Governors 

shall represent the public interest generally. The amendment also 

adds a requirement that the Governors shall be selected by the 

President based solely on their demonstrated ability in managing 

large organizations or corporations, in either the public or the private sector. The amendment requires the President to consult with 

the Speaker and minority leader of the House and the majority and 

minority leaders of the Senate in selecting individuals to nominate 

to the Board. The term of office for Governor is five years instead 

of nine. Those Governors serving under an appointment made prior 

to enactment will not be affected, however, when that office becomes vacant, the appointment of any person to fill that office shall 

be made in accordance with this amendment. This section also establishes transition rules for vacancies occurring in terms of Governors incumbent as of the date of enactment. 

Section 502—Obligations 

Section 502 amends section 2005 of title 39 to delete specified 

limits on borrowing for capital improvements and for operational 

expense by the Postal Service. The Postal Service Fund’s $2 billion 

annual cap on borrowing for capital investments and $1 billion annual cap on borrowing for operational expenses is modified to a $3 

billion total annual combined cap for both purposes. 

Section 503—Private carriage of letters 

Section 503 amends section 601 of title 39 to provide limited additional statutory exemptions to the postal monopoly. Subsection 

503(b) provides that a letter may be carried outside the mail under 

three new circumstances: (1) when the amount paid to a private 

carrier is at least 6 times the rate then currently charged for the 

first ounce of a single-piece first-class letter; (2) when the letter 

weighs at least 12 and one-half ounces; and (3) when private carriage is within the scope of current Postal Service regulations that 

purport to suspend the operation of current law. By setting the 

limit at 6 times the first-class stamp price, the amended section 

54

601 provides that the price limit on the postal monopoly will rise 

as the stamp price increases.

Section 601 as amended also codifies the exemptions to the postal monopoly referenced in subsection 503(b)(3) that have been administratively adopted by the Postal Service and widely used by 

private carriers and the public even though they are based on a 

questionable interpretation of current law. Entities in both the government and the private sector have testified that the Postal Service has misinterpreted the suspension power found in section 

601(b) of current law. Since 1974, the Postal Service has, under 

color of section 601(b), issued regulations that, in effect, suspend 

the postal monopoly. Subsection 601(b), however, is derived from 

section 7 of an 1864 postal act. This provision was originally intended to authorize the Postmaster General to suspend the exception to the postal monopoly now found in section 601(a), which allows private carriage of letters if postage is paid by applying and 

canceling postage stamps. There is no evidence that Congress intended to grant the Postal Service authority to suspend the postal 

monopoly itself. The proposed amendment would repeal the Postal 

Service’s authority to suspend the postal monopoly exception for 

stamped letters—an antiquated and never used authority—and to 

codify the exemptions to the postal monopoly that the Postal Service has adopted to date in apparent misinterpretation of the suspension provision. The intent of this provision to continue to allow 

private carriage under those circumstances in which private carriage is purportedly permitted by current Postal Service ‘‘suspensions’’ of the monopoly but not to continue provisions in the Postal 

Service regulations that purport to condition or limit use of such 

‘‘suspensions,’’ e.g., a requirement that customers of private carriers must permit otherwise unauthorized inspections by postal inspectors. 

The Regulatory Commission is authorized to adopt regulations 

necessary to carry out the exceptions to the postal monopoly set out 

in section 601 as amended. This amendment does not take effect 

until the Postal Regulatory Commission promulgates regulations 

for the competitive pricing system under section 3633. 

Section 504—Rulemaking authority 

Section 504 amends section 401(2) of title 39 to clarify the rulemaking function of the Postal Service. Amended section 401(2) authorizes the Postal Service ‘‘to adopt, amend, and repeal such rules 

and regulations, not inconsistent with this title, as may be necessary in the execution of its functions under this title and such 

other functions as may be assigned to the Postal Service under any 

provisions of law outside of this title.’’ This amendment is intended 

to make clear that the Postal Service is not empowered to adopt 

regulations implementing other parts of the U.S. Code unless explicitly authorized to do so by Congress. This amendment is modeled on the Federal Communications Commission’s rulemaking authority in 47 U.S.C. 154(i). The amendment recognizes that the 

rulemaking authority of the Postal Service is affected by its obligations under title 5 and certain other limited provisions of law outside title 39. 

55

Section 505—Noninterference with collective bargaining agreements 

Section 505 revises the current procedures regarding collective 

bargaining with unions representing postal employees. It eliminates the fact-finding process in current law and provides for the 

appointment of a mediator to try to resolve collective bargaining 

disputes. Subsection 505(a) amends section 1207 of title 39 to state 

that if there is a collective bargaining agreement in effect, no party 

shall terminate or modify such agreement unless they serve no less 

than 90 days notice on the other party. The party serving such notice shall notify the Federal Mediation and Conciliation Service of 

the existence of a dispute within 45 days of such notice. If no 

agreement is reached, the Director of the Federal Mediation and 

Conciliation Service shall, within 10 days, appoint a mediator. If no 

agreement is reached within 60 days after the expiration or termination of the agreement or if the parties decide upon arbitration 

but do not agree upon the arbitration procedures, then a three 

member arbitration panel shall be established with one member selected by the Postal Service, one member selected by the bargaining representative of the employees and the third jointly selected. Decisions of the arbitration board shall be binding and final 

and the costs shall be shared by both parties. In the case of a bargaining unit whose recognized representative does not have an 

agreement with the Postal Service, if the parties fail to reach 

agreement within 90 days of the commencement of collective bargaining, a mediator shall be appointed. If the parties fail to reach 

agreement within 180 days of the commencement of collective bargaining, and they have not agreed to another procedure for binding 

resolution, an arbitration board shall be established to provide conclusive and binding arbitration. 

Subsection 505(b) states that except as provided in subsection 

(a), nothing in this act shall restrict, expand or otherwise affect any 

of the rights, privileges, or benefits of either employees or of labor 

organizations representing employees of the Postal Service. 

Subsection 505(c) provides that nothing in the bill will affect free 

mail as currently provided by law for: (1) correspondence of members of the diplomatic corps and consuls of the countries of the 

Postal Union of Americas and Spain; (2) the blind and the disabled; 

and (3) mailing of balloting materials under the Uniformed and 

Overseas Citizens Absentee Voting Act. 

TITLE VI—ENHANCED REGULATORY COMMISSION

Section 601—Reorganization and modification of certain provisions 

relating to the Postal Regulatory Commission 

Section 601 creates a new chapter 5 in title 39 to establish the 

Postal Regulatory Commission, which will replace the current Postal Rate Commission. It recognizes the Regulatory Commission’s enhanced responsibilities by establishing it in provisions set out in a 

chapter located in part I of title 39, dealing with general matters, 

rather than, as in current law, provisions set out in a subchapter 

of chapter 36, dealing with rate regulation. In addition, this section 

establishes qualification requirements for Postal Regulatory Commissioners. Lastly, it directs the Postal Regulatory Commission to 

designate an officer of the Postal Regulatory Commission in all 

public proceedings to represent the interests of the general public. 

56

Section 602—Authority of the Postal Regulatory Commission to 

issue subpoenas

Section 602 amends section 504 of title 39, i.e., section 3604 of 

current law as re-designated by section 601 of the bill. Section 504, 

as amended, provides that Commissioners, any administrative law 

judge appointed by the Commission, and any designated employee 

of the Commission may administer oaths, examine witnesses, take 

depositions, and receive evidence. In addition, the Chairman of the 

Commission, any Commissioner designated by the Chairman, and 

any administrative law judge appointed by the Commission may 

subpoena officers, employees, contractors, and agents of the Postal 

Service to require attendance, presentation of testimony, production of documents or to order depositions and responses to written 

interrogatories. Any subpoena requires the written concurrence of 

a majority of Commissioners then holding office in advance of its 

issuance. The Commission may seek an order enforcing the subpoena in U.S. District Court in the event of a failure to comply. 

Failure to obey the court’s order is punishable as a contempt of 

court. 

The amendment also provides for the handling of proprietary information requested from the Postal Service by the Commission. 

Section 504, as amended, provides that, if the Postal Service determines requested information is proprietary and so notifies the 

Commission in writing, the Commission may use the information 

only for the purpose for which it is supplied and must restrict access to the information to Commission officials. The amendment 

further provides for the possibility of discovery of such information 

by private parties in proceedings under sections 556 and 557 of 

title 5 and requires the Commission to adopt rules to protect the 

confidentiality of such information similar to the rules that govern 

protective orders issued by the federal courts under the Federal 

Rules of Civil Procedure. 

Section 603—Appropriations for the Postal Regulatory Commission 

Section 603 further amends section 504 of title 39 to ensure the 

financial independence of the Postal Regulatory Commission. 

Under the amendment, funding for the Commission will be paid 

out of the Postal Service Fund, as under current law, but the budget of the Commission will no longer be subject to disapproval by the 

Governors. 

Section 604—Redesignation of the Postal Regulatory Commission 

Section 604 changes the name of the ‘‘Postal Rate Commission’’ 

to the ‘‘Postal Regulatory Commission’’ in various statutes. 

Section 605—Financial transparency 

Section 605 amends section 101 of title 39 by including a requirement that the Postal Service shall be subject to ‘‘a high degree of 

transparency to ensure fair treatment of customers of the Postal 

Service’s market-dominant products and companies competing with 

the Postal Service’s competitive products.’’ 

57

TITLE VII—EVALUATIONS

Section 701—Assessments of ratemaking, classification and other 

provisions 

Section 701 requires the Regulatory Commission to report to the 

President and the Congress at least every 3 years, in conjunction 

with the Postal Service, on the operation of the amendments made 

by this bill, with recommendations for any legislative or other 

measures necessary to improve the effectiveness or efficiency of the 

nation’s postal laws. 

Section 702—Report on universal postal service and the postal monopoly. 

Section 702(a) requires the Postal Regulatory Commission, no 

later than 12 months after enactment, to submit a report to the 

President and Congress on the universal postal service and the 

postal monopoly including the monopoly on the delivery of mail and 

access to mailboxes. The report shall include (1) a comprehensive 

review of the history and development of universal service and the 

postal monopoly; (2) the scope and standards of universal service 

and the postal monopoly under current law; (3) a description of any 

geographic areas or communities that are not currently covered by 

universal service or that are covered but that are receiving deficient services; and (4) the scope and standards of universal service 

and the postal monopoly likely to be required in the future to meet 

the needs and expectations of the public. Section 702(b) requires 

the Postal Regulatory Commission to include in the report any recommended changes to universal service and the postal monopoly as 

the Commission considers appropriate and an estimate of the costs 

and likely benefits of the obligation to provide universal service. 

The Regulatory Commission will update the report in each report 

submitted to the President and Congress pursuant to section 701. 

Section 703—Study on equal application of laws to competitive 

products. 

Section 703 requires the Federal Trade Commission (FTC) to prepare and submit to the President, Congress and the Postal Regulatory Commission within one year after enactment a comprehensive report identifying Federal and State laws that apply differently to the Postal Service with respect to the competitive category of mail and similar products provided by private companies, 

including recommendations as it considers appropriate to bring 

such legal discrimination to an end. In preparing the report, the 

FTC shall consult with the Postal Service, the Postal Regulatory 

Commission and other federal agencies, mailers, private delivery 

companies and the general public and append any comments to its 

report. The Postal Regulatory Commission shall take the FTC’s recommendations into account in establishing regulations for competitive products under section 3633 of title 39. 

Section 704—Report on postal workplace safety and workplace-related injuries 

Subsection 704(a) directs the Inspector General of the United 

States Postal Service, not later than six months after enactment, 

to submit a report to Congress and the Postal Service that details 

58

and assesses any progress the Postal Service has made in improving workplace safety and reducing workplace-related injuries nationwide and identifies opportunities for improvement. This report

shall: discuss any injury reduction goals established by the Postal 

Service; describe actions that the Postal Service has taken to improve workplace safety and reduce injuries; identify areas where 

the Postal Service has failed to meet its injury reduction goals; explain the reasons why these goals were not met; and identify opportunities for making further progress in meeting these goals. 

Subsection 704(b) requires the Postal Service, no later than 6 

months after receiving the report under Subsection 704(a), to submit a report to Congress detailing how it plans to improve workplace safety and reduce workplace-related injuries, including goals 

and metrics. The Postal Service’s report shall also include plans developed in conjunction with the Inspector General and employee 

representatives, including representatives of each postal labor 

union and management association, for addressing the problem 

areas identified by the Inspector General. 

Section 705—Study on recycled paper 

Subsection 705(a) directs the Government Accountability Office 

(GAO), within 12 months of enactment, to submit to the Congress, 

the Board of Governors of the Postal Service and the Postal Regulatory Commission a report concerning the economic and environmental efficacy of establishing rate incentives for mailers linked to 

the use of recycled paper. The GAO report shall also include a description of the Postal Service’s accomplishments in each of the preceding 5 years involving recycling activities, including the amount 

of revenue generated and savings achieved by the Postal Service as 

a result of its use of recycled paper and other recycled products. Finally, the GAO report shall discuss the Postal Service’s efforts to 

recycle undeliverable mail and other material and additional opportunities that may be available for the Postal Service to engage in 

recycling initiatives, including the projected costs and revenues associated with undertaking such opportunities. 

Subsection 705(b) specifies that the report under Subsection 

705(a) shall include recommendations for any appropriate administrative or legislative actions. 

TITLE VIII—POSTAL SERVICE RETIREMENT AND HEALTH BENEFITS

FUNDING

Section 801—Short title 

Section 801 provides that title VIII may be cited as the ‘‘Postal 

Civil Service Retirement and Health Benefits Funding Amendments of 2004’’. 

Section 802—Civil Service Retirement System 

In general, section 802 provides for transfer of the costs of providing military service credit under the Civil Service Retirement 

System (CSRS) from the Postal Service to the U.S. Treasury. It 

also modifies the existing provisions for funding CSRS benefits for 

Postal employees. Paragraph (a)(1) eliminates the current requirement that the Postal Service make a contribution to the Retirement Fund based upon a percentage of the salaries of Postal ServVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00062 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
59

ice employees. Paragraph (a)(2) amends the existing provisions of 

5 U.S.C. § 8348(h). 

As amended, § 8348(h)(1) defines ‘‘Postal surplus or supplemental 

liability’’ as the estimated difference, as determined by the Office 

of Personnel Management (OPM), between the actuarial present 

value of future CSRS retirement benefits attributable to civilian 

employment with the United States Postal Service, and the sum of 

the actuarial present value of future Postal Service CSRS deductions from the salaries of current Postal employees plus the net 

portion of the Fund balance attributable to Postal civilian employment (taking into account contributions, payments and earnings); 

plus any other appropriate amount, as determined by OPM in accordance with generally accepted actuarial practices and principles. 

As amended, § 8348(h)(2)(A) provides that by June 30, 2006, 

OPM will determine the Postal surplus or supplemental liability, 

as of September 30, 2005. Any surplus will be transferred to the 

Postal Service Retiree Health Benefit Fund established by the new 

5 U.S.C. § 8909a. If there is a supplemental liability, OPM will establish an amortization schedule providing for the liquidation of 

the liability by September 30, 2043. 

As amended, § 8348(h)(2)(B) provides that OPM will each year 

thereafter through FY 2038 recompute whether there is a Postal 

surplus or supplemental liability. Any surplus will remain in the 

Fund until transfers are authorized under subparagraph (C). If 

there is a liability, OPM will establish a new amortization schedule 

providing for the liquidation of the liability by September 30, 2043, 

and superceding earlier amortization schedules. 

As amended, § 8348(h)(2)(C) provides that if there is a surplus at 

the end of FY’s 2015, 2025, 2035, and 2039, it shall be transferred 

to the Postal Service Retiree Health Benefits Fund, terminating 

any prior amortization schedules. 

As amended, § 8348(h)(2)(D) and (E) provide that the amortization schedules shall be set in accordance with generally accepted 

actuarial practices and principles, with interest computed at the 

rate used in the most recent valuation of the CSRS, with Postal 

payments due not later than the date scheduled by OPM. 

As amended, § 8348(h)(3) provides that in computing payments 

under any other subsection of § 8348 based upon unfunded liability, 

OPM will compute those payments taking into account payments 

under the amended § 8348(h). 

Section 802(b) provides that since the amounts paid in FY’s 2003 

through 2005 by the Postal Service for CSRS military service costs 

will be recredited to the Postal Service towards its civilian CSRS 

obligations, the Treasury shall make the contributions for those 

years. 

Section 803—Health insurance

Section 803(a)(1) also amends 5 U.S.C. § 8906(g)(2)(A) to provide 

that future payments for the employer share of health benefits premiums for retired Postal employees shall be made from the Postal 

Service Retiree Health Benefit Fund established by the new 5 

U.S.C. § 8909a up to the amount in the Fund, with any additional 

amount contributed by the Postal Service. 

60

Section 803(a)(1) also adds a new 5 U.S.C. § 8909a establishing 

a Postal Service Retiree Health Benefit Fund, administered by 

OPM. 

New § 8909a(c) provides that the new Fund shall be invested in 

the same manner as the Retirement Fund. 

New § 8909a(d)(1) provides that at the end of 2006 and each year 

thereafter, OPM will compute the net present value of the future 

payments required under section 8906(g)(2)(A) and attributable to 

the service of Postal Service employees during the most recently 

ended fiscal year. 

New § 8909a(d)(2)(A) provides that at the end of 2006 and each 

year thereafter, OPM will compute the net present value of the unfunded liability for future payments required by 5 U.S.C. 

§ 8906(g)(2)(A), taking into account the Fund balance and the 

amount computed under § 8909a(d)(1) that will be paid by the Postal Service. 

New § 8909a(d)(2)(B) provides that at the end of 2006 OPM will 

compute, and each year thereafter recompute, an amortization 

schedule providing for the liquidation by January 31, 2046, or within 15 years, whichever is later, of the net present value determined 

under subparagraph (A), including interest at the rate used in that 

computation. 

New § 8909a(d)(3) provides that at the end of 2006 and each year 

thereafter, the Postal service will pay into the Postal Service Retiree Health Benefit Fund the amounts computed under 

§§ 8909a(d)(1) and (2)(B). 

New § 8909a(d)(4) provides that computations under subsection 

(d) will be made consistent with the assumptions and methodology 

used by OPM for financial reporting under the Chief Financial Officers Act of 1990. 

New § 8909a(d)(4) provides that any necessary regulations shall 

be promulgated by OPM after consultation with the Postal Service. 

Section 804—Repeal of disposition of savings provision 

Section 804 repeals section 3 of the Postal Civil Service Retirement System Funding Reform Act of 2003, Public Law 108–18, 

which made provision for disposition of savings under the provisions of that Act. 

Section 805—Effective dates 

Section 805(a) provides that title VIII generally takes effect on 

October 1, 2005. 

Section 805(b) provides that paragraph (1) of section 802(a), providing for the elimination of the Postal Service contributions to the 

Retirement Fund based on a percentage of employee salary, takes 

effect on the first day of the first pay period beginning on or after 

October 1, 2005. 

TITLE IX—COMPENSATION FOR WORK INJURIES

Section 901—Temporary disability; continuation of pay 

Section 901 amends section 8117 of title 5 to put into place a 

three-day waiting period before an employee of the Postal Service 

injured on the first day of the first pay period beginning on or after 

October 1, 2005 is eligible to receive 45 days of continuation of pay. 

61

The affected postal employee may use annual leave, sick leave, or 

leave without pay during this period. If the disability exceeds 14 

days or is followed by permanent disability, the employee may have 

any annual leave or sick leave used reinstated or may receive pay 

for the time spent on leave without pay. 

Section 902—Disability retirement for postal employees 

Section 902 amends sections 8105 and 8106 of title 5 by converting compensation benefits for total or partial disability to a retirement annuity when an affected postal employee injured on the 

first day of the first pay period beginning on or after October 1, 

2005 reaches an appropriate retirement age as defined by section 

216(l) of the Social Security Act. This change would reflect the fact 

that disabled postal employees would likely retire at some point 

were they not on the rolls of the Office of Workers’ Compensation 

Programs. 

The compensation entitlement for partial disability is converted 

to 50 percent of the difference between an employee’s monthly pay 

and his or her monthly wage earning capacity after the beginning 

of partial disability when the injured employee reaches his or her 

‘‘retirement age’’ as defined in section 216 of the Social Security 

Act. 

The compensation entitlement for total disability is converted to 

50 percent of the monthly pay of the employee when the injured 

employee reaches his or her ‘‘retirement age’’ as defined in section 

216 of the Social Security Act. 

Under current law, employees with dependents are eligible for 75 

percent of their pre-injury salary plus cost-of-living adjustments 

(COLAs), tax-free. Employees with no dependents receive 662⁄3 percent of their pre-injury salary plus COLAs, tax-free. There is no 

maximum dollar cap on workers’ compensation payments. 

TITLE X—MISCELLANEOUS

Section 1001—Employment of Postal Police Officers

Section 1001 amends section 404 of title 39, United States Code 

to permit the Postal Service to employ guards for buildings owned 

and operated by the Postal Service or under the charge and control 

of the Postal Service. The Postal Service may give such guards 

with respect to this property the powers of special policemen provided under section 1315 of title 40. The Postmaster General or his 

or her designee may take any action that the Secretary of Homeland Security may take under section 1315 of title 40 with respect 

to that property. 

Section 1002—Expanded contracting authority 

Subsection 1002(a) amends 39 U.S.C 5402(d) to provide that the 

Postal Service may contract with any air carrier for transportation 

of mail in interstate air transportation, including the rates therefor, through negotiations or competitive bidding. The Postal Service 

may contract with any air carrier or foreign air carrier for transportation of mail in foreign air transportation, including the rates 

therefor, through negotiations or competitive bidding except that 

(1) any such contract may be awarded only to an air carrier holding 

a certificate required by section 41101 of title 49 or an exemption 

62

therefrom issued by the Secretary of Transportation, or any such 

contract may be awarded only to a foreign air carrier holding a permit required by section 41301 of title 49 or an exemption therefrom 

issued by the Secretary of Transportation, or a combination of such 

air carriers and foreign air carriers; (2) mail transported under any 

such contract shall not be subject to any duty-to-carry requirement 

imposed by any provision of subtitle VII of title 49 or any certificate, permit, or corresponding authority issued by the Secretary of 

Transportation; (3) every contract awarded to a foreign air carrier 

shall be subject to the requirement that air carriers shall be provided the same opportunity to carry the mail of the country to and 

from which the mail is transported and the flag country of the foreign air carrier; (4) the Postmaster General shall consult with the 

Secretary of Defense concerning actions that affect the carriage of 

military mail in foreign air transportation. 

Section 1002(b) amends section 41901(a) of title 49 to permit the 

Postal Service to provide for the transportation of mail by aircraft 

in air transportation and deletes restrictions on the foreign air 

transportation of mail and prices for foreign transportation of mail. 

V. EVALUATION OF REGULATORY IMPACT

Paragraph 11(b)(1) of rule XXVI of the Standing Rules of the 

Senate requires that each report accompanying a bill evaluate the 

regulatory impact that would be incurred in carrying out the bill. 

S. 2468 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

impose no costs on state, local, or tribal governments. 

VI. ESTIMATED COST OF LEGISLATION

Section 11(a) of rule XXVI of the Standing Rules of the Senate 

requires that each report accompanying a bill include an estimate 

of the costs which would be incurred in carrying out such bill. The 

following estimate was prepared by the Congressional Budget Office: 

S. 2468—Postal Accountability and Enhancement Act 

Summary: S. 2468 would change the laws that govern the operation of the United States Postal Service (USPS), particularly those 

regarding the cost of pensions and health care benefits of retired 

workers and the requirement to hold certain funds in escrow. CBO 

estimates that enacting this legislation would result in on-budget 

savings of $20.2 billion and off-budget costs of $35.8 billion over the 

2005–2014 period. (The net expenditures of the USPS are classified 

as ‘‘off-budget.’’). Thus, CBO estimates the net cost to the unified 

budget would be $15.7 billion over the 2005–2014 period. Those 

costs would constitute direct spending. (The bill would not affect 

revenues.) In addition, we estimate that implementing S. 2468 

would cost about $90 million (less than $10 million a year) over the 

2005–2014 period, assuming appropriation of the necessary 

amounts. 

Enacting S. 2468 would not affect how much the federal government spends on pension or health care benefits for USPS retirees. 

