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###### Postal Regulatory Commission

          - 39 CFR Part 3020
          - [Docket Nos. MC2009-40 and CP2009-61; Order No. 295]

# AGENCY:

Postal Regulatory Commission.

# ACTION:

Final rule.

# SUMMARY:

The Commission is adding Parcel Select & Parcel Return Service Contract 2 to the Competitive Product List. This action is consistent with changes in a recent law governing postal operations. Republication of the lists of market dominant and competitive products is also consistent with new requirements in the law.

# DATES:

Effective October 1, 2009 and is applicable beginning September 4, 2009.

# FOR FURTHER INFORMATION CONTACT:

                        Stephen L. Sharfman, General Counsel, 202-789-6820 or                         *stephen.sharfman@prc.gov.*

# SUPPLEMENTARY INFORMATION:

*Regulatory History,*74 FR 44881 (August 31, 2009).                

I. Introduction

II. Background

III. Comments

IV. Commission Analysis

V. Ordering Paragraphs

## I. Introduction

The Postal Service seeks to add a new product identified as Parcel Select & Parcel Return Service Contract 2 to the Competitive Product List. For the reasons discussed below, the Commission approves the Request.

## II. Background

                    On August 21, 2009, the Postal Service filed a formal request pursuant to 39 U.S.C. 3642 and 39 CFR 3020.30,                     *et seq.,*                     to add Parcel Select & Parcel Return Service Contract 2 to the Competitive Product List.[1]                                          The Postal Service asserts that the Parcel Select & Parcel Return Service Contract 2 product is a competitive product “not of general applicability” within the meaning of 39 U.S.C. 3632(b)(3).                     *Id.*                     at 1. The Request has been assigned Docket No. MC2009-40.                

                    The Postal Service contemporaneously filed a contract related to the proposed new product pursuant to 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5.                     *Id.*                     The contract has been assigned Docket No. CP2009-61.                          ( print page 50709)    

                    In support of its Request, the Postal Service filed the following materials: (1) A redacted version of the Governors' Decision authorizing the new product which also includes an analysis of Parcel Select & Parcel Return Service Contract 2 and certification of the Governors' vote; [2]                                          (2) a redacted version of the contract which, among other things, provides (a) that the effective date of the contract is the day after the date on which the Commission issues all regulatory approvals, and (b) that the contract will expire on May 31, 2011, unless it is extended for an additional year; [3]                                          (3) requested changes in the Mail Classification Schedule product list; [4]                                          (4) a Statement of Supporting Justification as required by 39 CFR 3020.32; [5]                                          (5) a certification of compliance with 39 U.S.C. 3633(a); [6]                                          and (7) an application for non-public treatment of materials.[7] 

                    In the Statement of Supporting Justification, Daniel J. Barrett, Manager, Sales Strategy and Customer Support, Ground Shipping Services, asserts that the service to be provided under the contract will cover its attributable costs, make a positive contribution to coverage of institutional costs, and increase contribution toward the requisite 5.5 percent of the Postal Service's total institutional costs.                     *Id.,*                     Attachment D. Thus, Mr. Barrett contends there will be no issue of subsidization of competitive products by market dominant products as a result of this contract.                     *Id.*                     W. Ashley Lyons, Manager, Regulatory Reporting and Cost Analysis, Finance Department, certifies that the contract complies with 39 U.S.C. 3633(a).                     *See id.,*                     Attachment E.                

                    The Postal Service filed much of the supporting materials, including the unredacted Governors' Decision, the unredacted contract, and supporting financial analysis,[8]                                          under seal. In its application for non-public treatment of materials, the Postal Service maintains that the contract and related financial information, including the customer's name and the accompanying analyses that provide prices, terms, conditions, and financial projections, should remain confidential.                     *Id.,*                     Attachment F.                

