55422 Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Rules and Regulations 

1Request of United States Postal Service to Add 

Inbound Direct Entry Contracts with Foreign Postal 

Administrations to the Competitive Product List, 

and Notice of Filing (Under Seal) the Enabling 

Governors’ Decision and Two Functionally 

Equivalent Contracts with Foreign Posts, August 5, 

2008 (Request). 

2The draft MCS remains under review. The 

Commission anticipates providing interested 

persons an opportunity to comment on the draft 

MCS in the near future. 

3The Commission characterizes the Governors’ 

Decision and associated materials filed in Docket 

No. MC2008–6 as material that supports the specific 

negotiated service agreements filed in Docket Nos. 

CP2008–14 and CP2008–15. 

4See PRC Order No. 95, August 11, 2008, at 2 

regarding the filing of certifications under seal. The 

Postal Service is directed to follow the practice 

established in Docket Nos. CP2008–11, CP2008–12, 

and CP2008–13 regarding the filing of redacted 

versions of certifications for the above-captioned 

‘‘CP’’ cases. 

5Public Representative Comments in Response to 

United States Postal Service Request to Add 

Inbound Direct Entry Contracts with Foreign Postal 

Administrations to the Competitive Products List, 

August 25, 2008 (Public Representative Comments). 

6The term ‘‘hybrid’’ here means has 

characteristics of both market dominant and 

competitive products. See Public Representative 

Comments at 9. 

POSTAL REGULATORY COMMISSION 

39 CFR Part 3020 

[Docket Nos. MC2008–6, CP2008–14, and 

CP2008–15; Order No. 105] 

Administrative Practice and Procedure, 

Postal Service 

AGENCY: Postal Regulatory Commission. 

ACTION: Final rule. 

SUMMARY: The Commission is adding 

the Postal Service’s negotiated 

agreements with China Post Group and 

Hong Kong Post to the competitive 

product list. This action is consistent 

with changes in a recent law governing 

postal operations. Republication of the 

lists of market dominant and 

competitive products is also consistent 

with new requirements in the law. 

DATES: Effective September 24, 2008. 

FOR FURTHER INFORMATION CONTACT: 

Stephen L. Sharfman, General Counsel, 

202–789–6820 and 

stephen.sharfman@prc.gov. 

SUPPLEMENTARY INFORMATION: Regulatory 

History, 73 FR 49723 (August 22, 2008). 

In these dockets, the Postal Service 

requests that the Commission add a new 

product to the competitive product list 

and add two new contracts to that 

competitive product. For the reasons 

discussed below, the Commission grants 

the Postal Service’s requests. 

I. Background 

On August 5, 2008, the Postal Service 

filed three requests announcing prices 

and classification changes for 

competitive products not of general 

applicability. The requests incorporate 

notices, pursuant to 39 U.S.C. 3642, 39 

CFR 3020.30 et seq. The request in 

Docket No. MC2008–6 informs the 

Commission that ‘‘the Governors have 

established prices and classifications 

not of general applicability for Inbound 

Direct Entry Contracts with Foreign 

Postal Administrations,’’ and attaches a 

redacted copy of the Governors’ 

Decision.1 See Request, Attachment 1. 

The Postal Service also provides a 

revision of the draft Mail Classification 

Schedule (MCS) (section 2612) 

concerning Inbound Direct Entry 

Contracts with Foreign Postal 

Administrations to the Request.2 See 

Request, Attachment 1, Attachment A. 

In support of these dockets, the Postal 

Service provides a Statement of 

Supporting Justification of Pranab Shah. 

See Request, Attachment 2. The Postal 

Service also provides materials under 

seal, including the unredacted 

Governors’ Decision in Docket No. 

MC2008–6. The Postal Service claims 

that ‘‘[p]rices and other contract terms 

relating to the foreign posts’ processes 

and procedures are highly confidential 

in the business world . * * * [and that 

its] ability * * * to negotiate individual 

contracts would be severely 

compromised if prices * * * [for] these 

types of agreements were publicly 

disclosed.’’ Request at 2–3. 