By increasing how much the Postal Service pays to finance those 

benefits and by eliminating the current-law escrow account requireVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00066 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
63

ments, however, the bill would increase future budget deficits as 

measured by the unified federal budget. Eliminating the escrow account requirement for the USPS would allow that agency to increase spending for capital improvements or other projects, pay 

down its outstanding debt, postpone or diminish future rate increases, or some combination of these options. Enacting the bill 

also would reduce direct spending by making the costs of the Postal 

Rate Commission subject to appropriation and by reducing payments made by the Postal Service for workers’ compensation. 

S. 2468 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would impose no costs on state, local, or tribal governments. 

Major provisions of S. 2468 would: 

• Eliminat a requirement in Public Law 108–18 (P.L. 108–18), 

the Postal Civil Service Retirement Funding Reform Act of 2003, 

that the Postal Service place savings from reduced pension contributions in escrow. • Transfer from the Postal Service to the Department of the 

Treasury responsibility for paying pension costs associated with 

military service credits. • Replace direct payments the Postal Service is making for retiree health care costs with payments designed to prefund the 

health care costs of current employees when they retire. • Revise the procedure for raising postal rates. • Strengthen the USPS Board of Governors and the Postal Rate 

Commission, which would be redesignated the Postal Regulatory 

Commission (PRC). • Make other changes designed to increase the Postal Service’s 

competitiveness with private industry. 

Estimated cost to the Federal Government: The estimated budgetary impact of S. 2468 is shown in Table 1. The costs of this legislation fall within budget functions 370 (commerce and housing 

credit), 550 (health), 900 (net interest), and 950 (undistributed offsetting receipts).

TABLE 1.—ESTIMATED BUDGETARY EFFECTS OF S. 2468

By fiscal year, in billions of dollars—

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CHANGES IN DIRECT SPENDING 

On-Budget Effects: 

Estimated Budget Authority 0.0 2.4 ¥2.3 ¥2.4 ¥2.5 ¥2.7 ¥2.9 ¥3.1 ¥3.3 ¥3.5

Estimated Outlays .............. 0.0 2.4 ¥2.3 ¥2.4 ¥2.5 ¥2.7 ¥2.9 ¥3.1 ¥3.3 ¥3.5

Off-Buget Effects: 

Estimated Budget Authority * 2.9 3.2 3.5 3.6 3.9 4.2 4.4 4.8 5.2 

Estimated Outlays .............. * 2.9 3.2 3.5 3.6 3.9 4.2 4.4 4.8 5.2

Total Unified Budget Effect: 

Estimated Budget Authority * 5.4 0.9 1.1 1.1 1.2 1.4 1.4 1.6 1.7 

Estimated Outlays .............. * 5.4 0.9 1.1 1.1 1.2 1.4 1.4 1.6 1.7 

1 Implementing the bill also would affect discretionary spending, subject to the availability of appropriated funds. CBO estimates that those 

discretionary costs would be less than $10 million a year.

Notes.—Components may not add to totals because of rounding. 

* = savings of less than $50 million. 

Basis of estimate: For this estimate, CBO assumes that S. 2468 

will be enacted near the start of fiscal year 2005. CBO estimates 

that enacting the bill would result in on-budget savings of $20.2 

billion and off-budget costs of $35.8 billion over the 2005–2014 peVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00067 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
64

1P.L. 108–18 increased the contribution rate the Postal Service pays for its CSRS employees 

from 7 percent to 17.4 percent. That legislation also eliminated a series of amortization payments the Postal Service was required to make for unfunded CSRS liabilities. For more details, 

see CBO’s cost estimates of the Postal Civil Service Retirement System Funding Reform Act of 

2003 (S. 380 and H.R. 735 from the 108th Congress). These estimates are posted on 

www.cbo.gov. 

riod, for a net cost to the unified budget of $15.7 billion over the 

10-year period. In addition, we estimate that implementing S. 2468 

would cost about $90 million over the 2005–2014 period, assuming 

appropriation of the necessary amounts, mostly to fund the PRC. 

Background 

The following paragraphs present background information relating to the major provisions of S. 2468, mostly for postal finances 

affected by the bill. 

Budgetary Treatment of USPS. Although the Postal Service is a 

federal agency, its financial operations are classified as off-budget. 

Despite this treatment, federal budget documents present the net 

income (gross income minus expenses) of the agency in the unified 

budgetary totals for the federal government. The Postal Service is 

required by law to set postage rates to cover its full costs, although 

from year to year its net income may be positive or negative. In fiscal year 2003, the Postal Service generated $69.5 billion in collections, mostly from postage and user fees, and had $64.2 billion in 

expenses, for a net cash surplus of $5.3 billion in that year. 

USPS and Federal Retirement Plans. Postal Service employees 

participate in the federal government’s two main defined benefit 

pension programs. Those workers initially hired prior to 1984 are 

covered by the Civil Service Retirement System (CSRS) while those 

initially hired after 1983, as well as former CSRS workers who 

elected to change federal retirement plans in 1987 or 1998, participate in the Federal Employees’ Retirement System (FERS). In 

2003, about 30 percent of the USPS workforce was covered by 

CSRS, and the rest were under FERS. 

The Postal Service and its employees each make payroll contributions toward the civilian retirement systm (CSRS and FERS). Unlike other agencies, the agency contribution rate for most CSRS 

employees is 17.4 percent of basic pay (most other agencies contribute 7 percent), while the employee contribution rate is 7 percent.1 For FERS employees, the agency contribution rate for most 

employees is 10.7 percent, while the employee rate is 0.8 percent, 

plus Social Security payroll taxes on both employers and employees. Workers in CSRS receive generally higher benefits than those 

in FERS, but unlike FERS, those in CSRS do not participate in Social Security and do not receive agency contributions toward the 

Thrift Savings Plan. In addition to its payroll contributions, the 

Postal Service also makes annual amortization payments toward 

an unfunded liability within CSRS. In 2003, that payment was 

about $300 million. 

USPS and Federal Health Benefits. The Postal Service also pays 

a portion of health care premiums for currently retired USPS employees who are eligible to participate in the Federal Employees 

Health Benefits (FEHB) program. Currently, there are over 

400,000 Postal Service retirees who participate in the FEHB program. On average, the Postal Service currently pays about 45 percent of the health care premiums for its retirees. Retirees pay 

65

about 30 percent of their FEHB premiums with general revenues 

accounting for the remaining amount, roughly 25 percent. In 2003, 

the Postal Service paid $1.1 billion to FEHB for premiums for current retirees.

USPS Escrow Fund. Starting in October 2006, the Postal Service 

will be required under current law to begin holding funds in an escrow account equal to the difference between what the Postal Service currently pays toward CSRS and what it would have paid for 

CSRS benefits prior to the enactment P.L. 108–18. Under current 

law, CBO estimates the Postal Service will need to hold in escrow 

nearly $3 billion in 2006 and $36 billion over the 2006–2014 period. 

S. 2468 would eliminate the requirement that USPS collect and 

hold these funds in escrow. 

Effects on the Unified Budget 

S. 2468 would not affect how much the federal government 

spends on pension or health benefits for USPS retirees. However, 

by increasing how much the Postal Service pays to finance those 

benefits and by eliminating the current-law escrow requirements, 

the bill would increase future budget deficits as measured by the 

unified federal budget. 

Off-budget payments made by the Postal Service for CSRS and 

FEHB are transfers to on-budget federal accounts, and are counted 

as offsetting receipts (a credit against direct spending). Eliminating 

the USPS transfer to CSRS for military service credits would reduce on-budget offsetting receipts by $13.5 billion over the 2005–

2014 period. Under the bill, that reduction would be offset by a 

$33.6 billion net increase in on-budget offsetting receipts paid by 

the Postal Service for the new health benefits fund. Taken together, those provisions would increase on-budget offsetting receipts by $20.2 billion over the 2005–2014 period. 

The collection of funds to be held in escrow by the Postal Service 

is recorded as an off-budget offsetting receipt. Eliminating the requirement to fund the escrow account would allow the USPS to pay 

down debt, increase spending for capital improvements or other 

projects, postpone or diminish future rate increases, or some combination of these activities. CBO estimates that this provision 

would increase net off-budget spending by $36 billion over the 

2006–2014 period. (Much of that spending would be to fund the 

new health benefits payments mentioned above as on-budget offsetting receipts.) Making the costs of the PRC subject to appropriation 

would reduce direct spending by the Postal Service by about $90 

million over the next 10 years. Furthermore, reducing USPS costs 

for workers’ compensation could reduce direct spending by an additional $50 million over the 2005–2014 period. 

The combined effect of the $20.2 billion increase in on-budget receipts, the $36 billion reduction in off-budget offsetting receipts, 

and a $140 million reduction in USPS direct spending would 

produce a $15.7 billion cost to the unified budget deficit over the 

2005–2014 period. Those effects are presented in Table 2 and explained in more detail below.

66

TABLE 2.—ESTIMATED CHANGES IN DIRECT SPENDING FOR S. 2468

By fiscal year, outlays in billions of dollars—

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

CHANGES IN DIRECT SPENDING

On-Budget Effects

Civil Service Retirement System 0 2.0 1.9 1.8 1.7 1.5 1.4 1.2 1.1 0.9

Postal Service Retiree Health 

Benefits Fund net of retiree 

premium payments to FEHB 1 0 0.4 ¥4.2 ¥4.2 ¥4.2 ¥4.2 ¥4.3 ¥4.3 ¥4.3 ¥4.4

Total On-Budget Effects 0 2.4 ¥2.3 ¥2.4 ¥2.5 ¥2.7 ¥2.9 ¥3.1 ¥3.3 ¥3.5

Off-Budget Effects

Eliminate Escrow Account ........... 0 2.9 3.2 3.5 3.7 3.9 4.3 4.5 4.8 5.2

Funding for PRC Costs Subject 

to Appropriation and Workers’ 

Compensation Savings ........... * * * * * * * * * *

Total Off-Budget Effects * 2.9 3.2 3.5 3.6 3.9 4.2 4.4 4.8 5.2

Total Unified Budget Effects ........................... * 5.4 0.9 1.1 1.1 1.2 1.4 1.4 1.6 1.7

MEMORANDUM

Payments from the Postal Service received by PSRHBF .......... 0 0 ¥5.9 ¥6.1 ¥6.4 ¥6.6 ¥6.8 ¥7.1 ¥7.4 ¥7.8

FEHB premiums paid from 

PSRHBF ................................... 0 0.4 1.8 2.0 2.2 2.4 2.6 2.8 3.1 3.4 

Net outlays of PSRHBF .. 0 0.4 ¥4.2 ¥4.2 ¥4.2 ¥4.2 ¥4.3 ¥4.3 ¥4.3 ¥4.4

1 Starting in July 2006, CBO assumes that payments of FEHB premiums for Postal Service retirees would be paid out of the Postal Service Retiree Health Benefits Fund instead of being paid directly by the Postal Service as under current law. S. 2468 would require the first payment prefunding and amortization amounts to be made by January 31, 2007. The bill would have no effect on spending by the FEHB program for health benefits for Postal Service annuitants.

Notes.—FEHB = Federal Employees Health Benefits program; PSRHBF = Postal Service Retiree Health Benefits Fund; PRC = Postal Regulatory Commission; USPS = United States Postal Service. * = savings of less than $50 million. 

Components may not add to totals because of rounding. 

Amounts in the table represent net changes in offsetting receipts, which are recorded in the budget as changes in direct spending. A positive sign indicates lower offsetting receipts, thus an increase in outlays; negative numbers represent increased offsetting receipts, or a reduction in net outlays. 

On-Budget Effects (Direct Spending) 

CBO estimates the total on-budget effect of the pension and 

health care provisions in S. 2468 would be a decrease in offsetting 

receipts of $2.4 billion in 2006, an increase of $4.8 billiion over the 

2006–2009 period, and $20.2 billion over the 2006–2014 period. 

That increase in on-budget collections would come from increased 

transfers (off-budget outlays) coming from the USPS. (The off-budget effects are discussed in the following section.) 

Civil Service Retirement Contributions. S. 2468 would change 

the way the Postal Service finances retirement benefits for current 

and retired employees. Starting in October 2005, the bill would 

transfer financial responsibility for militlary service credits earned 

by Postal Service employees and retirees participating in CSRS 

from the Postal Service to the Department of Treasury. Military 

service credits represent time served in the U.S. military that is 

credited toward benefits under the civilian retirement system. Most 

federal agencies are not responsible for the cost to the pension system of the military service credits incurred by their CSRS employees, but P.L. 108–18 transferred responsibility for military service 

credits from the Treasury tot he Postal Service beginning in June 

2004. 

67

2This overfunding, which is calculated on a net-present-value basis, represents an estimate 

of the total amount of money the Postal Service will have contributed toward CSRS from 1971 

through September 30, 2005, minus the agency’s CSRS liabilities if USPS bears not financial 

responsibility for the pension costs associated with military service credits. The projected overfunding is due primarily to larger-than-expected returns on assets held in the CSRDF. 

The Office of Personnel Management (OPM) estimates that 

transferring responsibility for military service credits from the 

Postal Service back to the Treasury would cause the Postal Service 

to have overfunded its obligation to CSRS by about $19.4 billion 

through September 2005.2 Consequently, under S. 2468 the Postal 

Service would no longer be obligated to make either agency contributions or any further annual amortization payments for CSRS. 

(Employee contributions would continue at 7 percent of basic pay 

and retirement benefits under CSRS would not change.) 

Spending by the Postal Service—including amounts paid into 

other federal accounts—is considered off-budget spending. However, the Civil Service Retirement and Disability Fund (CSRDF) is 

an on-budget account, so the amounts the CSRDF collects from the 

Postal Service are on-budget offsetting receipts. Reducing payments 

the Postal Service makes to the CSRDF would result in a reduction 

in off-budget spending and a reduction in on-budget offsetting receipts. CBO estimates transferring responsibility for military service credits, and the attendant reduction in CSRS contributions such 

a change would bring, would reduce on-budget receipts by $2 billion in 2006 and $13.5 billion over the 2006–2014 period. Although 

the Treasury Department would then be responsible for the costs 

associated with those pension liabilities under the bill, the Treasury payment and receipt by CSRDF are both on-budget 

intragovernmental transactions. That is, the bill would replace one 

intragovernmental transfer with another. Instead of a transfer 

from the off-budget Postal Service to the on-budget CSRDF, there 

would be a transfer from the Treasury to the CSRDF. 

Postal Service Retiree Health Benefits Fund. S. 2468 also would 

change the way the Postal Service financeses its share of the cost 

of providing health care to retirees. Instead of directly paying a 

portion of the health premiums incurred by current retirees each 

year, the USPS would begin paying for estimated costs of retiree 

health care as such costs are accrued by current workers. Starting 

in 2007, S. 2468 would require the USPS to make payments equal 

to the annual increased in retiree health care liabilities accrued by 

current employees. These payments would be deposited into a new 

on-budget account, the Postal Service Retiree Health Benefits Fund 

(PSRHBF), which would earn interest at the same rate as the 

CSRDF. The Postal Service’s share of health care premiums for 

current retirees would be paid out of the PSRHBF as soon as 

adequeate funds are available in the account to do so. 

Under S. 2468, any overfunding toward CSRS liabilities (after financial responsibility for military service credits reverts to the 

Treasury) would be transferred from the CSRDF to the PSRHBF 

by June 30, 2006. Based on information provided by OPM, CBO anticipates that the transfer to the new fund would total $20.2 billion 

and would occur in June 2006. (This amount reflects the $19.4 billion in estimated CSRS overfunding plus interest that would accrue 

between the end of the valuation period in September 2005 and 

68

when CBO assumes the asset transfer would take place in June 

2006.) 

Under the bill, the Postal Service also would make annual amortization payments toward the unfunded liabilites for health care 

costs of both current and future retirees. The unfunded liability 

would be the difference between the assets held in the PSRHBF 

and the net present value of accrued liabilities projected for retiree 

health care. The bill would direct OPM to compute the required 

prefunding and amortization payments consistent with assumptions and methodologies for financial reporting used by OPM under 

current law. The bill specifies that payment would be made by January 31st of each year, starting in 2007, for the prior fiscal year. 

(CBO assumes those payments would include interest accrued between the end of the valuation period and the payment date each 

year.) Based on information provided by OPM, CBO anticipates the 

net present value of the unfunded liability for the health care costs 

of retirees would amount to $43.2 billion at the end of 2006 and 

would shrink to $39.9 billion by the end of 2014. CBO estimates 

that payments by the Postal Service for prefunding health care 

costs of retirees and amortization payments for the remaining unfunded liability would be $5.9 billion in 2007, $18.4 biliion over the 

2007–2009 period, and $54.2 billion over the 2007–2014 period. CBO epxects that the transfer of $20.2 billion from the CSRDF 

to the PSRHBF resulting from the shift in responsibility for military service credits would occur in June 2006.

Therefore, the Postal Service would cease making payments 

under current law for its share of FEHB premiums for annuitants 

beginning in July 2006; with those premium payments instead 

being drawn from the PSRHBF. CBO estimates that change in the 

funding mechanism for retiree health benefits would reduce offbudget payments by the Postal Service for FEHB premiums by $0.4 

billion in 2006 (which reflects premium payments, under current 

law, for the last three months of 2006), $6.3 billion over the 2006–

2009 period, and $20.5 billion over the 2006–2014 period. On-budget payments for those amounts would then be transferred from the 

PSRHBF to the FEHB and any payments that would be made into 

the new PSRHBF would be considered on-budget offsetting receipts. CBO estimates the increase in on-budget receipts as a result 

of changes in how the Postal Service finances its health care obligations would be $4.2 billion in 2007, $12.2 billion over the 2007–

2009 period, and $33.6 billion over the 2007–20014 period. 

Off-Budget Effects (Direct Spending) 

CBO estimates that enacting S. 2468 would result in net offbudget costs of $2.9 billion in fiscal year 2006, $13.2 billion over 

the 2005–2009 period, and $35.8 billion over the 2005–2004 period 

because it would eliminate the requirement to fund the escrow account, allowing the Postal Service to increase other spending, reduce postal rates, or some combination of these actions. The bill 

also would make the costs of the PRC subject to appropriation, 

thus reducing direct spending by about $90 million over the next 

10 years. In addition, S. 2468 would reduce USPS payments for 

workers’ compensation, which would reduce direct spending by $50 

million over the next 10 years. The bill contains many other provisions that could affect USPS cash flows in each year, but we estiVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00072 Fmt 6659 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
69

mate they would not have a significant net effect on the USPS over 

the long term. 

Elimination of Escrow Fund. P.L. 108–18 permanently reduced 

payments by the USPS to the CSRDF. As a result of that act, 

USPS payments to the CSRDF declined by $2.5 billion to $5 billion 

annually, beginning in 2003. For fiscal years starting in 2006, P.L. 

108–18 requires that savings resulting from reduced payments to 

the CSRDF be considered an operating expense of the Postal Service and held in escrow, remaining unavailable for obligation unless 

authorized by subsequent legislation. 

S. 2468 would amend P.L. 108–18 to eliminate the escrow fund 

requirement. As a result of this provision, the Postal Service could 

lower rates and thus reduce its revenues, or maintain rates and increase spending, or some combination of these actions. The net outlays of the Postal Service would increase because collections would 

not be deposited in escrow. CBO estimates that eliminating the escrow requirement would increase net spending by about $2.9 billion 

in 2006, $13.3 billion over the 2006–2009 period, and $36 billion 

over the 2006–2014 period. Much of the spending would go toward 

making new payments to the on-budget account for health care 

costs. 

Make Cost of PRC Subject to Appropriation. Under current law, 

the PRC is funded from the Postal Service Fund without annual 

Congressional appropriation. This office spent about $8 million in 

2003. S. 2468 would authorize the appropriation of such sums as 

may be necessary from the Postal Service Fund for the PRC. Thus, 

enacting this legislation would reduce direct spending—and therefore, increase spending subject to appropriation—by about $8 million annually beginning in fiscal year 2005. 

Workers’ Compensation Costs. The bill would lower workers’ 

compensation payments made by the USPS by reducing an injured 

postal worker’s long-term disability payments when the individual 

reaches retirement age as defined by the Social Security Act. Based 

on information provided by the USPS, CBO estimates that these 

savings would total roughly $50 million over the 2005–2014 period. 

In addition, CBO estimates that there would be a negligible net 

savings to the Department of Labor’s workers’ compensation account, which is on-budget. 

Changes to USPS Rate-Setting Procedures. Under the bill the 

Postal Service would be directed to define the cost basis for the different products and services it supplies. These products and services would broadly be categorized as market-dominant products 

and competitive products. Different rate-setting procedures would 

apply to these different categories of products and services. 

Market-Dominant Products. Under S. 2468, market-dominant 

products would include: first-class mail, special services, periodicals, standard mail, media mail, library mail, bound printed matter, single-piece parcel post, and single-piece international mail. 

S. 2468 would require the PRC to establish, within one year of 

enactment, a new system for regulating postage rates for marketdominant products. This new system would include annual limitations on the percentage changes in rates based on inflation-related 

indices, such as the Consumer Price Index, the Employment Cost 

Index, or similar measures. Under the legislation, however, these 

70

annual limits could be exceeded under extraordinary circumstances. 

Later this year we expect the Postal Service to begin preparations for a rate case in 2006. Assuming the PRC would need the 

full year that the bill would provide to establish the new system 

for regulating rates for market dominant products, we assume that 

the new rate setting system would not be effective until after 2006. 

Since 1970, increases in postage rates have largely tracked the 

rate of inflation. Over the past 10 years, rates were increased in 

1995, 1999, 2001, and 2002 as a result of rate cases. After 2006, 

we expect that the Postal Service would increase rates for marketdominant mail services more frequently than under current law, 

but by smaller increments (as defined by the annual limitation). 

Over the long term, CBO does not expect that enacting S. 2468 

would significantly change the revenues from market-dominant 

products that the Postal Service would be expected to receive under 

current law. 

Competitive Products. Under S. 2468, competitive products would 

include the following: priority mail, express mail, mailgrams, bulk 

international mail, and bulk parcel post. Competitive products currently contribute less than 15 percent of total postal revenues. 

S. 2468 would direct the PRC to prohibit subsidizing competitive 

products by market-dominant products, ensure that each competitive product covers its attributable costs, and ensure that all competitive products collectively cover their share of the institutional 

costs of the Postal Service. After these requirements have been implemented, the USPS could change rates for competitive products 

as long as the cost coverage requirements are met and the PRC has 

reviewed the proposed changes. In addition, the Postal Service 

would have to provide public notice and justification of changes in 

rates. 

In addition, S. 2468 would require the Postal Service to establish 

a new off-budget fund, the Competitive Products Fund, solely for 

revenues and expenditures associated with competitive products. 

We expect that it could be difficult to differentiate postal expenses 

related only to competitive products, as USPS uses the same employees and facilities to handle both market dominant and competitive products. 

CBO cannot predict the bill’s effect on Postal Service revenues 

from competitive products because the agency could set and change 

prices with few restrictions, although we would expect that yearly 

cash flows under the bill would differ from those estimated under 

current law. CBO also cannot predict how successfully the Postal 

Service might compete in the open market. However, the highly 

competitive nature of the mailing industry would tend to keep 

prices and revenues down, while the labor-intensive cost structure 

of the USPS would maintain upward pressure on expenses. Thus, 

over the long term under this legislation, CBO expects the Postal 

Service to attempt to recover its costs and break even as it did before the enactment of P.L. 108–18. 

Other Off-Budget Effects. S. 2468 would make many other 

changes to the laws governing the Postal Service, the PRC, and the 

delivery of mail and other postal products. Some of these provisions, such as the expansion of USPS contracting authority for the 

interstate air transportation of mail, would yield savings. Other 

71

provisions, including the requirement for numerous additional 

USPS reports, would increase costs. In total, CBO does not expect 

the net effects of these provisions to be significant. 

Spending subject to appropriation 

S. 2468 would authorize the appropriation of such sums as may 

be necessary, out of the Postal Service Fund, for the PRC. (Currently, the Postal Rate Commission is funded out of the Postal 

Service Fund without Congressional action.) Beginning in 2005, 

this provision would entail about $8 million a year in spending, 

subject to appropriation of the necessary amounts. Enacting the bill 

would reduce direct spending by about the same amount. Spending 

on this activity would likely still be considered off-budget, since 

funds would come from the Postal Service Fund. 

