50744 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

1PRC Order No. 2, January 30, 2007 and PRC 

Order No. 15, May 17, 2007. 

2Attachment A to this order contains a list of the 

parties filing comments. 

POSTAL REGULATORY COMMISSION 

39 CFR Parts 3001, 3010, 3015 and 

3020 

[Docket No. RM2007–1; Order Nos. 26 and 

27] 

Administrative Practice and Procedure, 

Postal Service 

AGENCY: Postal Regulatory Commission. 

ACTION: Proposed rule. 

SUMMARY: A recently-enacted federal 

law directs the Commission to develop 

rules to implement a new postal 

ratemaking system. This proposal 

responds to that directive by presenting 

rules addressing market dominant and 

competitive products, including 

negotiated service agreements, the 

regulatory calendar, and product lists. 

This document incorporates a revision 

identified in an errata notice. Issuance 

of this document will allow the 

Commission to consider comments and, 

if appropriate, to make revisions prior to 

adoption of final rules. 

DATES: Submit comments by September 

24, 2007; submit reply comments by 

October 9, 2007. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: 

Regulatory History 

72 FR 5230, February 5, 2007. 

72 FR 29284, May 25, 2007. 

72 FR 33261, June 15, 2007. 

I. Introduction 

This is the third in a series of orders 

designed to establish regulations 

implementing a modern system for 

regulating rates and classes for market 

dominant and competitive products.1 In 

response to those earlier orders, the 

Commission received more than 100 

comments from interested parties.2 The 

Commission has reviewed these 

comments carefully. They have been 

useful in clarifying the Commission’s 

analysis, and the parties’ contributions 

are appreciated. 

In this order, the Commission outlines 

how it intends to administer various 

provisions of the Postal Accountability 

and Enhancement Act (PAEA), Pub. L. 

No. 109–435, 120 Stat. 3198 (December 

20, 2006). The proposed regulations are 

set forth in section V. Comments are due 

by September 14, 2007. Reply comments 

are due by September 28, 2007. 

Although afforded 18 months, until 

June 19, 2008, to promulgate the new 

regulations under the PAEA, the 

Commission has made a concerted effort 

to accelerate that schedule considerably. 

The Commission views early 

implementation as beneficial to all 

stakeholders. Early implementation of a 

ratemaking framework prior to the 

statutory deadline will enable the Postal 

Service to use new, streamlined 

procedures to initiate rate (and class) 

changes as needed to respond to its 

financial needs and market conditions. 

The regulations may serve as a safety 

valve, providing an immediate means to 

address challenges faced by the Postal 

Service and perhaps obviate the 

necessity for rate relief through an 

omnibus rate case under existing 

procedures. The commenters urge that 

such a filing should be avoided, thereby 

allowing the Postal Service and the 

Commission to dedicate more resources 

to thoughtfully implementing other 

aspects of the reform legislation. It 

would be unfortunate if, in this 

reformed environment, rate changes had 

to be litigated under the old cost of 

service system. Having this new 

framework in place, and the Postal 

Service operating under the new 

framework as early as practical, would 

provide the Postal Service flexibility to 

respond quickly to changed conditions. 

The Commission’s goal is to make this 

new system of rate adjustment 

advantageous for all stakeholders, 

enabling the Postal Service to price its 

own products, ensuring the lawfulness 

of competitive rates, providing 

increased transparency, and 

maintaining universal service at 

affordable rates. Fulfilling these 

objectives requires that competing 

interests be carefully balanced. 

The Commission, among other things, 

identifies the mail matter that comprises 

each type of mail listed in section 

3631(a) and the products within the 

competitive category of mail. It also 

discusses generally the mail matter that 

comprises each type of mail listed in 

section 3621(a). However, in lieu of 

identifying specific market dominant 

products, the Commission has 

determined that for reasons of accuracy 

and expedition, it would be preferable 

to accept the Postal Service offer to 

prepare and submit a draft mail 

classification schedule, which, inter 

alia, identifies the market dominant 

products it believes should be contained 

therein. This will enable the Postal 

Service to categorize its market 

dominant services into products that 

best serve its business needs. In 

addition, it will permit the Postal 

Service to fashion a draft mail 

classification schedule with what it 

believes is an appropriate level of detail. 

The Commission then will be able to 

evaluate this draft for consistency with 

the principles discussed in this order. 

The draft mail classification schedule is 

due September 14, 2007. Comments on 

the draft mail classification schedule are 

due September 28, 2007. 

The proposed regulations represent 

the Commission’s initial effort to 

establish a functional framework for 

regulating rates and classes for market 

dominant and competitive products. 

The proposed regulations do not seek to 

address every issue that might arise 

under the PAEA. The intent is that these 

regulations provide a reasonable starting 

point and that they will evolve over 

time. 

In the sections that follow, the 

Commission discusses proposed 

regulations governing: 

• Rules Applicable to Rate 

Adjustments for Market Dominant 

Products (part 3010); 

• Regulation of Rates for Competitive 

Products (part 3015); and 

• Product Lists (part 3020). 

The Commission must also issue 

proposals amending the structure of its 

rules, and specific regulations 

applicable to complaints, reporting 

requirements, and commercially 

sensitive materials, as well as 

regulations to implement sections 404a 

and 504(f). Completing those tasks is 

complementary to the proposed 

regulations, which, once implemented, 

will be sufficient to enable the Postal 

Service to begin to operate as 

contemplated by the PAEA. 

II. Market Dominant Products 

A. Introduction 

Background. This segment of the 

rulemaking focuses on rate changes 

referred to as ‘‘rate adjustments’’ in the 

PAEA for market dominant products. 

The emphasis is on proposing 

regulations that will provide the Postal 

Service with the option of pursuing its 

next general round of price changes 

under the new law’s ratesetting 

provisions, which feature a price cap 

mechanism and a streamlined advance 

notice and review, and on providing a 

comprehensive framework. 

Much of the discussion on this topic 

since the enactment of the PAEA has 

occurred in the context of a joint Postal 

Regulatory Commission–Postal Service 


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Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 50745 

3See PRC Order No. 19, Notice and Order on 

Field Hearings to Receive Testimony on 

Implementation of Modern System of Ratemaking, 

Docket No. RM2007–1, June 8, 2007. 

4The parties have submitted several rounds of 

comments in response to the two advance notices 

of proposed rulemaking. As a matter of 

convenience, citations to these comments will 

identify the party’s comments by filing date; reply 

comments will be so denoted. For example, the 

referenced Postal Service initial comments are cited 

as Postal Service Comments, June 18, 2007, at xx; 

reply comments are cited similarly, e.g., PSA Reply 

Comments, July 3, 2007, at xx. 

5See, for example, Advo Comments, April 6, 

2007, at 2–3; MOAA Reply Comments, May 7, 2007, 

at 1–2; PSA Comments, April 6, 2007, at 1–4; Time 

Warner Comments, April 6, 2007, at 1–3; and Postal 

Service Comments, April 6, 2007, at 2–4. 

6 Jon Mulford, for example, states: ‘‘[the] PAEA 

has given the Commission extraordinary power to 

regulate the USPS. The Commission, in devising its 

system for setting rates * * * should at all costs 

avoid unnecessarily tying USPS management’s 

hands as they attempt to cope with an impending 

financial crisis.’’ Mulford Comments, March 9, 

2007, at 5. 

7These requirements are not ‘‘stand alone’’

elements of the new system, but must be given 

effect in concert with certain statutory factors and 

objectives. However, unlike the ‘‘requirements,’’

most of which are new postal ratemaking features, 

many of the factors and objectives are identical to 

those employed in the Postal Reorganization Act of 

1970 (PRA) ratemaking. 

summit, regional field hearings, 3

comments filed in response to 

Commission orders, 4 and Congressional 

hearings. The Commission’s preliminary 

conclusions about the direction of this 

regulatory effort reflect considered 

review of the comments and testimony 

presented in these forums. 

Commenters identify two main tasks 

for the Commission at this stage of 

implementation. One is reaching 

consensus on conceptual and practical 

aspects of the scope, depth and 

timeframe of Commission review of 

planned rate changes. The other is 

transforming numerous statutory 

requirements, objectives and factors into 

a new ‘‘road map’’ for navigating the 

regulatory calendar, expedited 

procedures, and price cap mechanism 

that are core components of the new 

system. Most commenters observe that 

these tasks involve balancing policy 

considerations, pragmatic concerns, and 

a revamped PRC/Postal Service 

partnership.5 They agree that the statute 

provides certainty on some key points, 

but point to numerous instances where 

other important issues are open to 

interpretation. Some urge the 

Commission to adopt a light-handed 

approach to the new notice-and-review 

process, with the price cap calculation 

being the sole focus.6 Others caution 

that implementation will allow price 

changes to occur more often than 

annually, the cap to be applied 

unequally to products within a class of 

mail, and the cap to be exceeded (within 

a certain range) under an exception 

referred to as ‘‘unused rate adjustment 

authority’’ or the banking exception. 

They suggest that these possibilities 

may have significant implications with 

respect to mailers’ expectations that the 

modern system will provide 

predictability, certainty and stability. 

The Commission appreciates the 

responses to its request for assistance in 

developing new regulations, and finds 

that the commenters’ observations 

provide useful guidance. It also 

appreciates the Postal Service’s efforts, 

outside of this rulemaking, to work with 

mailers on developing a viable 

regulatory calendar and on addressing 

rate implementation issues. See Postal 

Service Reply Comments, May 7, 2007, 

at 3–4 and Appendix B. The 

Commission proposes basic rules 

regarding the regulatory calendar in 

proposed rule 3010.7. 

B. Statutory Framework for Rate 

Changes 

Section 3622(d) of the PAEA, 

captioned ‘‘Requirements,’’ addresses 

some of the mandatory features the 

Commission must include in the 

modern regulatory system.7 It provides, 

in pertinent part: 

(1) In General.—The system for regulating 

rates and classes for market-dominant 

products shall—

(A) include an annual limitation on the 

percentage changes in rates to be set by the 

Postal Regulatory Commission that will be 

equal to change in the Consumer Price Index 

for All Urban Consumers unadjusted for 

seasonal variation over the most recent 

available 12-month period preceding the date 

the Postal Service files notice of its intention 

to increase rates; 

(B) establish a schedule whereby rates, 

when necessary and appropriate, would 

change at regular intervals by predictable 

amounts; 

(C) not later than 45 days before the 

implementation of any adjustment in rates 

under this section, including adjustments 

made under subsection (c)(10)–

(i) require the Postal Service to provide 

public notice of the adjustment; 

(ii) provide an opportunity for review by 

the Postal Regulatory Commission; 

(iii) provide for the Postal Regulatory 

Commission to notify the Postal Service of 

any noncompliance of the adjustment with 

the limitation under subparagraph (A); and 

(iv) require the Postal Service to respond 

to the notice provided under clause (iii) and 

describe the actions to be taken to comply 

with the limitation under subparagraph (A); 

(D) establish procedures whereby the 

Postal Service may adjust rates not in excess 

of the annual limitations under subparagraph 

(A). 

* * * * * 

However, the ‘‘price cap’’ in subsection 

3622(d)(1)(A) is not an absolute limit; other 

provisions expressly require that the new 

system: 

(E) notwithstanding any limitation set 

under subparagraphs (A) and (C), and 

provided there is not sufficient unused rate 

authority under paragraph (2)(C), establish 

procedures whereby rates may be adjusted on 

an expedited basis due to either 

extraordinary or exceptional circumstances, 

provided that the Commission determines, 

after notice and opportunity for a public 

hearing and comment, and within 90 days 

after any request by the Postal Service, that 

such adjustment is reasonable and equitable 

and necessary to enable the Postal Service, 

under best practices of 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. 

* * * * * 

Further, the following provisions in 

subsection 3622(d)(2) authorize the 

annual cap to be exceeded under certain 

conditions: 

* * * * * 

(C) Use of Unused Rate Authority.—

(i) Definition.—In this subparagraph, the 

term ‘‘unused rate adjustment authority’’

means the difference between—

(I) the maximum amount of a rate 

adjustment that the Postal Service is 

authorized to make in any year subject to the 

annual limitation under paragraph (1); and 

(II) the amount of the rate adjustment the 

Postal Service actually makes in that year. 

(ii) Authority. Subject to clause (iii), the 

Postal Service may use any unused rate 

adjustment authority for any of the 5 years 

following the year such authority occurred. 

Finally, the exercise of ‘‘banking authority’’

is itself subject to the following limitations: 

(iii) Limitations.—In exercising the 

authority under clause (ii) in any year, the 

Postal Service—

(I) may use unused rate adjustment 

authority from more than 1 year; 

(II) may use any part of the unused rate 

adjustment authority from any year; 

(III) shall use the unused rate adjustment 

authority from the earliest year such 

authority first occurred and then each 

following year; and 

(IV) for any class or service, may not 

exceed the annual limitation under 

paragraph (1) by more than 2 percentage 

points. 

* * * * * 

These comprehensive provisions 

unequivocally establish subsection 

3622(d) as the administrative 

cornerstone of the new rate setting 

system for market dominant products. 

Collectively, streamlined advance 

review procedures, the price cap 

mechanism, the banking exception, and 

the exigency clause are designed to 

foster pricing flexibility, reduce burden, 

and facilitate quick implementation of 

rate changes. The Commission’s 

proposed regulations are intended to fill 

in many of the details of price cap 


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50746 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

8Testimony of William S. Berkley, President and 

CEO, Tension Envelope Corporation, Before the 

United States Postal Regulatory Commission Field 

Hearing, Kansas City, June 22, 2007. 

administration, content of rate change 

filings, and due process. 

C. Summary of Main Issues 

The PAEA specifies use of the Bureau 

of Labor Statistics’ widely-known CPI–

U, but does not address some related 

aspects of administration, such as how 

to calculate the index adjustment and 

how to calculate the base to which the 

adjustment applies. It also does not 

address the extent of documentation of 

worksharing discounts. The 

Commission sought comments on these 

matters in its Second Advance Notice of 

Proposed Rulemaking on Regulations 

Establishing a System of Ratemaking, 

May 17, 2007. 

Additional implementation issues 

raised in the comments include: 

—whether the phrase ‘‘not later than 45 

days’’ used in section 3622(d)(1)(C) 

limits Commission review to this 

number of days, or allows a longer 

period; 

—whether price change filings, other 

than exigent requests, involve 

‘‘barebones’’ notice and 

documentation or more 

comprehensive support; 

—Whether the Commission’s advance 

review is limited to assessing 

compliance with the price cap 

provisions or extends to other matters, 

such as an evaluation of worksharing 

discounts; 

—whether the Commission should 

solicit public comment in routine rate 

change filings; 

—whether the authority to ‘‘bank’’

unused rate adjustment authority for 

up to 5 years carries with it the ability 

to apply the banked pricing credit to 

a class other than the one in which it 

was accumulated; and 

—whether the rules should define 

‘‘exigent circumstances’’ and whether 

trial-type proceedings must or should 

be held. 

D. Structure of New Proceedings and 

Rules 

Review of the comments points to 

interest in a new road map for rate 

changes. William Berkley usefully 

highlights this by observing: 

We need to keep in mind that we have to 

keep proceedings simple and rules of 

practice simple to avoid a system that only 

postal attorneys and economists can use. We 

ask when you establish these new rules that 

you remember to keep it as simple as you 

can. Proceedings before every regulator are 

always difficult, but let us also insure that we 

make it easy to navigate and understand the 

proceedings in this evolving system. 

Berkley Testimony at 5.8

United Parcel Service (UPS), 

addressing implementation in general, 

asserts: ‘‘To the extent possible, the 

Commission should interpret PAEA in a 

way that recognizes the value of 

administrative simplicity and 

practicality, and that minimizes the 

Postal Service’s burden, while 

remaining consistent with the statutory 

requirements.’’ UPS Reply Comments, 

July 3, 2007, at 10. 

Accordingly, the Commission 

proposes to: 

—Organize most of the rules directly 

affecting market dominant products 

into a largely self-contained unit; 

—Standardize terms, definitions and 

methods to the extent feasible; and 

—Establish streamlined proceedings to 

facilitate all types of price changes. 

The Commission proposes to establish 

a separate part, designated part 3010, 

Rules Applicable to Rate Adjustments 

for Market Dominant Products, in 39 

CFR. This part is divided into five 

subparts: 

Subpart A—General Provisions. 

Subpart B—Rules for Rate 

Adjustments for Rates of General 

Applicability (Type 1 Rate 

Adjustments). 

Subpart C—Rules for Applying the 

Price Cap. 

Subpart D—Rules for Rate 

Adjustments for Negotiated Service 

Agreements (Type 2 Rate Adjustments). 

Subpart E—Rules for Rate 

Adjustments in Exigent Circumstances 

(Type 3 Rate Adjustments). 

E. Overview of Proposed Subpart A— 

General Provisions 

This subpart consists of seven 

proposed rules. The first provision, 

proposed 3010.1, captioned 

‘‘Applicability,’’ is a general 

representation that the rules in subpart 

A implement the ratesetting policies 

and procedures of the PAEA for market 

dominant products. It also notes a 

distinction between ‘‘notice’’ filings and 

‘‘request’’ filings. 

Proposed 3010.2(a) codifies the 

following basic scenarios in which rate 

changes for market dominant products 

may be addressed: under price cap 

authority or a variation thereon, often 

referred to by commenters as the 

banking exception or banking authority; 

under a special contractual, or 

negotiated service agreement; and under 

an exigent circumstance. For ease of 

reference and reporting, this rule 

reflects the Commission’s proposal to 

refer to each of these scenarios as 

‘‘types’’ of filings, similar to the 

approach that has been used 

successfully for six categories of library 

references since Docket No. RM98–2. 

The Commission notes, for example, 

that for purposes of conducting the 10- 

year assessment of the new ratesetting 

approach, it may prove useful to have a 

ready tool for determining how many 

different types of notices and requests 

have been filed. The Commission 

incorporates these definitions into the 

regulations and the accompanying 

discussion. The following table 

summarizes this approach. 

TABLE II–1.—SUMMARY OF ALTERNATIVE FILING TERMS

Statutory source Filing basis Proposed alternative(s) 

39 U.S.C. 3622(d)(1)(A) ..................................... ‘‘annual limitation on the percentage changes 

in rates’’.

Type 1–A Rate Adjustment. 

39 U.S.C. 3622(d)(2)(C)(i) .................................. ‘‘unused rate adjustment authority’’ ................. Type 1–B Rate Adjustment. 

39 U.S.C. 3622(c)(10) ........................................ ‘‘the desirability of special classifications . . . 

including agreements between the Postal 

Service and postal users’’.

Type 2 Rate Adjustment. 

39 U.S.C. 3622(d)(1)(E) ..................................... ‘‘due to either extraordinary or exceptional circumstances’’.Type 3 Rate Adjustment. 


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Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 50747 

9Based on the Postal Service’s comments, it 

anticipates filing 90 days in advance of 

implementation with the first 45 days constituting 

the statutory period for Commission review and the 

second half for implementation. 

F. Overview of Proposed Subpart B—

Rules for Rate Adjustments for Rates of 

General Applicability (Type 1 Rate 

Adjustments) 

This subpart consists of five rules. 

These rules lay out basic procedures 

and certain fundamental Commission 

positions. Some of the debate among 

commenters centered on the timeframe 

for Commission action in a price change 

proceeding and on public input. The 

timeframe issue stems from the 

highlighted wording in the following 

passage from the PAEA: 

(C) not later than 45 days before the 

implementation of any adjustment in rates 

under this section, including adjustments 

made under subsection (c)(10)—

(i) require the Postal Service to provide 

public notice of the adjustment; 

(ii) provide an opportunity for review by 

the Postal Regulatory Commission. 

39 U.S.C. 3622(d)(1)(C)(i)–(ii). 

The crux of the issue is whether the 

statute intends 45 days as the maximum 

or minimum period for advance notice 

and review. The Postal Service appears 

to read this language as establishing a 

statutory maximum, but acknowledges 

that some changes, as a matter of good 

business practice, such as those 

involving new worksharing discounts, 

will create more implementation issues. 

It indicates that it intends to provide 

additional notice in these instances. 

Postal Service Comments, June 18, 2007, 

at 14–15. The Mail Order Association of 

America (MOAA) shares the Postal 

Service’s view. MOAA Reply 

Comments, May 7, 2007, at 14–15. Many 

commenters, however, see the wording 

in the statute as establishing a 

minimum, and therefore clearly 

authorizing the Commission to require 

the Postal Service to provide more 

notice. Time Warner suggests 90 days. 

Time Warner Comments, April 6, 2007, 

at 15. 

The Commission concludes that as a 

matter of statutory interpretation, the 

Postal Service’s position reads the 

qualifier ‘‘at least’’ completely out of the 

statute. The conclusion more consistent 

with the statute’s overall theme of 

transparency is that 45 days is the 

minimum period required by the 

statute, and the Commission may 

require a longer period in certain 

circumstances.9 At the same time, it 

seems that any extension should be in 

keeping with the notion of streamlined 

review; thus, the four months the OCA 

suggests as the routine approach 

appears excessive for the Commission’s 

task of assessing the planned rate 

changes in terms of the price cap and/ 

or the use of banking authority. 

The Commission concludes that for 

purposes of drafting an initial set of 

regulations, the language from the 

statute requiring notice and review ‘‘not 

later than 45 days’’ can be carried over 

directly into proposed rules 

3010.10(a)(1) and (2). A provision in 

proposed rule 3010.10(b) encouraging 

more time for review recognizes the 

Postal Service’s representations on this 

record that it intends to provide 

additional time for review when price 

changes are more complicated. Postal 

Service Comments, June 18, 2007, at 9–

10. Proposed rule 3010.10(a) does not 

require the Postal Service to publish a 

Federal Register notice concerning a 

planned adjustment, but does 

contemplate broad dissemination of its 

intent to the mailing community and to 

the general public. This typically 

provides more effective notice than a 

Federal Register notice, in keeping with 

a modern rate setting system, and 

reduces administrative burden by 

freeing the Postal Service from the 

production details necessarily 

associated with Federal Register 

publication. The Commission notes that 

it imposes on itself, in proposed rule 

3010.13(a), an obligation to publish 

notice of a rate adjustment filing in the 

Federal Register. 

Commenters are divided on the 

question of public input during the 

review period. Some, including the 

Postal Service, argue against it on 

grounds that the logic of the PAEA 

suggests that if public input is not 

expressly provided for in the statute, it 

is not authorized. On the other hand, 

the OCA and several others think it 

would be helpful. Newspaper 

Association of America (NAA), for 

example, asserts that allowing public 

comment would promote transparency. 

NAA Comments, March 30, 2007, at 2. 

NAA acknowledges that the new statute 

expressly provides for public 

participation when rate adjustments are 

based on exigent circumstances, but 

asserts: 

Nothing in the PAEA, however, prohibits 

the Commission from inviting such comment 

also when the Postal Service purports to 

notice rate adjustments consistent with the 

CPI limitation. Public comment—which 

necessarily would have to be expedited and 

would be submitted in writing—would 

promote transparency and could provide 

information helpful to the Commission’s 

review. 

Id. at 7. 

It adds: 

Where the Postal Service’s notice is 

straightforward, there likely will be relatively 

few comments. However, in instances when 

the Postal Service notices a more 

complicated set of rate changes, the 

Commission may benefit from the insights 

that the mailing community and broader 

public may be able to offer. The stakes of this 

review are important because the rates that 

will take effect from this process will be in 

effect for a substantial period of time before 

they are later reviewed by the Commission 

either in an annual review or in a complaint. 

Id. at 7–8. 

The Commission agrees that the 

statute does not expressly provide for 

public participation during the review 

period as it does in the exigency clause 

(in subsection 3622(d)(1)(E)). At the 

same time, the statute gives the 

Commission broad discretion in 

deciding on how to conduct its review. 

It follows that if the Commission 

believes public input might be helpful 

in determining the compliance of the 

anticipated rate changes with the 

statutory pricing provisions, there is no 

statutory bar to incorporating this into 

its review proceedings/procedures. The 

Commission believes this will be the 

case, and provides, in proposed rule 

3010.13(a) for 20 days (from the date of 

filing of a rate adjustment notice) for the 

public to file written comments. 

Proposed rule 3010.11 addresses 

several ‘‘housekeeping’’ details. It notes 

the limitation on rate increases in any 

12-month period, the existence of CPI–

U as a limitation, the exception allowing 

annual recapture of unused rate 

authority, and the allocation of unused 

rate authority to each class of mail. The 

latter provision directly addresses some 

commenters’ concerns about ‘‘crossclass’’ banking. 

Proposed rule 3010.12 adopts the 

PAEA’s stated inflation measure (CPI–

U) and describes the source as the 

Bureau of Labor Statistics. The clarity of 

the PAEA on this point meant that there 

was no debate among the commenters 

on the benchmark that is to be used. 

Proposed rules 3010.13 and 14 

address the nature of proceedings and 

the content of rate adjustment filings, 

and are the most extensive rules in this 

subpart. The flagship proceedings under 

the former statutory structure were 10- 

month trial-type ‘‘omnibus’’ rate and 

classification proceedings, bookended 

between considerable advance 

preparation on the part of the Postal 

Service (and many mailers) and a postdecision phase encompassing review by 

the Governors and the potential for 

reconsideration. Commenters agree that, 

barring a final omnibus rate case under 

39 U.S.C. 3622(f), the PAEA casts that 

apparatus aside and replaces it with a 


rmajette on PROD1PC64 with PROPOSALS3
50748 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

simpler process. In keeping with the 

new statutory emphasis on simpler 

proceedings, the Commission does not 

propose formal discovery, Notices of 

Inquiry, Presiding Officer’s Information 

Requests, testimony, and hearings. It 

anticipates handling resolution of 

discrepancies or other matters through 

direct communication with the Postal 

Service. 

There also has been considerable 

discussion of the statutory scope of the 

Commission’s review. The main 

positions are that it extends to: 

—Only, or primarily, the price cap; 

—The price cap, plus some evaluation 

of worksharing; and 

—The price cap, worksharing 

evaluation, plus consistency with 

statutory factors and objectives, plus 

identification of certain features, such 

as differential intra-class treatment 

exceeding a certain percentage. 

Some commenters, such as the Postal 

Service and MOAA, advocate ‘‘lighthanded’’ review, the OCA seeks 

extensive review, and some, such as the 

NAA, take a middle ground. NAA 

suggests that during the review period, 

the Commission has, at a minimum, 

legal authority: 

—To review the notices of rate 

adjustments for compliance with the 

CPI cap; 

—To review the noticed change to 

ensure at least facial compliance with 

the provisions of section 3622(e) 

regarding workshare discounts; 

—To prohibit rates that are unlawful on 

their face from taking effect; and 

—To review the justification for changes 

in rate categories within a class that 

exceed CPI by an amount set by the 

Commission, such as the CPI plus 2 

percent proposed by NAA. 

NAA Reply Comments, May 7, 2007, at 

25–26. 

The Commission agrees that the 

PAEA ushers in a fundamentally 

different approach to rate regulation for 

market dominant products, and that its 

implementing regulations should honor 

the spirit and letter of the new law. 

Proposed rule 3010.13(b) limits the 

appropriate scope of public comments 

to compliance with the price cap 

formula and consistency with certain 

statutory policies; thus, they represent a 

marked shift away from PRA-style indepth examination. The proposed scope 

of public comment is no longer openended. The Commission does not invite, 

and will not entertain, public comment 

during the 45-day review period on 

matters such as costing methods. 

Moreover, in proposed rule 3010.13(e), 

the Commission expedites review to 

determine the consistency of an 

amended notice of rate adjustment with 

filing requirements. 

Filing contents. Proposed rule 3010.14 

describes the contents of the Postal 

Service’s rate adjustment filings. The 

notice is to include a schedule of 

proposed rates, identification of the 

effective date(s), and a representation or 

evidence that public notice of the 

planned changes has been issued or will 

be issued at least 45 days before the 

effective date(s) of the proposed rates. 

In addition, proposed rule 

3010.14(b)(1)–(8) identifies explanatory 

material that is to be provided. This 

includes the amount of the applicable 

change in CPI–U calculated under 

Commission rules and the percentage 

change in rates for each class, calculated 

as required by Commission rules along 

with supporting workpapers. It also 

includes the amount of new unused rate 

authority that will be generated by the 

instant notice of rate adjustment and a 

5-year schedule showing unused rate 

authority for each class of mail, along 

with supporting calculations. For Type 

1–B filings, which draw on recaptured 

pricing authority, the Postal Service is 

to identify for each affected class how 

much existing unused rate authority is 

used in the proposed rates calculated as 

required by Commission rules. See 

proposed rule 3010.14(d). An 

explanation must be provided if new 

unused rate authority will be generated 

for a class of mail that is not expected 

to cover its attributable costs. 

Several commenters express concern 

about the potential for intra-class 

increases to exceed the cap. NAA asserts 

that the Postal Service’s authority to 

exceed the annual cap for a rate category 

is not unlimited, as the phrase 

‘‘predictable amounts’’ is not limited to 

the aggregate change for a class, but ‘‘on 

its face requires that the specific rate 

changes themselves within the class 

should be reasonably predictable.’’ NAA 

Comments, March 30, 2007, at 9. It 

contends that objective 8, which 

requires that the rate schedule be ‘‘just 

and reasonable’’ supports this 

interpretation. Id. NAA suggests that the 

Commission impose a standard 

whereby, absent special justification, 

increases for a rate category beyond a 

pre-established range (such as CPI plus 

2 percent) would not be considered 

‘‘predictable’’ or ‘‘just and reasonable.’’

Id. at 9–10. It asserts that this approach, 

which it refers to as a ‘‘soft band,’’

would satisfy the statutory objective of 

providing the Postal Service with 

pricing flexibility, while honoring the 

provision in objective 8 allowing 

changes of unequal magnitude within, 

between or among class of mail. Id. at 

9; NAA Reply Comments, May 7, 2007, 

at 8. In terms of proposed rules, NAA 

suggests that the Postal Service could be 

required to certify that no rate would 

change by more than the permitted 

range (when this is the case) or bring 

changes exceeding the range to the 

Commission’s attention and provide 

additional justification. NAA 

Comments, March 30, 2007, at 10. It 

contends that over time, as the 

Commission reviews these explanations 

on a case-by-case basis, it will become 

evident which explanations are 

adequate to allow the rates to become 

effective, and which are not. NAA Reply 

Comments, May 7, 2007, at 8. 

The Parcel Shippers Association 

(PSA) does not suggest prohibiting 

adjustments beyond a certain level, but 

suggests that the Commission require 

the Postal Service to provide a written, 

on the record, justification for any 

market dominant rate increases that 

substantially exceed inflation. PSA 

Comments, April 6, 2007, at 4–5, 22–23. 

(Emphasis in original.) 

In a similar vein, OCA suggests, given 

the potential for large percentage 

increases in rates for individual 

subclasses, that subclass increases be 

capped at 50 percent above the overall 

class increase. OCA Comments, June 18, 

2007, at 2, 15–19. It notes: 

Some of the principles of rate setting 

include continuity of expectations, 

implementation of rates that are 

understandable, and perceived and/or actual 

fairness. Accordingly, some level of subclass 

protection appears to be appropriate. We 

suggest 50 percent as reasonable: that is, if 

rates for a class of service increase by an 

overall maximum of two percent, no subclass 

rate would increase by more than three 

percent. 

Id. at 15. 

Discover Financial Services, LLC 

(DFS) asserts that the OCA’s 

recommendation is ‘‘at odds with the 

legislation, which nowhere indicates 

that such a cap would be permissible. 

Indeed, notions that rates should be 

capped in any fashion other than at the 

class level were much debated in 

Congress and specifically rejected as not 

giving the Postal Service sufficient rate 

flexibility.’’ DFS Further Comments, 

July 16, 2007, at 4. 