                    In Order No. 288, the Commission gave notice of the two dockets, appointed a public representative, requested supplemental information, and provided the public with an opportunity to comment.[9]                                          On August 27, 2009, the Postal Service filed a response to the Commission's request for supplemental information.[10] 

## III. Comments

                    Comments were filed by the Public Representative.[11]                                          No filings were submitted by other interested parties. The Public Representative states that the Postal Service's filing and the Parcel Select & Parcel Return Service Contract 2 agreement comply with applicable Commission rules of practice.                     *Id.*                     at 3. He also addresses the relationship between the data systems used to calculate costs in this case and the Postal Service's proposal to change that established methodology as “proposal fourteen” in Commission Docket No. RM2009-10. Specifically, he notes that “the Commission's determination on the costing methodology might impact the data supplied for the instant contract.”                     *Id.*                     at 4. However, the Public Representative “concede[s] that pricing for this PS&PRS NSA appears to fully comply with the three-pronged requirements of 39 U.S.C. 3633(a), and with the other pricing, cost coverage, and contribution provisions of title 39.”                     *Id.*

                    The Public Representative believes that the Postal Service has provided adequate justification for maintaining confidentiality in this case.                     *Id.*                     at 2. He also believes that because the contract is designed to help acquire new volume, the contract appears to benefit the general public.                     *Id.*                     at 5.                

## IV. Commission Analysis

The Commission has reviewed the Request, the contract, the financial analysis provided under seal, the supplemental information filed by the Postal Service, and the comments filed by the Public Representative.

*Statutory requirements.*                     The Commission's statutory responsibilities in this instance entail assigning Parcel Select & Parcel Return Service Contract 2 to either the Market Dominant Product List or to the Competitive Product List. 39 U.S.C. 3642. As part of this responsibility, the Commission also reviews the proposal for compliance with the Postal Accountability and Enhancement Act (PAEA) requirements. This includes, for proposed competitive products, a review of the provisions applicable to rates for competitive products. 39 U.S.C. 3633.                

*Product list assignment.*                     In determining whether to assign Parcel Select & Parcel Return Service Contract 2 as a product to the Market Dominant Product List or the Competitive Product List, the Commission must consider whether                

[T]he Postal Service exercises sufficient market power that it can effectively set the price of such product substantially above costs, raise prices significantly, decrease quality, or decrease output, without risk of losing a significant level of business to other firms offering similar products.

39 U.S.C. 3642(b)(1). If so, the product will be categorized as market dominant. The competitive category of products shall consist of all other products.

The Commission is further required to consider the availability and nature of enterprises in the private sector engaged in the delivery of the product, the views of those who use the product, and the likely impact on small business concerns. 39 U.S.C. 3642(b)(3).

                    The Postal Service asserts that its bargaining position is constrained by the existence of other shippers who can provide similar services, thus precluding it from taking unilateral action to increase prices without the risk of losing volume to private companies. Request, Attachment D, at para. (d). The Postal Service also contends that it may not decrease quality or output without risking the loss of business to competitors that offer similar ground shipping services.                     *Id.*                     It further states that the contract partner supports the addition of the contract to the Competitive Product List to effectuate the negotiated contractual terms.                     *Id.*                     at para. (g). Finally, the Postal Service states that the market for ground shipping services is highly competitive and requires a substantial infrastructure to support a national network. It indicates that large carriers serve this market. Accordingly, the Postal Service states that it is unaware of any small business concerns that could offer comparable service for this customer.                     *Id.*                     at para. (h).                

                    No commenter opposes the proposed classification of Parcel Select & Parcel Return Service Contract 2 as                           ( print page 50710)                        competitive. Having considered the statutory requirements and the support offered by the Postal Service, the Commission finds that Parcel Select & Parcel Return Service Contract 2 is appropriately classified as a competitive product and should be added to the Competitive Product List.                

*Cost considerations.*                     The Postal Service presents a financial analysis showing that Parcel Select & Parcel Return Service Contract 2 ensures that the contract covers its attributable costs, does not result in subsidization of competitive products by market dominant products, and increases contribution from competitive products.                