Docket Nos. CP2008–14 and CP2008– 

15 announce specific Inbound Direct 

Entry Contracts that the Postal Service 

has entered into with the individual 

Foreign Postal Administrations, namely 

China Post Group and Hong Kong Post, 

respectively.3 Id. at 2. In support of these 

dockets, the Postal Service also provides 

materials, including the contracts and 

supporting certifications, under seal.4

The Postal Service’s filings in these 

dockets are related. Docket No. 

MC2008–6 establishes, in essence, a 

shell classification, while Docket Nos. 

CP2008–14 and CP2008–15 are specific 

agreements negotiated pursuant to the 

conditions of the shell classification. 

Given this interrelationship, the 

Commission reviews these proceedings 

together in this order. 

In Order No. 43, the Commission 

issued regulations establishing a 

modern system of rate regulation, 

including a list of competitive products. 

Docket No. RM2007–1, Order 

Establishing Ratemaking Regulations for 

Market Dominant and Competitive 

Products, October 29, 2007, Appendix 

A. Among other things, the Commission 

determined that each negotiated service 

agreement would initially be classified 

as a separate product. The Commission 

also acknowledged the possibility of 

grouping substantially equivalent 

agreements as a single product if they 

exhibit similar cost and market 

characteristics. Id., paras. 2177 and 

3001. In its filings, the Postal Service 

contends that these two agreements are 

premised on similar cost and market 

characteristics and provides arguments 

to support this claim. Request at 5–6. 

The Postal Service requests that the 

Commission classify the two agreements 

filed in Docket Nos. CP2008–14 and 

CP2008–15 as part of the same product. 

II. Comments 

Comments were filed by the Public 

Representative.5 These comments 

discuss (1) Confidentiality; (2) the 

Governors’ Decision; (3) pricing, cost 

coverage, and contribution; (4) 

functional equivalency; (5) whether the 

contracts belong on the competitive or 

market dominant products list; and (6) 

practical considerations. Id. The Public 

Representative finds that the Postal 

Service adequately justifies its under 

seal submissions, has confidence in the 

Governors’ Decision, and acknowledges 

that the pricing, cost coverage, and 

contribution comport with the 

provisions of title 39. Id. at 3–5. The 

Public Representative believes that the 

Postal Service persuasively reasons that 

the proposed contracts are functionally 

equivalent. Id. at 5–6. With respect to 

whether the product should be 

classified as market dominant or 

competitive, the Public Representative 

believes that Inbound Direct Entry 

contracts are hybrids 6 because they 

include mostly competitive products 

but also include inbound First-Class 

Mail, a market dominant product. Id. at 

6–10. Due to practical considerations 

and the fact that the Inbound Direct 

Entry contracts are predominantly 

comprised of competitive products, the 

Public Representative contends that 

classifying the product as competitive is 

appropriate. Id. at 10–12. 

III. Commission Analysis 

A. Statutory Requirements 

The statutory responsibility of the 

Commission, in this instance, is to 

assign new products to either the market 

dominant list or the competitive 

product list. 39 U.S.C. 3642. As part of 

this responsibility, the Commission also 

will preliminarily review the proposals 

for compliance with the requirements of 

the Postal Accountability and 

Enhancement Act (PAEA) of 2006. For 

proposed competitive products, this 

includes a review of the provisions 


rwilkins on PROD1PC63 with RULES_2
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Rules and Regulations 55423 

7See Public Representative Comments at 2. 

8This finding is preliminary and does not 

preclude the Commission from revisiting this issue 

at a future date if circumstances warrant. See 39 

U.S.C. 3642. 

applicable to rates for competitive 

products. 39 U.S.C. 3633. 