NAA, PSA and OCA identify a clear 

example of where statutory objectives 

may conflict. The Commission does not 

view capping subclass increases as 

sanctioned by the PAEA. Requiring a 

separate certification or justification is 

not statutorily suspect in the same 

sense; however, adopting a rule of this 

sort makes the process cumbersome. It 

is to be expected that rate adjustments 

within a class will be both above and 


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10There are four limited exceptions to this 

mandate: (1) When the discount is new and mailers 

must be encouraged to use it; (2) when the discount 

is already in place and reducing it will cause rate 

shock; (3) when the discount is provided in 

connection with subclasses consisting exclusively 

of mail matter of educational, cultural, scientific, or 

informational value; and (4) when reducing or 

eliminating the discount would cause a shift in mail 

mix that would lead to operational inefficiencies for 

the Postal Service. For the first two exceptions, the 

Postal Service must eventually phase out the excess 

discount. 

below average. Requiring written 

justification for individual rates is 

contrary to the goals of a simpler, more 

flexible, process. The Commission finds 

that the Postal Service should be given 

an opportunity to exercise its pricing 

flexibility by making changes of unequal 

magnitude without having to file 

separate justification for what some 

might consider ‘‘excessive’’ above-cap 

increases within a class. Should the 

Postal Service abuse this discretion, and 

regularly fail to develop rate 

adjustments consistent with the 

statutory objective of maintenance of 

just and reasonable rate schedules, 

additional regulations in this area can 

be developed. 

Information supporting proposed 

workshare discounts. The PAEA charges 

the Commission with establishing a 

modern system of ratemaking that is 

designed to achieve nine specific 

objectives including to maximize 

incentives to reduce costs and increase 

efficiency. The PAEA also enumerates 

several factors which must be 

considered by the Commission in 

establishing this system. Two of these 

factors—3622(c)(5), 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; and 3622(c)(12), the need 

for the Postal Service to increase its 

efficiency and reduce its costs—can be 

linked directly to workshare discounts. 

Section 3622(e)(2) directs the 

Commission to ensure that [workshare] 

discounts do not exceed the cost that 

the Postal Service avoids as a result of 

workshare activity.10

The PAEA defines workshare 

discounts as rate discounts provided to 

mailers for the presorting, prebarcoding, handling, or transportation of 

mail. Both the Commission and the 

Postal Service have long held the view 

that setting workshare discounts in line 

with the Efficient Component Pricing 

Rule (ECPR) is an effective method for 

encouraging efficient mailing practices. 

The ECPR is the principle that 

workshare discounts should be set 

equal, on a per-unit basis, to the costs 

avoided by the Postal Service when the 

mailer performs the workshare activity. 

Several parties reiterated the 

importance of ECPR in encouraging 

efficiency and satisfying the objectives 

of the PAEA. Pitney Bowes states 

‘‘regulations should require the Postal 

Service to establish discounts that 

reflect the full measure of worksharerelated costs avoided to the extent 

practicable.’’ Pitney Bowes Comments, 

April 6, 2007, at 36. In addition, Pitney 

Bowes sponsored the comments of John 

Panzar which focus exclusively on the 

merits of continued use of ECPR in 

ratemaking. The Alliance of Nonprofit 

Mailers, National Association of Presort 

Mailers, and National Postal Policy 

Council (ANM/NAPM/NPPC) believe 

that the Postal Service’s rates should be 

presumed reasonable as long as the 

discounts satisfy the ECPR. ANM/ 

NAPM/NPPC Comments, April 6, 2007, 

at 16–19. 

Support for efficient component 

pricing is also found in testimony 

received during the Commission’s field 

hearings. Don Hall, Jr., President and 

CEO of Hallmark Cards, seeks assurance 

that the workshare discounts will reflect 

the true savings to the Postal Service. 

Transcript of Kansas City Field Hearing, 

June 22, 2007, at 29. John Campo, Vice 

President of Postal Relations for Pitney 

Bowes, said the ‘‘regulations should 

encourage the Postal Service to adopt 

pricing incentives or work sharing 

discounts to fully reward mailer activity 

that reduces total postal system costs.’’

Transcript of Wilmington Field Hearing, 

July 9, 2007, at 10. John Carper, Director 

of Mail and Receiving Services, 

Pepperdine University, claims that 

‘‘[worksharing] can flourish fully only if 

the discounts offered by the Postal 

Service * * * he costs that the Postal 

Service saves.’’ Transcript of Los 

Angeles Field Hearing, June 28, 2007, at 

39. 

In contrast, Advo, Inc. presents three 

reasons why ECPR should not be 

followed in setting rates under the 

PAEA: 

First, the statute does not permit 

consideration of factors other than 

compliance with price caps in the review 

process. Second, ECP, although useful in 

theory as a pricing tool, is not the only 

appropriate consideration in setting 

discounts and is susceptible to being 

misapplied. Third, adoption of ECP as the 

‘‘gold standard’’ will inevitably and 

unnecessarily impinge on the Postal Service’s 

pricing flexibility—a flexibility that is 

imperative to its ability to remain viable 

under the price cap regime. 

Advo Reply Comments, July 3, 2007, at 

6. 

MOAA, NAA, and the Postal Service 

recognize the importance of the ECPR, 

but contend that other, perhaps 

competing, factors are also important. 

Therefore, they believe that ECPR 

should not be a requirement for 

workshare discounts. 

The Commission strongly believes 

that efficient component pricing should 

be used as a guiding principle in 

establishing and maintaining workshare 

discounts. In both sections 3622(b) and 

3622(c) the statute stresses the need for 

efficient rates and efficient component 

pricing is an established method of 

measuring efficient ratemaking. 

Nonetheless, the Commission 

recognizes that other factors must also 

be considered, and that the PAEA grants 

the Postal Service substantial flexibility 

in setting rates. However, in the interest 

of transparency and accountability, the 

Postal Service has a burden to explain 

how its rates, including workshare 

discounts, meet the objectives and 

factors of the PAEA. 

The Postal Service has proposed that 

when it files its notice of price 

adjustment, it will also file, for preexisting workshare discounts, a 

comparison of the new (or unchanged) 

discount price with the historical, 

Commission reviewed cost avoidances 

of the last Annual Compliance Review, 

and will provide appropriate 

justification for any discount that 

exceeds those cost avoidances. Postal 

Service Comments, June 18, 2007, at 11. 

The proposed rules reflect this 

undertaking. To meet its burden of 

ensuring that the rates are in 

compliance with the objectives and 

factors of the PAEA, the Postal Service 

must also identify and explain any 

discounts that are substantially below 

the cost avoidances. 

The Postal Service is to provide with 

each notice of rate adjustment a 

schedule of the workshare discounts 

included in the proposed rates, together 

with a companion schedule listing 

underlying avoided costs, along with 

supporting workpapers. The avoided 

cost figures must be developed from the 

most recent PRC Annual Compliance 

Report. The Postal Service is to provide 

a separate justification for all proposed 

workshare discounts that exceed 

avoided costs. The Postal Service shall 

also identify and explain discounts that 

are set substantially below avoided 

costs, and explain any relationship 

between discounts that are above and 

those that are below avoided costs. 

In addition, when new workshare 

discounts are established, the Postal 

Service is to include with its filing a 

statement explaining its reasons for 

establishing the discount; provide all 

data, economic analyses, and other 

information believed to justify the 

discount; and certify, based on 


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11Testimony of Daniel C. Emens on Behalf of 

JPMorgan Chase & Co., July 9, 2007 (Emens 

Testimony). 

12All CPI–U data is obtained from the BLS Web 

site at: http://data.bls.gov/cpi-bin/surveymost. 

comprehensive, competent analyses that 

the discount will not adversely affect 

either the rates or the service levels of 

users of postal services who do not take 

advantage of the discount. 

Lastly, the Postal Service is to provide 

a discussion of how the proposed rates 

will help achieve the objectives listed in 

39 U.S.C. 3622(b) and properly take into 

account the factors listed in 39 U.S.C 

3622(c). 

G. Overview of Subpart C—Rules for 

Applying the Price Cap 

This subpart consists of nine rules 

related primarily to administration of 

the price cap mechanism. Proposed rule 

3010.21 addresses how to calculate the 

statutory annual inflation-based 

limitation. A question has arisen over 

the 

* * * an annual limitation * * * equal to 

the change in the Consumer Price Index for 

All Urban Consumers unadjusted for 

seasonal variation over the most recent 

available 12-month period preceding the date 

the Postal Service files notice of its intention 

to increase rates. 

39 U.S.C. 3622(d)(1)(A). (Emphasis 

added.) 

Two suggestions have emerged on this 

record, but commenters generally agree 

that both approaches are consistent with 

the statute. One is referred to as the 

‘‘point-to-point’’ method and was 

initially suggested by the Postal Service 

and the OCA. The other is the ‘‘running 

average’’ or ‘‘weighted average’’ method 

which is incorporated in the proposed 

rules. 

JPMorgan Chase & Company (Chase) 

comments are representative. Chase 

urges the Commission to calculate the 

index adjustment based on a 12-month 

average of CPI levels, rather than on a 

‘‘snapshot’’ of year-over-year changes to 

the CPI between a single pair of 

beginning and end dates. It reasons: 

While the two approaches should achieve 

similar results over the long run, the use of 

the twelve-month average is likely to produce 

a much less bumpy and volatile path along 

the way by damping the short-term 

oscillations in the CPI index. For Chase and 

other mailers that operate on an annual 

budget cycle—i.e., for the mailers that 

generate most of the Postal Service’s volume, 

reducing the short-term unpredictability of 

cost increases is extremely important. 

Emens Testimony at 5.11

Many parties commented that they 

prefer the moving average method 

because it provides more predictability 

and stability in rates. NAA states, the 

average method ‘‘better advance[s] the 

statutory objective of creating 

‘predictability and stability in rates’

while promoting transparency in rates 

and assuring that the Postal Service is 

financially sound.’’ NAA Comments, 

June 18, 2007, at 2. See also Advo 

Comments, June 18, 2007, at 2; Advo 

Reply Comments, July 3, 2007, at 1; 

GCA Reply Comments, July 3, 2007, at 

1–2; Pitney Bowes Reply Comments, 

July 3, 2007, at 3; and PostCom Reply 

Comments, July 3, 2007, at 2. 

Contrary to these views, OCA states 

that the point method ‘‘does not result 

in significantly less rate stability and 

predictability.’’ OCA Reply Comments, 

July 3, 2007, at 6. It contends that the 

moving average method ‘‘would have 

substantial lags in the updating of 

rates.’’ OCA Initial Comments, June 18, 

2007, at 7. See also Valpak Comments, 

June 18, 2007, at 5; and OCA Reply 

Comments, July 3, 2007, at 2–4. 

The Postal Service expressed concern 

that using the moving average method 

includes 24 months of data rather than 

12. USPS states, ‘‘It is arguable that 

calculating the price cap by reference to 

CPI-U data over a 24-month period is 

counter to the statutory requirement that 

the CPI calculation be ‘‘equal to’’ the 

change in CPI-U ‘‘over the most recent 

available 12-month period.’’ Postal 

Service Comments, June 18, 2007, at 3–

4. APWU also believes that the point 

method better adheres to the plain 

language of the PAEA. APWU 

Comments, June 18, 2007, at 2–3. 

APWU and Valpak advocate the point 

method as providing more transparency 

and less administrative burden. APWU 

Comments, June 18, 2007, at 2; and 

Valpak Comments, June 18, 2007, at 

4–5. 

The majority of commenters are 

satisfied that both the moving average 

method and point method meet the 

statutory requirements of the PAEA. 

MOAA states, ‘‘The provisions of [the] 

PAEA are sufficiently broad that either 

the [moving average method] or the 

[point method] could be used for the 

purpose of calculating the CPI cap 

limitation as set forth in 3622 (b), (c) 

and (d).’’ MOAA Comments, June 18, 

2007, at 1. See also GCA Comments, 

June 18, 2007, at 2; Advo Comments, 

June 18, 2007, at 2; PostCom Comments, 

June 18, 2007, at 2; and Pitney Bowes 

Comments, June 18, 2007, at 2. 

The Commission proposes to use the 

moving average method of calculating 

the CPI–U limitation. This method 

provides mailers with stable and 

predictable rates, and also grants the 

Postal Service the same benefits. The 

moving average method does not 

impose any undue administrative 

burden on the Postal Service and does 

not inhibit transparency. The 

Commission finds the increased 

predictability and stability resulting 

from use of the moving average method 

are quite valuable, and directly further 

the specific objectives of the PAEA. The 

Commission derives the moving average 

method from Bureau of Labor Statistics 

(BLS) monthly CPI–U values. At the end 

of each calendar year, BLS calculates 

the annual percentage change between 

two years as the percentage change 

between the two years’ annual averages. 

The only difference in methodology is 

that BLS applies this methodology to 

calendar years, and the Commission 

will apply it to 12-month periods. 

Calculation of the annual limitation in 

this method involves three steps. First, 

a simple average CPI–U index (Recent 

Average) is calculated by summing the 

most recently available 12 monthly CPI–

U values from the date the Postal 

Service files notice of its intentions to 

increase rates, and dividing the sum by 

12. Then, a second simple average CPI–

U index (Base Average) is similarly 

calculated by summing the 12 monthly 

CPI–U values preceding those used in 

the Recent Average calculation and 

dividing the sum by 12. Finally, the 

percentage change between the Recent 

Average and the Base Average is 

computed, using the following formula: 

Annual Limitation (Moving Average 

Method) = (Recent Average/ Base 

Average) ¥ 1. 

Example 1 illustrates the annual 

limitation calculation, using the moving 

average method, assuming that the 

Postal Service had filed a hypothetical 

notice of its intentions to increase rates 

during the third week of April 2006.12


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Example 1 assumes that rate filings 

are 12 months apart; that is, that the 

Postal Service filed its most recent 

previous notice for a rate increase in 

April 2006. This assumption can be 

adjusted in two ways depending on 

when the Postal Service files a notice of 

rate adjustment. 

The first adjustment occurs when the 

Postal Service files a notice of rate 

adjustment less than one year after the 

previous adjustment. In this instance, if 

the calculation were to use 12 months 

of data, the Postal Service would benefit 

from double counting months of CPI 

data. This would violate the statutory 

limitation. To remedy this problem, a 

partial year limitation is calculated. 

Example 2 calculates a partial year 

limitation. First, a simple 12-month 

average must be calculated using the 

most recently available 12 months of 

CPI–U data from the BLS Web site 

(Recent Average). Then the partial year 

limitation is calculated by dividing the 

Recent Average by the Recent Average 

from the most recent previous notice 

and subtracting 1. The formula is as 

follows: Partial Year Limitation = 

(Recent Average/Recent Average from 

most recent previous notice) ¥ 1. 

Still assuming that the Postal Service 

filed its first notice of rate adjustment in 

April of 2006 (Example 1), assume now 

that the Postal Service files its second 

hypothetical notice of rate adjustment in 

October 2006 (six months later). 

Example 2 shows how the partial year 

limitation will be calculated for the 

October 2006 rate adjustment. 


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A corresponding adjustment can be 

made should the Postal Service file a 

notice of rate adjustment more than 12 

months after the last adjustment. This 

scenario provides no reason to alter the 

calculation of the annual inflation-based 

limitation, but does present a different 

concern; there are several months of 

CPI–U changes that the Postal Service 

may lose. The clear intent of the 

statutory provision allowing for 

recapture of unused rate authority is to 

encourage the Postal Service to 

whenever possible refrain from 

imposing the maximum permissible rate 

increases. If the Postal Service can delay 

imposing increases on the public, it 

should not be penalized. See proposed 

rule 3010.26(c). To address this concern, 

the interim unused rate authority will 

be added to the cumulative unused rate 

authority. 

Still assuming that the Postal Service 

filed its first notice of rate adjustment in 

April 2006 (Example 1), assume now 

that the Postal Service files its second 

hypothetical notice of rate adjustment in 

July 2007 (15 months later). Example 3 

illustrates how the price cap will be 

calculated for the July 2007 notice of 

rate adjustment, along with the 

calculation of the three months of 

interim unused rate authority. To 

calculate interim unused rate authority, 

divide the Base Average of the current 

notice by the Recent Average of the last 

notice and subtract 1. The formula to 

calculate the amount of interim unused 

rate authority is as follows: Interim 

Unused Rate Authority = (Base Average 

for Current Notice/ Recent Average for 

Last Notice) ¥ 1. 


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APWU argues for cross-class 

application of unused rate authority and 

recommends a method of weighting the 

revenue. This cross-class application of 

unused rate authority would grant the 

Postal Service the ability to use unused 

rate authority from one class, and apply 

it to other classes of mail in later years. 

APWU Comments, April 6, 2007, at 9–

10. Several parties assert that this would 

(1) be at odds with section 

3622(d)(2)(C), which states that the 

annual limitations shall apply to a class 

of mail and defines unused rate 

authority in terms of an individual class 

of mail; (2) be inconsistent with the 

legislative history; and (3) merge 

multiple class-specific baskets into a 

single basket. See ANM/MPA Reply 

Comments, May 7, 2007, at 3–6; ANM/ 

NAPM/NPPC Reply Comments, May 7, 

2007, at 9–11; MOAA Reply Comments, 

May 7, 2007, at 11; Pitney Bowes 

Comments, April 6, 2007, at 9; and 

USPS Reply Comments, May 7, 2007, 

at 16. 

The Commission agrees that unused 

rate authority for a given class of mail 

may only be applied to the class where 

it originated. 

Finally, The McGraw-Hill Companies, 

Inc. (McGraw-Hill) suggests that the 

rules should include a method to reduce 

the price cap if the Postal Service 

performance levels deteriorate, or if the 

Postal Service places costly mail 

preparation requirements on mailers. 

See McGraw-Hill Reply Comments, July 

30, 2007, at 6–7. During the Kansas City 

field hearings, witness Stumbo of 

Meredith Corporation expressed a 

similar concern: 

We would submit that the critical issues 

regarding cost shifting and service reduction 

are [sic] the rate-setting process must contain 

a mechanism to adjust rates to reflect the 

shift in cost from the Postal Service to private 

industry. In addition, the rules should 

contain methodology to adjust rates to reflect 

the diminished level of service the 

imposition of preparation rule changes or 

other means. 

Transcript of Kansas City Field Hearing, 

June 22, 2007, at 40. 

No commenter has suggested a 

method for applying such adjustments. 

The Commission is sympathetic to these 

concerns, yet finds the better course is 

to defer such considerations. The statute 

establishes a system of accountability 

through increased transparency. The 

Commission is developing separate 

rules providing for annual Postal 

Service reports that will include data on 

service achievement. Additionally, 

proposed rule 3020.91 requires the 

Postal Service to inform the 

Commission of changes that would alter 

the nature of a product through the 

imposition of preparation rule changes. 

The Commission expects that the 

Postal Service will operate within both 

the letter and the spirit of the PAEA. For 

now, it is best to presume that the Postal 

Service will do so. If experience shows 

that additional regulations in this area 

are necessary to achieve the objectives 

of the legislation, the Commission is 

obligated to develop such regulations, or 


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13See also Campbell James, An Analysis of 

Provisions of the Postal Accountability and 

Enhancement Act Relating to the Regulation of 

Postal Rates and Services. August 3, 2007, at 52–

55. 

recommend to Congress appropriate 

additional legislation. 

Test for compliance with the annual 

limitation. Proposed rule 3010.20 states 

that the appropriate annual limitation 

shall be applied to a measure of the 

rates paid by mail sent in each class for 

which rate adjustments are to be made 

to determine whether planned rates are 

consistent with the annual limitation. 

39 U.S.C. 3622(d) requires that the 

system for regulating rates and classes 

for market dominant products include a 

limitation on the percentage increase in 

rates. To calculate the percentage 

change in an individual rate is a simple 

matter, but section 3622(d)(2)(A) 

stipulates that the restriction be applied 

at the class level. Therefore, to 

determine compliance in the context of 

a pre-implementation compliance 

review of a notice of rate adjustment, it 

is necessary to develop rules that 

provide a means of calculating the 

aggregate percentage change in rates for 

each class. To accomplish this, weights 

(in the form of billing determinants) 

must be applied to the set of rates that 

comprise a class. 

Postal Service proposal. The Postal 

Service proposes to apply the most 

recent available billing determinants to 

the current rates, then apply the same 

billing determinants to the new rates 

and compare the resulting revenues to 

determine the change in rates for a class. 

As acknowledged by the Postal Service, 

this is not ideal because an annual rate 

cycle combined with the need for 

advance notice dictates that the billing 

determinants will not correspond to a 

single set of rates, but will reflect mailer 

behavior for part of a year at the current 

rates and part at the previous rates. 

Postal Service Reply Comments, May 7, 

2007, Appendix C. Rather than debating 

the rates (current or new) to which the 

ideal billing determinants would 

correspond, the parties’ comments have 

focused on more practical 

considerations regarding the use of 

historical billing determinants instead 

of forecast billing determinants. 

Parties’ positions. On this, there is 

near universal support for the Postal 

Service’s proposed approach, or some 

slight variation thereof. Pitney Bowes, 

OCA, MOAA, ANM/MPA, APWU, 

PostCom, Advo, and JPMorgan/Chase all 

support the use of historical billing 

determinants as weights in their 

comments. The primary rationale for 

this position is that historical data are 

far less likely to be controversial than 

forecasts, and given the limited time 

and public participation for the review 

of notices of rate adjustment, simplicity 

and speed of analysis should take 

precedence. 

There is some disagreement regarding 

the treatment of classification changes 

and negotiated service agreements. The 

Postal Service proposes to make 

adjustments to the historical billing 

determinants to incorporate the effects 

of classification changes, such as the 

creation or elimination of rates. It 

proposes to use known mail 

characteristics and reasonable 

judgments to make the necessary 

adjustments. See Postal Service 

Comments, June 18, 2007, at 7–10, inter 

alia. This proposal is supported by 

MOAA. See also MOAA Comments, 

April 6, 2007 at 4–5; ANM/MPA 

Comments, May 7, 2007, at 1–2; and 

APWU Comments, June 18, 2007, at 3–

4. 

PostCom takes the position that the 

effects of classification changes are 

outside the scope of the Commission’s 

pre-implementation review of a notice 

of rate adjustment. It argues that the 

effects of such changes on compliance 

with the price cap may only be 

determined in a post hoc review of the 

new rates. PostCom concludes that, 

‘‘any attempt by the Commission to 

assess the effects of a change in rate 

design at the time that the change is 

proposed will entail a re-introduction of 

the old cost of service methods that the 

Commission has used under the Postal 

Reorganization Act, including the 

attempt to establish a test year, the 

reintroduction of roll-forwards and 

volume and revenue forecasts, and all of 

the uncertainty, controversy and 

confusion that these methods entail.’’

PostCom Comments, June 18, 2007, at 

4–5. 

Commission analysis. The 

Commission’s proposed rules calculate 

the percentage change in rates using the 

most recent available billing 

determinant as weights. As many parties 

point out, any attempt to develop a 

forecast of billing determinants would 

likely be controversial and complex, 

and a worthwhile analysis and 

resolution cannot realistically be 

achieved in the context of a preimplementation review under section 

3622(d)(1)(C). 

The rules also instruct the Postal 

Service to make reasonable adjustments 

to the billing determinants to account 

for the effects of classification changes. 

The Postal Service has stated that such 

adjustments will typically be 

straightforward and based on known 

mail characteristics. Any adjustments 

are to be fully explained by the Postal 

Service at the time of the notice. 

The Commission recognizes that the 

pre-implementation method of 

calculating the percentage change in 

rates in the proposed rules is not a 

perfect measure of what the actual 

change in rates will be. The billing 

determinants to be used will likely not 

correspond to a single set of rates, and 

adjustments for classification changes 

will be imperfect. Some commenters 

suggest that the after-the-fact review 

will be the most effective means of 

ensuring compliance with the rate cap. 

Id. at 4–6; see also Transcript of 

Wilmington Field Hearing, July 9, 2007, 

at 47. (Emens).13 The statute requires 

the Commission to monitor the 

effectiveness of these rules and consider 

modifications to improve their 

effectiveness as events warrant. 

Proposed rule 3010.23, captioned 

‘‘Calculation of percentage change in 

rates,’’ explains in paragraph (b) that for 

each class of mail, the percentage 

change in rates is calculated in three 

steps. The first step involves 

multiplying the volume of each rate cell 

in the class by the current rate for that 

cell and summing the resulting 

products. (In the case of seasonal or 

temporary rates, the most recently 

applied rate shall be considered the 

current rate.) The second step involves 

multiplying the same set of rate cell 

volumes by the corresponding planned 

rate for each cell and summing the 

resulting products. The third step 

involves calculating the percentage 

change in rates by dividing the results 

of the first step by the results of the 

second step and subtracting 1 from the 

quotient. The result is expressed as a 

percentage. Paragraph (c) sets out the 

formula. 

Treatment of volume associated with 

negotiated service agreements. Advo 

and Pitney Bowes advocate the 

exclusion of negotiated service 

agreements from the determination of 

percentage changes in rates. They assert 

that including the lower rates offered to 

negotiated service agreement partners 

will allow for offsetting larger increases 

for non-negotiated service agreement 

mail, thus undermining the price cap 

protection afforded to non-participating 

mailers. See Advo Comments, June 18, 

2007, at 4; Pitney Bowes Comments, 

June 18, 2007, at 4. The Postal Service 

disagrees, arguing that in certain 

situations, some negotiated service 

agreement mailers may pay prices 

higher than list prices. If this occurs, 

excluding negotiated service agreements 

from the calculation of change in 

revenue would deny non-negotiated 

service agreement mailers the 

opportunity for potentially lower 


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Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 50755 

increases. Postal Service Reply 

Comments, July 3, 2007, at 6–7. 

The proposed rules exclude the 

effects of negotiated service agreements 

from the calculation of percentage 

change in rates. The foundational 

argument in support of negotiated 

service agreements is that they can be 

structured to benefit the participating 

mailer and the Postal Service, while not 

harming (and hopefully, benefiting) 

non-participating mailers. Pitney Bowes 

and Advo are correct in their conclusion 

that including negotiated service 

agreements in the test for compliance 

with the rate cap may lead to rates for 

non-participating mailers that exceed 

the rate cap. This would undermine the 

rationale for permitting negotiated 

service agreements. 

Proposed section 3010.24 addresses 

volume associated with negotiated 

service agreements. Paragraph (a) 

provides that mail volumes sent at nontariff rates under negotiated service 

agreements are to be included in the 

calculation of percentage change in rates 

as though they paid the appropriate 

rates of general applicability. Where it is 

impractical to identify the rates of 

general applicability, the volumes 

associated with the mail sent under the 

terms of the negotiated service 

agreement shall be excluded from the 

calculation of percentage change in 

rates. Paragraph (b) requires related 

support in the form of identification and 

explanation of all assumptions made 

with respect to the treatment of 

negotiated service agreements in the 

calculation of the percentage change in 

rates and the rationale for assumptions. 

Limit on application of banking 

exception. Proposed rule 3010.25 

addresses certain limits on unused rate 

adjustment authority. It provides that 

these adjustments may only be applied 

together with inflation-based limitation 

rate adjustments or when inflationbased limitation rate adjustments are 

not possible. It further provides that 

unused rate adjustment authority may 

not be used in lieu of an inflation-based 

limitation rate adjustment. 

H. Overview of Subpart D—Rules for 

Rate Adjustments for Negotiated Service 

Agreements (Type 2 Rate Adjustments) 

Section 3622(c)(10) of the PAEA 

requires consideration of the desirability 

of special classifications for both postal 

users and the Postal Service. 

Subsections 3622(c)(10)(A) and (B) 

mandate that such agreements must 

improve the net finances of the Postal 

Service or enhance operational 

performance while not causing 

unreasonable harm to the marketplace. 

Section 3622(d)(1)(C) further details the 

review period that will begin ‘‘not later 

than 45 days before the 

implementation’’ of any agreement 

made under subsection (c)(10). These 

subsections of the PAEA provide the 

basis and criteria for evaluating and 

approving negotiated service 

agreements. 

In their comments, parties have 

expressed a range of views on how the 

Commission should implement the 

legislative framework for negotiated 

service agreement regulation. The level 

of review described in these diverse 

comments can be summarized into two 

groups: Parties who consider the current 

negotiated service agreement process 

amenable with the PAEA, and parties 

who assert that the PAEA calls for a 

significantly streamlined process. 

Parties who support a continuation of 

the current process, and in some 

instances, the regulations as currently 

written, include Valpak, NAA, Jon 

Mulford Associates, and APWU. This 

viewpoint was summarized by NAA, 

stating 

[t]he Commission should continue to adhere 

to its established, balanced approach to 

considering special classifications in the 

form of negotiated services agreements or 

niche classifications. This includes 

conducting a thorough public and prior 

review, which results in a determination that 

the proposed mailer-specific agreement may 

or may not take effect. In keeping with the 

new statutory approach giving the 

Commission the final say, that determination 

should be subject to judicial review. 

NAA Reply Comments, May 7, 2007, at 

13. 

Parties supporting a simplified and 

minimal review of negotiated service 

agreements include Advo, Discover 

Financial Services, LLC (DFS), MOAA, 

Pitney Bowes, and Time Warner. This 

viewpoint was summarized by Pitney 

Bowes stating, ‘‘The elimination of 

advance, on-the-record Commission 

review of NSAs should significantly 

enhance the Postal Service’s ability to 

meet the needs of mailers * * *.’’

Pitney Bowes Reply Comments, May 7, 

2007, at 13. 

The Commission finds that the statute 

requires a regulatory approach that 

combines elements of the divergent 

views among parties. The legislation 

seeks to provide the Postal Service with 

added flexibility to enhance producer 

and consumer surplus through 

negotiated service agreements. The 

proposed rules will decrease the 

administrative and economic burden in 

implementing such agreements. 

However, arguments such as those 

presented in the comments of Jon 

Mulford, stating ‘‘[t]he Commission 

should insure that periodic audits verify 

that claimed benefits persist through the 

duration of the NSA’’ also reflect the 

policies of the PAEA. See Jon Mulford 

Associates Comments, March 14, 2007, 

at 4. Combining flexibility and 

accountability is the essence of the new 

legislation, and the Commission 

attempts to achieve the proper balance 

in the subpart D rules. 

This subpart consists of four rules. 

Proposed rule 3010.40 expresses the 

Commission’s objective in 

administering the implementation of 

negotiated service agreements. It 

clarifies that this objective is directly 

tied to statutory requirements in 39 

U.S.C. 3622(c)(10) mandating that 

special classifications either improve 

the net financial position of the Postal 

Service or enhance the performance of 

operational functions and do not cause 

unreasonable harm to the marketplace. 

Timing of notice and review. 

Proposed rule 3010.41 addresses 

procedures. Paragraphs (a)(1) and (2) 

reflect the requirements for Type 2 

changes that public notice and notice to 

the Commission occur not later than 45 

days prior to the intended rate 

implementation date. 

Contents of filing. Proposed rule 

3010.42 addresses the contents of a 

notice in support of a negotiated 

settlement agreement. It indicates that 

this should include, at a minimum, a 

copy of the negotiated service agreement 

and a statement identifying all parties 

and a description explaining the 

operative components. It is also to 

include the estimated mailer-specific 

costs, volumes and revenues of the 

Postal Service absent the 

implementation of the agreement; the 

estimated mailer-specific costs, volumes 

and revenues of the Postal Service 

which result from implementation; and 

an analysis of the effects of the 

agreement on the contribution to 

institutional costs from mailers not 

party to the agreement. If mailer-specific 

costs are not available, the source and 

derivation of the costs that are used 

shall be provided, together with a 

discussion of the currency and 

reliability of those costs, and their 

suitability as a proxy for the mailerspecific costs. 

