58682 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules

PART 39—AIRWORTHINESS

DIRECTIVES

1. The authority citation for part 39

continues to read as follows:

Authority: 49 U.S.C. 106(g), 40113, 44701.

§ 39.13 [Amended]

2. Section 39.13 is amended by

adding a new airworthiness directive to

read as follows:

Bell Helicopter Textron, Inc.: Docket No.

2000–SW–16–AD.

Applicability: Model 204B helicopters with

main rotor mast assembly, part number (P/N)

204–011–450–001, installed, certificated in

any category.

Note 1: This AD applies to each helicopter

identified in the preceding applicability

provision, regardless of whether it has been

otherwise modified, altered, or repaired in

the area subject to the requirements of this

AD. For helicopters that have been modified,

altered, or repaired so that the performance

of the requirements of this AD is affected, the

owner/operator must request approval for an

alternative method of compliance in

accordance with paragraph (b) of this AD.

The request should include an assessment of

the effect of the modification, alteration, or

repair on the unsafe condition addressed by

this AD; and if the unsafe condition has not

been eliminated, the request should include

specific proposed actions to address it.

Compliance: Required within 25 hours

time-in-service, unless accomplished

previously.

To prevent failure of the main rotor mast

assembly (mast) and subsequent loss of

control of the helicopter, accomplish the

following:

(a) Remove any mast, P/N 204–011–450–

001, from service and replace it with an

airworthy mast. Accomplishing the

requirement of this paragraph constitutes

terminating action for the requirements of

this AD. P/N 204–011–450–001 is not eligible

for installation on any helicopter.

(b) An alternative method of compliance or

adjustment of the compliance time that

provides an acceptable level of safety may be

used if approved by the Manager, Rotorcraft

Certification Office, Rotorcraft Directorate,

FAA. Operators shall submit their requests

through an FAA Principal Maintenance

Inspector, who may concur or comment and

then send it to the Manager, Rotorcraft

Certification Office.

Note 2: Information concerning the

existence of approved alternative methods of

compliance with this AD, if any, may be

obtained from the Rotorcraft Certification

Office.

(c) Special flight permits may be issued in

accordance with sections 21.197 and 21.199

of the Federal Aviation Regulations (14 CFR

21.197 and 21.199) to operate the helicopter

to a location where the requirements of this

AD can be accomplished.

Issued in Fort Worth, Texas, on September

25, 2000.

Eric Bries,

Acting Manager, Rotorcraft Directorate,

Aircraft Certification Service.

[FR Doc. 00–25154 Filed 9–29–00; 8:45 am]

BILLING CODE 4910–13–P

POSTAL SERVICE

39 CFR Parts 111 and 502

Production, Distribution, and Use of

Postal Security Devices and

Information-Based Indicia

AGENCY: Postal Service.

ACTION: Proposed rule.

SUMMARY: The Postal Service is

proposing to add new sections to the

Domestic Mail Manual (DMM) and to

title 39, Code of Federal Regulations

(CFR), to reflect policies and regulations

pertaining to all postage evidencing

systems that generate information-based

indicia (IBI). We originally published

policies and regulations for public

review and comment in the March 28,

1997, Federal Register (62 FR 14833). In

the September 2, 1998, Federal Register

(63 FR 46719) we published a revision

of those proposed policies and

regulations which included changes

made in response to the comments

received from the public.

This publication of proposed policies

and regulations includes extensive

changes. We based the changes since the

1998 publication on public comments

and on the experience we gained by

testing and implementing the first

postage evidencing systems to generate

information-based indicia (IBI). One

significant proposed change is the

establishment by the Postal Service of

the Electronic Funds Resetting System

(EFRS) to process resetting data for

these systems. We will continue to

process data for traditional postage

meters under the Computerized Meter

Resetting System (CMRS). Other

proposed changes include modifying

the forms of payment the Postal Service

will accept, and changing the policy for

refunds for unused IBI postage and for

the balance remaining on a postal

security device (PSD) that is withdrawn

from service.

We are reissuing the policies and

regulations in this proposal for public

comment because we made extensive

changes. We will revise the proposed

IBI policies and regulations, if required,

and publish them as a final rule after we

review the comments.

DATES: Comments must be received on

or before December 1, 2000.

ADDRESSES: Written comments should

be mailed or delivered to the Manager,

Postage Technology Management, USPS

Headquarters, 475 L’Enfant Plaza SW,

Room 8430, Washington, DC 20260–

2444. Copies of all written comments

will be available at this address for

inspection and photocopying between 9

a.m. and 4 p.m., Monday through

Friday.

FOR FURTHER INFORMATION CONTACT:

Nicholas S. Stankosky, 202–268–5311.

SUPPLEMENTARY INFORMATION: Postage

evidencing systems covered by these

regulations include all those systems

that generate information-based indicia

(IBI) and use a postal security device

(PSD). The characteristics of these

systems enable the Postal Service to

scan indicia to detect fraud. Core

security functions, such as digital

signature generation, digital signature

verification, and the management of

postage registers are performed by the

PSD. The IBI contains a twodimensional barcode that incorporates a

cryptographic digital signature. The

component of these postage evidencing

systems that controls the registered user

infrastructure for system authorization,

system audits, remote postage resetting,

and production of the indicia is called

the client system.

Authorized postage evidencing

systems are available from authorized,

commercial product service providers.

The provider’s infrastructure supports

user registration (formerly ‘‘licensing’’),

PSD management and life cycle support,

and an interface between the client

system and the Postal Service

infrastructure. The Postal Service

infrastructure supports the issuance of

user registrations, updating user

registration information, PSD inventory

and tracking, resetting, account

reconciliation, lost and stolen/

irregularity monitoring, and the

assignment of digital certificates.

The Following is a Summary of the

Postal Service’s Position on Some

General Interest Policy Issues for

Postage Evidencing Systems That

Generate IBI

1. Any proposed postage evidencing

system that generates IBI must be

submitted to the Postal Service for

approval under the then current version

of the postage evidencing product

submission procedures. These

procedures include specifics on letters

of intent, nondisclosure agreements, the

product service provider’s concept of

operations and infrastructure,

documentation requirements, product

submissions, and testing activities.

Information pertaining to these

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules 58683

procedures may be accessed through the

USPS Web site.

2. The user must register with the

Postal Service before using a postage

evidencing system that generates IBI.

3. PSDs remain the property of the

USPS-authorized product service

provider and are available only through

a lease agreement with the provider.

The software component of these

postage evidencing systems is licensed

to the registered user by the provider.

4. Until the Postal Service has

recorded sufficient data on reliability

and security, the total amount of postage

in a descending register, which shows

the amount of postage available, will be

limited to an amount established by the

Postal Service.

5. Authorized providers must keep

records of the distribution,

maintenance, replacement, and disposal

of all PSDs throughout the complete life

cycle of the PSD. All PSDs must be

tracked, including newly produced

PSDs; active leased PSDs; and inactive

unleased PSDs; and lost, stolen, and

scrapped PSDs.

6. Indicia produced by these postage

evidencing systems may be used to

indicate postage for single-piece rate

First-Class Mail (including Priority

Mail), single-piece rate International

Mail, Standard Mail (B); and Express

Mail, Express Mail International

Service, Global Priority Mail, and

Priority Mail Global Guaranteed. Mail

bearing the indicia is entitled to all

privileges and subject to all conditions

applying to these classes of mail.

7. Providers are responsible for audit

functions. The Postal Service will not

take over this function, but may at times

participate in or review the audit

process. PSDs must be audited at least

once every 3 months.

8. To ensure the quality and

readability of the indicia, providers

must perform an analysis of the

mailpieces that registered users submit

every 6 months for the provider’s

mailpiece quality assurance program.

The provider must notify the registered

user and the Postal Service of any

deficiencies and provide guidance to the

user to correct any deficiencies that are

discovered.

9. All postage downloads or settings

will be made under the provisions of the

Electronic Funds Resetting System

(EFRS). The Postal Service will conduct

periodic audits of the provider’s

resetting system to ensure that the

system is operating correctly and that

postal revenues are protected.

10. The Postal Service may physically

inspect a PSD if it has a reason to

suspect a security problem.

11. The Postal Service will provide

refunds through the product service

providers, in accordance with Postal

Service procedures, for printed but

unused postage and for the full postage

value balance remaining on a PSD that

is withdrawn from service.

12. The provider must supply

registered users with modifications

reflecting rate changes and must

implement new rates as of the effective

date for the new rates established by the

Postal Service.

13. There are provisions in the

regulations for the correction of postage

and dates. For date correction, the

facing identification mark (FIM) and

two-dimensional barcode will be

suppressed; for postage correction, the

FIM will be suppressed.

14. The provider will make the

registered user aware of the applicable

Postal Service regulations pertaining to

use of the information-based indicia and

of the postage evidencing system that

generates them through cautionary

statements in the system software,

system documentation, and product

labeling, as appropriate.

List of Subjects in 39 CFR Part 111

Administrative practice and

procedure, Postal Service.

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 public comments

on the following proposed amendments

to the Domestic Mail Manual,

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. Add the following sections to the

Domestic Mail Manual as set forth

below:

P050 Information-Based Indicia (IBI)

1.0 BASIC INFORMATION

1.1 Description of Postage Evidencing

Systems that Generate InformationBased Indicia (IBI)

Postage evidencing systems that

generate information-based indicia (IBI)

are secure systems that print USPSauthorized, digitally signed indicia to

show payment of postage. These

systems include as a primary

component a postal security device

(PSD) that performs core security

functions such as digital signature

generation and verification, as well as

the management of postage registers.

The component of these postage

evidencing systems that controls the

registered user infrastructure for system

authorization, system audits, remote

postage resetting, and production of the

indicia is called the client system. The

PSD and the client system interact to

generate the indicia. Indicia consist of a

USPS-approved two-dimensional

barcode and certain human-readable

information. Authorized postage

evidencing systems are available from

authorized, commercial product service

providers. Avoiding the payment of

postage by misusing a postage

evidencing system is punishable by law.

1.2 Product Service Provider

Responsibilities

Postal security devices (PSDs) remain

the property of the USPS-authorized

product service provider and are

available only through a lease agreement

with the provider. The software

component of these postage evidencing

systems is licensed to the registered user

by the provider. The Postal Service

holds providers responsible for the

control, operation, distribution,

maintenance, and replacement of the

PSD throughout the entire life cycle of

the PSD. The provider is also

responsible for the secure disposal or

destruction of the PSD at the end of its

useful life.

1.3 Product Service Providers

Postage evidencing systems that

generate IBI are available from

authorized providers. The following

providers have been approved as of

September 2000:

E-Stamp Corporation, 2051 Stierlin Court,

Mountain View, CA 94043–4655,

www.estamp.com

Neopost Online, 3400 Bridge Parkway, Suite

201, Redwood City, CA 94065–1168,

www.neopostonline.com

Pitney Bowes, Inc., 40 Lindeman Drive,

Trumbull, CT 06611–4785,

www.pitneybowes.com/soho/

Stamps.com, 3420 Ocean Park Boulevard,

Suite 1040, Santa Monica, CA 90405–3035,

www.stamps.com

1.4 Possession

No one other than an authorized

product service provider may possess or

use a PSD without a valid USPS-issued

postage evidencing system user

registration and a valid lease agreement

with the provider. Any person in

possession of a PSD without meeting

these conditions must immediately

surrender it to the provider or to the

USPS.

58684 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules

1.5 Classes of Mail

Information-based indicia (IBI)

produced by an authorized postage

evidencing system may be used to

indicate postage for single-piece rate

First-Class Mail (including Priority

Mail), single-piece rate International

Mail, and single-piece rate Standard

Mail (B); also Express Mail, Express

Mail Military Service, Express Mail

International Service, Global Priority

Mail, and Priority Mail Global

Guaranteed. The indicia can be used to

pay for special services. Mail prepared

using such a system is entitled to all

privileges and subject to all conditions

that apply to the various mail classes

and services.

