[Federal Register Volume 83, Number 138 (Wednesday, July 18, 2018)]
[Notices]
[Pages 33965-33966]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15284]



[[Page 33965]]

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POSTAL REGULATORY COMMISSION

[Docket Nos. PI2018-1; Order No. 4708]


Classification of the Inbound Letter Post Product

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: The Commission is establishing a public inquiry regarding 
Postal Service's claim that the Inbound Letter Post product is subject 
to competition. This notice informs the public of this proceeding, 
invites public comment, and takes other administrative steps.

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:

I. Introduction
II. Background
III. Claims of Competition and Commission Action
IV. Ordering Paragraphs

I. Introduction

    In recent proceedings, the Postal Service claimed that the Inbound 
Letter Post product \1\ is subject to competition. The Commission 
establishes this docket to examine these and related claims.
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    \1\ As defined in section 1130 of the Mail Classification 
Schedule (MCS).
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II. Background

A. The Universal Postal Union

    The Universal Postal Union (UPU) is a United Nations specialized 
agency comprising 192 member countries, including the United States.\2\ 
Member countries negotiate international agreements governing the 
exchange of international mail, including applicable rates for the 
delivery of international mail. The UPU identifies three types of 
international mail: Letter Post, Parcel Post, and Express Mail Service 
(EMS).\3\
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    \2\ The full list of UPU member countries is available at http://www.upu.int/en/the-upu/member-countries.html.
    \3\ EMS mail is an express service for documents and 
merchandise, which member countries have the option of providing. 
MCS Section 2515.6.1. EMS prices are set through bilateral or 
multilateral negotiations. Id. Sections 2515.6.4., 2515.6.6.
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    UPU Letter Post mailpieces consist of letters, postcards, printed 
papers, and small packets weighing up to 2 kilograms.\4\ The UPU 
divides UPU Letter Post mail into three shapes: Letters and cards 
(format P); large letters or ``flats'' (format G); and bulky letters 
and small packets (format E). In January 2018, the Universal Postal 
Convention (UPU Convention) began differentiating UPU Letter Post mail 
by content in addition to shape.\5\ The UPU Convention limits the 
contents of cards, letters, flats, and bulky letters to documents. UPU 
Convention, Article 17.2. Small packets are UPU Letter Post mailpieces 
containing goods. Id. Article 17.3.
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    \4\ UPU Convention, Article 17. UPU Letter Post mail also 
consists of literature for the blind weighing up to 7 kilograms and 
M-bags weighing up to 30 kilograms. Id. M-bags are special bags 
containing newspapers, periodicals, books, and similar matter mailed 
to a single address. Id.
    \5\ See International Mailing Services: Proposed Product and 
Price Change--CPI, 82 FR 49160, 49161 (October 24, 2017); Docket No. 
R2018-1, Notice of Market Dominant Price Adjustment, October 6, 
2017, at 10.
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B. Statutory Framework