The Postal Service is also to identify 

each component of the agreement 

expected to enhance the performance of 

mail preparation, processing, 

transportation or other functions in each 

year of the agreement, and a discussion 

of the nature and expected impact of 

each such agreement. Furthermore, it is 

to provide details regarding any and all 

actions to assure that the agreement will 

not result in unreasonable harm to the 

marketplace. 


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50756 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

14Testimony of Randy Stumbo, Director of 

Distributoin and Postal Affairs for Meredith 

Corporation, Postal Regulatory Commission Field 

Hearing, Kansas City, June 22, 2007 (Stumbo 

Testimony). 

15Testimony of Don Hall, Jr., President and CEO, 

Hallmark Cards, Inc., June 22, 2007 (Hall 

Testimony). 

Finally, the Postal Service is to collect 

and provide annual data that are 

intended to enable the Commission and 

interested persons to evaluate whether 

each negotiated service agreement has 

met, and is likely to meet in the future, 

the expectations that caused the Postal 

Service to enter the agreement. It is 

understood that not every agreement 

will meet Postal Service expectations. 

Nonetheless, continuing periodic review 

is the best way to assure that flaws in 

Postal Service projection techniques are 

recognized and remedied. 

I. Overview of Subpart E—Rules for Rate 

Adjustments in Exigent Circumstances 

(Type 3 Rate Adjustments) 

The PAEA also requires that the 

Commission establish procedures to 

allow rate adjustments in excess of the 

annual limitation on an expedited basis 

due to either extraordinary or 

exceptional circumstances, provided: 

[T]here is not sufficient unused rate authority 

as defined in 39 U.S.C. 3622(d)(2)(C); and 

[T]he Commission determines, after notice 

and opportunity for a public hearing and 

comment, and within 90 days after any 

request by the Postal Service, that such 

adjustment is reasonable and equitable and 

necessary to enable the Postal Service, under 

best practices of 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. 

See 39 U.S.C. 3622(d)(1)(E). 

There are several significant 

differences between a Type 3 change 

and the other three types. First, based 

on the legislative history, a Type 3 

change is expected to be an atypical 

occurrence, while the other types are 

considered more routine. Types 1-A, 1- 

B and 2 changes follow the streamlined 

45-day notice-and-review process, while 

a Type 3 filing occurs pursuant to a 

request and a hearing, with up to 90 

days for consideration. 

Commenters addressing 

implementation of the exigency clause 

in 39 U.S.C. 3622(d)(1)(E) focus mainly 

on the extent to which Commission 

rules should define ‘‘exigent 

circumstances’’ for purposes of rate 

adjustments; the related possibility, if 

the definition is too broad, that frequent 

requests for exigent increases could 

undermine the intended discipline of 

the price cap mechanism; and the 

nature and extent of public participation 

in exigent request filings. 

The Postal Service describes the 

PAEA’s exigency clause as a safety valve 

for those ‘‘extraordinary or exceptional 

situations in which the [price] cap 

cannot be met even through honest, 

efficient, and economical management.’’

Postal Service Comments, April 6, 2007, 

at 16. It does not address the content of 

an exigent rate filing or the role of the 

public, but asserts, with respect to 

defining exigent circumstances, that it is 

not necessary or prudent for the 

Commission to attempt to specify in this 

rulemaking the situations that might be 

covered in advance of an actual need to 

do so. Postal Service Reply Comments, 

May 7, 2007, at 15. 

Pitney Bowes and Time Warner share 

the Postal Service’s view that the 

Commission should not attempt to 

define qualifying circumstances at this 

time. Pitney Bowes suggests addressing 

the question on a case-by-case basis as 

circumstances arise. Pitney Bowes 

Comments, April 6, 2007, at 10. 

Similarly, Time Warner says: 

* * * the Commission need not and 

should not attempt to determine a 

substantive standard for granting Postal 

Service requests under the exigent 

circumstances provision (other than the 

standard set out in § 3622(d)(1)(E) itself) until 

presented with the concrete circumstances 

attending an actual Postal Service request 

under that provision; the kind of judgment 

that the Commission is called on to make in 

deciding whether to grant such a request 

cannot be exercised well in the abstract or 

upon hypotheticals; moreover, to the extent 

that such a standard might err on the side of 

leniency, it would undermine the discipline 

that the price caps are intended to instill, and 

to the extent that it might err on the side of 

stringency, it could create perverse 

incentives to find alternative ways of 

circumventing the caps. 

Time Warner Comments, April 6, 2007, 

at 22–23. 

Several other commenters echo Time 

Warner’s concern about the relationship 

between the exigency clause and the 

price cap mechanism. The Alliance of 

Nonprofit Mailers, National Association 

of Presort Mailers, and National Postal 

Policy Council jointly state: ‘‘* * * the 

exigency provision for ‘‘extraordinary or 

exceptional’’ services must be drawn 

very narrowly; otherwise the availability 

of this mechanism will undermine the 

index as a constraint on costs and 

efficiency.’’ ANM/NAPM/NPPC 

Comments, April 6, 2007, at 2 and 11; 

see also ANM/NAPM/NPPC Reply 

Comments, May 7, 2007, at 8. They urge 

the Commission to make it clear that 

exigent financial consequences should 

have to be large enough to threaten the 

Postal Service’s financial integrity, and 

must not be due to an unreasonable 

failure to hedge and insure against risk 

or any other form of inefficient or 

uneconomical management. ANM/ 

NAPM/NPPC Comments, April 6, 2007, 

at 11. Randy Stumbo, representing 

Meredith Corporation, says: ‘‘An easy 

out provided by a liberal exigency 

provision would seriously damage the 

cost control incentive created by a rate 

cap.’’ Stumbo Testimony at 3.14

Don Hall, Jr., representing Hallmark, 

also cautions: ‘‘* * * [I]f the exigency 

provision is over-used, mail users in all 

classes will have to conclude that the 

price cap scheme is not going to 

succeed—and, as the Act also provides, 

after 10 years this Commission will have 

to devise something better.’’ Hall 

Testimony at 7.15

Mr. Hall also asserts that it is 

imperative that the Commission clarify 

what circumstances warrant the rate cap 

to be pierced and to make certain that 

the Postal Service exhaust all other 

resources provided by its ability to 

retain earnings before seeking rate 

increases above the cap. Id. at 12. 

Mr. Stumbo seeks more specific 

direction, as he suggests: 

While it seems premature and imprudent 

to explicitly define in the abstract the events 

under which exigency may be exercised, it is 

necessary to define what it is not. 

Attributable cost shortfalls at the class or 

subclass level do not constitute exigent 

circumstances. Nor should the exigency 

clause be used to re-apportion rates in any 

way. 

Stumbo Testimony at 3. 

The Magazine Publishers Association 

(MPA) and the Alliance of Nonprofit 

Mailers (ANM) agree that the failure of 

a class to cover its attributable costs 

should be affirmatively identified as not 

qualifying as an exigent circumstances. 

ANM/MPA Comments, April 6, 2007, at 

11–12. Time Warner, however, claims 

that the Commission need not and 

should not decide that failure of a class 

to recover attributable costs could never 

constitute exigent circumstances 

justifying above-cap increases. Time 

Warner Reply Comments, May 2, 2007, 

at 33. 

The Greeting Card Association (GCA) 

suggests that the Commission could 

clarify the scope of the exigency clause 

by defining ‘‘extraordinary or 

exceptional circumstances’’ to exclude 

matters that, under the Postal 

Reorganization Act of 1970, would have 

been dealt with under the provision for 

contingencies. GCA Comments, April 6, 

2007, at 9. It says the Commission 

should provide guidance on how the 

nature of the ‘‘extraordinary or 

exceptional’’ circumstances motivating 

the adjustment relates to the allocation 


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Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 50757 

16Pursuant to section 3642, the Commission may 

change the lists of competitive products under 

section 3631 and market dominant products under 

section 3621 by adding new products to or 

removing products from the lists, or transferring 

products between the lists. 

17OCA Comments, June 18, 2007, at 23; UPS 

Comments, June 18, 2007, at 2. 

of burdens among mail users. Id. at 11–

12. GCA also concludes, after 

addressing the potential impact of 

external and internal events, that the 

Commission: 

* * * should make clear in setting up the 

subparagraph (E) [exigency clause] 

procedures that the Postal Service, in first 

presenting its proposed adjustment, must 

explain fully (i) the nature of the 

extraordinary or exceptional circumstances 

claimed to justify the rate change, and (ii) the 

theory on which it considers its proposed 

rate changes appropriate to reflect (i). 

Id. at 13. Moreover, it asserts that this 

explanation should be required to be 

part of the initial filing, as the 

Commission must make its required 

findings in 90 days or less. Id. 

Commenters differ on the nature and 

extent of public comment. Advo, for 

example, simply notes, in contrasting 

the types of public input called for in 

the PAEA, that the statute requires that 

the Commission provide ‘‘notice and 

opportunity for public hearing and 

comment,’’ but does not address the 

nature and scope of the public hearing. 

Advo Comments, April 6, 2007, at 5. 

GCA and Time Warner note that the 

PAEA provides an opportunity for 

public participation when the Postal 

Service files an exigent request, but do 

not contend that this mandates formal 

trial-type hearings. GCA, instead, asserts 

that the procedures must provide ‘‘some 

opportunity’’ for parties to raise 

challenges to the bases of the proposed 

increase, and that the Postal Service 

must overcome such challenges to meet 

the burden of justifying exigent 

increases. GCA Comments, April 6, 

2007, at 14–15. Others suggest that the 

PAEA’s reference to an ‘‘opportunity for 

public participation and comment’’

means that the Commission must 

establish trial-type proceedings for 

exigent requests. See, for example, 

ANM/NAPM/NPPC Comments, May 7, 

2007, at 11. 

Discussion. The Commission 

appreciates commenters’ concerns that 

the exigency clause, if invoked too 

frequently, could undermine the 

statutory price cap mechanism. At this 

point, it should be assumed that the 

Postal Service’s intent is to honor the 

clear import of the PAEA’s overarching 

ratesetting philosophy that exigent 

requests are meant to be a safety net for 

dealing with unforeseeable emergencies. 

The Commission believes that the 

commenters’ concerns can largely be 

addressed by requiring, as proposed rule 

3010.61 does, that the Postal Service 

provide focused explanation in support 

of any exigent request. This includes a 

full discussion of the circumstances 

giving rise to the filing, the reasons why 

the requested increases are necessary, 

and why the specific proposed increases 

are reasonable and equitable as between 

the types of users of market dominant 

products. The Postal Service will be 

required to provide considerable 

additional context, such as an 

explanation of how long the exigent 

increases are intended to be in effect, 

the circumstances under which 

rescission of the increases might occur, 

a justification addressing the 

foreseeability or avoidability of the 

circumstances giving rise to the request, 

and other information that would assist 

the Commission in reaching a decision. 

The Commission reserves the right, in 

proposed rule 3010.62, to require the 

Postal Service to clarify or further 

supplement its request. These 

provisions do not explicitly define 

‘‘exigent circumstances,’’ and 

unmistakably convey the message that 

exigent requests are indeed 

‘‘extraordinary or exceptional.’’

The proposed rules provide that upon 

receipt of an exigent request, the 

Commission will conduct an expedited 

review, including a public hearing, that 

allows for resolution within 90 days. 

The rulemaking record is relatively slim 

on this aspect of PAEA implementation, 

perhaps due to the focus on filings 

considered more routine. The 

Commission has carefully considered 

the nature and extent of public input for 

exigent requests, and preliminarily has 

concluded that while the PAEA would 

not preclude reviving the trial-type 

proceedings that held sway in the past, 

it also does not require them. The fact 

that the statute does not explicitly refer 

to a hearing ‘‘on the record,’’ which is 

universally associated with trial-type 

hearings under the Administrative 

Procedure Act (APA), provides support 

for this conclusion. The drafters were 

well aware that the system they were 

replacing had included APA-style 

formal proceedings, and could have 

mandated equivalent proceedings for 

exigent requests by including an 

unmistakable reference to ‘‘on the 

record’’ proceedings, but did not. 

Additional support is drawn from the 

period of time (90 days) allowed for 

review, which is inconsistent with 

overly-elaborate hearings; and as the 

Postal Service and some joint 

commenters suggest, the likelihood that 

issues will not simply require 

adjudication of facts, but also may 

involve significant policy 

considerations. Given these 

considerations, the Commission 

proposes a written process, without 

cross-examination, to facilitate public 

participation, coupled with public 

hearings at which one or more 

responsible Postal Service official 

would appear for questioning by the 

Commission. This mechanism strikes an 

appropriate balance between assuring 

transparency and accountability in 

keeping with the statute, while 

facilitating completion of review within 

90 days. These provisions appear in 

proposed subpart E. 

III. Competitive Products 

Subchapter II of chapter 36 of 39 

U.S.C., 39 U.S.C. 3631–34, sets forth the 

provisions applicable to competitive 

products, which, pursuant to § 3631(a), 

initially include priority mail, expedited 

mail, bulk parcel post, bulk 

international mail, and mailgrams.16

Section 3631(c) provides that ‘‘[m]ail 

matter referred to in [§ 3631(a)] shall, for 

purposes of this subchapter, be 

considered to have the meaning given to 

such mail matter under the mail 

classification schedule.’’ In Order No. 

15, the Commission solicited the 

parties’ views on ‘‘mail matter’’

comprising each of the foregoing types 

of mail and on the meaning of the 

phrase ‘‘mail classification schedule.’’

PRC Order No. 15, May 17, 2007, at 6. 

Several parties addressed these issues. 

See, e.g., Postal Service Comments, June 

18, 2007, at 11–16; UPS Comments, June 

18, 2007, at 2–4; OCA Comments, June 

18, 2007 at 22–27; and PSA Comments, 

June 18, 2007, at 1–3. 

A. Mail Classification Schedule 

OCA and UPS contend that ‘‘mail 

classification schedule’’ as used in 

section 3631(c) refers to the Domestic 

Mail Classification Schedule (DMCS).17

For several reasons, the Commission is 

not persuaded by this construction. 

First, section 3631(a) includes mail 

matter not subject to the DMCS, i.e., 

bulk international mail. Second, when 

Congress intended that the DMCS be 

used, it was specific. See section 

3622(d)(2)(A), applying the price cap 

limit to ‘‘a class of mail, as defined in 

the Domestic Mail Classification 

Schedule as in effect on the date of 

enactment of the [PAEA].’’ Thus, the 

failure to specify the DMCS in section 

3631(c) suggests that something else is 

intended. Third, while the DMCS may 

be useful in initially determining mail 

matter comprising the competitive 

products, the mail classification 


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50758 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

18Postal Service Supplemental Comments, June 

19, 2007. The bulk of these comments relate to 

market dominant products, with the Postal Service 

suggesting a framework for classification changes 

and development of a mail classification schedule. 

Id. at 1–14. 

19The list also includes ‘‘mailgrams,’’ a service 

which was terminated on August 17, 2006. See 

Postal Bulletin 22192, October 26, 2006, at 5; see 

also letter from Daniel J. Foucheaux, Jr. to Steven 

W. Williams, Secretary, Postal Rate Commission, 

filed November 2, 2006. 

20The Commission concurs with the Postal 

Service’s position that the mail classification 

schedule should provide a level of detail similar to 

the DMCS. The Commission also agrees with the 

Postal Service that maintaining separate 

classification schedules for market dominant 

products and competitive products is reasonable. 

Nonetheless, for administrative convenience and 

clarity, the Commission intends to initially combine 

the separate lists for market dominant and 

competitive products in a single mail classification 

schedule. 

21The mail classification schedule also serves as 

the source of the list of competitive products 

maintained by the Commission pursuant to section 

3642. 

22See also OCA Comments, June 18, 2007, at 22; 

PSA Comments, April 6, 2007, at 8, n.8; PSA 

Comments, June 18, 2007, at 2; and UPS Comments, 

June 18, 2007, at 2. 

23 Id. Elsewhere, however, OCA appears to 

suggest that other than two ‘‘bulk international 

mail’’ services all remaining international mail 

should be categorized as market dominant. Id. at 26. 

24As PSA points out, the listing of ‘‘Bulk Parcel 

Post’’ among the rate categories of the Parcel Post 

subclass (DMCS section 521.3) is an anachronism 

since there is no current rate associated with that 

rate category which preceded the Parcel Select rate 

categories. PSA Comments, June 18, 2007, at 2. 

schedule has a continuing, if somewhat 

new, role under the statute. Among 

other things, the mail classification 

schedule incorporates international mail 

(both single-piece and bulk) and is 

subject to section 3642, which 

authorizes the Commission to modify 

the makeup of competitive and market 

dominant products. 

The Postal Service recognizes that the 

PAEA contemplates a mail classification 

schedule, suggesting that it would 

contain ‘‘a level of detail equivalent to 

the current DMCS,’’ with additional 

language added to account for 

international mail. Postal Service 

Comments, June 18, 2007, at 16. The 

Postal Service advocates that separate 

classification schedules be established 

for market dominant and competitive 

products. Id. 

In supplemental comments, the Postal 

Service offers its views on what it calls 

the classification process.18 Regarding 

competitive products, it argues that the 

Commission has no role in developing 

or overseeing the mail classification 

schedule other than determining, 

pursuant to section 3642, what products 

are in the competitive category of mail. 

Id. at 14. The Postal Service asserts that 

‘‘the Governors will maintain the 

‘‘Competitive Products Classification 

Schedule,’’’ with changes made 

pursuant to section 3632(b). Id. The 

Commission interprets its 

responsibilities under the PAEA 

differently, concluding that the mail 

classification schedule falls within its 

purview. 

The Postal Service states that ‘‘the 

PAEA clearly vests classification 

authority with the Governors[.]’’ Id. To 

a point, this statement is 

unobjectionable. Notably, however, it 

overlooks limitations on the Governors’

authority, namely, that it is subject to 

subchapter II (of chapter 36 of title 39) 

and regulations promulgated by the 

Commission under section 3633. 

Moreover, the Governors’ authority to 

change rates or classes (pursuant to 

section 3632) cannot reasonably be read 

to encompass the wholly separate power 

to develop and maintain a mail 

classification schedule for competitive 

products. If the Governors were 

intended to have such authority, there 

would be no reason for the process 

mandated by section 3631 or for 

subjecting the Governors’ authority to 

change rates or classes to the 

Commission’s regulations. Nor would 

there be any reason for the separate 

provision, section 3642, for establishing 

new products. 

Section 3631(a) identifies the initial 

list of competitive mail matter, 

including priority mail, expedited mail, 

bulk parcel post, and bulk international 

mail.19 None of these terms is defined 

in the statute. To establish what each of 

the foregoing means section 3631(c) 

instructs that the ‘‘[m]ail 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.’’ Pursuant to this rulemaking, 

the Commission will identify the mail 

matter, including the products, in the 

(competitive) mail classification 

schedule that initially comprise each 

type of mail listed in section 3631(a). 

This process is integral to the 

Commission fulfilling its 

responsibilities under the PAEA, which 

requires, among other things, that each 

competitive product cover its 

attributable costs. 

Commission maintenance of the mail 

classification schedule does not deprive 

the Governors of any flexibility to 

change rates or classes or offer new 

products. It does, however, assure nondiscriminatory service and transparency 

in a manner contemplated by the 

statute.20 The mail classification 

schedule identifies the products subject 

to the Commission’s oversight, a task 

which does not fall to the Governors.21

B. Competitive Mail Matter 

Not unreasonably, parties addressing 

the issue define mail matter, in the first 

instance, by reference to the existing 

materials, namely, the DMCS and 

International Mail Manual (IMM). This 

works reasonably well for ‘‘priority 

mail’’ and ‘‘expedited mail,’’ both of 

which appear in the DMCS. Thus, for 

example, the Postal Service suggests 

that ‘‘priority mail’’ consists of mail 

within the ‘‘Priority Mail’’ subclass 

(DMCS section 223) and ‘‘expedited 

mail’’ consists of Express Mail entered 

under the ‘‘Expedited Mail 

Classification Schedule’’ (DMCS section 

110 et seq.). Postal Service Comments, 

June 18, 2007, at 11–12.22

For purposes of promulgating the 

initial regulations applicable to 

competitive products, the Commission 

agrees that, at a minimum, mail matter 

qualifying as priority mail and 

expedited mail is that described in the 

DMCS. There are three features to this 

initial classification: each represents 

only domestic mail; each is a separate 

product; and the rates for each product 

are rates of general applicability. 

OCA notes that the listing of priority 

mail and expedited mail in section 

3631(a) does not distinguish between 

domestic and international mail or 

between single-piece and bulk. OCA 

Comments, June 18, 2007, at 23. Thus, 

it asserts that priority mail and 

expedited mail should include both 

domestic and international in the 

competitive mail classification 

schedule.23 This position is not 

unreasonable and the Commission 

proposes to include outbound 

international priority mail (Priority Mail 

International) and expedited mail 

(Global Express Guaranteed and Express 

Mail International) as separate products 

within the priority mail and expedited 

mail classifications respectively. As 

discussed below, inbound shipments 

would be classified as market dominant. 

Reference to the DMCS and IMM 

works less well for ‘‘bulk parcel post’’

and ‘‘bulk international mail’’ since 

neither is clearly delineated.24 The 

parties addressing the issue agree 

generally that ‘‘bulk parcel post’’

consists of the following mail matter: 

Parcel Select (DMCS sections 521.23–

26); Parcel Select Return Service (DMCS 

sections 521.27–28); Inter-BMC 

qualifying for OBMC and BMC 

discounts (DMCS sections 521.41–42); 

and Inter-BMC and Intra-BMC 

qualifying for a barcode discount 

(DMCS section 521.5). See Postal 

Service Comments, June 18, 2007, at 12–

13; PSA Comments, June 18, 2007, at 3; 


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25Should experience prove otherwise, mail 

matter defined as single-piece parcel post may, if 

appropriate, be transferred to the competitive 

products classification pursuant to section 3642. 

26 In its reply comments, UPS notes that it agrees 

generally with the Postal Service’s definition of 

bulk parcel post. UPS Reply Comments, July 3, 

2007, at 1. 

27See Postal Service Reply Comments, May 7, 

2007, at 32–33; Postal Service Comments, June 18, 

2007, at 13–14; UPS Comments, June 18, 2007, at 

4; OCA Comments, June 18, 2007, at 26; and PSA 

Comments, April 6, 2007, at 8, n.8; see also Pitney 

Bowes Comments, June 18, 2007, at 12–13. 

28OCA contends that ICMs involving single-piece 

international mail should be characterized as a 

market dominant product. OCA Comments, June 18, 

2007, at 56–57. 

29Postal Service Comments, June 18, 2007, at 13. 

In an earlier round of comments, the Postal Service 

endorsed the views of PSA and the International 

Mailers’ Advisory Group (IMAG) that certain singlepiece international mail should be categorized as 

competitive products, but on different grounds, 

namely, that the products, e.g., Global Express 

Guaranteed, Priority Mail International, and 

Express Mail International, are ‘‘subject to fierce 

competition[.]’’ Postal Service Reply Comments, 

May 7, 2007, at 32. In its more recent comments, 

the Postal Service’s position on what constitutes 

bulk international mail appears to be limited to 

multi-item mailings tendered by a single mailer. See 

Postal Service Reply Comments, July 3, 2007, at 38–

39. As an exception to this, the Postal Service 

indicates that because costs and revenues 

associated with Global Package Discount service are 

not separately collected, Express International Mail 

would need to be categorized as a competitive 

product. Postal Service Comments, June 18, 2007, 

at 15, n.17. 

30 In its discussion of ICMs, the Postal Service 

refers to Global Shipping Solutions and Global 

Package Discounts. Postal Service Comments, June 

18, 2007, at 15, see also id. at n.17. Whether these 

are separate services or marketing programs in the 

form of ICMs is unclear. In its comments, the Postal 

Service should clarify their status. 

31As noted above, in earlier comments OCA 

contends that an ICM involving single-piece 

international mail, such as Priority Mail 

International, should be categorized as a market 

dominant product. OCA Comments, June 18, 2007, 

at 56–57. 

32The Postal Service identifies Global Bulk 

Economy and Global Direct as candidates for 

inclusion in the bulk international mail category. 

Postal Service Comments, June 18, 2007, at 15. It 

indicates that these services are available through 

an ICM. Whether these services are available only 

as an ICM or if they represent a separate category 

of international mail similar to IPA and ISAL is 

unclear. In its comments, the Postal Service should 

clarify their status. 

33The Express Delivery & Logistics Association 

filed a white paper concerning section 407(e) taking 

issue with the Postal Service position on inbound 

mail. White Paper by Express Delivery & Logistics 

Association Regarding Implementation of Section 

405 of the Postal Accountability and Enhancement 

Act of 2006, July 20, 2007, at 2. See also FedEx 

Comments, April 6, 2007, at 4–5. 

OCA Comments, June 18, 2007, at 24; 

and UPS Comments, June 18, 2007, at 

2–3. 

The Commission agrees with the 

consensus view that ‘‘bulk parcel post’’

consists of the following mail matter: 

Parcel Select, Parcel Return Service, and 

Parcel Post mail qualifying for OBMC, 

BMC, and barcode discounts. Initially, 

therefore, bulk parcel post would be 

comprised of these three products. 

UPS and the Postal Service also 

suggest that bulk parcel post include 

additional mail matter. UPS would 

include mail entered as Inter-BMC or 

Intra-BMC Parcel Post by commercial 

mailers in quantities greater than one. 

UPS Comments, June 18, 2007, at 3; see 

also UPS Reply Comments, July 3, 2007, 

at 1. PSA opposes UPS’s proposal as 

contrary to the commonly accepted use 

of the terms ‘‘bulk’’ and ‘‘single-piece’’

in the DMCS. PSA Reply Comments, 

July 3, 2007, at 2–3. 

To qualify for various current Parcel 

Post discounts, mailers must deposit at 

least 50 properly prepared pieces. See, 

e.g., DMCS sections 521.23–26 and 

521.41–42. This minimum quantity is a 

prerequisite for mailing at discounted 

(or non-single-piece) rates. UPS offers 

no justification for reducing that 

minimum volume threshold to two. 

Accordingly, the Commission will not 

adopt that suggestion.25

The Postal Service suggests that ‘‘bulk 

parcel post’’ include Inter- and IntraBMC Parcel Post pieces if postage is 

paid using a Merchandise Return 

Service permit. Postal Service 

Comments, June 18, 2007, at 12–13. 

Merchandise Return Service is a special 

service enabling the permit holder to 

authorize a mailer to mail parcels, 

including Parcel Post mail, with the 

postage and fees paid by the permit 

holder. Merchandise Return Service is 

also available for sending First-Class 

Mail parcels. No party commented on 

this proposal specifically.26

Although the proposal has some 

appeal, the Commission will not adopt 

it at this juncture. Under the PAEA, 

special services are classified as market 

dominant as are First-Class Mail parcels. 

The availability of Merchandise Return 

Service as both a market dominant and 

competitive service raises practical 

difficulties that are unexplored in this 

docket. Moreover, there may well be 

other special services that would be 

better categorized as competitive. Thus, 

to consider one in isolation may lead to 

results with unintended consequences. 

The better practice is to utilize the 

procedures for transferring items 

between the market dominant and 

competitive product lists once these 

lists have been established as specified 

by Congress in the PAEA. 

The parties’ attempts to define the 

term ‘‘bulk international mail’’ are 

handicapped by the lack of a longstanding mail classification schedule. 

Instead, they turn to the IMM for 

guidance. It is a useful tool, but does not 

eliminate uncertainty surrounding the 

meaning of the term ‘‘bulk international 

mail.’’ Based on the parties’’ comments, 

there appears to be little dispute that, at 

a minimum, bulk international mail 

consists of the following: 27

International Priority Airmail Service 

(IPA), which is available to bulk mailers 

of all international letter items (IMM 

section 292); International Surface 

Airlift Service (ISAL), which is a bulk 

mailing system for the delivery of letter 

items (IMM section 293); and 

International Customized Mailing 

Agreements (ICMs), which are mailerspecific agreements subject to minimum 

revenue or quantity requirements (IMM 

section 297).28 There is, however, some 

controversy over the characterization of 

the remaining international mail 

services. 

The Postal Service suggests that bulk 

international mail should be interpreted 

to include ‘‘multi-item mailings 

tendered by a single mailer.’’ 29 The 

Postal Service indicates that multiple 

quantities may be satisfied by volume 

commitments or other types of annual 

guarantees. Id. at 13. Thus, in addition 

to the foregoing international services, 

the Postal Service proposes that the 

following be characterized as bulk 

international mail: Global Bulk 

Economy, which it indicates provides 

for surface transportation of bulk FirstClass Mail international items; Global 

Direct, which it indicates provides for 

direct entry of bulk mailings sent 

through the Postal Service bearing the 

indicia, postal markings, and return 

address of the destination country; and 

direct sacks of printed matter sent to a 

single foreign addressee, also known as 

M-bags. Id. at 14.30

No party filed comments opposing the 

Postal Service’s view of bulk 

international mail.31 UPS agrees with it. 

UPS Reply Comments, July 3, 2007, at 

1. For purposes of promulgating these 

initial regulations, the Commission 

proposes to define bulk international 

mail by reference to bulk commercial 

services, which may be satisfied by 

volume commitments or other types of 

annual guarantees. This would include 

IPA, ISAL, ICMs, and M-bags.32 The 

Commission proposes to define IPA, 

ISAL, and M-bags as separate products 

and, at least initially, each ICM as a 

product. 

Regarding international mail 

determined by the Commission to be a 

competitive product, the PAEA amends 

title 39 by adding section 407(e)(2) as 

follows: 33

With respect to shipments of 

international mail that are competitive 

products within the meaning of section 

3631 that are exported or imported by 


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34The Commission’s interpretation of section 

407(e) concerns only its role as the arbiter of 

international mail to be classified as a competitive 

product. It is not intended to suggest how other 

federal agencies may apply the customs laws and 

other laws relating to the importation and 

exportation of mail. 

35Express Mail is not available to or from certain 

difficult-to-access locations. Nonetheless, it is 

available in the nation as a whole. 36A ‘‘negotiated service agreement’’ is a contract 

negotiated between the Postal Service and another 

entity, most likely the mailer, for service and rates 

different from those of general applicability. 

37The Census Bureau, for example, divides the 

country into four regions, which are further 

subdivided into divisions. The geographic area of 

the nine states that comprise the West Region’s 

Mountain Division is more than three times greater 

than that occupied by the South Region’s South 

Atlantic Division, which is comprised of eight 

states and the District of Columbia stretching from 

Delaware to Florida (856.1 thousand square miles 

versus 266.1 thousand square miles). However, the 

population in the South Atlantic Division is more 

than 2.5 times greater than that of the Mountain 

Division (57.1 million versus 20.8 million based on 

July 2006 estimates). 

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. 

Section 407(e)(1) defines the term 

‘‘private company’’ as one 

‘‘substantially owned or controlled by 

persons who are citizens of the United 

States.’’ Thus, the Commission’s 

findings regarding international mail 

classified as competitive products are 

relevant to the application of customs 

and related laws to the importation and 

exportation of such shipments, 

requiring that such laws be applied ‘‘in 

the same manner to both shipments by 

the Postal Service and similar 

shipments by private companies.’’

Regarding outbound international mail 

classified as competitive products, e.g., 

IPA, ISAL, and ICMs, section 407(e)(2) 

would apply to shipments by the Postal 

Service and similar shipments by 

private companies.34

Regarding inbound international mail, 

there are two issues. First, the 

demarcation between bulk and singlepiece international mail is less clear. 

The Universal Postal Union (UPU) 

identifies three types of mail: Letter 

Post, Express, and Parcel Post. The 

issues of inbound international mail 

have not been addressed sufficiently to 

enable the Commission to determine 

what inbound international mail 

qualifies as ‘‘bulk international mail.’’

Given the UPU’s designations, one 

possibility would be to classify Letter 

Post as market dominant with the other 

types of mail classified as competitive 

products. The Commission, however, 

has no data indicating that either 

Express or Parcel Post is properly 

considered to be ‘‘bulk international 

mail.’’