1.6 Amount of Postage

The value of the indicia affixed to

each mailpiece must equal or exceed the

exact amount due for the piece when

mailed. Refunds for overpayment must

meet the standards in P014.

1.7 Reply Postage

A postage evidencing system that

generates IBI may be used to prepare

prepaid reply postage for the following

domestic mail classes: All single-piece

rate First-Class Mail (including Priority

Mail), Standard Mail (B), and Express

Mail. The prepaid reply mail must meet

the following conditions:

a. The postage amount in the

indicium must be enough to prepay the

postage in full.

b. Indicium showing postage

evidencing may be printed directly on

the mailpiece or on a label and must be

applied to a mailpiece in accordance

with the directions in 4.4. An applied

label must adhere well enough that it

cannot be removed in one piece.

c. The mailpiece must be preaddressed for return to the registered

user.

d. If the postage evidencing system

used to prepare the return postage

indicium has the capability to print

destination addresses for the given size

and class of mailpiece, the address for

returning the mailpiece to the registered

user must be prepared using that

system.

e. For those postage evidencing

systems without the capability to print

an address for the given class or size of

mailpiece, the address side of reply mail

may be prepared by any photographic,

mechanical, or electronic process or

combination of such processes (other

than handwriting, typewriting, or hand

stamping).

f. The address side of the mailpiece

must follow the style and content of the

example below. Nothing may be added

except a return address and facing

identification mark (FIM).

g. If the reply mailpiece is letter-sized

First-Class Mail, a FIM D is required

when the indicium for reply postage is

printed directly on the mailpiece.

h. Prepaid reply mail is delivered

only to the address of the registered

user. If the address is altered, the mail

is held for postage.

i. IBI used to prepay reply postage

must show the date the indicium was

printed by the registered user, and must

include the words ‘‘REPLY POSTAGE’’.

2.0 USER REGISTRATION

2.1 Procedures

The user must register with the Postal

Service before using a postage

evidencing system that generates IBI. An

applicant must apply for a user

registration through the provider and

submit to the provider all data required

for a registration to lease and use

postage evidencing systems. The

application must show the post office

where the applicant intends to deposit

the mail. This is called the registration

post office. An application for a user

registration is processed through the

Centralized Registration System (CRS),

formerly the Centralized Meter

Licensing System. The provider

electronically transmits the required

information to CRS in the USPSspecified format. There is no fee for the

application or user registration. After

approving an application, the Postal

Service issues a postage evidencing

system user registration, and notifies the

appropriate provider. A single user

registration covers all postage

evidencing systems for the same

applicant for the same post office, but a

separate application must be submitted

for each post office where the applicant

intends to deposit mail. A single PSD

can be registered to only one post office

at any one time; it must be reauthorized

by the provider for use at a different

post office.

2.2 Registered User’s Agreement

By submitting an application for a

user registration, the applicant agrees

that the registration may be revoked

immediately and that the postage

evidencing system may be withdrawn

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules 58685

from service by the provider or the

USPS for the following reasons:

a. The postage evidencing system is

used in any fraudulent or unlawful

scheme or enterprise.

b. The postage evidencing system is

not used for 12 consecutive months.

c. The registered user fails to exercise

sufficient control of the postage

evidencing system or fails to comply

with the standards for system care or

use.

d. The postage evidencing system is

used outside the United States, its

territories or its possessions, except as

specifically authorized by these

regulations or by the manager of Postage

Technology Management, USPS

Headquarters.

e. IBI mail is deposited at other than

the registration post office (except as

permitted under 5.0 or D072).

f. The registered user fails to forward

mailpieces to the provider for quality

assurance as required in 2.6.h.

2.3 Refusal to Register a User

The Postal Service notifies both the

applicant and the provider when an

application for user registration is

refused. The notification is in writing

and is sent certified mail, return receipt

requested. Any applicant refused a user

registration may appeal the decision

under 2.5. The Postal Service may

refuse to register a user for the following

reasons:

a. The applicant submitted false

information on the user registration

application.

b. The applicant violated any

standard for the care or use of a PSD,

postage evidencing system, informationbased indicia, or postage meter that

resulted in the revocation of that

applicant’s user registration or postage

meter license within 5 years preceding

submission of the application.

c. There is sufficient reason to believe

that the postage evidencing system is to

be used in violation of Postal Service

regulations.

2.4 Revocation of a User Registration

The Postal Service notifies the

registered user of any revocation. The

Postal Service also notifies the

registered user’s provider of the

revocation so that the provider can

cancel the lease agreement and

withdraw the postage evidencing system

from service. The notification is in

writing and is sent certified mail, return

receipt requested. Revocation takes

effect 10 calendar days after the

registered user receives or refuses to

receive the revocation notice unless,

within that time, the registered user

appeals the decision under 2.5. A user

registration is subject to revocation for

any of the following reasons:

a. The postage evidencing system is

used for any illegal scheme or enterprise

or there is probable cause to believe that

the system is to be used in violation of

the applicable standards.

b. The user registration does not have

a postage evidencing system applied

against it or the registered user’s postage

evidencing system has not been reset

within the last 12 months.

c. Sufficient control of the postage

evidencing system is not exercised or

the standards for its care or use are not

followed.

d. The postage evidencing system is

kept or used outside the customs

territory of the United States or those

U.S. territories and possessions where

the Postal Service operates, except as

specified in 2.11 or 2.12.

e. IBI mail is deposited at other than

the registration post office (except as

permitted under 5.0 or D072).

f. The registered user fails to forward

mailpieces to the provider for quality

assurance as required in 2.6.h.

2.5 Appeal Process

An applicant who is refused a user

registration, or a registered user whose

registration is revoked, may file a

written appeal with the manager of

Postage Technology Management, USPS

Headquarters, within 10 calendar days

after receiving or refusing to receive

notification of the decision.

2.6 Registered User’s Responsibilities

The registered user’s responsibilities

for the care and use of a postage

evidencing system that generates IBI

include the following:

a. A PSD that is delivered to a

registered user must remain in the

registered user’s custody until it is

returned to the authorized provider, or

to the Postal Service, or is removed by

the U.S. Postal Inspection Service.

b. Some postage evidencing systems

maintain a log file that automatically

records all transactions relating to

indicia creation, funds transfer

(including postage value download),

and postal security device audits which

is transmitted automatically to the

provider by the system with each

connection. The registered user may not

manipulate these log files to reflect an

inaccurate record of transactions or

prevent the transmission of these log

files to the provider.

c. The registered user must, upon

request, make immediately available for

review and audit by the provider or by

the Postal Service any PSD in the user’s

custody and the corresponding

transaction records.

d. The registered user must reset the

PSD at least once every 3 months to

meet provider audit and examination

requirements. A zero value reset will

meet this requirement.

e. The registered user must update

information with the provider whenever

there is any change in the user’s name,

address, telephone number, location of

the PSD, registration post office, or any

other required user registration

information. The Postal Service will

issue a revised user registration based

on the transmission of updated

information from the provider.

f. The registered user must report a

misregistering or otherwise defective

PSD to the provider under 2.8, and must

ensure that the defective PSD is not

used. Anyone in possession of a

misregistering or otherwise defective

PSD must return it to the provider

within 3 business days.

g. For postage evidencing systems that

generate IBI and access the USPS

Address Management System (AMS)

CD–ROM, the registered user must

maintain address quality by ensuring

the CD–ROM is updated at least once

every 6 months.

h. The registered user must forward a

mailpiece with an indicium produced

by the postage evidencing system to the

provider for quality assurance when the

system is installed and at least once

every 6 months thereafter, in accordance

with provider directions.

i. The registered user must enter into

a signed lease agreement with the

provider that includes a financial

agreement for resetting the PSD with

postage and the Postage Payment

Agreement. The Postal Service is not a

party to the lease agreement, except to

the extent that it may enforce the

Postage Payment Agreement.

j. The registered user must ensure that

the cautionary information placed by

the provider in system documentation,

on the opening screens at system startup, or on labels attached to the PSD or

its housing, is not removed or destroyed

while the postage evidencing system is

in the registered user’s possession. The

cautionary information contains basic

reminders on ownership and use of the

PSD, warnings against system tampering

or misuse resulting in non-payment of

postage owed, and the penalties for such

system misuse. Postage evidencing

systems without this cautionary

information shall not be authorized for

use.

2.7 Custody of Suspect PSDs

The Postal Service may conduct

unannounced, on-site examinations of

PSDs reasonably suspected of being

manipulated or otherwise defective. A

58686 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules

postal inspector also may immediately

withdraw a suspect PSD from service for

physical and/or laboratory examination.

The inspector withdrawing a suspect

PSD issues the registered user a receipt

for the PSD; forwards a copy to the

provider; and, if necessary, assists in

obtaining a replacement PSD. Where

possible, the Inspection Service gives

advance notice to the provider that a

PSD is to be inspected. Unless there is

reason to believe that the PSD is

fraudulently set with postage, existing

postage in the PSD is refunded to the

registered user, in accordance with

established refund procedures, when it

is withdrawn from service.

2.8 Defective PSD

The registered user must immediately

report any defective PSD to the

provider. The provider must retrieve

any defective PSD in a user’s possession

within 3 business days of notification by

the registered user, and must notify the

manager of Postage Technology

Management, USPS Headquarters,

immediately. A faulty PSD may not be

used under any circumstance. The

provider supplies the registered user

with a replacement PSD only if the

faulty PSD is in the provider’s

possession.

2.9 Missing PSD

The registered user must immediately

report to the provider the loss or theft

of any PSD or the recovery of any

missing PSD. Reports must include the

postal security device identification

number of the PSD; the date, location,

and details of the loss, theft, or recovery;

and a copy of any police report. The

provider will report all details of the

incident to the manager of Postage

Technology Management, USPS

Headquarters.

2.10 Returning a PSD

A registered user in possession of a

faulty or misregistering PSD, or who no

longer wants to keep a PSD, must return

the PSD to the provider to be withdrawn

from service. PSDs must be shipped by

Priority Mail unless the manager of

Postage Technology Management, USPS

Headquarters, gives written permission

to ship at another rate or special service.

2.11 Approval for Use of Postage

Evidencing Systems at Military Post

Offices

A person authorized by the

Department of Defense to use the

services of an overseas military post

office, such as an APO or FPO, is

allowed to use a USPS-approved

postage evidencing system that

generates IBI in accordance with the

same regulations that apply to domestic

users. For such users, the APO or FPO

will be designated as the registration

post office on their user registration.

These users must deposit the mail

prepared with their system at the

registration post office.

2.12 Approval for Use of Postage

Evidencing Systems Outside the

Country

Under certain conditions, with

specific approval from the manager of

Postage Technology Management, USPS

Headquarters, registered users (other

than those with access to an overseas

military post office) may use postage

evidencing systems that generate IBI

outside the customs territory of the

United States to print evidence of U.S.

postage. The procedures and conditions

are as follows:

a. The potential users must maintain

a permanent, established business

address in the United States. Any

exceptions must be specifically

approved in writing by the manager of

Postage Technology Management, USPS

Headquarters (see G043).

b. All registered users who use a

USPS-approved postage evidencing

system outside the customs territory of

the United States are subject to all

Postal Service regulations and U.S.

statutes pertaining to mail, mail fraud,

and misuse of postage evidencing

systems.

c. All postage evidencing systems

authorized by the USPS for use in

foreign locations must have enhanced

security features. Only those systems

specifically approved in writing by the

manager of Postage Technology

Management, USPS Headquarters, may

be used outside the customs territory of

the U.S.

d. Potential users must submit all data

required for the application for a

registration to lease and use postage

evidencing systems to the provider. The

provider will annotate the application to

state that it is for the foreign use of a

U.S. postage evidencing system and

show where the system is to be located.