    In 2006, the Postal Accountability and Enhancement Act (PAEA) \6\ 
was enacted. The PAEA separated postal products into two distinct 
classifications: Market dominant and competitive.\7\ Pursuant to 39 
U.S.C. 3642(b), market dominant products are those products over which 
``the Postal Service exercises sufficient market power that it can 
effectively set the price of such product[s] substantially above costs, 
raise prices significantly, decrease quality, or decrease output, 
without risk of losing a significant level of business to other firms 
offering similar products.'' \8\ Competitive products ``consist of all 
other products.'' \9\
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    \6\ Public Law 109-435, 120 Stat. 3198 (2006).
    \7\ 39 U.S.C. 3621, 3631, 3642. The PAEA exempted experimental 
products from the requirement that they be classified as market 
dominant or competitive products. 39 U.S.C. 3641(a)(2).
    \8\ 39 U.S.C. 3642(b)(1). Examples of market dominant products 
include products in the First-Class Mail, USPS Marketing Mail, and 
Periodicals classes.
    \9\ Id. Examples of competitive products include Priority Mail, 
Priority Mail Express, and First-Class Package Service.
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    Section 3642 of title 39 governs the addition of products to, 
removal of products from, or transfer of products (or components of a 
product) between the market dominant and competitive product lists.\10\ 
The Commission may consider a change to a product's market dominant or 
competitive classification upon request of the Postal Service, users of 
the mail, or upon its own initiative. 39 U.S.C. 3642(a). The criteria 
for assigning a product to either the market dominant or competitive 
product list is described in 39 U.S.C. 3642(b). When transferring 
products between product lists, there is nothing to prevent transfer of 
only part of a product. 39 U.S.C. 3642(c).
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    \10\ 39 U.S.C. 3642. The implementing regulations for this 
section appear in 39 CFR part 3020.
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    The criteria for assigning a product to either the market dominant 
or competitive product list are based on a measure of the Postal 
Service's market power; whether or not the product is covered by the 
postal monopoly; and the concerns of the private sector, users of the 
product, and small businesses. 39 U.S.C. 3642(b).
    The market power criteria are specified in 39 U.S.C. 3642(b)(1) as 
follows:
    [The text of 39 U.S.C. 3642(b)(1) was removed to comply with the 
Federal Register Document Drafting Handbook, section 2.6. See 39 U.S.C. 
3642(b)(1).].
    The postal monopoly criteria are specified in 39 U.S.C. 3642(b)(2) 
as follows:
    [The text of 39 U.S.C. 3642(b)(2) was removed to comply with the 
Federal Register Document Drafting Handbook, section 2.6. See 39 U.S.C. 
3642(b)(2).].
    The private sector, users of the product, and small businesses 
criteria are specified in 39 U.S.C. 3642(b)(3) as follows:
    [The text of 39 U.S.C. 3642(b)(3) was removed to comply with the 
Federal Register Document Drafting Handbook, section 2.6. See 39 U.S.C. 
3642(b)(3).].
    When including products on the competitive product list, the 
product must also meet the financial requirements of 39 U.S.C. 3633(a), 
which:
    [The text of 39 U.S.C. 3633(a) was removed to comply with the 
Federal Register Document Drafting Handbook, section 2.6. See 39 U.S.C. 
3633(a).].

C. Classification of Inbound Letter Post

    Sections 3621 and 3631 of title 39 listed the products 
preliminarily classified as market dominant and competitive, 
respectively. The PAEA preliminarily classified single-piece 
international mail as market dominant and bulk international mail as 
competitive. 39 U.S.C. 3621(a)(10) and 3631(a)(4). When the Commission 
requested comments related to the classification of inbound 
international mail in its initial rulemaking pursuant to the 
requirements of PAEA, the Postal Service argued that the Commission 
should not classify inbound

[[Page 33966]]

international mail as market dominant or competitive.\11\
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    \11\ Docket No. RM2007-1, Initial Comments of the United States 
Postal Service in Response to Order No. 26, September 24, 2007, at 
13-22.
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    The Commission found the Postal Service's arguments for exceptional 
treatment of inbound international mail as neither market dominant nor 
competitive unpersuasive and inconsistent with section 3642.\12\ The 
Commission concluded, ``[h]ad Congress intended to exempt inbound 
international mail from the requirement that all products be 
categorized as either market dominant or competitive, it would have 
done so explicitly, as it did by specifically exempting experimental 
products from the requirements of section 3642.'' Order No. 43 at 78 
(footnote omitted). The Commission found that the PAEA unambiguously 
requires the Commission to classify inbound international mail products 
as either market dominant or competitive. Id. Consistent with section 
3621, the Commission classified Inbound Letter Post as a market 
dominant product. Id. at 85.
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    \12\ Docket No. RM2007-1, Order Establishing Ratemaking 
Regulations for Market Dominant and Competitive Products, October 
29, 2007, at 78 (Order No. 43).
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III. Claims of Competition and Commission Action