Second, it is not apparent that 

classifying any inbound international 

mail as a competitive product has the 

same significance it does for outbound 

mail. To be sure, section 407(e) applies 

to the importation of shipments deemed 

competitive. More specifically, 

however, it applies to such shipments 

by the Postal Service and private 

companies owned by U.S. citizens. The 

Postal Service does not operate ETOEs 

(extra-territorial offices of exchange). 

Thus, there are no foreign-originating 

mail shipments by the Postal Service. 

Currently, shipments of inbound mail 

are handled by foreign posts and by 

private carriers. Foreign posts are not 

defined as private companies for 

purposes of section 407(e). In addition, 

although the Postal Service receives 

inbound mail from foreign posts at 

various customs locations, whether such 

mail is, within the meaning of section 

407(e), ‘‘imported by the Postal Service’’

is unclear. Finally, even if shipments 

received by the Postal Service from 

foreign posts are construed as shipments 

by the Postal Service, there may be good 

reason to view such inbound mail as 

market dominant. The record is not 

sufficiently developed to enable the 

Commission to determine what inbound 

international mail is appropriately 

classified as ‘‘bulk international’’ and, 

therefore, a competitive product. The 

parties commenting on the foregoing 

discussion should thoroughly address 

the law and facts supporting their 

position and, in particular, the 

application of section 407(e) to inbound 

mail. 

Lastly, regarding competitive 

products, section 3632(b)(3) permits rate 

(or class) changes not of general 

applicability for competitive products. 

In recognition of this, the Commission 

is initially of the view that negotiated 

service agreements for mail classified as 

competitive are within the competitive 

products category and that each such 

agreement should be classified as a 

separate product. 

C. General Applicability of Rates and 

Classes 

Section 3632(b) identifies two types of 

rates or classes—those of general 

applicability and those not of general 

applicability. Each is qualified by the 

phrase ‘‘in the Nation as a whole or in 

any substantial region of the Nation[.]’’

Sections 3632(b)(2) and (b)(3). Section 

3632(b)(4) provides that the 

Commission shall establish by 

regulation the criteria for determining 

whether a rate or class is or is not of 

general applicability in the nation or 

any substantial part of the nation. 

Three parties address the ‘‘general 

applicability’’ of rates or classes largely 

by reference to their availability. The 

Postal Service suggests that a rate (or 

class) is of general applicability if it is 

‘‘publicly available throughout the 

nation[.]’’ Postal Service Comments, 

June 18, 2007, at 19. UPS advocates a 

generally similar standard, contending 

that a rate or class is of general 

applicability ‘‘if it is available to all 

mailers equally,’’ even if not all mailers 

satisfy the conditions for the rate or 

class. UPS Comments, June 18, 2007, at 

7. At the other end of the spectrum, the 

parties suggest that rates or classes 

negotiated between the Postal Service 

and individual mailers are not of 

general applicability. See Postal Service 

Comments, June 18, 2007, at 19; UPS 

Comments, June 18, 2007, at 7; and PSA 

Comments, June 18, 2007, at 4. 

Defining whether a rate or class is ‘‘of 

general applicability’’ by reference to its 

availability is a reasonable means for 

establishing the outer bounds of the 

term. The Commission will adopt that 

standard. Thus, a rate (or class) of 

general applicability is one that is 

available nationwide to all mailers 

equally, i.e., on the same terms. That 

some mailers may not be able to qualify 

for the rate, e.g., for failure to satisfy the 

preparation requirements, or because it 

is not available in all geographic areas, 

does not alter the nature of the rate as 

one of general applicability.35

On the other hand, a contract rate 

(negotiated service agreement) 

negotiated between the Postal Service 

and an individual mailer would not be 

of general applicability.36 Between these 

parameters, however, determining 

whether a rate or class is or is not of 

general applicability throughout the 

nation or in any substantial region of the 

nation is less exact and, in all 

likelihood, would turn on the facts. In 

those situations, availability will 

continue to serve as a reasonable 

touchstone for determining the general 

applicability of the rate or class. 

Only the Postal Service addresses the 

meaning of the term ‘‘substantial 

region,’’ suggesting that it be defined by 

the size of the population of the relevant 

region. Postal Service Comments, June 

18, 2007, at 19–20. That standard is one 

of several that might be appropriate.37

Rather than address the issue in the 

abstract, the Commission concludes that 

whether a rate or class is or is not of 

general applicability in any substantial 


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38Although Express Mail service is not available 

at every post office, unquestionably the service 

would be fairly characterized as being of general 

applicability throughout the nation. 

39Advo Comments, June 18, 2007, at 10–11; PSA 

Comments, June 18, 2007, at 4; and Postal Service 

Comments, June 18, 2007, at 18–19. 

40UPS Comments, June 18, 2007, at 4–5. In its 

reply comments, UPS appears to modify its 

position, indicating, among other things, that it is 

not suggesting the Postal Service be required to file 

test year projections and that fiscal year data 

included in the annual report may be sufficient for 

rate changes noticed relatively shortly after the 

filing of the annual report. UPS Reply Comments, 

July 3, 2007, at 3–4. 

41Pursuant to the proposed regulations, the Postal 

Service will also be required to file the notice of all 

proposed rate (and class) changes of general 

applicability with the Commission no later than the 

date such notice is published in the Federal 

Register. 

42See, e.g., FedEx Corporation’s press releases of 

December 4, 2006, announcing a 4.9 percent 

increase in certain ‘‘standard list rates;’’ and of 

November 3, 2006, announcing a 3.5 percent 

increase in the net average shipping rate for FedEx 

Express, both of which may be accessed at: 

http://www.fedex.com/us/about/news/ 

pressreleases/?link=4. 

region of the country is, at least at the 

outset, best determined on a case-bycase basis based on the facts presented. 

Currently, with the possible exception 

of Alaska bypass, the Postal Service 

does not provide any non-nationwide 

service.38 Among other things, section 

3642 concerns the establishment of new 

products. Thus, to the extent the Postal 

Service chooses to offer a product on a 

less-than-nationwide basis, there will be 

an opportunity to consider the phrase 

‘‘substantial region of the nation’’ in the 

context of a specific proposal. 

D. Information Supporting Rate and 

Class Decisions 

The Governors’ authority to establish 

rates and classes for competitive 

products is subject to subchapter II of 

chapter 36 of title 39 and the regulations 

promulgated by the Commission under 

section 3633 to: (a) Prohibit crosssubsidies of competitive products by 

market dominant products, (b) require 

each competitive product to cover its 

attributable costs, and (c) ensure that 

collectively competitive products cover 

an appropriate share of the institutional 

costs of the Postal Service. In Order No. 

15, the Commission solicited the 

parties’ views on what information is 

needed to support changes in rates or 

classes whether of general applicability 

or not. PRC Order No. 15, May 17, 2007, 

at 6–7. In addition, the Commission 

asked whether the information needed 

to support a rate decrease differed from 

that for a rate increase. Id. at 6. 

The parties offer starkly contrasting 

views on the information needed to 

support changes in rates. Advo, PSA, 

and the Postal Service contend that 

nothing need be filed with the 

Commission, other than the notice 

required under section 3632(b)(3), at the 

time rate changes are announced.39

These parties assert that competitive 

products’ compliance with section 3633 

should be considered only in the annual 

compliance review under section 3653. 

Id. UPS, on the other hand, contends 

that rate changes should be 

accompanied by the following 

information: Volumes, revenues, billing 

determinants, attributable costs, 

including an explanation of substantial 

cost changes; prior fiscal year audited 

data; projected data for the period when 

the rates are in effect; and unaudited 

data for the current fiscal year.40 UPS 

concludes that pre-implementation 

review is a prerequisite for determining 

competitive products’ compliance with 

section 3633. Id. 

The Postal Service asserts that the 

‘‘structure of the statute, including, the 

nature of the data required to show 

compliance with 3633, suggests that 

there is no prior review by the 

Commission.’’ Postal Service 

Comments, June 18, 2007, at 18. In 

support, it points to the different notice 

requirements associated with rate 

changes of general applicability 

(Federal Register notice no less than 30 

days prior to the effective date) and rate 

changes of less than general 

applicability (filing with the 

Commission not less than 15 days prior 

to the effective date). Id. at 18–19. It 

argues that the former suggests that any 

substantive review is limited to the 

annual compliance review, whereas the 

latter seemingly is intended to protect 

the confidentiality of customized 

agreements. Id. at 19. This argument is 

not persuasive. 

The statutory provisions governing 

competitive products, 39 U.S.C. 3631–

34, neither explicitly provide for nor 

prohibit pre-implementation review of 

rate changes by the Commission. 

Section 3633 directs the Commission to 

promulgate regulations to: (a) Prohibit 

cross-subsidies of competitive products 

by market dominant products; (b) 

ensure that each competitive product 

covers its attributable costs; and (c) that 

collectively competitive products make 

an appropriate contribution to the Postal 

Service’s overhead. To fulfill these 

responsibilities, the Commission cannot 

turn a blind eye to changes which may 

not be in compliance with those 

requirements. The different notice/filing 

requirements prescribed by section 3632 

suggest the need for closer scrutiny of 

certain types of rate changes. 

Section 3632(b)(2) requires that, for 

rate (or class) changes of general 

applicability, the Governors publish 

each rate (or class) decision and the 

record of the Governors’ proceeding in 

the Federal Register at least 30 days 

before the effective date of any new 

rates or classes.41 Rates (or classes) of 

general applicability are available to all 

mailers equally, i.e., those satisfying the 

eligibility standards for the rate (or 

class). So, for example, Parcel Select 

rates would be available to all mailers 

meeting the eligibility requirements for 

such service. In essence, rates of general 

applicability are the published (or tariff) 

rates for the particular service. When a 

carrier’s published rates (those of 

general applicability) are changed, 

experience suggests that they are likely 

to be increased.42 As a general rule, 

anytime competitive prices are 

increased concern over unfair 

competition is diminished. Likewise, 

increases in postal rates of general 

applicability above those found in 

compliance with section 3633 can, for 

purposes of these implementing 

regulations, be deemed to be 

presumptively reasonable. In that 

situation, the annual review would 

appear to be adequate to assure 

compliance with section 3633. The 

complaint process would be available as 

well. 

An identical presumption of 

reasonableness cannot fairly be 

presumed for rate decreases of general 

applicability, which, at a minimum, 

intensify concerns about potentially 

unfair competition. This is not to 

suggest any limitation on the Governors’

authority to change rates. Unlike its 

private enterprise counterparts, 

however, the Postal Service has no 

residual claimants, i.e., stockholders, to 

shoulder the consequences of an 

improvident decision to change rates. 

The Commission’s role is to ensure that 

rates and classes comply with section 

3633. By doing so, the Commission 

preserves fair competition. The change 

in circumstances giving rise to the 

decrease, resulting in a reduction from 

the pre-existing presumptively lawful 

rates, justifies the pre-implementation 

review to ensure continued compliance 

with section 3633. Thus, the 

Commission proposes that for decreases 

in rates of general applicability the 

Postal Service will be required to 

demonstrate the change is in 

compliance with section 3633. See 

section 3015.3(c) of the proposed 

regulations. The Commission does not 

anticipate that the regulations will 

either unduly burden the Postal Service 


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43The Postal Service’s suggestion that customized 

agreements are required to be filed with the 

Commission, as opposed to simply being noticed in 

the Federal Register, to protect the confidentiality 

of such agreements (Postal Service Comments, June 

18, 2007, at 19), is only one aspect of this issue. The 

Postal Service is aware that certain information 

should be public. See 72 FR 37454 (July 10, 2007), 

concerning recent revisions to the IMM regarding 

the notifications of ICMs. 

44PostCom supports PSA’s position. PostCom 

Reply Comments, July 3, 2007, at 5. 

45Advo notes the possibility that implementation 

of section 2011(h) may cause an increase in 

competitive products’ costs, ‘‘resulting in a rate 

floor that is well in excess of the ‘cross subsidy’

threshold.’’ Id. 

46UPS asserts that the Federal Trade 

Commission’s report, pursuant to section 703(d) of 

the PAEA, will aid the Commission in determining 

the ‘‘net economic benefit realized by the Postal 

Service due to preferential legal treatment[.]’’ Id. 

47The Postal Service indicates that an analysis 

will be required to identify group-specific costs. Id. 

at 21. 

48PSA’s endorsement of the incremental cost test 

appears to be designed to satisfy both the 

proscription against cross-subsidies and the 

requirement that each product cover its attributable 

costs. See PSA Comments, April 6, 2007, at 5. 

49See Docket No. R87–1, USPS–T–3 at 11. 

or delay the effectiveness of changes 

satisfying the minimal standards of 

lawfulness. 

Section 3632(b)(3) authorizes the 

Governors to establish rates (or classes) 

not of general applicability, i.e., to 

execute negotiated service agreements 

with mailers providing for rates 

different from the published rates (of 

general applicability). Notably, 

negotiated service agreements are 

subject to different filing requirements 

than are rate changes of general 

applicability. Specifically, each such 

negotiated service agreement (rate or 

class decision not of general 

applicability) and the record of 

proceedings in connection with such 

decision must be filed with the 

Commission not less than 15 days prior 

to the effective date of any new rate or 

class. There is good reason for the 

different filing requirements depending 

upon the type of rate change involved.43

Changes not of general applicability 

will invariably involve discounts 

compared to published rates and 

perhaps involve combinations of 

services. Thus, such arrangements will 

inevitably raise concerns about the 

potential for unfair competition. The 

Commission would be remiss if it did 

not review these filings prior to their 

implementation to ensure compliance 

with section 3633. The Governors’ rate 

(or class) changes must be in writing 

and include a statement of explanation 

and justification. 39 U.S.C. 3632(b)(1). 

The information to demonstrate 

compliance with section 3633 will 

presumably have been reviewed by the 

Postal Service and be readily available. 

Thus, the Commission proposes to 

require the Postal Service to file with all 

competitive negotiated service 

agreements, i.e., rate (or class) changes 

not of general applicability, sufficient 

cost and revenue information to enable 

the Commission to assess, as a 

preliminary screen, whether the 

agreement satisfies the requirements of 

section 3633. In particular, the 

Commission proposes that the Postal 

Service be required to show that each 

negotiated service agreement covers its 

attributable costs and to represent that 

the agreement is otherwise in 

compliance with section 3633. 

The Commission does not anticipate 

that this review process will delay the 

effective date of any negotiated service 

agreement found to be in compliance 

with section 3633. Nor will the review 

process impinge on the Governors’

authority to change rates or execute 

negotiated service agreements. The 

limited review is intended to provide 

some assurance that, at least 

preliminarily, the arrangement is not 

unlawful. As these arrangements will 

undoubtedly contain commercially 

sensitive information, it is understood 

that the Postal Service may exercise its 

prerogative to seek appropriate 

protective conditions. 

E. Section 3633 Standards 

Section 3633 contains three 

provisions by which the lawfulness of 

competitive products’ rates are judged. 

These provisions, prohibiting crosssubsidies, establishing an attributable 

cost floor, and requiring an appropriate 

institutional cost contribution, are 

designed to act in concert to ensure that 

competitive rates are lawful. Each 

provision, along with the parties’

suggestions for its implementation, is 

discussed in turn. 

1. Prohibition Against Cross-Subsidies 

Section 3633(a)(1) prohibits the 

subsidization of competitive products 

by market dominant products. In 

response to Order No. 15, the parties 

suggest a wide range of standards to be 

used to test for cross-subsidies. 

• OCA suggests that the standard 

requires competitive products to cover 

both their attributable costs plus an 

appropriate share of institutional costs. 

OCA Comments, June 18, 2007, at 33. 

• APWU contends that there is no 

cross-subsidy if competitive products 

cover their attributable costs. APWU 

Comments, June 18, 2007, at 5. 

• PSA advocates use of the 

incremental cost test, whereby 

‘‘revenues for each competitive product 

cover its incremental cost.’’ PSA 

Comments, April 6, 2007, at 5. It 

suggests that the Commission’s 

attributable costs serve as a proxy for 

incremental costs. Id.44

• Advo endorses the incremental cost 

test applied to competitive products 

collectively, i.e., revenues from 

competitive products ‘‘cover their 

combined incremental costs.’’ Advo 

Comments, June 18, 2007, at 11.45

• UPS contends that subsection (a)(1) 

redefines the term ‘‘subsidy’’ to require 

that competitive products collectively 

cover their attributable costs, their 

appropriate share of institutional costs, 

plus an additional amount representing 

‘‘a fair share of the unattributable 

network costs from which competitive 

products benefit.’’ UPS Comments, June 

18, 2007, at 9.46

• The Postal Service advocates a 

standard requiring competitive 

products’ total revenues to be at least 

equal to the sum of each product’s 

attributable costs ‘‘plus the groupspecific costs caused by the competitive 

products as a group.’’ Postal Service 

Comments, June 18, 2007, at 24.47

To test for cross-subsidies, the 

Commission will initially apply the 

incremental cost test, a standard that 

Advo and PSA suggest.48 Incremental 

costs are the variable and fixed costs 

that would be eliminated if a product 

(or products) was (were) 

(hypothetically) discontinued.49 In prior 

rate cases, the Commission has 

discussed the issue and adopted a 

definition offered by Postal Service 

witness Panzar: ‘‘The revenues collected 

from any service (or group of services) 

must be at least as large as the 

additional (or incremental) cost of 

adding that service (or group of services) 

to the enterprise’s other offerings.’’ PRC 

Op. R97–1, ¶ 4022, quoting USPS–T–11 

at 8. While acknowledging that this is 

the test it should endeavor to apply (id., 

¶ 4026), the Commission’s attempts to 

do so have been thwarted by concerns 

about the underlying assumptions used, 

e.g., constant variability and the 

stability of the operating plan. See, e.g., 

PRC Op. R2000–1, ¶ 4055 (‘‘the results 

of the test may still be unreliable where 

deleting a subclass or combination of 

subclasses causes a large reduction in an 

important cost driver.’’) 

The Commission recognizes that 

presently it lacks the data that would 

enable it to employ rigorously the 

incremental costs to test for crosssubsidies of competitive products. 

Shortly, the Department of the Treasury 

will provide its analysis of Postal 

Service costs, and the Commission will 

initiate a public proceeding to evaluate 


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50UPS and NAA urge the Commission to 

commence a separate proceeding to address cost 

issues. UPS Comments, June 18, 2007, at 15; NAA 

Comments, June 18, 2007, at 11–12. 

51PSA suggests this as well. PSA Comments, 

April 6, 2007, at 5. 

52APWU does not elaborate on its suggestion 

there is no cross-subsidy provided that competitive 

products cover their attributable costs. APWU 

Comments, June 18, 2007, at 5–6. Without more, 

however, that standard appears merely to restate 

subsection (a)(2)’s requirement of an attributable 

cost floor. OCA’s suggested test, on the other hand, 

does take into account non-negative markups, but 

also includes ‘‘an appropriate share of institutional 

costs[.]’’ OCA Comments, June 18, 2007, at 33. The 

test for cross-subsidies is independent from the 

issue of what the appropriate share should be for 

competitive products as a whole. Revenues in 

excess of incremental costs (or attributable costs in 

the interim) demonstrate no cross-subsidy exists, 

but are not necessarily an indication that the 

contribution to institutional costs (the share) is 

appropriate. 

53Postal Service Reply Comments, July 3, 2007, 

at 24–27; Advo Reply Comments, July 3, 2007, at 

5–7; and PSA Reply Comments, July 3, 2007, at 3–

5. 

54See Advo Reply Comments, July 3, 2007, at 7. 

55Elaborating on the point, the Commission noted 

that in addition to specific fixed costs it also found 

other nonvariable costs to be attributable, e.g., the 

fixed portion of special delivery messengers. Id. at 

¶ 4016. See also PSA Comments, April 6, 2007, at 

9. 

56See Postal Service Reply Comments, July 3, 

2007, at 29–30, remarking on the period deemed 

sufficient to allow the Postal Service to adjust fully 

to the impact the provision of the product creates. 

this information.50 Previously, to test for 

cross-subsidies the Commission has 

used each product’s attributable cost as 

a reasonable proxy for the costs 

associated with that product.51

Endorsing this standard as an 

appropriate surrogate, the Commission 

remarked that ‘‘nonnegative markups 

are good evidence against the presence 

of the most elementary cross subsidies.’’

PRC Op. R97–1, ¶ 4024.52

The Postal Service’s suggested test, 

competitive products’ revenues at least 

equal to the sum of the products’

attributable costs plus the products’

causally related group-specific costs, 

appears to be similar to the incremental 

cost test. To test for cross-subsidies, the 

incremental cost test should consider all 

possible combinations of products 

(services). It is not clear whether this is 

different from what the inclusion of 

‘‘group-specific costs’’ contemplates. 

See Postal Service Reply Comments, 

July 3, 2007, at 40. In any event, the 

Postal Service does agree that ‘‘analysis 

will be required’’ to quantify the 

additional, causally related, nonvariable group-specific costs. Postal 

Service Comments, June 18, 2007, at 21. 

To test for cross-subsidies, the 

inclusion of such group-specific costs is 

appropriate. Thus, until reliable 

incremental cost data are available, the 

Commission will continue to use its 

current cross-subsidy test, 

supplemented to include causally 

related, group-specific costs. If and 

when incremental costs can be 

accurately determined, the Commission 

may adjust its existing practice. 

UPS asserts that the PAEA redefines 

cross-subsidy to require that 

competitive products collectively bear 

costs in excess of their attributable costs 

‘‘and a fair share of the unattributable 

network costs from which competitive 

products benefit.’’ UPS Comments, June 

18, 2007, at 9. The Postal Service, Advo, 

and PSA take issue with UPS’s 

contention that the PAEA redefines the 

term ‘‘subsidy.’’ 53 The Commission will 

not adopt UPS’s construction. The 

relevant PAEA provisions, sections 

3633(a)(1) and 2011(h)(1)(A)(i)(II), 

prohibit the cross-subsidy of 

competitive products by market 

dominant products. Apart from any 

consideration of the public policies that 

might be furthered by the UPS test, an 

issue not developed on this record,54 the 

Commission does not interpret the 

foregoing provisions as redefining the 

concept of cross-subsidy. 

2. Attributable Cost Floor 

Section 3633(a)(2) requires that each 

competitive product cover its 

attributable costs, which, in section 

3631(b), are defined as ‘‘the direct and 

indirect postal costs attributable to such 

product through reliably identified 

causal relationships.’’ This standard 

codifies the Commission’s long-standing 

method of attribution under the Postal 

Reorganization Act. See, e.g., PRC Op. 

R97–1, ¶ 4017 (‘‘The Commission is not 

prepared to depart from the position 

that attributable cost means costs which 

can be said to be reliably caused by a 

subclass of mail or service.’’) 55 For 

purposes of initially implementing 

regulations pursuant to section 3633, 

the Commission intends to employ this 

long-established attribution method to 

determine compliance with section 

3633(a)(2). 

UPS advocates that long-run 

incremental costs be used as the 

benchmark for each competitive 

product’s attributable costs. UPS 

Comments, June 18, 2007, at 12. It views 

this approach as preferable to the 

existing method because it includes 

‘‘shared fixed costs,’’ i.e., fixed costs 

incurred over the long run by more than 

one product. Id. In reply comments, 

UPS appears to endorse this standard to 

test for cross-subsidies as well, at least 

with respect to calculating groupspecific costs. UPS Reply Comments, 

July 3, 2007, at 5. The Commission does 

not adopt UPS’s suggestion. 

Section 3633(a)(2) specifies 

attributable costs as a term that has an 

accepted meaning in the context of 

Postal Service costing. Employing longrun incremental costs as a measure of 

attributable costs renders all costs 

variable in theory.56 Furthermore, 

although the notion of shared fixed 

costs may be relevant to the issue of 

cross-subsidies, as discussed in the 

previous subsection, UPS has not 

demonstrated any reasonable nexus 

between those costs, which by 

definition are fixed regardless of the 

number of products, and a product’s 

attributable costs, including those 

reliably identified based on causal 

relationships. 

In its response to Order No. 15, the 

Postal Service does not appear to 

comment specifically on the standard to 

be used to measure compliance with 

section 3633(a)(2). Rather, it includes 

that subsection in its interpretation of 

what section 3633 requires as a whole, 

namely, that competitive products’

revenues ‘‘be sufficient to cover the sum 

of attributable costs and group specific 

costs, plus any mark-up on attributable 

costs that the Commission determines is 

‘appropriate.’ ’’ Postal Service 

Comments, June 18, 2007, at 23. In its 

reply comments, the Postal Service 

recognizes that the statutory definition, 

section 3631(b), codifies the longstanding attribution method. Postal 

Service Reply Comments, July 3, 2007, 

at 29. The Postal Service goes on, 

however, to note its apparent agreement 

with UPS ‘‘that, for purposes of 

3633(a)(2), the cost floor for each 

competitive product should be the costs 

the Postal Service would avoid if it did 

not offer that competitive product.’’ Id. 

This statement appears to suggest 

agreement with UPS’s position 

regarding the use of long-run 

incremental costs for purposes other 

than testing for cross-subsidies, 

although the Postal Service does raise 

the issue of how one would define the 

period sufficient to allow the Postal 

Service to adjust fully to the impact the 

provision of the service creates. See id. 

at 30. This appears to be an area where 

future analysis may be warranted. 

3. Appropriate Share of Institutional 

Costs 

Section 3633(a)(3) requires that 

competitive products collectively cover 

an ‘‘appropriate share’’ of the Postal 

Service’s institutional costs. The term 

‘‘appropriate share’’ is not defined; its 

meaning is left for the Commission to 

determine based on consideration of all 

relevant factors. The parties addressing 

this issue suggest a variety of 


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57See OCA Comments, June 18, 2007, at 34–35; 

PSA Comments, April 6, 2007, at 11–13; Pitney 

Bowes Comments, April, 6, 2007, at 38: and UPS 

Reply Comments, July 3, 2007, at 6. Initially, UPS 

suggested that the contribution from competitive 

products should be maximized. UPS Comments, 

April 6, 2007, at 5–7. 58Advo Reply Comments, May 7, 2007, at 15–19; 

MOAA Comments, June 18, 2007, at 2; and APMU 

Comments, April 6, 2007, at 3–5. 

59 Valpak Comments, June 18, 2007, at 13–14. 

Valpak states that such comparisons ‘‘would enable 

the Commission to ensure that competitive 

products are not subsidizing market-dominant 

products[.]’’ Id. at 14. 

60Postal Service Comments, June 18, 2007, at 24–

26. 

61Necessarily, the results are estimated since data 

are not reported for bulk parcel post and bulk 

international mail separately from their single-piece 

counterparts. For purposes of this exercise, bulk 

parcel post consists of Parcel Select, Parcel Return 

Service, and Parcel Post eligible for a BMC, OBMC, 

or barcode discount. The foregoing estimate 

includes a TY 2008 contribution for bulk 

international mail of approximately $176 million 

(out of $376 million), calculated using the average 

percentage contribution for competitive 

international mail in FY 2005 and FY 2006 as a 

proxy. 

62Among the non-cost factors the Commission 

used to assign institutional costs are: Value of 

service, impact on mailers and competitors, 

availability of alternatives, and simplicity of rate 

structure. See 39 U.S.C. 3622(b) (2002). For 

purposes of this discussion, reference to the PRA 

is shorthand for the Act prior to its amendment by 

the PAEA. 

approaches, the most concrete of which 

is that the Commission begin with the 

markups from Docket No. R2006–1.57

Several parties urge that the 

contribution be set at a low level, 

arguing, among other things, that it 

represents a floor not a ceiling, that the 

Postal Service has incentive to exceed 

that floor, and that if set too high the 

Postal Service will be unable to compete 

and, as a result, contribution will be lost 

to the detriment of market dominant 

mailers.58 One party contends that 

contributions from market dominant 

and competitive products must be 

compared, suggesting various ways in 

which this might be accomplished, e.g., 

on a per-piece (unit contribution) or 

percentage (markup) basis.59 The Postal 

Service advocates that the contribution 

be set at a relatively low level,60

suggesting that it be ‘‘calculated as a 

mark-up on the sum of the competitive 

products’ attributable cost.’’ Id. at 23. 

UPS agrees with this method of 

calculating the contribution. UPS Reply 

Comments, July 3, 2007, at 6. 

The Commission considered various 

options, including all of those suggested 

in the comments, in evaluating how best 

to quantify, at least initially, appropriate 

share. Among the options considered 

and rejected were: Equal unit 

contribution, equal percentage markup, 

markup of competitive products’

attributable costs, and percentage of 

revenues. None of these was deemed 

preferable to the alternative of basing 

competitive products’ contribution on a 

percentage of total institutional costs. 

To be sure, the various other methods 

could all be expressed mathematically 

in terms of percentage of total 

institutional costs, but each implies a 

pricing technique, e.g., a particular 

coverage level, absent from simply 

basing appropriate share on a 

percentage of total institutional costs. 

The latter better reflects the section 

3633(a)(3) directive and is more easily 

understood than the various 

alternatives. Moreover, this approach is 

a fitting starting point, recognizing that 

by year’s end the Department of the 

Treasury will submit recommendations 

to the Commission relating to treatment 

of Postal Service costs. Interested 

persons will have an opportunity to 

comment on those recommendations. 

See section 2011(h)(2)(A). 

In attempting to quantify appropriate 

share, the Commission begins its 

analysis with the competitive products’

contribution resulting from rates 

recommended in Docket No. R2006–1. 

Based on the recommended rates, the 

Commission estimates that in TY 2008 

competitive products will contribute 

approximately $2.4 billion to the Postal 

Service’s institutional costs.61

Expressed as a percentage, this figure 

represents approximately 6.9 percent of 

the total contribution to institutional 

costs. 

For purposes of implementing these 

regulations initially, the Commission is 

persuaded that the competitive 

products’ contribution should be 

modified from Docket No. R2006–1 

levels. The Commission proposes to set 

the initial contribution at 5.5 percent of 

the Postal Service’s institutional costs. 

Illustratively, based on Docket No. 

R2006–1 TY 2008 figures, this 

percentage yields a contribution of 

approximately $1.9 billion. 

Several factors influence the 

Commission’s proposal to establish an 

appropriate share below the 

contribution level derived from rates 

recommended in Docket No. R2006–1. 

The PAEA so thoroughly overhauls the 

ratemaking process that the Commission 

would be remiss if it failed to consider 

the differences in the rate setting 

process. Under the pre-PAEA Postal 

Reorganization Act (PRA), postal rates 

were constrained by a break-even 

requirement and systemwide pricing 

scheme under which institutional costs 

were assigned based on non-cost 

factors.62 Given these constraints, 

pricing was a ‘‘zero-sum game,’’ i.e., an 

increase (or decrease) in the assignment 

to one subclass (or service) must be 

offset by a decrease (or increase) to one 

or more other subclasses (or services). 

In lieu of that system, the PAEA 

bifurcates Postal Service products into 

market dominant and competitive 

categories with a principal objective 

being to reduce costs and increase 

efficiency. Under the PAEA, the Postal 

Service has an incentive to reduce both 

attributable and institutional costs due 

to limitations on market dominant rates 

and because it is authorized to retain 

earnings. 

Under the PRA, the assignment of 

institutional costs was designed to 

ensure that each subclass or type of mail 

made a reasonable contribution to the 

Postal Service’s overhead, yielding rates 

that were fair and equitable and 

subsidy-free. The PAEA addresses the 

issues of rate levels and subsidies 

differently. Market dominant rates are 

limited by a price cap, not by policy 

considerations. Thus, market dominant 

mailers are insulated from the 

consequences of any failure by the 

Postal Service to compete successfully. 

Rates for competitive products are 

subject to market conditions and, by 

statute, must satisfy criteria which 

preclude the possibility of subsidization 

by market dominant products. 

