Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 51983 

or appear before that Federal program or 

Federal agency. 

* * * * * 

(e) The Appeals Council will mail a 

notice of its decision on the request for 

reinstatement to the suspended or 

disqualified person. It will also mail a 

copy to the General Counsel (or other 

official the Commissioner may 

designate), or his or her designee. 

* * * * * 

PART 422—ORGANIZATION AND 

PROCEDURES 

Subpart C—[Amended] 

63. The authority for subpart C of part 

422 continues to read as follows: 

Authority: Secs. 205, 221, and 702(a)(5) of 

the Social Security Act (42 U.S.C. 405, 421, 

and 902(a)(5)); 30 U.S.C. 923(b). 

64. Amend § 422.203 by revising 

paragraph (b)(1) to read as follows: 

§ 422.203 Hearings. 

* * * * * 

(b) Request for hearing. (1) A request 

for a hearing under paragraph (a) of this 

section may be made on Form HA–501, 

‘‘Request for Hearing,’’ Form HA–501.1, 

‘‘Request for Hearing, part A Hospital 

Insurance Benefits,’’ electronically at 

the times and in the manner that we 

prescribe (see §§ 404.933, 404.934, 

416.1433, and 416.1434 of this chapter), 

or by any other writing requesting a 

hearing. The request must be filed at an 

office of the Social Security 

Administration, usually a district office 

or a branch office, or at the Veterans 

Administration Regional Office in the 

Philippines (except in title XVI cases), 

or at a hearing office of the Office of 

Disability Adjudication and Review, or 

with the Appeals Council. A qualified 

railroad retirement beneficiary may, if 

(s)he prefers, file a request for a hearing 

under part A of title XVIII with the 

Railroad Retirement Board. Form HA–

501 may be obtained from any Social 

Security district office or branch office. 

* * * * * 

Subpart F—[Amended] 

65. The authority citation for subpart 

F of part 422 continues to read as 

follows: 

Authority: Sec. 1140(a)(2)(A) of the Social 

Security Act. 42 U.S.C. 1320b–10(a)(2)(A) 

(Pub. L. 103–296, Sec. 312(a)). 

66. Amend § 422.515 by adding a 

second sentence to the introductory text 

to read as follows: 

§ 422.515 Forms used for withdrawal, 

reconsideration and other appeals, and 

appointment of representative. 

* * * Prescribed forms include our 

traditional pre-printed forms, forms 

completed on computer screens based 

on information you give us, or SSAapproved forms completed and 

submitted using SSA’s Internet Web 

site. 

* * * * * 

[FR Doc. E8–20500 Filed 9–5–08; 8:45 am] 

BILLING CODE 4191–02–P 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3001 

[Docket No. RM2008–2; Order Nos. 99 and 

102] 

Periodic Reporting Rules 

AGENCY: Postal Regulatory Commission. 

ACTION: Proposed rule; availability of 

rulemaking petition. 

SUMMARY: Under a new law, the Postal 

Service must file an annual compliance 

report with the Postal Regulatory 

Commission on costs, revenues, rates, 

and quality of service associated with its 

products. It has filed documents with 

the Commission to change some of the 

methods it uses to compile the fiscal 

year 2008 report. In the Commission’s 

view, these documents constitute a 

rulemaking petition. Therefore, it has 

established a rulemaking docket to 

allow the public to comment on 

potential changes in periodic reporting 

rules. 

DATES: 1. Technical conference: August 

27, 2008 at 10 a.m. 

2. Initial comments: September 8, 

2008. 

3. Reply comments: September 15, 

2008. 

ADDRESSES: Submit comments 

electronically via the Commission’s 

Filing Online system at http:// 

www.prc.gov. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: On August 

11, 2008, the Commission received 

Request of the United States Postal 

Service for Commission Order 

Amending the Established Costing 

Methodologies for Purposes of Preparing 

the FY 2008 Annual Compliance Report 

(Request). In the Request, the Postal 

Service states that it has eight changes 

that it would like to make to the 

methods by which it compiles the FY 

2008 version of the annual report that is 

required by 39 U.S.C. 3652 to provide to 

the Commission each year. It cites 39 

U.S.C. 3652(a)(1), which gives the 

Commission the responsibility to 

prescribe methods that are used to 

produce the information that is 

compiled in the annual report. Request 

at 2. Among other things, the 

information supplied in the annual 

report is used by the Commission to 

prepare the Annual Compliance 

Determination (ACD) that is required by 

39 U.S.C. 3653. 

The Postal Service references pages 9–

10 of the most recent Commission ACD. 

FY 2008 Annual Compliance 

Determination, March 27, 2007 (FY 

2007 ACD). There, numerous 

commenters recommended that the 

Postal Service not change methods for 

collecting and analyzing cost data 

unless interested persons have had an 

opportunity to evaluate and comment 

on them. The Commission concurred, 

stating that it intended to issue 

regulations governing periodic reports 

generally (including the Postal Service’s 

annual report) that would vet proposed 

changes in analytical methods through 

informal rulemakings in advance of the 

filing of the report. FY 2007 ACD at 10. 

I. Procedural Expedition 

The Postal Service notes that it is 

already preparing its annual report for 

FY 2008. Given the lead time that is 

required, it observes that it is unlikely 

that the regulations that the Commission 

described in its FY 2007 ACD can be 

issued, and public scrutiny of particular 

changes in analytical methods could be 

completed under those regulations, in 

time to be incorporated in its FY 2008 

annual report. It therefore asks that an 

alternative, expedited procedure be 

used to vet its proposed changes in 

analytical methods. 

In the Postal Service’s view, none of 

its proposed methodological changes 

‘‘are of sufficient complexity to hinder 

relatively straightforward evaluation by 

both the parties and the Commission.’’

Request at 2. It therefore proposes that 

its filing be treated as a rule 21 motion 

for a Commission order approving its 

proposed changes to current baseline 

methods used to analyze costs. Id., n.2. 