Based on the data submitted, the Commission finds that Parcel Select & Parcel Return Service Contract 2 should cover its attributable costs (39 U.S.C. 3633(a)(2)), should not lead to the subsidization of competitive products by market dominant products (39 U.S.C. 3633(a)(1)), and should have a positive effect on competitive products' contribution to institutional costs (39 U.S.C. 3633(a)(3)). Thus, an initial review of proposed Parcel Select & Parcel Return Service Contract 2 indicates that it comports with the provisions applicable to rates for competitive products.

                    In his comments, the Public Representative raises the issue of the pending Parcel Select and Parcel Return Service methodological changes.                     *See*                     Docket No. RM2009-10, Proposal Fourteen. In the instant filing, the Postal Service correctly uses the current approved methodology concerning Parcel Select and Parcel Return Service Transportation and Mail Processing costs. Nevertheless, the Commission believes the changes presented in Proposal Fourteen, if approved, would not harm the potential profitability of this contract.                

*Application for non-public treatment.*                     The Postal Service believes that the 10-year period of non-public treatment, as specified in 39 U.S.C. 3007.30, is insufficient to protect customer identifying information. Notice, Attachment F, at 6. It asserts that such information should be protected permanently and requests that the Commission enter an order extending that duration indefinitely.                

The request is premature. Should the need for non-public treatment remain due to ongoing business relationships, the Postal Service may submit a motion to the Commission to extend the duration at the appropriate time.

*Other considerations.*                     The Postal Service shall notify the Commission if the contract is extended for an additional year. If the agreement terminates earlier than anticipated, the Postal Service shall inform the Commission prior to the new termination date. The Commission will then remove the product from the Competitive Product List.                

In conclusion, the Commission approves Parcel Select & Parcel Return Service Contract 2 as a new product. The revision to the Competitive Product List is shown below the signature of this order and is effective upon issuance of this order.

## V. Ordering Paragraphs

*It is ordered:*

1. Parcel Select & Parcel Return Service Contract 2 (MC2009-40 and CP2009-61) is added to the Competitive Product List as a new product under Negotiated Service Agreements, Domestic.

2. The Postal Service shall notify the Commission if the contract is extended for an additional year and update the Commission if termination occurs prior to that date, as discussed in this order.

                    3. The Secretary shall arrange for the publication of this order in the                     **Federal Register**                    .                

# List of Subjects in 39 CFR Part 3020

      - Administrative practice and procedure; Postal Service

By the Commission.

Judith M. Grady,

Acting Secretary.

For the reasons stated in the preamble, under the authority at 39 U.S.C. 503, the Postal Regulatory Commission amends 39 CFR part 3020 as follows:

# PART 3020—PRODUCT LISTS

1. The authority citation for part 3020 continues to read as follows: 

Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.

2. Revise Appendix A to Subpart A of Part 3020—Mail Classification Schedule to read as follows: 

# Appendix A to Subpart A of Part 3020—Mail Classification Schedule

#### Part A—Market Dominant Products

#### 1000 Market Dominant Product List

First-Class Mail

Single-Piece Letters/Postcards

Bulk Letters/Postcards

Flats

Parcels

Outbound Single-Piece First-Class Mail International

Inbound Single-Piece First-Class Mail International

Standard Mail (Regular and Nonprofit)

High Density and Saturation Letters

High Density and Saturation Flats/Parcels

Carrier Route

Letters

Flats

Not Flat-Machinables (NFMs)/Parcels

Periodicals

Within County Periodicals

Outside County Periodicals

Package Services

Single-Piece Parcel Post

Inbound Surface Parcel Post (at UPU rates)