In addition, S. 2468 would require OPM to make actuarial computations related to the CSRS and PSRHBF trust funds and would 

increase OPM’s administrative workload to comply with the requirements under the bill. CBO estimates that such activities 

would cost less than $500,000 annually, assuming the availability 

of appropriated funds. 

Intergovernmental and private-sector impact: S. 2468 contains no 

intergovernmental or private-sector mandates as defined in UMRA 

and would impose no costs on state, local, or tribal governments. 

Previous CBO estimate: On June 23, 2004, CBO transmitted a 

revised cost estimate for H.R. 4341, the Postal Accountability and 

Enhancement Act, as ordered reported by the House Committee on 

Government Reform on May 12, 2004. CBO estimates that enacting 

that legislation would result in on-budget savings of $25.7 billion 

and off-budget costs of $34.5 billion over the 2005–2014 period, for 

a net cost to the unified budget of $8.7 billion over that period. 

A key difference between S. 2468 and H.R. 4341 concerns how 

the Postal Service would finance the health care costs of retirees. 

Both of the bills would require payments to prefund the costs associated with the annual retiree health liabilities accrued by current 

employees although the proposed payment schedules would differ. 

H.R. 4341 would require payments for prefunding and interest to 

be made at the end of each fiscal year, starting in fiscal year 2006. 

The first payment under S. 2468, however, would be made in fiscal 

year 2007, and annual payments made in January of each year 

would reflect estimated costs for the prior fiscal year. 

Another important difference between these bills concerns how 

they address the unfunded liabilities for the health care costs of 

current and future retirees. H.R. 4341 would require the Postal 

Service to pay annual interest costs on the unfunded liability, while 

S. 2468 would require USPS to make amortization payments toward that liability. Also, H.R. 4341 would require a minimum level 

of prefunding by the Postal Service, net of premium disbursement 

from the PSRHBF. S. 2468 does not include a similar provision. 

H.R. 4341 also would authorize the appropriation of such sums 

as may be necessary for the USPS Office of Inspector General. 

Thus, CBO estimated that implementing H.R. 4341 would cost 

about $1.6 billion over the 2005–2014 period, assuming appropriation of the necessary amounts, and an equivalent amount of offbudget direct spending savings over that period. 

72

In addition, H.R. 4341 did not reduce USPS costs for workers’ 

compensation, and the cost estimates reflect that difference. 

Estimate prepared by: Federal Costs: Mark Grabowicz for USPS, 

Geoffrey Gerhardt for retirement costs, and Julia Christensen for 

health care costs; Impact on State, Local, and Tribal Governments: 

Sarah Puro; and Impact on the Private Sector: Paige Piper/Bach. 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

(73)

ADDITIONAL VIEWS 

In total, we are pleased with the outcome of the legislation reported by the Committee. However, we are concerned about the 

specific issue of negotiated service agreements (NSA). This issue 

was raised during Committee consideration of the bill and a number of Senators expressed their concerns with the specific language 

addressing NSA’s. Similar concerns were raised during hearings on 

the legislation. We are troubled by the inclusion of report language 

that appears to endorse the NSA language that was ultimately 

stricken from the bill. To that end, we do not believe that the report accurately reflect the views expressed during Committee consideration nor does it appropriately reflect the legislative history. 

We believe that the report should have pointed out that while 

the existing regulatory system allows for negotiated service agreements, if certain conditions are met, some mailers in the committee’s hearings expressed concerns that this type of private sector 

pricing mechanism may not be appropriate for a governmental organization such as the Postal Service. During mark-up of the legislation, committee members expressed reservations about the appropriateness of negotiated service agreements, articulating concerns 

that service agreements for individual mailers could result in discriminatory rates that favor one mailer over other mailers, and 

thereby unfairly distort the downstream markets in which those 

mailers compete. 

This information, coupled with that which was included in the 

underlying report more accurately reflect the views of the Committee as a whole and more fairly represent the legislative history 

of the issue. We appreciate the hard work of the Chairman and 

Ranking Member of the Committee to complete this important legislation and believe that the reforms included herein are vital to 

the future of the United States Postal Service.

RICHARD SHELBY. 

JOHN E. SUNUNU. 

GEORGE V. VOINOVICH.

74

VII. CHANGES IN EXISTING LAW

In compliance with paragraph 12 of the Standing Rules of the 

Senate, changes in existing law made by S. 2468, as reported, are 

shown as follows: existing law proposed to be omitted is enclosed 

in black brackets, new matter is printed in italic, existing law in 

which no change is proposed is shown in roman: 

TITLE 39, POSTAL SERVICE 

PART I—GENERAL 

CHAPTER 1.—POSTAL POLICY AND DEFINITIONS 

§ 101. Postal policy 

(a) The United States Postal Service shall be operated as a basic 

and fundamental service provided to the people by the Government 

of the United States, authorized by the Constitution, created by Act 

of Congress, and supported by the people. The Postal Service shall 

have as its basic function the obligation to provide postal services 

to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide 

prompt, reliable, and efficient services to patrons in all areas and 

shall render postal services to all communities. The costs of establishing and maintaining the Postal Service shall not be apportioned 

to impair the overall value of such service to the people. 

(b) The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and 

small towns where post offices are not self-sustaining. No small 

post office shall be closed solely for operating at a deficit, it being 

the specific intent of the Congress that effective postal services be 

insured to residents of both urban and rural communities. 

(c) As an employer, the Postal Service shall achieve and maintain 

compensation for its officers and employees comparable to the rates 

and types of compensation paid in the private sector of the economy of the United States. It shall place particular emphasis upon 

opportunities for career advancements of all officers and employees 

and the achievement of worthwhile and satisfying careers in the 

service of the United States. 

(d) As an independent establishment of the executive branch of the 

Government of the United States, the Postal Service shall be subject 

to a high degree of transparency to ensure fair treatment of customers of the Postal Service’s market-dominant products and companies competing with the Postal Service’s competitive products.

ø(d)¿ (e) Postal rates shall be established to apportion the costs 

of all postal operations to all users of the mail on a fair and equitable basis. 

ø(e)¿ (f) In determining all policies for postal services, the Postal 

Service shall give the highest consideration to the requirement for 

the most expeditious collection, transportation, and delivery of important letter mail. 

ø(f)¿ (g) In selecting modes of transportation, the Postal Service 

shall give highest consideration to the prompt and economical delivery of all mail and shall make a fair and equitable distribution 

75

of mail business to carriers providing similar modes of transportation services to the Postal Service. Modern methods of transporting mail by containerization and programs designed to achieve 

overnight transportation to the destination of important letter mail 

to all parts of the Nation shall be a primary goal of postal operations. 

ø(g)¿ (h) In planning and building new postal facilities, the Postal Service shall emphasize the need for facilities and equipment designed to create desirable working conditions for its officers and 

employees, a maximum degree of convenience for efficient postal 

services, proper access to existing and future air and surface transportation facilities, and control of costs to the Postal Service. 

§ 102. Definitions 

As used in this title—

(1) ‘‘Postal Service’’ means the United States Postal Service 

established by section 201 of this title; 

(2) ‘‘Board of Governors,’’ and ‘‘Board,’’ unless the context 

otherwise requires, mean the Board of Governors established 

under section 202 of this title; 

(3) ‘‘Governors’’ means the 9 members of the Board of Governors appointed by the President, by and with the advice and 

consent of the Senate, under section 202(a) of this title; øand¿

(4) ‘‘Inspector General’’ means the Inspector General appointed under section 202(e) of this titleø.¿;

(5) ‘‘postal service’’ refers to the physical delivery of letters, 

printed matter, or packages weighing up to 70 pounds, including physical acceptance, collection, sorting, transporation, or 

other services ancillary thereto; 

(6) ‘‘product’’ means a postal service with a distinct cost or 

market characteristic for which a rate or rates are applied; 

(7) ‘‘rates’’, as used with respect to products, includes fees for 

postal services; 

(8) ‘‘market-dominant product’’ or ‘‘product in the marketdominant category of mail’’ means a product subject to subchapter I of chapter 36; and 

(9) ‘‘competitive product’’ or ‘‘product in the competitive category of mail’’ means a product subject to subchapter II of chapter 36; and 

(10) ‘‘year’’, as used in chapter 36 (other than subchapters I 

and VI thereof), means a fiscal year.

* * * * * * *

CHAPTER 2.—ORGANIZATION 

§ 202. Board of Governors 

ø(a)¿ (a)(1) The exercise of the power of the Postal Service shall 

be directed by a Board of Governors composed of 11 members appointed in accordance with this section. Nine of the members, to be 

known as Governors, shall be appointed by the President, by and 

with the advice and consent of the Senate, not more than 5 of 

whom may be adherents of the same political party. The Governors 

shall elect a Chairman from among the members of the Board. 

øThe Governors shall be chosen to represent the public interest 

76

generally, and shall not be representatives of specific interests 

using the Postal Service, and may be removed only for cause.¿ The 

Governors shall represent the public interest generally, and shall be 

chosen solely on the basis of their demonstrated ability in managing 

organizations or corporations (in either the public or private sector) 

of substantial size. The Governors shall not be representatives of 

specific interests using the Postal Service, and may be removed only 

for cause. Each Governor shall receive a salary of $30,000 a year plus $300 a day for not more than 42 days of meetings each year 

and shall be reimbursed for travel and reasonable expenses incurred in attending meetings of the Board. Nothing in the preceding sentence shall be construed to limit the number of days of 

meetings each year to 42 days.

(2) In selecting the individuals described in paragraph (1) for 

nomination for appointment to the position of Governor, the President should consult with the Speaker of the House of Representatives, the minority leader of the House of Representatives, the majority leader of the Senate, and the minority leader of the Senate.

(b)(1) The terms of the 9 Governors shall be ø9 years¿ 5 years,

except that the terms of the 9 Governors first taking office shall expire as designated by the President at the time of appointment, 1 

at the end of 1 year, 1 at the end of 2 years, 1 at the end of 3 years, 

1 at the end of 4 years, 1 at the end of 5 years, 1 at the end of 

6 years, 1 at the end of 7 years, 1 at the end of 8 years, and 1 at 

the end of 9 years, following the appointment of the first of them. 

Any Governor appointed to fill a vacancy before the expiration of 

the term for which his predecessor was appointed shall serve for 

the remainder of such term. A Governor may continue to serve 

after the expiration of his term until his successor has qualified, 

but not to exceed one year.

(2) No person may serve more than 3 terms as a Governor.

* * * * * * *

CHAPTER 4—GENERAL AUTHORITY 

§ 401. General powers of the Postal Service 

øThe¿ Subject to the provisions of section 404a, the Postal Service 

shall have the following general powers: 

(1) to sue and be sued in its official name; 

ø(2) to adopt, amend, and repeal such rules and regulations 

as it deems necessary to accomplish the objectives of this 

title;¿

(2) to adopt, amend, and repeal such rules and regulations, 

not inconsistent with this title, as may be necessary in the execution of its functions under this title and such other functions 

as may be assigned to the Postal Service under any provisions 

of law outside of this title;

* * * * * * *

§ 404. Specific powers 

(a) øWithout¿ Subject to the provisions of section 404a, but otherwise without limitation of the generality of its powers, the Postal 

Service shall have the following specific powers, among others: 

77

(1) to provide for the collection, handling, transportation, delivery, forwarding, returning, and holding of mail, and for the 

disposition of undeliverable mail; 

(2) to prescribe, in accordance with this title, the amount of 

postage and the manner in which it is to be paid; 

(3) to determine the need for post offices, postal and training 

facilities and equipment, and to provide such offices, facilities, 

and equipment as it determines are needed; 

(4) to provide and sell postage stamps and other stamped 

paper, cards, and envelopes and to provide such other evidences of payment of postage and fees as may be necessary or 

desirable; 

(5) to provide philatelic services; 

ø(6) to provide, establish, change, or abolish special nonpostal or similar services;¿

ø(7)¿ (6) to investigate postal offenses and civil matters relating to the Postal Service; 

ø(8)¿ (7) to offer and pay rewards for information and services in connection with violations of the postal laws, and, unless a different disposal is expressly prescribed, to pay one-half 

of all penalties and forfeitures imposed for violations of law affecting the Postal Service, its revenues, or property, to the person informing for the same, and to pay the other one-half into 

the Postal Service Fund; and 

ø(9)¿ (8) to authorize the issuance of a substitute check for 

a lost, stolen, or destroyed check of the Postal Service. 

* * * * * * *

(c) Except as provided in section 411, nothing in this title shall 

be considered to permit or require that the Postal Service provide 

any special nonpostal or similar services. 

(d) The Postal Service may employ guards for all buildings and 

areas owned or occupied by the Postal Service or under the charge 

and control of the Postal Service, and may give such guards, with 

respect to such property, any of the powers of special policemen provided under section 1315 of title 40. The Postmaster General, or the 

designee of the Postmaster General, may take any action that the 

Secretary of Homeland Security may take under section 1315 of title 

40, with respect to that property. 

§ 404a. Specific limitations 

(a) Except as specifically authorized by law, the Postal Service 

may not— 

(1) establish any rule or regulation (including any standard) 

the effect of which is to preclude competition or establish the 

terms of competition unless the Postal Service demonstrates 

that the regulation does not create an unfair competitive advantage for itself or any entity funded (in whole or in part) by the 

Postal Service; 

(2) compel the disclosure, transfer, or licensing of intellectual 

property to any third party (such as patents, copyrights, trademarks, trade secrets, and proprietary information); or 

(3) obtain information from a person that provides (or seeks 

to provide) any product, and then offer any postal service that 

78

uses or is based in whole or in part on such information, without the consent of the person providing that information, unless 

substantially the same information is obtained (or obtainable) 

from an independent source or is otherwise obtained (or obtainable). 

(b) The Postal Regulatory Commission shall prescribe regulations 

to carry out this section. 

(c) Any party (including an officer of the Commission representing 

the interests of the general public) who believes that the Postal Service has violated this section may bring a complaint in accordance 

with section 3662. 

* * * * * * *

§ 407. International postal arrangements 

ø(a)(1) The Secretary of State shall have primary responsibility 

for formulation, coordination and oversight of policy with respect to 

United States participation in the Universal Postal Union, including the Universal Postal Convention and other Acts of the Universal Postal Union, amendments thereto, and all postal treaties 

and conventions concluded within the framework of the Convention 

and such Acts. 

ø(2) Subject to subsection (d), the Secretary may, with the consent of the President, negotiate and conclude treaties, conventions 

and amendments referred to in paragraph (1).

ø(b)(1) Subject to subsections (a), (c), and (d), the Postal Service 

may, with the consent of the President, negotiate and conclude 

postal treaties and conventions. 

ø(2) The Postal Service may, with the consent of the President, 

establish rates of postage or other charges on mail matter conveyed 

between the United States and other countries. 

ø(3) The Postal Service shall transmit a copy of each postal treaty or convention concluded with other governments under the authority of this subsection to the Secretary of State, who shall furnish a copy to the Public Printer for publication. 

ø(c) The Postal Service shall not conclude any treaty or convention under the authority of this section or any other arrangement 

related to the delivery of international postal services that is inconsistent with any policy developed pursuant to subsection (a). 

ø(d) In carrying out their responsibilities under this section, the 

Secretary and the Postal Service shall consult with such federal 

agencies as the Secretary or the Postal Service considers appropriate, private providers of international postal services, users of 

international postal services, the general public, and such other 

persons as the Secretary or the Postal Service considers appropriate.¿

(a) It is the policy of the United States— 

(1) to promote and encourage communications between peoples by efficient operation of international postal services and 

other international delivery services for cultural, social, and 

economic purposes; 

(2) to promote and encourage unrestricted and undistorted 

competition in the provision of international postal services and 

other international delivery services, except where provision of 

79

such services by private companies may be prohibited by law of 

the United States; 

(3) to promote and encourage a clear distinction between governmental and operational responsibilities with respect to the 

provision of international postal services; and 

(4) to participate in multilateral and bilateral agreements 

with other countries to accomplish these objectives. 

(b)(1) The Secretary of State shall be responsible for formulation, 

coordination, and oversight of foreign policy related to international 

postal services and shall have the power to conclude postal treaties 

and conventions, except that the Secretary may not conclude any 

postal treaty or convention if such treaty or convention would, with 

respect to any competitive product, grant an undue or unreasonable 

preference to the Postal Service, a private provider of international 

postal services, or any other person. 

(2) In carrying out the responsibilities specified in paragraph (1), 

the Secretary of State shall exercise primary authority for the conduct of foreign policy with respect to international postal services, 

including the determination of United States positions and the conduct of United States participation in negotiations with foreign governments and international bodies. In exercising this authority, the 

Secretary— 

(A) shall coordinate with other agencies as appropriate, and 

in particular, should consider the authority vested by law or 

Executive order in the Postal Regulatory Commission, the Department of Commerce, the Department of Transportation, and 

the Office of the United States Trade Representative in this 

area; 

(B) shall maintain continuing liaison with other executive 

branch agencies concerned with postal and delivery services; 

(C) shall maintain continuing liaison with the Committee on 

Governmental Affairs of the Senate and the Committee on Government Reform of the House of Representatives; 

(D) shall maintain appropriate liaison with both representatives of the Postal Service and representatives of users and private providers of international postal services and other international delivery services to keep informed of their interests and 

problems, and to provide such assistance as may be needed to 

ensure that matters of concern are promptly considered by the 

Department of State or (if applicable, and to the extent practicable) other executive branch agencies; and 

(E) shall assist in arranging meetings of such public sector 

advisory groups as may be established to advise the Department 

of State and other executive branch agencies in connection with 

international postal services and international delivery services. 

(3) The Secretary of State shall establish an advisory committee 

(within the meaning of the Federal Advisory Committee Act) to perform such functions as the Secretary considers appropriate in connection with carrying out subparagraphs (A) through (D) of paragraph (2). 

(c) Before concluding any postal treaty or convention that establishes a rate or classification for a product subject to subchapter I 

of chapter 36, the Secretary of State shall request the Postal Regulatory Commission to submit its views on whether such rate or clasVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00083 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
80

sification is consistent with the standards and criteria established 

by the Commission under section 3622. 

(d) Nothing in this section shall be considered to prevent the Postal Service from entering into such commercial or operational contracts related to providing international postal services as it deems 

appropriate, except that— 

(1) any such contract made with an agency of a foreign government (whether under authority of this subsection or otherwise) shall be solely contractual in nature and may not purport 

to be binding under international law; and 

(2) a copy of each such contract between the Postal Service 

and an agency of a foreign government shall be transmitted to 

the Secretary of State and the Postal Regulatory Commission 

not later than the effective date of such contract. 

(e)(1) With respect to shipments of international mail that are 

competitive products within the meaning of section 3631 that are exported or imported by the Postal Service, the Customs Service and 

other appropriate Federal agencies shall apply the customs laws of 

the United States and all other laws relating to the importation or 

exportation of such shipments in the same manner to both shipments by the Postal Service and similar shipments by private companies. 

(2) In exercising the authority under subsection (b) to conclude 

new postal treaties and conventions related to international postal 

services and to renegotiate such treaties and conventions, the Secretary of State shall, to the maximum extent practicable, take such 

measures as are within the Secretary’s control to encourage the governments of other countries to make available to the Postal Service 

and private companies a range of nondiscriminatory customs procedures that will fully meet the needs of all types of American shippers. The Secretary of State shall consult with the United States 

Trade Representative and the Commissioner of Customs in carrying 

out this paragraph. 

(3) The provisions of this subsection shall take effect 6 months 

after the date of the enactment of this subsection or such earlier 

date as the Customs Service may determine in writing. 

* * * * * * *

§ 409. Suits by and against the Postal Service 

(a) øExcept as provided in section 3628 of this title¿ Except as 

otherwise provided in this title, the United States district courts 

shall have original but not exclusive jurisdiction over all actions 

brought by or against the Postal Service. Any action brought in a 

State court to which the Postal Service is a party may be removed 

to the appropriate United States district court under the provisions 

of chapter 89 of title 28 [1. 28 USCS §§ 1441 et seq.]. 

(b) Unless otherwise provided in this title, the provisions of title 

28 relating to service of process, venue, and limitations of time for 

bringing action in suits in which the United States, its officers, or 

employees are parties, and the rules of procedure adopted under 

title 28 for suits in which the United States, its officers, or employees are parties, shall apply in like manner to suits in which the 

Postal Service, its officers, or employees are parties. 

81

(c) The provisions of chapter 171 [28 USCS §§ 2671 et seq.] and 

all other provisions of title 28 relating to tort claims shall apply to 

tort claims arising out of activities of the Postal Service. 

ø(d) The Department of Justice shall furnish, under section 411 

of this title, the Postal Service such legal representation as it may 

require, but with the prior consent of the Attorney General the 

Postal Service may employ attorneys by contract or otherwise to 

conduct litigation brought by or against the Postal Service or its officers or employees in matters affecting the Postal Service.¿

ø(e) A judgment against the Government of the United States 

arising out of activities of the Postal Service shall be paid by the 

Postal Service out of any funds available to the Postal Service.¿

(d)(1) For purposes of the provisions of law cited in paragraphs 

(2)(A) and (2)(B), respectively, the Postal Service— 

(A) shall be considered to be a ‘‘person’’, as used in the provisions of law involved; and 

(B) shall not be immune under any other doctrine of sovereign immunity from suit in Federal court by any person for 

any violation of any of those provisions of law by any officer or 

employee of the Postal Service. 

(2) This subsection applies with respect to— 

(A) the Act of July 5, 1946 (commonly referred to as the 

‘‘Trademark Act of 1946’’ (15 U.S.C. 1051 and following)); and 

(B) the provisions of section 5 of the Federal Trade Commission Act to the extent that such section 5 applies to unfair or 

deceptive acts or practices. 

(e)(1) To the extent that the Postal Service, or other Federal agency acting on behalf of or in concert with the Postal Service, engages 

in conduct with respect to any product which is not reserved to the 

United States under section 1696 of title 18, the Postal Service or 

other Federal agency (as the case may be)— 

(A) shall not be immune under any doctrine of sovereign immunity from suit in Federal court by any person for any violation of Federal law by such agency or any officer or employee 

thereof; and 

(B) shall be considered to be a person (as defined in subsection (a) of the first section of the Clayton Act) for purposes 

of— 

(i) the antitrust laws (as defined in such subsection); and 

(ii) section 5 of the Federal Trade Commission Act to the 

extent that such section 5 applies to unfair methods of competition. 

For purposes of the preceding sentence, any private carriage of 

mail allowable by virtue of section 601 shall not be considered 

a service reserved to the United States under section 1696 of 

title 18. 

(2) No damages, interest on damages, costs or attorney’s fees may 

be recovered, and no criminal liability may be imposed, under the 

antitrust laws (as so defined) from any officer or employee of the 

Postal Service, or other Federal agency acting on behalf of or in concert with the Postal Service, acting in an official capacity. 

(3) This subsection shall not apply with respect to conduct occurring before the date of the enactment of this subsection. 

82

(f) To the extent that the Postal Service engages in conduct with 

respect to the provision of competitive products, it shall be considered a person for the purposes of the Federal bankruptcy laws. 

(g)(1) Each building constructed or altered by the Postal Service 

shall be constructed or altered, to the maximum extent feasible as 

determined by the Postal Service, in compliance with 1 of the nationally recognized model building codes and with other applicable 

nationally recognized codes.

(2) Each building constructed or altered by the postal Service 

shall be constructed or altered only after consideration of all requirements (other than procedural requirements ) of zoning laws, 

land use laws, and applicable environmental laws of a State or subdivision of a State which would apply to the building if it were not 

a building constructed or altered by an establishment of the Government of the United States. 

(3) For purposes of meeting the requirements of paragraphs (1) 

and (2) with respect to a building, the Postal Service shall— 

(A) in preparing plans for the building, consult with appropriate officials of the State or political subdivision, or both, in 

which the building will be located; 

(B) upon request, submit such plans in a timely manner to 

such officials for review by such officials for a reasonable period 

of time not exceeding 30 days; and 

(C) permit inspection by such officials during construction or 

alteration of the building, in accordance with the customary 

schedule of inspections for construction or alteration of buildings in the locality, if such officials provide to the Postal Service— 

(i) a copy of such schedule before construction of the 

building begins; and 

(ii) reasonable notice of their intention to conduct any inspection before conducting such inspection. 

