61014 Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Rules and Regulations

1Copies may be obtained, at cost, from the

National Technical Information Service, 5285 Port

Royal Road, Springfield, VA 22161.

2See footnote 1.

3See footnote 1.

DoD 5400.11–R,1 and procedures

outlined in this part amplified by 32

CFR part 286.

§ 285.4 Responsibilities.

(a) The Assistant Secretary of Defense

for Public Affairs shall:

(1) Direct and administer the DoD

FOIA Program to ensure compliance

with policies and procedures that

govern the administration of the

program.

(2) Issue a DoD FOIA regulation and

other discretionary instructions and

guidance to ensure timely and

reasonably uniform implementation of

the FOIA in the Department of Defense.

(3) Internally administer the FOIA

Program for OSD, the Chairman of the

Joint Chiefs of Staff and, as an exception

to DoD Directive 5100.3,2 the Combatant

Commands.

(4) As the designee of the Secretary of

Defense, serve as the sole appellate

authority for appeals to decisions of

respective Initial Denial Authorities

within OSD, the Chairman of the Joint

Chiefs of Staff, the Combatant

Commands, and the DoD Field

Activities.

(b) The General Counsel of the

Department of Defense shall provide

uniformity in the legal interpretation of

this part.

(c) The Heads of the DoD Components

shall:

(1) Publish in the Federal Register

any instructions necessary for the

internal administration of this part

within a DoD Component that are not

prescribed by this Directive or by other

issuances of the Assistant Secretary of

Defense (Public Affairs). For the

guidance of the public, the information

specified in 5 U.S.C. 552(a)(1) shall be

published in accordance with DoD

Directive 5400.9.3

(2) Conduct training on the provisions

of this part, 5 U.S.C. 552, and 32 CFR

part 286 for officials and employees

who implement the FOIA.

(3) Submit the report prescribed in

subpart G of 32 CFR part 286.

(4) Make available for public

inspection and copying in an

appropriate facility or facilities, in

accordance with rules published in the

Federal Register, the records specified

in 10 U.S.C. 552(a)(2), unless such

records are published and copies are

offered for sale. These records shall be

made available to the public in hard

copy, by computer telecommunications,

or other electronic means.

(5) Maintain and make available for

public inspection and copying current

indices of all (a)(2) records as required

by 10 U.S.C. 552(a)(2).

§ 285.5 Information requirements.

The reporting requirements in subpart

G of 32 CFR part 286 have been assigned

Report Control Symbol DD–PA(A) 1365.

Dated: November 5, 1997.

L.M. Bynum,

Alternate OSD Federal Register Liaison

Officer, Department of Defense.

[FR Doc. 97–29659 Filed 11–13–97; 8:45 am]

BILLING CODE 5000–04–M

POSTAL SERVICE

39 CFR Part 111

Eligibility Requirements for Certain

Nonprofit Standard Mail Rate Matter

AGENCY: Postal Service.

ACTION: Final rule.

SUMMARY: This notice adopts a proposed

rule which was published in the

Federal Register on September 8, 1997

(62 FR 47178–47179). It amends the

regulations of the Postal Service

governing the eligibility requirements

for mail to be sent at the Nonprofit

Standard Mail rates of postage. For the

most part, this final rule adopts the

proposal as it was published with

changes suggested in comments

received from interested parties.

EFFECTIVE DATE: November 14, 1997.

FOR FURTHER INFORMATION CONTACT:

Jerome M. Lease, 202–268–5188.

SUPPLEMENTARY INFORMATION: The

proposed rule discussed in detail the

common practice of nonprofit

organizations to offer premium items,

such as tote bags, umbrellas, t-shirts,

and coffee mugs when seeking

contributions or membership dues

payments from new members. As

explained in the proposed rule, 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 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 or other

prescribed exceptions are met. 39 U.S.C.

3626(j)(1)(D).

The Postal Service promulgated

standards implementing the statute

effective October 1, 1995. Since that

time, the Postal Service has consistently

held that ‘‘backend premiums’’ such as

those described above are to be

considered advertising for the product

offered as a premium. In addition, the

Postal Service has generally concluded

that ‘‘utilitarian’’ items such as coffee

mugs, t-shirts, tote bags, umbrellas, and

similar items are not normally related to

an organization’s qualifying purposes,

thus disqualifying such advertisements

from being mailed at the Nonprofit

Standard Mail rates.

The proposed rule offered standards

by which, if met, the Postal Service

would not consider the announcement

of the backend premium as an

‘‘advertisement.’’ Specifically, the Postal

Service proposed two tests. First, the

requested contribution must be at least

five (5) times the cost of the premium

to exempt the announcement from being

considered as an advertisement for the

premium. The cost of the premium is its

actual cost to the nonprofit organization.

Second, the requested contribution must

be at least three (3) times the

represented value in the mailpiece, if

any, of the premium. Each test must be

met or the offer will be considered an

advertisement.

The Postal Service received a total of

12 comments on the proposed rule. In

one fashion or another, all of the

commenters expressed their support for

a test or threshold by which

announcements of backend premiums

would not be considered as

advertisements, thereby eliminating the

need for consideration of the

substantially related test. Accordingly,

after full consideration of the comments

received, the Postal Service believes it is

appropriate to adopt, with revision of

the ratios, the proposed changes in

eligibility requirements at this time.

