I 113th CONGRESS 2d Session H. R. 4174 IN THE HOUSE OF REPRESENTATIVES March 6, 2014 Mr. Issa (for himself and Mr. Farenthold ) introduced the following bill; which was referred to the Committee on Oversight and Government Reform A BILL To amend title 39, United States Code, to modernize and improve Alaska bypass freight mail transportation.

1. Short title This Act may be cited as the Alaska Bypass Modernization Act of 2014 . 2. Alaska bypass mail transportation (a) In general Section 5402 of title 39, United States Code, is amended— (1) in the section heading by striking Contracts for transportation of mail by air and inserting Alaska bypass mail transportation ; (2) in subsection (a)— (A) by striking paragraphs (2), (7), and (9); and (B) by redesignating paragraphs (3), (4), (5), (6), (8), (10), (11), (12), (13), (14), (15), (16), (17), (18), (19), (20), (21), (22), (23), (24), and (25) as paragraphs (2) through (22), respectively; (3) by striking subsections (b) through (f); (4) by redesignating subsections (g) through (s) as subsections (c) through (o), respectively; (5) by inserting after subsection (a) the following: (b) Efficient transport of Alaska bypass mail In selecting a carrier of nonpriority bypass mail to a point in the State of Alaska, the Postal Service shall— (1) ensure a minimum of 1 scheduled flight per week to each nonpriority bypass mail destination with guaranteed capacity for nonpriority bypass mail, subject to the condition that weather conditions, lack of available service, or other extraordinary circumstances do not interfere with the fulfillment of this minimum requirement; and (2) ensure that any flight that transports nonpriority bypass mail to a nonpriority bypass mail destination and is in addition to the minimum flights required under paragraph (1)— (A) is necessary to the delivery of nonpriority bypass mail; and (B) maximizes the cost efficiency to the Postal Service. ; (6) in subsection (c)(2) (as redesignated by paragraph (4) of this subsection)— (A) in subparagraph (E) by striking (E)(i) and all that follows through the end of clause (i) and inserting the following: (E) (i) may offer tender of nonpriority mainline bypass mail at mainline rates to a bush carrier operating from an acceptance point to a hub point in the State of Alaska, in addition to the terms of subparagraph (C); and ; (B) by striking subparagraph (F) and inserting the following: (F) shall offer equitable tender of nonpriority bypass mail in proportion to passenger and nonmail freight pools described in this section between qualified passenger and nonmail freight carriers on a route from an acceptance point to a bush destination in the State of Alaska at a composite rate if— (i) (I) for a passenger carrier, the carrier receiving the composite rate provided passenger service in accordance with the requirements of subsection (d)(2); or (II) for a nonmail freight carrier, the carrier receiving the composite rate provided at least 25 percent of the nonmail freight service for the 12 months immediately preceding the date on which the carrier seeks tender of such mail; (ii) the carrier qualifies under subsection (d) to be tendered nonpriority bypass mail out of the hub point being bypassed; (iii) the tender of such mail will not decrease efficiency of delivery of nonpriority bypass mail service into or out of the hub point being bypassed; and (iv) such tender will result in reduced payments to the carrier by the Postal Service over flying the entire route; and ; (C) in subparagraph (G) by striking notwithstanding subparagraph (F), ; and (D) in the matter following subparagraph (G) by striking subparagraph (G) and inserting subparagraphs (F) and (G) ; and (7) in subparagraph (c)(4)(A) (as redesignated by paragraph (4) of this subsection) by striking subparagraph (B) and inserting subparagraph (B), paragraph (2)(E), . (b) Clerical amendment The table of sections for chapter 54 of such title is amended by striking the item relating to section 5402 and inserting the following: 5402. Alaska bypass mail transportation. . (c) Conforming amendments Section 5402 of such title is amended— (1) in subsection (a)— (A) in paragraph (4) by striking subsection (g)(1)(A)(iv)(I) and inserting subsection (c)(1)(A)(iv)(I) ; (B) in paragraph (5) by striking subsection (g)(1)(A)(iv)(I) and inserting subsection (c)(1)(A)(iv)(I) ; (C) in paragraph (13) by striking subsection (g)(1)(A)(iv)(II) and inserting subsection (c)(1)(A)(iv)(II) ; and (D) in