Nothing in this subsection shall impose an obligation on any 

State or political subdivision to take any action under the preceding sentence, nor shall anything in this subsection require 

the Postal Service or any of its contractors to pay for any action 

taken by a State or political subdivision to carry out this subsection (including reviewing plans, carrying out on-site inspections, issuing building permits, and making recommendations). 

(4) Appropriate officials of a State or a political subdivision of a 

State may make recommendations to the Postal Service concerning 

measures necessary to meet the requirements of paragraphs (1) and 

(2). Such officials may also make recommendations to the Postal 

Service concerning measures which should be taken in the construction or alteration of the building to take into account local conditions. The Postal Service shall give due consideration to any such 

recommendations. 

(5) In addition to consulting with local and State officials under 

paragraph (3), the Postal Service shall establish procedures for soliciting, assessing, and incorporating local community input on real 

property and land use decisions. 

(6) For purposes of this subsection, the term ‘‘State’’ includes the 

District of Columbia, the Commonwealth of Puerto Rico, and a territory or possession of the United States. 

83

(h)(1) Notwithstanding any other provision of law, legal representation may not be furnished by the Department of Justice to the 

Postal Service in any action, suit, or proceeding arising, in whole 

or in part, under any of the following: 

(A) Subsection (d) or (e) of this section. 

(B) Subsection (f) or (g) of section 504 (relating to administrative subpoenas by the Postal Regulatory Commission). 

(C) Section 3663 (relating to appellate review). The Postal 

Service may, by contract or otherwise, employ attorneys to obtain any legal representation that it is precluded from obtaining 

from the Department of Justice under this paragraph. 

(2) In any circumstance not covered by paragraph (1), the Department of Justice shall, under section 411, furnish the Postal Service 

such legal representation as it may require, except that, with the 

prior consent of the Attorney General, the Postal Service may, in 

any such circumstance, employ attorneys by contract or otherwise to 

conduct litigation brought by or against the Postal Service or its officers or employees in matters affecting the Postal Service. 

(3)(A) In any action, suit, or proceeding in a court of the United 

States arising in whole or in part under any of the provisions of law 

referred to in subparagraph (B) or (C) of paragraph (1), and to 

which the Commission is not otherwise a party, the Commission 

shall be permitted to appear as a party on its own and as of right. 

(B) The Department of Justice shall, under such terms and conditions as the Commission and the Attorney General shall consider 

appropriate, furnish the Commission such legal representation as it 

may require in connection with any such action, suit, or proceeding, 

except that, with the prior consent of the Attorney General, the Commission may employ attorneys by contract or otherwise for that purpose. 

(i) A judgment against the Government of the United States 

arising out of activities of the Postal Service shall be paid by 

the Postal Service out of any funds available to the Postal Service, subject to the restriction specified in section 2011(g). 

* * * * * * * 

CHAPTER 5—POSTAL REGULATORY COMMISSION 

§ 501. Establishment 

The Postal Regulatory Commission is an independent establishment of the executive branch of the Government of the United 

States. 

§ 502. Commissioners 

(a) The Postal Regulatory Commission is composed of 5 Commissioners, appointed by the President, by and with the advice and consent of the Senate. The Commissioners shall be chosen solely on the 

basis of their technical qualifications, professional standing, and 

demonstrated expertise in economics, accounting, law, or public administration, and may be removed by the President only for cause. 

Each individual appointed to the Commission shall have the qualifications and expertise necessary to carry out the enhanced responsibilities accorded Commissioners under the Postal Accountability 

84

and Enhancement Act. Not more than 3 of the Commissioners may 

be adherents of the same political party. 

(b) No Commissioners shall be financially interested in any enterprise in the private sector of the economy engaged in the delivery of 

mail matter. 

(c) A Commissioner may continue to serve after the expiration of 

his term until his successor has qualified, except that a Commissioner may not so continue to serve for more than 1 year after the 

date upon which his term otherwise would expire under subsection 

(f). 

(d) One of the Commissioners shall be designated as Chairman 

by, and shall serve in the position of Chairman at the pleasure of, 

the President. 

(e) The Commissioners shall by majority vote designate a Vice 

Chairman of the Commission. The Vice Chairman shall act as 

Chairman of the Commission in the absence of the Chairman. 

(f) The Commissioners shall serve for terms of 6 years. 

§ 503. Rules; regulations; procedures 

The Postal Regulatory Commission shall promulgate rules and 

regulations and establish procedures, subject to chapters 5 and 7 of 

title 5 [5 USCS §§ 501 et seq. and 701 et seq.], and take any other 

action they deem necessary and proper to carry out their functions 

and obligations to the Government of the United States and the people as prescribed under this chapter [9 USCS §§3601 et seq.]. Such 

rules, regulations, procedures, and actions shall not be subject to 

any change or supervision by the Postal Service. 

§ 504. Administration 

(a) The Chairman of the Postal Regulatory Commission shall be 

the principal executive officer of the Commission. The Chairman 

shall exercise or direct the exercise of all the executive and administrative functions of the Commission, including functions of the Commission with respect to (1) the appointment of personnel employed 

under the Commission, except that the appointment of heads of 

major administrative units under the Commission shall require the 

approval of a majority of the members of the Commission, (2) the 

supervision of the personnel employed under the Commission and 

the distribution of business among them and among the Commissioners, and (3) the use and expenditure of funds. 

(b) In carrying out any of his functions under this section, the 

Chairman shall be governed by the general policies of the Commission. 

(c) The Chairman may obtain such facilities and supplies as may 

be necessary to permit the Commission to carry out its functions. 

Any officer or employee appointed under this section shall be paid 

at rates of compensation and shall be entitled to programs offering 

employee benefits established under chapter 10 or chapter 12 of this 

title [39 USCS §§ 1001 et seq. or 1201 et seq.], as appropriate. 

(d) There are authorized to be appropriated, out of the Postal 

Service Fund, such sums as may be necessary for the Postal Regulatory Commission. In requesting an appropriation under this subsection for a fiscal year, the Commission shall prepare and submit 

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85

penses, including expenses for facilities, supplies, compensation, and 

employee benefits. 

(e) The provisions of section 410 and chapter 10 of this title [39 

USCS §§ 410 and 1001 et seq.] shall apply to the Commission, as 

appropriate. 

(f)(1) Any Commissioner of the Postal Regulatory Commission, 

any administrative law judge appointed by the Commission under 

section 3105 of title 5, and any employee of the Commission designated by the Commission may administer oaths, examine witnesses, take depositions, and receive evidence. 

(2) The Chairman of the Commission, any Commissioner designated by the Chairman, and any administrative law judge appointed by the Commission under section 3105 of title 5 may, with 

respect to any proceeding conducted by the Commission under this 

title or to obtain information to be used to prepare a report under 

this title— 

(A) issue subpoenas requiring the attendance and presentation of testimony by, or the production of documentary or 

other evidence in the possession of, any covered person; and 

(B) order the taking of depositions and responses to written 

interrogatories by a covered person. The written concurrence of 

a majority of the Commissioners then holding office shall, with 

respect to each subpoena under subparagraph (A), be required 

in advance of its issuance. 

(3) In the case of contumacy or failure to obey a subpoena issued 

under this subsection, upon application by the Commission, the district court of the United States for the district in which the person 

to whom the subpoena is addressed resides or is served may issue 

an order requiring such person to appear at any designated place 

to testify or produce documentary or other evidence. Any failure to 

obey the order of the court may be punished by the court as a contempt thereof. 

(4) For purposes of this subsection, the term ‘‘covered person’’ 

means an officer, employee, agent, or contractor of the Postal Service. 

(g)(1) If the Postal Service determines that any document or other 

matter it provides to the Postal Regulatory Commission under a 

subpoena issued under subsection (f), or otherwise at the request of 

the Commission in connection with any proceeding or other purpose 

under this title, contains information which is described in section 

410(c) of this title, or exempt from public disclosure under section 

552(b) of title 5, the Postal Service shall, at the time of providing 

such matter to the Commission, notify the Commission, in writing, 

of its determination (and the reasons therefor). 

(2) Except as provided in paragraph (3), no officer or employee of 

the Commission may, with respect to any information as to which 

the Commission has been notified under paragraph (1)—

(A) use such information for purposes other than the purposes 

for which it is supplied; or 

(B) permit anyone who is not an officer or employee of the 

Commission to have access to any such information. 

(3)(A) Paragraph (2) shall not prohibit the Commission from publicly disclosing relevant information in furtherance of its duties 

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86

tions under section 553 of title 5, that establish a procedure for according appropriate confidentiality to information identified by the 

Postal Service under paragraph (1). In determining the appropriate 

degree of confidentiality to be accorded information identified by the 

Postal Service under paragraph (1), the Commission shall balance 

the nature and extent of the likely commercial injury to the Postal 

Service against the public interest in maintaining the financial 

transparency of a government establishment competing in commercial markets. 

(B) Paragraph (2) shall not prevent the Commission from requiring production of information in the course of any discovery procedure established in connection with a proceeding under this title. 

The Commission shall, by regulations based on rule 26(c) of the 

Federal Rules of Civil Procedure, establish procedures for ensuring 

appropriate confidentiality for information furnished to any party. 

§ 505. Officer of the Postal Regulatory Commission representing the general public 

The Postal Regulatory Commission shall designate an officer of 

the Postal Regulatory Commission in all public proceedings who 

shall represent the interests of the general public. 

* * * * * * *

CHAPTER 6—PRIVATE CARRIAGE OF LETTERS 

§ 601. Letters carried out of the mail 

(a) A letter may be carried out of the mails when—

(1) it is enclosed in an envelope; 

(2) the amount of postage which would have been charged on 

the letter if it had been sent by mail is paid by stamps, or postage meter stamps, on the envelope; 

(3) the envelope is properly addressed; 

(4) the envelope is so sealed that the letter cannot be taken 

from it without defacing the envelope; 

(5) any stamps on the envelope are canceled in ink by the 

sender; and 

(6) the date of the letter, of its transmission or receipt by the 

carrier is endorsed on the envelope in ink. 

ø(b) The Postal Service may suspend the operation of any 

part of this section upon any mail route where the public interest requires the suspension.¿

(b) A letter may also be carried out of the mails when—

(1) the amount paid for the private carriage of the letter is at 

least the amount equal to 6 times the rate then currently 

charged for the 1st ounce of a single-piece first class letter; 

(2) the letter weighs at least 121⁄2 ounces; or 

(3) such carriage is within the scope of services described by 

regulations of the United States Postal Service (as in effect on 

July 1, 2001) that permit private carriage by suspension of the 

operation of this section (as then in effect). 

(c) Any regulations necessary to carry out this section shall be 

promulgated by the Postal Regulatory Commission. 

* * * * * * *

87

PART II—PERSONNEL 

CHAPTER 12—EMPLOYEE-MANAGEMENT AGREEMENTS 

§ 1207. Labor disputes 

(a) If there is a collective-bargaining agreement in effect, no 

party to such agreement shall terminate or modify such agreement 

unless the party desiring such termination or modification serves 

written notice upon the other party to the agreement of the proposed termination or modification not less than 90 days prior to the 

expiration date thereof, or not less than 90 days prior to the time 

it is proposed to make such termination or modification. The party 

serving such notice shall notify the Federal Mediation and Conciliation Service of the existence of a dispute within 45 days of such 

notice, if no agreement has been reached by that time. 

(b) If the parties fail to reach agreement or to adopt a procedure 

providing for a binding resolution of a dispute by the expiration 

date of the agreement in effect, or the date of the proposed termination or modification, the Director of the Federal Mediation and 

Conciliation Service shall ødirect the establishment of a factfinding 

panel consisting of 3 persons. For this purpose, he shall submit to 

the parties a list of not less than 15 names, from which list each 

party, within 10 days, shall select 1 person. The 2 so selected shall 

then choose from the list a third person who shall serve as chairman of the factfinding panel. If either of the parties fails to select 

a person or if the 2 members are unable to agree on the third person within 3 days, the selection shall be made by the Director. The 

factfinding panel shall issue after due investigation a report of its 

findings, with or without recommendations, to the parties no later 

than 45 days from the date the list of names is submitted.¿ within 

10 days appoint a mediator of nationwide reputation and professional stature, and who is also a member of the National Academy 

of Arbitrators. The parties shall cooperate with the mediator in an 

effort to reach an agreement and shall meet and negotiate in good 

faith at such times and places that the mediator, in consultation 

with the parties, shall direct. 

(c)(1) If no agreement is reached within ø90¿ 60 days after the 

expiration or termination of the agreement or the date on which 

the agreement became subject to modification under subsection (a) 

of this section, or if the parties decide upon arbitration but do not 

agree upon the procedures therefor, an arbitration board shall be 

established consisting of 3 members, ønot members of the factfinding panel,¿ 1 of whom shall be selected by the Postal Service, 

1 by the bargaining representative of the employees, and the third 

by the 2 thus selected. If either of the parties fails to select a member, or if the members chosen by the parties fail to agree on the 

third person within 5 days after their first meeting, the selection 

shall be made from a list of names provided by the Director. This 

list shall consist of not less then 9 names of arbitrators of nationwide reputation and professional nature, who are also members of 

the National Academy of Arbitrators, and whom the Director has 

determined are available and willing to serve. øIf the parties do not 

agree on the framing of the issues to be submitted, the factfinding 

88

panel shall frame the issues and submit them to the arbitration 

board.¿

(2) The arbitration board shall give the parties a full and fair 

hearing, including an opportunity to present evidence in support of 

their claims, and an opportunity to present their case in person, by 

counsel or by other representative as they may elect. Decisions of 

the arbitration board shall be conclusive and binding upon the parties. The arbitration board shall render its decision within 45 days 

after its appointment. 

(3) Costs of the arbitration board and øfactfinding panel¿ mediation shall be shared equally by the Postal Service and the bargaining representative. 

(d) In the case of a bargaining unit whose recognized collectivebargaining representative does not have an agreement with the 

Postal Service, if the parties fail to reach agreement within 90 days 

of the commencement of collective bargaining, a øfactfinding panel 

will be established¿ mediator shall be appointed in accordance with 

the terms of subsection (b) of this section, unless the parties have 

previously agreed to another procedure for a binding resolution of 

their differences. If the parties fail to reach agreement within 180 

days of the commencement of collective bargaining, and if they 

have not agreed to another procedure for binding resolution, an arbitration board shall be established to provide conclusive and binding arbitration in accordance with the terms of subsection (c) of 

this section. 

* * * * * * * 

PART III—MODERNIZATION AND FISCAL 

ADMINISTRATION 

CHAPTER 20—FINANCE 

§ 2001. Definitions 

As used in this chapter [39 USCS §§ 2001 et seq.]—

(1) ‘‘Fund’’ means the Postal Service Fund established by section 2003 of this chapter; øand¿

(2) ‘‘Competitive Products Fund’’ means the Postal Service 

Competitive Products Fund established by section 2011; and 

ø(2)¿ (3) ‘‘Obligations,’’ when referring to debt instruments 

issued by the Postal Service, means notes, bonds, debentures, 

mortgages, and any other evidence of indebtedness. 

§ 2002. Capital of the Postal Service 

(a) The initial capital of the Postal Service shall consist of the equity, as reflected in the budget of the President, of the Government 

of the United States in the former Post Office Department. The 

value of assets and the amount of liabilities transferred to the Postal Service upon the commencement of operations of the Postal 

Service shall be determined by the Postal Service subject to the approval of the Comptroller General, in accordance with the following 

guidelines: 

* * * * * * *

89

(b) The capital of the Postal Service at any time shall consist of 

its assets, including the balance in the øFund¿ Fund and the balance in the Competitive Products Fund, less its liabilities. 

* * * * * * *

§ 2003. The Postal Service Fund 

(a) There is established in the Treasury of the United States a 

revolving fund to be called the Postal Service Fund which shall be 

available to the Postal Service without fiscal-year limitation to 

carry out the purposes, functions, and powers authorized by this 

øtitle¿ title (other than any of the purposes, functions, or powers for 

which the Competitive Products Fund is available).

(b) øThere¿ Except as otherwise provided in section 2011, there

shall be deposited in the Fund, subject to withdrawal by check by 

the Postal Service—

(1) revenues from postal [and nonpostal] services rendered 

by the Postal Service; 

(2) amounts received from obligations issued by the Postal 

Service; 

(3) amounts appropriated for the use of the Postal Service; 

(4) interest which may be earned on investments of the 

Fund; 

(5) any other receipts of the Postal Service; 

(6) the balance in the Post Office Department Fund established under former section 2202 of title 39 as of the commencement of operations of the Postal Service; 

(7) amounts (including proceeds from the sale of forfeited 

items) from any civil forfeiture conducted by the Postal Service; 

and 

(8) any transfers from the Secretary of the Treasury from the 

Department of the Treasury Forfeiture Fund which shall be 

available to the Postmaster General only for Federal law enforcement related purposes. 

* * * * * * *

(e)(1) øThe Fund shall be available for the payment of all expenses incurred by the Postal Service in carrying out its functions 

as provided by law and, subject to the provisions of section 3604 

of this title, all of the expenses of the Postal Rate Commission.¿

The Fund shall be available for the payment of (A) all expenses incurred by the Postal Service in carrying out its functions as provided by law, subject to the same limitation as set forth in the parenthetical matter under subsection (a); (B) all expenses of the Postal 

Regulatory Commission, subject to the availability of amounts appropriated under section 504(d); and (C) all expenses of the Office 

of the Inspector General, subject to the availability of amounts appropriated under section 8G(f) of the Inspector General Act of 1978.

The Postmaster General shall transfer from the Fund to the Secretary of the Treasury for deposit in the Department of the Treasury Forfeiture Fund amounts appropriate to reflect the degree of 

participation of Department of the Treasury law enforcement organizations (described in section 9703(p) of title 31) in the law enforcement effort resulting in the forfeiture pursuant to laws enforced or administered by the Postal Service. Neither the Fund nor 

90

any of the funds credited to it shall be subject to apportionment 

under the provisions of subchapter II of chapter 15 of title 31 [31 

USCS §§ 1511 et seq.]. 

(2) Funds appropriated to the Postal Service under section 2401 

of this title shall be apportioned as provided in this paragraph. 

From the total amounts appropriated to the Postal Service for any 

fiscal year under the authorizations contained in section 2401 of 

this title, the Secretary of the Treasury shall make available to the 

Postal Service 25 percent of such amount at the beginning of each 

quarter of such fiscal year. 

* * * * * * *

§ 2005. Obligations 

(a)(1) The Postal Service is authorized to borrow money and to 

issue and sell such obligations as it determines necessary to carry 

out the purposes of this øtitle¿ title, other than any of the purposes 

for which the corresponding authority is available to the Postal 

Service under section 2011. The aggregate amount of any such obligations outstanding at any one time shall not exceed the maximum 

amount then allowable under paragraph (2) of this subsection. øIn 

any one fiscal year the net increase in the amount of obligations 

outstanding issued for the purpose of capital improvements shall 

not exceed $2,000,000,000, and the net increase in the amount of 

obligations outstanding issued for the purpose of defraying operating expenses of the Postal Service shall not exceed 

$1,000,000,000.¿

(2) The maximum amount allowable under this paragraph is—

(A) $10,000,000,000 for fiscal year 1990; 

(B) $12,500,000,000 for fiscal year 1991; and 

(C) $15,000,000,000 for fiscal year 1992 and each fiscal year 

thereafter. 

ø(b)¿(b)(1) The Postal Service may pledge the assets of the Postal 

Service and pledge and use its revenues and receipts for the payment of the principal of or interest on øsuch obligations¿ obligations issued by the Postal Service under this section, for the purchase or redemption thereof, and for other purposes incidental 

thereto, including creation of reserve, sinking, and other funds 

which may be similarly pledged and used, to such extent and in 

such manner as it deems necessary or desirable. The Postal Service 

is authorized to enter into binding covenants with the holders of 

such obligations, and with the trustee, if any, under any agreement 

entered into in connection with the issuance thereof with respect 

to the establishment of reserve, sinking, and other funds, application and use of revenues and receipts of the Postal Service, stipulations concerning the subsequent issuance of obligations or the execution of leases or lease purchases relating to properties of the 

Postal Service and such other matters as the Postal Service deems 

necessary or desirable to enhance the marketability of such obligations.

(2) Notwithstanding any other provision of this section—

(A) the authority to pledge assets of the Postal Service under 

this subsection shall be available only to the extent that such 

assets are not related to the provision of competitive products 

91

(as determined under section 2011(h) or, for purposes of any period before accounting practices and principles under section 

2011(h) have been established and applied, the best information 

available from the Postal Service, including the audited statements required by section 2008(e)); and 

(B) any authority under this subsection relating to the pledging or other use of revenues or receipts of the Postal Service 

shall be available only to the extent that they are not revenues 

or receipts of the Competitive Products Fund. 

* * * * * * *

§ 2006. Relationship between the Treasury and Postal Service 

* * * * * * *

(b) Subject to the conditions of subsection (a) of this section, the 

Postal Service may require the Secretary of the Treasury to purchase obligations of the Postal Service in such amounts as will not 

cause the holding by the Secretary of the Treasury resulting from 

such required purchases to exceed $2,000,000,000 at any one time. 

This subsection shall not be construed as limiting the authority of 

the Secretary to purchase obligations of the Postal Service in excess of such amount. Nothing in this chapter shall be considered to 

permit or require the Secretary of the Treasury to purchase any obligations of the Postal Service other than those issued under section 

2005.

(c) Notwithstanding section 2005(d)(5) of this title, obligations 

issued by the Postal Service under section 2005 shall be obligations 

of the Government of the United States, and payment of principal 

and interest thereon shall be fully guaranteed by the Government 

of the United States, such guaranty being expressed on the face 

thereof, if and to the extent that—

(1) the Postal Service requests the Secretary of the Treasury 

to pledge the full faith and credit of the Government of the 

United States for the payment of principal and interest thereon; and 

(2) the Secretary, in his discretion, determines that it would 

be in the public interest to do so. 

* * * * * * *

§ 2009. Annual budget 

The Postal Service shall cause to be prepared annually a budget 

program which shall be submitted to the Office of Management and 

Budget, under such rules and regulations as the President may establish as to the date of submission, the form and content, the classifications of data, and the manner in which such budget program 

shall be prepared and presented. The budget program shall be a 

business-type budget, or plan of operations, with due allowance 

given to the need for flexibility, including provision for emergencies 

and contingencies, in order that the Postal Service may properly 

carry out its activities as authorized by law. The budget program 

shall contain estimates of the financial condition and operations of 

the Postal Service for the current and ensuing fiscal years and the 

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92

cal year. Such budget program shall include a statement of financial condition, a statement of income and expense, an analysis of 

surplus or deficit, a statement of sources and application of funds, 

and such other supplementary statements and information as are 

necessary or desirable to make known the financial condition and 

operations of the Postal Service. Such statements shall include estimates of operations by major types of activities, together with estimates of administrative expenses and estimates of borrowings. 

øThe budget program shall also include separate statements of the 

amounts which the Postal Service requests to be appropriated 

under subsections (b) and (c) of section 2401 of this title.¿ The 

budget program shall also include separate statements of the 

amounts which (1) the Postal Service requests to be appropriated 

under subsections (b) and (c) of section 2401, (2) the Office of Inspector General of the United States Postal Service requests to be 

appropriated, out of the Postal Service Fund, under section 8G(f) of 

the Inspector General Act of 1978, and (3) the Postal Regulatory 

Commission requests to be appropriated, out of the Postal Service 

Fund, under section 504(d) of this title. The President shall include 

these amounts, with his recommendations but without revision, in 

the budget transmitted to Congress under section 1105 of title 31. 

§ 2010. Restrictions on agreements 

The Postal Service shall promote modern and efficient operations 

and should refrain from expending any funds, engaging in any 

practice, or entering into any agreement or contract, other than an 

agreement or contract under chapter 12 of this title [39 USCS 

§§ 1201 et seq.], which restricts the use of new equipment or devices which may reduce the cost or improve the quality of postal 

services, except where such restriction is necessary to insure safe 

and healthful employment conditions.

§ 2011. Provisions relating to competitive products 

(a) There is established in the Treasury of the United States a revolving fund, to be called the Postal Service Competitive Products 

Fund, which shall be available to the Postal Service without fiscal 

year limitation for the payment of—

(1) costs attributable to the competitive products; and 

(2) all other costs incurred by the Postal Service, to the extent 

allocable to competitive products. 