The Postal Service notes that its Request 

includes the rationale for each of the 

eight methodological changes that it 

proposes, and estimates the impact of 

each change on the costs borne by mail 

classes. Equipped with this information, 

it suggests, the public could provide 

input in the form of answers supporting 

or opposing the motion. It recognizes, 

however, that the 7-day period that rule 

21 allows for answers to motions should 


sroberts on PROD1PC70 with PROPOSALS
51984 Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 

1Time Warner Inc. (Time Warner) has responded 

with a motion asking that the deadline for answers 

be extended to September 2, 2008. See Motion of 

Time Warner Inc. to Extend the Period for Response 

to Request of the United States Postal Service for 

Commission Order Amending the Established 

Costing Methodologies for Purposes of Preparing 

the FY 2008 Annual Compliance Report, August 14, 

2008 (Motion). It argues that the substance of these 

proposals is not sufficiently simple and 

straightforward to be vetted in 7 days. It argues, 

further, that it needs more time to examine and 

comment on the alternative procedures that the 

Postal Service proposes, particularly if they are to 

become standard procedures for vetting 

methodological changes. Motion at 3–4. The 

rulemaking procedures and extended deadlines 

authorized in this notice should meet Time 

Warner’s procedural objections. 

probably be lengthened. The Postal 

Service notes that if interested parties 

feel that more elaborate procedures for 

their input are needed, they can include 

those suggestions in their answers. Id. at 

2. As noted, the Postal Service’s petition 

is followed by a description of each 

proposal, together with its background, 

objective, and supporting rationale.1

Although it does not have all of the 

changes to baseline analytical methods 

that it hopes to incorporate in its 2008 

annual report ready to submit for public 

comment, the Postal Service observes 

that the process should begin. It notes 

that these proposed changes would be 

part of the core cost and revenue 

analysis process, which must be 

finalized before other changes, such as 

those from new special studies, can be 

added to its cost and revenue analysis. 

It says that other proposed changes will 

be submitted for public scrutiny as they 

are developed. Id. at 3. 

The Commission agrees that the 

process of vetting proposed changes in 

the methods by which cost incurrence 

will be analyzed in the Postal Service’s 

FY 2008 annual report should begin 

now with those proposals that are 

sufficiently refined to be submitted for 

public comment. The Request suggests 

that it should be procedurally sufficient 

for the Commission to adopt an order 

ruling on its proposed methodological 

changes. The Commission, however, 

prefers at least initially to interpret the 

definition of a ‘‘rule’’ in the 

Administrative Procedure Act (APA) to 

include analytical methods that affect 

the way costs or revenues are accounted 

for in a rate setting regulatory regime. 

The APA requires that notice be given 

in the Federal Register and an 

opportunity for public comment be 

provided before substantive rules take 

effect. See 5 U.S.C. 551(4) and 553. For 

this reason, the Commission will treat 

the Postal Service’s August 11, 2008 

filing as a petition to initiate an informal 

rulemaking consistent with section 553 

of the APA. 

The Commission hereby grants the 

Postal Service’s petition. Since time is 

of the essence in vetting these proposed 

methodological changes, the 

Commission is tentatively scheduling a 

technical conference in which Postal 

Service experts would be available to 

answer questions related to these 

proposals. The technical conference will 

be held on August 27, 2008 at 10 a.m. 

in the Commission’s hearing room. The 

Postal Service should also arrange for 

the possibility that a follow-up technical 

conference could be held on the 

afternoon of September 3, 2008, if 

needed. Interested persons may file 

written comments on the Postal 

Service’s proposals on or before 

September 8, 2008. Reply Comments 

may be filed on or before September 15, 

2008. 

II. Substance of Postal Service 

Proposals 

The Postal Service proposals, see 

Request at 5 et seq., are described 

below. 

Proposal One. Proposed Group 

Specific Cost Change (Cost Segment 18). 

Objective: A methodology change is 

proposed for the manner in which 

headquarters Finance Number (FN) Cost 

Segment 18 costs are categorized in the 

FY 2008 Cost & Revenue Analysis (CRA) 

Report. 

Background: In FY 2007, and for years 

before, almost all Cost Segment 18 costs 

for headquarters Finance Numbers were 

treated as institutional costs. With the 

enactment of the Postal Act of 2006, 

however, there is a need to define a new 

category of cost—‘‘group-specific’’ cost. 

Group-specific costs are those costs 

which cannot be attributed to individual 

products, but which are caused by 

either the competitive or marketdominant products as a group. The 

remaining business sustaining or 

common fixed costs are ‘‘institutional.’’

An example of a competitive product 

group-specific cost would be a HQ 

organization unit that only supports 

competitive products. Pursuant to 

Commission rule 3015.7(a), the 

Commission is currently using 

competitive products’ attributable costs, 

supplemented to include causally 

related, group-specific costs, to test for 

cross-subsidies. 

Competitive products also must cover 

an ‘‘appropriate share’’ of institutional 

cost. In addition to the identification of 

competitive product group-specific 

costs, the identification of marketdominant group-specific costs is also 

important, as the value of the 

institutional cost will be the residual of 

postal costs that are not attributable to 

products and are not group-specific to 

either group. To the extent costs are 

group-specific costs, the remaining 

‘‘institutional cost’’ will be a smaller 

amount than it would be otherwise. 

Proposal: The new taxonomy for costs 

places a new requirement to be able to 

identify group-specific HQ 

administrative and program costs for 

market-dominant and competitive 

product groups. The Postal Service 

captures costs for administrative 

activities and programs using a cost 

center designation of the ‘‘Finance 

Number.’’ Administrative organization 

units and programs are assigned a 

Finance Number and all expenses are 

charged to the Finance Number. Most 

Headquarters activities and programs 

support the entire enterprise or support 

all products. However, the cost in some 

Finance Numbers may be associated 

with either competitive or marketdominant product groups. 

To facilitate the identification of 

group-specific costs in Headquarters, 

the Postal Service has created a new 

attribute for Finance Numbers called the 

Product Activity Attribute. The value of 

the Product Activity Attribute will 

indicate which of the following 

describes the activities and costs of the 

Headquarters Finance Number: 

Market-Dominant—Activity in 

Finance Number only supports MarketDominant Products. 

