This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

27520 

Vol. 83, No. 114 

Wednesday, June 13, 2018 

1Though DEA has used the term ‘‘final order’’ 

with respect to temporary scheduling orders in the 

past, this notice of intent adheres to the statutory 

language of 21 U.S.C. 811(h), which refers to a 

‘‘temporary scheduling order.’’ No substantive 

change is intended. 

2As discussed in a memorandum of 

understanding entered into by the Food and Drug 

Administration (FDA) and the National Institute on 

Drug Abuse (NIDA), the FDA acts as the lead agency 

within the HHS in carrying out the Secretary’s 

scheduling responsibilities under the CSA, with the 

concurrence of NIDA. 50 FR 9518, Mar. 8, 1985. 

The Secretary of the HHS has delegated to the 

Assistant Secretary for Health of the HHS the 

authority to make domestic drug scheduling 

recommendations. 58 FR 35460, July 1, 1993. 

DEPARTMENT OF JUSTICE 

Drug Enforcement Administration 

21 CFR Part 1308 

[Docket No. DEA–482] 

Schedules of Controlled Substances: 

Temporary Placement of NEthylpentylone in Schedule I 

AGENCY: Drug Enforcement 

Administration, Department of Justice. 

ACTION: Proposed amendment; notice of 

intent. 

SUMMARY: The Acting Administrator of 

the Drug Enforcement Administration is 

publishing this notice of intent to issue 

an order temporarily scheduling N-1- 

(1,3-benzodioxol-5-yl)-2-(ethylamino)-1- 

pentanone (N-ethylpentylone, ephylone) 

in schedule I. This action is based on a 

finding by the Acting Administrator that 

the placement of N-ethylpentylone in 

schedule I is necessary to avoid an 

imminent hazard to the public safety. 

When it is issued, the temporary 

scheduling order will impose regulatory 

requirements under the Controlled 

Substances Act (CSA) on the 

manufacture, distribution, reverse 

distribution, possession, importation, 

exportation, research, and conduct of 

instructional activities, and chemical 

analysis of N-ethylpentylone, as well as 

administrative, civil, and criminal 

remedies with respect to persons who 

fail to comply with such requirements 

or otherwise violate the CSA with 

respect to N-ethylpentylone. 

DATES: June 13, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Michael J. Lewis, Diversion Control 

Division, Drug Enforcement 

Administration; Mailing Address: 8701 

Morrissette Drive, Springfield, Virginia 

22152; Telephone: (202) 598–6812. 

SUPPLEMENTARY INFORMATION: This 

notice of intent is issued pursuant to the 

temporary scheduling provisions of 21 

U.S.C. 811(h). The Drug Enforcement 

Administration (DEA) intends to issue a 

temporary order (in the form of a 

temporary amendment) placing Nethylpentylone in schedule I of the 

Controlled Substances Act (CSA).1 The 

temporary scheduling order will be 

published in the Federal Register on or 

after July 13, 2018. 

Legal Authority 

Section 201 of the CSA, 21 U.S.C. 811, 

provides the Attorney General with the 

authority to temporarily place a 

substance in schedule I of the CSA for 

two years without regard to the 

requirements of 21 U.S.C. 811(b) if he 

finds that such action is necessary to 

avoid an imminent hazard to the public 

safety. 21 U.S.C. 811(h)(1). In addition, 

if proceedings to control a substance 

permanently are initiated under 21 

U.S.C. 811(a)(1) while the substance is 

temporarily controlled under section 

811(h), the Attorney General may 

extend the temporary scheduling for up 

to one year. 21 U.S.C. 811(h)(2). 

Where the necessary findings are 

made, a substance may be temporarily 

scheduled if it is not listed in any other 

schedule under section 202 of the CSA, 

21 U.S.C. 812, or if there is no 

exemption or approval in effect for the 

substance under section 505 of the 

Federal Food, Drug, and Cosmetic Act 

(FDCA), 21 U.S.C. 355. 21 U.S.C. 