    In Docket Nos. R2018-1 and Docket ACR2017, the Postal Service 
repeatedly claimed that Inbound Letter Post is subject to 
``considerable,'' ``substantial,'' and ``intense'' competition, 
especially Inbound Letter Post small packets.\13\ However, the Postal 
Service filed documents in support of its claims of competition for the 
first time when it filed its Motion for Reconsideration. Motion for 
Reconsideration, Attachments 1-4. Despite these claims of competition, 
the Postal Service acknowledged that the Inbound Letter Post product is 
on the market dominant product list and that it has not requested to 
transfer all or part of the Inbound Letter Post product to the 
competitive product list. Motion for Reconsideration at 6.
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    \13\ See Docket No. ACR2017, United States Postal Service Motion 
for Reconsideration of Order No. 4451, April 6, 2018, at 4 (Motion 
for Reconsideration) (``Inbound Letter Post is subject to 
substantial competition.''); id. at 8-9 (cited filings in other 
Commission proceedings that allege the private sector competes in 
the Inbound Letter Post market); id.at 10 (``the vast majority of 
Inbound Letter Post mail faces substantial competition''); id. at 
12-13 (``existing market research regarding inbound package volume, 
which is included in Nonpublic Attachment 1, illustrates the intense 
competition for Inbound Letter Post faced by the Postal Service and 
foreign postal operators.'' (footnote omitted)); Docket No. ACR2017, 
Response of the United States Postal Service to Order No. 4409, 
February 23, 2018, at 5 (small packets ``already face considerable 
competition today.'' (footnote omitted)); id. at 6 (``the Postal 
Service operates in a competitive market for inbound international 
shipping, which includes inbound small packets containing 
merchandise.'' (footnote omitted)); id. at 6 n.13 (``Not only are 
Inbound Letter Post packets subject to considerable competition, but 
bulk international letter and flat mail can be subject to 
competition as well.''); Docket No. ACR2017, United States Postal 
Service Notice of Filing Nonpublic Folder USPS-FY17-NP40 and 
Application for Nonpublic Treatment, February 14, 2018, Attachment 
at 2 (CHIR No. 15 Application for Non-Public Treatment) (``Not only 
are Inbound Letter Post packets (E Format) subject to considerable 
competition, but bulk international letter and flat mail (P and G 
Format) can be subject to competition as well.''); id. at 3 (``The 
Postal Service is just one of the participants operating in the 
competitive market for inbound international shipping, which 
includes inbound small packets containing merchandise.''); Docket 
No. R2018-1, United States Postal Service Answer in Opposition to 
U.S. Chamber of Commerce Motion to Unseal Library Reference and 
Motion to Request Issuance of Information Request, October 23, 2017, 
at 4 (`` `inbound letter post . . . face[s] significant competition 
from private sector competitors and Extraterritorial Offices of 
Exchange[.]' The competitive nature of the international market, 
particularly with respect to . . . inbound letter post packets 
weighing 4.4 pounds or less, is well established.'' (footnote 
omitted)).
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    In its Motion for Reconsideration, the Postal Service stated that 
it explored the potential transfer of Inbound Letter Post small packets 
from the market dominant to the competitive products list. Id. However, 
the Postal Service stated that one obstacle to transferring all or part 
of the Inbound Letter Post product from the market dominant product 
list to the competitive product list relates to the ``inability to 
separate Inbound Letter Post that is subject to the Private Express 
Statutes [(PES)] from Inbound Letter Post that is not subject to the 
PES.'' Id.
    These claims raised the question of whether Inbound Letter Post 
should be wholly or partially transferred from the market dominant 
product list to the competitive product list. Rather than attempt to 
address these issues in Docket No. ACR2017, the Commission concluded 
that the best course of action is to initiate a separate proceeding to 
evaluate these issues, including the non-public attachments the Postal 
Service provided with its Motion for Reconsideration.
    Accordingly, the Commission establishes the instant proceeding to 
examine the classification of the Inbound Letter Post product. The 
Commission is issuing a Commission Information Request (CIR) 
concurrently with this Order. Once a sufficient record has been 
developed, the Commission will issue a procedural schedule inviting 
comment.
    Pursuant to 39 U.S.C. 505, James Waclawski is designated as an 
officer of the Commission (Public Representative) to represent the 
interests of the general public in this proceeding.
    Additional information may be accessed via the Commission's website 
at http://www.prc.gov.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission hereby establishes Docket No. PI2018-1 to review 
issues related to the classification of the Inbound Letter Post product 
and parts thereof.
    2. Pursuant to 39 U.S.C. 505, James Waclawski is designated as an 
officer of the Commission (Public Representative) to represent the 
interests of the general public in this proceeding.
    3. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2018-15284 Filed 7-17-18; 8:45 am]
 BILLING CODE 7710-FW-P