Competitive—Activity in Finance 

Number only supports Competitive 

Products. 

Common/Enterprise Sustaining—

Activity in Finance Number supports 

both groups of products, or supports the 

Enterprise as a whole. 

In the analysis to support the Annual 

Compliance Report beginning in FY 

2008, the Postal Service proposes to use 

the value of the Product Activity 

Attribute for Headquarters Finance 

Numbers to help identify group-specific 

costs (and possibly some productspecific costs) for competitive and 

market-dominant products. That is, 

expenses in Finance Numbers deemed 

‘‘Market-Dominant’’ would be 

candidates for market-dominant groupspecific costs and expenses in Finance 

Numbers deemed ‘‘Competitive’’ would 

be candidates for competitive product 

group-specific costs. Costs in Finance 

Numbers deemed ‘‘Common/Enterprise 

Sustaining’’ would be candidates for 

Institutional Cost. The analysis of 

group-specific costs by Finance Number 

would not replace, but rather would 

supplement, existing volume-variable 

and product-specific analysis of 

expenses in Headquarters Finance 

Numbers. 


sroberts on PROD1PC70 with PROPOSALS
Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 51985 

Approach To Determine Value of the 

Product Activity Attribute 

A. Existing Finance Numbers 

The Postal Service is conducting a 

survey of the owners of the 

Headquarters Finance numbers to obtain 

information on the type of activity or 

program performed in the Finance 

Number. Responses to the survey will 

be used to help ascertain whether the 

activity supports a specific product 

group or is Common/Enterprise 

Sustaining. The Cost Attribution unit in 

Corporate Financial Planning will 

analyze the results of the survey and 

conduct further research as necessary to 

determine the appropriate value of the 

Product Activity Attribute for each 

Finance Number. The value of the 

Product Activity Attribute will be 

populated in the Finance Number 

Control Master File. 

B. New Finance Numbers 

The Postal Service will modify its 

current business process for the creation 

of new Finance Numbers to include a 

step for the requestor of the new 

Finance Number to respond to the 

Product Activity Survey Questions. The 

Cost Attribution unit in Corporate 

Financial Planning will serve as the 

gate-keeper for review and approval of 

the value of the Product Activity 

Attribute in the official Finance Number 

Control Master File. 

Impact: The proposed approach is 

designed to position the Postal Service 

to identify group-specific costs as the 

organization and strategies for Mailing 

Services (i.e., Market-dominant 

products) and Shipping Services (i.e., 

Competitive products) evolve. The 

Postal Service does not have survey data 

to estimate the impact of the proposed 

approach on FY 2007 costs and, because 

of the substantial amount of HQ 

organizational restructuring which has 

taken place this fiscal year, believes that 

historical information from FY 2007 

would have limited value in projecting 

future group-specific costs. The typical 

FN at headquarters usually contains 

several million dollars, however, so 

depending on the numbers of FNs 

determined to be Market-Dominant or 

Competitive Product, something 

between tens of millions to perhaps as 

much as several hundreds of millions of 

dollars would be expected to move out 

of institutional costs and into group 

specific costs. 

Proposal Two: Proposed GroupSpecific Cost Change (Cost Segment 16). 

Objective: A methodology change is 

proposed for the manner in which 

advertising costs (Cost Segment 16) for 

Click-N-Ship and Carrier Pickup are 

assigned in the FY 2008 Cost & Revenue 

Analysis (CRA) Report. 

Background: In the FY 2007 CRA, the 

advertising costs for Click-N-Ship and 

Carrier Pickup were treated as 

institutional, even though these costs 

related to specific products (Express 

Mail, Priority Mail, International 

packages, International Express Mail, 

and International Priority Mail), all of 

which are Competitive Products. 

Proposal: In FY 2008, it is proposed 

that advertising costs for Click-N-Ship 

and Carrier pickup be assigned as a 

group-specific cost to competitive 

products, as the advertising for these 

services relates specifically to products 

that are competitive. 

Impact: In FY 2007, approximately 

$40 million was spent on advertising for 

Click-N-Ship and Carrier Pickup, 

together. Therefore, a similar amount of 

group-specific costs to competitive 

products might be expected in FY 2008. 

Proposal Three: Proposed In-Office 

Cost System (IOCS) Mixed Mail. Coding 

Changes. Objective: changes are 

proposed to the IOCS coding of mixed 

mail that better support shape-based 

costing by the Postal Service. 

Background: Currently, readings 

observed on employees handling 

wheeled containers, pallets, and empty 

containers are assigned mixed mail 

activity codes that depend only on the 

operation where the sampled employee 

was assigned. While this approach 

works well for employees in operations 

that handle a single shape of mail, it is 

fairly imprecise for allied operations 

such as platform. 

Proposal: For FY 2008, it is proposed 

to use additional information on the 

shape (letter, flat, or parcel) of the 

contents in a wheeled container or 

pallet when assigning IOCS mixed mail 

codes. If the contents are all of the same 

shape (for example, all loose lettershaped mail and letter trays), it is 

proposed to assign the mixed mail code 

to the corresponding shape. For empty 

equipment, it is proposed to assign a 

shape-based mixed mail code that 

corresponds to the equipment type; for 

example, empty letter trays would be 

assigned a letter-shape code. Containers 

that contain multiple shapes or no 

shape information would continue to be 

assigned as they are now. 

Impact: There would be a decrease in 

the IOCS dollar-weighted tallies 

associated with IOCS activity codes for 

mixed mail all shapes and empty 

equipment of approximately 28 percent, 

and a corresponding increase in shapespecific mixed mail codes of 86 percent. 

These changes, when incorporated in 

the mail processing model, would 

slightly increase unit costs for parcelshape mail, slightly decrease them for 

letter-shape mail, and leave costs for 

flat-shape almost unchanged. 

Proposal Four: Proposed City Carrier 

Collection Cost Change. Objective: A 

change is proposed to identify an 

additional $60 million of First-Class 

Mail product specific cost in collection 

costs for city delivery carriers. 