The ‘‘appropriate share’’ required by 

the PAEA is not synonymous with 

‘‘reasonably assignable’’ required by 

PRA section 3622(b)(3). No longer are 

rates for competitive products 

predicated on explicit consideration of 

specific non-cost factors. Moreover, the 

resulting rate levels represent 

significantly different things. Under the 

PRA, rate levels equate with maximum 

rates for the subclass or type of mail, as 

rates are not designed to generate a 

surplus. In contrast, under the PAEA, 

the concept of rate levels for 

competitive products largely disappears, 

with the Postal Service given the 

flexibility to price competitive products 

however it wishes, provided its rates 

satisfy the statutory standards of 

lawfulness. Appropriate share is a floor 

for all competitive products, but the 

hope (and expectation) is that 

competitive products will generate 

contributions in excess of the floor. 

Thus, it is unlike reasonably assignable 

in two other respects: it applies to 

competitive products collectively, not to 

subclasses or services individually; and 

it represents a minimum (not maximum) 

contribution level, serving as a 

threshold for compliance with section 

3633(a)(3). Because it may retain 

earnings, the Postal Service has 

incentives to exceed this threshold, 

including reducing rate pressure on 

market dominant rates, continuation of 


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63The figures for international mail were 

developed based on the contribution associated 

with that mail included within the competitive 

category in this order. The international CRA for 

FY2006 does not separately identify data for Global 

Bulk Economy (GBE) mail. However, since GBE had 

no reported volume in FY 2005, its contribution in 

FY 2006, if any, would likely have no measurable 

affect on the total international mail contribution. 

64The contribution from bulk parcel post is, in 

any event, relatively minor. For the convenience of 

the parties, workpapers showing the development 

of these estimates will be made available on the 

Commission’s Web site (http://www.prc.gov) in 

Docket No. RM2007–1. The Commission is 

providing this level of detail so that parties have an 

opportunity to review the underlying data and, if 

appropriate, suggest revisions which may more 

accurately portray historic results. 

65Pursuant to section 2011(h)(1)(A)(ii), the 

Secretary of the Treasury will recommend 

substantive and procedural rules that should be 

followed in determining the assumed Federal 

income tax on competitive products income. Those 

recommendations are due on or before December 

19, 2007. Interested persons will have an 

opportunity to comment on those 

recommendations. For purposes of this order, it is 

sufficient to note that the assumed Federal income 

tax on competitive products income is an issue that 

may affect future efforts to develop an appropriate 

share. 

66See, e.g., PSA Comments, June 18, 2007, at 11; 

MOAA Reply Comments, July 3, 2007, at 4; Advo 

Reply Comments, July 3, 2007, at 12; and Pitney 

Bowes Comments, June 18, 2007, at 11. 

67NAA Comments, June 18, 2007, at 14. NAA 

observes, correctly, that product is defined in a 

manner that ‘‘resembles the Commission’s 

traditional test for a rate category.’’ Id. at 14–15. 

68See, e.g., NPPC Comments, June 18, 2007, at 10 

(negotiated service agreements are products); 

PostCom Reply Comments, July 3, 2007, at 7–8 

(each market dominant negotiated service 

agreement should be viewed as a distinct product); 

GCA Comments, June 18, 2007, at 9–10 (special 

classifications and class not of general applicability 

containing one service would be a product, but a 

negotiated service agreement may or may not be); 

and NAA Comments, June 18, 2007, at 16 (status 

of negotiated service agreements should be decided 

on a case-by-case basis). See also UPS Comments, 

June 18, 2007, at 19 (rates for a given type of mail 

may vary only if there is ‘‘a distinct and significant 

cost or market characteristic for [that] type of mail 

***’’). 

69 39 U.S.C. 102(6) (emphasis added). 

70See PRC Op. MC95–1, ¶ 3022 (emphasis 

added); see also id. ¶ 3023 (‘‘The Commission has 

consistently expected proponents of separate 

subclass treatment to show differences in both costs 

and demand.’’). 

universal service, and the possibility of 

bonuses. 

Section 3633 requires that each 

competitive product cover its 

attributable costs and prohibits 

competitive products from being 

subsidized by market dominant 

products. Thus, they must be selfsustaining since any shortfall cannot be 

recovered by increasing market 

dominant rates. 

In attempting to quantify an 

appropriate contribution, the 

Commission is mindful of the risks of 

setting it too high, particularly at the 

outset of the new system of regulation. 

The market is competitive; the Postal 

Service’s market share is relatively 

small; and the Postal Service needs 

some flexibility to compete. On the 

other hand, the Commission has an 

obligation to preserve competition by 

not establishing a markup so low as to 

give the Postal Service an artificial 

competitive advantage. The task, as 

Advo noted, ‘‘calls for a delicate 

balance.’’ Advo Reply Comments, May 

7, 2007, at 16. 

The Commission’s proposal to set the 

minimum contribution level at 5.5 

percent of total institutional costs is 

influenced by historic results. A review 

of the Cost and Revenue Analysis (CRA) 

for domestic and international postal 

operations supports a best estimate of 

competitive products’ contribution to 

institutional costs at 5.4 percent in FY 

2005 and 5.7 percent in FY 2006. These 

figures were developed based on the 

reported FY 2005 and FY 2006 data for 

Priority Mail, Express Mail, and 

international mail.63 The CRA reports 

Parcel Post data in the aggregate. Thus, 

to develop an estimate for bulk Parcel 

Post, consisting of Parcel Select, Parcel 

Return Service, and Parcel Post mail 

eligible for a BMC, OBMC, or barcode 

discount, the Commission calculated an 

estimated bulk parcel post unit 

contribution for FY 2005 based on 

actual FY 2005 data. Comparable data 

are not available for FY 2006. Thus, the 

estimated FY 2006 bulk parcel post 

contribution is based on the same 

proportional relationship between bulk 

parcel post and parcel post as a whole 

used for FY 2005.64 Setting the initial 

competitive products’ contribution at 

historic levels is a reasonable means to 

quantify appropriate share, particularly 

at the outset of the new form of 

competitive rate regulation. Since it is 

no longer subject to the pricing 

constraints of the PRA, the Postal 

Service should perform at least as well 

as it has historically. 

This order represents the initial effort 

to implement the competitive products’

regulations. The Commission 

emphasizes that its initial quantification 

of appropriate share is not written in 

stone. The statute specifically 

authorizes the Commission to revise this 

share as needed and, in any event, 

requires that the regulations be 

reviewed every five years to determine 

whether they be retained, modified, or 

eliminated. The Commission anticipates 

that that need may arise for any number 

of reasons, e.g., additions or deletions to 

the competitive product lists and market 

conditions.65

4. Application of the term ‘‘product’’

The PAEA defines the term ‘‘product’’

to mean ‘‘a postal service with a distinct 

cost or market characteristic for which 

a rate or rates are, or may reasonably be, 

applied.’’ 39 U.S.C. 102(6). The parties 

offer widely differing suggestions as to 

how this definition should be applied. 

The Postal Service recognizes that the 

term could be interpreted to mean 

individual rate categories are products. 

Postal Service Supplemental Comments, 

June 19, 2007, at 6. It dismisses that 

construction, however, contending that 

product should be ‘‘interpreted at a high 

level of aggregation’’ and proposing that 

it be interpreted ‘‘as generally 

equivalent to the current ‘subclasses’

under the PRA.’’ Id. Several parties echo 

the Postal Service’s view that product 

should be equated with subclass.66

OCA, on the other hand, takes the 

position that, for competitive products, 

the term ‘‘product’’ be interpreted ‘‘at 

the rate-cell level.’’ OCA Comments, 

April 6, 2007, at 36. NAA asserts that 

product is not synonymous with 

subclass or rate category, but instead 

should be construed ‘‘more consistent 

with everyday understandings[.]’’ 67

Other parties assert that various specific 

arrangements, e.g., special 

classifications, customized agreements, 

and negotiated service agreements, 

either are or are not products.68

Suggestions that the term ‘‘product’’

be applied in a blanket fashion are 

neither practical nor justified. Instead, 

as discussed below, a more nuanced 

approach, based on balancing the 

objectives of the PAEA and practical 

considerations, is required. 

Plainly, product cannot reasonably be 

read as equivalent to subclass since 

product is defined as having either ‘‘a 

distinct cost or market characteristic’’ 69

whereas, under the Commission’s longestablished practice, subclass requires 

both cost and demand differences. The 

Commission has clearly expressed the 

relevant standard: ‘‘To identify 

groupings of mail, which should be 

accorded subclass rather than rate 

category treatment, the Commission 

traditionally has sought to identify 

differences in both cost and market, or 

demand.’’ 70

The PAEA overhauls postal 

ratemaking, bifurcating the mailstream 

into market dominant and competitive 

mail categories, and prescribing 

different rate setting mechanisms for 

each. Market dominant rates are subject 

to an annual price cap. Section 

3622(d)(1)(A). This foremost ratemaking 

requirement is, by statute, applicable to 

classes of mail as defined in the DMCS 

in effect on the date of enactment of the 

PAEA. Section 3622(d)(2)(A). In 


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71The Postal Service also contends that language 

in section 3652(b), which concerns annual reports 

to the Commission, supports its interpretation of 

product as being equivalent to subclass. 

Specifically, it contends that the phrase ‘‘with 

respect to each market-dominant product for which 

a workshare discount was in effect’’ suggests that 

a market dominant product is not equivalent to 

workshare discount, ‘‘such that an individual 

workshare discount (which is a rate category) is not 

itself an individual ‘product.’ ’’ Id. at 8. This 

supposition is not persuasive. First, as the Postal 

Service concedes, the term ‘‘product’’ could be 

interpreted as a rate category; thus a workshare 

discount could be a product. Second, the 

Commission reads the phrase ‘‘each marketdominant product for which a workshare discount 

was in effect’’ as reflecting the possibility that mail 

matter for which a workshare discount is in effect, 

e.g., First-Class automation letters, could be found 

to be a separate product. 

72 Id. at 6. 

73Mailgrams have been discontinued and, thus, 

are not discussed. 

74A few parties suggest that competitive products 

are defined as the types of mail listed in section 

3631(a). See, e.g., NAA Comments, June 18, 2007, 

at 14–15; PSA Reply Comments, May 8, 2007, at 6; 

see also Postal Service Supplemental Comments, 

June 19, 2007, at 8–9. These contentions lack merit. 

Competitive products are not ‘‘define[d]’’ in section 

3631(a). PSA Comments, May 8, 2007, at 6. That 

section merely lists the types of mail designated as 

competitive. It does not define, i.e., identify, what 

each competitive product is. That process requires 

the Commission to identify the mail matter that 

comprises each type of mail listed in section 

3631(a) and, as appropriate, to identify the product 

(or products) within each. 

contrast, competitive rates are not tied 

to a cap; instead, they cannot be set 

below certain cost thresholds, 

including, among other things, the 

requirement that each competitive 

product covers its attributable costs. 

Section 3633(a)(2). When drafting the 

PAEA, Congress was well aware of the 

Commission’s long-established 

definitions, as it showed when defining 

‘‘costs attributable’’ in section 3631(b). It 

can be assumed to have intentionally 

chosen the term ‘‘product’’ in preference 

to ‘‘subclass,’’ a term that is not defined 

by the PAEA and, under the new rate 

setting procedures, is largely an 

irrelevant artifact. 

Nor is the Commission persuaded by 

the Postal Service’s attempts to buttress 

its suggestion that product be defined as 

a subclass by reference to other 

provisions of the PAEA. For example, it 

compares section 3622(c)(2) with former 

section 3622(b)(3) and notes that 

attribution ‘‘is expressly linked ‘to each 

competitive product.’ ’’ Postal Service 

Supplemental Comments, June 19, 2007, 

at 7. Based on this, it concludes ‘‘there 

is nothing to suggest that attribution be 

done differently under the PAEA than it 

was done under the PRA: at the subclass 

level.’’ Id. The focus on attribution does 

not support the Postal Service’s 

argument. The PAEA reaffirms the 

Commission’s attribution method and 

specifically applies it to each 

competitive product, which is given a 

different meaning than subclass. 

Moreover, concerning market dominant 

products, the price cap regulation 

supersedes attribution.71 As discussed 

below, the rejection of the contention 

that product should, in all instances, be 

equated with subclass does not foreclose 

a finding that a specific subclass is a 

product. 

OCA’s proposal is the polar opposite 

of the Postal Service’s. Instead of ‘‘a 

high level of aggregation,’’ 72 OCA 

would apply the term ‘‘product’’ at the 

most disaggregated level. Specifically, 

OCA proposes that, for competitive 

products, product be applied at the rate 

cell level, a result it contends is 

suggested by the phrase ‘‘ ‘distinct cost 

* * * characteristic.’ ’’ OCA Comments, 

April 6, 2007, at 36. Thus, under its 

reading, every competitive rate cell 

must cover its attributable costs. The 

Commission does not construe section 

102(6) so narrowly. 

Rate cells generally reflect cost 

differences, but that is not the same as 

having separate distinct cost 

characteristics. There are myriad cost 

driving factors, e.g., degree of 

preparation, density, weight, shape, 

distance, and type of delivery, that may 

be characterized as cost characteristics. 

Rate cells identify variations within 

characteristics such as zoned rates, or 

levels of presortation. OCA’s system 

would be impractical to implement and 

impossible to administer. Aside from 

these practical difficulties, OCA’s 

proposal is flawed in another respect. It 

contends that rate cell satisfies the 

requirement that ‘‘a rate or rates’’ be 

applied because a rate cell may have 

more than one rate, e.g., the same 

weight/zone Express Mail Post Officeto-Post Office has different rates than 

Post Office-to-Addressee. This hardly 

proves that a rate cell may have more 

than one rate; rather, the example 

involves separate rate categories with 

separate rate cells. 

To qualify as a product, a postal 

service must exhibit either a distinct 

cost or market characteristic for which 

a rate or rates are, or may reasonably be, 

applied. But the existence of a separate 

rate, implying a cost difference, does not 

require that the particular postal service, 

e.g., rate cell, be deemed a product. A 

rule of reason must be applied. 

The revamped ratemaking under the 

PAEA is designed to achieve various 

goals, principal among them are to 

afford the Postal Service enhanced 

pricing flexibility, while at the same 

time providing accountability through 

greater transparency. These joint goals 

will best be achieved if they are 

balanced with one another. 

Transparency cannot be achieved if the 

term ‘‘product’’ is applied too broadly, 

e.g., solely at the subclass level. 

Aggregating postal services into only a 

few products, a result urged by several 

parties, forfeits transparency and serves 

no legitimate business or regulatory 

need. Stated differently, it will not 

provide for accountability, a bedrock 

principle underlying the PAEA. By the 

same token, pricing flexibility is illusory 

if the term ‘‘product’’ is applied too 

narrowly, e.g., at the rate cell level. 

Disaggregating postal services into too 

many products would impose 

unwarranted administrative burdens on 

the Postal Service, thwart pricing 

flexibility, and serve no legitimate 

business or regulatory need. It would 

not, in short, lead to any enhancement 

in postal service, which, too, is a central 

principle underlying the PAEA. 

In applying the term ‘‘product’’ to the 

competitive and market dominant 

categories of mail, the Commission has 

been guided by these principles and has 

tried to strike an appropriate balance 

between these competing goals. In doing 

so, the Commission has also considered 

other factors, including the type of mail 

involved, the pre-existing 

classifications, and the potential for 

other reasonable groupings of postal 

services. 

The term ‘‘product’’ has greater 

significance for competitive products 

than for market dominant products. 

Section 3633(a)(2) requires each 

competitive product to cover its 

attributable costs. Each competitive 

product is identified following the 

process outlined in section 3631, which 

first, in section 3631(a), lists four types 

of mail (‘‘priority mail, expedited mail, 

bulk parcel post, and bulk international 

mail’’) as being within the competitive 

category of mail;73 and second, in 

section 3631(c), instructs that the ‘‘mail 

matter’’ comprising each of these types 

of mail has ‘‘the meaning given to such 

mail matter under the mail classification 

schedule.’’ The Commission is charged 

with the responsibility of determining 

what mail matter comprises each of 

these types of mail, and that mail matter 

is what initially becomes the 

competitive products.74

In the discussion above, the 

Commission identified 11 products that 

initially comprise the competitive 

products’ category. These are as follows: 

• Priority mail, consisting of 

Domestic Priority Mail and International 

Priority Mail; 

• Expedited mail, consisting of 

Domestic Express Mail and 

International 

• Express Mail; 


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75Each negotiated service agreement is a separate 

product. 

76As a result, these types of mail are 

distinguishable from other market dominant 

products. See section 3642(b)(2). At first blush, this 

distinction may suggest a lesser need to 

disaggregate these types of mail matter into more 

than one product. Other considerations, e.g., 

transparency and the business and/or regulatory 

needs, may outweigh that initial inclination. 

77 In some instances, it may be appropriate to 

group as a single product negotiated service 

agreements that are functionally equivalent and 

thus take on the characteristics of a niche 

classification. 

• Bulk parcel post, consisting of 

Parcel Select, Parcel Return Service, and 

parcel post qualifying for BMC, OBMC, 

and barcode discounts; 

• Bulk international mail, consisting 

of IPA, ISAL, and M-bags; and 

• Negotiated service agreements, 

which includes ICMs.75

These products not only form the 

basis for the mail classification 

schedule, but also comprise the initial 

competitive product list required by 

section 3642. 

In developing the initial list of 

competitive products, the Commission 

balanced the Postal Service’s business 

needs for pricing flexibility with the 

public’s need for accountability. The 

results demonstrate that the term 

‘‘product’’ can be applied in a judicious 

manner, based on a consideration of the 

law and facts. This process results in 

products based on classes of mail 

(Express Mail), subclasses of mail 

(Priority), rate categories (Parcel Select), 

and negotiated service agreements. 

While these products could, in theory, 

be further disaggregated or, in the case 

of negotiated service agreements, further 

aggregated, the Commission concludes 

that doing so at this time is 

unwarranted. This effort represents the 

initial listing of competitive products. In 

fashioning this list, the Commission has 

endeavored to balance goals of the 

PAEA, while also taking into account 

the parties’ competing concerns. The 

PAEA contemplates that the 

implementing regulations and the 

product lists may be changed. See 

sections 3622(a), 3633(a), and 3642(a). 

Once experience is gained, the list of 

products may be changed as warranted. 

The application of the term ‘‘product’’

to the types of mail listed in section 

3621(a) is of lesser significance because, 

as noted above, the price cap is applied 

at the class level, not at a product (or 

any other) level. Nonetheless, the same 

rule of construction applies. Compare 

sections 3621(b) and 3631(c). The 

process begins with section 3621(a) 

which lists the following 10 types of 

mail as being within the market 

dominant category of mail: 

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. 

As with competitive products, section 

3621(b) instructs that the ‘‘mail matter’’

comprising each of the foregoing types 

of mail ‘‘have the meaning given to such 

mail matter under the mail classification 

schedule.’’ Moreover, the foregoing list 

(and thus the mail matter represented 

therein) are ‘‘subject to any changes the 

Postal Regulatory Commission may 

make under section 3642.’’ Section 

3621(a). The Commission is charged 

with the responsibility of determining 

what mail matter comprises each type of 

mail, and that mail matter is what 

initially becomes the market dominant 

products. These products, in turn, form 

the basis for the mail classification 

schedule and also serve as the source of 

the market dominant product list 

required by section 3642. 

The types of market dominant mail 

listed in section 3621(a) represent a 

medley of current postal services. Five 

are classes of mail, i.e., Periodicals; 

Standard Mail; Bound Printed Matter; 

and Media and Library Mail; two are 

subclasses, i.e., First-Class letters and 

sealed parcels, and First-Class cards; 

and one, single-piece parcel post, is a 

rate category. The remaining two 

include special services, i.e., ancillary 

services, and single-piece international 

mail. An additional consideration is that 

three of these types of mail, First-Class 

letters and sealed parcels, First-Class 

cards, and Standard Mail, are covered 

by the postal monopoly.76

In considering how best to identify 

the mail matter comprising each type of 

mail, the Commission turns initially to 

the existing reference materials, an 

approach suggested by numerous 

parties. With respect to domestic mail, 

identifying the relevant mail matter may 

be accomplished by reference to the 

DMCS, a relatively straightforward 

proposition, except for single-piece 

parcel post. However, since the 

Commission has identified the 

competitive products associated with 

bulk parcel post, the latter simply 

represents the remaining parcel post 

mail matter. With respect to single-piece 

international mail, the relevant mail 

matter may be gleaned from the IMM. In 

an earlier filing, the Postal Service 

suggested specific types of mail matter 

that might be considered single-piece 

international mail. Postal Service Reply 

Comments, May 7, 2007, at 33. Since the 

Commission has identified the 

competitive products associated with 

bulk international mail, the single-piece 

counterpart would logically consist of 

the remaining international mail matter. 

In addition to the foregoing, the 

Commission proposes to add negotiated 

service agreements, i.e., special 

classifications pursuant to section 

3622(c)(10), as separate market 

dominant product. Initially, each 

agreement (special classification) will be 

treated as a separate product.77 This 

treatment affords the Postal Service 

flexibility to enter into any special 

classification it wishes, but provides the 

necessary transparency to satisfy 

relevant business and regulatory needs. 

Absent the discipline that such 

accountability imposes, both the Postal 

Service and the Commission roles under 

the PAEA may be compromised. For 

example, the Postal Service may lack 

agreement-specific details on 

profitability of the agreement, while the 

Commission would be unable to assess 

whether the agreement complied with 

the statute. 

In lieu of identifying at this time the 

market dominant products associated 

with the foregoing mail, the 

Commission concludes, for reasons of 

accuracy and expedition, that a 

preferable alternative exists. In 

commenting on the mail classification 

process, the Postal Service volunteered 

to compile a mail classification 

schedule. Postal Service Supplemental 

Comments, June 19, 2007, at 11, n.34. 

The Commission appreciates that offer. 

Doing so will be a useful exercise as it 

will enable the Postal Service to draft a 

mail classification schedule, consistent 

with this order, that best suits its needs. 

Previously, the Postal Service indicated 

the mail classification schedule would 

contain a level of detail similar to the 

DMCS. Id. at 10–11. The Commission 

finds that prospect acceptable. 

In its submission, the Postal Service 

should identify the market dominant 

products it believes should be in the 

mail classification schedule. This will 

enable the Postal Service to categorize 

its services into products so that it can 

make appropriate business decisions. 

The draft mail classification schedule 

should incorporate the competitive 

products discussed above. 

The draft mail classification schedule 

is due September 14, 2007. Responses to 

this schedule may be filed by no later 

than September 28, 2007. Lastly, section 

3642 provides the Commission with 

authority to add or remove products 


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78This may include incorporating some ancillary 

services, which currently are considered special 

services, into host products. 

from the market dominant and 

competitive product lists, and to 

transfer products between the lists. This 

proceeding represents the initial attempt 

to establish these lists. The Commission 

anticipates that changes to these lists 

will be necessary. Once the initial lists 

are established, the Postal Service may 

wish to modify them to better serve its 

and its customers’ needs. 

IV. Part 3020—Product Lists 

Rule 3020.1 explains the purpose of 

all rules that follow in part 3020. The 

rules establish a Mail Classification 

Schedule, which categorizes products as 

either market dominant or competitive. 

The categorizations must initially be 

consistent with the types of mail 

specified by 39 U.S.C. 3621(a) and 39 

U.S.C. 3631(a). Once the Mail 

Classification Schedule is established, 

the rules specify the procedures to 

modify the market dominant and 

competitive product lists and to update 

the explanatory information contained 

therein. Authority for this rule flows 

directly from the general requirements 

specified in 39 U.S.C. 3642, which 

allows the Commission to consider 

modifications to the market dominant 

and competitive product lists. 

Experimental products offered as 

market tests are specifically excluded 

from the requirements of part 3020 by 

39 U.S.C. 3641(a)(2). The Commission 

intends to develop separate rules 

allowing recognition of experimental 

products in the Mail Classification 

Schedule during the market tests to 

facilitate transparency. 

A. Subpart A—Mail Classification 

Schedule 

The Commission is charged with 

maintaining accurate product lists. 39 

U.S.C. 3642. The Commission views the 

Mail Classification Schedule as the 

vehicle for presenting the product lists 

with necessary descriptive content. The 

explanatory information included with 

the product lists will inform 

participants in Commission proceedings 

of the nature and scope of Postal Service 

products and must be sufficiently 

detailed to allow the Commission to 

verify that the rates and categorization 

of products are in compliance with the 

PAEA. Thus, the Mail Classification 

Schedule is important in that it will 

provide for the transparent and accurate 

maintenance of the product lists. 

The Postal Service suggests two mail 

classification schedules: one for market 

dominant products and one for 

competitive products. Postal Service 

Supplemental Comments, June 19, 2007, 

at 11. The Postal Service believes this is 

appropriate because different regulatory 

regimes apply to each side of the 

business. Postal Service Comments, 

June 18, 2007, at 16. Additionally, the 

Postal Service views the product lists as 

an entity separate from the mail 

classification schedules. 

The Commission, as a matter of 

preference and administrative ease, 

proposes a single Mail Classification 

Schedule subdivided into two parts. A 

single schedule will be less likely to 

cause confusion, simpler to administer 

when modifying product lists, and will 

facilitate the process of providing 

adequate public notice when 

modifications to the product lists occur. 

Rule 3020.10 describes the Mail 

Classification Schedule as a single 

document containing two parts. The 

first part contains the list of market 

dominant products with related 

explanatory information, and the second 

part contains the list of competitive 

products with related explanatory 

information. 

The Postal Service has expressed the 

view that it should maintain the 

physical Mail Classification Schedule. 

Postal Service Supplemental Comments, 

June 19, 2007, at 14. The Commission 

finds the Mail Classification Schedule to 

be the appropriate vehicle for 

maintaining the market dominant and 

competitive product lists that the 

Commission is charged with overseeing. 

This does not impose constraints on the 

Postal Service’s flexibility to develop 

new products or modify products 

consistent with the policies of title 39. 

The Commission’s primary role under 

39 U.S.C. 3642, as evident from the 

proposed rules, is the proper 

categorization of Postal Service 

products. The rules proposed for 

updating product descriptions and 

features in the Mail Classification 

Schedule will not inhibit Postal Service 

flexibility. 

The Postal Service has indicated that 

it may be appropriate for the Mail 

Classification Schedule to be at a similar 

level of detail as the previous Domestic 

Mail Classification Schedule (DMCS). 

Postal Service Comments, June 18, 2007, 

at 16. Elements of the International Mail 

Manual (IMM) also will have to be 

incorporated into the Mail Classification 

Schedule. Id. The Commission 

concludes that the Postal Service is in 

the best position to describe its own 

products and propose descriptive 

language to be included in the Mail 

Classification Schedule. Whether the 

type of mail is categorized as market 

dominant or competitive is already 

determined by statute as specified in 39 

U.S.C. 3621(a) and 39 U.S.C. 3631(a). 

The portion of this notice of proposed 

rulemaking describing the regulation of 

competitive products clarifies the 

proper categorization where potential 

questions of interpretation might arise. 

Rule 3020.11 directs the Postal Service 

to initially propose the contents of a 

Mail Classification Schedule consistent 

with the categorization specified by 

statute. 

A short 30-day period from the 

enactment of this rule is provided for 

the Postal Service to formulate its Mail 

Classification Schedule proposal. This 

should provide sufficient time because 

it is expected that the Postal Service 

will draw heavily from existing material 

provided in the DMCS and the IMM. 

The Postal Service also has considerable 

time to plan and undertake preliminary 

preparation for this activity prior to this 

rule becoming final. 

Several comments suggest that the 

product categorizations specified in the 

statute did not fully reflect the 

distinctions between market dominant 

and competitive products. Some time 

after the initial rounds of rulemakings 

are complete, the Commission expects 

the Postal Service to propose 

comprehensive modifications to the 

product lists to more accurately reflect 

market dominant and competitive 

products.78

The Commission will file notice of the 

Postal Service’s Mail Classification 

Schedule proposal in the Federal 

Register, with initial commentary by the 

Commission, and solicit public 

comment. This process will allow the 

Commission to develop a Mail 

Classification Schedule that can become 

part of the Commission’s rules. 

The Commission currently publishes 

the Domestic Mail Classification 

Schedule in the Code of Federal 

Regulations. However, extensive 

portions of this document are abridged 

to facilitate the Office of the Federal 

Register’s publication requirements. 

Redacting portions of this document is 

labor intensive, and the portions of the 

document eventually published do not 

provide a complete description of Postal 

Service products to interested parties. 

The Postal Service incorporates by 

reference the Mailing Standards of the 

United States Postal Service, Domestic 

Mail Manual (DMM) and the IMM into 

its rules, which avoids many of the 

publication problems now experienced 

by the Commission. Incorporating a 

document by reference into the Code of 

Federal Regulations requires permission 

from the Office of the Federal Register. 

The Commission has initiated 

discussions with the Office of the 


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Federal Register to obtain the 

permission necessary to incorporate by 

reference the Mail Classification 

Schedule. Thus, rule 3020.12 adopts the 

Postal Service’s approach and pending 

Office of the Federal Register approval 

incorporates the Mail Classification 

Schedule by reference into the 

Commission’s rules of practice. 

Rule 3020.13 specifies the content of 

the Mail Classification Schedule. Unlike 

the current DMCS which is organized by 

classes and subclasses, the Mail 

Classification Schedule will be 

organized by Postal Service products 

with market dominant and competitive 

products each appearing in separate 

sections of the document. This is 

intended to satisfy the requirement to 

maintain separate market dominant and 

competitive product lists. 

Unique to the market dominant 

section of the Mail Classification 

Schedule is the requirement to specify 

the class of each product. See rule 

3020.13(a)(1). A single product might be 

a class in and of itself, or a group of 

products such as single-piece Parcel 

Post, Media Mail, Bound Printed Matter, 

and Library Mail might make up a class. 

Identification of class is necessary to 

implement the system of regulating rates 

and classes required under 39 U.S.C. 

3622(d)(2)(A). 

Rules 3020.13(a)(2) and (b)(1) require 

presentation of product descriptions, 

and rules 3020.13(a)(3) and (b)(2) 

require presentation of the current rates 

and fees. The Commission invites 

comment on whether the rate and fee 

schedules should be integrated with 

each product description, or whether 

rate and fee schedules should be 

collected and appear at the end of the 

market dominant section or the 

competitive section as applicable, 

similar to how they now appear in the 

DMCS. 

For competitive products, the rules 

only require disclosure of rates and fees 

for products of general applicability. For 

products not of general applicability, 

the rates and fees of negotiated 

agreements still may be disclosed, but 

disclosure is not required because of the 

probability that these rates and fees may 

be subject to confidentiality 

requirements. 

Several products may be subject to 

unique regulatory treatment under the 

PAEA, such as products of special 

classification, products not of general 

applicability, experimental products 

undergoing market tests, and non-postal 

products. Rules 3020.13(a)(4)–(6) and 

(b)(3)–(5) simply require that these 

products be identified as such. 

The Commission is required to 

provide notice in the Federal Register 

whenever modifications are approved 

for the market dominant and 

competitive product lists. Rule 

3020.14(e) implements these notice 

requirements specified by 39 U.S.C. 

3642(d)(2). 

B. Subpart B—Requests Initiated by the 

Postal Service To Modify the Product 

Lists Described Within the Mail 

Classification Schedule 

Rule 3020.30 provides the procedure 

for the Postal Service to propose 

modifications to the market dominant 

and competitive product lists as 

specified by 39 U.S.C. 3642(a). 

Proposals to modify the lists shall be 

initiated by filing a request with the 

Commission. The modifications that 

may be proposed are to add a product 

to a list, remove a product from a list, 

or to transfer a product between lists. 

Multiple modifications may be included 

in one request. 

The Commission requires specific 

information to properly determine the 

correct categorization of a product as 

either market dominant or competitive. 