The provider must submit the

application to the manager of Postage

Technology Management, USPS

Headquarters, for review and approval.

Once an application is approved,

Postage Technology Management will

designate the registration post office and

notify the provider and the registered

user. Multiple foreign postage

evidencing systems for the same

registered user at the same registration

post office may be covered by one

foreign user registration. Mailers who

currently have a user registration must

apply for a separate foreign user

registration to participate in this

program.

e. The provider selected by the

registered user must agree in writing to

all terms and conditions established by

the Postal Service pertaining to the

distribution of U.S. postage evidencing

systems outside of the United States.

Once the postage evidencing system is

installed, the provider must provide the

information required for Form 3601–C,

Postage Evidencing System Activity

Report, and submit it directly to the

manager of Postage Technology

Management, USPS Headquarters (see

G043).

f. Mail to which an IBI is applied as

postage evidencing must use domestic

U.S. postage and must be entered at the

registration post office.

3.0 SETTING

3.1 Initialization and Authorization of

the PSD

Before the registered user can print

evidence of postage, the PSD must be

initialized and authorized by the

provider. The initialization process

installs PSD-specific information that

does not change over the life cycle of

the PSD. The authorization process is

the setting of user-specific information.

The PSD is reauthorized by the provider

when certain user-specific information

changes. Settings are made in

accordance with the provisions of the

USPS Electronic Funds Resetting

System (EFRS).

3.2 Relocation of Registered User

If a registered user changes the post

office at which IBI mail is to be

deposited, the provider must

reauthorize the PSD for the new

registration post office. The user must

notify the provider and must be

registered at the new registration post

office before the provider can

reauthorize the PSD.

3.3 Payment for Postage

The Postal Service will accept

payment only in the following forms:

Automated Clearinghouse (ACH) debit

and credit card.

3.4 Resetting

To reset a PSD the following

conditions must be met:

a. The registered user shall initiate

payment to the Postal Service sufficient

to cover the desired postage increment

before requesting a postage value

download to reset the PSD.

b. As part of the resetting procedure,

the registered user must provide

identifying information and PSD audit

data as required by the Postal Service

and in accordance with the provider’s

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resetting specifications. Before

completing the PSD resetting, the

provider must verify the identifying

data, authenticate the registered user,

conduct the postage evidencing system

audit, and ascertain whether payment to

the Postal Service sufficient to cover the

requested postage value download was

initiated by the registered user.

c. The provider will supply the

registered user with documentation of

the reset transaction and the balance on

the PSD.

3.5 Postage Refunds

The Postal Service provides refunds

for the entire postage value balance

remaining on a PSD that is withdrawn

from service and is in the possession of

the provider. Refunds are requested and

paid through the provider. Refunds for

postage already printed onto an

envelope or label are made in

accordance with P014. Postage losses

due to malfunctions are the

responsibility of the provider.

3.6 Postage Adjustment for Faulty or

Misregistering PSD

If the registered user requests a

postage adjustment for a faulty or

misregistering PSD, then the PSD must

be withdrawn from service and must be

in the possession of the provider for

examination. The provider will examine

the PSD in comparison with the data

from the registered user’s log files. After

examining a PSD withdrawn from

service for apparent faulty operation

affecting the ascending or descending

registers, the provider must report the

malfunction to the manager of Postage

Technology Management, USPS

Headquarters. The report must contain

all applicable documentation (including

a copy of the registered user’s log files)

and a recommendation for the

appropriate postage adjustment. At the

same time the report is made to the

Postal Service, the provider must notify

the registered user of the proposed

postage adjustment. A registered user

may appeal a postage adjustment to the

manager of Postage Technology

Management, USPS Headquarters,

within 60 calendar days of the date that

the provider submitted the postage

adjustment recommendation to the

Postal Service.

3.7 Periodic Examinations

The registered user must reset the

PSD at least once every 3 months. A

zero-value reset meets this requirement.

The Postal Service reserves the right to

examine PSDs by remote access or

otherwise.

3.8 Amount of Postage Available

The descending register of the PSD,

which shows the amount of postage

remaining, is programmed not to exceed

a specified amount established by the

Postal Service, for a given registered

user at any time.

4.0 INDICIA

4.1 Designs

The indicia designs (types, sizes, and

styles) must be those that the provider

specified when the postage evidencing

system was approved by the Postal

Service for production and distribution

(see Exhibit 4.1).

[Exhibit 4.1, which shows all

approved indicia designs, will be

included when these regulations are

published in final form in the Domestic

Mail Manual.]

* * * * *

4.2 Legibility

The indicia must be legible. Illegible

indicia are not acceptable for the

payment of postage. Should there be a

need to place multiple indicia on an

envelope (e.g., for redate and/or postage

correction) the indicia must not overlap

each other. The address and POSTNET

barcode must meet the specifications

listed in C840. Reflectance

measurements of the indicia and the

background material must meet the

standards in C840.5.

4.3 On an Adhesive Label

A label used to apply informationbased indicia to a mailpiece for postage

evidencing must be approved by the

manager of Postage Technology

Management, USPS Headquarters.

Failure to use a USPS-approved label

may result in revocation of the user

registration for the postage evidencing

system. The label must meet the

following requirements:

a. The label must be a pressuresensitive, permanent label. The label is

subject to the corresponding standards

in C810.6.2 for minimum peel adhesion.

The applied label must adhere well

enough that it cannot be removed in one

piece. A face stock/liner, or

‘‘sandwich,’’ label must not be used for

printing information-based indicia.

b. The label must meet the reflectance

requirements in C840.5.0.

c. The label must be large enough to

contain the entire information-based

indicia.

d. Information-based indicia printed

on a label must be the same as the

indicia approved by the manager of

Postage Technology Management for

printing directly on an envelope. The

label must not include any image or text

other than that required by the IBI

performance criteria or as required or

recommended by Postal Service

regulation.

e. For labels applied to standard

letter-sized envelopes and postcards

sent as First-Class Mail, the label must

have fluorescent striping that meets the

following requirements:

(1) A stripe along the right side

(leading edge) of the label that is 1⁄4 inch

wide and extends a minimum of 1⁄2 inch

and a maximum of 11⁄2 inches from the

top of the label.

(2) A stripe along the top edge of the

label that is 1⁄4 inch wide and extends

a minimum of 1⁄2 inch and a maximum

of 11⁄2 inches from the right edge of the

label.

(3) All stripes must have a minimum

fluorescent emission intensity of at least

20 phosphor meter units (PMU), with a

maximum of 70 PMU. The visible color

of the fluorescent tagging may be any

color that meets the fluorescence

requirements.

(4) The fluorescent tagging shall

exhibit no noticeable change (i.e., no

more than 10 percent) in its emission

when exposed to elevated temperature

and/or high humidity conditions.

f. The label must be placed on the

envelope such that the position of the

indicia meets the requirements in 4.4.

g. If the label is applied to an

envelope that already has a FIM, then

the existing FIM cannot be covered by

the label.

4.4 Position

The indicia must be printed or

applied in the upper right corner of the

envelope. The indicia must be at least

1⁄4 inch from the right edge of the

mailpiece and 1⁄4 inch from the top edge

of the mailpiece. The barcode in the

indicia must be horizontally oriented. If

a FIM is printed with the indicia, the

position of the FIM must meet the

requirements in C100.5.0. The indicia

must not infringe on the areas reserved

for the FIM, POSTNET barcode, or

optical character reader (OCR) clear

zone.

4.5 Content and Format

The boundaries of the indicium are

defined by the right-hand edge of the

envelope, the top edge of the envelope,

the bottom edge of the two-dimensional

barcode or any indicium element below

the barcode, and the left-most edge of

the two-dimensional barcode or any

indicium element to the left of the

barcode. A 1⁄2 inch clear zone, within

which nothing shall be printed by the

postage evidencing system, must

surround the indicium boundaries to

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the left of and below all elements of the

indicium.

The manager of Postage Technology

Management, USPS Headquarters, must

approve the contents and format of all

indicia that will be produced by a

postage evidencing system. This

approval shall include all elements in

the indicium required by the IBI

performance criteria and/or Postal

Service regulations and applies to the

entire area within the indicium

boundaries. The USPS-approved indicia

supplied by the provider consist of

human-readable information and twodimensional barcoded information. For

the contents of indicia used for prepaid

reply mail, see 1.7; for the contents of

redate indicia, see 4.8; and for the

contents of postage correction indicia,

see 4.9. The contents of other indicia is

as follows:

a. Unless otherwise approved by the

manager of Postage Technology

Management, USPS Headquarters, the

required human-readable information

must show, at a minimum, the city,

state, and 5-digit ZIP Code of the

registration post office; the postal

security device ID; date of mailing;

endorsement or mail class; the words

‘‘US Postage’’; and the postage amount.

The Arial font must be used for this

information. The postage amount must

use at least 10-point type size. For all

other required information, the type size

must be at least 8 points. The mail class

or endorsement, the postage amount,

and the words ‘‘US Postage’’ must be in

bold type and all letters must be capital

letters. The remaining required

information (city, state and 5-digit ZIP

Code, the date, and the postal security

device ID) need not be capitalized or

bold. The type size used for all other

information printed in the indicia must

be no greater than 8 points and must not

be in bold type.

b. As an alternative to the city, state,

and 5-digit ZIP Code of the registration

post office, the indicia may show the

ZIP Code rather than the city and state

designation. In this case, the words

‘‘Mailed From ZIP Code’’ and the ZIP

Code of the registration post office may

appear in place of the city and state,

respectively.

c. When it is necessary to print

multiple indicia on a given mailpiece,

the human-readable information

showing the registration post office

must be included in each.

d. The requirements for the data

elements of the two-dimensional

barcode are found in the performance

criteria for the given postage evidencing

system.

4.6 Complete Date

The month, day, and year must be

shown in human-readable form in the

indicia. The year must be represented

by four digits.

4.7 Date Accuracy

The date of mailing in the indicium

must be the actual date of deposit,

except that mail deposited in a

collection box after the day’s last

scheduled collection may bear the

actual date of deposit or the date of the

next scheduled collection.

If the registered user knows the mail

will not be tendered to the Postal

Service on the date of mailing shown in

the indicium, the user should use a date

correction indicium (see 4.8) or have the

postage evidencing system advance the

date and print the intended date of

deposit in the indicium.

4.8 Date Correction

If date correction is required, indicia

showing only the actual date of mailing

and the word ‘‘REDATE’’ instead of the

postage amount shall be used. On lettersized mail, date correction indicia must

be placed on the nonaddress side at

least 3⁄4 inch from the bottom edge of the

mailpiece and not on an envelope flap.

On flats or parcels, it must be placed

next to the original indicium. Date

correction indicia must not include the

FIM or the two-dimensional barcode.

The redate indicium may be printed on

a USPS-approved label instead of

directly on the mailpiece.

4.9 Postage Correction

Indicia for additional postage may be

placed on a shortpaid mailpiece to

correct postage. On letter-size mail,

correction indicia must be printed on

the nonaddress side at least 3⁄4 inch

from the bottom edge of the mailpiece

and not on an envelope flap. On flats or

parcels, it must be placed next to the

original indicium. The postage

correction indicium must contain all of

the elements required for the indicium

in 4.5 except for the destination delivery

point. The word ‘‘CORRECTION’’ must

be added to the human readable

information. Postage correction indicia

must not include the FIM. To meet twodimensional barcode readability

requirements, postage correction indicia

may be printed on a USPS-approved

label instead of directly on the

mailpiece.

4.10 Use of Indicia

Valid information-based indicia

produced by postage evidencing

systems shall be used only to show

evidence of payment for postage or

postal services. In any illustration of

information-based indicia, or for any

other non-postal use, the twodimensional barcode shall be rendered

unreadable, for example by printing

‘‘VOID’’ or similar text across the

barcode.