For purposes of this subsection, the term ‘‘costs attributable’’ has the 

meaning given such term by section 3631.

(b) There shall be deposited in the Competitive Products Fund, 

subject to withdrawal by the Postal Service— 

(1) revenues from competitive products; 

(2) amounts received from obligations issued by the Postal 

Service under subsection (e); 

(3) interest and dividends earned on investments of the Competitive Products Fund; and 

(4) any other receipts of the Postal Service (including from the 

sale of assets), to the extent allocable to competitive products. 

(c) If the Postal Service determines that the moneys of the Competitive Products Fund are in excess of current needs, it may invest 

such amounts as it considers appropriate in accordance with reguVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00096 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
93

lations which the Secretary of the Treasury shall prescribe within 

12 months after the date of enactment of the Postal Accountability 

and Enhancement Act. 

(d) The Postal Service may, in its sole discretion, provide that the 

moneys of the Competitive Products Fund be deposited in a Federal 

Reserve bank or a depository for public funds. 

(e)(1) Subject to the limitations specified in section 2005(a), the 

Postal Service is authorized to borrow money and to issue and sell 

such obligations as it determines necessary to provide for competitive products and deposit such amounts in the Competitive Products 

Fund, except that the Postal Service may pledge only assets related 

to the provision of competitive products (as determined under subsection (h) or, for purposes of any period before accounting practices 

and principles under subsection (h) have been established and applied, the best information available from the Postal Service, including the audited statements required by section 2008(e)), and the revenues and receipts from such products, for the payment of the principal of or interest on such obligations, for the purchase or redemption thereof, and for other purposes incidental thereto, including creation of reserve, sinking, and other funds which may be similarly 

pledged and used, to such extent and in such manner as the Postal 

Service determines necessary or desirable. 

(2) The Postal Service may enter into binding covenants with the 

holders of such obligations, and with the trustee, if any, under any 

agreement entered into in connection with the issuance thereof with 

respect to—

(A) the establishment of reserve, sinking, and other funds; 

(B) application and use of revenues and receipts of the Competitive Products Fund; 

(C) stipulations concerning the subsequent issuance of obligations or the execution of leases or lease purchases relating to 

properties of the Postal Service; and 

(D) such other matters as the Postal Service considers necessary or desirable to enhance the marketability of such obligations. 

(3) Obligations issued by the Postal Service under this subsection—

(A) may not be purchased by the Secretary of the Treasury; 

(B) shall not be exempt either as to principal or interest from 

any taxation now or hereafter imposed by any State or local 

taxing authority; 

(C) shall not be obligations of, nor shall payment of the principal thereof or interest thereon be guaranteed by, the Government of the United States, and the obligations shall so plainly 

state; and 

(D) notwithstanding the provisions of the Federal Financing 

Bank Act of 1973 or any other provision of law (except as specifically provided by reference to this subparagraph in a law enacted after this subparagraph takes effect), shall not be eligible 

for purchase by, commitment to purchase by, or sale or issuance 

to, the Federal Financing Bank. 

(4)(A) This paragraph applies wtih respect to the period beginning 

on the date of the enactment of this paragraph and ending at the 

94

close of the 5-year period which begins on the date on which the 

Postal Service makes its submission under subsection (h)(1). 

(B) During the period described in subparagraph (A), nothing in 

subparagraph (A) or (D) of paragraph (3) or the last sentence of section 2006(b) shall, with respect to any obligations sought to be 

issued by the Postal Service under this subsection, be considered to 

affect such obligations’ eligibility for purchase by, commitment to 

purchase by, or sale or issuance to, the Federal Financing Bank. 

(C) The Federal Financing Bank may elect to purchase such obligations under such terms, including rates of interest, as the Bank 

and the Postal Service may agree, but at a rate of yield no less than 

the prevailing yield on outstanding marketable securities of comparable maturity issued by entities with the same credit rating as 

the rating then most recently obtained by the Postal Service under 

subparagraph (D), as determined by the Bank. 

(D) In order to be eligible to borrow under this paragraph, the 

Postal Service shall first obtain a credit rating from a nationally 

recognized credit rating organization. Such rating— 

(i) shall be determined taking into account only those assets 

and activities of the Postal Service which are described in section 3634(a)(2) (relating to the Postal Service’s assumed taxable 

income from competitive products); and 

(ii) may, before final rules of the Postal Regulatory Commission under subsection (h) are issued (or deemed to have been 

issued), be based on the best information available from the 

Postal Service, including the audited statements required by 

section 2008(e). 

(f) The receipts and disbursements of the Competitive Products 

Fund shall be accorded the same budgetary treatment as is accorded to receipts and disbursements of the Postal Service fund 

under section 2009a. 

(g) A judgment against the Postal Service or the Government of 

the United States (or settlement of a claim) shall, to the extent that 

it arises out of activities of the Postal Service in the provision of 

competitive products, be paid out of the Competitive Products Fund. 

(h)(1) The Secretary of the Treasury, in consultation with the 

Postal Service, an independent, certified public accounting firm, 

and such other advisers as the Secretary considers appropriate, 

shall develop recommendations regarding— 

(A) the accounting practices and principles that should be followed by the Postal Service with the objectives of— 

(i) identifying and valuing the assets and liabilities of the 

Postal Service associated with providing, and the capital 

and operating costs incurred by the postal Service in providing, competitive products; and 

(ii) preventing the subsidization of such products by market-dominant products; and 

(B) the substantive and procedural rules that should be followed in determining the Postal Service’s assumed Federal income tax on competitive products income for any year (within 

the meaning of section 3634). 

Such recommendations shall be submitted to the Postal Regulatory 

Commission not earlier than 6 months, and not later than 12 

months, after the effective date of this section. 

95

(2)(A) Upon receiving the recommendations of the Secretary of the 

Treasury under paragraph (1), the Commission shall give interested 

parties, including the Postal Service, users of the mails, and an officer of the Commission who shall be required to represent the interests of the general public, an opportunity to present their views on 

those recommendations through submission of written data, views, 

or arguments with or without opportunity for oral presentation, or 

in such other manner as the Commission considers appropriate. 

(B) After due consideration of the views and other information received under subparagraph (A), the Commission shall by rule— 

(i) provide for the establishment and application of the accounting practices and principles which shall be followed by the 

Postal Service; 

(ii) provide for the establishment and application of the substantive and procedural rules described in paragraph (1)(B); 

and (iii) provide for thesubmission by the Postal Service to the 

Postal Regulatory Commission of annual and other periodic reports setting forth such information as the Commission may require. 

Final rules under this subparagraph shall be issued not later than 

12 months after the date on which the Secretary of the Treasury 

makes his submission to the Commission under paragraph (1) (or 

by such later date as agreed to by the Commission and the Postal 

Service). The Commission is authorized to promulgate regulations 

revising such rules. 

(C) Reports described in subparagraph (B)(iii) shall be submitted 

at such time, in such form, and shall include such information, as 

the Commission by rule requires. The Commission may, on its own 

motion or on requires of an interested party, initiate proceedings (to 

be conducted in accordance with such rules as the Commission 

shall prescribe) to improve the quality, accuracy, or completeness of 

Postal Service data under such subparagraph whenever it shall appear that— 

(i) the quality of the information furnished in those reports 

has become significantly inaccurate or can be significantly improved; or 

(ii) such revisions are, in the judgment of the Commission, 

otherwise necessitated by the public interest. 

(D) A copy of each report described in subparagraph (B)(iii) shall 

also be transmitted by the Postal Service to the Secretary of the 

Treasury and the Inspector General of the United States Postal 

Service. 

(i) The Postal Service shall render an annual report to the 

Secretary of the Treasury concerning the operation of the Competitive Products Fund, in which it shall address such matters 

as risk limitations, reserve balances, allocation or distribution 

of moneys, liquidity requirements, and measures to safeguard 

against losses. A copy of its then most recent report under this 

subsection shall be included with any other submission that it 

is required to make to the Postal Regulatory Commission under 

section 3652(g). 

* * * * * * *

96

PART IV—MAIL MATTER 

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES 

øSUBCHAPTER I—POSTAL RATE COMMISSION¿

ø§ 3601. Establishment 

ø(a) The Postal Rate Commission is an independent establishment of the executive branch of the Government of the United 

States. The Commission is composed of 5 Commissioners, appointed by the President, by and with the advice and consent of the 

Senate. The Commissioners shall be chosen on the basis of their 

professional qualifications and may be removed by the President 

only for cause. Not more than 3 of the Commissioners may be adherents of the same political party. 

ø(b) A Commissioner may continue to serve after the expiration 

of his term until his successor has qualified, except that a Commissioner may not so continue to serve for more than 1 year after the 

date upon which his term otherwise would expire under section 

3602 of this title. 

ø(c) One of the Commissioners shall be designated as Chairman 

by, and shall serve in the position of Chairman at the pleasure of, 

the President. 

ø(d) The Commissioners shall by majority vote designate a Vice 

Chairman of the Commission. The Vice Chairman shall act as 

Chairman of the Commission in the absence of the Chairman.¿

ø§ 3602. Terms of office 

øThe Commissioners of the Postal Rate Commission shall serve 

for terms of 6 years except that—

ø(1) the terms of the Commissioners first taking office shall expire as designated by the President at the time of appointment, 1 

at the end of 2 years, 2 at the end of 4 years, and 2 at the end 

of 6 years, following the appointment of the first of them; and 

ø(2) any Commissioner appointed to fill a vacancy occurring before the expiration of the term for which his predecessor was appointed shall serve for the remainder of such term. 

ø§ 3603. Rules; regulations; procedures 

øThe Postal Rate Commission shall promulgate rules and regulations and establish procedures, subject to chapters 5 and 7 of title 

5 [5 USCS §§ 501 et seq. and 701 et seq.], and take any other action they deem necessary and proper to carry out their functions 

and obligations to the Government of the United States and the 

people as prescribed under this chapter [9 USCS §§ 3601 et seq.]. 

Such rules, regulations, procedures, and actions shall not be subject to any change or supervision by the Postal Service.¿

ø§ 3604. Administration 

ø(a) The Chairman of the Postal Rate Commission shall be the 

principal executive officer of the Commission. The Chairman shall 

exercise or direct the exercise of all the executive and administrative functions of the Commission, including functions of the Commission with respect to (1) the appointment of personnel employed 

under the Commission, except that the appointment of heads of 

97

major administrative units under the Commission shall require the 

approval of a majority of the members of the Commission, (2) the 

supervision of the personnel employed under the Commission and 

the distribution of business among them and among the Commissioners, and (3) the use and expenditure of funds. 

ø(b) In carrying out any of his functions under this section, the 

Chairman shall be governed by the general policies of the Commission. 

ø(c) The Chairman may obtain such facilities and supplies as 

may be necessary to permit the Commission to carry out its functions. Any officer or employee appointed under this section shall be 

paid at rates of compensation and shall be entitled to programs offering employee benefits established under chapter 10 or chapter 

12 of this title [39 USCS §§ 1001 et seq. or 1201 et seq.], as appropriate. 

ø(d) (1) The Commission shall periodically prepare and submit to 

the Postal Service a budget of the Commission’s expenses, including, but not limited to, expenses for facilities, supplies, compensation, and employee benefits. The budget shall be considered approved—

ø(A) as submitted if the Governors fail to act in accordance 

with subparagraph (B) of this paragraph; or 

ø(B) as adjusted if the Governors holding office, by unanimous written decision, adjust the total amount of money requested in the budget. Subparagraph (B) shall not be construed to authorize the Governors to adjust any item included 

within the budget. 

ø(2) Expenses incurred under any budget approved under paragraph (1) of this subsection shall be paid out of the Postal Service 

fund established under section 2003 of this title. 

ø(e) The provisions of section 410 and chapter 10 of this title [39 

USCS §§ 410 and 1001 et seq.] shall apply to the Commission, as 

appropriate.¿

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES 

Subchapter II—Permanent Rates and Classes of Mail

ø§ 3621. Authority to fix rates and classes 

øExcept as otherwise provided, the Governors are authorized to 

establish reasonable and equitable classes of mail and reasonable 

and equitable rates of postage and fees for postal services in accordance with the provisions of this chapter [39 USCS §§ 3601 et 

seq.]. Postal rates and fees shall be reasonable and equitable and 

sufficient to enable the Postal Service under honest, efficient, and 

economical management to maintain and continue the development 

of postal services of the kind and quality adapted to the needs of 

the United States. Postal rates and fees shall provide sufficient 

revenues so that the total estimated income and appropriations to 

the Postal Service will equal as nearly as practicable total estimated costs of the Postal Service. For purposes of this section, 

‘‘total estimated costs’’ shall include (without limitation) operating 

expenses, depreciation on capital facilities and equipment, debt 

service (including interest, amortization of debt discount and exVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00101 Fmt 6602 Sfmt 6602 E:\HR\OC\SR318.XXX SR318
98

pense, and provision for sinking funds or other retirements of obligations to the extent that such provision exceeds applicable depreciation charges), and a reasonable provision for contingencies.¿

§ 3621. Applicability; definitions 

(a) Applicability.—This subchapter shall apply with respect to— 

(1) first-class mail letters and sealed parcels; 

(2) first-class mail cards; 

(3) periodicals; 

(4) standard mail; 

(5) single-piece parcel post; 

(6) media mail; 

(7) bound printed matter; 

(8) library mail; 

(9) special services; and 

(10) single-piece international mail, subject to any changes 

the Postal Regulatory Commission may make under section 

3642. 

(b) RULE OF CONSTRUCTION.—Mail matter referred to in subsection (a) shall, for purposes of this subchapter, be considered to 

have the meaning given to such mail matter under the mail classification schedule.

ø§ 3622. Rates and fees 

ø(a) From time to time the Postal Service shall request the Postal Rate Commission to submit a recommended decision on changes 

in a rate or rates of postage or in a fee or fees for postal services 

if the Postal Service determines that such changes would be in 

public interest and in accordance with the policies of this title. The 

Postal Service may submit such suggestions for rate adjustments 

as it deems suitable. 

ø(b) Upon receiving a request, the Commission shall make a recommended decision on the request for changes in rates or fees in 

each class of mail or type of service in accordance with the policies 

of this title and the following factors: 

ø(1) the establishment and maintenance of a fair and equitable schedule; 

ø(2) the value of the mail service actually provided each class 

or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, and priority of delivery; 

ø(3) the requirement that each class of mail or type of mail 

service bear the direct and indirect postal costs attributable to 

that class or type plus that portion of all other costs of the 

Postal Service reasonably assignable to such class or type; 

ø(4) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the 

economy engaged in the delivery of mail matter other than letters; 

ø(5) the available alternative means of sending and receiving 

letters and other mail matter at reasonable costs; 

ø(6) the degree of preparation of mail for delivery into the 

postal system performed by the mailer and its effect upon reducing costs to the Postal Service; 

99

ø(7) simplicity of structure for the entire schedule and simple, identifiable relationships between the rates or fees charged 

the various classes of mail for postal services; 

ø(8) the educational, cultural, scientific, and informational 

value to the recipient of mail matter; and 

ø(9) such other factors as the Commission deems appropriate. 

ø(c) Regular rates for each class or subclass of mail that includes 

1 or more special rate categories for mail under former section 

4358(d) or (e), 4452(b) or (c), or 4554(b) or (c) of this title shall be 

established by applying the policies of this title, including the factors of section 3622(b) of this title, to the costs attributable to the 

regular rate mail in each class or subclass combined with the mail 

in the corresponding special rate categories authorized by former 

section 4358(d) or (e), 4452(b) or (c), or 4554(b) or (c) of this title. 

ø(d) Compliance with any provision of the Occupational Safety 

and Health Act of 1970 (29 U.S.C. 651 et seq.) shall not be considered by the Commission in determining whether to increase rates 

and shall not otherwise affect the service of the Postal Service.¿

§ 3622. Modern rate regulation 

(a) AUTHORITY GENERALLY.—The Postal Regulatory Commission 

shall, within 12 months after the date of the enactment of this section, by regulation establish (and may from time to time thereafter 

by regulation revise) a modern system for regulating rates and 

classes for market-dominant products. 

(b) OBJECTIVES.—Such system shall be designed to achieve the 

following objectives: 

(1) To reduce the administrative burden and increase the 

transparency of the ratemaking process while affording reasonable opportunities for interested parties to participate in that 

process. 

(2) To create predictability and stability in rates. 

(3) To maximize incentives to reduce costs and increase efficiency. 

(4) To enhance mail security and deter terrorism by promoting secure, sender-identified mail. 

(5) To allow the Postal Service pricing flexibility, including 

the ability to use pricing to promote intelligent mail and encourage increased mail volume during nonpeak periods. 

(6) To assure adequate revenues, including retained earnings, 

to maintain financial stability and meet the service standards 

established under section 3691. 

(7) To allocate the total institutional costs of the Postal Service equitably between market-dominant and competitive products. 

(c) FACTORS.—In establishing or revising such system, the Postal 

Regulatory Commission shall take into account— 

(1) the establishment and maintenance of a fair and equitable 

schedule for rates and classification system; 

(2) the value of the mail service actually provided each class 

or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, 

and priority of delivery; 

100

(3) the requirement that each class of mail or type of mail 

service bear the direct and indirect postal costs attributable to 

each class or type of mail service plus that portion of all other 

costs of the Postal Service reasonably assignable to such class 

or type; 

(4) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the 

economy engaged in the delivery of mail matter other than letters; 

(5) the available alternative means of sending and receiving 

letters and other mail matter at reasonable costs; 

(6) the degree of preparation of mail for delivery into the postal system performed by the mailer and its effect upon reducing 

costs to the Postal Service; 

(7) simplicity of structure for the entire schedule and simple, 

identifiable relationships between the rates or fees charged the 

various classes of mail for postal services; 

(8) the relative value to the people of the kinds of mail matter 

entered into the postal system and the desirability and justification for special classifications and services of mail; 

(9) the importance of providing classifications with extremely 

high degrees of reliability and speed of delivery and of providing those that do not require high degrees of reliability and 

speed of delivery; 

(10) the desirability of special classifications from the point 

of view of both the user and of the Postal Service; 

(11) the educational, cultural, scientific, and informational 

value to the recipient of mail matter; and 

(12) the policies of this title as well as such other factors as 

the Commission deems appropriate. 

(d) REQUIREMENTS.—The system for regulating rates and classes 

for market-dominant products shall— 

(1) require the Postal Regulatory Commission to set annual 

limitations on the percentage changes in rates based on inflation using indices, such as the Consumer Price Index, the Employment Cost Index, the Gross Domestic Product Price Index, 

or any similar measure as the Postal Regulatory Commission 

may prescribe; 

(2) establish a schedule whereby rates, when necessary and 

appropriate, would change at regular intervals by predictable 

amounts; 

(3) not later than 45 days before the implementation of any 

adjustment in rates under this section— 

(A) require the Postal Service to provide public notice of 

the adjustment; 

(B) provide an opportunity for review by the Postal Regulatory Commission; 

(C) provide for the Postal Regulatory Commission to notify the Postal Service of any noncompliance of the adjustment with the limitation under paragraph (1); and 

(D) require the Postal Service to respond to the notice 

provided under subparagraph (C) and describe the actions 

to be taken to comply with the limitation under paragraph 

(1). 

101

(4) notwithstanding any limitation set under paragraphs (1) 

and (3), establish procedures whereby rates may be adjusted on 

an expedited basis due to the unexpected and extraordinary circumstances. 

(e) WORKSHARE DISCOUNTS.— 

(1) DEFINITION.—In this subsection, the term ‘‘workshare discount’’ refers to rate discounts provided to mailers for the 

presorting, prebarcoding, handling, or transportation of mail, 

as further defined by the Postal Regulatory Commission under 

subsection (a). 

(2) REGULATIONS.—As part of the regulations established 

under subsection (a), the Postal Regulatory Commission shall 

establish rules for workshare discounts that ensure that such 

discounts do not exceed the cost that the Postal Service avoids 

as a result of workshare activity, unless—

(A) the discount is— 

(i) associated with a new postal service or with a 

change to an existing postal service; and 

(ii) necessary, over a period of time not to exceed 4 

years, to induce mailer behavior that furthers the economically efficient operation of the Postal Service; 

(B) a reduction in the discount would— 

(i) lead to a loss of volume in the affected category 

of mail and reduce the aggregate contribution to institutional costs of the Postal Service from the mail matter subject to the discount below what it otherwise 

would have been if the discount had not been reduced 

to costs avoided; 

(ii) result in a further increase in the rates paid by 

mailers not able to take advantage of the discount; or 

(iii) impede the efficient operation of the Postal Service; 

(C) the amount of the discount above costs avoided— 

(i) is necessary to mitigate rate shock; and 

(ii) will be phased out over time; or 

(D) the workshare discount is provided in connection 

with subclasses of mail consisting exclusively of mail matter of educational, cultural, or scientific value. 

(3) REPORT.—Whenever the Postal Service establishes or 

maintains a workshare discount, the Postal Service shall, at the 

time it publishes the workshare discount rate, submit to the 

Postal Regulatory Commission a detailed report and explanation of the Postal Service’s reasons for establishing or maintaining the rate, setting forth the data, economic analyses, and 

other information relied on by the Postal Service to justify the 

rate. 

(f) TRANSITION RULE.—Until regulations under this section first 

take effect, rates and classes for market-dominant products shall remain subject to modification in accordance with the provisions of 

this chapter and section 407, as such provisions were last in effect 

before the date of the enactment of this section.

102

ø§ 3623. Mail classification 

ø(a) Within 2 years after the effective date of this subchapter [effective Jan. 20, 1971], the Postal Service shall request the Postal 

Rate Commission to make a recommended decision on establishing 

a mail classification schedule in accordance with the provisions of 

this section. 

ø(b) Following the establishment of the mail classification schedule requested under subsection (a) of this section, the Postal Service may from time to time request that the Commission submit, or 

the Commission may submit to the Governors on its own initiative, 

a recommended decision on changes in the mail classification 

schedule. 

ø(c) The Commission shall make a recommended decision on establishing or changing the schedule in accordance with the policies 

of this title and the following factors: 

ø(1) the establishment and maintenance of a fair and equitable classification system for all mail; 

ø(2) the relative value to the people of the kinds of mail matter entered into the postal system and the desirability and justification for special classifications and services of mail; 

ø(3) the importance of providing classifications with extremely high degrees of reliability and speed of delivery; 

ø(4) the importance of providing classifications which do not 

require an extremely high degree of reliability and speed of delivery; 

ø(5) the desirability of special classifications from the point 

of view of both the user and of the Postal Service; and 

ø(6) such other factors as the Commission may deem appropriate. 

ø(d) The Postal Service shall maintain one or more classes of 

mail for the transmission of letters sealed against inspection. The 

rate for each such class shall be uniform throughout the United 

States, its territories, and possessions. One such class shall provide 

for the most expeditious handling and transportation afforded mail 

matter by the Postal Service. No letter of such a class of domestic 

origin shall be opened except under authority of a search warrant 

authorized by law, or by an officer or employee of the Postal Service for the sole purpose of determining an address at which the letter can be delivered, or pursuant to the authorization of the addressee.¿

§ 3623. Service agreements for market-dominant products 

(a) IN GENERAL.— 

(1) AUTHORITY.—The Postal Service may enter into service 

agreements with a customer or group of customers that provide 

for the provision of postal services under terms, conditions, or 

service standards that differ from those that would apply under 

the otherwise applicable classification of market-dominant 

mail. 

(2) AGREEMENTS.—An agreement under this section may involve— 

(A) performance by the contracting mail user of mail 

preparation, processing, transportation, or other functions; 

103

(B) performance by the Postal Service of additional mail 

preparation, processing, transportation, or other functions; 

or 

(C) other terms and conditions that meet the requirements of subsections (b) and (c). 

(b) REQUIREMENTS.—A service agreement under this section may 

be entered into only if each of the following conditions is met: 

(1) The total revenue generated under the agreement— 

(A) will cover all Postal Service costs attributable to the 

postal services covered by the agreement; and 

(B) will result in no less contribution to the institutional 

costs of the Postal Service than would have been generated 

had the agreement not been entered into. 

(2) Rates or fees for other mailers will not increase as a result 

of the agreement. 

(3) The agreement pertains exclusively to products in the market-dominant category of mail. 