The Postal Service explains that 

adding the Inbound Direct Entry 

Contracts with Foreign Postal 

Administrations (MC2008–6) product 

will allow Foreign Postal 

Administrations the ability to prepare 

individual items from their customers 

for shipment, print USPS mail labels 

and permit imprints, package the items 

in receptacles, and dispatch these items 

to Postal Service incoming acceptance 

points. See Request, Attachment 2, at 2– 

3. The fees to be charged identified in 

the Postal Service’s Request would 

cover the sack handling activities upon 

arrival of the dispatches from the 

foreign posts. Id. The Postal Service 

believes that adding these agreements to 

the competitive product list will 

improve the Postal Service’s 

competitive posture and that the 

contracts cover their attributable costs, 

make a positive contribution to coverage 

of institutional costs, and do not result 

in subsidization of competitive products 

by market dominant products. Id. at 2. 

The Commission has reviewed the 

financial analyses provided under seal 

that accompanies the two agreements as 

well as the comments filed by interested 

persons. A preliminary review of the 

proposed Inbound Direct Entry Contract 

with Foreign China Post Group and the 

proposed Inbound Direct Entry Contract 

with Hong Kong Post indicate that they 

both comport with the provisions 

applicable to rates for competitive 

products. Based on the information 

provided, the Commission finds that the 

proposed contracts submitted should 

cover their individual attributable costs 

(39 U.S.C. 3633(a)(2)); each agreement 

should not lead to the subsidization of 

competitive products by market 

dominant products (39 U.S.C. 

3633(a)(1)), and each should have a 

positive effect on competitive products’ 

contribution to institutional costs (39 

U.S.C. 3633(a)(3)). 

In determining whether to assign the 

Inbound Direct Entry Contracts with 

Foreign Postal Administrations 

(MC2008–6) product to the market 

dominant product list or the 

competitive product list the 

Commission must consider whether 

[T]he Postal Service exercises sufficient 

market power that it can effectively set the 

price of such product substantially above 

costs, raise prices significantly, decrease 

quality, or decrease output, without risk of 

losing a significant level of business to other 

firms offering similar products. 

39 U.S.C. 3642(b)(1). If this is the case, 

the product will be categorized as 

market dominant. The competitive 

category of products shall consist of all 

other products. 

The Commission is further required to 

consider the availability and nature of 

enterprises in the private sector engaged 

in the delivery of the product, the views 

of those that use the product, and the 

likely impact on small business 

concerns. 39 U.S.C. 3642(b)(3). 

The Postal Service asserts that its 

bargaining position is constrained by 

the existence of other shippers who can 

provide similar services. Thus, the 

market precludes the Postal Service 

from taking unilateral action to increase 

prices without the risk of losing volume 

to private companies. The Postal Service 

states that large private consolidators 

and freight forwarders also may offer 

international shipping arrangements 

whereby they provide inbound direct 

entry services under similar conditions 

using their own networks or the Postal 

Service’s domestic mail network for 

domestic delivery. Request, Attachment 

2, at 3–4. The Postal Service also 

contends that the Postal Service may not 

decrease quality or output without 

risking the loss of business to 

competitors that offer similar expedited 

delivery services. Id. at 4. The Postal 

Service believes the classification will 

have little, if any, impact upon small 

business concerns, and it is unaware of 

any small businesses that could offer 

comparable services. Id. Finally, it states 

that it does not have any data on 

whether the users/contract partners 

prefer to have the contracts placed on 

either the list of competitive or market 

dominant products. Id. at 6. 

No commenter opposes the proposed 

regulatory classification of the Inbound 

Direct Entry Contracts with Foreign 

Postal Administrations (MC2008–6) as 

competitive and no late-filed comments 

were received,7 although the Public 

Representative does raise an issue with 

respect to the proper classification of 

the contracts. Having considered the 

statutory requirements, the argument 

put forth by the Postal Service, and the 

public comments, the Commission finds 

that the contracts are appropriately 

classified and should be added to the 

list of competitive products. The 

product/contracts are for the provision 

of the service of accepting sacks of 

certain types of mail and entering the 

parcels contained in the sacks into the 

domestic mailstream at published 

domestic rates. See Request at 5. For the 

provision of these services, the Postal 

Service charges a sack handling fee, 

regardless of the actual type of mail that 

is contained in the sacks. Since the 

types of mail contained in the sacks do 

not receive discounted postage, the 

Commission does not view these 

contracts as ‘‘hybrid’’ products.8

B. Substantially Equivalent Agreements 

The Postal Service has filed two 

agreements with foreign postal 

administrations that it believes are 

substantially similar, and accordingly 

should be grouped under one product. 

