[Federal Register Volume 73, Number 197 (Thursday, October 9, 2008)]
[Rules and Regulations]
[Pages 59514-59518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24054]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3020

[Docket Nos. MC2008-7, CP2008-16 and CP2008-17; Order No. 112]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adding a new product identified as Global 
Plus 2 Negotiated Service Agreements to the Mail Classification 
Schedule Competitive Product List. This action is consistent with 
changes in a recent law governing postal operations. Re-publication of 
the lists of market dominant and competitive products is also 
consistent with new requirements in the law.

DATES: Effective October 9, 2008.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820 and <a href="/cdn-cgi/l/email-protection#c2b1b6a7b2aaa7acecb1aaa3b0a4afa3ac82b2b0a1eca5adb4"><span class="__cf_email__" data-cfemail="7c0f08190c141912520f141d0e1a111d123c0c0e1f521b130a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: Regulatory History, 73 FR 49723 (August 22, 
2008).
    The Postal Service seeks to add a new product identified as Global 
Plus 2 Negotiated Service Agreements to the Competitive Product List. 
For the reasons discussed below, the Commission approves the Request.

I. Background

    On August 8, 2008, the Postal Service filed a Request with the 
Commission for the addition of a new product, which it identifies as 
Global Plus 2 Negotiated Service Agreements, to the Mail Classification 
Schedule's Competitive Product List for prices not of general 
applicability. A concurrent Notice announces issuance of a Governors' 
Decision authorizing the new product and the Postal Service's 
execution, under this authority, of two contracts it considers 
functionally equivalent.\1\
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    \1\ Request of the United States Postal Service to Add Global 
Plus 2 Negotiated Service Agreements to the Competitive Product 
List, and Notice of Filing (Under Seal) the Enabling Governors' 
Decision and Two Functionally Equivalent Agreements, August 8, 2008 
(collectively referred to as Request). The Request was filed 
pursuant to 39 U.S.C. 3642 and implementing regulations at 39 CFR 
3020.30 et seq. A public (redacted) version of the referenced 
Governors' Decision appears as Attachment 1 to the Request. See 
Decision of the Governors of the United States Postal Service on the 
Establishment of Prices and Classifications for Global Direct, 
Global Bulk Economy, and Global Plus Contracts (Governors' Decision 
No. 08-10), July 16, 2008 (Governors' Decision).

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[[Page 59515]]

    The proposed new product includes three services: Global Bulk 
Economy (GBE), Global Direct, and Global Plus 2 contracts.\2\ Mail 
classification language accompanying the Request describes each of 
these services. Global Plus 2 contracts are described as a combination 
of GBE and Global Direct designed for high-volume mailers or Postal 
Qualified Wholesalers. They require a mailer to have the capability, on 
an annualized basis, of either tendering at least 5,000 pieces of 
international mail to the Postal Service or paying at least $100,000 in 
international postage to the Postal Service, and meeting other 
requirements. Governors' Decision, Attachment 1, Attachment A-3, at 1 
(Sec.  2610.6) (Global Plus 2). Id., Attachments A-1 and A-3 (GBE and 
Global Direct, respectively).
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    \2\ The Governors' Decision notes that the classifications for 
Global Direct and Global Bulk Economy contracts are contained in the 
Mail Classification Schedule language originally proposed by the 
Postal Service as modified in attachments to the instant decision. 
Eligible customers may also contract separately for GBE and Global 
Direct service. Governors' Decision at 1, n.1.
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    Commission Order No. 98 provided formal notice of the Request and 
related submissions; established the captioned dockets to consider the 
Request; appointed an officer of the Commission to represent the 
interests of the general public; and set August 27, 2008 as the 
deadline for comments.\3\
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    \3\ See Notice and Order Concerning Global Plus 2 Negotiated 
Service Agreements, August 14, 2008 (Order No. 98). Order No. 98 
appears at 73 FR 49723 (August 22, 2008).
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    Commission decision. The Commission has reviewed the filing in 
terms of relevant statutory provisions, and concludes that the filing 
is consistent with all pertinent statutory considerations. It finds 
that Global Plus 2 is appropriately classified as a competitive 
product. Accordingly, it grants the Request to add the Global Plus 2 
product to the Competitive Product List. It also classifies the two 
contracts filed in Docket Nos. CP2008-16 and CP2008-17 as falling 
within the Global Plus 2 product, based on a finding that they are 
functionally equivalent.