(4) The agreement will not preclude or materially hinder 

similarly situated mail users from entering into agreements 

with the Postal Service on the same, or substantially the same 

terms or conditions, and the Postal Service remains willing and 

able to enter into such. 

(c) LIMITATIONS.—A service agreement under this section shall— 

(1) be for a term not to exceed 3 years; and 

(2) provide that such agreement shall be subject to the cancellation authority of the Commission under section 3662. 

(d) NOTICE REQUIREMENTS.— (1) IN GENERAL.—At least 30 days before a service agreement 

under this section is to take effect, the Postal Service shall file 

with the Postal Regulatory Commission and publish in the Federal Register the following information with respect to such 

agreement: 

(A) A description of the postal services the agreement involves. 

(B) A description of the functions the customer is to perform under the agreement. 

(C) A description of the functions the Postal Service is to 

perform under the agreement. 

(D) The rates and fees payable by the customer during 

the term of the agreement. 

(E) With respect to each condition under subsection (b), 

information sufficient to demonstrate the bases for the view 

of the Postal Service that such condition would be met. 

(2) AGREEMENTS LESS THAN NATIONAL IN SCOPE.—In the case 

of a service agreement under this section that is less than national in scope, the information described under paragraph (1) 

shall also be published by the Postal Service in a manner designed to afford reasonable notice to persons within any geographic area to which such agreement (or any amendment to 

that agreement) pertains. 

(e) EQUAL TREATMENT REQUIRED.—If the Postal Service enters 

into a service agreement with a mailer under this section, the Postal 

Service shall make such agreement available to similarly situated 

mailers on functionally equivalent terms and conditions consistent 

104

with the regulatory system established under section 3622 without 

unreasonable distinctions based on mailer profiles, provided that 

such distinctions, if ignored, would not render any subsequent 

agreement uneconomic or impractical. 

(f) COMPLAINTS.—Any person who believes that a service agreement under this section is not in conformance with the requirements 

of this section, or who is aggrieved by a decision of the Postal Service not to enter into an agreement under this section, may file a 

complaint with the Postal Regulatory Commission in accordance 

with section 3662. 

(g) POSTAL REGULATORY COMMISSION ROLE.— (1) REGULATIONS.—The Postal Regulatory Commission may 

promulgate such regulations regarding service agreements as 

the Commission determines necessary to implement the requirements of this section. 

(2) REVIEW.—The Postal Regulatory Commission may review 

any agreement or proposed agreement under this section and 

may suspend, cancel, or prevent such agreement if the Commission finds that the agreement does not meet the requirements of 

this section. 

(h) INTERPRETATION.—The determination of whether the revenue 

generated under the agreement meets the requirements of subsection 

(b)(1)(B) shall be based, to the extent practicable, on the actual contribution of the mail involved, not on the average contribution made 

by the mail classification most similar to the services performed 

under the agreement. If mailer-specific data is not available, the 

bases for the determination used shall be provided and shall include a discussion of the suitability of the data used, in accordance 

with regulations established by the Postal Regulatory Commission.

ø§ 3624. Recommended decisions of Commission 

ø(a) The Postal Rate Commission shall promptly consider a request made under section 3622 or 3623 of this title, except that the 

Commission shall not recommend a decision until the opportunity 

for a hearing on the record under sections 556 and 557 of title 5 

has been accorded to the Postal Service, users of the mails, and an 

officer of the Commission who shall be required to represent the interests of the general public. 

ø(b) In order to conduct its proceedings with utmost expedition 

consistent with procedural fairness to the parties, the Commission 

may (without limitation) adopt rules which provide for—

ø(1) the advance submission of written direct testimony; 

ø(2) the conduct of prehearing conferences to define issues, and 

for other purposes to insure orderly and expeditious proceedings; 

ø(3) discovery both from the Postal Service and the parties to the 

proceedings; 

ø(4) limitation of testimony; and 

ø(5) the conduct of the entire proceedings off the record with the 

consent of the parties. 

ø(c)(1) Except as provided by paragraph (2) of this subsection, in 

any case in which the Postal Service makes a request under section 

3622 of this title for a recommended decision by the Commission 

on changes in a rate or rates of postage or in a fee or fees for postal 

services the Commission shall transmit its recommended decision 

105

to the Governors under subsection (d) of this section no later than 

10 months after receiving any such request from the Postal Service. 

ø(2) In any case in which the Commission determines that the 

Postal Service has unreasonably delayed consideration of a request 

made by the Postal Service under section 3622 by failing to respond within a reasonable time to any lawful order of the Commission, the Commission may extend the 10–month period described 

in paragraph (1) of this subsection by one day for each day of such 

delay. 

ø(d) The Commission shall transmit its recommended decision in 

a rate, fee, or classification matter to the Governors. The recommended decision shall include a statement specifically responsive to the criteria established under section 3622 or 3623, as the 

case may be.¿

ø§ 3625. Action of the Governors 

ø(a) Upon receiving a recommended decision from the Postal 

Rate Commission, the Governors may approve, allow under protest, 

reject, or modify that decision in accordance with the provisions of 

this section. 

ø(b) The Governors may approve the recommended decision and 

order the decision placed in effect. 

ø(c) The Governors may, under protest, allow a recommended decision of the Commission to take effect and (1) seek judicial review 

thereof under section 3628 of this title, or (2) return the recommended decision to the Commission for reconsideration and a 

further recommended decision, which shall be acted upon under 

this section and subject to review in accordance with section 3628 

of this title. 

ø(d) The Governors may reject the recommended decision of the 

Commission and the Postal Service may resubmit its request to the 

Commission for reconsideration. Upon resubmission, the request 

shall be reconsidered, and a further recommended decision of the 

Commission shall be acted upon under this section and subject to 

review in accordance with section 3628 of this title. However, with 

the unanimous written concurrence of all of the Governors then 

holding office, the Governors may modify any such further recommended decision of the Commission under this subsection if the 

Governors expressly find that (1) such modification is in accord 

with the record and the policies of this chapter [39 USCS §§ 3601 

et seq.], and (2) the rates recommended by the Commission are not 

adequate to provide sufficient total revenues so that total estimated 

income and appropriations will equal as nearly as practicable estimated total costs. 

ø(e) The decision of the Governors to approve, allow under protest, reject, or modify a recommended decision of the Commission 

shall be in writing and shall include an estimate of anticipated revenue and a statement of explanation and justification. The decision, the record of the Commission’s hearings, and the Commission’s recommended decision shall be made generally available at 

the time the decision is issued and shall be printed and made 

available for sale by the Public Printer within 10 days following the 

day the decision is issued. 

106

ø(f) The Board shall determine the date on which the new rates, 

fees, the mail classification schedule, and changes in such schedule 

under this subchapter [39 USCS §§ 3621 et seq.] shall become effective.¿

* * * * * * * 

ø§ 3628. Appellate review 

øA decision of the Governors to approve, allow under protest, or 

modify the recommended decision of the Postal Rate Commission 

may be appealed to any court of appeals of the United States, within 15 days after its publication by the Public Printer, by an aggrieved party who appeared in the proceedings under section 

3624(a) of this title. The court shall review the decision, in accordance with section 706 of title 5, and chapter 158 [28 USCS §§ 2341 

et seq.] and section 2112 of title 28, except as otherwise provided 

in this section, on the basis of the record before the Commission 

and the Governors. The court may affirm the decision or order that 

the entire matter be returned for further consideration, but the 

court may not modify the decision. The court may not suspend the 

effectiveness of the changes, or otherwise prevent them from taking 

effect until final disposition of the suit by the court. No court shall 

have jurisdiction to review a decision made by the Commission or 

Governors under this chapter [39 USCS §§ 3601 et seq.] except as 

provided in this section.¿

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES

øSubchapter II—Permament Rates and Classes of Mail¿

Subchapter I—Provisions Relating to Market-Dominant 

Products

§ 3629. Reduced rates for voter registration purposes ƒCaution: For effective date of section, see § 13 of Act May 

20, 1993, P.L. 103–31, which appears as a note to 

this section≈

The Postal Service shall make available to a State or local voting 

registration official the rate for any class of mail that is available 

to a qualified nonprofit organization under section 3626 for the 

purpose of making a mailing that the official certifies is required 

or authorized by the National Voter Registration Act of 1993.

Subchapter II—Provisions Relating to Competitive Products

§ 3631. Applicability; definitions and updates 

(a) APPLICABILITY.—This subchapter shall apply with respect to—

(1) priority mail; 

(2) expedited mail; 

(3) bulk parcel post; 

(4) bulk international mail; and 

(5) mailgrams; subject to subsection (d) and any changes the 

Postal Regulatory Commission may make under section 3642. 

107

(b) DEFINITION.—For purposes of this subchapter, the term ‘‘costs 

attributable’’, as used with respect to a product, means the direct 

and indirect postal costs attributable to such product. 

(c) RULE OF CONSTRUCTION.—Mail matter referred to in subsection (a) shall, for purposes of this subchapter, be considered to 

have the meaning given to such mail matter under the mail classification schedule. 

(d) LIMITATION.—Notwithstanding any other provision of this section, nothing in this subchapter shall be considered to apply with 

respect to any product then currently in the market-dominant category of mail. 

§ 3632. Action of the Governors 

(a) AUTHORITY TO ESTABLISH RATES AND CLASSES.—The Governors, with the written concurrence of a majority of all of the Governors then holding office, shall establish rates and classes for products in the competitive category of mail in accordance with the requirements of this subchapter and regulations promulgated under 

section 3633. 

(b) PROCEDURES.— 

(1) IN GENERAL.—Rates and classes shall be established in 

writing, complete with a statement of explanation and justification, and the date as of which each such rate or class takes effect. 

(2) PUBLIC NOTICE; REVIEW; AND COMPLIANCE.—Not later 

than 30 days before the date of implementation of any adjustment in rates under this section—

(A) the Governors shall provide public notice of the adjustment and an opportunity for review by the Postal Regulatory Commission; 

(B) the Postal Regulatory Commission shall notify the 

Governors of any noncompliance of the adjustment with 

section 3633; and 

(C) the Governors shall respond to the notice provided 

under subparagraph (B) and describe the actions to be 

taken to comply with section 3633. 

(c) TRANSITION RULE.—Until regulations under section 3633 first 

take effect, rates and classes for competitive products shall remain 

subject to modification in accordance with the provisions of this 

chapter and section 407, as such provisions were as last in effect before the date of the enactment of this section. 

§ 3633. Provisions applicable to rates for competitive products 

The Postal Regulatory Commission shall, within 180 days after 

the date of the enactment of this section, promulgate (and may from 

time to time thereafter revise) regulations to— 

(1) prohibit the subsidization of competitive products by market-dominant products; 

(2) ensure that each competitive product covers its costs attributable; and 

(3) ensure that all competitive products collectively cover their 

share of institutional costs of the Postal Service. 

108

§ 3634. Assumed Federal income tax on competitive products 

income 

(a) DEFINITIONS.—For purposes of this section—

(1) the term ‘‘assumed Federal income tax on competitive 

products income’’ means the net income tax that would be imposed by chapter 1 of the Internal Revenue code of 1986 on the 

Postal Service’s assumed taxable income from competitive products for the year; and 

(2) the term ‘‘assumed taxable income from competitive products’’, with respect to a year, refers to the amount representing 

what would be the taxable income of a corporation under the 

Internal Revenue Code of 1986 for the year, if—

(A) the only activities of such corporation were the activities 

of the Postal Service allocable under section 2011(h) to competitive products; and 

(B) the only assets held by such corporation were the assets 

of the Postal Service allocable under section 2011(h) to such activities. 

(b) COMPUTATION AND TRANSFER REQUIREMENTS.—The Postal 

Service shall, for each year beginning with the year in which occurs 

the deadline for the Postal Service’s first report to the Postal Regulatory Commission under section 3652(a)—

(1) compute its assumed Federal income tax on competitive 

products income for such year; and 

(2) transfer from the Competitive Products Fund to the Postal 

Service Fund the amount of that assumed tax. 

(c) DEADLINE FOR TRANSFERS.—Any transfer required to be made 

under this section for a year shall be due on or before the January 

15th next occurring after the close of such year.

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES

øSubchapter III—Temporary Rates and Classes¿

Subchapter III—Provisions Relating to Experimental and 

New Products

ø§ 3641. Temporary changes in rates and classes 

ø(a) In any case in which the Postal Rate Commission fails to 

transmit a recommended decision on a change in rates of postage 

or in fees for postal services to the Governors in accordance with 

section 3624(c) of this title, the Postal Service may establish temporary changes in rates of postage and in fees for postal services 

in accordance with the proposed changes under consideration by 

the Commission. Such temporary changes may take effect upon 

such date as the Postal Service may determine, except that such 

temporary changes may take effect only after 10 days’ notice in the 

Federal Register. 

ø(b) Any temporary rate or fee established by the Postal Service 

under subsection (a) of this section shall be in accordance with the 

policies of this title and shall not exceed such amount as may be 

necessary for sufficient revenues to assure that the total estimated 

income, including appropriations, of the Postal Service shall, to the 

109

extent practicable, be equal to the total estimated costs of the Postal Service. 

ø(c) Notwithstanding the provisions of subsection (b) of this section, the Postal Service may not establish any temporary rate for 

a class of mail or any temporary fee for a postal service which is 

more than the permanent rate or fee requested for such class or 

postal service by the Postal Service under section 3622 of this title. 

ø(d) Any temporary change in rates of postage or in fees for postal services made by the Postal Service under this section shall remain in effect no longer than 150 days after the date on which the 

Commission transmits its recommended decision to the Governors 

under section 3624(d) of this title, unless such temporary change 

is terminated by the Governors before the expiration of such period. 

ø(e) If the Postal Rate Commission does not transmit to the Governors within 90 days after the Postal Service has submitted, or 

within 30 days after the Postal Service has resubmitted, to the 

Commission a request for a recommended decision on a change in 

the mail classification schedule (after such schedule is established 

under section 3623 of this title), the Postal Service, upon 10 days’ 

notice in the Federal Register, may place into effect temporary 

changes in the mail classification schedule in accordance with proposed changes under consideration by the Commission. Any temporary change shall be effective for a period ending not later than 

30 days after the Commission has transmitted its recommended decision to the Governors. 

ø(f) If, under section 3628 of this title, a court orders a matter 

returned to the Commission for further consideration, the Postal 

Service, with the consent of the Commission, may place into effect 

temporary changes in rates of postage, and fees for postal services, 

or in the mail classification schedule.¿

§ 3641. Market tests of experimental products 

(a) AUTHORITY.— 

(1) IN GENERAL.—The Postal Service may conduct market 

tests of experimental products in accordance with this section. 

(2) PROVISIONS WAIVED.—A product shall not, while it is 

being tested under this section, be subject to the requirements 

of sections 3622, 3633, or 3642, or regulations promulgated 

under those sections. 

(b) CONDITIONS.—A product may not be tested under this section 

unless it satisfies each of the following; 

(1) SIGNIFICANTLY DIFFERENT PRODUCT.—The product is, 

from the viewpoint of the mail users, significantly different 

from all products offered by the Postal Service within the 2 year 

period preceding the start of the test. 

(2) MARKET DISRUPTION.—The introduction or continued offering of the product will not create an unfair or otherwise inappropriate competitive advantage for the Postal Service or any 

mailer, particularly in regard to small business concerns (as defined under subsection (h)). 

(3) CORRECT CATEGORIZATION.—The Postal Service identifies 

the product, for the purpose of a test under this section, as either market-dominant or competitive, consistent with the criVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00113 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
110

teria under section 3642(b)(1). Costs and revenue attributable to 

a product identified as competitive shall be included in any determination under section 3633(3) (relating to provisions applicable to competitive products collectively). Any test that solely 

affects products currently classified as competitive, or which 

provides services ancillary to only competitive products, shall be 

presumed to be in the competitive product category without regard to whether a similar ancillary product exists for marketdominant products. 

(c) NOTICE.— (1) IN GENERAL.—At least 30 days before initiating a market 

test under this section, the Postal Service shall file with the 

Postal Regulatory Commission and publish in the Federal Register a notice— 

(A) setting out the basis for the Postal Service’s determination that the market test is covered by this section; 

and 

(B) describing the nature and scope of the market test. 

(2) SAFEGUARDS.—For a competitive experimental product, 

the provisions of section 504(g) shall be available with respect 

to any information required to be filed under paragraph (1) to 

the same extent and in the same manner as in the case of any 

matter described in section 504(g)(1). Nothing in paragraph (1) 

shall be considered to permit or require the publication of any 

information as to which confidential treatment is accorded 

under the preceding sentence (subject to the same exception as 

set forth in section 504(g)(3)). 

(d) DURATION.— (1) IN GENERAL.—A market test of a product under this section may be conducted over a period of not to exceed 24 months. 

(2) EXTENSION AUTHORITY.—If necessary in order to determine the feasibility or desirability of a product being tested 

under this section, the Postal Regulatory Commission may, 

upon written application of the Postal Service (filed not later 

than 60 days before the date as of which the testing of such 

product would otherwise be scheduled to terminate under paragraph (1)), extend the testing of such product for not to exceed 

an additional 12 months. 

(e) DOLLAR-AMOUNT LIMITATION.— (1) IN GENERAL.—A product may only be tested under this 

section if the total revenues that are anticipated, or in fact received, by the Postal Service from such product do not exceed 

$10,000,000 in any year, subject to paragraph (2) and subsection (g). 

(2) EXEMPTION AUTHORITY.—The Postal Regulatory Commission may, upon written application of the Postal Service, exempt 

the market test from the limit in paragraph (1) if the total revenues that are anticipated, or in fact received, by the Postal 

Service from such product do not exceed $50,000,000 in any 

year, subject to subsection (g). In reviewing an application 

under this paragraph, the Postal Regulatory Commission shall 

approve such application if it determines that— 

(A) the product is likely to benefit the public and meet an 

expected demand; 

111

(B) the product is likely to contribute to the financial stability of the Postal Service; and 

(C) the product is not likely to result in unfair or otherwise inappropriate competition. 

(f) CANCELLATION.—If the Postal Regulatory Commission at any 

time determines that a market test under this section fails to meet 

1 or more of the requirements of this section, it may order the cancellation of the test involved or take such other action as it considers 

appropriate. A determination under this subsection shall be made 

in accordance with such procedures as the Commission shall by regulation prescribe. 

(g) ADJUSTMENT FOR INFLATION.—For purposes of each year following the year in which occurs the deadline for the Postal Service’s 

first report to the Postal Regulatory Commission under section 

3652(a), each dollar amount contained in this section shall be adjusted by the change in the Consumer Price Index for such year (as 

determined under regulations of the Commission.) 

(h) DEFINITION OF A SMALL BUSINESS CONCERN.—The criteria 

used in defining small business concerns or otherwise categorizing 

business concerns as small business concerns shall, for purposes of 

this section, be established by the Postal Regulatory Commission in 

conformance with the requirements of section 3 of the Small Business Act. 

(i) EFFECTIVE DATE.—Market tests under this subchapter may be 

conducted in any year beginning with the first year in which occurs 

the deadline for the Postal Service’s first report to the Postal Regulatory Commission under section 3652(a). 

§ 3642. New products and transfers of products between the 

market-dominant and competitive categories of 

mail 

(a) IN GENERAL.—Upon request of the Postal Service or users of 

the mails, or upon its own initiative, the Postal Regulatory Commission may change the list of market-dominant products under section 

3621 and the list of competitive products under section 3631 by adding new products to the lists, removing products from the lists, or 

transferring products between the lists. 

(b) CRITERIA.—All determinations by the Postal Regulatory Commission under subsection (a) shall be made in accordance with the 

following criteria: 

(1) The market-dominant category of products shall consist of 

each product in the sale of which 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 substantial business to other firms offering similar products. The competitive category of products shall consist of all 

other products.

(2) EXCLUSION OF PRODUCTS COVERED BY POSTAL MONOPOLY.—A product covered by the postal monopoly shall not be 

subject to transfer under this section from the market-dominant 

category of mail. For purposes of the preceding sentence, the 

term ‘‘product covered by the postal monopoly’’ means any product the conveyance or transmission of which is reserved to the 

112

United States under section 1696 of title 18, subject to the same 

exception as set forth in the last sentence of section 409(e)(1). 

(3) ADDITIONAL CONSIDERATIONS.—In making any decision 

under this section, due regard shall be given to— 

(A) the availability and nature of enterprises in the private sector engaged in the delivery of the product involved; 

(B) the views of those who use the product involved on 

the appropriateness of the proposed action; and 

(C) the likely impact of the proposed action on small 

business concerns (within the meaning of section 3641(h)). 

(c) TRANSFERS OF SUBCLASSES AND OTHER SUBORDINATE UNITS

ALLOWABLE.— Nothing in this title shall be considered to prevent 

transfers under this section from being made by reason of the fact 

that they would involve only some (but not all) of the subclasses or 

other subordinate units of the class of mail or type of postal service 

involved (without regard to satisfaction of minimum quantity requirements standing alone.) 

(d) NOTIFICATION AND PUBLICATION REQUIREMENTS.— 

(1) NOTIFICATION REQUIREMENT.—The Postal Service shall, 

whenever it requests to add a product or transfer a product to 

a different category, file with the Postal Regulatory Commission 

and publish in the Federal Register a notice setting out the 

basis for its determination that the product satisfies the criteria 

under subsection (b) and, in the case of a request to add a product or transfer a product to the competitive category of mail, 

that the product meets the regulations promulgated by the Postal Regulatory Commission under section 3633. The provisions 

of section 504(g) shall be available with respect to any information required to be filed. 

(2) PUBLICATION REQUIREMENT.—The Postal Regulatory Commission shall, whenever it changes the list of products in the 

market-dominant or competitive category of mail, prescribe new 

lists of products. The revised lists shall indicate how and when 

any previous lists (including the lists under sections 3621 and 

3631) are superseded, and shall be published in the Federal 

Register. 

(e) PROHIBITION.—Except as provided in section 3641, no product 

that involves the physical delivery of letters, printed matter, or packages may be offered by the Postal Service unless it has been assigned to the market-dominant or competitive category of mail (as 

appropriate) either— 

(1) under this subchapter; or 

(2) by or under any other provision of law.

113

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES 

[Subchapter IV—Postal Services and Complaints]

Subchapter V—Postal Services, Complaints, and Judicial 

Review

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES 

[Subchapter V—General]

Subchapter VI—General 

Subchapter IV—Reporting Requirements and Related 

Provisions 

§ 3651. Annual reports by the Commission 

(a) IN GENERAL.—The Postal Regulatory Commission shall submit an annual report to the President and the Congress concerning 

the operations of the Commission under this title, including the extent to which regulations are achieving the objectives under sections 

3622, 3633, and 3691. 

(b) INFORMATION FROM POSTAL SERVICE.—The Postal Service 

shall provide the Postal Regulatory Commission with such information as may, in the judgment of the Commission, be necessary in 

order for the Commission to prepare its reports under this section. 

§ 3652. Annual reports to the Commission 

(a) COSTS, REVENUES, RATES, AND SERVICE.—Except as provided 

in subsection (c), the Postal Service shall, no later than 90 days 

after the end of each year, prepare and submit to the Postal Regulatory Commission a report (together with such nonpublic annex to 

the report as the Commission may require under subsection (e))— 

(1) which shall analyze costs, revenues, rates, and quality of 

service in sufficient detail to demonstrate that all products during such year complied with all applicable requirements of this 

title; and 

(2) which shall, for each market-dominant product provided 

in such year, provide— 

(A) product information, including mail volumes; and 

(B) measures of the service afforded by the Postal Service 

in connection with such product, including— 

(i) the level of service (described in terms of speed of 

delivery and reliability) provided; and 

(ii) the degree of customer satisfaction with the service provided. 

Before submitting a report under this subsection (including any 

annex to the report and the information required under subsection 

(b)), the Postal Service shall have the information contained in such 

report (and annex) audited by the Inspector General. The results of 

any such audit shall be submitted along with the report to which 

it pertains. 

(b) INFORMATION RELATING TO WORKSHARE DISCOUNTS.—The 

Postal Service shall include, in each report under subsection (a), the 

following information with respect to each market-dominant product 

114

for which a workshare discount was in effect during the period covered by such report: 

(1) The per-item cost avoided by the Postal Service by virtue 

of such discount. 