4.11 Other Printed Matter

An approved indicium shall include

within its boundaries only postal

markings and text required or

recommended by Postal Service

regulation, except that the indicium

may identify the product service

provider. Other printed matter may be

printed only outside the boundaries of

the clear zone (see 4.5) surrounding the

indicium. Such printed matter may not

be obscene, defamatory of any person or

group, or deceptive, and it must not

advocate any unlawful action.

4.12 Postal Markings

Postal markings related to the mail

class, subclass, or category of mail are

required in the indicia.

4.13 Facing Identification Mark (FIM)

The facing identification mark (FIM)

serves to orient and separate certain

types of First-Class Mail during the

facing and canceling process. Lettersized First-Class Mail with the IBI

printed directly on the envelope must

bear a USPS-approved FIM D unless it

is courtesy reply mail. The FIM must

meet the dimensions, print quality, and

placement specified in the C100.5.

5.0 MAILINGS

5.1 Preparation of IBI Mail

Mail is subject to the preparation

standards that apply to the class of mail

and rate claimed.

5.2 Where to Deposit

Single-piece rate First-Class Mail

(including Priority Mail), Standard Mail

(B), and expedited mail may be

deposited in any street collection box or

other place where mail is accepted and

that is served by the registration post

office. International mail weighing less

than 16 ounces may be deposited in any

street collection box in accordance with

the regulations for domestic mail.

Limited quantities (i.e., a handful) of

single-piece rate First-Class Mail

including Priority Mail, expedited mail,

and international mail may be deposited

at offices other than the registration post

office to expedite dispatch, with the

following exceptions:

a. Certain Special Postal Services

require that the mail be presented

directly to a Postal Service employee

(see S900).

b. A registered user authorized to use

an APO or FPO as the registration post

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office shall deposit mail only at the

registration APO or FPO.

c. All other registered users who have

Postal Service approval to use a postage

evidencing system that generates IBI

outside the country shall deposit mail

only at their domestic registration post

office.

d. International mail that requires a

customs declaration, or that weighs 16

ounces or over, must be given directly

to a Postal Service employee at the

registration post office or other location

designated by the postmaster.

Otherwise, the mail will be returned to

the sender for proper entry and

acceptance. See the International Mail

Manual for additional information.

6.0 AUTHORIZATION TO PRODUCE

AND DISTRIBUTE POSTAGE

EVIDENCING SYSTEMS THAT

GENERATE INFORMATION-BASED

INDICIA (IBI)

Title 39, Code of Federal Regulations,

part 502, contains information

concerning authorization to produce

and distribute postage evidencing

systems that generate information-based

indicia (IBI), the suspension and

revocation of such authorization;

performance standards, test plans,

testing, and approval; required

production security measures; and

standards for distribution and

maintenance. Further information may

be obtained from the manager of Postage

Technology Management, USPS

Headquarters.

List of Subjects in 39 CFR Part 502

Administrative practice and

procedure, Postal Service.

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 public comments

on the following proposed amendments

to the Code of Federal Regulations. For

the reasons set out in this document, the

Postal Service proposes to add 39 CFR

part 502 as follows:

PART 502—AUTHORITY TO PRODUCE

AND DISTRIBUTE POSTAGE

EVIDENCING SYSTEMS THAT

GENERATE INFORMATION—BASED

INDICIA (IBI)

Sec.

502.1 Applicability of regulations.

502.2 Description of postage evidencing

systems that generate information-based

indicia (IBI).

502.3 Definition and use of PC Postage

trademark.

502.4 Product service provider

qualifications.

502.5 Provider authorization.

502.6 Changes in ownership or control.

502.7 Burden of proof standard.

502.8 Suspension and revocation of

authorization.

502.9 Information-based indicia program

(IBIP) performance criteria.

502.10 Product submission procedures and

testing.

502.11 Security testing.

502.12 Postage evidencing system approval.

502.13 Conditions for approval.

502.14 Suspension and revocation of

approval.

502.15 Reporting.

502.16 Administrative sanction on

reporting.

502.17 Materials and workmanship.

502.18 Destruction of information-based

indicia.

502.19 Inspection of new postage

evidencing systems.

502.20 Distribution facilities.

502.21 Distribution controls.

502.22 Administrative sanction.

502.23 Postage evidencing system

maintenance.

502.24 Access or changes to secure

components.

502.25 Inspection of postal security devices

(PSDs) in use.

502.26 PSDs not located.

502.27 Electronic Funds Resetting System

(EFRS).

502.28 Indicia quality assurance.

502.29 Refunds for postage evidencing

systems that generate information-based

indicia.

502.30 Registered user information.

502.31 Intellectual Property.

Authority: 5 U.S.C. 552(a); 39 U.S.C. 101,

401, 403, 404, 410, 2601, 2605; Inspector

General Act of 1978, as amended (Pub. L. 95–

452, as amended), 5 U.S.C. App 3.

§ 502.1 Applicability of regulations.

The regulations in this section apply

to all postage evidencing systems that

print information-based indicia (IBI) to

show payment of postage.

§ 502.2 Description of postage evidencing

systems that generate information-based

indicia (IBI).

(a) Postage evidencing systems that

generate IBI are secure systems that

print USPS-authorized, digitally-signed

indicia as evidence of payment of

postage. Indicia consist of a USPSapproved two-dimensional barcode and

certain human-readable information.

Authorized postage evidencing systems

are available from authorized,

commercial product service providers.

(b) These postage evidencing systems

include as a primary component a

postal security device (PSD) that

performs core security functions such as

digital signature generation and

verification, as well as the management

of postage registers. The component of

these postage evidencing systems that

controls the registered user

infrastructure for system authorization,

system audits, remote postage resetting,

and production of the indicia is called

the client system. The PSD and the

client system interact to generate the

indicia. The PSD is remotely set with

postage value and requires the user to

initiate payment to the Postal Service

sufficient to cover the desired postage

increment before initial setting or

resetting.

§ 502.3 Definition and use of PC Postage

trademark.

(a) ‘‘PC Postage’’ is the Postal Service

trademark for Postal Service-approved,

secure, postage evidencing systems that

generate information-based indicia and

allow registered users to purchase and

print postage using their personal

computers and the Internet.

(b) Use of the PC Postage trademark

on USPS-approved postage evidencing

systems and other products must be

specifically approved by the manager of

Postage Technology Management

(PTM), USPS Headquarters. The

provider must sign a trademark

licensing agreement with the Postal

Service for each product the Postal

Service authorizes to use the PC Postage

trademark.

§ 502.4 Product service provider

qualifications.

For authorization from the Postal

Service to produce and/or lease PSDs

and postage evidencing systems that

generate information-based indicia (IBI)

for use by registered users under

Domestic Mail Manual P050, a potential

provider must:

(a) Satisfy the Postal Service of its

integrity and fiscal responsibility.

(b) Obtain approval of at least one

postage evidencing system

incorporating all the features and

safeguards specified in § 502.9, in

accordance with the procedures

outlined in § 502.10.

(c) Have, or establish, and keep under

its supervision and control adequate

production facilities suitable to carry

out the provisions of §§ 502.17 through

502.19, to the satisfaction of the Postal

Service. The production facilities must

be subject to unannounced inspection

by representatives of the Postal Service.

If the production facilities are

established by the provider outside the

customs territory of the United States,

the provider shall be responsible for all

costs incurred by the Postal Service to

conduct the inspections.

(d) Have, or establish, and keep under

its supervision and control adequate

facilities for the control, distribution,

and maintenance of postage evidencing

systems that generate IBI, and their

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replacement or secure disposal or

destruction when necessary.

§ 502.5 Provider authorization.

An applicant meeting the

qualifications in § 502.4 may be

authorized in writing by the manager of

Postage Technology Management, USPS

Headquarters, as a provider of postage

evidencing systems that generate IBI

and will be allowed to lease authorized

PSDs and systems to users registered by

the Postal Service. The written

authorization defines the conditions

under which the postage evidencing

system may be marketed and

distributed.

§ 502.6 Changes in ownership or control.

Any person, entity, or concern

wanting to acquire ownership or control

of a provider of an authorized postage

evidencing system must provide the

Postal Service with satisfactory

evidence of that person’s, entity’s, or

concern’s integrity and financial

responsibility.

§ 502.7 Burden of proof standard.

The burden of proof is on the Postal

Service in adjudications of suspensions

and revocations under § 502.8 and

§ 502.14 and administrative sanctions

under § 502.16 and § 502.22. Except as

otherwise indicated in those sections,

the standard of proof shall be the

preponderance-of-evidence standard.

§ 502.8 Suspension and revocation of

authorization.

(a) The Postal Service may suspend

and/or revoke authorization to provide

and/or distribute any or all of a

provider’s postage evidencing systems if

the provider engages in any unlawful

scheme or enterprise, fails to comply

with any provision in this part 502, or

fails to implement instructions issued in

accordance with any final decision

issued by the Postal Service within its

authority over the IBI program.

(b) The decision to suspend or revoke

a provider’s authorization shall be based

on the nature and circumstances of the

violation (e.g., whether the violation

was willful, whether the provider

voluntarily admitted to the violation,

whether the provider cooperated with

the Postal Service, or whether the

provider implemented successful

remedial measures) and on the

provider’s performance history. Before

determining whether a provider’s

authorization to produce and/or

distribute postage evidencing systems

should be revoked, the procedures in

paragraph (c) of this section shall be

followed.

(c) Suspension in all cases shall be as

follows:

(1) Upon determination by the Postal

Service that a provider is in violation of

the provisions in this part 502, the

Postal Service shall issue a written

notice of proposed suspension citing

deficiencies for which suspension of

authorization to produce and/or

distribute a specific postage evidencing

system, or a family of system models,

may be imposed under paragraph (c)(2)

of this section. The notification is in

writing and is sent certified mail, return

receipt requested. Except in cases of

willful violation, the provider shall be

given an opportunity to correct

deficiencies and achieve compliance

with all requirements within a time

limit, determined by the Postal Service,

corresponding to the potential risk to

postal revenue.

(2) In cases of willful violation, or if

the Postal Service determines that the

provider has failed to correct cited

deficiencies within the specified time

limit, the Postal Service shall issue a

written notice setting forth the facts and

reasons for the decision to suspend and

the effective date if a written defense is

not presented as provided in paragraph

(d) of this section. The notification is in

writing and is sent certified mail, return

receipt requested.

(3) If, upon consideration of the

defense as provided in paragraph (e) of

this section, the Postal Service deems

that the suspension is warranted, the

suspension shall remain in effect for up

to 90 days unless withdrawn by the

Postal Service, as provided in paragraph

(c)(4)(iii) of this section.

(4) At the end of the 90-day

suspension, the Postal Service may:

(i) Extend the suspension to allow

more time for investigation or to allow

the provider to correct the problem;

(ii) Make a determination to revoke

authorization to provide and/or

distribute the provider’s postage

evidencing systems that generate IBI in

part or in whole; or

(iii) Withdraw the suspension based

on identification and implementation of

a satisfactory solution to the problem.

Provider suspensions may be

withdrawn before the end of the 90-day

period if the Postal Service determines

that the provider’s solution and

implementation are satisfactory.

(d) The provider may present the

Postal Service with a written defense to

any suspension or revocation

determination within 30 calendar days

after receiving or refusing to receive the

written notice, unless a shorter period is

deemed necessary. The defense must

include all supporting evidence and

specify the reasons for which the order

should not be imposed.

(e) After receipt and consideration of

the defense, the Postal Service shall

advise the provider of the decision and

the facts and reasons for it. The decision

shall be effective on receipt unless it

provides otherwise. The decision shall

also advise the provider that it may

appeal that determination within 30

calendar days after the provider receives

or refuses to receive written notification

of the decision, unless a shorter period

is deemed necessary, as specified

therein. The appeal must include all

supporting evidence and specify the

reasons the provider believes that the

decision is erroneous.