It also needs information to assure the 

accuracy of the product lists in the Mail 

Classification Schedule. The Postal 

Service is to provide this information in 

its request. 

Rule 3020.31 specifies the content of 

the Postal Service’s request. It requires 

the Postal Service to identify the 

product and class of the product, if 

applicable, (rule 3020.31(a)), and any 

special characteristics of the product 

such as: whether it is a special 

classification, whether it is a product 

not of general applicability, or whether 

it is a non-postal product (rule 

3020.31(d)). Rule 3020.31(c) requires the 

Postal Service to indicate the nature of 

the request, i.e., whether it is a request 

to add, remove or transfer a product. 

Rule 3020.31(f) requires the Postal 

Service to propose modifications to the 

Mail Classification Schedule necessary 

to implement its request. Finally, rules 

3020.31(b) and (e) require the Postal 

Service to provide supporting 

justification for its request. The 

supporting justification includes a copy 

of the Governors’ decision supporting 

the request if one has been issued, and 

the material specified in rule 3020.32 

described below. 

Rule 3020.32 directs the Postal 

Service to provide supporting 

justification to demonstrate that the 

modification it requests is in accordance 

with the policies and applicable criteria 

of title 39. The supporting justification 

shall be in the form of a statement from 

a sponsor(s) of the request who attests 

to the accuracy of the information 

provided. Given a presumption that a 

hearing on the record will not be 

provided unless a need is demonstrated, 

the statement need not be in the form of 

testimony. 

Paragraphs (b) through (h) of rule 

3020.32 focus attention on specific 

provisions of title 39. For market 

dominant products, paragraph (b) 

requires the Postal Service to 

demonstrate that its proposal is not 

inconsistent with the objectives, factors, 

and requirements of modern rate 

regulation for market dominant 

products specified in 39 U.S.C. 3622. 

For competitive products, paragraph (c) 

requires the Postal Service to 

demonstrate that its proposal is not 

inconsistent with the requirements for 

rates of competitive products specified 

in 39 U.S.C. 3633. 

The primary criteria upon which the 

Commission is to review the Postal 

Service’s request are provided in 39 

U.S.C. 3642(b). These criteria require 

consideration of the product’s market 

power, monopoly status, private sector 

provision of similar products, the 

opinions of users of the product, and the 

impact on small business concerns. 

Paragraphs (d) through (h) of the 

proposed rule require the Postal Service 

to provide specific information 

necessary for the Commission to analyze 

the request in light of these criteria. 

Finally, paragraph (i) requires the Postal 

Service to provide other information as 

is necessary to fully inform the 

Commission of its proposal. 

Rule 3020.33 institutes a docket for 

each Postal Service request. Assigning a 

docket allows the Commission to 

organize and track all material related to 

a request within its docketing, i.e., filing 

online, system. Notice of each docket 

shall be published in the Federal 

Register. The notice will provide 

information regarding the opportunity 

for written comment from the public. 

Written comment will be the primary 

avenue for public input as to whether or 

not the proposed product modification 

complies with applicable statutory 

provisions and Commission rules. 

The PAEA anticipates a different form 

of review than what was provided for 

classification changes under previous 

legislation. The primary focus of the 

review will be on compliance with the 

statutory requirements for proper 

categorization of the Postal Service 

product as either market dominant or 

competitive. Review of the operational 

parameters of the product and the 

financial basis of the product typically 

will be minimal. The Postal Service’s 

request will be reviewed as presented. 

Participant input into the review 

process will be through notice and 

comment. The Commission will review 


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each request for compliance with 

applicable statutory provisions and 

Commission rules with consideration of 

the views expressed in public 

comments. 

Rule 3020.34 outlines the review 

procedures. If the requested 

modification appears to be in 

compliance with applicable statutory 

provisions and Commission rules, the 

Commission may approve the 

modification without further 

proceedings. This is consistent with 

providing the Postal Service flexibility 

and with the after-the-fact review 

anticipated by the PAEA. If the request 

does not appear to be in compliance, the 

Commission will provide an 

explanation to the Postal Service and, if 

appropriate, institute a proceeding to 

further consider the request. Where 

minor problems are discovered, the 

Commission may provide the Postal 

Service with the opportunity to modify 

its request to bring the request into 

compliance. 

Rule 3020.35 provides options for 

further consideration of a request where 

there is an indication that the request is 

not in compliance. Consideration will 

begin with the Commission convening a 

conference to identify issues and 

discuss appropriate approaches for 

exploring relevant issues. In preparation 

for the conference, the Commission will 

request written statements of positions 

that identify the issues and solicit 

proposals for further review procedures. 

Shortly after the conclusion of the 

conference, the Commission will issue a 

procedural ruling on how to proceed 

with the request. The Commission 

preserves options ranging from 

immediately approving the request, to 

providing an opportunity for a hearing, 

to instituting any other action 

appropriate to the nature of issues 

involved. 

C. Subpart C—Requests Initiated by 

Users of the Mail To Modify the Product 

Lists Described Within the Mail 

Classification Schedule 

Rule 3020.50 provides the procedure 

for users of the mail to propose 

modifications to the market dominant 

and competitive product lists as 

specified by 39 U.S.C. 3642(a). To allow 

the Postal Service to be the first to 

initiate proposals to modify product 

lists, rules in subpart C will not become 

effective until 6 months after the rules 

in subpart B become effective. 

In general, the rules in subpart C 

parallel the rules discussed above in 

subpart B applicable to Postal Service 

requests. The notable exceptions are 

discussed below. 

In many instances, a Postal Service 

request will be supported by a 

Governors’ decision. Typically, a 

Governors’ decision will not be 

available for modification requests 

initiated by users of the mail. Thus, a 

user of the mail does not have a 

requirement to provide a Governors’

decision in support of its request. Rule 

3220.5, cf. rule 3020.31(b). 

A user of the mail may or may not 

have informed the Postal Service of its 

intent to file a request. Thus, rule 

3020.54 directs the Secretary of the 

Commission to provide a copy of the 

request to the Postal Service. At the 

same time, the Postal Service is given an 

opportunity to provide its initial views, 

within 28 days, as to the request and to 

suggest appropriate Commission action. 

The initial views provided by the Postal 

Service play an important part in the 

review process. With a request initiated 

by the Postal Service, it is presumed 

that the request is feasible to implement 

and consistent with the operational 

plans and goals of the Postal Service. 

This may or may not be the case for 

requests initiated by users of the mail. 

The review of a request under rule 

3020.55 is more complex than a review 

of a Postal Service request under rule 

3020.34 because the initial views of the 

Postal Service must be considered. It 

would be impractical to proceed with a 

request that was operationally not 

feasible for the Postal Service to 

implement, or inconsistent with Postal 

Service policies and goals. With this in 

mind, if the proposed modification is in 

compliance with statutory provisions 

and Commission rules, the Commission 

may approve the modification without 

further proceedings, but only to the 

extent that the request is consistent with 

the Postal Service’s views. If the request 

does not appear in compliance with 

applicable statutory provisions, 

Commission rules, or is not consistent 

with the views of the Postal Service, the 

Commission will either reject the 

request, or if appropriate, institute 

proceedings to further consider the 

request under rule 3020.56. 

D. Subpart D—Proposal of the 

Commission To Modify the Product Lists 

Described Within the Mail Classification 

Schedule 

Rule 3020.70 provides the procedure 

for the Commission to propose 

modifications to the market dominant 

and competitive product lists as 

specified by 39 U.S.C. 3642(a). To allow 

the Postal Service to be the first to 

initiate proposals to modify product 

lists, rules in subpart C will not become 

effective until 6 months after the rules 

in subpart B become effective. 

In general, the rules in subpart D 

parallel the rules discussed above in 

subpart B applicable to Postal Service 

requests. The notable exceptions are 

discussed below. 

As with a request initiated by a user 

of the mail, a Governors’ decision will 

not be available for modification 

proposals initiated by the Commission. 

Thus, the Commission does not have a 

requirement to provide a Governors’

decision in support of its request. The 

Commission will, however, provide its 

explanation for initiating the docket. 

Rule 3220.71, cf. rule 3020.31(b). 

To formally start the review process, 

rule 3020.74 directs the Secretary of the 

Commission to provide a copy of the 

Commission proposal to the Postal 

Service. As with a request initiated by 

a user of the mail, the Postal Service is 

given an opportunity to provide its 

initial views as to the proposal and to 

suggest appropriate Commission action, 

within 28 days. The initial views 

provided by the Postal Service play an 

equally important role in the review 

process, whether the request was 

initiated by a user of the mails or 

proposed by the Commission. 

The review of a request under rule 

3020.75 is similar to a request initiated 

by a user of the mail under rule 3020.55 

in that the initial views of the Postal 

Service must be considered. With this in 

mind, if the proposed modification is in 

compliance with statutory provisions 

and Commission rules, the Commission 

may approve the modification without 

further proceedings, but only to the 

extent that the request is consistent with 

the Postal Service’s views. If the request 

does not appear in compliance with 

applicable statutory provisions, 

Commission rules, or is not consistent 

with the views of the Postal Service, the 

Commission will either withdraw the 

proposal, or if appropriate, institute 

proceedings to further consider the 

proposal under rule 3020.76. 

E. Subpart E—Requests Initiated by the 

Postal Service To Update the Mail 

Classification Schedule 

The accuracy and timeliness of the 

Mail Classification Schedule are 

important as the Commission will rely 

on the Mail Classification Schedule 

when undertaking its regulatory 

responsibilities. Users of the mail also 

may rely on the Mail Classification 

Schedule to form the basis for 

understanding and utilizing Postal 

Service products and services and 

presenting their positions before the 

Commission. This subpart provides a 

simplified path for the Postal Service to 

provide necessary updates to the Mail 

Classification Schedule. 


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The Postal Service is in the best 

position to provide timely and accurate 

descriptions of its products. Rule 

3020.90 requires the Postal Service to 

assure that the product descriptions 

(i.e., all information about a product 

appearing in the Mail Classification 

Schedule) accurately reflect the current 

offerings of Postal Service products and 

services. 

There are inherent limits on the scope 

or magnitude of any update allowable 

under subpart E. Specifically excluded 

are updates that would modify the 

market dominant or the competitive 

product lists. Implicitly excluded are 

updates that might be governed by other 

rules such as changes to rates and fees. 

A proposed update may not change the 

nature of a service to such an extent that 

it effectively creates a new product or 

eliminates an existing product. This 

subpart is not intended for such 

changes. 

Within these limitations, however, 

this subpart allows the Postal Service 

the flexibility to update provisions of 

the Mail Classification Schedule with 

minimal review. To prevent abuse, other 

checks and balances always are 

available such as the compliant process. 

This is consistent with both allowing 

the Postal Service flexibility and 

providing after-the-fact review where 

appropriate. 

The simplified path provided by rule 

3020.91 to make changes to the 

descriptions of the products and 

services described within the Mail 

Classification Schedule only requires 

the Postal Service to provide notice to 

the Commission prior to the effective 

date of a proposed change. While 

preserving the Commission’s editorial 

rights in the Mail Classification 

Schedule, rule 3020.92 indicates that 

the Commission intends to implement 

requested appropriate updates to the 

Mail Classification Schedule. There is 

no provision requiring review of the 

substance of such changes. The 

document will be updated to coincide 

with the effective date of the change 

determined by the Postal Service. 

F. Subpart F—Size and Weight 

Limitations for Mail Matter 

The Postal Service may establish size 

and weight limitations for mail matter 

pursuant to 39 U.S.C. 3682. Subpart F 

requires the Postal Service to include 

size and weight limitations for mail 

matter in the Mail Classification 

Schedule to provide visibility to users of 

the mail and provide information 

necessary for the Commission to fulfill 

its statutory role. For market dominant 

mail matter, the Commission will 

provide notice of the proposed update 

in the Federal Register and allow public 

comment. If the Commission finds the 

proposed update in accordance with the 

policies and the applicable criteria of 

title 39, the Mail Classification Schedule 

will be updated to coincide with the 

effective date of the proposed change. If 

the Commission finds the proposed 

update not in accordance with the 

policies and the applicable criteria of 

title 39, the Commission will take such 

action as it deems appropriate. For 

competitive mail matter, the Postal 

Service simply provides notice of an 

update to the Mail Classification 

Schedule pursuant to subpart E. The 

Commission does not review proposed 

updates to weight and size limitations of 

competitive mail matter. 

V. Ordering Paragraphs 

It is ordered: 

1. The Commission proposes to 

amend its rules of practice and 

procedure as shown below. The 

proposed amendments involve revising 

rule 5, 39 CFR 3001.5, by amending 

rules 5(r) and (s) and adding new rules 

5(t) and (u); and adding new parts 3010, 

Rules Applicable to Rate Adjustments 

for Market Dominant Products; 3015, 

Regulation of Rates for Competitive 

Products; and 3020, Product Lists. 

2. Interested persons may submit 

comments by September 14, 2007. 

3. Interested persons may submit 

reply comments by September 28, 2007. 

4. The United States Postal Service 

shall submit, by September 14, 2007, a 

draft mail classification schedule 

containing a market dominant product 

list and a competitive product list 

consistent with the discussion in 

chapter III, section E.4. 

5. Interested persons may submit 

comments concerning the draft mail 

classification schedule by September 28, 

2007. 

6. The Secretary shall arrange for 

publication of this order in the Federal 

Register. 

ATTACHMENT A.—COMMENTS TO REGULATIONS ESTABLISHING A SYSTEM OF RATEMAKING

Participant Title Filing date 

Advo, Inc. (Advo) ...................................................... Comments of Advo, Inc. in Response to Advance 

Notice of Proposed Rulemaking on Regulations 

Establishing a System of Ratemaking.

April 6, 2007. 

Reply Comments of Advo, Inc. in Response to Advance Notice of Proposed Rulemaking.May 7, 2007. 

Comments of Advo, Inc. in Response to Second 

Advance Notice of Proposed Rulemaking on 

Regulations Establishing a System of Ratemaking.

June 18, 2007. 

Reply Comments of Advo, Inc. in Response to 

Second Advance Notice of Proposed Rulemaking on Regulations Establishing a System of 

Ratemaking.

July 3, 2007. 

Akerman Senterfitt Wickwire Gavin .......................... Submission of Comments ....................................... April 2, 2007. 

Alliance of Nonprofit Mailers, National Association 

of Presort Mailers and National Postal Policy 

Council (ANM–NAPM–NPPC).

Comments of Alliance of Nonprofit Mailers, National Association of Presort Mailers and National Postal Policy Council on Advance Notice 

of Proposed Rulemaking.

April 6, 2007. 

Reply Comments of Alliance of Nonprofit mailers, 

National Association of Presort Mailers and National Postal Policy Council on Advance Notice 

of Proposed Rulemaking.

May 7, 2007. 

Alliance of Nonprofit Mailers and Magazine Publishers of America, Inc. (ANM–MPA).Comments of Alliance of Nonprofit Mailers and 

Magazine Publishers of America, Inc. on Advance Notice of Proposed Rulemaking.

April 6, 2007. 


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50772 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

ATTACHMENT A.—COMMENTS TO REGULATIONS ESTABLISHING A SYSTEM OF RATEMAKING—Continued 

Participant Title Filing date 

Reply Comments of Alliance of Nonprofit Mailers 

and Magazine Publishers of America, Inc. on 

Advance Notice of Proposed Rulemaking.

May 7, 2007. 

Initial Comments of Alliance of Nonprofit Mailers 

and Magazine Publishers of America, 2007. Inc. 

on Further Advance Notice of Proposed Rulemaking (Order No. 15).

June 18, 2007. 

Reply Comments of Alliance of Nonprofit Mailers 

and Magazine Publishers of America, Inc. on 

Further Advance Notice of Proposed Rulemaking (Order No. 15).

July 3, 2007. 

Amazon.com ............................................................. Statement of Paul Misener, Vice President for 

Global Public Policy on Behalf of Amazon.com 

at Wilmington, Delaware Field Hearing on July 

9, 2007.

July 9, 2007. 

American Business Media (ABM) ............................ Initial Comments of American Business Media ...... April 6, 2007. 

American Business Media, Greeting Card Association, and Newspaper Association of America 

(ABM–GCA–NAA).

Joint Comments of American Business Media, 

Greeting Card Association, and Newspaper Association of America With Respect to the Complaint Process.

April 6, 2007. 

American Postal Workers Union, AFL–CIO (APWU) Initial Comments of the American Postal Workers 

Union, AFL–CIO, in Response to Advance Notice of Proposed Rulemaking on Regulations 

Establishing a System of Ratemaking.

April 6, 2007. 

Reply Comments of the American Postal Workers 

Union, AFL–CIO.

May 7, 2007. 

Initial Comments of the American Postal Workers 

Union, AFL–CIO, in Response to Second Advance Notice of Proposed Rulemaking on Regulations Establishing a System of Ratemaking.

June 18, 2007. 

Reply Comments of the American Postal Workers 

Union, AFL–CIO, in Response to Second Advance Notice of Proposed Rulemaking on Regulations Establishing a System of Ratemaking.

July 3, 2007. 

Association for Postal Commerce (PostCom) .......... Initial Comments of PostCom in Response to Advance Notice of Proposed Rulemaking on Regulations Establishing a System of Ratemaking.April 6, 2007. 

Reply Comments of the Association for Postal 

Commerce.

May 7, 2007. 

Comments of PostCom in Response to Second 

Advance Notice of Proposed Rulemaking on 

Regulations Establishing a System of Ratemaking.

June 18, 2007. 

Joint Comments on OCA Positions ........................ July 3, 2007. 

Reply Comments of PostCom in Response to 

Second Advance Notice of Proposed Rulemaking.

July 3, 2007. 

Association of Priority Mail Users, Inc. (APMU) ...... Association of Priority Mail Users, Inc. Comments 

on Regulations Establishing a System of Ratemaking in Response to Commission Order No. 

2.

April 6, 2007. 

Association of Priority Mail Users, Inc. Comments 

on Regulations Establishing a System of Ratemaking in Response to Commission Order No. 

15.

June 18, 2007. 

Association of Priority Mail Users, Inc. Reply Comments on Regulations Establishing a System of 

Ratemaking in Response to Commission Order 

No. 15.

July 3, 2007. 

Senators Collins and Carper .................................... PRC Comments from Senators Collins and Carper April 11, 2007. 

DigiStamp, Inc. ......................................................... Comments of DigiStamp ......................................... April 2, 2007. 

Direct Marketing Association, Inc. (DMA) ................ Direct Marketing Association, Inc. Initial Comments Pursuant to PRC Order No. 2.April 6, 2007. 

Direct Marketing Association, Inc. Reply Comments Pursuant to PRC Order No. 2.May 7, 2007. 

Direct Marketing Association, Inc. Reply Comments Pursuant to PRC Order No. 15.July 3, 2007. 

Discover Financial Services LLC (DFS) ................... Reply Comments of Discover Financial Services 

LLC.

May 7, 2007 

Further Comments of DFS Services LLC ............... July 16, 2007. 


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Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 50773 

ATTACHMENT A.—COMMENTS TO REGULATIONS ESTABLISHING A SYSTEM OF RATEMAKING—Continued 

Participant Title Filing date 

DST Systems, Inc., DST Output, Inc. and DST 

Mailing Service, Inc..

Statement of Mury Salls on Behalf of DST Systems, Inc., DST Output, Inc., and DST Mailing 

Service, Inc., at Kansas City Field Hearing June 

22, 2007.

June 26, 2007. 

Federal Express Corporation (FedEx) ..................... Comments of Federal Express Corporation ........... April 5, 2007. 

Greeting Card Association (GCA). ........................... Comments of the Greeting Card Association in 

Response to Advance Notice of Proposed Rulemaking.

April 6, 2007. 

Reply Comments of the Greeting Card Association May 7, 2007. 

Comments of the Greeting Card Association in 

Response to Second Advance Notice of Proposed Rulemaking.

June 18, 2007. 

Reply Comments of the Greeting Card Association 

in Response to Second Advance Notice of Proposed Rulemaking.

July 3, 2007. 

Hallmark Cards, Inc. ................................................. Statement of Don Hall, Jr., President and CEO, 

Hallmark Cards, Inc. at Kansas City, Missouri 

Field Hearing, June 22, 2007.

June 26, 2007. 

International Mailers’ Advisory Group ...................... Comments on Behalf of the International Mailers’

Advisory Group.

April 6, 2007. 

JP Morgan Chase & Co. .......................................... Statement of Daniel C. Emens on Behalf of JP 

Morgan Chase & Co. at Wilmington, Delaware 

Field Hearing on July 9, 2007.

July 9, 2007. 

Jon Mulford Associates ............................................ Comments of Jonathan Mulford on Behalf of John 

Mulford Associates Regarding Docket No. 

RM2007–1.

March 14, 2007. 

Los Angeles Times ................................................... Statement of David D. Hiller, Publisher, Los Angeles Times at Los Angeles Field Hearing on June 

28, 2007.

June 28, 2007. 

Mail Order Association of America (MOAA) ............ Comments of Mail Order Association of America .. April 6, 2007. 

Reply Comments of Mail Order Association of 

America.

May 7, 2007. 

Response of the Mail Order Association of America to Second Advance Notice of Proposed 

Rulemaking on Regulations Establishing a System of Ratemaking.

June 18, 2007. 

Reply Comments of Mail Order Association of 

America to Comments Filed in Response to 

Second Notice of Proposed Rulemaking.

July 3, 2007. 

Major Mailers Association (MMA). ........................... Initial Comments of Major Mailers Association ....... June 18, 2007. 

The McGraw-Hill Companies, Inc. ........................... Reply Comments of The McGraw-Hill Companies, 

Inc. Pursuant to Order No. 2.

May 7, 2007. 

McBride, Ken ............................................................ Statement of Ken McBride at Los Angeles Field 

Hearing on June 28, 2007.

June 28, 2007. 

Reply Comments of The McGraw-Hill Companies, 

Inc. in Response to Supplemental Comments of 

the United States Postal Service on the Classification Process.

July 6, 2007. 

Meredith Corporation ................................................ Statement of Randy Stumbo, Director of Distribution and Postal Affairs for Meredith Corporation, 

at Kansas City, Missouri Field Hearing on June 

22, 2007.

June 26, 2007. 

The Nation ................................................................ Comments of The Nation on Docket RM2007–1 ... June 19, 2007. 

National Association of Homebuilders ..................... Comments of National Home Association of Home 

Builders.

June 18, 2007. 

National Association of Letter Carriers (NALC) ....... National Association of Letter Carriers’ Response 

to Other Parties’ Comments on Proposed Rulemaking Concerning Exigency Clause and Future 

Complaint Procedures.

May 7, 2007. 

National Association of Presort Mailers (NAPM) ..... Comments of the National Association of Presort 

Mailers.

June 18, 2007. 

National Catholic Development Conference ............ Statement of Sr. Georgette Lehmuth, OSF on Behalf of National Catholic Development Conference at Wilmington, Delaware Field Hearing 

on July 9, 2007.

July 9, 2007. 

National Newspaper Association (NNA) .................. Comments of the National Newspaper Association 

(NNA).

April 6, 2007. 


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50774 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

ATTACHMENT A.—COMMENTS TO REGULATIONS ESTABLISHING A SYSTEM OF RATEMAKING—Continued 

Participant Title Filing date 

National Newspaper Association (NNA) and Missouri Press Association.Statement of Dave Berry, Vice President, Community Newspaper Publishers, Inc. and Publisher 

of the Bolivar Herald-Free Press, Bolivar, Missouri on Behalf of the NNA and Missouri Press 

Association, at Kansas City Field Hearing June 

22, 2007.

June 26, 2007. 

National Postal Policy Council (NPPC) .................... Comments of National Postal Policy Council in 

Response to Further Advance Notice of Proposed Rulemaking.

June 18, 2007. 

National Postal Policy Council and National Association of Presort Mailers (NPPC–NAPM).Reply Comments of National Postal Policy Council 

and National Association of Presort Mailers in 

Response to Further Advance Notice of Proposed Rulemaking.

July 3, 2007. 

Newgistics, Inc. ......................................................... Initial Comments of Newgistics, Inc ........................ April 6, 2007. 

Newspaper Association of America (NAA) .............. Comments of the Newspaper Association of America.March 30, 2007. 

Reply Comments of the Newspaper Association of 

America.

May 7, 2007. 

Comments of the Newspaper Association of America on Second Advance Notice of Proposed 

Rulemaking.

June 18, 2007. 

Reply Comments of the Newspaper Association of 

America on Second Advance Notice of Proposed Rulemaking.

July 3, 2007. 

Office of the Consumer Advocate (OCA) ................. OCA Comments in Response to Advance Notice 

of Proposed Rulemaking on Regulations Establishing a System of Ratemaking.

April 6, 2007. 

OCA Comments in Reply to Those Filed in Response to Order No. 2.May 7, 2007. 

Office of the Consumer Advocate Comments in 

Response to Second Advance Notice of Proposed Rulemaking on Regulations Establishing 

a System of Ratemaking.

June 18, 2007. 

Office of the Consumer Advocate Reply Comments in Response to Second Advance Notice 

of Proposed Rulemaking on Regulations Establishing a System of Ratemaking.

July 3, 2007. 

Office of the Consumer Advocate Comments in 

Response to Supplemental Comments of the 

United States Postal Service on the Classification Process.

July 3, 2007. 

Parcel Shippers Association (PSA) .......................... Comments of the Parcel Shippers Association ...... April 6, 2007, 

Reply Comments of Parcel Shippers Association 

to Comments of United Parcel Service.

May 7, 2007. 

Errata to Reply Comments of Parcel Shippers Association to Comments of United Parcel Service.May 8, 2007. 

Reply Comments of Parcel Shippers Association 

to Comments of United Parcel Service and 

Comments of the Office of the Consumer Advocate [Revised Filing].

May 8, 2007. 

Response of the Parcel Shippers Association to 

Second Advance Notice of Proposed Rulemaking.

June 18, 2007. 

Reply of Parcel Shippers Association to Comments Filed in Response to Second Notice of 

Proposed Rulemaking.

July 3, 2007. 

Pepperdine University .............................................. Statement of John Carper on Behalf of 

Pepperdine University at Los Angeles Field 

Hearing on June 28, 2007.

June 28, 2007. 

Pitney Bowes Inc. ..................................................... Initial Comments of John C. Panzar on Behalf of 

Pitney Bowes Inc. in Response to Advance Notice of Proposed Rulemaking on Regulations 

Establishing a System of Ratemaking.

April 6, 2007. 

Initial Comments of Pitney Bowes Inc. in Response to Advance Notice of Proposed Rulemaking on Regulations Establishing a System of 

Ratemaking.

April 6, 2007. 

Reply Comments of Pitney Bowes Inc. in Response to Advance Notice of Proposed Rulemaking on Regulations Establishing a System of 

Ratemaking.

May 7, 2007. 


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Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 50775 

ATTACHMENT A.—COMMENTS TO REGULATIONS ESTABLISHING A SYSTEM OF RATEMAKING—Continued 

Participant Title Filing date 

Initial Comments of Pitney Bowes Inc. in Response to Second Advance Notice of Proposed 

Rulemaking on Regulations Establishing a System of Ratemaking.

June 18, 2007. 

Reply Comments of Pitney Bowes Inc. in Response to Second Advance Notice of Proposed 

Rulemaking on Regulations Establishing a System of Ratemaking.

July 3, 2007. 

Statement of Michael Monahan, Executive Vice 

President and President, Mailing Solutions and 

Services, on Behalf of Pitney Bowes Inc. at Wilmington, Delaware Field Hearing on July 9, 

2007.

July 9, 2007. 

Sprint-Nextel ............................................................. Initial Comments of Sprint-Nextel. .......................... April 6, 2007. 

Stamps.com .............................................................. Submission of Comments of Stamps.com .............. April 6, 2007. 

Reply Comments of Stamps.com ........................... May 7, 2007. 

Stamps.com Comments .......................................... June 18, 2007. 

Tension Envelope Corporation ................................. Statement of William S. Berkley, President and 

CEO, Tension Envelope Corporation at the Kansas City, Missouri Field Hearings on June 22, 

2007.

June 26, 2007. 

Time Warner Inc. ...................................................... Initial Comments of Time Warner Inc. in Response 

to Commission Order No. 2.

April 6, 2007. 

Reply Comments of Time Warner Inc. to Initial 

Comments in Response to Commission Order 

No. 2.

May 7, 2007. 

Comments of Time Warner Inc. In Response to 

Commission Order No. 15.

June 18, 2007. 

United Parcel Service (UPS) .................................... Comments of United Parcel Service in Response 

to Advance Notice of Proposed Rulemaking on 

Regulations Establishing a System of Ratemaking.

April 6, 2007. 

Reply Comments of United Parcel Service in Response to Advance Notice of Proposed Rulemaking on Regulations Establishing a System of 

Ratemaking.

May 7, 2007. 

Comments of United Parcel Service in Response 

to Second Advance Notice of Proposed Rulemaking on Regulations Establishing a System of 

Ratemaking.

June 18, 2007. 

Reply Comments of United Parcel Service in Response to Second Advance Notice of Proposed 

Rulemaking on Regulations Establishing a System of Ratemaking.

July 3, 2007. 

United States Postal Service (USPS) ...................... Initial Comments of the United States Postal Service.April 6, 2007. 

Reply Comments of the United States Postal 

Service.

May 7, 2007. 

Initial Comments of the United States Postal Service on the Second Advance Notice of Proposed 

Rulemaking.

June 18, 2007. 

Supplemental Comments of the United States 

Postal Service on the Classification Process.

June 19, 2007. 

Reply Comments of the United States Postal 

Service on the Second Advance Notice of Proposed Rulemaking.

July 3, 2007. 

Valpak Direct Marketing Systems, Inc. and Valpak 

Dealers’ Association, Inc. (Valpak).

Valpak Direct Marketing Systems, Inc. and Valpak 

Dealers’ Association, Inc. Comments on Regulations Establishing a System of Ratemaking in 

Response to Commission Order No. 2.

April 6, 2007. 

Valpak Direct Marketing Systems, Inc. and Valpak 

Dealers’ Association, Inc. Reply Comments on 

Regulations Establishing a System of Ratemaking in Response to Commission Order No. 

2.

May 7, 2007. 

Valpak Direct Marketing Systems, Inc. and Valpak 

Dealers’ Association, Inc. Comments on Regulations Establishing a System of Ratemaking in 

Response to Commission Order No. 15.

June 18, 2007. 


rmajette on PROD1PC64 with PROPOSALS3
50776 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

ATTACHMENT A.—COMMENTS TO REGULATIONS ESTABLISHING A SYSTEM OF RATEMAKING—Continued 

Participant Title Filing date 

Valpak Direct Marketing Systems, Inc. and Valpak 

Dealers’ Association, Inc. Reply Comments on 

Regulations Establishing a System of Ratemaking in Response to Commission Order No. 

15.

July 3, 2007. 

Williams–Sonoma Inc. .............................................. Statement of James West, Director, Postal and 

Government Affairs, on Behalf of Williams–

Sonoma Inc. at Los Angeles Field Hearing on 

June 28, 2007.

June 28, 2007. 

YourAuctionCompany.com ....................................... Statement of Adam and Wendy Leidhecker, Chief 

Executive Officers, on Behalf of 

YourAuctionCompany.com at Wilmington, Delaware Field Hearing on July 9, 2007.

July 9, 2007. 

List of Subjects 

39 CFR Part 3001 

Administrative practice and 

procedure, Confidential business 

information, Freedom of information, 

Sunshine Act. 

39 CFR Part 3010 

Administrative practice and 

procedure, Postal Service. 

39 CFR Part 3015 

Administrative practice and 

procedure, Postal Service. 

39 CFR Part 3020 

Administrative practice and 

procedure, Postal Service. 

By the Commission. 

Steven W. Williams, 

Secretary. 