Evaluation of Comments Received

Written comments were received from

12 organizations and associations

representing nonprofit organizations. Of

primary concern to 11 of the 12

commenters is the Postal Service’s

proposed test of requiring a contribution

or dues payment to be at least five times

the cost and three times the represented

value of the premium to activate the

exception from material being

considered as an advertisement. Four

commenters supported the proposal in

its entirety including the five times cost

and three times represented value

criteria. On the other hand, two

commenters requested a test of three

times the cost and eliminating the

represented value test. Other
Federal Register / Vol. 62, No. 220 / Friday, November 14, 1997 / Rules and Regulations 61015

suggestions included a test of three

times cost and 11⁄2 times represented

value; three times cost and two times

represented value; four times cost and

two times represented value; and a

single test that would be based on the

lower of cost or market value of the

premium.

The most common reason for

requesting lower numbers be used,

particularly with respect to the test

related to the ‘‘represented value’’ of the

premium, is a disclosure requirement of

the Internal Revenue Service which

requires that the ‘‘fair market value’’ of

a premium be disclosed. (The donor

may not take a charitable deduction for

that part of his or her payment). Along

those same lines, one commenter was

concerned about using a cost figure

when merchandise which is ‘‘obsolete’’

and without current market value is

offered as a premium. Others simply

cited lower numbers as a more

reasonable way to fairly assess whether

the offer of a premium should be

considered advertising.

We have considered the comments,

and determined to adopt both of the

proposed tests, albeit with

modifications in the original ratios. Up

to this time, the Postal Service viewed

these solicitations as two distinct

transactions (i.e., part donation and part

sale). Even though the amount of the

donation generally exceeded the amount

of the sale, the premium offer was

considered to be an advertisement for

that item. The rulemaking looks to the

premise, supported by a recent ruling of

another agency, that the solicitation is a

single transaction (rather than part

solicitation and part sale); it then looks

to whether the solicitation or sale is the

predominant part of the transaction.

That is, it looks to whether the amount

of the sale is greater than the amount of

the donation.

One means to make this judgment

would be to compare the fair market

value of the premium(s) with the

‘‘donation’’ (i.e., the difference between

the amount solicited and the fair market

value). However, the fair market value

of the premium may not always be clear

or readily ascertained. Accordingly, the

Postal Service proposal looked to the

represented value, if any, of the

premium(s), since this would be the

perceived value of the premium(s), as

well as the cost to the nonprofit, since

there is generally a relationship (i.e.,

markup) between cost and market value.

We continue to believe that both of

these standards are appropriate, but will

adjust the ratios. With respect to

represented value, the solicitation will

not be considered to be an

advertisement if the requested donation

is more than two times the represented

value of the premium(s). (For example,

if the request is for $100.00, the

represented value of the premium(s)

could be no more than $49.99). With

respect to cost to the nonprofit, the

solicitation will not be considered an

advertisement if the requested donation

is more than four times the represented

value of the premium(s). (For example,

if the request is for $100.00, the cost of

the premium(s) may be no more than

$24.99). In adopting this test, we

considered that a usual ‘‘markup’’ over

costs is two to one, which was suggested

in some comments (although other

comments suggest the ratio may be

higher).

The comment concerning application

of the test to ‘‘obsolete’’ merchandise

raises an interesting concern. Even if we

would be inclined to consider this

concern, it is not clear to us how a

standard could easily be administered

(e.g., how can we determine what is

‘‘obsolete?’’). While we do not believe it

appropriate to delay this rulemaking to

give further consideration to this

concern, we will consider further

proposals regarding it.

Two commenters were concerned that

the proposed rule does not make clear

that only premium offers which are not

substantially related to a nonprofit

organization’s qualifying purposes must

meet the test incorporated in the final

rule to be eligible for mailing at

Nonprofit Standard Mail rates. We

believe that adoption of these

suggestions is not needed, and would

unnecessarily complicate the

regulations. The rule is intended to

define the solicitations which will not

be considered advertising. If

solicitations are advertising, they may

still be eligible for nonprofit rates if the

premiums are substantially related to

the organization’s purposes or contained

in material meeting the content

requirements of a periodical.

One commenter also suggested that

future adjustments be made possible,

such as adjustments for inflation. We

will remain open to future suggestions

to change the standards adopted here.

Another commenter requested that

the Postal Service include a provision

for ‘‘one written warning’’ if a premium

offer for a product or service is

determined to be ineligible for mailing

at the nonprofit rates; and, to create a

statute of limitations to limit a nonprofit

organization’s liability for making

improper mailings. This same

commenter requested ‘‘retroactive’’

application of the policy adopted in the

final rule, although no justification for

this request was offered in the comment

provided. These requests are beyond the

scope of this rulemaking. Nevertheless,

the Postal Service has an ongoing

dialogue with the nonprofit community

and concerns such as those expressed

here have been considered.

Finally, one commenter offered views

concerning the application of the

‘‘substantially related’’ standard. These

comments were beyond the scope of the

rulemaking.

List of Subjects in 39 CFR Part 111

Postal Service.

For the reasons discussed above, the

Postal Service hereby adopts the

following amendments to the Domestic

Mail Manual, which is incorporated by

reference in the Code of Federal

Regulations (see 39 CFR part 111).

PART 111—[AMENDED]

1. 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. In the Domestic Mail Manual,

redesignate 5.9, 5.10, 5.11, and 5.12 as

5.10, 5.11, 5.12, and 5.13, respectively;

add new 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 more than 4 times the cost of the

premium item(s) offered and more than

2 times the represented value in the

mailpiece, if any, of the premium

item(s) offered.

* * * * *

A transmittal letter making these changes

in the pages of the Domestic Mail Manual

will be published and will be transmitted to

subscribers automatically. Notice of issuance

will be published in the Federal Register as

provided by 39 CFR 111.3.

Stanley F. Mires,

Chief Counsel, Legislative.

[FR Doc. 97–30008 Filed 11–13–97; 8:45 am]

BILLING CODE 7710–12–P