(f) An order or final decision under

this section does not preclude any other

criminal or civil statutory, common law,

or administrative remedy that is

available by law to the Postal Service,

the United States, or any other person

or concern.

§ 502.9 Information-based indicia program

(IBIP) performance criteria.

(a) The performance criteria

applicable to the given postage

evidencing system relate to the data

contents and format of the indicia, the

PSD (which implements digital

signature technology for the creation

and verification of digital signatures),

the client system (which supports the

creation of the indicia and the interface

with the PSD and the provider), and

cryptographic key management.

(b) The information-based indicia

program (IBIP) performance criteria

describe required system elements that

include the provider infrastructure and

the registered user infrastructure, and

their interface to the Postal Service

infrastructure. The Postal Service

infrastructure supports user registration,

postage evidencing system audit,

postage resetting, total population

management, key management support,

financial reconciliation, PSD life cycle

tracking, lost and stolen/irregularity

management functions and other

reporting. The provider infrastructure

will support all IBIP functions. The

registered user infrastructure will

consist of the PSD and a client system.

The Postal Service will evaluate and test

postage evidencing systems for

compliance with this infrastructure.

Contact the manager of Postage

Technology Management, USPS

Headquarters for these criteria.

§ 502.10 Product submission procedures

and testing.

(a) Each postage evidencing system

that generates IBI is submitted for Postal

Service approval and will be tested and

evaluated in accordance with the

requirements and provisions of the most

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules 58691

current postage evidencing product

submission procedures. Particular

attention must be given to the

requirement to submit identical postage

evidencing systems simultaneously to

the Postal Service and to a laboratory

accredited under the National Voluntary

Laboratory Accreditation Program

(NVLAP) for FIPS 140–1 certification.

Contact the manager of Postage

Technology Management, USPS

Headquarters for these requirements.

Information pertaining to these

procedures may be accessed through the

USPS website.

(b) The indicia design must be

approved by the manager of Postage

Technology Management, USPS

Headquarters, and must comply with

the requirements in the Domestic Mail

Manual and the applicable IBI

performance criteria.

(c) Any change to an approved

postage evidencing system must be

submitted to the Postal Service for

evaluation in accordance with the most

current postage evidencing product

submission procedures.

(d) Where complete evaluation of all

security-related components of a

postage evidencing system requires

USPS review of data located outside the

customs territory of the United States,

the provider shall be responsible for all

costs incurred by the USPS in

conducting that review.

§ 502.11 Security testing.

The Postal Service reserves the right

to require or conduct additional

examination and testing at any time,

without cause, of any postage

evidencing system submitted to the

Postal Service for approval or

previously approved by the Postal

Service for production and distribution.

§ 502.12 Postage evidencing system

approval.

As provided in § 502.15, the provider

has a duty to report security weaknesses

to the Postal Service to ensure that every

postage evidencing system in service

protects the Postal Service against loss

of revenue at all times. An approval of

a system does not constitute an

irrevocable determination that the

Postal Service is satisfied with its

revenue-protection capabilities and all

other features of the system. After

approval is granted to produce and

distribute a postage evidencing system,

no change affecting the features or

safeguards may be made except as

authorized or required by the Postal

Service in writing.

§ 502.13 Conditions for approval.

(a) The Postal Service may require,

and reserves future rights to require,

that production models of approved

postage evidencing systems, as well as

the current design documentation, user

manuals, and specifications applicable

to such systems and any revisions

thereof, be submitted to the manager of

Postage Technology Management, USPS

Headquarters.

(b) Upon request by the Postal

Service, additional postage evidencing

systems must be submitted to the Postal

Service for testing, at the expense of the

provider.

§ 502.14 Suspension and revocation of

approval.

(a) The Postal Service may suspend

approval of a postage evidencing system

under § 502.12 if the Postal Service has

probable cause to believe that the

postage evidencing system or the family

of system models poses an unacceptable

risk to postal revenue. Suspension of

approval to produce or distribute a

postage evidencing system or a family of

system models, in whole or in part,

shall be based on the potential risk to

postal revenue. Before determining

whether approval of a postage

evidencing system or a family of system

models, should be revoked, the

procedures in paragraph (b) of this

section shall be followed.

(b) Suspension procedures:

(1) Upon determination by the Postal

Service that a postage evidencing

system poses an unacceptable risk to

postal revenue, the Postal Service shall

issue a written notice of proposed

suspension citing deficiencies for which

suspension may be imposed under

paragraph (b)(2) of this section. The

notification is in writing and is sent

certified mail, return receipt requested.

The provider shall be given an

opportunity to correct deficiencies and

achieve compliance with all

requirements within a time limit

determined by the Postal Service,

corresponding to the potential risk to

postal revenue.

(2) If the Postal Service determines

that the provider has failed to correct

cited deficiencies within the USPSspecified time limit, the Postal Service

shall issue a written notice setting forth

the facts and reasons for the decision to

suspend and the effective date if a

written defense is not presented as

provided in paragraph (c) of this

section. The notification is in writing

and is sent certified mail, return receipt

requested.

(3) If, upon consideration of the

defense as provided in paragraph (d) of

this section, the Postal Service deems

that the suspension is warranted, the

suspension shall remain in effect for up

to 90 days unless withdrawn by the

Postal Service, as provided in paragraph

(b)(4)(iii) of this section.

(4) At the end of the 90-day

suspension, the Postal Service may:

(i) Extend the suspension to allow

more time for investigation or to allow

the provider to correct the problem;

(ii) Make a determination to revoke

the approval of the provider’s postage

evidencing system or family of system

models, or

(iii) Withdraw the suspension based

on identification and implementation of

a satisfactory solution to the problem.

Provider suspensions may be

withdrawn before the end of the 90-day

period if the Postal Service determines

that the provider’s solution and

implementation are satisfactory.

(c) The provider may present the

Postal Service with a written defense to

any suspension or revocation

determination within 30 calendar days

after receiving or refusing to receive

notice, unless a shorter period is

deemed necessary. The defense must

include all supporting evidence and

specify the reasons for which the order

should not be imposed.

(d) After receipt and consideration of

the written defense, the Postal Service

shall advise the provider of the decision

and the facts and reasons for it. The

decision shall be effective on receipt

unless it states otherwise. The decision

shall also advise the provider that it

may appeal that determination within

30 calendar days after the provider

receives or refuses to receive written

notice, unless a shorter period is

deemed necessary, as specified therein.

The appeal must include all supporting

evidence and specify the reasons that

the provider believes that the decision

is erroneous.

(e) An order or final decision under

this section does not preclude any other

criminal or civil statutory, common law,

or administrative remedy that is

available by law to the Postal Service,

the United States, or any other person

or concern.

§ 502.15 Reporting.

(a) For purposes of this section,

‘‘provider’’ refers to an entity authorized

under § 502.5 and its foreign or

domestic affiliates, subsidiaries, assigns,

dealers, independent dealers,

employees, and parent corporations.

(b) Each provider authorized under

§ 502.5 must submit a preliminary

report to notify the Postal Service

promptly (in no event more than 21

calendar days of discovery) of the

following:

(1) All findings or results of any

testing known to the provider

concerning the security or revenue

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protection features, capabilities, or

failings of any postage evidencing

system or PSD sold, leased, or

distributed by the provider that has

been approved for sale, lease, or

distribution by the Postal Service or by

any foreign postal administration; or

have been submitted for approval by the

provider to the Postal Service or to a

foreign postal administration.

(2) All potential security weaknesses

or methods of system tampering of the

postage evidencing systems that the

provider distributes, of which the

provider knows or should know, and

the system or model subject to each

weakness or method. These potential

security weaknesses include, but are not

limited to suspected equipment defects,

suspected abuse by a registered user or

provider employee, suspected security

breaches of the Electronic Funds

Resetting System, cryptographic key

compromises, occurrences outside

normal performance, or any repeatable

deviation from normal postage

evidencing system performance (within

the same model family and/or by the

same registered user).

(c) Within 45 calendar days of the

preliminary notification to the Postal

Service under § 502.15(b), the provider

must submit a written report to the

Postal Service. The report must include

the circumstances, proposed

investigative procedure, and the

anticipated completion date of the

investigation. The provider must also

provide periodic status reports to the

Postal Service during subsequent

investigation and, on completion, must

submit a summary of the investigative

findings.

(d) The provider must establish and

adhere to timely and efficient

procedures for internal reporting of

potential security weaknesses. The

provider is required to submit a copy of

internal reporting procedures and

instructions to the Postal Service for

review.

§ 502.16 Administrative sanction on

reporting.

(a) Notwithstanding any act,

admission, or omission by the Postal

Service, an authorized provider may be

subject to an administrative sanction for

failing to comply with § 502.15.

(b) The Postal Service shall determine

all costs and revenue losses measured

from the date that the provider knew, or

should have known, of a potential

security weakness, including, but not

limited to, administrative and

investigative costs and documented

revenue losses that result from any

postage evidencing system for which the

provider failed to comply with any

provision in § 502.15. The provider

shall be responsible to the Postal

Service for all such costs and losses (net

of any amount collected by the Postal

Service from the registered users) with

interest when the Postal service issues

a written notice to the provider setting

forth the facts and reasons on which the

determination to impose the sanction is

based. The notification is in writing and

is sent certified mail, return receipt

requested. The notice shall advise the

provider of the date that the action takes

effect if a written defense is not

presented within 30 calendar days of

receipt of the notice.

(c) The provider may present the

Postal Service with a written defense to

the proposed action within 30 calendar

days after receiving or refusing to

receive notification. The defense must

include all supporting evidence and

specify the reasons for which the

sanction should not be imposed.

(d) After receipt and consideration of

the defense, the Postal Service shall

advise the provider of the decision and

the facts and reasons for it; the decision

shall be effective on receipt unless it

states otherwise. The notification of the

decision is in writing and is sent

certified mail, return receipt requested.

The decision shall also advise the

provider that it may, within 30 calendar

days of receiving the decision, appeal

that determination as specified therein.

(e) The provider may submit a written

appeal to the Postal Service within 30

calendar days of receiving or refusing to

receive notification of the decision. The

appeal must include all supporting

evidence and specify the reasons that

the provider believes that the

administrative sanction was erroneously

imposed. The submission of an appeal

stays the effectiveness of the sanction.

(f) The imposition of an

administrative sanction under this

section does not preclude any other

criminal or civil statutory, common law,

or administrative remedy that is

available by law to the Postal Service,

the United States, or any other person

or concern.

§ 502.17 Materials and workmanship.

All postage evidencing systems that

generate IBI must continuously

maintain the quality in materials and

workmanship of the production model

approved by the Postal Service.

§ 502.18 Destruction of information-based

indicia.

All indicia created in the process of

testing the postage evidencing system by

the provider, or its agent, must be

collected and securely controlled or

destroyed by the provider to prevent

unauthorized use.

§ 502.19 Inspection of new postage

evidencing systems.

The provider shall inspect all new

postage evidencing systems that

generate IBI to ensure proper

functioning of all operational

capabilities of each system before

distribution.

§ 502.20 Distribution facilities.

(a) An authorized provider must keep

adequate facilities for and records of the

distribution, control, maintenance,

replacement, and disposal or

destruction of all PSDs throughout their

entire life cycle. Recordkeeping is

required for all PSDs, including newly

produced PSDs, active leased PSDs and

inactive, unleased PSDs, as well as lost

and stolen PSDs. All such facilities and

records are subject to inspection by

Postal Service representatives.

(b) If the provider uses a third party

to control, distribute, maintain, replace,

repair, or dispose of PSDs or postage

evidencing systems, all aspects of the

arrangement between the parties must

be specifically authorized in writing by

the manager of Postage Technology

Management, USPS Headquarters.

(1) The third party relationship shall

not compromise any security element of

the postage evidencing system. The

functions of the third party with respect

to these systems are subject to the same

scrutiny as the functions of the

provider.