Background: In the FY 2007 CRA, the 

Postal Service attributed the nonvolume variable portion ($60 million) of 

the city carrier time, associated with 

picking up mail in blue collection 

boxes, to First-Class single-piece letters. 

However, in the Commission’s FY 2007 

Annual Compliance Determination 

Report, the Commission rejected this 

treatment. 

Proposal: For FY 2008, the Postal 

Service again proposes that this $60 

million be attributed to First-Class 

single-piece letters. These costs 

represent a portion of the labor costs for 

collecting mail at ‘‘blue’’ collection 

boxes. The Commission correctly noted 

in its FY 2007 Annual Compliance 

Determination that the boxes do not 

state that their use is solely for the 

collection of First-Class single-piece 

letters. Still, over 90 percent of 

collection box mail is First-Class singlepiece letters. (Moreover, in the new 

regime, single-piece letters and singlepiece cards are now both components of 

the same Mail Classification Schedule 

‘‘product’’ to which these costs will be 

treated as product specific, which is a 

change from the old regime in which 

cards and letters were separate 

subclasses.) Collection boxes are put 

into service for collecting First-Class 

single-piece letters, though a small 

amount of other products are sometimes 

deposited there. Furthermore, as of July 

2007, the Postal Service prohibited 

stamped mail over 13 ounces from being 

deposited in these collection boxes, for 

security reasons. This would exclude 

some classes of mail that would have 

been there previously. Finally, with 

Carrier Pickup, competitive products 

such as Express and Priority Mail now 

have an alternative to using collection 

boxes. Therefore, the non-volume 

variable labor costs of sweeping 

collection boxes are reasonably treated 

as product specific to First-Class singlepiece letters. Of course, to the limited 

extent that other types of mail are 

deposited in collection boxes, they will 

continue to get a proportionate 

distribution of the volume-variable 

costs, based on the existing distribution 

key. 

Impact: The impact is $60 million of 

attributable cost for First-Class singlepiece letters, which would be 

institutional otherwise. 


sroberts on PROD1PC70 with PROPOSALS
51986 Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 

Proposal Five: Proposed Express Mail 

Processing Changes. Objective: The 

purpose of this document is to propose 

addressing and implementing the 

changes recommended in the 

Commission’s FY 2007 Annual 

Compliance Determination Report for 

(1) the distribution key for the costs of 

the mail processing activity called ‘‘out 

of office, delivering Express Mail,’’ and 

(2) the treatment of the non-volume 

variable portion of the cost for the same 

mail processing activity. 

Background: In the FY 2007 CRA, the 

distribution key used for the costs of the 

mail processing activity called ‘‘out of 

office, delivering Express Mail’’ were 

the costs of the mail processing 

activities that the clerks were 

performing when they were ‘‘in office.’’

However, in the Commission’s FY 2007 

Annual Compliance Determination 

Report, the Commission suggested using 

Revenue, Pieces, and Weight (RPW) 

volumes of domestic and international 

Express to distribute the ‘‘out of office, 

delivering Express Mail’’ costs. Thus, 

the Postal Service is proposing adoption 

of the Commission’s suggestion. 

In the FY 2007 CRA, the non-volume 

variable portion (57 percent) of the costs 

for the ‘‘out of office, delivering Express 

Mail’’ activity was treated as 

institutional. In the Commission’s FY 

2007 Annual Compliance Determination 

Report, the Commission suggested the 

Postal Service review this variability/ 

treatment and return with further 

suggestions. 

Proposal: For FY 2008, the Postal 

Service proposes adopting the 

Commission’s suggestion to use the 

relative RPW volumes of domestic and 

international Express Mail to form the 

distribution key. 

For FY 2008, since the Postal Service 

does not have a new study to update the 

variability, it is proposing continuing 

with the 43 percent variability (with the 

remaining 57 percent non-volume 

variable), and also proposing to treat the 

57 percent non-volume variable amount 

as group-specific to Competitive 

Products, as these costs are solely for 

domestic and international Express 

Mail, which are both Competitive 

Products. 

Impact: Using the RPW volume of 

domestic and international Express Mail 

shifts about $4.346 million away from 

domestic Express Mail and into 

international Express Mail (using FY 

2007 cost information in C/S 3.1 inputs 

to the spreadsheets). 

Treating the 57 percent non-volume 

variable costs as Group Specific to 

Competitive Products shifts about 

$33.882 million from Institutional Costs 

to Attributable Competitive Group 

Specific (using FY 2007 cost 

information). 

Proposal Six: Proposed Change to 

Distribution of Empty Equipment Costs 

Objective: For FY 2008, the Postal 

Service proposes a change in the 

methodology by which attributable 

empty equipment Cost Segment 14 

(Purchased Transportation) costs are 

distributed to products. 

Background: Accrued purchased 

transportation empty equipment costs 

are contained in two general ledger 

accounts, 53191 and 53192, for highway 

and rail empty equipment costs, 

respectively. Empty equipment costs are 

generally incurred when empty 

equipment items, i.e. letter trays, flat 

tubs, sacks, rolling stock, etc., are 

transported between mail processing 

facilities and Mail Transport Equipment 

Service Centers (MTESC), or from 

MTESC directly to large mailers. 

The attributable costs are computed 

by applying the variability factor to the 

accrued costs. The variability for 

transporting empty equipment by 

highway is the average cost weighted 

variability from all contracted highway 

transportation (approximately 80 

percent). The variability for transporting 

empty equipment by rail is equal to the 

freight rail variability (approximately 99 

percent). The Postal Service is not 

proposing any change in the variability 

factor applied to either highway or rail 

accrued empty equipment costs. 

Currently, after the highway and rail 

attributable empty equipment costs are 

computed, they are distributed to 

products in the same proportions as the 

aggregate of all non-amphibious (that is, 

with the exception of inland and 

offshore water) Cost Segment 14 costs, 

using a simple three-step process. First, 

all other attributable Cost Segment 14 

costs are distributed to products based 

on the distribution keys and distribution 

factors for the various other Cost 

Segment 14 components. Second, based 

on the results of the first step, the 

cumulative proportion of all nonamphibious Cost Segment 14 costs that 

have been distributed to each product is 

calculated. Third, each product then 

receives the same proportion of empty 

equipment costs as it received of total of 

all non-amphibious Cost Segment 14 

costs. This methodology has been 

utilized in PRC versions of the CRA 

since FY 2000. 