For the reasons stated in the 

preamble, under the authority at 39 

U.S.C. 503, the Postal Regulatory 

Commission proposes to amend 39 CFR 

chapter III as follows: 

PART 3001—RULES OF PRACTICE 

AND PROCEDURE 

1. Revise the authority citation for 

part 3001 to read as follows: 

Authority: 39 U.S.C. 404(d); 503; 3622; 

3633; 3661, 3652. 

2. Amend § 3001.5 as follows: 

a. Revise paragraphs (r) and (s); and 

b. Add paragraphs (t) and (u). 

Subpart A—Rules of General 

Applicability 

§ 3001.5 Definitions. 

* * * * * 

(r) Negotiated service agreement 

means a written contract, to be in effect 

for a defined period of time, between 

the Postal Service and a mailer, that 

provides for customer-specific rates or 

fees and/or terms of service in 

accordance with the terms and 

conditions of the contract. A negotiated 

service agreement is not a rate of general 

applicability. 

(s) Postal service refers to the delivery 

of letters, printed matter, or mailable 

packages, including acceptance, 

collection, sorting, transportation, or 

other functions ancillary thereto. 

(t) Product means a postal service 

with a distinct cost or market 

characteristic for which a rate or rates 

are, or may reasonably be, applied. 

(u) Rate or class of general 

applicability means a rate or class that 

is available to all mailers equally on the 

same terms and conditions. 

3. Add part 3010 to read as follows: 

PART 3010—RULES APPLICABLE TO 

RATE ADJUSTMENTS FOR MARKET 

DOMINANT PRODUCTS 

Subpart A—General Provisions 

Sec. 

3010.1 Applicability. 

3010.2 Types of rate adjustments for market 

dominant products. 

3010.3 Type 1–A rate adjustment—in 

general. 

3010.4 Type 1–B rate adjustment—in 

general. 

3010.5 Type 2 rate adjustment—in general. 

3010.6 Type 3 rate adjustment—in general. 

3010.7 Schedule of regular rate changes. 

Subpart B—Rules for Rate Adjustments for 

Rates of General Applicability (Type 1 Rate 

Adjustments) 

3010.10 Procedures. 

3010.11 Limit on size of rate increases. 

3010.12 Source of CPI–U data for purposes 

of annual limitation. 

3010.13 Proceedings for Type 1–A and 

Type 1–B rate adjustment filings. 

3010.14 Contents of notice of rate 

adjustment. 

Subpart C—Rules for Applying the Price 

Cap 

3010.20 Test for compliance with the 

annual limitation. 

3010.21 Calculation of annual limitation. 

3010.22 Calculation of less than annual 

limitation. 

3010.23 Calculation of percentage change in 

rates. 

3010.24 Treatment of volume associated 

with negotiated service agreements. 

3010.25 Limitation on unused rate 

adjustment authority rate adjustments. 

3010.26 Calculation of unused rate 

adjustment authority. 

3010.27 Application of unused rate 

adjustment authority. 

3010.28 Maximum size of unused rate 

adjustment authority rate adjustments. 

Subpart D—Rules for Rate Adjustments for 

Negotiated Service Agreements (Type 2 

Rate Adjustments) 

3010.40 Negotiated service agreements. 

3010.41 Procedures. 

3010.42 Contents of notice of agreement in 

support of a negotiated service 

agreement. 

3010.43 Data collection plan. 

Subpart E—Rules for Rate Adjustments for 

Exigent Circumstances (Type 3 Rate 

Adjustments) 

3010.60 Applicability. 

3010.61 Contents of exigent requests. 

3010.62 Supplemental information. 

3010.63 Treatment of unused rate 

adjustment authority. 

3010.64 Expeditious treatment of exigent 

requests. 

3010.65 Special procedures applicable to 

exigent requests. 

3010.66 Deadline for Commission decision. 

Authority: 39 U.S.C. 503; 3622. 

Subpart A—General Provisions 

§ 3010.1 Applicability. 

The rules in this part implement 

provisions in the Postal Accountability 

and Enhancement Act (PAEA) 

establishing ratesetting policies and 

procedures for market dominant 

products. With the exception of 

exigency-based rate adjustments, these 

procedures allow a minimum of 45 days 

for advance public notice of the Postal 

Service’s planned rate adjustments and 

the Commission’s assessment of their 

compliance with provisions establishing 

an annual limitation, unused rate 

adjustment authority, or standards for 


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negotiated service agreements, as 

applicable. Exigency-based rate 

adjustments require the Postal Service 

to file a formal request with the 

Commission and are subject to special 

procedures. 

§ 3010.2 Types of rate adjustments for 

market dominant products. 

(a) There are four types of rate 

adjustments for market dominant 

products. A Type 1–A rate adjustment, 

authorized under 39 U.S.C. 

3622(d)(1)(D), is based on the statutory 

annual limitation. A Type 1–B rate 

adjustment, authorized under 39 U.S.C. 

3622(d)(2)(C), is based on an exception 

to the annual limitation, and is referred 

to as unused rate adjustment authority. 

A Type 2 rate adjustment, authorized 

under 39 U.S.C. 3622(c)(10), is based on 

a negotiated service agreement. A Type 

3 rate adjustment, authorized under 39 

U.S.C. 3622(d)(1)(E), is based on exigent 

circumstances. 

(b) Upon the establishment of unused 

rate adjustment authority in any class, 

the Postal Service shall devise and 

maintain a schedule that tracks the 

establishment and subsequent use of 

unused rate adjustment authority. 

(c) The Postal Service may combine 

Types 1–A, 1–B and 2 rate adjustments 

for purposes of filing with the 

Commission. 

§ 3010.3 Type 1–A rate adjustment—in 

general. 

(a) A Type 1–A rate adjustment 

represents the usual type of adjustment 

to rates of general applicability. 

(b) A Type 1–A rate adjustment may 

result in a rate adjustment that is less 

than or equal to the annual limitation, 

but may not exceed the annual 

limitation. 

(c) A Type 1–A rate adjustment for 

any class that is less than the applicable 

change in CPI–U results in unused rate 

adjustment authority associated with 

that class. Part or all of the unused rate 

adjustment authority may be used in a 

subsequent adjustment for that class, 

subject to the expiration terms in 

§ 3010.26(d). 

§ 3010.4 Type 1–B rate adjustment—in 

general. 

(a) A Type 1–B rate adjustment is a 

rate adjustment which uses unused rate 

adjustment authority in whole or in 

part. A rate adjustment using unused 

rate adjustment authority may not result 

in a rate that exceeds the applicable 

annual limitation plus 2 percentage 

points. 

(b) Unused rate adjustment authority 

in each class may be applied to rate 

adjustments in the same class for up to 

5 years. 

§ 3010.5 Type 2 rate adjustment—in 

general. 

A negotiated service agreement rate 

adjustment entails a rate adjustment 

negotiated between the Postal Service 

and a customer or group of customers. 

§ 3010.6 Type 3 adjustment—in general. 

(a) A Type 3 rate adjustment is a 

request for an exigency-based rate 

adjustment. It is authorized only when 

justified by exceptional or extraordinary 

circumstances. 

(b) An exigency-based rate adjustment 

is not subject to the inflation-based 

limitation or the restrictions on the use 

of unused rate adjustment authority, 

and does not implement a negotiated 

service agreement. 

(c) A Postal Service request for a Type 

3 rate adjustment is subject to public 

participation and Commission review 

within 90 days. 

§ 3010.7 Schedule of regular rate changes. 

(a) The Postal Service shall maintain 

on file with the Commission a Schedule 

for Regular and Predictable Rate 

Changes. The Commission shall display 

the Schedule for Regular and 

Predictable Rate Changes on the 

Commission Web site, http:// 

www.prc.gov. 

(b) The Schedule for Regular and 

Predictable Rate Changes shall provide 

mailers with estimated implementation 

dates for future Type 1–A rate changes 

for each separate class of mail, should 

such changes be necessary and 

appropriate. Rate changes will be 

scheduled at specified regular intervals. 

(c) The Schedule for Regular and 

Predictable Rate Changes shall provide 

an explanation that will allow mailers to 

predict with reasonable accuracy the 

amounts of future scheduled rate 

changes. 

(d) The initial Schedule for Regular 

and Predictable Rate Changes must be 

filed within 90 days of the effective date 

of this rule. The Postal Service should 

balance its financial and operational 

needs with the convenience of mailers 

of each class of mail in developing the 

schedule. 

(e) Whenever the Postal Service 

deems it appropriate to change the 

Schedule for Regular and Predictable 

Rate Changes, it shall file a revised 

schedule and explanation with the 

Commission. 

(f) The Postal Service may, for good 

cause shown, vary rate adjustments 

from those estimated by the Schedule 

for Regular and Predictable Rate 

Changes. In such case, the Postal 

Service should provide a succinct 

explanation for such variation with its 

Type 1–A filing. No explanation is 

required for changes involving smaller 

than predicted rate adjustments. 

Subpart B—Rules for Rate 

Adjustments for Rates of General 

Applicability (Type 1 Rate 

Adjustments) 

§ 3010.10 Procedures. 

(a) The Postal Service, in every 

instance in which it determines to 

exercise its statutory authority to make 

a Type 1–A or Type 1–B rate adjustment 

for a market dominant postal product 

shall: 

(1) Provide public notice in a manner 

reasonably designed to inform the 

mailing community and the general 

public that it intends to change rates not 

later than 45 days prior to the intended 

implementation date; and 

(2) Transmit a notice of rate 

adjustment to the Commission no later 

than 45 days prior to the intended rate 

implementation date. 

(b) The Postal Service is encouraged 

to provide public notice and to submit 

its notice of rate adjustment as far in 

advance of the 45-day minimum as 

practicable, especially in instances 

where the intended price changes 

include classification changes or 

operations changes likely to have 

material impact on mailers. 

§ 3010.11 Limit on size of rate increases. 

Rate increases for each class of market 

dominant products in any 12-month 

period are limited. 

(a) Rates of general applicability are 

subject to an inflation-based limitation 

computed using CPI–U values as 

detailed in § 3010.12. 

(b) An exception to the inflationbased limitation allows a limited annual 

recapture of unused rate authority. The 

amount of unused rate authority is 

measured separately for each class of 

mail. 

(c) In any 12-month period the 

inflation-based limitation combined 

with the allowable recapture of unused 

rate authority equals the price cap 

applicable to each class of mail. 

§ 3010.12 Source of CPI–U data for 

purposes of annual limitation. 

The monthly CPI–U values needed for 

the calculation of the annual limitation 

under this part shall be obtained from 

the Bureau of Labor Statistics (BLS) 

Consumer Price Index—All Urban 

Consumers, U.S. All Items, Not 

Seasonally Adjusted, Base Period 1982–

84 = 100. The current Series ID for the 

index is ‘‘CUUR0000SA0.’’


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§ 3010.13 Proceedings for Type 1–A and 

Type 1–B rate adjustment filings. 

(a) The Commission will establish a 

docket for each rate adjustment filing, 

promptly publish notice of the filing in 

the Federal Register, post the filing on 

its Web site, and allow 20 days from the 

date of the filing for public comment. 

(b) Public comments should address: 

(1) Whether the planned rate 

adjustments measured using the formula 

established in § 3010.21(b) are at or 

below the annual limitation established 

in § 3010.11; and 

(2) Whether the planned rate 

adjustments are consistent with the 

policies of 39 U.S.C. 3622 and any 

subsequent amendments thereto. 

(c) Within 14 days of the conclusion 

of the public comment period the 

Commission will determine whether the 

planned rate adjustments are consistent 

with the test for compliance with the 

annual limitation and issue a notice and 

order announcing its findings. 

(1) If the planned rate adjustments are 

in compliance with the annual 

limitation and, if applicable, with the 

exception for unused rate adjustment 

authority, they may take effect; or 

(2) If the planned rate adjustments are 

not in compliance with the annual 

limitation or with the exception for 

unused rate adjustment authority, the 

Commission shall explain the basis of 

its determination. 

(d) If planned rate adjustments are not 

in compliance with the annual 

limitation or with the exception for 

unused rate adjustment authority, the 

Postal Service will submit an amended 

notice of rate adjustment and describe 

the modifications to its planned rate 

adjustments that will bring its rate 

adjustments into compliance. An 

amended notice of rate adjustment shall 

be accompanied by sufficient 

explanatory information to show that all 

deficiencies identified by the 

Commission have been corrected. 

(e) The Commission will review any 

amended notice of rate adjustment for 

compliance with the annual limitation 

and the exception for unused rate 

adjustment authority and within 14 

days issue a notice and order 

announcing its findings. 

(1) If the planned rate adjustments are 

in compliance with the annual 

limitation or, if applicable, with the 

exception for unused rate adjustment 

authority, they may take effect. 

However, no rate shall take effect until 

45 days after the Postal Service files a 

notice of rate adjustment specifying that 

rate. 

(2) If the planned rate adjustments in 

an amended notice of rate adjustment 

are found to be not in compliance with 

the annual limitation or, if applicable, 

with the exception for unused rate 

adjustment authority, the Commission 

shall explain the basis of its 

determination and suggest an 

appropriate remedy. 

§ 3010.14 Contents of notice of rate 

adjustment. 

(a) General. The Postal Service notice 

of rate adjustment must include the 

following information: 

(1) A schedule of the proposed rates; 

(2) The planned effective date(s) of 

the proposed rates; 

(3) A representation or evidence that 

public notice of the planned changes 

has been issued or will be issued at least 

45 days before the effective date(s) for 

the proposed new rates; and 

(4) The identity of a responsible 

Postal Service official who will be 

available to provide prompt responses 

to requests for clarification from the 

Commission. 

(b) Supporting technical information 

and justifications. The notice of rate 

adjustment shall be accompanied by: 

(1) The amount of the applicable 

change in CPI–U calculated as required 

by § 3010.21 or § 3010.22, as 

appropriate. This information must be 

supported by workpapers in which all 

calculations are shown, and all input 

values including all relevant CPI–U 

values are listed with citations to the 

original sources. 

(2) A schedule showing unused rate 

authority available for each class of mail 

displayed by class and available amount 

for each of the preceding 5 years. This 

information must be supported by 

workpapers in which all calculations 

are shown. 

(3) The percentage change in rates for 

each class of mail calculated as required 

by § 3010.23. This information must be 

supported by workpapers in which all 

calculations are shown, and all input 

values including current rates, new 

rates, and billing determinants are listed 

with citations to the original sources. 

(4) The amount of new unused rate 

authority, if any, that will be generated 

by the rate adjustment calculated as 

required by § 3010.26. All calculations 

are to be shown with citations to the 

original sources. If new unused rate 

authority will be generated for a class of 

mail that is not expected to cover its 

attributable costs, the Postal Service 

should explain the rationale underlying 

this rate adjustment. 

(5) A schedule of the workshare 

discounts included in the proposed 

rates, and a companion schedule listing 

the avoided costs that underlie each 

such discount. The avoided cost figures 

must be developed from the most recent 

PRC Annual Compliance Report. This 

information must be supported by 

workpapers in which all calculations 

are shown, and all input values are 

listed with citations to the original 

sources. 

(6) Separate justification for all 

proposed workshare discounts that 

exceed avoided costs. Each such 

justification shall reference applicable 

reasons identified in 39 U.S.C. 

3622(e)(2) or (3). The Postal Service 

shall also identify and explain discounts 

that are set substantially below avoided 

costs and explain any relationship 

between discounts that are above and 

those that are below avoided costs. 

(7) A discussion of how the proposed 

rates will help achieve the objectives 

listed in 39 U.S.C. 3622(b) and properly 

take into account the factors listed in 39 

U.S.C. 3622(c). 

(8) Such other information as the 

Postal Service believes will assist the 

Commission to issue a timely 

determination of whether the requested 

increases are consistent with applicable 

statutory policies. 

(c) New workshare discounts. 

Whenever the Postal Service establishes 

a new workshare discount rate, it must 

include with its filing: 

(1) A statement explaining its reasons 

for establishing the discount; 

(2) All data, economic analyses, and 

other information believed to justify the 

discount; and 

(3) A certification based on 

comprehensive, competent analyses that 

the discount will not adversely affect 

either the rates or the service levels of 

users of postal services who do not take 

advantage of the discount. 

(d) Information required only when 

Type 1–B rate adjustments are 

proposed. The notice of rate adjustment 

shall identify for each affected class 

how much existing unused rate 

authority is used in the proposed rates 

calculated as required by § 3010.27. All 

calculations are to be shown, including 

citations to the original sources. 

Subpart C—Rules for Applying the 

Price Cap 

§ 3010.20 Test for compliance with the 

annual limitation. 

The appropriate annual limitation 

shall be applied to a measure of the 

rates paid by mail sent in each class for 

which rate adjustments are to be made 

to determine whether planned rates are 

consistent with the annual limitation. 

§ 3010.21 Calculation of annual limitation. 

The calculation of an annual 

limitation involves three steps. First, a 

simple average CPI–U index is 


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calculated by summing the most 

recently available 12 monthly CPI–U 

values from the date the Postal Service 

files its notice of rate adjustment and 

dividing the sum by 12 (Recent 

Average). Then, a second simple average 

CPI–U index is similarly calculated by 

summing the 12 monthly CPI–U values 

immediately preceding the Recent 

Average and dividing the sum by 12 

(Base Average). Finally, the annual 

limitation is calculated by dividing the 

Recent Average by the Base Average and 

subtracting 1 from the quotient. The 

result is expressed as a percentage. The 

formula for calculating an annual 

limitation is as follows: Annual 

Limitation = (Recent Average/Base 

Average) ¥ 1. 

§ 3010.22 Calculation of less than annual 

limitation. 

(a) If a notice of rate adjustment is 

filed less than 1 year after the last Type 

1–A or Type 1–B notice of rate 

adjustment applicable to an affected 

class of mail, then the annual limitation 

will recognize the rate increases that 

have occurred during the preceding 12 

months. When the effects of those 

increases are removed, the remaining 

partial year limitation is the applicable 

restriction on rate increases. 

(b) The applicable partial year 

limitation is calculated in two steps. 

First, a simple average CPI–U index is 

calculated by summing the 12 most 

recently available monthly CPI–U 

values from the date the Postal Service 

files its notice of rate adjustment and 

dividing the sum by 12 (Recent 

Average). The partial year limitation is 

then calculated by dividing the Recent 

Average by the Recent Average from the 

most recent previous notice of rate 

adjustment (Previous Recent Average) 

applicable to each affected class of mail 

and subtracting 1 from the quotient. The 

result is expressed as a percentage. 

(c) The formula for calculating the 

partial year limitation for a notice of rate 

adjustment filed less than 1 year after 

the last notice is as follows: Partial Year 

Limitation = (Recent Average/Previous 

Recent Average) ¥ 1. 

§ 3010.23 Calculation of percentage 

change in rates. 

(a) The term rate cell as applied in the 

test for compliance with the annual 

limitation shall apply to each and every 

separate rate identified in any 

applicable notice of rate adjustment for 

rates of general applicability. Thus, 

seasonal or temporary rates, for 

example, shall be identified and treated 

as rate cells separate and distinct from 

the corresponding non-seasonal or 

permanent rates. 

(b) For each class of mail, the 

percentage change in rates is calculated 

in three steps. First, the volume of each 

rate cell in the class is multiplied by the 

current rate for the respective cell and 

the resulting products are summed. In 

the case of seasonal or temporary rates, 

the most recently applied rate shall be 

considered the current rate. Then, the 

same set of rate cell volumes are 

multiplied by the corresponding 

planned rate for each cell and the 

resulting products are summed. Finally, 

the percentage change in rates is 

calculated by dividing the results of the 

first step by the results of the second 

step and subtracting 1 from the quotient. 

The result is expressed as a percentage. 

(c) The formula for calculating the 

percentage change in rates for a class 

described in paragraph (b) of this 

section is as follows: 

Percentage change in rates = 

R V

R V

i i

i

N

i i

i

N

,

,

 n

 c

( )( )

( )( )

























− =

=

∑

∑

1

1

1

N = number of rate cells in the class 

i = denotes a rate cell (i = 1, 2, ..., N) 

Ri n = planned rate of rate cell i 

Ri c = current rate of rate cell i 

Vi = volume of rate cell i 

(d) The volumes for each rate cell 

shall be obtained from the most recent 

available 12 months of Postal Service 

billing determinants. The Postal Service 

shall make reasonable adjustments to 

the billing determinants to account for 

the effects of classification changes such 

as the introduction, deletion, or 

redefinition of rate cells. Whenever 

possible, adjustments shall be based on 

known mail characteristics. The Postal 

Service shall identify and explain all 

adjustments. All information and 

calculations relied upon to develop the 

adjustments shall be provided together 

with an explanation of why the 

adjustments are appropriate. 

§ 3010.24 Treatment of volume associated 

with negotiated service agreements. 

(a) Mail volumes sent at non-tariff 

rates under negotiated service 

agreements are to be included in the 

calculation of percentage change in rates 

as though they paid the appropriate 

rates of general applicability. Where it is 

impractical to identify the rates of 

general applicability (e.g., because 

unique rate categories are created for a 

mailer), the volumes associated with the 

mail sent under the terms of the 

negotiated service agreement shall be 

excluded from the calculation of 

percentage change in rates. 

(b) The Postal Service shall identify 

and explain all assumptions it makes 

with respect to the treatment of 

negotiated service agreements in the 

calculation of the percentage change in 

rates and provide the rationale for its 

assumptions. 

§ 3010.25 Limitation on unused rate 

adjustment authority rate adjustments. 

Unused rate adjustment authority rate 

adjustments may only be applied 

together with inflation-based limitation 

rate adjustments or when inflationbased limitation rate adjustments are 

not possible. Unused rate adjustment 

authority rate adjustments may not be 

used in lieu of an inflation-based 

limitation rate adjustment. 

§ 3010.26 Calculation of unused rate 

adjustment authority. 

(a) Unused rate adjustment authority 

accrues during the entire period 

between Type 1 rate adjustments. 

(b) When notices of rate adjustments 

are filed 12 months apart or less, either 

the annual or partial year limitation 

(developed pursuant to § 3010.21(a) or 

§ 3010.22(b) respectively) is used to 

measure the accrued unused rate 

authority. In either circumstance, the 

new unused rate authority for each class 

is equal to the difference between the 

maximum allowable percentage change 

in rates under the applicable rate 

limitation and the actual percentage 

change in rates for that class. 

(c) When a notice of rate adjustment 

is filed more than 12 months after the 

previous notice of rate adjustment, 

unused rate authority is computed in 

three steps. 

(1) The unused rate authority for the 

12 months represented by the annual 

limitation is computed as described in 

paragraph (b) of this section. 

(2) The additional unused rate 

authority accrued is measured by 

dividing the Base Average applicable to 

the instant notice of rate adjustment (as 

developed pursuant to § 3010.21(a)) by 

the Recent Average utilized in the 

previous notice of rate adjustment (as 

developed pursuant to § 3010.21(a)) and 

subtracting 1 from the quotient. The 

result is expressed as a percentage. 

(3) The results from step one and step 

two are added together. 

(d) Unused rate adjustment authority 

lapses 5 years after the date of filing of 

the notice of rate adjustment leading to 

its computation. 

§ 3010.27 Application of unused rate 

adjustment authority. 

When the percentage change in rates 

for a class is greater than the applicable 

annual limitation, then the difference 

between the percentage change in rates 


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for the class and the price cap shall be 

subtracted from the existing unused rate 

authority for the class, using a first-in, 

first-out (FIFO) method, beginning 5 

years before the instant notice. 

§ 3010.28 Maximum size of unused rate 

adjustment authority rate adjustments. 

Unused rate adjustment authority rate 

adjustments for any class may not 

exceed the applicable annual limitation 

described in § 3010.21 plus the lesser of: 

(a) 2 percent; or 

(b) The sum of any unused rate 

adjustment authority for that class. 

Subpart D—Rules for Rate 

Adjustments for Negotiated Service 

Agreements (Type 2 Rate Adjustments) 

§ 3010.40 Negotiated service agreements. 

In administering this subpart, it shall 

be the objective of the Commission to 

allow implementation of negotiated 

service agreements that satisfy the 

statutory requirements of 39 U.S.C. 

3622(c)(10) mandating that special 

classifications: 

(a) Negotiated service agreements 

must either: 

(1) Improve the net financial position 

of the Postal Service (39 U.S.C. 

3622(c)(10)(A)(i)), or 

(2) Enhance the performance of 

operational functions (39 U.S.C. 

3622(c)(10)(A)(ii)). 

(b) Negotiated service agreements may 

not cause unreasonable harm to the 

marketplace (39 U.S.C. 3622(c)(10)(B)). 

§ 3010.41 Procedures. 

The Postal Service, in every instance 

in which it determines to exercise its 

statutory authority to make a Type 2 rate 

adjustment for a market dominant postal 

product shall provide public notice in a 

manner reasonably designed to inform 

the mailing community and the general 

public that it intends to change rates not 

later than 45 days prior to the intended 

implementation date; and transmit a 

notice of agreement to the Commission 

no later than 45 days prior to the 

intended rate implementation date. 

§ 3010.42 Contents of notice of agreement 

in support of a negotiated service 

agreement. 

(a) Whenever the Postal Service 

proposes to establish or change rates or 

fees and/or the Mail Classification 

Schedule based on a negotiated service 

agreement, the Postal Service shall file 

with the Commission a notice of 

agreement. This shall include at a 

minimum: 

(b) General. Each notice of agreement 

will include: 

(1) A copy of the negotiated service 

agreement; 

(2) The planned effective date(s) of 

the proposed rates; 

(3) A representation or evidence that 

public notice of the planned changes 

has been issued or will be issued at least 

45 days before the effective date(s) for 

the proposed new rates; and 

(4) The identity of a responsible 

Postal Service official who will be 

available to provide prompt responses 

to requests for clarification from the 

Commission. 

(5) A statement identifying all parties 

to the agreement and a description 

clearly explaining the operative 

components of the agreement. 

(c) Details regarding the expected 

improvements in the net financial 

position or operations of the Postal 

Service. The projection of change in net 

financial position as a result of the 

agreement shall include for each year of 

the agreement: 

(1) The estimated mailer-specific 

costs, volumes, and revenues of the 

Postal Service absent the 

implementation of the negotiated 

service agreement; 

(2) The estimated mailer-specific 

costs, volumes, and revenues of the 

Postal Service which result from 

implementation of the negotiated 

service agreement; and 

(3) An analysis of the effects of the 

negotiated service agreement on the 

contribution to institutional costs from 

mailers not party to the agreement. 

(4) If mailer-specific costs are not 

available, the source and derivation of 

the costs that are used shall be 

provided, together with a discussion of 

the currency and reliability of those 

costs and their suitability as a proxy for 

the mailer-specific costs. 

(d) An identification of each 

component of the agreement expected to 

enhance the performance of mail 

preparation, processing, transportation 

or other functions in each year of the 

agreement, and a discussion of the 

nature and expected impact of each 

such enhancement. 

(e) Details regarding any and all 

actions (performed or to be performed) 

to assure that the agreement will not 

result in unreasonable harm to the 

marketplace. 

(f) Such other information as the 

Postal Service believes will assist the 

Commission to issue a timely 

determination of whether the requested 

increases are consistent with applicable 

statutory policies. 

§ 3010.43 Data collection plan. 

The Postal Service shall include with 

any notice of agreement a detailed plan 

for providing data or information on 

actual experience under the agreement 

sufficient to allow evaluation of whether 

the negotiated service agreement 

operates in compliance with 39 U.S.C. 

3622(c)(10). This shall include, at a 

minimum, a plan for providing the 

following annualized information on a 

yearly basis within 60 days of the date 

of implementation of a proposed 

agreement: 

(a) The change in net financial 

position as a result of the agreement. 

This calculation shall include for each 

year of the agreement: 

(1) The actual mailer-specific costs, 

volumes, and revenues of the Postal 

Service; and 

(2) An analysis of the effects of the 

negotiated service agreement on the net 

overall contribution to the institutional 

costs of the Postal Service. 

(3) If mailer-specific costs are not 

available, the source and derivation of 

the costs that are used shall be 

provided, including a discussion of the 

currency and reliability of those costs, 

and their suitability as a proxy for the 

mailer-specific costs. 

(b) A discussion of the changes in 

operations of the Postal Service that 

have resulted from the agreement. This 

shall include, for each year of the 

agreement, identification of each 

component of the agreement known to 

enhance the performance of mail 

preparation, processing, transportation, 

or other functions in each year of the 

agreement. 

(c) An analysis of the impact of the 

negotiated service agreement on the 

marketplace, including a discussion of 

any and all actions taken to protect the 

marketplace from unreasonable harm. 

Subpart E—Rules for Rate 

Adjustments in Exigent Circumstances 

(Type 3 Rate Adjustments) 

§ 3010.60 Applicability. 

The Postal Service may request to 

increase rates for market dominant 

products in excess of the annual 

limitation on the percentage changes in 

rates described in § 3010.11(c) due to 

extraordinary or exceptional 

circumstances. Such requests will be 

known as exigent requests. 

§ 3010.61 Contents of exigent requests. 

(a) Each exigent request shall include 

the following: 

(1) A schedule of the proposed rates; 

(2) Calculations quantifying the 

increase for each affected product and 

class; 

(3) A full discussion of the 

extraordinary or exceptional 

circumstance(s) giving rise to the 

request, and a complete explanation of 

how both the requested overall increase, 


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and the specific rate increases 

requested, relate to those circumstances; 

(4) A full discussion of why the 

requested increases are necessary to 

enable the Postal Service, under best 

practices of 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; 

(5) A full discussion of why the 

requested increases are reasonable and 

equitable as between types of users of 

market dominant products; 

(6) An explanation of when the 

exigent increase will be rescinded. If the 

period that the exigent increases will be 

in is intended to be permanent or 

temporary. If the increase is intended to 

be temporary, the request should 

include a discussion of when and under 

what circumstances the increase would 

be rescinded, in whole or in part; 

(7) A justification for exigent 

treatment which analyzes why the 

circumstance giving rise to the request 

was neither foreseeable nor avoidable by 

reasonable prior action; and 

(8) Such other information as the 

Postal Service believes will assist the 

Commission to issue a timely 

determination of whether the requested 

increases are consistent with applicable 

statutory policies. 

(b) The Postal Service shall identify 

one or more knowledgeable Postal 

Service official(s) who will be available 

to provide prompt responses to 

Commission requests for clarification 

related to each topic specified in 

§ 3010.61(a). 

§ 3010.62 Supplemental information. 

The Commission may require the 

Postal Service to provide clarification of 

its request or to provide information in 

addition to that called for by § 3010.61 

in order to gain a better understanding 

of the circumstances leading to the 

request or the justification for the 

specific rate increases requested. 

§ 3010.63 Treatment of unused rate 

adjustment authority. 

(a) Each exigent request will identify 

the unused rate authority for each class 

of mail as of the date of the request. 

(b) Pursuant to an exigent request, 

increases may use accumulated unused 

rate adjustment authority in amounts 

greater than the limitation described in 

§ 3010.28. 

(c) Exigent increases will exhaust all 

unused rate adjustment authority for 

each class of mail before imposing 

additional rate increases in excess of the 

price cap for any class of mail. 

§ 3010.64 Expeditious treatment of exigent 

requests. 

Requests under this subpart seek rate 

relief required by extraordinary or 

exceptional circumstances and will be 

treated with expedition at every stage. It 

is Commission policy to provide 

appropriate relief as quickly as possible 

consistent with statutory requirements 

and procedural fairness. 

§ 3010.65 Special procedures applicable to 

exigent requests. 

(a) When the Commission receives a 

request for exigent rate increases, it will 

publish a notice in the Federal Register 

describing the request and inviting 

public participation. 

(b) The Commission will hold a 

public hearing on the Postal Service 

request. During the public hearing, 

responsible Postal Service officials will 

appear and respond under oath to 

questions from the Commissioners or 

their designees addressing previously 

identified aspects of the Postal Service’s 

request and the supporting information 

provided in response to the topics 

specified in § 3010.61(a). 