II. Comments

A. Public Representative's Comments

    The Public Representative finds the Postal Service's filing 
consistent with requirements in the Postal Accountability and 
Enhancement Act (PAEA) and related Commission regulations. In 
particular, he concludes that pricing for the two proffered contracts 
satisfies 39 U.S.C. 3633 and falls within the floor and ceiling for the 
``shell''--or umbrella--classification in the Governors' Decision.\4\ 
He also concludes that the Postal Service has ``concisely justified'' 
the extent of confidentiality it seeks in this filing; states that 
contractual provisions on preparation and volume requirements ensure 
that some economies of scale will result from implementation; and finds 
that the two contracts appear to be functionally equivalent. Id. at 2-
4.
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    \4\ Public Representative Comments in Response to United States 
Postal Service Request to Add Global Plus 2 Negotiated Service 
Agreements to the Competitive Products List, August 27, 2008 at 4 
(Public Representative Comments).
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    However, the Public Representative expresses concern that the 
inclusion of Global Direct as a component of Global Plus 2 service 
raises a question about the appropriateness of assigning Global Plus 2 
to the Competitive Product List because:

--Global Direct appears to provide shipments of First-Class Mail to a 
destination country;
--Single-piece outbound International First-Class Mail has been 
classified as a market dominant product; and
--The PAEA assigns ``single piece'' international mail to the market 
dominant product line and ``bulk'' international to the competitive 
line. Id. at 2-8.\5\
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    \5\ The Public Representative notes that he also raised the 
issue of whether a proposed service is a ``hybrid'' product in 
Docket No. MC2008-6. Id. at 4-5.
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B. The Postal Service's Reply Comments

    The Postal Service maintains that the treatment of competitive 
products under the PAEA and an assessment of competitive market 
characteristics support a conclusion that Global Plus 2 is properly 
classified as a competitive product.\6\ It acknowledges that the PAEA 
requires that international mail be classified as either market 
dominant or competitive depending upon whether it is ``single-piece'' 
or ``bulk,'' but maintains that the PAEA does not further define those 
terms or seek to provide guidance on the existing and future 
international mail categories they are intended to encompass. Id. at 2. 
However, it notes that when classifying postal products [in Docket No. 
RM2007-1] as either market dominant or competitive, the Commission 
proposed to define bulk international mail by reference to bulk 
commercial services, which may be satisfied by volume commitments or 
other types of annual guarantees. Id. The Postal Service further 
observes that the Commission included International Customized Mail 
(ICM) agreements among the products classified as ``bulk,'' and that 
each ICM was further initially defined as an individual product. Id.
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    \6\ Reply of United States Postal Service to Public 
Representative Comments in Response to United States Postal Service 
Request to Add Global Plus 2 Negotiated Service Agreements to the 
Competitive Products List, August 29, 2008 at 1-2 (Postal Service 
Reply Comments).
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    Applying this line of reasoning to the instant case, the Postal 
Service says that the Global Plus 2 contracts are tied to revenue 
commitments, just as are the Global Plus 1 contracts, and thus appear 
to satisfy the Commission's determination that an annual revenue 
guarantee would suffice to define a product as ``bulk.'' It therefore 
contends that even if pieces under the contract were mailed 
individually, this should not change the fact that the annual revenue 
guarantee ensures that this is a bulk product. Moreover, it contends 
that because the Commission views the contract as the product, as 
opposed to the individual services under the contract (which include 
both Global Direct and Global Bulk Economy services), it would seem 
that even assuming that a piece of Global Direct mail were sent 
individually, this likewise should not convert a bulk product into a 
single-piece product. Id. at 2-3.
    In addition, the Postal Service maintains that as a practical 
matter, Global Direct is not a single-piece service, so each mailing 
involving Global Bulk Economy and Global Direct is, in fact, a bulk 
mailing. Id. at 3. In support of this position, it asserts that Global 
Direct service has only been available through customized agreements; 
notes that a customer cannot walk into a post office and deposit a 
single piece bearing foreign indicia; states that retail Global Direct 
service does not exist; and says that both Global Plus 2 contracts 
provide that postage payments are to be made by permit imprint. Id.
    The Postal Service provides a hypothetical example involving a 
single-piece mailing, but asserts that this example does not reflect 
routine mailer behavior. Instead, it maintains that the customers are 
large volume, Postal Qualified Wholesalers who are required under the 
terms of the contract

[[Page 59516]]

to deposit their Global Direct mail at specific locations designated by 
the Postal Service and who also must comply with foreign postal 
administrations' preparation requirements. Id. at 3-4. It says it is 
more than likely that any one mailing will contain multiple Global 
Direct pieces. In fact, it says that the Postal Service does not recall 
ever seeing a postage statement containing only one piece of Global 
Direct mail. Id. at 4.
    The Postal Service acknowledges that certain items sent using 
Global Direct services, including under Global Plus 2 contracts, are 
``letters'' within the meaning of 39 CFR 310.1(a). Id. It notes, 
however, that private entities are entitled to offer service for 
outbound letters `` `to a foreign country for deposit in its domestic 
or international mails for delivery to an ultimate destination outside 
the United States.' '' Id. (footnote omitted).
    ``The Postal Service asserts that Congress codified this statutory 
exception to the so-called letter monopoly in the PAEA, and that 
competition exists in the outbound letter market, with a variety of 
entities providing services comparable to the Postal Service's. It 
further states that in addition to facing competing providers, the 
Postal Service must also contend with mailers' prerogative to carry 
their own letters out of the United States and deposit them in the 
destination country's mailstream. Id.
    The Postal Service then says that for reasons described more fully 
in the Statement of Supporting Justification filed in these dockets, it 
operates within competitive constraints in offering Global Plus 2 
contracts, including their Global Direct components, rather than from a 
position of market dominance. Thus, it says that under the descriptive 
criteria in 39 U.S.C. 3642(b) and 39 CFR 3020.32, these contracts 
should be construed as competitive products. Id. at 4-5.