811(h)(1); 21 CFR part 1308. The 

Attorney General has delegated 

scheduling authority under 21 U.S.C. 

811 to the Administrator of the DEA. 28 

CFR 0.100. 

Background 

Section 201(h)(4) of the CSA, 21 

U.S.C. 811(h)(4), requires the 

Administrator to notify the Secretary of 

the Department of Health and Human 

Services (HHS) of his intention to 

temporarily place a substance in 

schedule I of the CSA.2 The Acting 

Administrator transmitted notice of his 

intent to place N-ethylpentylone in 

schedule I on a temporary basis to the 

Acting Assistant Secretary for Health of 

HHS by letter dated November 22, 2017. 

The Acting Assistant Secretary 

responded to this notice of intent by 

letter dated December 13, 2017, and 

advised that based on a review by the 

Food and Drug Administration (FDA), 

there are currently no active 

investigational new drug applications or 

approved new drug applications for Nethylpentylone. The Acting Assistant 

Secretary also stated that the HHS has 

no objection to the temporary placement 

of N-ethylpentylone in schedule I of the 

CSA. N-Ethylpentylone is not currently 

listed in any schedule under the CSA, 

and no exemptions or approvals are in 

effect for this substance under section 

505 of the FDCA, 21 U.S.C. 355. 

To find that placing a substance 

temporarily in schedule I of the CSA is 

necessary to avoid an imminent hazard 

to the public safety, the Administrator is 

required to consider three of the eight 

factors set forth in 21 U.S.C. 811(c): The 

substance’s history and current pattern 

of abuse; the scope, duration and 

significance of abuse; and what, if any, 

risk there is to the public health. 21 

U.S.C. 811(h)(3). Consideration of these 

factors includes actual abuse, diversion 

from legitimate channels, and 

clandestine importation, manufacture, 

or distribution. 21 U.S.C. 811(h)(3). 

A substance meeting the statutory 

requirements for temporary scheduling 

may only be placed in schedule I. 21 

U.S.C. 811(h)(1). Substances in schedule 

I are those that have a high potential for 

abuse, no currently accepted medical 

use in treatment in the United States, 

and a lack of accepted safety for use 

under medical supervision. 21 U.S.C. 

812(b)(1). 

N-Ethylpentylone 

Around 2014, the synthetic cathinone, 

N-ethylpentylone, emerged in the 

United States’ illicit drug market after 

the scheduling of other popular 

synthetic cathinones (e.g., ethylone, 4- 

methyl-N-ethylcathinone (4–MEC), 

mephedrone, methylone, pentylone, and 

3,4-methylenedioxymethamphetamine 

(MDPV)). The identification of Nethylpentylone in forensic evidence and 

overdose deaths indicates that this 

substance is being misused and abused. 

Law enforcement encounters include 

those reported to the National Forensic 


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3NFLIS and STRIDE/STARLiMS databases were 

queried on February 8, 2018. 

4NFLIS and STRIDE/STARLiMS databases were 

queried on February 8, 2018. 

Laboratory Information System (NFLIS), 

a DEA sponsored program that 

systematically collects drug 

identification results and associated 

information from drug cases analyzed 

by Federal, State, and local forensic 

laboratories, the System to Retrieve 

Information from Drug Evidence 

(STRIDE), a federal database for the drug 

samples analyzed by DEA forensic 

laboratories, and STARLiMS (a webbased, commercial laboratory 

information management system that 

replaced STRIDE in 2014). Forensic 

laboratories have analyzed drug exhibits 

received from State, local, or Federal 

law enforcement agencies that were 

found to contain N-ethylpentylone.3

NFLIS registered over 6,000 reports 

from state and local forensic laboratories 

identifying this substance in drugrelated exhibits for a period from 

January 2013 to December 2017 from 41 

states. N-Ethylpentylone was first 

identified in NFLIS in May 2014. 

