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[Federal Register Volume 62, Number 173 (Monday, September 8, 1997)]
[Proposed Rules]
[Pages 47178-47179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23682]

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POSTAL SERVICE

39 CFR Part 111

Eligibility Requirements for Certain Nonprofit Standard Mail 
Matter

AGENCY: Postal Service.

ACTION: Proposed rule.

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SUMMARY: This proposed rule will amend the standards for mail matter 
eligible to be sent at the Nonprofit Standard Mail rates. Specifically, 
mail matter that seeks or solicits contributions or membership dues 
payments and offers a premium item such as a tote bag or umbrella will 
be considered eligible for the Nonprofit Standard Mail rates provided 
that certain criteria are met. The Postal Service has determined that a 
revision to the standards in this manner is consistent with the 
treatment of similar solicitations by other agencies, most notably the 
Internal Revenue Service and the Federal Trade Commission.

DATES: Comments must be received on or before October 8, 1997.

ADDRESSES: Written comments should be mailed or delivered to Manager, 
Business Mail Acceptance, USPS Headquarters, 475 L'Enfant Plaza SW., 
Washington, DC 20260-6808. Copies of all written comments will be 
available for inspection and photocopying between 9 a.m. and 4 p.m., 
Monday through Friday, in Room 6801 at the above address.

FOR FURTHER INFORMATION CONTACT: Jerome M. Lease, 202-268-5188.

SUPPLEMENTARY INFORMATION: Nonprofit organizations authorized to mail 
at the Nonprofit Standard Mail rates commonly offer premium items when 
soliciting contributions or membership in their organizations. These 
premiums, often referred to as ``backend premiums'' since they are 
offered in return for a contribution, donation, or membership dues 
payment, include such items as tote bags, umbrellas, t-shirts, and 
coffee mugs.
    By statute, material that advertises, promotes, offers, or, for a 
fee or consideration, recommends, describes, or announces the 
availability of any product or service, other than separately 
restricted travel, insurance, and financial instruments such as credit 
cards, is ineligible for the nonprofit rates of postage unless certain 
prescribed exceptions are met. 39 U.S.C. 3626(j)(1)(D). In accordance 
with its responsibility to administer the statute, the Postal Service 
promulgated new standards effective October 1, 1995.
    Domestic Mail Manual (DMM) E670.5.4d. provides that Nonprofit 
Standard Mail rates may not be used for the entry of material that 
advertises a product or service unless the sale of the product or the 
provision of such service is substantially related to the exercise or 
performance by the organization of one or more of the purposes used by 
the organization to qualify for mailing at the Nonprofit Standard Mail 
rates. In the implementation of these rules, the Postal Service has 
concluded that ``utilitarian'' items such as tote bags, umbrellas, 
coffee mugs, t-shirts, and similar items are not normally considered 
substantially related to an organization's qualifying purposes.
    Since the adoption of the regulations implementing the statute, the 
Postal Service has consistently held that backend premiums are to be 
considered advertising for the product offered as a premium. This 
policy was discussed in Federal Register articles promulgating the new 
rules. See 60 FR 22270, 22272 (May 5, 1995); 59 FR 23158, 23162 (May 5, 
1994). It has also been followed in publications such as USPS 
Publication 417 (Nonprofit Standard Mail Eligibility) and training in 
this area. Backend premiums are similar to typical advertisements 
because they invite a transaction which provides funds to the sender, 
but are dissimilar from typical advertisements because the value of the 
premium is usually much less than the required donation or other 
payment. Although cognizant of the argument that the donor is motivated 
by eleemosynary purposes, rather than a desire for the article, the 
transaction can also be viewed as part donation and part sale, which, 
in the view of the Postal Service, makes the offer an advertisement 
under the statutory restrictions. This interpretation of the statute 
is, at least in part, supported by IRS policy, which requires donors 
declaring charitable deductions to subtract the value of premiums from 
donations.
    Recently, the Postal Service has become aware of new developments 
which warrant review of the policy concerning backend premiums. 
Notably, an advisory opinion by the Federal Trade Commission held that 
telephone fundraising calls in which certain backend premiums are 
offered are not ``telemarketing'' because they are not ``conducted to 
induce the purchase of

[[Page 47179]]

goods or services.'' Similarly, the Internal Revenue Service does not 
deem nonprofit organizations that provide backend premiums to be 
involved in sales transactions.
    The Postal Service believes it is reasonable to provide similar 
treatment to backend premiums, particularly where the receipt of the 
premiums does not appear to be the principal motivation of the donors 
or members. In these instances, the offer of the premiums will not be 
considered as ``advertisements'' for postal purposes; thus the 
announcements are exempt from the substantially related rules affecting 
advertisements in nonprofit mail. The Postal Service proposes two 
tests. First, the requested contribution or other payment must be at 
least five (5) times the total cost of the premiums to exempt the 
announcements from being considered as advertisements for the premiums. 
The cost of each premium is its actual cost to the nonprofit 
organization. Second, the requested contribution or other payment must 
be at least three (3) times the represented values in the mailpiece, if 
any, of the premiums. Both tests must be met or the offer will be 
considered an advertisement. Nonprofit organizations wishing to mail 
solicitations for contributions which offer a premium may be asked to 
substantiate the cost to the nonprofit organization for the premium, 
consistent with their usual obligation to demonstrate eligibility for 
nonprofit rates.
    Although exempt from the notice and comment requirements of the 
Administrative Procedure Act (5 U.S.C. 553(b), (c)) regarding proposed 
rulemaking by 39 U.S.C. 410(a), the Postal Service invites comments on 
the following proposed revisions of the Domestic Mail Manual, 
incorporated by reference in the Code of Federal Regulations. See 39 
CFR part 111.

List of Subjects in 39 CFR Part 111

    Postal Service.

PART 111---[AMENDED]

    The authority citation for 39 CFR part 111 continues to read as 
follows:

    Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 3001-
3011, 3201-3219, 3403-3406, 3621, 3626, 5001.

    2. Amend Domestic Mail Manual E670.5.0, Eligible And Ineligible 
Matter, by renumbering subsections 5.9 to 5.10, 5.10 to 5.11, 5.11 to 
5.12, and 5.12 to 5.13, and adding a new subsection 5.9 to read as 
follows:
5.0  ELIGIBLE AND INELIGIBLE MATTER
* * * * *
5.9  Contribution and Membership Premiums
    Announcements for premiums received as a result of a contribution 
or payment of membership dues are not considered advertisements if the 
requested contribution or membership dues is at least 5 times the cost 
to the nonprofit organization of the premium item(s) offered and at 
least 3 times the represented value in the mailpiece, if any, of the 
premium item(s) offered.
* * * * *
    3. An appropriate amendment to 39 CFR 111.3 to reflect these 
changes will be published if the proposal is adopted.
R. Andrew German,
Acting Chief Counsel, Legislative.
[FR Doc. 97-23682 Filed 9-5-97; 8:45 am]
BILLING CODE 7710-12-U
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