(2) The percentage of such per-item cost avoided that the peritem workshare discount represents. 

(3) The per-item contribution made to institutional costs. 

(c) SERVICE AGREEMENTS AND MARKET TESTS.—In carrying out 

subsections (a) and (b) with respect to service agreements (including 

service agreements entered into under section 3623) and experimental products offered through market tests under section 3641 in 

a year, the Postal Service— 

(1) may report summary data on the costs, revenues, and 

quality of service by service agreement and market test; and 

(2) shall report such data as the Postal Regulatory Commission requires. 

(d) SUPPORTING MATTER.—The Postal Regulatory Commission 

shall have access, in accordance with such regulations as the Commission shall prescribe, to the working papers and any other supporting matter of the Postal Service and the Inspector General in 

connection with any information submitted under this section. 

(e) CONTENT AND FORM OF REPORTS.— (1) IN GENERAL.—The Postal Regulatory Commission shall, 

by regulation, prescribe the content and form of the public reports (and any nonpublic annex and supporting matter relating 

to the report) to be provided by the Postal Service under this 

section. In carrying out this subsection, the Commission shall 

give due consideration to— 

(A) providing the public with timely, adequate information to assess the lawfulness of rates charged; 

(B) avoiding unnecessary or unwarranted administrative 

effort and expense on the part of the Postal Service; and 

(C) protecting the confidentiality of commercially sensitive information. 

(2) REVISED REQUIREMENTS.—The Commission may, on its 

own motion or on request of an interested party, initiate proceedings (to be conducted in accordance with regulations that 

the Commission shall prescribe) to improve the quality, accuracy, or completeness of Postal Service data required by the 

Commission under this subsection whenever it shall appear 

that— 

(A) the attribution of costs or revenues to products has 

become significantly inaccurate or can be significantly improved; 

(B) the quality of service data has become significantly 

inaccurate or can be significantly improved; or 

(C) such revisions are, in the judgment of the Commission, otherwise necessitated by the public interest. 

(f) CONFIDENTIAL INFORMATION.— (1) IN GENERAL.—If the Postal Service determines that any 

document or portion of a document, or other matter, which it 

provides to the Postal Regulatory Commission in a nonpublic 

annex under this section or under subsection (d) contains information which is described in section 410(c) of this title, or exVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00118 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
115

empt from public disclosure under section 552(b) of title 5, the 

Postal Service shall, at the time of providing such matter to the 

Commission, notify the Commission of its determination, in 

writing, and describe with particularity the documents (or portions of documents) or other matter for which confidentiality is 

sought and the reasons therefor. 

(2) TREATMENT.—Any information or other matter described 

in paragraph (1) to which the Commission gains access under 

this section shall be subject to paragraphs (2) and (3) of section 

504(g) in the same way as if the Commission had received notification with respect to such matter under section 504(g)(1). 

(g) OTHER REPORTS.—The Postal Service shall submit to the Postal Regulatory Commission, together with any other submission that 

the Postal Service is required to make under this section in a year, 

copies of its then most recent— 

(1) comprehensive statement under section 2401(e); 

(2) strategic plan under section 2802; 

(3) performance plan under section 2803; and 

(4) program performance reports under section 2804. 

§ 3653. Annual determination of compliance 

(a) OPPORTUNITY FOR PUBLIC COMMENT.—After receiving the reports required under section 3652 for any year, the Postal Regulatory Commission shall promptly provide an opportunity for comment on such reports by users of the mails, affected parties, and an 

officer of the Commission who shall be required to represent the interests of the general public. 

(b) DETERMINATION OF COMPLIANCE OR NONCOMPLIANCE.—Not 

later than 90 days after receiving the submissions required under 

section 3652 with respect to a year, the Postal Regulatory Commission shall make a written determination as to— 

(1) whether any rates or fees in effect during such year (for 

products individually or collectively) were not in compliance 

with applicable provisions of this chapter (or regulations promulgated thereunder); or 

(2) whether any service standards in effect during such year 

were not met. 

If, with respect to a year, no instance of noncompliance is found 

under this subsection to have occurred in such year, the written determination shall be to that effect. 

(c) IN ANY NONCOMPLIANCE IS FOUND.—If, for a year, a timely 

written determination of noncompliance is made under subsection 

(b), the Postal Regulatory Commission shall take any appropriate 

remedial action authorized by section 3662(c). 

(d) REBUTTABLE PRESUMPTION.—A timely written determination 

described in the last sentence of subsection (b) shall, for purposes of 

any proceeding under section 3662, create a rebuttable presumption 

of compliance by the Postal Service (with regard to the matters described in paragraphs (1) through (3) of subsection (b)) during the 

year to which such determination relates.

* * * * * * * 

116

ø§ 3662. Rate and service complaints 

øInterested parties who believe the Postal Service is charging 

rates which do not conform to the policies set out in this title or 

who believe that they are not receiving postal service in accordance 

with the policies of this title may lodge a complaint with the Postal 

Rate Commission in such form and in such manner as it may prescribe. The Commission may in its discretion hold hearings on such 

complaint. If the Commission, in a matter covered by subchapter 

II of this chapter [39 USCS §§ 3621 et seq.], determines the complaint to be justified, it shall, after proceedings in conformity with 

section 3624 of this title, issue a recommended decision which shall 

be acted upon in accordance with the provisions of section 3625 of 

this title and subject to review in accordance with the provisions 

of section 3628 of this title. If a matter not covered by subchapter 

II of this chapter [39 USCS §§ 3621 et seq.] is involved, and the 

Commission after hearing finds the complaint to be justified, it 

shall render a public report thereon to the Postal Service which 

shall take such action as it deems appropriate.¿

§ 3662. Rate and service complaints 

(a) IN GENERAL.—Any person (including an officer of the Postal 

Regulatory Commission representing the interests of the general 

public) who believes the Postal Service is not operating in conformance with the requirements of chapter 1, 4, or 6, or this chapter (or 

regulations promulgated under any of those chapters) may lodge a 

complaint with the Postal Regulatory Commission in such form and 

manner as the Commission may prescribe. 

(b) PROMPT RESPONSE REQUIRED.— (1) IN GENERAL.—The Postal Regulatory Commission shall, 

within 90 days after receiving a complaint under subsection (a), 

either— 

(A) begin proceedings on such complaint; or 

(B) issue an order dismissing the complaint (together 

with a statement of the reasons therefor). 

(2) TREATMENT OF COMPLAINTS NOT TIMELY ACTED ON.—For 

purposes of section 3663, any complaint under subsection (a) on 

which the Commission fails to act in the time and manner required by paragraph (1) shall be treated in the same way as if 

it had been dismissed under an order issued by the Commission 

on the last day allowable for the issuance of such order under 

paragraph (1). 

(c) ACTION REQUIRED IF COMPLAINT FOUND TO BE JUSTIFIED.—

If the Postal Regulatory Commission finds the complaint to be justified, it shall order that the Postal Service take such action as the 

Commission considers appropriate in order to achieve compliance 

with the applicable requirements and to remedy the effects of any 

noncompliance including ordering unlawful rates to be adjusted to 

lawful levels, ordering the cancellation of market tests, ordering the 

Postal Service to discontinue providing loss-making products, and 

requiring the Postal Service to make up for revenue shortfalls in 

competitive products. 

(d) AUTHORITY TO ORDER FINES IN CASES OF DELIBERATE NONCOMPLIANCE.—In addition, in cases of deliberate noncompliance by 

the Postal Service with the requirements of this title, the Postal RegVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00120 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
117

ulatory Commission may order, based on the nature, circumstances, 

extent, and seriousness of the noncompliance, a fine (in the amount 

specified by the Commission in its order) for each incidence of noncompliance. Fines resulting from the provision of competitive products shall be paid out of the Competitive Products Fund established 

in section 2011. All receipts from fines imposed under this subsection shall be deposited in the general fund of the Treasury of the 

United States.

ø§ 3663. Annual report on international services 

ø(a) Not later than July 1 of each year, the Postal Rate Commission shall transmit to each House of Congress a comprehensive report of the costs, revenues, and volumes accrued by the Postal 

Service in connection with mail matter conveyed between the 

United States and other countries for the previous fiscal year. 

ø(b) Not later than March 15 of each year, the Postal Service 

shall provide to the Postal Rate Commission such data as the Commission may require to prepare the report required under subsection (a) of this section. Data shall be provided in sufficient detail 

to enable the Commission to analyze the costs, revenues, and volumes for each international mail product or service, under the 

methods determined appropriate by the Commission for the analysis of rates for domestic mail.¿

§ 3663. Appellate review 

A person, including the Postal Service, adversely affected or aggrieved by a final order or decision of the Postal Regulatory Commission may, within 30 days after such order or decision becomes 

final, institute proceedings for review thereof by filing a petition in 

the United States Court of Appeals for the District of Columbia. The 

court shall review the order or decision in accordance with section 

706 of title 5, and chapter 158 and section 2112 of title 28, on the 

basis of the record before the Commission. 

§ 3664. Enforcement of orders 

The several district courts have jurisdiction specifically to enforce, 

and to enjoin and restrain the Postal Service from violating, any 

order issued by the Postal Regulatory Commission.

* * * * * * * 

CHAPTER 36—POSTAL RATES, CLASSES, AND SERVICES

Subchapter VII—Modern Service Standards 

§ 3691. Establishment of modern service standards 

(a) AUTHORITY GENERALLY.—The Postal Regulatory Commission 

shall, within 12 months after the date of the enactment of this section, by regulation establish (and may from time to time thereafter 

by regulation revise) a set of service standards for market-dominant 

products consistent with sections 101 (a) and (b) and 403. 

(b) OBJECTIVES.—Such standards shall be designed to achieve the 

following objectives: 

(1) To enhance and preserve the value of postal services to 

both senders and recipients. 

118

(2) To provide a system of objective external performance 

measurements for each market-dominant product as a basis for 

measurement of Postal Service performance. 

(3) To guarantee Postal Service customers delivery reliability, 

speed and frequency consistent with reasonable rates and best 

business practices. 

(c) FACTORS.—In establishing or revising such standards, the 

Postal Regulatory Commission shall take into account— 

(1) the actual level of service that Postal Service customers receive under any service guidelines previously established by the 

Postal Service or service standards established under this section; 

(2) the degree of customer satisfaction with Postal Service 

performance in the acceptance, processing and delivery of mail; 

(3) mail volume and revenues projected for future years; 

(4) the projected growth in the number of addresses the Postal 

Service will be required to serve in future years; 

(5) the current and projected future cost of serving Postal 

Service customers; 

(6) the effect of changes in technology, demographics and population distribution on the efficient and reliable operation of the 

postal delivery system; and 

(7) the policies of this title as well as such other factors as 

the Commission determines appropriate.

* * * * * * * 

PART V—TRANSPORTATION OF MAIL 

CHAPTER 54—TRANSPORTATION OF MAIL BY AIR 

§ 5402. Contracts for transportation of mail by air 

* * * * * * *

ø(d) If the Postal Service determines that service by certificated 

air carriers or combination of air carriers between any pair or pairs 

of points in foreign air transportation is not adequate for its purposes, it may contract for a period of not more than 4 years, without advertising for bids, in such manner and under such terms and 

conditions as it may deem appropriate, with any air taxi operator 

or combination thereof for such air transportation service. Contracts made under this subsection may be renewed at the existing 

rate by mutual agreement between the holder and the Postal Service. The Postal Service, with the consent of the air taxi operator, 

may adjust the compensation under such contracts for increased or 

decreased costs occasioned by changed conditions occurring during 

the contract term. The Postal Service shall cancel such a contract 

when the Secretary of transportation authorizes an additional certificated carrier or carriers to provide service between any pair or 

pairs of points covered by the contract, and such carrier or carriers 

inaugurate schedules adequate for its purposes.¿

(d)(1) The Postal Service may contract with any air carrier for the 

transportation of mail by aircraft in interstate air transportation, 

including the rates therefor, either through negotiations or competitive bidding. 

119

(2) Notwithstanding subsections (a) through (c), the Postal Service 

may contract with any air carrier or foreign air carrier for the 

transportation of mail by aircraft in foreign air transportation, including the rates therefor, either through negotiations or competitive 

bidding, except that— 

(A) any such contract may be awarded only to (i) an air carrier holding a certificate required by section 41101 of title 49 

or an exemption therefrom issued by the Secretary of Transportation, (ii) a foreign air carrier holding a permit required by 

section 41301 of title 49 or an exemption therefrom issued by 

the Secretary of Transportation, or (iii) a combination of such 

air carriers or foreign air carriers (or both); 

(B) mail transported under any such contract shall not be 

subject to any duty-to-carry requirement imposed by any provision of subtitle VII of title 49 or by any certificate, permit, or 

corresponding exemption authority issued by the Secretary of 

Transportation under that subtitle; 

(C) every contract that the Postal Service awards to a foreign 

air carrier under this paragraph shall be subject to the continuing requirement that air carriers shall be afforded the same 

opportunity to carry the mail of the country to and from which 

the mail is transported and the flag country of the foreign air 

carrier, if different, as the Postal Service has afforded the foreign air carrier; and 

(D) the Postmaster General shall consult with the Secretary 

of Defense concerning actions that affect the carriage of military 

mail transported in foreign air transportation. 

(3) Paragraph (2) shall not be interpreted as suspending or otherwise diminishing the authority of the Secretary of Transportation 

under section 41310 of title 49.

ø(e) 

ø(1) The Postal Service may determine rates and contract 

with any air carrier for the transportation of mail by aircraft 

in interstate air transportation either through negotiations or 

competitive bidding. 

ø(2)(A) In the exercise of its authority under paragraph (1), 

the Postal Service may require any air carrier to accept as mail 

shipments of day-old poultry, honeybees, and such other live 

animals as postal regulations allow to be transmitted as mail 

matter. The authority of the Postal Service under this subparagraph shall not apply in the case of any air carrier who commonly and regularly refuses to accept any live animals as 

cargo. 

ø(B) Notwithstanding any other provision of law, the Postal 

Service is authorized to assess, as postage to be paid by the 

mailers of any shipments covered by subparagraph (A), a reasonable surcharge that the Postal Service determines in its discretion to be adequate to compensate air carriers for any necessary additional expense incurred in handling such shipments.¿

(e) For purposes of this section, the terms ‘‘air carrier’’, ‘‘air transportation’’, ‘‘foreign air carrier’’, ‘‘foreign air transportation’’, ‘‘interVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00123 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
120

state air transportation’’, and ‘‘mail’’ shall have the meanings given 

such terms in section 40102 of title 49.

* * * * * * * 

TITLE 5—GOVERNMENT ORGANIZATION 

AND EMPLOYEES 

PART I—THE AGENCIES GENERALLY 

CHAPTER 1—ORGANIZATION 

§ 104. Independent establishment 

For the purpose of this title [5 USCS §§ 101 et seq.], ‘‘independent establishment’’ means—

(1) an establishment in the executive branch (other than the 

United States Postal Service or the øPostal Rate Commission¿

Postal Regulatory Commission) which is not an Executive department, military department, Government corporation, or 

part thereof, or part of an independent establishment; and 

(2) the General Accounting Office. 

* * * * * * *

CHAPTER 3—POWERS 

§ 306. Strategic plans 

* * * * * * * 

(f) For purposes of this section the term ‘‘agency’’ means an Executive agency defined under section 105, but does not include the 

Central Intelligence Agency, the General Accounting Office, the 

Panama Canal Commission, the United States Postal Service, and 

the øPostal Rate Commission.¿ Postal Regulatory Commission.

* * * * * * * 

PART III—EMPLOYEES 

Subpart A—General Provisions 

Chapter 21—DEFINITIONS 

§ 2104. Officer 

* * * * * * * 

(b) Except as otherwise provided by law, an officer of the United 

States Postal Service or of the øPostal Rate Commission¿ Postal 

Regulatory Commission is deemed not an officer for purposes of 

this title. 

* * * * * * *

121

Subpart B—Employment and Retention 

CHAPTER 33—EXAMINATION, SELECTION, AND 

PLACEMENT 

Subchapter VI—Assignments to and from States 

§ 3371. Definitions 

For the purpose of this subchapter [5 USCS §§ 3371 et seq.]— 

* * * * * * * 

(3) ‘‘Federal agency’’ means an Executive agency, military department, a court of the United States, the Administrative Office of the United States Courts, the Library of Congress, the 

Botanic Garden, the Government Printing Office, the Congressional Budget Office, the United States Postal Service, the 

øPostal Rate Commission¿ Postal Regulatory Commisson, the 

Office of the Architect of the Capitol, the Office of Technology 

Assessment, and such other similar agencies of the legislative 

and judicial branches as determined appropriate by the Office 

of Personnel Management; and 

* * * * * * *

Subpart D—Pay and Allowances 

CHAPTER 53—PAY RATES AND SYSTEMS 

Subchapter II—Executive Schedule Pay Rates 

§ 5314. Positions at level III 

Level III of the Executive Schedule applies to the following positions, for which the annual rate of basic pay shall be the rate determined with respect to such level under chapter 11 of title 2 [2 

USCS §§ 351 et seq.], as adjusted by section 5318 of this title: 

* * * * * * *

Chairman, øPostal Rate Commission¿ Postal Regulatory Commission.

* * * * * * *

§ 5315. Positions at level IV 

Level IV of the Executive Schedule applies to the following positions, for which the annual rate of basic pay shall be the rate determined with respect to such level under chapter 11 of title 2 [1. 

2 USCS §§351 et seq.], as adjusted by section 5318 of this title: 

* * * * * * *

Members, øPostal Rate Commissions¿ Postal Regulatory Commission (4). 

* * * * * * * 

122

CHAPTER 55—PAY ADMINISTRATION 

Subchapter II—Withholding Pay 

§ 5514. Installment deduction for indebtedness to the United 

States 

* * * * * * *

(5) For purposes of this subsection—

(A) ‘‘disposable pay’’ means that part of pay of any individual remaining after the deduction from those earnings 

of any amounts required by law to be withheld; and 

(B) ‘‘agency’’ includes executive departments and agencies, the United States Postal Service, the øPostal Rate 

Commission¿ Postal Regulatory Commission, the United 

States Senate, the United States House of Representatives, and any court, court administrative office, or instrumentality in the judicial or legislative branches of the Government, and government corporations. 

* * * * * * *

Subpart F—Labor-Management and Employee 

Relations 

CHAPTER 73—SUITABILITY, SECURITY, AND CONDUCT 

Subchapter IV—Foreign Gifts and Decorations 

§ 7342. Receipt and disposition of foreign gifts and decorations 

(a) For the purpose of this section—

(1) ‘‘employee’’ means—

(A) an employee as defined by section 2105 of this title 

and an officer or employee of the United States Postal 

Service or of the øPostal Rate Commission¿ Postal Regulatory Commission;

* * * * * * *

CHAPTER 75—ADVERSE ACTIONS 

Subchapter II—Removal, Suspension for More Than 14 

Days, Reduction in Grade or Pay, or Furlough for 30 Days 

or Less 

§ 7511. Definitions; application 

(a) For the purpose of this subchapter [5 USCS §§ 7511 et seq.]—

(1) ‘‘employee’’ means—

(A) an individual in the competitive service—

(i) who is not serving a probationary or trial period 

under an initial appointment; or 

(ii) who has completed 1 year of current continuous 

service under other than a temporary appointment 

limited to 1 year or less; 

123

(B) a preference eligible in the excepted service who has 

completed 1 year of current continuous service in the same 

or similar positions—

(i) in an Executive agency; or 

(ii) in the United States Postal Service or øPostal 

Rate Commission¿ Postal Regulatory Commission; and 

* * * * * * *

CHAPTER 81—COMPENSATION FOR WORK INJURIES 

Subchapter I—Generally 

§ 8105. Total disability 

(a) If the disability is total, the United States shall pay the employee during the disability monthly monetary compensation equal 

to 66 2⁄3 percent of his monthly pay, which is known as his basic 

compensation for total disability. This section applies to a Postal 

Service employee, except as provided under subsection (c).

(b) The loss of use of both hands, both arms, both feet, or both 

legs, or the loss of sight of both eyes, is prima facie permanent 

total disability.

(c)(1) In this subsection, the term ‘‘retirement age’’ has the meaning given under section 216(l)(1) of the Social Security Act (42 

U.S.C. 416(l)(1)). 

(2) Notwithstanding any other provision of law, for any injury occurring on or after the date of enactment of the Postal Accountability and Enhancement Act, and for any new claim for a period 

of disability commencing on or after that date, the compensation entitlement for total disability is converted to 50 percent of the monthly pay of the employee on the later of— 

(A) the date on which the injured employee reaches retirement 

age; or

* * * * * * *

(B) 1 year after the employee begins receiving compensation.

* * * * * * * 

§ 8106. Partial disability 

(a) If the disability is partial, the United States shall pay the employee during the disability monthly monetary compensation equal 

to 662⁄3 percent of the difference between his monthly pay and his 

monthly wage-earning capacity after the beginning of the partial 

disability, which is known as his basic compensation for partial disability. This section applies to a Postal Service employee, except as 

provided under subsection (d).

(b) The Secretary of Labor may require a partially disabled employee to report his earnings from employment or self-employment, 

by affidavit or otherwise, in the manner and at the times the Secretary specifies. The employee shall include in the affidavit or report the value of housing, board, lodging, and other advantages 

which are part of his earnings in employment or self-employment 

and which can be estimated in money. An employee who—

(1) fails to make an affidavit or report when required; or 

124

(2) knowingly omits or understates any part of of his earnings; 

forfeits his right to compensation with respect to any period for 

which the affidavit or report was required. Compensation forfeited 

under this subsection, if already paid, shall be recovered by a deduction from the compensation payable to the employee or otherwise recovered under section 8129 of this title, unless recovery is 

waived under that section. 

(c) A partially disabled employee who—

(1) refuses to seek suitable work; or 

(2) refuses or neglects to work after suitable work is offered 

to, procured by, or secured for him; is not entitled to compensation.

(d)(1) In this subsection, the term ‘‘retirement age’’ has the meaning given under section 216(l)(1) of the Social Security Act (42 

U.S.C. 416(l)(1)). 

(2) Notwithstanding any other provision of law, for any injury occurring on or after the date of enactment of this subsection, and for 

any new claim for a period of disability commencing on or after that 

date, the compensation entitlement for partial disability is converted 

to 50 percent of the difference between the monthly pay of an employee and the monthly wage earning capacity of the employee after 

the beginning of partial disability on the later of— 

(A) the date on which the injured employee reaches retirement 

age; or 

(B) 1 year after the employee begins receiving compensation. 

* * * * * * *

Subpart G—Insurance and Annuities 

CHAPTER 81—COMPENSATION FOR WORK INJURIES 

Subchapter I—Generally 

§ 8117. Time of accrual of right 

øAn employee¿ (a) An employee other than a Postal Service employee is not entitled to compensation for the first 3 days of temporary disability, except—

(1) when the disability exceeds 14 days; 

(2) when the disability is followed by permanent disability; 

or 

(3) as provided by sections 8103 and 8104 of this title.

(b) A Postal Service employee is not entitled to compensation or 

continuation of pay for the first 3 days of temporary disability, except as provided under paragraph (3) of subsection (a). A Postal 

Service employee may use annual leave, sick leave, or leave without 

pay during that 3-day period, except that if the disability exceeds 14 

days or is followed by permanent disability, the employee may have 

their sick leave or annual leave reinstated or receive pay for the time 

spent on leave without pay under this section. 

* * * * * * *

125

§ 8118. Continuation of pay; election to use annual or sick 

leave 

(a) The United States shall authorize the continuation of pay of 

an employee, as defined in section 8101(1) of this title (other than 

those referred to in clause (B) or (E)), who has filed a claim for a 

period of wage loss due to a traumatic injury with his immediate 

superior on a form approved by the Secretary of Labor within the 

time specified in section 8122(a)(2) of this title. 

(b) Continuation of pay under this subchapter [1. 5 USCS §§ 8101 

et seq.] shall be furnished—

ø(1) without a break in time unless controverted under regulations of the Secretary;¿

(1) without a break in time, except as provided under section 

8117(b), unless controverted under regulations of the Secretary.

2. (2) for a period not to exceed 45 days; and 

(3) under accounting procedures and such other regulations 

as the Secretary may require. 