(2) Any authorized third party must

keep adequate facilities for and records

of PSDs and postage evidencing systems

in accordance with the USPS-authorized

arrangement with the provider. All such

facilities and records are subject to

inspection by Postal Service

representatives, in so far as they are

used to control, distribute, store,

maintain, replace, repair, or dispose of

PSDs or postage evidencing systems.

(3) The Postal Service holds the

provider fully responsible for any

deficiencies found in third party

facilities, records, or procedures and can

require termination of the third party

arrangement if deficiencies are found.

§ 502.21 Distribution controls.

Each authorized provider must do the

following:

(a) Hold title permanently to all PSDs

that print U.S. postage, except those

purchased by the Postal Service.

(b) On behalf of applicants,

electronically transmit information

required to apply for a user registration

to the designated Postal Service central

registration processing facility.

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules 58693

(c) On behalf of users registered to use

their postage evidencing systems,

forward to the Postal Service any

changes to user registration information

when the user submits such changes to

the provider. The provider must follow

authorized USPS procedures for moving

the system when a registered user

changes the registration post office. The

provider must also notify the Postal

Service following any event that

indicates the need to update registered

user information, such as the return of

an invoice or the inability to

communicate with the user.

(d) Lease PSDs only to parties that

have valid user registrations issued by

the Postal Service to use a postage

evidencing system.

(e) Unless otherwise authorized by the

Postal Service, immediately withdraw

from service any PSD that the registered

user no longer wants, or that is to be

removed from service for any other

reason. The provider shall retrieve any

withdrawn PSD that is in the possession

of the registered user. All resetting

requests for a withdrawn PSD must be

denied. The provider must keep in its

possession for at least 1 year from the

date of withdrawal a copy of the

information on the registered user’s PS

Form 3601–C, Postage Evidencing

System Activity Report.

(f) Retrieve any misregistering, faulty,

or defective PSD and withdraw it from

service within 3 business days of being

notified by the registered user of the

defect. The provider must examine each

PSD withdrawn from service for

apparent faulty operation affecting the

ascending or the descending register, or

for other failure to record its operations

correctly and accurately. After

examining the withdrawn PSD, the

provider must compile a written report

explaining the malfunction to the

manager of Postage Technology

Management, USPS Headquarters. The

report must include an explanation of

the malfunction that resulted in the

faulty operation or other failure to

record operations correctly and

accurately, all applicable system

documentation, including log files, and

a recommendation for the appropriate

postage adjustment, if applicable. At the

same time the report is made to the

Postal Service, the provider must notify

the registered user of the proposed

postage adjustment. The provider may

supply the registered user with a

replacement PSD only if the faulty PSD

is in the provider’s possession.

(g) Report promptly the loss or theft

of any PSD, the recovery of any PSD

previously reported as lost or stolen, or

the scrapping of any PSD by the

provider. The provider must notify the

Postal Service by completing a

standardized Lost and Stolen Postage

Evidencing System Incident Report and

filing it with the Postal Service by the

tenth day of the month following when

a PSD is scrapped or the provider

determines the loss, theft, or recovery of

a PSD. For lost or stolen PSDs, the

provider must complete all preliminary

location activities specified in § 502.26

before including a given incident on this

report.

(h) Provide to the Postal Service upon

request an electronic file or database of

all postage evidencing systems in

service, including the PSD identification

number, the registered user’s name and

address, the date that the system was

placed in service, and the ZIP Code of

the registration post office. This

information is to be provided to the

Postal Service in USPS-specified format,

at times to be determined by the Postal

Service.

(i) Keep accurate records and

reconcile differences between their

records and Postal Service databases.

(j) Keep at provider’s headquarters an

electronic file or database with a

complete record of all PSDs produced,

showing all movements of each from the

time that the PSD is produced until it

is scrapped. The records shall be

organized by PSD identification number

and shall include the reading on the

ascending register each time the PSD is

authorized for a new registered user or

is withdrawn from service. These

records must be available for inspection

by Postal Service officials at any time

during normal business hours. The

record for each PSD must be maintained

for 3 years after the PSD is scrapped.

(k) Submit other reports as required

by the Postal Service.

(l) Cancel a lease agreement with any

lessee whose registration to use a

postage evidencing system is revoked by

the Postal Service.

(m) Promptly withdraw from service

any PSD that the Postal Service

indicates should be withdrawn from

service for revocation of user

registration or for any other reason, and

retrieve the PSD if it is in the possession

of the registered user. When a user

registration is revoked, the provider

must retrieve all PSDs in the possession

of the registered user and must

withdraw from service all PSDs

employed by the registered user.

(n) Take reasonable precautions in the

transportation and storage of PSDs to

prevent use by unauthorized

individuals. Providers must ship all

PSDs by Postal Service Priority Mail

unless given written permission by the

Postal Service to use another method.

(o) Communicate to all registered

users of a postage evidencing system the

required cautionary statements that

provide the registered user with basic

reminders that the postal security

device is leased, the actions needed on

relocation of the postage evidencing

system, and warnings against system

misuse.

(1) The cautionary statements must be

visually presented to the registered user

upon each start-up of the postage

evidencing system. The user must

actively acknowledge the statements

before proceeding with system use. In

addition, the statements shall be

included prominently in the user

documentation provided with each

system. PSDs that are in the possession

of a user shall include the cautionary

statements on a label attached to the

PSD, to the housing of the PSD, or to the

postage evidencing system containing

the PSD, if the physical dimensions of

the equipment will accommodate them.

Postage evidencing systems provided to

registered users without this cautionary

information shall not be authorized for

use.

(2) In every presentation of the

cautionary statements to the registered

user, the words shown below in capital

letters should be emphasized. If the

cautionary statement can be placed on

the PSD or other equipment, it shall be

placed in a conspicuous and highly

visible location. The minimum width of

the text block containing the statement

should be 3.25 inches, and the

minimum height should be 1.75 inches.

The statement shall read as follows:

POSTAL SERVICE NOTICE

LEASED POSTAGE EVIDENCING SYSTEM—

NOT FOR SALE

PROPERTY OF [NAME OF PROVIDER]

Use of this system is permissible only

under a U.S. Postal Service postage

evidencing system user registration.

Call [NAME OF PROVIDER] at phone

number ### ###–#### to relocate or return

this Postage Evidencing System.

WARNING! POSTAGE EVIDENCING

SYSTEM TAMPERING OR MISUSE IS A

FEDERAL OFFENSE.

IF YOU SUSPECT POSTAGE EVIDENCING

SYSTEM TAMPERING, CALL INSPECTOR

GENERAL’S HOTLINE AT 1–800–654–8896

OR YOUR LOCAL POSTAL INSPECTOR.

REWARD UP TO $50,000 for information

leading to the conviction of any person who

misuses a postage evidencing system

resulting in the Postal Service not receiving

correct postage payments.

(3) Exceptions to the formatting of

required cautionary labeling are

determined on a case-by-case basis. The

manager of Postage Technology

Management, USPS Headquarters, must

58694 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules

approve, in writing, any deviation from

the standard labeling requirements.

§ 502.22 Administrative sanction.

The Postal Service holds providers

responsible for the entire life cycle of

their postage evidencing systems,

including control, distribution,

operation, maintenance, replacement,

and secure disposal.

(a) ‘‘Postage evidencing system,’’ for

purposes of this section, means any

system that is produced by a provider

authorized under § 502.5 that is not

owned or leased by the Postal Service.

(b) An authorized provider that,

without just cause, fails to conduct or

perform adequately any of the controls

required by § 502.21, to follow

standardized lost and stolen incident

reporting in § 502.26, or to conduct the

inspections required by § 502.25 in a

timely fashion is subject to an

administrative sanction based on the

investigative and administrative costs

and documented revenue losses (net of

any amount collected by the Postal

Service from the registered user), with

interest per occurrence measured from

the date on which the cost and/or loss

occurred, as determined by the Postal

Service. Sanctions shall be based on the

costs and revenue losses that result from

the provider’s failure to comply with

these requirements.

(c) The Postal Service may impose an

administrative sanction under this

section by issuing a written notice to the

provider setting forth the facts and

reasons on which the determination to

impose the sanction is based. The

notification is in writing and is sent

certified mail, return receipt requested.

The Postal Service shall determine all

costs and losses. The notice shall advise

the provider of the date that the action

shall take effect if a written defense is

not presented within 30 calendar days

of receipt of the notice.

(d) The provider may present to the

Postal Service a written defense to the

proposed action within 30 calendar

days of receiving or refusing to receive

the notice. The defense must include all

supporting evidence and specify the

reasons for which the sanction should

not be imposed.

(e) After receipt and consideration of

the written defense, the Postal Service

shall advise the provider of the decision

and the facts and reasons for it. The

decision shall be effective on receipt

unless it states otherwise.

(f) The provider may submit a written

appeal of the decision within 30

calendar days of receiving or refusing to

receive the decision, addressed to the

manager of Postage Technology

Management, USPS Headquarters. The

appeal must include all supporting

evidence and specify the reasons that

the provider believes that the

administrative sanction was erroneously

imposed. The submission of an appeal

stays the effectiveness of the sanction.

(g) The imposition of an

administrative sanction under this

section does not preclude any other

criminal or civil statutory, common law,

or administrative remedy that is

available by law to the Postal Service,

the United States, or any other person

or concern.

§ 502.23 Postage evidencing system

maintenance.

(a) The provider must keep its postage

evidencing systems that generate IBI in

proper operating condition by

maintaining or replacing them when

necessary or desirable to prevent

electronic failure, malfunction,

expiration of the life of the battery for

the clock or timer, or mechanical

breakdown.

(b) The provider must provide the

registered users with modifications

reflecting rate changes and must

implement new rates as of the effective

date for the new rates established by the

Postal Service.

§ 502.24 Access or changes to secure

components.

Postage evidencing system

maintenance involving access or

changes to secure components must be

done only within a secure facility under

the provider’s direct control and

supervision. PSDs must be withdrawn

from service before any such

maintenance is performed.

§ 502.25 Inspection of postal security

devices (PSDs) in use.

(a) The provider must conduct an

audit of each PSD at least once every 3

months in conjunction with the postage

value resetting requirements in § 502.27.

A zero-value reset will satisfy this

requirement. The PSD must have a lockout feature that prevents use of the

system if an audit is not completed in

accordance with this regulation.

(b) Postage evidencing systems that

generate IBI, other than PC Postage,

shall be inspected by the provider every

2 years. Registered user mail-in of

indicia may substitute for the provider

inspection, with Postal Service

approval. The provider shall inspect or

sample PC Postage products under

special circumstances, as directed by

the Postal Service. The Postal Service

examines postage evidencing systems

when warranted by special

circumstances.

§ 502.26 PSDs not located.

Upon learning that one or more of its

PSDs in service cannot be located, the

provider must undertake reasonable and

timely efforts to locate the PSD by

following a series of Postal Servicespecified actions designed to locate the

PSDs. If these efforts are unsuccessful

and a PSD is determined to be lost or

stolen, the provider must notify the

Postal Service in accordance with

§ 502.21.

(a) If a user registered to use a postage

evidencing system cannot be located,

the provider must, at a minimum,

complete the following actions:

(1) Call the registered user’s last

known telephone number.

(2) Call directory assistance for the

user’s new telephone number.

(3) Contact the registered user’s local

post office for current change of address

information.

(4) Contact Postage Technology

Management to verify the location of the

PSD and the registered user as currently

maintained in Postal Service records.

(5) Contact the rental agency

responsible for the property where the

registered user was located, if

applicable.

(6) Visit the registered user’s last

known address to see whether the

building superintendent or a neighbor

knows the user’s new address.

(7) Mail a certified letter with return

receipt to the registered user at the last

known address with the endorsement

‘‘Forwarding and Address Correction

Requested’’.

(8) If new address information is

obtained during these steps, any missed

or delinquent scheduled PSD audit must

be completed immediately.