Proposal: In the second step of the 

distribution process described above, 

the Postal Service is proposing to 

exclude a portion of Cost Segment 14 

costs mapped to component 828 (Total 

International) when calculating the 

cumulative distribution factors used to 

distribute highway and rail empty 

equipment attributable costs to 

products. Specifically, it proposes to 

exclude costs from accounts 53261, 

53262, 53263, and 53268 before 

calculating the distribution key that 

attributes empty equipment costs to 

products. In FY07, those four accounts 

totaled $472.4 million. 

Rationale: The Postal Service believes 

the current method of allocating 

attributable empty equipment costs to 

products should be refined to compute 

the distribution factors after excluding 

the portion of costs mapped to 

component 828 (Total International) 

that are not transportation related. The 

accounts recommended to be excluded 

from the distribution factor calculation 

are for terminal dues (accounts 53262, 

53263, 53268) and for internal 

conveyance charges (account 53261). 

These costs are largely the result of 

settling foreign postal transactions, and 

are not transportation related. Since 

there is no apparent causal relationship 

between variations in nontransportation component 828 costs and 

empty equipment costs, these nontransportation costs should be 

eliminated from the distribution factor 

calculation. 

In the current domestic Cost Segment 

14 model, all component 828 costs are 

mapped to the International Mail 

product group. As a result, including all 

component 828 costs (transportation 

and non-transportation) in computing 

the empty equipment distribution 

factors causes International Products to 

be assigned an inequitable proportion of 

empty equipment costs. Computing the 

distribution factors after excluding the 

non-transportation related portion of 

component 828 costs will result in a 

fairer distribution of highway and rail 

empty equipment costs to products. Of 

course, international mail products are 

sampled as they travel via the various 

modes of domestic transportation, and 

they will therefore continue to be 

assigned an appropriate share of empty 

equipment costs on that basis. 

Impact: The following table which 

shows the impact of the proposed 

change on products (using FY07 mail 

categories and costs). The proposed 

methodology results in International 

Products receiving $9 million less in 

empty equipment costs, while First 

Class Mail and Priority Mail each 

receive $3 million in additional 

highway and rail empty equipment 

costs, respectively. 


sroberts on PROD1PC70 with PROPOSALS
Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 51987 

IMPACT OF PROPOSED CHANGES

Class, subclass, or 

special service 

FY 2007 Highway empty 

equipment 

costs 

FY 2007 Proposed highway 

empty equipment costs 

Highway difference (proposed-current) FY 2007 Rail 

empty equipment costs 

FY 2007 Proposed rail 

empty equipment costs 

Rail difference 

(proposedcurrent) 

Highway + rail 

difference 

(proposedcurrent) 

First-Class Mail: 

Single-Piece Letters .................... $10,259 $11,193 934 $4,839 $5,272 433 1,368 

Presort Letters ...... 9,863 10,750 887 4,676 5,090 414 1,301 

Single-Piece Cards 126 137 11 61 66 5 16 

Presort Cards ........ 297 324 27 143 156 13 40 

Total FirstClass .......... 20,545 22,405 1,860 9,719 10,584 865 2,725 

Priority Mail .................. 24,157 26,393 2,236 11,156 12,169 1,012 3,248 

Express Mail ................ 1,799 1,964 165 837 912 75 240 

Periodicals: 

Within County ....... 2 2 0 1 1 0 0 

Outside County ..... 3,633 3,963 330 1,716 1,870 153 483 

Total Periodicals ............. 3,635 3,965 330 1,717 1,870 153 484 

Standard Mail: 

Enhanced Carrier 

Route ................. 1,361 1,485 124 636 693 57 181 

Regular ................. 6,591 7,183 593 3,125 3,402 277 869 

Total Standard 

Mail ............. 7,951 8,668 717 3,761 4,094 334 1,050 

Package Services: 

Parcel Post ........... 5,045 5,508 462 2,355 2,567 212 674 

Bound Printed Matter ...................... 1,197 1,305 108 568 618 50 159 

Media Mail ............ 1,695 1,849 154 806 878 72 226 

Total Package 

Services ..... 7,938 8,662 724 3,729 4,064 334 1,059 

U.S. Postal Service ...... 567 620 53 265 289 24 77 

Free Mail ...................... 79 86 7 38 41 3 10 

International Mail .......... 14,409 8,31 (6,091) 6,73 3,930 (2,802) (8,893) 

Total Volume 

Variable ...... 81,079 81,079 (0) 37,953 37,953 (0) (0) 

Proposal Seven: Proposed Change in 

Distribution Key for Vehicle Service 

Driver (VSD) Costs. 

Objective: A methodology change is 

proposed for FY 2008 in the distribution 

key for Cost Segment 8 (Vehicle Service 

Drivers) costs. 

Background: Cost Segment 8 includes 

the salaries, benefits, and related costs 

of vehicle service driver (VSD) labor. 

VSD workload involves transporting 

mail using postal-owned and leased 

vehicles. Transportation runs are made 

between post offices, branches, 

Processing and Distribution Centers/ 

Facilities, Air Mail Centers/Air Mail 

Facilities, Bulk Mail Centers, depots, 

and certain customer locations. 

The attributable costs are calculated 

by applying the variability factor of 

60.44 percent to the accrued costs 

(approximately $660 million in FY 

2007). The volume variability factor was 

developed in R97–1 (USPS–T–20, 

Exhibit 2 Revised, page 22). This 

proposal does not address changing the 

volume variability factor. In FY 2007, 

there were approximately $400 million 

in VSD attributable costs. Currently, 

after the attributable costs are 

calculated, they are distributed to 

products in the same proportions as 

cubic feet of originating mail obtained 

from Revenue, Pieces and Weight (RPW) 

Statistics. 