Bound Printed Matter Flats

Bound Printed Matter Parcels

Media Mail/Library Mail

Special Services

Ancillary Services

International Ancillary Services

Address List Services

Caller Service

Change-of-Address Credit Card Authentication

Confirm

International Reply Coupon Service

International Business Reply Mail Service

Money Orders

Post Office Box Service

Negotiated Service Agreements

HSBC North America Holdings Inc. Negotiated Service Agreement

Bookspan Negotiated Service Agreement

Bank of America Corporation Negotiated Service Agreement

The Bradford Group Negotiated Service Agreement

Inbound International

Canada Post—United States Postal Service Contractual Bilateral Agreement for Inbound Market Dominant Services

Market Dominant Product Descriptions

First-Class Mail

[Reserved for Class Description]

Single-Piece Letters/Postcards

[Reserved for Product Description]

Bulk Letters/Postcards

[Reserved for Product Description]

Flats

[Reserved for Product Description]

Parcels

[Reserved for Product Description]

Outbound Single-Piece First-Class Mail International

[Reserved for Product Description]

Inbound Single-Piece First-Class Mail International

[Reserved for Product Description]

Standard Mail (Regular and Nonprofit)

[Reserved for Class Description]

High Density and Saturation Letters

[Reserved for Product Description]

High Density and Saturation Flats/Parcels

[Reserved for Product Description]

Carrier Route

[Reserved for Product Description]

Letters

[Reserved for Product Description]

Flats

[Reserved for Product Description]

Not Flat-Machinables (NFMs)/Parcels

[Reserved for Product Description]

Periodicals

[Reserved for Class Description]

Within County Periodicals

[Reserved for Product Description]

Outside County Periodicals

[Reserved for Product Description]

Package Services

                            [Reserved for Class Description]                                  ( print page 50711)    

Single-Piece Parcel Post

[Reserved for Product Description]

Inbound Surface Parcel Post (at UPU rates)

[Reserved for Product Description]

Bound Printed Matter Flats

[Reserved for Product Description]

Bound Printed Matter Parcels

[Reserved for Product Description]

Media Mail/Library Mail

[Reserved for Product Description]

Special Services

[Reserved for Class Description]

Ancillary Services

[Reserved for Product Description]

Address Correction Service

[Reserved for Product Description]

Applications and Mailing Permits

[Reserved for Product Description]

Business Reply Mail

[Reserved for Product Description]

Bulk Parcel Return Service

[Reserved for Product Description]

Certified Mail

[Reserved for Product Description]

Certificate of Mailing

[Reserved for Product Description]

Collect on Delivery

[Reserved for Product Description]

Delivery Confirmation

[Reserved for Product Description]

Insurance

[Reserved for Product Description]

Merchandise Return Service

[Reserved for Product Description]

Parcel Airlift (PAL)

[Reserved for Product Description]

Registered Mail

[Reserved for Product Description]

Return Receipt

[Reserved for Product Description]

Return Receipt for Merchandise

[Reserved for Product Description]

Restricted Delivery

[Reserved for Product Description]

Shipper-Paid Forwarding

[Reserved for Product Description]

Signature Confirmation

[Reserved for Product Description]

Special Handling

[Reserved for Product Description]

Stamped Envelopes

[Reserved for Product Description]

Stamped Cards

[Reserved for Product Description]

Premium Stamped Stationery

[Reserved for Product Description]

Premium Stamped Cards

[Reserved for Product Description]

International Ancillary Services

[Reserved for Product Description]

International Certificate of Mailing

[Reserved for Product Description]

International Registered Mail

[Reserved for Product Description]

International Return Receipt

[Reserved for Product Description]

International Restricted Delivery

[Reserved for Product Description]

Address List Services

[Reserved for Product Description]

Caller Service

[Reserved for Product Description]

Change-of-Address Credit Card Authentication

[Reserved for Product Description]

Confirm

[Reserved for Product Description]

International Reply Coupon Service

[Reserved for Product Description]

International Business Reply Mail Service

[Reserved for Product Description]

Money Orders

[Reserved for Product Description]

Post Office Box Service

[Reserved for Product Description]

Negotiated Service Agreements

[Reserved for Class Description]