(b) If a PSD is reported to be lost or

stolen by the registered user, the

provider must, at a minimum, complete

the following actions:

(1) Discontinue postage value

downloads to the lost or stolen PSD.

(2) Ensure that the registered user has

filed a police report for a stolen PSD and

that copies have been provided to the

appropriate Inspection Service

Contraband Postage Identification

Program (CPIP) specialist.

(3) Withhold issuance of a

replacement PSD until the missing PSD

has been properly reported to the police

and to the appropriate Inspection

Service CPIP specialist.

(c) If the provider later learns that the

PSD has been located and/or recovered,

the provider must take the following

actions before returning the PSD to

service or allowing a postage value

download:

(1) Submit a new Lost and Stolen

Postage Evidencing System Incident

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules 58695

Report that references the initial report

and outlines the details of how the PSD

was recovered, in accordance with

§ 502.21. The provider is responsible for

keeping records of these reports as

submitted to the Postal Service for a

minimum of 3 years after submission.

(2) Retrieve the recovered PSD from

the registered user and examine it for

apparent faulty operation that could

affect its ability to record its operations

correctly and result in a questionable

accurate registration.

(3) Recommend a postage adjustment

or refund, if appropriate.

(4) Withdraw the PSD from service if

a replacement PSD has been supplied to

the registered user or if there is an issue

of questionable accurate registration.

(d) Any authorized provider that fails

to comply with standardized lost and

stolen reporting procedures and

instructions is subject to an

administrative sanction under § 502.22,

as determined by the Postal Service.

§ 502.27 Electronic Funds Resetting

System (EFRS).

(a) Description. A remote resetting

system permits registered users to reset

their PSDs at places of business and/or

homes via modem or network interface.

The Electronic Funds Resetting System

(EFRS) is the Postal Service system that

processes system resetting data for

postage value downloads submitted by

providers of postage evidencing systems

that generate IBI. The Postal Service

processes the data separately from data

processed under the Computerized

Meter Resetting System (CMRS), which

is used for traditional postage meters.

(b) Resetting a PSD. To reset a PSD,

the registered user connects to the

provider and provides specified

identifying data and PSD audit data for

the postage value download. Before

proceeding with the transaction, the

provider must verify all the data,

conduct the system audit, and ascertain

whether payment to the Postal Service

sufficient to cover the desired postage

value download was initiated by the

registered user. If payment was initiated

and the system audit was successful, the

provider may complete the postage

value download.

(c) Payment to the Postal Service.

(1) The only acceptable methods used

for postage payments for postage

evidencing systems that generate IBI are

credit cards and Automated

Clearinghouse (ACH) debit. The

providers must publicize these payment

options to all registered IBI users. When

publicizing these options, the provider

must provide a clear and concise

description of each.

(i) Credit Cards. The provider must

offer the registered user the option to

use all of the credit cards approved for

use by the Postal Service for payment

for postage. Each provider must receive

authorization from the Postal Service to

offer credit card options to registered

users and must sign a vendor credit card

pilot test agreement, a legal agreement

with the Postal Service on credit card

payment, which addresses security

requirements, payment of transaction

costs, reconciliation requirements, and

retrieval and chargeback requests. The

provider must use a certified credit card

payment process approved for use by

the Postal Service’s designated card

processor. All credit card transactions

must be sent through the designated

Postal Service card processor, with each

provider working as an agent with the

Postal Service as the merchant of record.

(ii) ACH Debit. All ACH debit

payments for postage must be

electronically transferred directly from

the registered user’s account resident in

a financial institution that is neither

owned, nor controlled, nor contracted,

nor arranged for by a product service

provider or its affiliate. The funds must

be transferred directly into an account at

a financial institution designated by the

Postal Service.

(2) A registered user is required to

initiate payment to the Postal Service

sufficient to cover the desired postage

value download contemporaneously

with a download being made. The

details of this payment requirement are

covered in the Postage Payment

Agreement.

(3) Each provider is required to

incorporate the Postage Payment

Agreement into its postage evidencing

system lease agreement with each

registered user, as follows:

POSTAGE PAYMENT AGREEMENT

By signing this postage evidencing system

lease agreement you agree to initiate payment

for postage using either a USPS-approved

credit card or ACH debit. If you use ACH

debit, you agree to transfer funds directly to

the Postal Service through a financial

institution, as specified by the Postal Service,

for the purpose of prepayment of postage. If

you use a credit card, you agree to use only

those credit cards approved for use for

payment for postage by the Postal Service.

You understand that the provider and its

affiliates shall not hold, or contract with or

otherwise arrange for any third party to hold,

your funds intended for the purchase of

postage. You will be bound by all terms and

conditions of this Postage Payment

Agreement as it may be amended

periodically by the Postal Service.

(4) The provider must require each

registered user who requests a postage

value download to provide the PSD

identification number, the registered

user account number, and the ascending

and descending register readings on the

PSD at the time of the request. The

provider must verify that the

information entered by the registered

user is accurate and matches the

provider’s records. Providers must also

verify that the registered user has

initiated payment to the Postal Service

sufficient to cover the postage value

download requested before proceeding

with the resetting transaction.

Immediately following the completion

of each transaction, the provider must

give the user a statement documenting

the transaction.

(d) Revenue protection. The Postal

Service shall conduct periodic audits

and reviews of the EFRS revenue

protection safeguards employed by each

provider and shall reserve the right to

revoke a provider’s authorization if they

do not meet all EFRS requirements set

forth by the Postal Service. In addition,

the Postal Service shall reserve the right

to suspend the operation of the

provider, as provided in § 502.14, for

any serious operational deficiency that

may result in the loss of funds to the

Postal Service.

(e) Financial operation. The Postal

Service shall establish a separate

account at its designated financial

institution to handle the funds for

payment for postage received from

registered users. The provider may not

establish an account to handle the funds

of registered users intended for the

purchase of postage. Payment

Technologies, Office of the Treasurer,

USPS, will coordinate the

implementation of the ACH debit

process with the provider.

(f) Reports. The provider must submit

a daily financial transaction for each

postage value download or postage refill

according to established EFRS

procedures. The provider must provide

other reports as required by the Postal

Service.

(g) Inspection of records and facilities.

The provider must make its facilities

that handle the operation of the EFRS

and all records about the operation of

the system available for inspection by

representatives of the Postal Service at

all reasonable times.

§ 502.28 Indicia quality assurance.

The provider shall implement a

mailpiece quality assurance program to

ensure the quality and readability of the

indicia and shall instruct the registered

user on the submission of the required

mailpieces. The registered user is

required to forward a mailpiece to the

provider for evaluation when the system

is installed and at least once every 6

58696 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules

months thereafter. If the user fails to

comply with this requirement, the

provider must notify the user that all

future postage value resettings will be

denied. The provider must analyze

these mailpieces for quality and

readability and is required to provide

guidance to the registered user to correct

any deficiencies that are discovered.

The provider must notify the Postal

Service of all noncompliant registered

users, so that the Postal Service can

initiate revocation of the user’s

registration.

§ 502.29 Refunds for postage evidencing

systems that generate information-based

indicia (IBI).

The Postal Service provides refunds

for readable, valid, unused postage on

an unmailed envelope or label, and for

any balance remaining on a PSD

withdrawn from service and in the

possession of the provider, in

accordance with established refund

procedures. Postage losses to the

registered user due to system

malfunctions and the refund of any nonpostal fees are the responsibility of the

provider. Registered users submit

refund requests to the provider in

accordance with Domestic Mail Manual

(DMM) P014. The following procedures

apply, depending on the type of refund

requested:

(a) Refund for unused postage

(1) The provider shall acknowledge

the refund request and confirm that the

appropriate supporting materials have

been received, including Postal Service

Form 3533–PCP–X, Refund Request for

Unused IBI Postage, in accordance with

the requirements in DMM P014.

(2) The provider shall scan the twodimensional barcode in the submitted

indicium, analyze the data to ensure the

indicium is valid, and verify the

following:

(i) The PSD used in producing the

indicium is the expected PSD.

(ii) The unused postage is presented

by the user to whom the PSD that

produced the indicium is registered.

(iii) The date of mailing shown in the

indicium is not more than 10 days

before the date on which the registered

user mailed the indicium for refund.

The date is checked by postmark.

(iv) The human-readable data matches

the corresponding data in the twodimensional barcode.

(v) The PSD certificate has not been

revoked.

(vi) The indicium has not been

submitted before.

(3) The provider shall submit the

indicium data electronically to the

Certificate Authority for verification of

the digital signature.

(4) The provider shall ensure there is

no evidence that the mailpiece has been

processed by the Postal Service.

(5) The provider shall annotate Postal

Service Form 3533–PCP–X, Refund

Request for Unused IBI Postage, and

notify both the registered user and the

manager of Postage Technology

Management, USPS Headquarters, of

any instances where the refund request

for a given, unused indicium will be

denied.

(6) Upon successful signature

verification and completion of all other

required checks listed above, the

provider shall either:

(i) Issue an immediate refund to the

registered user from the provider’s own

funds, or

(ii) Issue the refund to the registered

user within 5 business days of receiving

reimbursement from the Postal Service.

(7) No more frequently than once per

week, the provider shall submit to the

Postal Service a refund request for

unused postage, using the format in

Postal Service Form PCP–X, Provider

Refund Request for Information-Based

Indicia.

(8) The Postal Service shall remit a

check made payable to the provider for

the total amount of the refund request

for unused postage.

(9) The Postal Service reserves the

right to audit the provider’s refund

processing and the unused mailpieces

submitted for refund. Providers are

required to maintain the following

records:

(i) The unused envelopes and labels

submitted for refund, and any other

correspondence related to the refund

request, attached to a copy of the

associated Form 3533 PCP–X, Refund

Request for Unused IBI Postage, and

organized by the date of the provider’s

refund request. The Postal Service will

destroy the unused mailpieces after the

completion of the audit.

(ii) Electronic copies of the scanned

indicia organized by date submitted for

refund. These are maintained until the

Postal Service completes its audit.

(iii) Postal Service Form 3533–PCP–X

(printed copy) submitted by the

registered user to the provider. The

printed copy shall be kept for 1 year. An

electronic, scanned version with the

registered user’s signature shall be kept

for 3 years after the destruction of the

printed copy.

(iv) A copy of each Postal Service

Form PCP–X, Provider Refund Request

for Information-Based Indicia,

submitted by the provider to the Postal

Service. This form shall be maintained

by the provider until completion of the

Postal Service audit.

(v) A refund count (by number of

pieces and postage amount) for each

PSD. This information shall be

maintained until completion of the first

Postal Service audit following the

withdrawal of the PSD from service.

(b) Refund for postage balance

remaining on a PSD that is withdrawn

from service and is in the possession of

the provider.

(1) The registered user informs the

provider of the intention to withdraw

the PSD from service and has the

postage evidencing system generate a

refund request indicium for transmittal

to the provider. The means by which

this is accomplished is at the provider’s

discretion. The transmittal of the refund

request indicium is the last activity that

is permitted for the PSD. If the

registered user has physical possession

of the PSD, the registered user returns

the withdrawn PSD to the provider, in

accordance with regulations for

returning PSDs.

(2) Upon receipt of the refund request

indicium and the PSD (where

applicable), the provider shall scan the

two-dimensional barcode in the

submitted indicium, analyze the data to

ensure the indicium is valid, and verify

the following:

(i) The descending register value in

the refund request indicium is $0.00.

(ii) The PSD used in producing the

indicia is the expected PSD.

(iii) The refund request indicium is

presented by the registered user of the

PSD.

(iv) The PSD certificate has not been

revoked.

(v) There is no evidence of tampering

with the PSD.

(3) The provider shall submit the

refund request indicium data

electronically to the Certificate

Authority for digital signature

verification.