STRIDE/STARLiMS registered over 300 

reports from DEA forensic laboratories 

from January 2013 to December 2017. NEthylpentylone was first reported to 

STRIDE/STARLiMS in December 2015. 

Additionally, encounters of Nethylpentylone have occurred by the 

U.S. Customs and Border Protection 

(CBP). 

N-Ethylpentylone, like other synthetic 

cathinones, is a designer drug of the 

phenethylamine class and it is 

pharmacologically similar to schedule I 

synthetic cathinones (e.g., cathinone, 

methcathinone, mephedrone, 

methylone, pentylone, and MDPV) and 

well-known schedule I and II 

sympathomimetic agents (e.g., 

methamphetamine, 3,4- 

methylenedioxymethamphetamine 

(MDMA), and cocaine). Nethylpentylone, similar to these 

substances, causes stimulant related 

psychological and somatic effects. 

Consequently, there have been 

documented reports of emergency room 

admissions and numerous deaths 

associated with the abuse of Nethylpentylone. No approved medical 

use has been identified for this 

substance, nor has it been approved by 

the FDA for human consumption. 

Available data and information for Nethylpentylone, summarized below, 

indicate that this substance has a high 

potential for abuse, no currently 

accepted medical use in treatment in the 

United States, and a lack of accepted 

safety for use under medical 

supervision. The DEA’s three-factor 

analysis is available in its entirety under 

‘‘Supporting and Related Material’’ of 

the public docket for this action at 

www.regulations.gov under Docket 

Number DEA–482. 

Factor 4. History and Current Pattern of 

Abuse 

N-Ethylpentylone is a synthetic 

cathinone of the phenethylamine class 

and it is structurally and 

pharmacologically similar to cathinone, 

methcathinone, mephedrone, 

methylone, pentylone, MDPV, 

methamphetamine, MDMA, and other 

schedule I and II substances. Thus, it is 

highly likely that N-ethylpentylone is 

abused in the same manner and by the 

same users as these substances. That is, 

N-ethylpentylone, like these substances, 

is most likely ingested by swallowing 

capsules or tablets or snorted by nasal 

insufflation of the powder tablets. 

Products containing N-ethylpentylone, 

similar to schedule I synthetic 

cathinones, are likely to be falsely 

marketed as ‘‘research chemicals,’’ 

‘‘jewelry cleaner,’’ ‘‘stain remover,’’ 

‘‘plant food or fertilizer,’’ ‘‘insect 

repellants’’ or ‘‘bath salts,’’ sold at 

smoke shops, head shops, convenience 

stores, adult book stores, and gas 

stations, and purchased on the internet. 

Like those seen with commercial 

products that contain synthetic 

cathinones, the packages of products 

that contain N-ethylpentylone also 

probably contain the warning ‘‘not for 

human consumption,’’ most likely in an 

effort to circumvent statutory 

restrictions for these substances. 

Demographic data collected from 

published reports and mortality records 

suggest that the main users of Nethylpentylone, similar to schedule I 

synthetic cathinones and MDMA, are 

young adults. 

Available evidence suggests that the 

history and pattern of abuse of Nethylpentylone parallels that of MDMA, 

methamphetamine, or cocaine and that 

N-ethylpentylone has been marketed as 

a replacement for these substances. NEthylpentylone has been identified in 

law enforcement seizures that were 

initially suspected to be MDMA. In 

addition, there are reports that abusers 

of N-ethylpentylone thought they were 

using MDMA or another illicit 

substance but toxicological analysis 

revealed that the psychoactive 

substance was N-ethylpentylone. 

Toxicology reports also revealed that Nethylpentylone is being ingested with 

other substances including other 

synthetic cathinones, common cutting 

agents, or other recreational substances. 

Consequently, products containing 

synthetic cathinones, including Nethylpentylone, are distributed to users, 

often with unpredictable outcomes. 

Thus, the recreational abuse of synthetic 

cathinones, including N-ethylpentylone, 

is a significant concern. 