HSBC North America Holdings Inc. Negotiated Service Agreement

[Reserved for Product Description]

Bookspan Negotiated Service Agreement

[Reserved for Product Description]

Bank of America Corporation Negotiated Service Agreement

The Bradford Group Negotiated Service Agreement

Part B—Competitive Products

2000 Competitive Product List

Express Mail

Express Mail

Outbound International Expedited Services

Inbound International Expedited Services

Inbound International Expedited Services 1 (CP2008-7)

Inbound International Expedited Services 2 (MC2009-10 and CP2009-12)

Priority Mail

Priority Mail

Outbound Priority Mail International

Inbound Air Parcel Post

Royal Mail Group Inbound Air Parcel Post Agreement

Parcel Select

Parcel Return Service

International

International Priority Airlift (IPA)

International Surface Airlift (ISAL)

International Direct Sacks—M-Bags

Global Customized Shipping Services

Inbound Surface Parcel Post (at non-UPU rates)

Canada Post—United States Postal service Contractual Bilateral Agreement for Inbound Competitive Services (MC2009-8 and CP2009-9)

International Money Transfer Service

International Ancillary Services

Special Services

Premium Forwarding Service

Negotiated Service Agreements

Domestic

Express Mail Contract 1 (MC2008-5)

Express Mail Contract 2 (MC2009-3 and CP2009-4)

Express Mail Contract 3 (MC2009-15 and CP2009-21)

Express Mail Contract 4 (MC2009-34 and CP2009-45)

Express Mail & Priority Mail Contract 1 (MC2009-6 and CP2009-7)

Express Mail & Priority Mail Contract 2 (MC2009-12 and CP2009-14)

Express Mail & Priority Mail Contract 3 (MC2009-13 and CP2009-17)

Express Mail & Priority Mail Contract 4 (MC2009-17 and CP2009-24)

Express Mail & Priority Mail Contract 5 (MC2009-18 and CP2009-25)

Express Mail & Priority Mail Contract 6 (MC2009-31 and CP2009-42)

Express Mail & Priority Mail Contract 7 (MC2009-32 and CP2009-43)

Express Mail & Priority Mail Contract 8 (MC2009-33 and CP2009-44)

Parcel Select & Parcel Return Service Contract 2 (MC2009-40 and CP2009-61)

Parcel Return Service Contract 1 (MC2009-1 and CP2009-2)

Priority Mail Contract 1 (MC2008-8 and CP2008-26)

Priority Mail Contract 2 (MC2009-2 and CP2009-3)

Priority Mail Contract 3 (MC2009-4 and CP2009-5)

Priority Mail Contract 4 (MC2009-5 and CP2009-6)

Priority Mail Contract 5 (MC2009-21 and CP2009-26)

Priority Mail Contract 6 (MC2009-25 and CP2009-30)

Priority Mail Contract 7 (MC2009-25 and CP2009-31)

Priority Mail Contract 8 (MC2009-25 and CP2009-32)

Priority Mail Contract 9 (MC2009-25 and CP2009-33)

Priority Mail Contract 10 (MC2009-25 and CP2009-34)

Priority Mail Contract 11 (MC2009-27 and CP2009-37)

Priority Mail Contract 12 (MC2009-28 and CP2009-38)

Priority Mail Contract 13 (MC2009-29 and CP2009-39)

Priority Mail Contract 14 (MC2009-30 and CP2009-40)

Priority Mail Contract 15 (MC2009-35 and CP2009-54)

Priority Mail Contract 16 (MC2009-36 and CP2009-55)

Priority Mail Contract 17 (MC2009-37 and CP2009-56)

Outbound International

Direct Entry Parcels Contracts

Direct Entry Parcels 1 (MC2009-26 and CP2009-36)

Global Direct Contracts (MC2009-9, CP2009-10, and CP2009-11)

Global Expedited Package Services (GEPS) Contracts

GEPS 1 (CP2008-5, CP2008-11, CP2008-12, and CP2008-13, CP2008-18, CP2008-19, CP2008-20, CP2008-21, CP2008-22, CP2008-23, and CP2008-24)