(4) Under no circumstances may a

provider issue a refund for a withdrawn

PSD unless the PSD is in the provider’s

possession.

(5) The provider shall not issue a

refund if there is any question as to the

remaining postage value on the PSD

without first consulting with the

manager of Postage Technology

Management, USPS Headquarters. The

provider shall notify both the registered

user and the manager of Postage

Technology Management of any

instances where the refund request will

be denied.

(6) The provider shall generate a form

equivalent to Postal Service Form 3601–

C, Postage Evidencing System Activity

Report, for withdrawal of the PSD. The

form will include the refund request

indicium.

Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules 58697

(7) Upon successful signature

verification and completion of all other

required checks listed above, the

provider shall initiate a PSD withdrawal

as specified by Postal Service

procedures and shall revoke the PSD

certificate. Then the provider shall

either:

(i) Issue an immediate refund to the

registered user from the provider’s own

funds; or

(ii) Issue the refund to the registered

user within 5 business days of receiving

reimbursement from the Postal Service.

(8) No more frequently than once per

week, the provider shall submit to the

Postal Service a refund request for

withdrawn PSDs, including a listing of

the refund requested by each registered

user, using the format in Postal Service

Form PCP–X, Provider Refund Request

for Information-Based Indicia.

(9) The Postal Service shall remit a

check made payable to the provider for

the total amount of the refund request

for postage value remaining on

withdrawn PSDs.

(10) The Postal Service reserves the

right to audit the provider’s refund

processing and the refund request

indicia. Providers are required to

maintain the following records:

(i) An electronic copy of a form

equivalent to Postal Service Form 3601–

C, Postage Evidencing System Activity

Report, which includes the refund

request indicia, organized by the date of

the provider’s refund request, shall be

kept for 2 years, or until the completion

of the Postal Service audit, whichever is

longer.

(ii) Any other correspondence that is

related to the refund request must be

retained by the provider until the Postal

Service completes its audit.

(iii) A copy of each Postal Service

Form PCP–X, Provider Refund Request

for Information-Based Indicia,

submitted by the provider to the Postal

Service shall be maintained by the

provider until completion of the Postal

Service audit.

§ 502.30 Registered user information.

(a) Providers are required to collect

registration information and transaction

records from registered users on behalf

of the Postal Service and to transmit the

data to the Postal Service as part of the

registration process, the postage

payment process; and, for IBI open

systems, the mailpiece generation

process. Although the Postal Service

does not require the provider to retain

registered user information, the provider

may choose to do so for its own

purposes, subject to the following

limitations:

(1) A provider that retains personal

information regarding a registered user

must issue a privacy policy that informs

the registered user of the information to

be retained and its intended uses.

(2) The provider is strictly prohibited

from disclosing any list of applicants or

registered users, or any identifying

information about any given applicant

or registered user, to any other entity,

for any purpose, without prior

notification to the customer.

(3) The provider must offer the

applicant or registered user the option

to not have their personal information

disclosed to any other entity.

(b) As stated in § 502.21, providers are

required to electronically transmit

information required to apply for a user

registration to the designated Postal

Service central registration processing

facility, on behalf of applicants.

(c) The Postal Service shall use the

registered user information in

accordance with the purposes and

routine uses published in the Privacy

Act system of records USPS 140.020,

Postage-Postage Evidencing System

Records. The Postal Service may use

applicant information in the

administration of postage evidencing

systems and mailing activities, and to

communicate with customers who may

no longer be visiting a traditional USPS

retail outlet. The Postal Service will also

use applicant information to

communicate with USPS customers

through any new retail channels, and for

the following purposes:

(1) To issue (including reregistration,

renewal, transfer, revocation, or refusal,

as applicable) a user registration to a

customer and to communicate with

respect to the status of such registration.

(2) To disclose to a provider the

identity of any PSD and any related user

registration data for any PSDs required

to be removed from service by that

provider as the result of revocation of a

user registration, questioned accurate

registration or other failure of the PSD

to record its operations correctly and

accurately, or decertification by the

Postal Service of any particular postage

evidencing system that generates IBI or

family of such models.

(3) To track the movement of postage

evidencing systems between a provider

and registered users and to

communicate to a provider (but not to

any third party other than the applicant/

registered user) concerning such

movement. The term ‘‘provider’’

includes a provider’s dealers and agents.

(4) To transmit general information to

all registered users concerning rate and

rate category changes implemented or

proposed for implementation by the

Postal Service.

(5) To advertise Postal Service

services relating to the acceptance,

processing and delivery of or postage

payment for mail using informationbased indicia.

(6) To allow the Postal Service to

communicate with USPS customers on

products, services, and other

information otherwise available to USPS

customers through traditional retail

outlets.

(7) To support any internal use by

Postal Service personnel, including

identification and monitoring activities

relating to postage evidencing systems,

provided that such use by the Postal

Service does not result in the disclosure

of applicant information to any third

party and will not enable any third

party to use applicant information for its

own purposes; except that the applicant

information may be disclosed to other

governmental agencies for law

enforcement purposes as provided by

law.

(8) To identify authorized product

service providers or announce deauthorization of an authorized product

service provider, or provide currently

available public information, where an

authorized provider is identified.

(9) To promote and encourage the use

of information-based indicia as a form of

postage evidencing, provided that the

same information is provided to all

registered users, and no particular

provider will be recommended by the

Postal Service.

(10) To contact registered users in

cases of revenue fraud or revenue

security, except that any registered user

suspected of fraud shall not be

identified to other users.

(11) To disclose to a provider

applicant information pertaining to that

provider’s customers that the Postal

Service views as necessary to enable the

Postal Service to carry out its duties and

purposes.

(12) To transmit to a provider all

applicant and system information

pertaining to that provider’s customers

and systems that may be necessary to

permit such provider to synchronize its

registered user and PSD database with

information contained in the computer

files of the Postal Service, including but

not limited to computerized data that

reside in Postal Service postage

evidencing system management

databases.

(13) Subject to the conditions stated

herein, to communicate in oral or

written form with any or all applicants

and registered users any information

that the Postal Service views as

necessary or desirable to enable the

Postal Service to carry out its duties and

purposes under this part 502.

58698 Federal Register / Vol. 65, No. 191 / Monday, October 2, 2000 / Proposed Rules

§ 502.31 Intellectual Property

(a) None of the following shall

constitute a grant of authorization or

consent by the Postal Service or the

United States to a provider or any other

person to manufacture or use any

patented invention or to infringe any

copyright, under 28 U.S.C. 1498 or

otherwise:

(1) The publication of performance

criteria, or

(2) The granting of authorization to a

provider under part 501 or this part 502,

or

(3) The granting of approval to a

provider to market or distribute a

postage evidencing system.

(b) A provider must reimburse the

Postal Service for any compensation or

other costs or damages (other than the

Postal Services’ own attorneys’ fees and

other costs of defense) that the Postal

Service or the U.S. Government is

required, by final order of a court of

competent jurisdiction which is either

not subject to appeal or as to which the

time to appeal has already passed, to

pay on a claim of infringement or

unauthorized use of a U.S. patent or

U.S. copyright, under any legal theory,

based on either:

(1) The manufacture, use, sale or

importation of provider’s postage

evidencing system, whether or not such

manufacture, use, sale or importation is

alleged to be pursuant to authorization

or consent provided under 28 U.S.C.

1498;

(2) The use of provider’s postage

evidencing system by mailers in a

manner specified or intended by

Provider to create postage indicia, apply

such indicia to mail, and/or deposit

such mail with the USPS; or

(3) The granting by the Postal Service

to provider of government authorization

or consent, under 28 U.S.C. 1498 or

otherwise, to make or use a patented

invention or infringe a copyright in

connection with the manufacture, use or

sale of provider’s postage evidencing

system, or the activities of provider

pursuant to such grant of authorization

and consent.

(c) The Postal Service may suspend

approval of a postage evidencing system

on 60 days’ notice to provider if a court

of competent jurisdiction determines

that the manufacture or use of the

postage evidencing system, or the

creation or validation of the indicia

produced thereby, infringes, induces or

contributes to the infringement of, or

otherwise violates any person’s or

entity’s rights under a U.S. patent or

U.S. copyright. The Postal Service shall

reinstate approval of such postage

evidencing system if and so long as:

(1) Such judicial determination is

vacated or reversed; or

(2) The provider duly licenses or

otherwise procures and maintains in

effect (for the benefit of itself, users and

the Postal Service as may be necessary)

the right to conduct, with respect to

provider’s postage evidencing device

and the indicia created thereby, the

activities that the court has determined

to be infringing.

(d) A determination that the

validating of an indicia by the Postal

Service infringes a patent or copyright

shall not be a basis for suspending

provider’s approval if the provider can

establish that alternative, non-infringing

means of performing such validation are

available to the Postal Service with

respect to the indicia created by

provider’s postage evidencing device so

long as such means fully comply with

the performance criteria under which

the postage evidencing device and

indicia have been approved.

(e) The Postal Service may provide

additional requirements relating to

intellectual property in the product

submission procedure, performance

criteria or both (‘‘IP Requirements’’) and

may condition the granting or

maintenance of approval of a postage

evidencing system on provider’s

compliance with those IP Requirements.

When IP Requirements are imposed on

a provider, they shall control over any

conflicting provision in this § 502.31.

(f) The requirements of this § 502.31

shall apply to all aspects of a provider’s

postage evidencing device and the

indicia created thereby, including those

aspects required or specified under

applicable performance criteria.

(g) Notwithstanding § 502.1 to the

contrary, this § 502.31 shall apply to any

postage evidencing system approved by

the Postal Service under part 501, part

502 or otherwise and to any

performance criteria whether directed to

IBI or other forms of postage evidence.

Appropriate amendments to 39 CFR

parts 111 and 502 to reflect these

changes will be published if the

proposal is adopted.

Stanley F. Mires,

Chief Counsel, Legislative.

[FR Doc. 00–25090 Filed 9–29–00; 8:45 am]

BILLING CODE 7710–12–U

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 52

[Region II Docket No. NY39–208,

FRL–6879–8]

Approval and Promulgation of

Implementation Plans; New York;

Motor Vehicle Inspection and

Maintenance Program

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Proposed rule.

SUMMARY: EPA is proposing to approve

a State Implementation Plan (SIP)

revision submitted by New York. This

revision consists of a demonstration of

the effectiveness of New York’s

enhanced motor vehicle inspection and

maintenance (I/M) program

decentralized testing network, to satisfy

the requirements of section 348 of the

National Highway Systems Designation

Act (NHSDA). This revision also

consists of the corrections to six de

minimus deficiencies related to the

Clean Air Act (CAA) requirements for

enhanced I/M. Therefore, EPA is also

proposing to remove all of the de

minimus conditions related to EPA’s

approval of New York’s I/M program

under the NHSDA. In addition, EPA is

proposing to approve New York’s test

method, NYTEST, as being 95 percent

as effective as IM240 in reducing

hydrocarbon emissions, 99 percent as

effective as IM240 in reducing carbon

monoxide emissions and 99 percent as

effective as IM240 in reducing nitrogen

oxide emissions. The effect is to propose

full approval of New York’s enhanced I/

M program.

DATES: Comments must be received on

or before November 1, 2000. Public

comments on this action are requested

and will be considered before taking

final action.

ADDRESSES: All comments should be

addressed to Raymond Werner, Branch

Chief, Air Programs Branch,

Environmental Protection Agency, 290

Broadway, 25th Floor, New York, New

York 10007–1866.

Copies of the documents relevant to

this action are available for public

inspection during normal business

hours at the following locations:

Environmental Protection Agency,

Region II Office, Air Programs Branch,

290 Broadway, 25th Floor, New York,

New York 10007–1866 and New York

State Department of Environmental

Conservation, 50 Wolf Road, Albany,

New York 12233.

FOR FURTHER INFORMATION CONTACT:

Judy-Ann Mitchell, Air Programs