Factor 5. Scope, Duration and 

Significance of Abuse 

N-Ethylpentylone is a popular 

recreational drug that emerged on the 

United States’ illicit drug market after 

the scheduling of other popular 

synthetic cathinones (e.g., ethylone, 

mephedrone, methylone, pentylone, and 

MDPV) (see DEA 3-Factor Analysis for 

a full discussion). Forensic laboratories 

have confirmed the presence of Nethylpentylone in drug exhibits received 

from state, local, and federal law 

enforcement agencies. Law enforcement 

data show that N-ethylpentylone first 

appeared in the illicit drug market in 

2014 with one encounter and began 

increasing thereafter.4 In 2015, NFLIS 

registered five reports from three states 

regarding N-ethylpentylone. However, 

in 2016, there were 2,074 reports from 

39 states and, in 2017, there were 3,955 

reports from 39 states related to this 

substance registered in NFLIS. NEthylpentylone represented 60% of all 

synthetic cathinones encountered by 

local law enforcement agencies and 

reported to NFLIS in 2017. From 

January 2013 to December 2017, NFLIS 

registered 6,035 reports from state and 

local forensic laboratories identifying 

this substance in drug-related exhibits 

from 41 states. STRIDE/STARLiMS 

registered over 338 reports from DEA 

forensic laboratories during January 

2013 to December 2017. Additionally, 

seizures of N-ethylpentylone have 

occurred by the U.S. Customs and 

Border Protection (CBP) beginning in 

2016. Concerns over the continuing 

abuse of synthetic cathinones have led 

to the control of many synthetic 

cathinones. 

Factor 6. What, if Any, Risk There Is to 

the Public Health 

The identification of Nethylpentylone in toxicological samples 

associated with fatal and non-fatal 

overdoses have been reported in the 

medical and scientific literature, 

forensic laboratory reports, and public 

health documents. Like schedule I 

synthetic cathinones, N-ethylpentylone 

has caused acute health problems 

leading to emergency department (ED) 

admissions, violent behaviors causing 

harm to self or others, and/or death. 

Adverse health effects associated with 

the abuse of N-ethylpentylone include a 

number of stimulant-like adverse health 


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effects such as diaphoresis, insomnia, 

mydriasis, hyperthermia, vomiting, 

agitation, disorientation, paranoia, 

abdominal pain, cardiac arrest, 

respiratory failure, and coma. In 

addition, N-ethylpentylone has been 

involved in deaths of many individuals. 

The DEA is aware of approximately 151 

overdose deaths involving Nethylpentylone abuse reported in the 

United States between 2014 and 2018. 

Thus, the abuse of N-ethylpentylone, 

like that of the abuse of schedule I 

synthetic cathinones and stimulant 

drugs, poses significant adverse health 

risks. Furthermore, because abusers of 

synthetic cathinones obtain these 

substances through unregulated sources, 

the identity, purity, and quantity are 

uncertain and inconsistent. These 

unknown factors pose an additional risk 

for significant adverse health effects to 

the end user. 

Based on information received by the 

DEA, the misuse and abuse of Nethylpentylone has led to, at least, the 

same qualitative public health risks as 

schedule I synthetic cathinones, 

MDMA, and methamphetamine. The 

public health risks attendant to the 

abuse of synthetic cathinones, including 

N-ethylpentylone, are well established 

and have resulted in large numbers of 

ED visits and fatal overdoses. 

Finding of Necessity of Schedule I 

Placement To Avoid an Imminent 

Hazard to the Public Safety 

In accordance with 21 U.S.C. 

811(h)(3), based on the available data 

and information, summarized above, the 

uncontrolled manufacture, distribution, 

reverse distribution, importation, 

exportation, conduct of research and 

chemical analysis, possession, and/or 

abuse of N-ethylpentylone resulting 

from the lack of control of this 

substance poses an imminent hazard to 

the public safety. The DEA is not aware 

of any currently accepted medical uses 

for this substance in the United States. 