Proposal: The Postal Service is 

proposing to distribute the attributable 

costs to products in the same 

proportions as the estimated cubic-foot 

miles of mail sampled on Intra-SCF 

routes. The relevant proportions are 

developed through the Transportation 

Cost System (TRACS). 

Rationale: The Postal Service submits 

that the current method of distributing 

attributable costs to products incorrectly 

assigns Vehicle Service Driver labor 

costs to mail that originates at the 

Destination Delivery Unit (DDU). 

Presumably, this mail is entered at the 

DDU for delivery on routes from that 

office, and thus avoids VSD costs. The 

current methodology, however, treats all 

originating mail, regardless of entry 

point, as incurring the same amount of 

these labor costs. Absent a specific VSD 

distribution key, the Postal Service takes 

the view that a distribution key 

consisting of the cubic-foot-mile 

proportions on Intra-SCF runs provides 

a reasonable proxy for distributing 

attributable VSD costs to products. 

Relative proportions of mail transported 

by Intra-SCF contracts are much more 

likely to be representative of VSD mail 


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51988 Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 

than relative proportions of originating 

cube, which necessarily include DDU 

mail that VSD drivers are unlikely to 

transport. Intra-SCF highway contracts, 

by definition, provide local 

transportation and include some trips 

from mail processing facilities to 

delivery units. 

Impact: The following table which 

shows the impact of the proposed 

change on products (using FY 2007 

costs). 

IMPACT OF PROPOSED CHANGE ON PRODUCTS

FY 2007 Class, subclass, or special service Highway intraSCF highway Highway cubic 

feet 

Current highway 2007 CS8 

costs 

Proposed FY 

2007 rail costs 

using intraSCF 

Proposed 

minus 

proposed rail 

current costs 

Current 

percent 

Rail proposed 

percent 

First-Class Mail: 

Single-Piece Letters .................... $145,729 109,232 $23,408 $69,963 $46,555 5.89 17.60 

Presort Letters ...... 56,127 129,637 27,781 26,946 (835) 6.99 6.78 

Single-Piece Cards 2,718 971 208 1,305 1,097 0.05 0.33 

Presort Cards ........ 4,857 2,852 611 2,332 1,721 0.15 0.59 

Total FirstClass .......... 209,431 242,692 52,008 100,546 48,538 13.08 25.29 

Priority Mail .................. 216,478 398,040 85,298 103,929 18,631 21.46 26.15 

Express Mail ................ 11,041 8,334 1,786 5,301 3,515 0.45 1.33 

Periodicals: 

Within County ....... 112 10,277 2,202 54 (2,148) 0.55 0.01 

Regular ................. 90,696 145,187 31,113 43,542 12,429 7.83 10.95 

Total Periodicals ............. 90,807 155,464 33,315 43,596 10,281 8.38 10.97 

Standard Mail: 

Enhanced Carr Rte 50,726 226,200 48,473 24,353 (24,120) 12.19 6.13 

Regular ................. 116,008 263,241 56,411 55,694 (717) 14.19 14.01 

Total Standard 

Mail ............. 166,734 489,441 104,884 80,047 (24,837) 26.39 20.14 

Package Services: 

Parcel Post ........... 70,236 302,504 64,825 33,720 (31,105) 16.31 8.48 

Bound Printed Matter ...................... 24,648 149,015 31,933 11,833 (20,100) 8.03 2.98 

Media Mail ............ 16,447 47,026 10,077 7,896 (2,181) 2.54 1.99 

Total Package 

Services ..... 111,331 498,545 106,835 53,449 (53,386) 26.88 13.45 

U.S. Postal Service ...... 8,352 21,612 4,631 4,010 (621) 1.17 1.01 

Free Mail ...................... 1,808 3,024 648 868 220 16 0.22 

International Mail .......... 11,985 37,770 8,094 5,754 (2,340) 2.04 1.45 

Total Volume Variable .................... 827,968 1,854,922 397,499 397,499 ........................ 100.00 100.00 

Proposal Eight: [Proposed change to 

bundle-based mapping for First-Class 

Mail Automation flats] 

Objective: A change in Mail 

Characteristics Study methodology is 

proposed to correct an error in the 

procedure used to map First-Class Mail 

Automation flats pieces to rate elements 

in the FY2007 ACR and the two 

previous rate cases (Docket Nos. R2006–

1 and R2005–1). 

Background: The methodology used 

for mapping preparation characteristic 

to rate element for First-Class Mail 

Automation flats in R2005–1, R2006–1, 

and the 2007 ACR was incorrect. These 

previous Mail Characteristics Studies 

(e.g., in the 2007 ACR, FY07–14) 

included a scheme to map automation 

flats pieces from preparation 

characteristic to rate element that used 

a container-based mapping. In fact, 

however, a bundle-based mapping 

should apply for automation flats. For 

example, an automation piece in a 5- 

digit bundle that is placed in a 3-digit 

container is assessed the 5-digit rate, 

and not the 3-digit rate that would be 

consistent with the presort level of the 

container. (To give a slightly more 

complete background, the current 

container-based mapping scheme was 

appropriate when designed in 

anticipation of adoption of a containerbased rate structure. The error, so to 

speak, occurred when the containerbased rate structure was never 

implemented, but, through oversight, 

the container-based mapped scheme 

was nonetheless maintained in the 

spreadsheets, rather than being adapted 

to a bundle-based mapping scheme to 

reflect the actual bundle-based rate 

structure. The intent of this proposal is 

to correct that oversight.) 

Rationale: The bundle-based rates are 

in effect for automation First-Class Mail 

flats. Pieces are assessed postage based 

on the presort level of the bundle, not 

the presort level of the container. 