Request at 6. It argues these contracts 

share the same cost and market 

characteristics; in particular, they both 

cover the same underlying services and 

similar preparation requirements. Id. at 

5–6. 

The Postal Service also identifies 

differences between the two proposed 

new contracts. Id. It notes the following 

differences: (1) Different account types 

are authorized in order to make 

payments, and (2) different dispute 

resolution procedures are allowed. 

The Commission has reviewed the 

contracts in Docket Nos. CP2008–14 and 

CP2008–15 and finds those agreements 

to be substantially equivalent in all 

pertinent respects. The contracts will be 

classified as one product within the 

competitive product list. 

The revisions to the competitive 

product list are shown below the 

signature of this Order, and shall 

become effective upon publication in 

the Federal Register. 

C. Updating the Mail Classification 

Schedule 

The agreements contain provisions for 

early termination and automatic 

renewal. The Postal Service shall 

promptly notify the Commission of an 

early termination no later than the 

actual termination date. The 

Commission then will remove the 

contract from the Mail Classification 

Schedule at the earliest possible 

opportunity. The Postal Service also 

shall notify the Commission of an 

automatic renewal of the agreement 15 

days prior to its occurrence. Otherwise, 

the Commission will assume that the 

contract has lapsed and remove the 

agreement from the Mail Classification 

Schedule without notice. 

IV. Ordering Paragraphs 

It is Ordered: 

1. The China Post Group contract 

submitted in Docket No. CP2008–14 and 

the Hong Kong Post contract submitted 

in Docket No. CP2008–15 will be added 

to the competitive product list as one 

product under Negotiated Service 

Agreements as Inbound Direct Entry 


rwilkins on PROD1PC63 with RULES_2
55424 Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Rules and Regulations 

Contracts with Foreign Postal 

Administrations (MC2008–6). 

2. The Postal Service is directed to file 

redacted versions of the certifications 

for the above-captioned cases as 

discussed in the body of this order. 

3. The Secretary shall arrange for 

publication of this Order in the Federal 

Register. 

Issued September 4, 2008. 

By the Commission. 

Steven W. Williams, 

Secretary. 

List of Subjects in 39 CFR Part 3020 

Administrative practice and 

procedure, Postal Service. 

■ For the reasons stated in the preamble, 

under the authority at 39 U.S.C. 503, the 

Postal Regulatory Commission amends 

39 CFR part 3020 as follows: 

PART 3020—PRODUCT LISTS 

■ 1. The authority citation for part 3020 

continues to read as follows: 

Authority: 39 U.S.C. 503; 3622; 3631; 3642; 

3682. 

■ 2. Revise Appendix A to subpart A of 

part 3020 to read as follows: 

Appendix A to Subpart A of Part 

3020—Mail Classification Schedule 

Part A—Market Dominant Products 

1000 Market Dominant Product List 

First-Class Mail 

Single-Piece Letters/Postcards 

Bulk Letters/Postcards 

Flats 

Parcels 

Outbound Single-Piece First-Class Mail 

International 

Inbound Single-Piece First-Class Mail 

International 

Standard Mail (Regular and Nonprofit) 

High Density and Saturation Letters 

High Density and Saturation Flats/Parcels 

Carrier Route 

Letters 

Flats 

Not Flat-Machinables (NFMs)/Parcels 

Periodicals 

Within County Periodicals 

Outside County Periodicals 

Package Services 

Single-Piece Parcel Post 

Inbound Surface Parcel Post (at UPU rates) 

Bound Printed Matter Flats 

Bound Printed Matter Parcels 

Media Mail/Library Mail 

Special Services 

Ancillary Services 

International Ancillary Services 

Address List Services 

Caller Service 

Change-of-Address Credit Card 

Authentication 

Confirm 

International Reply Coupon Service 

International Business Reply Mail Service 

Money Orders 

Post Office Box Service 

Negotiated Service Agreements 

HSBC North America Holdings Inc. 