(c) Interested persons will be given an 

opportunity to submit to the 

Commission suggested relevant 

questions that might be posed during 

the public hearing. Such questions, and 

any explanatory materials submitted to 

clarify the purpose of the questions, 

should be filed in accordance with 

§ 3001.9, and will become part of the 

administrative record of the proceeding. 

(d) The timing and length of the 

public hearing will depend on the 

nature of the circumstances giving rise 

to the request and the clarity and 

completeness of the supporting 

materials provided with the request. 

(e) If the Postal Service is unable to 

provide adequate explanations during 

the public hearing, supplementary 

written or oral responses may be 

required. 

(f) Following the conclusion of the 

public hearings and submission of any 

supplementary materials interested 

persons will be given the opportunity to 

submit written comments on: 

(1) The sufficiency of the justification 

for an exigent rate increase; 

(2) The adequacy of the justification 

for increases in the amounts requested 

by the Postal Service; and 

(3) Whether the specific rate 

adjustments requested are reasonable 

and equitable. 

(g) An opportunity to submit written 

reply comments will be given to the 

Postal Service and other interested 

persons. 

§ 3010.66 Deadline for Commission 

decision. 

The Commission will act 

expeditiously on the Postal Service 

request, taking into account all written 

comments. In every instance a 

Commission decision will be issued 

within 90 days of a Postal Service 

request for an exigent rate increase. 

4. Add part 3015 to read as follows: 

PART 3015—REGULATION OF RATES 

FOR COMPETITIVE PRODUCTS 

Sec. 

3015.1 Scope. 

3015.2 Increase in rates of general 

applicability. 

3015.3 Decrease in rates of general 

applicability. 

3015.4 Change in class of general 

applicability. 

3015.5 Rate or class not of general 

applicability. 

3015.6 Sufficiency of information. 

3015.7 Standards for compliance. 

Authority: 39 U.S.C. 503; 3633. 

§ 3015.1 Scope. 

Rules in this part are applicable to 

competitive products. 

§ 3015.2 Increase in rates of general 

applicability. 

(a) When the Postal Service 

determines to increase a rate or rates of 

general applicability, it shall file notice 

of the increase with the Commission no 

later than the date of publication of the 

decision in the Federal Register 

concerning such change, but at least 30 

days before the effective date of the 

increase. 

(b) The notice filed with the 

Commission shall include an 

explanation and justification for the 

change, the effective date, and a 

schedule of the changed rates. 

§ 3015.3 Decrease in rates of general 

applicability. 

(a) When the Postal Service 

determines to decrease a rate or rates of 

general applicability, it shall file notice 

of the decrease with the Commission no 

later than the date of publication of the 

decision in the Federal Register 

concerning such change, but at least 30 

days before the effective date of the 

decrease. 

(b) The notice filed with the 

Commission shall include an 

explanation and justification for the 

change, the effective date, and a 

schedule of the changed rates. 

(c) In addition to the notice, the Postal 

Service shall file with the Commission: 

(1) Sufficient annualized revenue and 

cost data to demonstrate that each 

effected competitive product will be in 


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compliance with 39 U.S.C. 3633(a)(2); 

and 

(2) A certified statement by a 

representative of the Postal Service 

attesting to the accuracy of the data 

submitted, and explaining why, 

following the change, competitive 

products in total will be in compliance 

with 39 U.S.C. 3633(a)(1) and (3). 

§ 3015.4 Change in class of general 

applicability. 

(a) In the case of a change in class of 

general applicability, the Postal Service 

shall file notice of the change with the 

Commission no later than the date of 

publication of the decision in the 

Federal Register, but at least 30 days 

before the effective date of the increase. 

(b) The notice filed with the 

Commission shall include an 

explanation and justification for the 

change, the effective date, and the 

record of proceedings regarding such 

decision. 

§ 3015.5 Rate or class not of general 

applicability. 

(a) When the Postal Service 

determines to add or change a rate or 

class not of general applicability, it shall 

file notice of its decision with the 

Commission at least 15 days before the 

effective date of the change. 

(b) The notice filed with the 

Commission shall include an 

explanation and justification for the 

change, the effective date, the rate and 

class decision, and the record of 

proceedings regarding such decision. 

(c) In addition to the notice, the Postal 

Service shall file with the Commission: 

(1) Sufficient annualized revenue and 

cost data to demonstrate that each 

effected competitive product will be in 

compliance with 39 U.S.C. 3633(a)(2); 

and 

(2) A certified statement by a 

representative of the Postal Service 

attesting to the accuracy of the data 

submitted, and explaining why, 

following the change, competitive 

products in total will be in compliance 

with 39 U.S.C. 3633(a)(1) and (3). 

§ 3015.6 Sufficiency of information. 

If, after review of the information 

submitted pursuant to this part, the 

Commission determines additional 

information is necessary to enable it to 

evaluate whether competitive products 

will be in compliance with 39 U.S.C. 

3633(a), it may, in its discretion, require 

the Postal Service to provide additional 

information as deemed necessary. 

§ 3015.7 Standards for compliance. 

For purposes of determining 

competitive products’ compliance with 

39 U.S.C. 3633, the Commission will 

apply the following standards: 

(a) Incremental costs will be used to 

test for cross-subsidies by market 

dominant products of competitive 

products. To the extent that incremental 

cost data are unavailable, the 

Commission will use competitive 

products’ attributable costs 

supplemented to include causally 

related, group-specific costs to test for 

cross-subsidies. 

(b) Each competitive product must 

recover its attributable costs as defined 

in 39 U.S.C. 3631(b). 

(c) Annually, on a fiscal year basis, 

the appropriate share of institutional 

costs to be recovered from competitive 

products collectively is, at a minimum, 

5.5 percent of the Postal Service’s total 

institutional costs. 

5. Add part 3020 to read as follows: 

PART 3020—PRODUCT LISTS 

Subpart A—Mail Classification Schedule 

Sec. 

3020.1 Applicability. 

3020.10 General. 

3020.11 Initial Mail Classification 

Schedule. 

3020.12 Publication of the Mail 

Classification Schedule. 

3020.13 Contents of the Mail Classification 

Schedule. 

3020.14 Notice of change. 

Subpart B—Requests Initiated by the Postal 

Service to Modify the Product Lists 

Described Within the Mail Classification 

Schedule 

3020.30 General. 

3020.31 Contents of a request. 

3020.32 Supporting justification. 

3020.33 Docket and notice. 

3020.34 Review. 

3020.35 Further proceedings. 

Subpart C—Requests Initiated by Users of 

Mail to Modify the Product Lists Described 

Within the Mail Classification Schedule 

3020.50 General. 

3020.51 Contents of a request. 

3020.52 Supporting justification. 

3020.53 Docket and notice. 

3020.54 Postal Service notice and reply. 

3020.55 Review. 

3020.56 Further proceedings. 

Subpart D—Proposal of the Commission to 

Modify the Product Lists Described Within 

the Mail Classification Schedule 

3020.70 General. 

3020.71 Contents of a proposal. 

3020.72 Supporting justification. 

3020.73 Docket and notice. 

3020.74 Postal Service notice and reply. 

3020.75 Review. 

3020.76 Further proceedings. 

Subpart E—Requests Initiated by the Postal 

Service to Update the Mail Classification 

Schedule 

3020.90 General. 

3020.91 Modifications. 

3020.92 Implementation. 

Subpart F—Size and Weight Limitations for 

Mail Matter 

3020.110 General. 

3020.111 Limitations applicable to market 

dominant mail matter. 

3020.112 Limitations applicable to 

competitive mail matter. 

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

3682. 

Subpart A—Mail Classification 

Schedule 

§ 3020.1 Applicability. 

(a) The rules in this part provide for 

establishing a Mail Classification 

Schedule. The Mail Classification 

Schedule shall categorize postal 

products as either market dominant or 

competitive. As established, the market 

dominant and competitive product lists 

specified in the Mail Classification 

Schedule shall be consistent with the 

market dominant product list specified 

in 39 U.S.C. 3621(a) and the competitive 

product list specified in 39 U.S.C. 

3631(a). 

(b) Once established, the Mail 

Classification Schedule may be 

modified subject to the procedures 

specified in this part. See part 3025 of 

this chapter for rules applicable to Mail 

Classification Schedule modifications 

for market tests of experimental 

products. 

§ 3020.10 General. 

The Mail Classification Schedule 

shall consist of two parts. Part One shall 

specify the list of market dominant 

products and include the explanatory 

information specified in § 3020.13(a). 

Part Two shall specify the list of 

competitive products and include the 

explanatory information specified in 

§ 3020.13(b). 

§ 3020.11 Initial Mail Classification 

Schedule. 

The Postal Service shall file with the 

Commission a proposed Mail 

Classification Schedule within 30 days 

of enactment of this rule. The proposed 

Mail Classification Schedule shall 

reflect the market dominant and 

competitive product lists as specified in 

39 U.S.C. 3621(a) and 39 U.S.C. 3631(a) 

respectively. The Commission shall 

cause notice of the Postal Service filing 

to be published in the Federal Register. 

The notice shall provide the 

opportunity for public comment. After 

consideration of the proposed Mail 

Classification Schedule and public 

comment, the Commission shall 

incorporate a Mail Classification 

Schedule into the Commission’s rules, 


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and cause notice thereof to be published 

in the Federal Register. Thereafter, the 

Mail Classification Schedule may be 

modified as specified by Commission 

rule. 

§ 3020.12 Publication of the Mail 

Classification Schedule. 

(a) Incorporation by reference. Section 

552(a) of title 5 U.S.C., relating to the 

public information requirements of the 

Administrative Procedure Act, provides 

in pertinent part that ‘‘* * * matter 

reasonably available to the class of 

persons affected thereby is deemed 

published in the Federal Register when 

incorporated by reference therein with 

the approval of the Director of the 

Federal Register.’’ In conformity with 

that provision, and with 39 U.S.C. 503, 

and as provided in this part, the Postal 

Regulatory Commission hereby 

incorporates by reference in this part, 

the Mail Classification Schedule, a 

looseleaf document published and 

maintained by the Postal Regulatory 

Commission. 

(b) Availability of the Mail 

Classification Schedule. (1) Copies of 

the Mail Classification Schedule, both 

current and previous issues, are 

available during regular business hours 

for reference and public inspection at 

the Postal Regulatory Commission’s 

Reading Room located at 901 New York 

Avenue, NW., Suite 200, Washington, 

DC 20268–0001. The Mail Classification 

Schedule, both current and previous 

issues, also are available on the Internet 

at http://www.prc.gov. A copy of the 

Mail Classification Schedule may be 

obtained by contacting the Postal 

Regulatory Commission’s Docket 

Section in Washington, DC. 

(2) Interested persons may receive 

electronic notification of updates to the 

Mail Classification Schedule by 

contacting the Postal Regulatory 

Commission’s Docket Section in 

Washington, DC. 

(3) Interested persons may inspect a 

copy of the Mail Classification Schedule 

at the National Archives and Records 

Administration (NARA). For 

information on the availability of this 

material at NARA, call 202–741–6030, 

or go to: http://www.archives.gov/

federal-register/cfr/ibr-locations.html. 

(c) Amendments to the Mail 

Classification Schedule. (1) Except final 

regulations published as provided in 

paragraph (c)(2) of this section, only 

notices rather than complete text of 

changes made to the Mail Classification 

Schedule are published in the Federal 

Register. These notices are published in 

the form of one summary transmittal 

letter for each issue of the Mail 

Classification Schedule. A complete 

issue of the Mail Classification 

Schedule, including the text of all 

changes published to date, will be filed 

with the Director, Office of the Federal 

Register. 

(2) When the Postal Regulatory 

Commission invites comments from the 

public on a proposed change to the Mail 

Classification Schedule, the proposed 

change and, if adopted, the full text of 

the final regulation is published in the 

Federal Register. 

(3) For references to amendments to 

the Mail Classification Schedule 

adopted under paragraph (c)(2) of this 

section after issuance of the most recent 

transmittal letter (termed Summary of 

Changes in the Mail Classification 

Schedule) listed below, see § 3020.12(c) 

in the List of CFR sections affecting title 

39 of the Code of Federal Regulations. 

Transmittal letter for issue Dated Federal Register publication 

1 ......................................................................... [TBD] ................................................................ [TBD FR TBD] 

(d) [Reserved] 

§ 3020.13 Contents of the Mail 

Classification Schedule. 

The Mail Classification Schedule 

shall provide: 

(a) The list of market dominant 

products, including: 

(1) The class of each market dominant 

product; 

(2) The description of each market 

dominant product; 

(3) A schedule listing for each market 

dominant product the current rates and 

fees; 

(4) Where applicable, the 

identification of a product as a special 

classification within the meaning of 39 

U.S.C. 3622(c)(10) for market dominant 

products; 

(5) Where applicable, the 

identification of a product as an 

experimental product undergoing a 

market test; and 

(6) Where applicable, the 

identification of a product as a nonpostal product. 

(b) The list of competitive products, 

including: 

(1) The description of each 

competitive product; 

(2) A schedule listing for each 

competitive product of general 

applicability the current rates and fees; 

(3) The identification of each product 

not of general applicability within the 

meaning of 39 U.S.C. 3632(b)(3) for 

competitive products; 

(4) Where applicable, the 

identification of a product as an 

experimental product undergoing a 

market test; and 

(5) Where applicable, the 

identification of a product as a nonpostal product. 

§ 3020.14 Notice of change. 

Whenever the Postal Regulatory 

Commission modifies the list of 

products in the market dominant 

category or the competitive category, it 

shall cause notice of such change to be 

published in the Federal Register. The 

notice shall: 

(a) Include the current list of market 

dominant products and the current list 

of competitive products appearing in 

the Mail Classification Schedule; 

(b) Indicate how and when the 

previous product lists have been 

modified; and 

(c) Describe other changes to the Mail 

Classification Schedule as necessary. 

Subpart B—Requests Initiated by the 

Postal Service To Modify the Product 

Lists Described Within the Mail 

Classification Schedule 

§ 3020.30 General. 

The Postal Service, by filing a request 

with the Commission, may propose a 

modification to the market dominant 

product list or the competitive product 

list appearing in the Mail Classification 

Schedule. For purposes of this part, 

modification shall be defined as adding 

a product to a list, removing a product 

from a list, or moving a product from 

one list to the other list. 

§ 3020.31 Contents of a request. 

A request to modify the market 

dominant product list or the 

competitive product list shall: 

(a) Provide the name, and class if 

applicable, of each product that is the 

subject of the request; 

(b) Provide the name and class, if 

applicable, of each product that is the 

subject of the request; 

(c) Indicate whether the request 

proposes to add a product to the market 

dominant list or the competitive list, 

remove a product from the market 

dominant list or the competitive list, or 

transfer a product from the market 


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dominant list to the competitive list or 

from the competitive list to the market 

dominant list; 

(d) Indicate whether each product that 

is the subject of the request is: 

(1) A special classification within the 

meaning of 39 U.S.C. 3622(c)(10) for 

market dominant products; 

(2) A product not of general 

applicability within the meaning of 39 

U.S.C. 3632(b)(3) for competitive 

products; or 

(3) A non-postal product. 

(e) Provide all supporting justification 

upon which the Postal Service proposes 

to rely; and 

(f) Include a copy of the applicable 

sections of the Mail Classification 

Schedule and the proposed changes 

therein in legislative format. 

§ 3020.32 Supporting justification. 

Supporting justification shall be in 

the form of a statement from one or 

more knowledgeable Postal Service 

official(s) who sponsors the request and 

attests to the accuracy of the 

information contained within the 

statement. The justification shall: 

(a) Demonstrate why the change is in 

accordance with the policies and the 

applicable criteria of chapter 36 of 39 

U.S.C.; 

(b) Explain why, as to market 

dominant products, the change is not 

inconsistent with each requirement of 

39 U.S.C. 3622(d), and that it advances 

the objectives of 39 U.S.C. 3622(b), 

taking into account the factors of 39 

U.S.C. 3622(c); 

(c) Explain why, as to competitive 

products, the addition, deletion, or 

transfer will not result in the violation 

of any of the standards of 39 U.S.C. 

3633. 

(d) Verify that the change does not 

classify as competitive a product over 

which the Postal Service exercises 

sufficient market power that it can: 

(1) Set the price of such product 

substantially above costs; 

(2) Raise prices significantly; 

(3) Decrease quality; or 

(4) Decrease output without risk of 

losing a significant level of business to 

other firms offering similar products. 

(e) Explain whether or not each 

product that is the subject of the request 

is covered by the postal monopoly as 

reserved to the Postal Service under 18 

U.S.C. 1696 subject to the exceptions set 

forth in 39 U.S.C. 601; 

(f) Provide a description of the 

availability and nature of enterprises in 

the private sector engaged in the 

delivery of the product; 

(g) Provide any information available 

on the views of those who use the 

product on the appropriateness of the 

proposed modification; 

(h) Provide a description of the likely 

impact of the proposed modification on 

small business concerns; and 

(i) Include such information and data, 

and such statements of reasons and 

bases, as are necessary and appropriate 

to fully inform the Commission of the 

nature, scope, significance, and impact 

of the proposed modification. 

§ 3020.33 Docket and notice. 

The Commission shall institute a 

docket for consideration of each request 

to modify the market dominant or the 

competitive product lists. The 

Commission shall cause notice of each 

docket to be published in the Federal 

Register, which includes: 

(a) A description of the request; 

(b) Direction to obtain further 

information in regard to the request, if 

any; 

(c) Direction for participation in the 

docket; 

(d) Designation of an officer of the 

Commission to represent the interests of 

the general public; and 

(e) Information regarding an 

opportunity for written comment 

addressing compliance with statutory 

provisions and applicable Commission 

rules in regard to the proposed 

modification. 

§ 3020.34 Review. 

The Commission shall review the 

request and responsive comments. The 

Commission shall either: 

(a) Approve the request to modify the 

market dominant and competitive 

product lists; 

(b) Institute further proceedings to 

consider all or part of the request if it 

finds that there is substantial likelihood 

that the modification is inconsistent 

with statutory policies or Commission 

rules, and explain its reasons for not 

approving the request to modify the 

market dominant and competitive 

product lists; 

(c) Provide an opportunity for the 

Postal Service to modify its request; or 

(d) Direct other action as the 

Commission may consider appropriate. 

§ 3020.35 Further proceedings. 

If the Commission determines that 

further proceedings are necessary, a 

conference shall be scheduled to 

consider the concerns expressed by the 

Commission. Written statements 

commenting on the Commission’s 

concerns shall be requested, to be filed 

7 days prior to the conference. Upon 

conclusion of the conference, the 

Commission shall promptly issue a 

ruling to: 

(a) Provide for a period of discovery 

to obtain further information; 

(b) Schedule a hearing on the record 

for further consideration of the request; 

(c) Explain the reasons for not going 

forward with additional proceedings 

and approve the request to modify the 

market dominant and competitive 

product lists; or 

(d) Direct other action as the 

Commission may consider appropriate. 

Subpart C—Requests Initiated by 

Users of the Mail To Modify the 

Product Lists Described Within the 

Mail Classification Schedule 

§ 3020.50 General. 

Users of the mail, by filing a request 

with the Commission, may propose a 

modification to the market dominant 

product list or the competitive product 

list appearing in the Mail Classification 

Schedule. For purposes of this part, 

modification shall be defined as adding 

a product to a list, removing a product 

from a list, or transferring a product 

from one list to the other list. 

§ 3020.51 Contents of a request. 

A request to modify the market 

dominant product list or the 

competitive product list shall: 

(a) Provide the name, and class if 

applicable, of each product that is the 

subject of the request; 

(b) Indicate whether the request 

proposes to add a product to the market 

dominant list or the competitive list, 

remove a product from the market 

dominant list or the competitive list, or 

move a product from the market 

dominant list to the competitive list or 

from the competitive list to the market 

dominant list; 

(c) Indicate whether each product that 

is the subject of the request is: 

(1) A special classification within the 

meaning of 39 U.S.C. 3622(c)(10) for 

market dominant products; 

(2) A product not of general 

applicability within the meaning of 39 

U.S.C. 3632(b) for competitive products; 

or 

(3) A non-postal product. 

(d) Provide all supporting justification 

upon which the proponent of the 

request proposes to rely; and 

(e) Include a copy of the applicable 

sections of the Mail Classification 

Schedule and the proposed changes 

therein in legislative format. 

§ 3020.52 Supporting justification. 

Supporting justification shall be in 

the form of a statement from a 

knowledgeable proponent of the request 

who attests to the accuracy of the 

information contained within the 

statement. The justification shall: 

(a) Demonstrate why the change is in 

accordance with the policies and the 


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applicable criteria of chapter 36 of 39 

U.S.C.; 

(b) Explain why, as to market 

dominant products, the change is not 

inconsistent with each requirement of 

39 U.S.C. 3622(d), and that it advances 

the objectives of 39 U.S.C. 3622(b), 

taking into account the factors of 39 

U.S.C. 3622(c); 

(c) Explain why, as to competitive 

products, the addition, deletion, or 

transfer will not result in the violation 

of any of the standards of 39 U.S.C. 

3633. 

(d) Verify that the change does not 

classify as competitive a product over 

which the Postal Service exercises 

sufficient market power that it can: 

(1) Set the price of such product 

substantially above costs; 

(2) Raise prices significantly; 

(3) Decrease quality; or 

(4) Decrease output without risk of 

losing a significant level of business to 

other firms offering similar products. 

(e) Explain whether or not each 

product that is the subject of the request 

is covered by the postal monopoly, as 

reserved to the Postal Service under 18 

U.S.C. 1696 subject to the exceptions set 

forth in 39 U.S.C. 601; 

(f) Provide a description of the 

availability and nature of enterprises in 

the private sector engaged in the 

delivery of the product; 

(g) Provide any information available 

on the views of those who use the 

product on the appropriateness of the 

proposed modification; 

(h) Provide a description of the likely 

impact of the proposed modification on 

small business concerns; and 

(i) Include such information and data, 

and such statements of reasons and 

bases, as are necessary and appropriate 

to fully inform the Commission of the 

nature, scope, significance, and impact 

of the proposed modification. 

§ 3020.53 Docket and notice. 

The Commission shall institute a 

docket for consideration of each request 

to modify the market dominant or the 

competitive product lists. The 

Commission shall cause notice of each 

docket to be published in the Federal 

Register, which includes: 

(a) A description of the request; 

(b) Direction to obtain further 

information in regard to the request, if 

any; 

(c) Direction for participation in the 

docket; 

(d) Designation of an officer of the 

Commission to represent the interests of 

the general public; and 

(e) Information regarding an 

opportunity for written comment 

addressing compliance with statutory 

provisions and applicable Commission 

rules in regard to the proposed 

modification. 

§ 3020.54 Postal Service notice and reply. 

The Secretary of the Commission 

shall forward to the Postal Service a 

copy of the request. Within 28 days of 

the filing of the request, the Postal 

Service shall provide its preliminary 

views in regard to the request. The 

Postal Service may include suggestions 

for appropriate Commission action in 

response to the request. 

§ 3020.55 Review. 

The Commission shall review the 

request, Postal Service reply, and public 

comment to determine whether the 

proposed modification to the market 

dominant and competitive product lists 

complies with applicable statutory 

requirements and the Commission’s 

rules, and whether the proposed 

modification is consistent with the 

position of the Postal Service as 

expressed in its reply. The Commission 

shall either: 

(a) Approve the request to modify the 

market dominant and competitive 

product lists, but only to the extent the 

modification is consistent with the 

position of the Postal Service; 

(b) Reject the request; 

(c) Institute further proceedings to 

consider the request to modify the 

market dominant and competitive 

product lists; or 

(d) Direct other action as the 

Commission may consider appropriate. 

§ 3020.56 Further proceedings. 

If the Commission determines that 

further proceedings are necessary, a 

conference shall be scheduled to 

consider the merits of going forward 

with the request. Upon conclusion of 

the conference, the Commission shall 

promptly issue a ruling to: 

(a) Provide for a period of discovery 

to obtain further information; 

(b) Schedule a hearing on the record 

for further consideration of the request; 

(c) Explain the reasons for not going 

forward with formal proceedings; or 

(d) Direct other action as the 

Commission may consider appropriate. 

Subpart D—Proposal of the 

Commission To Modify the Product 

Lists Described Within the Mail 

Classification Schedule 

§ 3020.70 General. 

The Commission, of its own initiative, 

may propose a modification to the 

market dominant product list or the 

competitive product list provided 

within the Mail Classification Schedule. 

For purposes of this part, modification 

shall be defined as adding a product to 

a list, removing a product from a list, or 

transferring a product from one list to 

the other list. 

§ 3020.71 Contents of a proposal. 

A proposal to modify the market 

dominant product list or the 

competitive product list shall: 

(a) Provide the name, and class if 

applicable, of each product that is the 

subject of the proposal; 

(b) Indicate whether the proposal 

would add a product to the market 

dominant list or the competitive list, 

remove a product from the market 

dominant list or the competitive list, or 

move a product from the market 

dominant list to the competitive list or 

from the competitive list to the market 

dominant list; 

(c) Indicate whether each product that 

is the subject of the proposal is: 

(1) A special classification within the 

meaning of 39 U.S.C. 3622(c)(10) for 

market dominant products; 

(2) A product not of general 

applicability within the meaning of 39 

U.S.C. 3632(b) for competitive products, 

or 

(3) A non-postal product. 

(d) Provide justification supporting 

the proposal; and 

(e) Include a copy of the applicable 

sections of the Mail Classification 

Schedule and the proposed changes 

therein in legislative format. 

§ 3020.72 Supporting justification. 

Supporting justification shall: 

(a) Provide an explanation for 

initiating the docket; 

(b) Explain why, as to market 

dominant products, the change is not 

inconsistent with each requirement of 

39 U.S.C. 3622(d), and that it advances 

the objectives of 39 U.S.C. 3622(b), 

taking into account the factors of 39 

U.S.C. 3622(c); 

(c) Explain why, as to competitive 

products, the addition, subtraction, or 

transfer will not result in the violation 

of any of the standards of 39 U.S.C. 

3633. 

(d) Verify that the change does not 

classify as competitive a product over 

which the Postal Service exercises 

sufficient market power that it can: 

(1) Set the price of such product 

substantially above costs; 

(2) Raise prices significantly; 

(3) Decrease quality; 

(4) Decrease output without risk of 

losing a significant level of business to 

other firms offering similar products. 

(e) Explain whether or not each 

product that is the subject of the request 

is covered by the postal monopoly as 

reserved to the Postal Service under 18 


rmajette on PROD1PC64 with PROPOSALS3
50786 Federal Register / Vol. 72, No. 170 / Tuesday, September 4, 2007 / Proposed Rules 

U.S.C. 1696 subject to the exceptions set 

forth in 39 U.S.C. 601; 

(f) Provide a description of the 

availability and nature of enterprises in 

the private sector engaged in the 

delivery of the product; 

(g) Provide any information available 

on the views of those who use the 

product involved on the 

appropriateness of the proposed 

modification; 

(h) Provide a description of the likely 

impact of the proposed modification on 

small business concerns; and 

(i) Include such information and data, 

and such statements of reasons and 

bases, as are necessary and appropriate 

to fully inform the Postal Service and 

users of the mail of the nature, scope, 

significance, and impact of the proposed 

modification. 

§ 3020.73 Docket and notice. 

The Commission shall institute a 

docket for consideration of each 

proposal to modify the market dominant 

or the competitive product lists. The 

Commission shall cause notice of each 

docket to be published in the Federal 

Register, which includes: 

(a) A description of the proposal; 

(b) Direction to obtain further 

information in regard to the proposal, if 

any; 

(c) Direction for participation in the 

docket; 

(d) Designation of an officer of the 

Commission to represent the interests of 

the general public; and 

(e) Information regarding an 

opportunity for written comment 

addressing compliance with statutory 

provisions and applicable Commission 

rules in regard to the proposed 

modification. 

§ 3020.74 Postal Service notice and reply. 

The Secretary of the Commission 

shall forward to the Postal Service a 

copy of the notice of proposal. Within 

28 days of the filing of the proposal, the 

Postal Service shall provide its 

preliminary views in regard to the 

proposal. The Postal Service may 

include suggestions for appropriate 

further procedural steps. 

§ 3020.75 Review. 

The Commission shall review the 

Postal Service reply and public 

comment. The Commission shall either: 

(a) Approve the proposal to modify 

the market dominant and competitive 

product lists, but only to the extent the 

modification is consistent with the 

position of the Postal Service; 

(b) Withdraw the proposal; 

(c) Institute further proceedings to 

consider the proposal, identifying 

relevant issues that may require further 

development; or 

(d) Direct other action as the 

Commission may consider appropriate. 

§ 3020.76 Further proceedings. 

If the Commission determines that 

further proceedings are appropriate, a 

conference shall be scheduled to 

consider the merits of going forward 

with the proposal. Upon conclusion of 

the conference, the Commission shall 

promptly issue a ruling to: 

(a) Provide for a period of discovery 

to obtain further information; 

(b) Schedule a hearing on the record 

for further consideration of the 

proposal; 

(c) Explain the reasons for not going 

forward with formal proceedings; or 

(d) Direct other action as the 

Commission may consider appropriate. 

Subpart E—Requests Initiated by the 

Postal Service To Conform the Mail 

Classification Schedule 

§ 3020.90 General. 

The Postal Service shall assure that 

product descriptions in the Mail 

Classification Schedule accurately 

represent the current offerings of Postal 

Service products and services. 

§ 3020.91 Modifications. 

The Postal Service shall submit 

corrections to product descriptions in 

the Mail Classification Schedule, that do 

not constitute a proposal to modify the 

market dominant product list or the 

competitive product list as defined in 

§ 3020.30, by filing notice of the 

proposed change with the Commission 

no later than 15 days prior to the 

effective date of the proposed change. 

§ 3020.92 Implementation. 

The Commission shall review the 

proposed corrections for formatting and 

conformance with the structure of the 

Mail Classification Schedule, and 

subject to editorial changes, shall 

update the Mail Classification Schedule 

to coincide with the effective date of the 

proposed change. 

Subpart F—Size and Weight 

Limitations for Mail Matter 

§ 3020.110 General. 

Applicable size and weight 

limitations for mail matter shall appear 

in the Mail Classification Schedule as 

part of the description of each product. 

§ 3020.111 Limitations applicable to 

market dominant mail matter. 

(a) The Postal Service shall inform the 

Commission of updates to size and 

weight limitations for market dominant 

mail matter by filing notice with the 

Commission 45 days prior to the 

effective date of the proposed update. 

The notice shall include a copy of the 

applicable sections of the Mail 

Classification Schedule and the 

proposed updates therein in legislative 

format. 

(b) The Commission shall provide 

notice of the proposed update in the 

Federal Register and seek public 

comment on whether the proposed 

update is in accordance with the 

policies and the applicable criteria of 

chapter 36 of 39 U.S.C.; 

(c) If the Commission finds the 

proposed update in accordance with the 

policies and the applicable criteria of 

chapter 36 of 39 U.S.C., the Commission 

shall review the proposed Mail 

classification Schedule language for 

formatting and conformance with the 

structure of the Mail classification 

Schedule, and subject to editorial 

changes, shall change the Mail 

Classification Schedule to coincide with 

the effective date of the proposed 

update. 

(d) If the Commission finds the 

proposed update not in accordance with 

the policies and the applicable criteria 

of chapter 36 of 39 U.S.C., the 

Commission may direct other action as 

deemed appropriate. 

§ 3020.112 Limitations applicable to 

competitive mail matter. 

The Postal Service shall notify the 

Commission of updates to size and 

weight limitations for competitive mail 

matter pursuant to subpart E of this part. 

[FR Doc. 07–4269 Filed 8–31–07; 8:45 am] 

BILLING CODE 7710–FW–P 


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