A substance meeting the statutory 

requirements for temporary scheduling, 

21 U.S.C. 811(h)(1), may only be placed 

in schedule I. Substances in schedule I 

are those that have a high potential for 

abuse, no currently accepted medical 

use in treatment in the United States, 

and a lack of accepted safety for use 

under medical supervision. Available 

data and information for Nethylpentylone indicate that this 

substance has a high potential for abuse, 

no currently accepted medical use in 

treatment in the United States, and a 

lack of accepted safety for use under 

medical supervision. As required by 

section 201(h)(4) of the CSA, 21 U.S.C. 

811(h)(4), the Administrator, through a 

letter dated November 22, 2017, notified 

the Acting Assistant Secretary of the 

DEA’s intention to temporarily place 

this substance in schedule I. 

Conclusion 

This notice of intent provides the 30- 

day notice pursuant to section 201(h) of 

the CSA, 21 U.S.C. 811(h), of DEA’s 

intent to issue a temporary scheduling 

order. In accordance with the provisions 

of section 201(h) of the CSA, 21 U.S.C. 

811(h), the Acting Administrator 

considered available data and 

information, herein set forth the 

grounds for his determination that it is 

necessary to temporarily schedule Nethylpentylone in schedule I of the CSA, 

and finds that placement of Nethylpentylone in schedule I of the CSA 

on a temporary basis is necessary in 

order to avoid an imminent hazard to 

the public safety. 

The temporary placement of Nethylpentylone in schedule I of the CSA 

will take effect pursuant to a temporary 

scheduling order, which will not be 

issued before July 13, 2018. Because the 

Acting Administrator hereby finds that 

it is necessary to temporarily place Nethylpentylone in schedule I to avoid an 

imminent hazard to the public safety, 

the temporary order scheduling this 

substance will be effective on the date 

that order is published in the Federal 

Register, and will be in effect for a 

period of two years, with a possible 

extension of one additional year, 

pending completion of the regular 

(permanent) scheduling process. 21 

U.S.C. 811(h)(1) and (2). It is the 

intention of the Acting Administrator to 

issue a temporary scheduling order as 

soon as possible after the expiration of 

30 days from the date of publication of 

this notice. Upon publication of the 

temporary order, N-ethylpentylone will 

be subject to the regulatory controls and 

administrative, civil, and criminal 

sanctions applicable to the manufacture, 

distribution, reverse distribution, 

importation, exportation, research, 

conduct of instructional activities and 

chemical analysis, and possession of a 

schedule I controlled substance. 

The CSA sets forth specific criteria for 

scheduling a drug or other substance. 

Regular scheduling actions in 

accordance with 21 U.S.C. 811(a) are 

subject to formal rulemaking procedures 

done ‘‘on the record after opportunity 

for a hearing’’ conducted pursuant to 

the provisions of 5 U.S.C. 556 and 557. 

21 U.S.C. 811. The regular scheduling 

process of formal rulemaking affords 

interested parties with appropriate 

process and the government with any 

additional relevant information needed 

to make a determination. Final 

decisions that conclude the regular 

scheduling process of formal 

rulemaking are subject to judicial 

review. 21 U.S.C. 877. Temporary 

scheduling orders are not subject to 

judicial review. 21 U.S.C. 811(h)(6). 

Regulatory Matters 

Section 201(h) of the CSA, 21 U.S.C. 

811(h), provides for a temporary 

scheduling action where such action is 

necessary to avoid an imminent hazard 

to the public safety. As provided in this 

subsection, the Attorney General may, 

by order, schedule a substance in 

schedule I on a temporary basis. Such 

an order may not be issued before the 

expiration of 30 days from (1) the 

publication of a notice in the Federal 

Register of the intention to issue such 

order and the grounds upon which such 

order is to be issued, and (2) the date 

that notice of the proposed temporary 

scheduling order is transmitted to the 

Assistant Secretary of HHS. 21 U.S.C. 

811(h)(1). 