Negotiated Service Agreement 

Bookspan Negotiated Service Agreement 

Bank of America Corporation Negotiated 

Service Agreement 

The Bradford Group Negotiated Service 

Agreement 

Market Dominant Product Descriptions 

First-Class Mail 

[Reserved for Class Description] 

Single-Piece Letters/Postcards 

[Reserved for Product Description] 

Bulk Letters/Postcards 

[Reserved for Product Description] 

Flats 

[Reserved for Product Description] 

Parcels 

[Reserved for Product Description] 

Outbound Single-Piece First-Class Mail 

International 

[Reserved for Product Description] 

Inbound Single-Piece First-Class Mail 

International 

[Reserved for Product Description] 

Standard Mail (Regular and Nonprofit) 

[Reserved for Class Description] 

High Density and Saturation Letters 

[Reserved for Product Description] 

High Density and Saturation Flats/Parcels 

[Reserved for Product Description] 

Carrier Route 

[Reserved for Product Description] 

Letters 

[Reserved for Product Description] 

Flats 

[Reserved for Product Description] 

Not Flat-Machinables (NFMs)/Parcels 

[Reserved for Product Description] 

Periodicals 

[Reserved for Class Description] 

Within County Periodicals 

[Reserved for Product Description] 

Outside County Periodicals 

[Reserved for Product Description] 

Package Services 

[Reserved for Class Description] 

Single-Piece Parcel Post 

[Reserved for Product Description] 

Inbound Surface Parcel Post (at UPU rates) 

[Reserved for Product Description] 

Bound Printed Matter Flats 

[Reserved for Product Description] 

Bound Printed Matter Parcels 

[Reserved for Product Description] 

Media Mail/Library Mail 

[Reserved for Product Description] 

Special Services 

[Reserved for Class Description] 

Ancillary Services 

[Reserved for Product Description] 

Address Correction Service 

[Reserved for Product Description] 

Applications and Mailing Permits 

[Reserved for Product Description] 

Business Reply Mail 

[Reserved for Product Description] 

Bulk Parcel Return Service 

[Reserved for Product Description] 

Certified Mail 

[Reserved for Product Description] 

Certificate of Mailing 

[Reserved for Product Description] 

Collect on Delivery 

[Reserved for Product Description] 

Delivery Confirmation 

[Reserved for Product Description] 

Insurance 

[Reserved for Product Description] 

Merchandise Return Service 

[Reserved for Product Description] 

Parcel Airlift (PAL) 

[Reserved for Product Description] 

Registered Mail 

[Reserved for Product Description] 

Return Receipt 

[Reserved for Product Description] 

Return Receipt for Merchandise 

[Reserved for Product Description] 

Restricted Delivery 

[Reserved for Product Description] 

Shipper-Paid Forwarding 

[Reserved for Product Description] 

Signature Confirmation 

[Reserved for Product Description] 

Special Handling 

[Reserved for Product Description] 

Stamped Envelopes 

[Reserved for Product Description] 

Stamped Cards 

[Reserved for Product Description] 

Premium Stamped Stationery 

[Reserved for Product Description] 

Premium Stamped Cards 

[Reserved for Product Description] 

International Ancillary Services 

[Reserved for Product Description] 

International Certificate of Mailing 

[Reserved for Product Description] 

International Registered Mail 

[Reserved for Product Description] 

International Return Receipt 

[Reserved for Product Description] 

International Restricted Delivery 

[Reserved for Product Description] 

Address List Services 

[Reserved for Product Description] 

Caller Service 

[Reserved for Product Description] 

Change-of-Address Credit Card 

Authentication 

[Reserved for Product Description] 

Confirm 

[Reserved for Product Description] 

International Reply Coupon Service 

[Reserved for Product Description] 

International Business Reply Mail Service 

[Reserved for Product Description] 

Money Orders 

[Reserved for Product Description] 

Post Office Box Service 

[Reserved for Product Description] 

Negotiated Service Agreements 

[Reserved for Class Description] 

HSBC North America Holdings Inc. 