Impact: The correction of the 

mapping of preparation characteristic 

does not alter the aggregate volume of 

pieces by rate element because RPW rate 


sroberts on PROD1PC70 with PROPOSALS
Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 51989 

element volumes are used as control 

values. The correction, however, will 

alter the distribution of pieces across 

preparation characteristic within rate 

elements. The effect of the correction 

will increase the modeled cost for all 

First-Class Mail Automation flats rate 

elements. The costs for 5-digit 

automation pieces increase because the 

5-digit rate element includes pieces in 

5-digit bundles that have been placed in 

MADC, ADC or 3-digit tubs and incur 

additional bundle sorts. In the incorrect 

versions, the 5-digit automation rate 

element only included pieces in 5-digit 

trays, which do not incur bundle sorting 

costs. The costs of 3-digit automation, 

ADC automation, and MADC 

automation pieces increase because 

these rate elements previously included 

the relatively lower cost pieces in 

bundles with a finer bundle presort than 

the container sort. For example, the 3- 

digit automation modeled costs 

included the modeled costs of 5-digit 

bundles that do not incur as many 

piece-sorts as pieces in 3-digit bundles. 

The increase in the modeled costs for 

each rate element decreases the CRA 

adjustment factor. As a result of a 

decrease in the CRA adjustment factor, 

the non-auto presort rate category costs 

go down. The effect on the avoided 

costs is indeterminate because the 

avoided costs depend on the estimated 

distribution of pieces across preparation 

characteristic. 

[The following text added by Order 

No. 102.] On August 18, 2008, Order No. 

99 [footnote omitted] established this 

docket to evaluate eight changes in 

costing methods that the Postal Service 

proposes to use in its FY 2008 annual 

report that it must file under 39 U.S.C. 

3652. Later that day, the Commission 

received the Motion of the United States 

Postal Service to Supplement the List of 

Its Proposed Costing Changes for 

Purposes of Preparing the FY 2008 

Annual Compliance Report (Motion). 

The Motion states that the Postal 

Service has finalized a ninth proposed 

change in costing methodology. It 

requests the Commission to consider its 

proposal under the procedures and 

schedule established in Order No. 99. 

The Postal Service characterizes this 

additional proposed change as relatively 

straightforward. It notes that a 

description of the proposed change, the 

rationale for adopting it, and an estimate 

of the impact of adopting it, 

accompanies the Motion. Given these 

circumstances, the Postal Service 

argues, consideration of this additional 

proposal could be consolidated with the 

original eight proposals and evaluated 

under the procedures outlined in Order 

No. 99, without detracting from the 

ability of the postal community to 

evaluate the original eight. 

The Commission agrees. It therefore 

orders consolidation of the proposed 

change in costing methods described 

below with the eight proposals already 

under consideration in Docket No. 

RM2008–2. 

Proposal Nine: Proposed Change in 

Distribution Key for PARS Equipment 

Depreciation, Maintenance Labor, and 

Parts/Supplies Costs. 

Objective: A methodology change is 

proposed for FY 2008 in the distribution 

key for the portion of depreciation (cost 

segment 20.1), maintenance labor (cost 

segment 11.2), and parts and supplies 

(cost segment 16.3.2) costs related to 

Postal Automation Redirection System 

(PARS) equipment. 

Background: PARS equipment is 

being deployed, replacing the use of 

Computer Forwarding System (CFS) in 

the forwarding and return to sender 

operations for letters. A description of 

PARS was provided in Docket No. 

R2006–1 in the testimony of Marc 

McCrery, USPS–T–42. PARS reduces 

the costs for processing, transporting 

and delivery of letters by identifying 

letter mail that is to be forwarded or 

returned, at origin. As shown in ACR 

2007, USPS–FY07–8, spreadsheet 

fy07equip.xls, the FY07 depreciation, 

maintenance labor and parts and 

supplies for PARS were $59.5, $3.6 and 

$0.7 million. These will grow in FY08. 

These costs, having a volume 

variability of nearly 100 percent, were 

distributed to class and subclass in the 

FY07 CRA based on the distribution key 

for CFS. 

Proposal: The Postal Service is 

proposing to distribute the attributable 

costs to products based on the IOCS 

tallies for the PARS related operations, 

as done for the distribution key for the 

PARS related work in the remote 

encoding centers, LDC 15 (see ACR 

2007, USPS–FY07–7, Preface.Part1, 

page 2). 

Rationale: The current method of 

distributing attributable PARS costs to 

products, using the CFS distribution, 

was the best available proxy in the past. 

But now that PARS tallies are available 

from the IOCS, there is no reason why 

the CFS proxy should not be replaced 

with information directly relating to 

relative usage of PARS. The current 

method incorrectly apportions much 

PARS equipment costs to classes and 

subclasses that benefit very little from 

PARS, particularly (because of shape) 

Periodicals. The proposed PARS 

distribution key will assign PARS 

equipment costs to those classes of mail 

processed with PARS, classes that also 

obtain the labor savings enabled by 

PARS. 

Impact: The following spreadsheet 

shows the impact of the proposed 

change on products (using FY07 costs). 

Component name 

Component 

No. cost 

segment notes 

LDC 49—Comp forwarding 

system (938) 98.1 

Set equal to 938 

Set W = 0.9992 

FY07 Distribution of PARS 

related costs 

$ in 000s 

FY07 PARS 

tallies 

distribution 

Distribution 

based on 

PARS tallies 

$ in 000s 

Change in 

distribution by 

adopting 

proposal nine 

$ in 000s 

First-Class Mail: 

Single Piece Letters ..... 101 26 ....................................... 16,597 30219.58 19,935 3,338 

Presort Letters ............. 102 25 ....................................... 16,138 43172.00 28,480 12,341 

Total Letters .......... 103 51 ....................................... 32,736 ........................ ........................ ........................

Single Piece Cards ...... 104 1 ......................................... 663 3023.10 1,994 1,331 

Presort Cards ............... 105 1 ......................................... 701 1663.90 1,098 396 

Total Cards ........... 108 2 ......................................... 1,365 ........................ ........................ ........................

Total First-Class .................. 109 53 ....................................... 34,100 ........................ ........................ ........................

Priority Mail ......................... 110 1 ......................................... 657 ........................ ........................ (657) 

Express Mail ....................... 111 0 ......................................... 19 ........................ ........................ (19) 

Periodicals: 

Within County .............. 113 1 ......................................... 516 ........................ ........................ (516) 

Outside County ............ 117 26 ....................................... 16,336 802.05 529 (15,807) 

Total Periodicals ................. 123 26 ....................................... 16,852 ........................ ........................ ........................