Inasmuch as section 201(h) of the 

CSA directs that temporary scheduling 

actions be issued by order and sets forth 

the procedures by which such orders are 

to be issued, the DEA believes that the 

notice and comment requirements of 

section 553 of the Administrative 

Procedure Act (APA), 5 U.S.C. 553, do 

not apply to this notice of intent. In the 

alternative, even assuming that this 

notice of intent might be subject to 

section 553 of the APA, the 

Administrator finds that there is good 

cause to forgo the notice and comment 

requirements of section 553, as any 

further delays in the process for 

issuance of temporary scheduling orders 

would be impracticable and contrary to 

the public interest in view of the 

manifest urgency to avoid an imminent 

hazard to the public safety. 

Although the DEA believes this notice 

of intent to issue a temporary 

scheduling order is not subject to the 

notice and comment requirements of 

section 553 of the APA, the DEA notes 

that in accordance with 21 U.S.C. 

811(h)(4), the Acting Administrator took 

into consideration comments submitted 

by the Acting Assistant Secretary in 

response to notice that DEA transmitted 

to the Acting Assistant Secretary 

pursuant to section 811(h)(4). 

Further, the DEA believes that this 

temporary scheduling action is not a 

‘‘rule’’ as defined by 5 U.S.C. 601(2), 

and, accordingly, is not subject to the 

requirements of the Regulatory 

Flexibility Act (RFA). The requirements 

for the preparation of an initial 

regulatory flexibility analysis in 5 U.S.C. 

603(a) are not applicable where, as here, 

the DEA is not required by section 553 


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1Petition of the United States Postal Service for 

the Initiation of a Proceeding to Consider Proposed 

Changes in Analytical Principles (Proposal Three), 

June 1, 2018 (Petition). 

2 Docket No. ACR2017, Annual Compliance 

Report, December 29, 2017, at 4–6. 

3 Docket No. ACR2017, Annual Compliance 

Determination, March 29, 2018, at 8. 

of the APA or any other law to publish 

a general notice of proposed 

rulemaking. 

Additionally, this action is not a 

significant regulatory action as defined 

by Executive Order 12866 (Regulatory 

Planning and Review), section 3(f), and, 

accordingly, this action has not been 

reviewed by the Office of Management 

and Budget. 

This action will not have substantial 

direct effects on the States, on the 

relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. Therefore, in 

accordance with Executive Order 13132 

(Federalism) it is determined that this 

action does not have sufficient 

federalism implications to warrant the 

preparation of a Federalism Assessment. 

List of Subjects in 21 CFR Part 1308 

Administrative practice and 

procedure, Drug traffic control, 

Reporting and recordkeeping 

requirements. 

For the reasons set out above, the DEA 

proposes to amend 21 CFR part 1308 as 

follows: 

PART 1308—SCHEDULES OF 

CONTROLLED SUBSTANCES 

■ 1. The authority citation for part 1308 

continues to read as follows: 

Authority: 21 U.S.C. 811, 812, 871(b), 

956(b), unless otherwise noted. 

■ 2. In § 1308.11, add paragraph (h)(36) 

to read as follows: 

§ 1308.11 Schedule I. 

* * * * * 

(h) * * * 

(36) N-Ethylpentylone, its optical, 

positional, and geometric isomers, salts and salts of isomers 

(Other names: ephylone, N-1- 

(1,3-benzodioxol-5-yl)-2- 

(ethylamino)-1-pentanone) .......... (7543) 

* * * * * 

Dated: June 6, 2018. 

Robert W. Patterson, 

Acting Administrator. 

[FR Doc. 2018–12669 Filed 6–12–18; 8:45 am] 

BILLING CODE 4410–09–P 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3050 

[Docket No. RM2018–6; Order No. 4635] 

Periodic Reporting 

AGENCY: Postal Regulatory Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commission is noticing a 

recent filing requesting that the 

Commission initiate an informal 

rulemaking proceeding to consider 

changes to an analytical method for use 

in periodic reporting (Proposal Three). 