III. Commission Analysis

A. Statutory Requirements

    The Commission's statutory responsibilities, in this instance, 
entail assigning Global Plus 2 to either the Market Dominant List or 
the Competitive Product List. 39 U.S.C. 3642. As part of this 
responsibility, the Commission also preliminarily reviews the proposals 
for compliance with PAEA requirements. This includes, for proposed 
competitive products, a review of the provisions applicable to rates 
for competitive products. 39 U.S.C. 3633.
    Product list assignment. 39 U.S.C. 3642 governs the assignment of 
new products to a list, in terms of the contract or product as a whole, 
not an individual component. In context, it is apparent that Global 
Direct--which is the source of the Public Representative's 
classification concern--is a bulk service. In particular, Global Direct 
is:

--A service that imposes minimum annual volume or revenue requirements 
on mailers;
--Intended for high-volume users and Postal Qualified Wholesalers; and
--Not available as a retail service for individuals.
Postal Service Reply Comments at 3-4. Thus, the Global Plus 2 contracts 
are appropriately classified as competitive products.
    The Commission must also consider the Postal Service's market 
position in determining appropriate product classification. The main 
consideration is whether

    the 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).
    Review of a statement provided by Frank Cebello, the Postal 
Service's executive director of Global Business Management, provides 
adequate support for a finding that the Postal Service's position with 
respect to Global Plus 2 precludes it from being able to take any of 
the actions referred to in the referenced provision without risk of 
losing a significant level of business to other firms or offering 
similar products. See Request, Attachment 2.
    Cost considerations. The Commission has reviewed the financial 
analyses provided under seal as well as the comments and the reply 
comments. This preliminary review indicates that each contract comports 
with the provisions applicable to rates for competitive products. In 
particular, based on the information provided, the Commission finds 
that the proposed contracts should cover their individual attributable 
costs (39 U.S.C. 3633(a)(2)); 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)).

B. Nature of the Agreements

    The Postal Service requests that the Commission classify the two 
Global Plus 2 contracts as part of the same product. The Commission 
finds that these contracts are premised on similar cost and market 
characteristics. It concludes that these two contracts are functionally 
equivalent in all pertinent respects, and can be appropriately 
classified as one product within the Competitive Product List.

C. Updating the Mail Classification Schedule

    The Commission is adding the new product, Global Plus 2, to the 
Competitive Product List, as requested. As noted, the two related 
contracts fall within that product. The changes to the product list are 
shown below the signature on this Order, and shall become effective 
upon publication in the Federal Register.
    The Postal Service shall notify the Commission of the effective 
date of each contract on the same date it notifies the contracting 
parties. The Commission notes that each Global Plus 2 contract contains 
a provision for early termination. The Postal Service shall promptly 
notify the Commission of an early termination no later than the actual 
termination date. The Commission will then remove the contract from the 
Mail Classification Schedule at the earliest possible opportunity.

IV. Ordering Paragraphs

    It is Ordered:
    1. Global Plus 2 is added as a new product to the Competitive 
Product List.
    2. The Negotiated Service Agreement submitted in Docket No. CP2008-
16 and the Negotiated Service Agreement submitted in Docket No. CP2008-
17 fall within the Global Plus 2 product.
    3. The Postal Service shall notify the Commission of the effective 
date of the Global Plus 2 contracts (in Docket Nos. CP2008-16 and 
CP2008-17) on the same date it notifies the contracting parties.
    4. The Secretary shall arrange for publication of this Order in the 
Federal Register.

List of Subjects in 39 CFR Part 3020

    Administrative practice and procedure, Postal Service.

    By the Commission.
Steven W. Williams,
Secretary.

0
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:

[[Page 59517]]

PART 3020--PRODUCT LISTS

0
1. The authority citation for part 3020 continues to read as follows:

    Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.


0
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
2000 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)
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, CP2008-
18, CP2008-19, CP2008-20, CP2008-21, CP2008-22, CP2008-23 and 
CP2008-24)
    Global Plus Contracts
    Global Plus 1 (CP2008-9 and CP2008-10)
    Global Plus 2 (MC2008-7, CP2008-16 and CP2008-17)
    Inbound Direct Entry Contracts with Foreign Postal 
Administrations (MC2008-6, CP2008-14 and CP2008-15)

[[Page 59518]]

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. E8-24054 Filed 10-8-08; 8:45 am]
BILLING CODE 7710-FW-P


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