Standard Mail: 


sroberts on PROD1PC70 with PROPOSALS
51990 Federal Register / Vol. 73, No. 174 / Monday, September 8, 2008 / Proposed Rules 

Component name 

Component 

No. cost 

segment notes 

LDC 49—Comp forwarding 

system (938) 98.1 

Set equal to 938 

Set W = 0.9992 

FY07 Distribution of PARS 

related costs 

$ in 000s 

FY07 PARS 

tallies 

distribution 

Distribution 

based on 

PARS tallies 

$ in 000s 

Change in 

distribution by 

adopting 

proposal nine 

$ in 000s 

Enhanced Carrier 

Route.

126 1 ......................................... 567 219.81 145 (422) 

Regular ........................ 127 10 ....................................... 6,688 16238.00 10,712 4,023 

Total Standard Mail ............. 135 11 ....................................... 7,256 ........................ ........................ ........................

Package Services: 

Parcel Post .................. 136 1 ......................................... 516 ........................ ........................ (516) 

Bound Printed Matter ... 137 2 ......................................... 1,014 ........................ ........................ (1,014) 

Media Mail ................... 139 0 ......................................... 236 ........................ ........................ (236) 

Total Package Services ...... 141 3 ......................................... 1,766 ........................ ........................ ........................

U.S. Postal Service ............. 142 4 ......................................... 2,499 1076.50 710 (1,789) 

Free Mail ............................. 147 0 ......................................... 96 222.77 ........................ (96) 

International Mail ................. 161 0 ......................................... 89 ........................ 147 57 

Total All Mail ....................... 162 99 ....................................... 63,336 ........................ ........................ ........................

Special Services: 

Registry ........................ 163 0 ......................................... 64 ........................ ........................ (64) 

Certified ........................ 164 0 ......................................... ........................ ........................ ........................ ........................

Insurance ..................... 165 0 ......................................... ........................ ........................ ........................ ........................

COD ............................. 166 0 ......................................... ........................ ........................ ........................ ........................

Money Orders .............. 168 0 ......................................... ........................ ........................ ........................ ........................

Stamped Cards ............ 159 0 ......................................... ........................ ........................ ........................ ........................

Stamped Envelopes ..... 169 0 ......................................... ........................ ........................ ........................ ........................

Special Handling .......... 170 0 ......................................... ........................ ........................ ........................ ........................

Post Office Box ............ 171 0 ......................................... ........................ ........................ ........................ ........................

Other ............................ 172 1 ......................................... 351 ........................ ........................ (351) 

Total Special Services ........ 173 1 ......................................... 414 ........................ ........................ ........................

Total Attributable ................. 198 100 ..................................... 63,750 96637.71 63,750 (0) 

Other Costs ......................... 199 ............................................. ........................ ........................ ........................ ........................

Total Costs .......................... 200 ............................................. ........................ ........................ ........................ ........................

Deprec ................................ $59,476 ........................ ........................ ........................

Maintenance Labor ............ $ 3,627 ........................ ........................ ........................

Parts & Supplies ................ $ 698 ........................ ........................ ........................

............................................. $63,801 ........................ ........................ ........................

Variability ............................ 0.99920 ........................ ........................ ........................

Total Vol. Var. Costs .......... $63,750 ........................ ........................ ........................

III. Ordering Paragraphs 

[Order No. 99] 

It is Ordered: 

1. Docket No. RM2008–3 is 

established for the purpose of 

considering the Request of the United 

States Postal Service for Commission 

Order Amending the established Costing 

Methodologies for Purposes of Preparing 

the FY 2008 Annual Compliance Report, 

filed August 11, 2008. 

2. An informal technical conference to 

explore and clarify proposals is 

scheduled for August 27, 2008 at 10 

a.m. in the Commission’s hearing room. 

3. Interested persons may file initial 

comments on or before September 8, 

2008. 

4. Reply comments may be filed on or 

before September 15, 2008. 

5. William C. Miller is designated as 

the Public Representative representing 

the interests of the general public in this 

proceeding. 

6. The Secretary shall arrange for 

publication of this Notice in the Federal 

Register. 

[Order No. 102] 

1. The Motion of the United States 

Postal Service to Supplement the List of 

Its Proposed Costing Changes for 

Purposes of Preparing the FY 2008 

Annual Compliance Report, filed 

August 18, 2008, is granted. 

2. The proposal described in this 

Order will be considered under the 

current procedural schedule in Docket 

No. RM2008–2. 

3. The Secretary shall arrange for 

publication of this Notice in the Federal 

Register. 

Authority: 39 U.S.C. 3652. 

By the Commission. 

Judith M. Grady, 

Acting Secretary. 

[FR Doc. E8–20694 Filed 9–5–08; 8:45 am] 

BILLING CODE 7710–FW–P 

DEPARTMENT OF EDUCATION 

34 CFR Chapter VI 

Office of Postsecondary Education; 

Notice of Negotiated Rulemaking for 

Programs Authorized Under Title IV 

and Title II of the Higher Education Act 

of 1965, as Amended 

AGENCY: Department of Education. 

ACTION: Notice of invitation for public 

comment and establishment of 

negotiated rulemaking committees. 

SUMMARY: We announce our intention to 

establish negotiated rulemaking 

committees to prepare proposed 

regulations under Title IV and, possibly, 

Title II of the Higher Education Act of 

1965, as amended (HEA). The 

committees will include representatives 

of organizations or groups with interests 

that are significantly affected by the 

subject matter of the proposed 

regulations. We also announce six 

public hearings, at which interested 

parties may suggest issues that should 

be considered for action by the 

negotiating committees. In addition, for 

anyone unable to attend a public 

hearing, we announce that the 

Department will accept written 

comments. 

DATES: The dates, times, and locations 

of the public hearings are listed under 

the SUPPLEMENTARY INFORMATION section 

of this notice. We must receive written 

comments suggesting issues that should 

be considered for action by the 


sroberts on PROD1PC70 with PROPOSALS