This document informs the public of the 

filing, invites public comment, and 

takes other administrative steps. 

DATES: Comments are due: June 29, 

2018. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http://

www.prc.gov. Those who cannot submit 

comments electronically should contact 

the person identified in the FOR FURTHER

INFORMATION CONTACT section by 

telephone for advice on filing 

alternatives. 

FOR FURTHER INFORMATION CONTACT: 

David A. Trissell, General Counsel, at 

202–789–6820. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Proposal Three 

III. Notice and Comment 

IV. Ordering Paragraphs 

I. Introduction 

On June 1, 2018, the Postal Service 

filed a petition pursuant to 39 CFR 

3050.11, requesting that the 

Commission initiate a rulemaking 

proceeding to consider changes to 

analytical principles relating to periodic 

reports.1 The Petition identifies the 

proposed analytical changes filed in this 

docket as Proposal Three. 

II. Proposal Three 

Background. The Commission 

adopted the use of incremental costs as 

the basis for class-level and productlevel attributable costs in September of 

2016.2 In FY 2017, the methodology was 

fully applied for the first time.3 Proposal 

Three seeks to revise two incremental 

costing procedures in accordance with 

this methodological change. 

The first proposed revision concerns 

the Postal Service’s method for 

calculating incremental costs for 

competitive products collectively. 

Under current analytical principles, the 

Postal Service calculates these costs 

using a so-called ‘‘hybrid’’ approach. 

The Postal Service first calculates the 

incremental costs of competitive 

domestic products (including group 

specific costs for these products) and 

then adds it to the volume variable and 

product specific costs of competitive 

international products. This ‘‘hybrid’’ 

approach blends an estimate of 

competitive domestic incremental costs 

with a proxy estimate of competitive 

international incremental costs. 

The second proposed revision relates 

to estimating inframarginal costs for 

products with insufficient data at the 

cost pool level. The Postal Service states 

that this revision primarily concerns 

negotiated service agreements (NSAs), 

because NSAs are classified as 

independent products, which can have 

low volumes. Petition, Proposal Three at 

1. Furthermore, the Postal Service 

contends that NSAs create practical 

issues in calculating incremental costs, 

in part because the Postal Service’s data 

systems do not distinguish between 

NSA and non-NSA mailpieces. Id. at 13. 

This prevents the Postal Service from 

creating the standard cost drivers for 

NSAs (e.g. volume, weight, cubic 

volume), which are necessary for 

calculating incremental costs. Id. 

Proposal. As discussed above, the 

Postal Service proposes two procedures 

to revise its calculation of incremental 

costs. 

Under procedure one, the Postal 

Service seeks to replace the ‘‘hybrid’’ 

approach to calculating aggregate 

incremental costs, which relies on a 

proxy for international costs, with a 

direct estimation of those costs. Id. at 4. 

Due to improvements suggested in the 

FY 2016 Annual Compliance 

Determination, in conjunction with 

corresponding analytical improvements, 

the Postal Service states that it can now 

directly estimate the actual incremental 

costs of international mail. Id. at 6. 

Under procedure two, the Postal 

Service proposes thresholds for 

calculating inframarginal costs and an 

alternative methodology for 

approximating the appropriate cost 

driver ratios for NSAs. Id. at 8. 

Specifically, the Postal Service suggests 

that it should not have to calculate the 

incremental costs if an NSA has less 

than 0.3 percent of the product type’s 

(e.g. Priority Mail, Parcel Select) volume 

variable cost or less than $8 million in 

volume variable cost. Id. at 11. The 

Postal Service also seeks to use the ratio 

of NSA volume variable costs to product 

type volume variable costs as a proxy 

cost driver to calculate the incremental 

cost of NSA products. Id. at 12–20. 

Rationale and impact. The Postal 

Service contends that procedure one 

will allow it ‘‘to rely upon the best 

available information’’ because the 


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