Global Expedited Package Services 2 (CP2009-50)

Global Plus Contracts

Global Plus 1 (CP2008-8, CP2008-46 and CP2009-47)

Global Plus 2 (MC2008-7, CP2008-48 and CP2008-49)

Inbound International

Inbound Direct Entry Contracts with Foreign Postal Administrations (MC2008-6, CP2008-14 and CP2008-15)

International Business Reply Service Competitive Contract 1 (MC2009-14 and CP2009-20)

Competitive Product Descriptions

Express Mail

[Reserved for Group Description]

Express Mail

[Reserved for Product Description]

Outbound International Expedited Services

[Reserved for Product Description]

Inbound International Expedited Services

[Reserved for Product Description]

                            Priority                                  ( print page 50712)    

[Reserved for Product Description]

Priority Mail

[Reserved for Product Description]

Outbound Priority Mail International

[Reserved for Product Description]

Inbound Air Parcel Post

[Reserved for Product Description]

Parcel Select

[Reserved for Group Description]

Parcel Return Service

[Reserved for Group Description]

International

[Reserved for Group Description]

International Priority Airlift (IPA)

[Reserved for Product Description]

International Surface Airlift (ISAL)

[Reserved for Product Description]

International Direct Sacks—M-Bags

[Reserved for Product Description]

Global Customized Shipping Services

[Reserved for Product Description]

International Money Transfer Service

[Reserved for Product Description]

Inbound Surface Parcel Post (at non-UPU rates)

[Reserved for Product Description]

International Ancillary Services

[Reserved for Product Description]

International Certificate of Mailing

[Reserved for Product Description]

International Registered Mail

[Reserved for Product Description]

International Return Receipt

[Reserved for Product Description]

International Restricted Delivery

[Reserved for Product Description]

International Insurance

[Reserved for Product Description]

Negotiated Service Agreements

[Reserved for Group Description]

Domestic

[Reserved for Product Description]

Outbound International

[Reserved for Group Description]

Part C—Glossary of Terms and Conditions [Reserved]

Part D—Country Price Lists for International Mail [Reserved]

# Footnotes

1.                             Request of the United States Postal Service to Add Parcel Select & Parcel Return Service Contract 2 to Competitive Product List and Notice of Establishment of Rates and Class Not of General Applicability, August 21, 2009 (Request).                    
        Back to Citation      

2.                             Attachment A to the Request. The analysis that accompanies the Governors' Decision notes, among other things, that the contract will result in new and more profitable volume for the Postal Service.                    
        Back to Citation      

3.                             Attachment B to the Request.                    
        Back to Citation      

4.                             Attachment C to the Request.                    
        Back to Citation      

5.                             Attachment D to the Request.                    
        Back to Citation      

6.                             Attachment E to the Request.                    
        Back to Citation      

7.                             Attachment F to the Request.                    
        Back to Citation      

8.                             The Commission appreciates the Postal Service's efforts to ensure its financial analysis is complete and thorough. The financial analysis filed in this docket should serve as a model for future requests.                    
        Back to Citation      

9.                             PRC Order No. 288, Notice and Order Concerning Parcel Select & Parcel Return Service Contract 2 Negotiated Service Agreement, August 25, 2009 (Order No. 288).                    
        Back to Citation      

10.                             Response of the United States Postal Service to Request for Supplemental Information in Order No. 288, August 27, 2009.                    
        Back to Citation      

11.                             Public Representative Comments in Response to United States Postal Service Request to Add Parcel Select & Parcel Return Service Contract 2 to Competitive Product List and Notice of Establishment of Rates and Class Not of General Applicability, September 2, 2009 (Public Representative Comments).                    
        Back to Citation      

[FR Doc. E9-23687 Filed 9-30-09; 8:45 am]

BILLING CODE 7710-FW-P