* * * * * * *

Subpart G—Insurance and Annuities 

CHAPTER 83—RETIREMENT 

Subchapter III—Civil Service Retirement 

§ 8334. Deductions, contributions, and deposits 

(a)(1)(A) The employing agency shall deduct and withhold from 

the basic pay of an employee, Member, Congressional employee, 

law enforcement officer, firefighter, bankruptcy judge, judge of the 

United States Court of Appeals for the Armed Forces, United 

States magistrate, Court of Federal Claims judge, member of the 

Capitol Police, member of the Supreme Court Police, or nuclear 

materials courier, as the case may be, the percentage of basic pay 

applicable under subsection (c). 

(B)(i) Except as provided in clause (ii), an equal amount shall be 

contributed from the appropriation or fund used to pay the employee or, in the case of an elected official, from an appropriation 

or fund available for payment of other salaries of the same office 

or establishment. When an employee in the legislative branch is 

paid by the Chief Administrative Officer of the House of Representatives, the Chief Administrative Officer may pay from the applicable accounts of the House of Representatives the contribution that 

otherwise would be contributed from the appropriation or fund 

used to pay the employee. 

ø(ii) In the case of an employee of the United States Postal Service, the amount to be contributed under this subparagraph shall 

(instead of the amount described in clause (i)) be equal to the product derived by multiplying the employee’s basic pay by the percentage equal to—

(I) the normal-cost percentage for the applicable employee 

category listed in subparagraph (A), minus 

(II) the percentage deduction rate that applies with respect 

to such employee under subparagraph (A).¿

126

(ii) In the case of an employee of the United States Postal Service, 

no amount shall be contributed under this subparagraph.

* * * * * * *

§ 8348. Civil Service Retirement and Disability Fund 

* * * * * * *

ø(h)(1)(A) For purposes of this subsection, ‘‘Postal supplemental 

liability’’ means the estimated excess, as determined by the Office, 

of—

ø(i) the actuarial present value of all future benefits payable 

from the Fund under this subchapter [5 USCS §§ 8331 et seq.] 

attributable to the service of current or former employees of 

the United States Postal Service, over 

ø(ii) the sum of—

ø(I) the actuarial present value of deductions to be withheld from the future basic pay of employees of the United 

States Postal Service currently subject to this subchapter 

[5 USCS §§ 8331 et seq.] pursuant to section 8334; 

ø(II) the actuarial present value of the future contributions to be made pursuant to section 8334 with respect to 

employees of the United States Postal Service currently 

subject to this subchapter [5 USCS §§ 8331 et seq.]; 

ø(III) that portion of the Fund balance, as of the date 

the Postal supplemental liability is determined, attributable to payments to the Fund by the United States Postal Service and its employees, including earnings on those 

payments; and 

ø(IV) any other appropriate amount, as determined by 

the Office in accordance with generally accepted actuarial 

practices and principles. 

ø(B)(i) In computing the actuarial present value of future benefits, the Office shall include the full value of benefits attributable 

to military and volunteer service for United States Postal Service 

employees first employed after June 30, 1971, and a prorated share 

of the value of benefits attributable to military and volunteer service for United States Postal Service employees first employed before July 1, 1971. 

ø(ii) Military service so included shall not be included in the computation of any amount under subsection (g)(2). 

ø(2)(A) Not later than June 30, 2004, the Office shall determine 

the Postal supplemental liability as of September 30, 2003. The Office shall establish an amortization schedule, including a series of 

equal annual installments commencing September 30, 2004, which 

provides for the liquidation of such liability by September 30, 2043. 

ø(B) The Office shall redetermine the Postal supplemental liability as of the close of the fiscal year, for each fiscal year beginning 

after September 30, 2003, through the fiscal year ending September 30, 2038, and shall establish a new amortization schedule, 

including a series of equal annual installments commencing on 

September 30 of the subsequent fiscal year, which provides for the 

liquidation of such liability by September 30, 2043. 

ø(C) The Office shall redetermine the Postal supplemental liability as of the close of the fiscal year for each fiscal year beginning 

127

after September 30, 2038, and shall establish a new amortization 

schedule, including a series of equal annual installments commencing on September 30 of the subsequent fiscal year, which provides for the liquidation of such liability over 5 years. 

ø(D) Amortization schedules established under this paragraph 

shall be set in accordance with generally accepted actuarial practices and principles, with interest computed at the rate used in the 

most recent dynamic actuarial valuation of the Civil Service Retirement System. 

ø(E) The United States Postal Service shall pay the amounts so 

determined to the Office, with payments due not later than the 

date scheduled by the Office. 

ø(F) An amortization schedule established under subparagraph 

(B) or (C) shall supersede any amortization schedule previously established under this paragraph. 

ø(3) Notwithstanding any other provision of law, in computing 

the amount of any payment under any other subsection of this section that is based upon the amount of the unfunded liability, such 

payment shall be computed disregarding that portion of the unfunded liability that the Office determines will be liquidated by 

payments under this subsection. 

ø(4) Notwithstanding any other provision of this subsection, any 

determination or redetermination made by the Office under this 

subsection shall, upon request of the Postal Service, be subject to 

reconsideration and review (including adjustment by the Board of 

Actuaries of the Civil Service Retirement System) to the same extent and in the same manner as provided under section 8423(c).¿

(h)(1) In this subsection, the term ‘‘Postal surplus or supplemental 

liability’’ means the estimated difference, as determined by the Office, between— 

(A) the actuarial present value of all future benefits payable 

from the Fund under this subchapter to current or former employees of the United States Postal Service and attributable to 

civilian employment with the United States Postal Service; and 

(B) the sum of— 

(i) the actuarial present value of deductions to be withheld from the future basic pay of employees of the United 

States Postal Service currently subject to this subchapter 

under section 8334; 

(ii) that portion of the Fund balance, as of the date the 

Postal surplus or supplemental liability is determined, attributable to payments to the Fund by the United States 

Postal Service and its employees, minus benefit payments 

attributable to civilian employment with the United States 

Postal Service, plus the earnings on such amounts while in 

the Fund; and 

(iii) any other appropriate amount, as determined by the 

Office in accordance with generally accepted actuarial practices and principles. 

(2)(A) Not later than June 30, 2006, the Office shall determine the 

Postal surplus or supplemental liability, as of September 30, 2005. 

If that result is a surplus, the amount of the surplus shall be transferred to the Postal Service Retiree Health Benefits Fund established 

under section 8909a. If the result is a supplemental liability, the OfVerDate jul 14 2003 04:52 Aug 27, 2004 Jkt 029010 PO 00000 Frm 00131 Fmt 6602 Sfmt 6603 E:\HR\OC\SR318.XXX SR318
128

fice shall establish an amortization schedule, including a series of 

annual installments commencing September 30, 2006, which provides for the liquidation of such liability by September 30, 2043. 

(B) The Office shall redetermine the Postal surplus or supplemental liability as of the close of the fiscal year, for each fiscal year 

beginning after September 30, 2006, through the fiscal year ending 

September 30, 2038. If the result is a surplus, that amount shall remain in the Fund until distribution is authorized under subparagraph (C), and any prior amortization schedule for payments shall 

be terminated. If the result is a supplemental liability, the Office 

shall establish a new amortization schedule, including a series of 

annual installments commencing on September 30 of the subsequent 

fiscal year, which provides for the liquidation of such liability by 

September 30, 2043. 

(C) As of the close of the fiscal years ending September 30, 2015, 

2025, 2035, and 2039, if the result is a surplus, that amount shall 

be transferred to the Postal Service Retiree Health Benefits Fund, 

and any prior amortization schedule for payments shall be terminated. 

(D) Amortization schedules established under this paragraph 

shall be set in accordance with generally accepted actuarial practices and principles, with interest computed at the rate used in the 

most recent valuation of the Civil Service Retirement System. 

(E) The United States Postal Service shall pay the amounts so determined to the Office, with payments due not later than the date 

scheduled by the Office. 

(3) Notwithstanding any other provision of law, in computing the 

amount of any payment under any other subsection of this section 

that is based upon the amount of the unfunded liability, such payment shall be computed disregarding that portion of the unfunded 

liability that the Office determines will be liquidated by payments 

under this subsection. 

* * * * * * *

Subpart G—Insurance and Annuities 

CHAPTER 84—FEDERAL EMPLOYEES’ RETIREMENT 

SYSTEM 

Subchapter I—General Provisions 

§ 8402. Federal Employees’ Retirement System; exclusions 

* * * * * * * 

(c)(1) The Office may exclude from the operation of this chapter 

[5 USCS §§8401 et seq.] an employee or group of employees in or 

under an Executive agency, the United States Postal Service, or 

the øPostal Rate Commission¿ Postal Regulatory Commission, 

whose employment is temporary or intermittent, except an employee whose employment is part-time career employment (as defined in section 3401(2)). 

* * * * * * * 

129

Subchapter II—Basic Annuity 

* * * * * * * 

§ 8423. Government contributions 

* * * * * * * 

(b) 

(1) The Office shall compute—

(A) the amount of the supplemental liability of the Fund 

with respect to individuals other than those to whom subparagraph (B) relates, and 

(B) the amount of the supplemental liability of the Fund 

with respect to current or former employees of the United 

States Postal Service (and the øPostal Rate Commission¿

Postal Regulatory Commission) and their survivors; 

* * * * * * * 

Subpart G—Insurance and Annuities 

Chapter 84—FEDERAL EMPLOYEES’ RETIREMENT 

SYSTEM 

Subchapter VII—Federal Retirement Thrift Investment 

Management System 

§ 8474. Executive Director

* * * * * * * 

(c) The Executive Director may—

(1) prescribe such regulations as may be necessary to carry 

out the responsibilities of the Executive Director under this 

section, other than regulations relating to fiduciary responsibilities; 

(2) appoint such personnel as may be necessary to carry out 

the provisions of this subchapter and subchapter III of this 

chapter [5 USCS §§ 8471 et seq., 8431 et seq.]; 

(3) subject to approval by the Board, procure the services of 

experts and consultants under section 3109 of this title; 

(4) secure directly from an Executive agency, the United 

States Postal Service, or the øPostal Rate Commission¿ Postal 

Regulatory Commission any information necessary to carry out 

the provisions of this subchapter or subchapter III of this chapter [5 USCS §§ 8471 et seq., 8431 et seq.] and policies of the 

Board; 

* * * * * * * 

CHAPTER 89—HEALTH INSURANCE 

§ 8906. Contribution 

* * * * * * * 

(g) 

(1) Except as provided in paragraphs (2) and (3), the Government contributions authorized by this section for health benefits for an annuitant shall be paid from annual appropriations 

130

which are authorized to be made for that purpose and which 

may be made available until expended. 

(2)(A) The Government contributions authorized by this section for health benefits for an individual who first becomes an 

annuitant by reason of retirement from employment with the 

United States Postal Service on or after July 1, 1971, or for a 

survivor of such an individual or of an individual who died on 

or after July 1, 1971 while employed by the United States 

Postal Service, øshall be paid by the United States Postal Service.¿ shall be paid first from the Postal Service Retiree Health 

Benefit Fund up to the amount contained in the Fund, with any 

remaining amount paid by the United States Postal Service.

(B) In determining any amount for which the Postal Service 

is liable under this paragraph, the amount of the liability shall 

be prorated to reflect only that portion of total service which 

is attributable to civilian service performed (by the former 

postal employee or by the deceased individual referred to in 

subparagraph (A), as the case may be) after June 30, 1971, as 

estimated by the Office of Personnel Management. 

(3) The Government contribution for persons enrolled in a 

health benefits plan as part of the demonstration project under 

section 1108 of title 10 shall be paid as provided in subsection 

(i) of that section. 

* * * * * * * 

§ 8909. Employees Health Benefits Fund 

(a) There is in the Treasury of the United States an Employees 

Health Benefits Fund which is administered by the Office of Personnel Management. The contributions of enrollees and the Government described by section 8906 of this title shall be paid into 

the Fund. The Fund is available—

(1) without fiscal year limitation for all payments to approved health benefits plans; and(2) to pay expenses for administering this chapter [5 USCS §§8901 et seq.] within the limitations that may be specified annually by Congress. 

* * * * * * * 

(g) The fund described in subsection (a) is available to pay costs 

that the Office incurs for activities associated with implementation 

of the demonstration project under section 1108 of title 10.

§ 8909a. Postal Service Retiree Health Benefit Fund 

(a) There is in the Treasury of the United States a Postal Service 

Retiree Health Benefits Fund which is administered by the Office of 

Personnel Management. 

(b) The Fund is available without fiscal year limitation for payments required under section 8906(g)(2)(A). 

(c) The Secretary of the Treasury shall immediately invest, in interest-bearing securities of the United States such currently available portions of the Fund as are not immediately required for payments from the Fund. Such investments shall be made in the same 

manner as investments for the Civil Service Retirement and Disability Fund under section 8348. 

131

(d)(1) Not later than December 31, 2006, and by December 31 of 

each succeeding year, the Office shall compute the net present value 

of the future payments required under section 8906(g)(2)(A) and attributable to the service of Postal Service employees during the most 

recently ended fiscal year. 

(2)(A) Not later than December 31, 2006, the Office shall compute, 

and by December 31 of each succeeding year, the Office shall recompute the difference between— 

(i) the net present value of the excess of future payments required under section 8906(g)(2)(A) for current and future 

United States Postal Service annuitants as of the end of the fiscal year ending on September 30 of that year; and 

(ii)(I) the value of the assets of the Postal Retiree Health Benefits Fund as of the end of the fiscal year ending on September 

30 of that year; and 

(II) the net present value computed under paragraph (1).

(B) Not later than December 31, 2006, the Office shall compute, 

and by December 31 of each succeeding year shall recompute, an 

amortization schedule including a series of annual installments 

which provide for the liquidation by January 31, 2046, or within 

15 years, whichever is later, of the net present value determined 

under subparagraph (A), including interest at the rate used in that 

computation. 

(3) Not later than January 31, 2007, and by January 31 of each 

succeeding year, the United States Postal Service shall pay into 

such Fund— 

(A) the net present value computed under paragraph (1); and 

(B) the annual installment computed under paragraph (2)(B). 

(4) Computations under this subsection shall be made consistent 

with the assumptions and methodology used by the Office for financial reporting under subchapter II of chapter 35 of title 31. 

(5) After consultation with the United States Postal Service, the 

Office shall promulgate any regulations the Office determines necessary under this subsection. 

* * * * * * *

TITLE 5—APPENDIX 

ETHICS IN GOVERNMENT ACT OF 1978

TITLE I, FINANCIAL DISCLOSURE REQUIREMENTS OF FEDERAL PERSONNEL 

§ 101. Persons required to file 

* * * * * * * 

(f) The officers and employees referred to in subsections (a), (d), 

and (e) are—

* * * * * * * 

132

(6) the Postmaster General, the Deputy Postmaster General, 

each Governor of the Board of Governors of the United States 

Postal Service and each officer or employee of the United 

States Postal Service or øPostal Rate Commission¿ Postal Regulatory Commission who occupies a position for which the rate 

of basic pay is equal to or greater than 120 percent of the minimum rate of basic pay payable for GS–15 of the General 

Schedule; 

* * * * * * * 

TITLE 29, LABOR 

CHAPTER 16—VOCATIONAL REHABILITATION AND 

OTHER REHABILITATION SERVICES RIGHTS AND ADVOCACY 

§ 791. Employment of individuals with disabilities 

* * * * * * * 

(b) Federal agencies; affirmative action program plans. Each department, agency, and instrumentality (including the United States 

Postal Service and the øPostal Rate Commission¿ Postal Regulatory Commission) in the executive branch and the Smithsonian 

Institution shall, with one hundred and eighty days after the date 

of enactment of this Act øenacted Sept. 26, 1973¿, submit to the 

Commission and to the Committee an affirmative action program 

plan for the hiring, placement, and advancement of individuals 

with disabilities in such department, agency, instrumentality, or 

Institution. Such plan shall include a description of the extent to 

which and methods whereby the special needs of employees who 

are individuals with disabilities are being met. Such plan shall be 

updated annually, and shall be reviewed annually and approved by 

the Commission, if the Commission determines, after consultation 

with the Committee, that such plan provides sufficient assurances, 

procedures and commitments to provide adequate hiring, placement, and advancement opportunities for individuals with disabilities. 

* * * * * * * 

TITLE 42, THE PUBLIC HEALTH AND 

WELFARE 

CHAPTER 112—VICTIM COMPENSATION AND 

ASSISTANCE 

§ 10601. Crime Victims Fund 

(a) Establishment. There is created in the Treasury a separate 

account to be known as the Crime Victims Fund (hereinafter in 

this chapter referred to as the ‘‘Fund’’). 

(b) Fines deposited in Fund; penalties; forfeited appearance 

bonds. Except as limited by subsection (c), there shall be deposited 

in the Fund—

133

(1) all fines that are collected from persons convicted of offenses against the United States except—

(A) fines available for use by the Secretary of the Treasury pursuant to—

(i) section 11(d) of the Endangered Species Act (16 

U.S.C. 1540(d)); and 

(ii) section 6(d) of the Lacey Act Amendments of 

1981 (16 U.S.C. 3375(d)); and 

(B) fines to be paid into—

(i) the railroad unemployment insurance account 

pursuant to the Railroad Unemployment Insurance 

Act (45 U.S.C. 351 et seq.); 

(ii) the Postal Service Fund pursuant to sections 

2601(a)(2) and 2003 of title 39 of the United States 

Code and for the purposes set forth in section 

ø404(a)(8)¿ 404(a)(7) of such title 39; 

(iii) the navigable waters revolving fund pursuant to 

section 311 of the Federal Water Pollution Control Act 

(33 U.S.C. 1321) and

(iv) county public school funds pursuant to section 

3613 of title 18 of the United States Code; 

* * * * * * *

TITLE 44, PUBLIC PRINTING AND 

DOCUMENTS 

CHAPTER 35—COORDINATION OF FEDERAL 

INFORMATION POLICY

Subchapter I—Federal Information Policy

§ 3502. Definitions 

As used in this subchapter [44 USCS §§ 3501 et seq.]—

* * * * * * * 

(5) the term ‘‘independent regulatory agency’’ means the 

Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Product 

Safety Commission, the Federal Communications Commission, 

the Federal Deposit Insurance Corporation, the Federal Energy 

Regulatory Commission, the Federal Housing Finance Board, 

the Federal Maritime Commission, the Federal Trade Commission, the Interstate Commerce Commission, the Mine Enforcement Safety and Health Review Commission, the National 

Labor Relations Board, the Nuclear Regulatory Commission, 

the Occupational Safety and Health Review Commission, the 

øPostal Rate Commission¿ Postal Regulatory Commission, the 

Securities and Exchange Commission, and any other similar 

agency designated by statute as a Federal independent regulatory agency or commission; 

* * * * * * * 

134

TITLE 49, TRANSPORTATION 

Subtitle VII—Aviation Programs 

PART A—AIR COMMERCE AND SAFETY 

Subpart II—Economic Regulation 

CHAPTER 411—AIR CARRIER CERTIFICATES

§ 41107. Transportation of mail 

When the United States Postal Service finds that the needs of 

the Postal Service require the transportation of mail by aircraft øin 

foreign air transportation or¿ between places in Alaska, in addition 

to the transportation of mail authorized under certificates in effect, 

the Postal Service shall certify that finding to the Secretary of 

Transportation with a statement about the additional transportation and facilities necessary to provide the additional transportation. A copy of each certification and statement shall be posted 

for at least 20 days in the office of the Secretary. After notice and 

an opportunity for a hearing, the Secretary shall issue a new certificate under section 41102 of this title, or amend or modify an existing certificate under section 41110(a)(2)(A) of this title, to provide the additional transportation and facilities if the Secretary 

finds the additional transportation is required by the public convenience and necessity. 

* * * * * * * 

CHAPTER 419—TRANSPORTATION OF MAIL

§ 41901. General authority 

ø(a) TITLE 39.—The United States Postal Service may provide for 

the transportation of mail by aircraft in interstate air transportation under section 5402(e) and (f) of title 39.¿

(a) TITLE 39.—The United States Postal Service may provide for 

the transportation of mail by aircraft in air transportation under 

this chapter and under chapter 54 of title 39.

(b) Authority to prescribe prices. Except as provided in section 

5402 of title 39, on the initiative of the Secretary of Transportation 

or on petition by the Postal Service or an air carrier, the Secretary 

shall prescribe and publish—

(1) after notice and an opportunity for a hearing on the 

record, reasonable prices to be paid by the Postal Service for 

the transportation of mail by aircraft [in foreign air transportation or] between places in Alaska, the facilities used in and 

useful for the transportation of mail, and the services related 

to the transportation of mail for each carrier holding a certificate that authorizes that transportation; 

(2) the methods used, whether by aircraft-mile, pound-mile, 

weight, space, or a combination of those or other methods, to 

determine the prices for each air carrier or class of air carriers; 

and 

135

(3) the effective date of the prices. 

* * * * * * * 

§ 41902. Schedules for certain transportation of mail 

(a) REQUIREMENT.—Except as provided in section 41906 of this 

title and section 5402 of title 39, an air carrier may transport mail 

by aircraft [in foreign air transportation or] between places in Alaska only under a schedule designated or required to be established 

under subsection (c) of this section for the transportation of mail. 

(b) STATEMENTS ON PLACES AND SCHEDULES.—Every air carrier 

shall file with the Secretary of Transportation and the United 

States Postal Service a statement showing—

(1) the places between which the carrier is authorized to provide foreign air transportation (other than foreign air transportation of mail); 

(2) the places between which the carrier is authorized to 

transport mail in Alaska; 

(3) every schedule of aircraft regularly operated by the carrier between places described in clauses (1) and (2) of this subsection and every change in each schedule; and

(4) for each schedule, the places served by the carrier and 

the time of arrival at, and departure from, each place. 

* * * * * * * 

§ 41903. Duty to provide certain transportation of mail 

(a) AIR CARRIERS.—Subject to subsection (b) of this section, an 

air carrier authorized by its certificate to transport mail by aircraft 

øin foreign air transportation or¿ between places in Alaska shall—

(1) provide facilities and services necessary and adequate to 

provide that transportation; and 

(2) transport mail between the places authorized in the certificate for transportation of mail when required, and under 

regulations prescribed, by the United States Postal Service. 

(b) MAXIMUM MAIL LOAD.—The Secretary of Transportation may 

prescribe the maximum mail load for a schedule or for an aircraft 

or type of aircraft for the transportation of mail by aircraft [in foreign air transportation or] between places in Alaska. If the Postal 

Service tenders to an air carrier mail exceeding the maximum load 

for transportation by the carrier under a schedule designated or required to be established for the transportation of mail under section 41902(c) of this title, the carrier, as nearly in accordance with 

the schedule as the Secretary decides is possible, shall— 

* * * * * * * 

§ 41907. Prices for foreign transportation of mail 

ø(a) LIMITATIONS.¿—When air transportation is provided between 

the United States and a foreign country both by aircraft owned or 

operated by an air carrier holding a certificate under chapter 411 

of this title [49 USCS §§ 41101 et seq.] and by aircraft owned or 

operated by a foreign air carrier, the United States Postal Service 

may not pay to or for the account of the foreign air carrier a price 

for transporting mail by aircraft between the United States and the 

136

foreign country that the Postal Service believes will result (over a 

reasonable period determined by the Postal Service considering exchange fluctuations and other factors) in the foreign air carrier receiving a price for transporting the mail that is higher than the 

price—

(1) the government of a foreign country or foreign postal administration pays to air carriers for transporting mail of the 

foreign country by aircraft between the foreign country and the 

United States; or 

(2) determined by the Postal Service to be comparable to the 

price the government of a foreign country or foreign postal administration pays to air carriers for transporting mail of the 

foreign country by aircraft between the foreign country and an 

intermediate country on the route of the air carrier between 

the foreign country and the United States. 

ø(b) CHANGES.—The Secretary of Transportation shall act expeditiously on proposed changes in prices for transporting mail by aircraft in foreign air transportation. When prescribing those prices, 

the Secretary shall consider—

ø(1) the prices paid for transportation of mail under the Universal Postal Union Convention as ratified by the United 

States Government; 

ø(2) the price-making elements used by the Universal Postal 

Union in prescribing its airmail prices; and 

ø(3) the competitive disadvantage to United States flag air 

carriers resulting from foreign air carriers receiving Universal 

Postal Union prices for transporting United States mail and 

national origin mail of their own countries.¿

Æ