Negotiated Service Agreement 

[Reserved for Product Description] 

Bookspan Negotiated Service Agreement 

[Reserved for Product Description] 

Bank of America Corporation Negotiated 

Service Agreement 

The Bradford Group Negotiated Service 

Agreement 

Part B—Competitive Products 

Competitive Product List 

Express Mail 

Express Mail 

Outbound International Expedited Services 

Inbound International Expedited Services 

Inbound International Expedited Services 1 

(CP2008–7) 


rwilkins on PROD1PC63 with RULES_2
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Rules and Regulations 55425 

Priority Mail 

Priority Mail 

Outbound Priority Mail International 

Inbound Air Parcel Post 

Parcel Select 

Parcel Return Service 

International 

International Priority Airlift (IPA) 

International Surface Airlift (ISAL) 

International Direct Sacks—M-Bags 

Global Customized Shipping Services 

Inbound Surface Parcel Post (at non-UPU 

rates) 

International Money Transfer Service 

International Ancillary Services 

Special Services 

Premium Forwarding Service 

Negotiated Service Agreements 

Domestic 

Express Mail Contract 1 (MC2008–5) 

Outbound International 

Global Expedited Package Services (GEPS) 

Contracts 

GEPS 1 (CP2008–5, CP2008–11, CP2008– 

12, and CP2008–13) 

Global Plus Contracts 

Global Plus 1 (CP2008–9 and CP2008–10) 

Inbound Direct Entry Contracts with 

Foreign Postal Administrations 

(MC2008–6) 

Competitive Product Descriptions 

Express Mail 

[Reserved for Group Description] 

Express Mail 

[Reserved for Product Description] 

Outbound International Expedited Services 

[Reserved for Product Description] 

Inbound International Expedited Services 

[Reserved for Product Description] 

Priority 

[Reserved for Product Description] 

Priority Mail 

[Reserved for Product Description] 

Outbound Priority Mail International 

[Reserved for Product Description] 

Inbound Air Parcel Post 

[Reserved for Product Description] 

Parcel Select 

[Reserved for Group Description] 

Parcel Return Service 

[Reserved for Group Description] 

International 

[Reserved for Group Description] 

International Priority Airlift (IPA) 

[Reserved for Product Description] 

International Surface Airlift (ISAL) 

[Reserved for Product Description] 

International Direct Sacks—M-Bags 

[Reserved for Product Description] 

Global Customized Shipping Services 

[Reserved for Product Description] 

International Money Transfer Service 

[Reserved for Product Description] 

Inbound Surface Parcel Post (at non-UPU 

rates) 

[Reserved for Product Description] 

International Ancillary Services 

[Reserved for Product Description] 

International Certificate of Mailing 

[Reserved for Product Description] 

International Registered Mail 

[Reserved for Product Description] 

International Return Receipt 

[Reserved for Product Description] 

International Restricted Delivery 

[Reserved for Product Description] 

International Insurance 

[Reserved for Product Description] 

Negotiated Service Agreements 

[Reserved for Group Description] 

Domestic 

[Reserved for Product Description] 

Outbound International 

[Reserved for Group Description] 

Part C—Glossary of Terms and Conditions 

[Reserved] 

Part D—Country Price Lists for International 

Mail [Reserved] 

[FR Doc. E8–22328 Filed 9–23–08; 8:45 am] 

BILLING CODE 7710–FW–P 


rwilkins on PROD1PC63 with RULES_2