paragraph (15)(A) by striking subsection (g)(1)(A)(iv) and inserting subsection (c)(1)(A)(iv) ; (2) in subsection (c) (as redesignated by subsection (a)(4) of this section)— (A) in paragraph (2)— (i) in subparagraph (C)(ii) by striking subsection (h)(5) and inserting subsection (d)(5) ; and (ii) in subparagraph (D)— (I) in clause (i)(II) by striking subsection (h)(5) and inserting subsection (d)(5) ; and (II) in clause (ii)(II) by striking subsection (i)(6) and inserting subsection (e)(6) ; and (B) in paragraph (5)— (i) in subparagraph (A)(i) by striking subsection (g)(1)(A)(iv)(II) and inserting paragraph (1)(A)(iv)(II) ; (ii) in subparagraph (B)(iii) by striking subsection (h)(5) and inserting subsection (d)(5) ; (iii) in subparagraph (C) by striking subsection (h)(2)(B) and inserting subsection (d)(2)(B) ; and (iv) in subparagraph (D) by striking subsection (h)(5) and inserting subsection (d)(5) ; (3) subsection (d) (as redesignated by subsection (a)(4) of this section)— (A) in paragraph (1)(A) by striking subsection (g)(1) and inserting subsection (c)(1) ; (B) in paragraph (3)— (i) in subparagraph (A) by striking subsection (g)(1) and inserting subsection (c)(1) ; and (ii) in subparagraph (B)(i)(II) by striking subsection (i)(1) and inserting subsection (e)(1) ; (C) in paragraph (5)(A) by striking subsection (k) and inserting subsection (g) ; and (D) in paragraph (6) by striking subsection (k) each place it appears and inserting subsection (g) ; (4) in subsection (e) (as redesignated by subsection (a)(4) of this section)— (A) in paragraph (3) by striking subsection (g)(1) and inserting subsection (c)(1) ; (B) in paragraph (4) by striking subsection (h) and inserting subsection (d) ; and (C) in paragraph (6) by striking subsection (k) and inserting subsection (g) ; (5) in subsection (f) (as redesignated by subsection (a)(4) of this section)— (A) in paragraph (1)— (i) by striking subsection (g)(1) and inserting subsection (c)(1) ; and (ii) by striking subsection (h) or (i) and inserting subsection (d) or (e) ; (B) in paragraph (2)— (i) in the matter preceding subparagraph (A) by striking subsections (h) and (i) and inserting subsections (d) and (e) ; (ii) in subparagraph (A) by striking subsection (h) and inserting subsection (d) ; and (iii) in subparagraph (B) by striking subsection (i) and inserting subsection (e) ; and (C) in paragraph (3)— (i) in subparagraph (B)— (I) in clause (i) by striking subsection (g)(1) and inserting subsection (c)(1) ; and (II) in clause (ii) by striking subsection (h) or (i) and inserting subsection (d) or (e) ; and (ii) in subparagraph (C) by striking subsection (h) or (i) and inserting subsection (d) or (e) ; (6) in subsection (h) (as redesignated by subsection (a)(4) of this section) by striking subsections (h) and (i) and inserting subsection (d) or (e) ; (7) in subsection (i) (as redesignated by subsection (a)(4) of this section)— (A) in paragraph (1)— (i) by striking subsections (h) and (i) and inserting subsections (d) and (e) ; and (ii) by striking subsection (h) and inserting subsection (d) ; and (B) in paragraph (2)— (i) in the matter preceding subparagraph (A) by striking subsection (i) and inserting subsection (e) ; (ii) in subparagraph (A) by striking subsections (h) and (i) and inserting subsections (d) and (e) ; and (iii) in subparagraph (B)— (I) by striking subsection (h) and inserting subsection (d) ; and (II) by striking subsection (i) and inserting subsection (e) ; (8) in subsection (l) (as redesignated by subsection (a)(4) of this section)— (A) in paragraph (1) by striking subsection (g)(2), (h), or (i) and inserting subsection (c)(2), (d), or (e) ; (B) in paragraph (2) by striking subsection (h) or (i) and inserting subsection (d) or (e) ; and (C) in paragraph (3)— (i) by striking subsection (g)(1)(A)(iv), (g)(2)(E), (g)(4), or (g)(5) and inserting subsection (c)(1)(A)(iv), (c)(2)(E), (c)(4), or (c)(5) ; and (ii) by striking subsection (h) and inserting subsection (d) ; (9) in subsection (n) (as redesignated by subsection (a)(4) of this section) by striking subsection (g)(1) and inserting subsection (c)(1) ; and (10) in subsection (o) (as redesignated by subsection (a)(4) of this section) by striking subsections (b), (c) and (d) and inserting subsections (b), (c), and (d) of section 5404 . 3. Contracts for foreign and interstate air transportation (a) In general At the end of chapter 54 of title 39, United States Code, add the following: 5404. Contracts for foreign and interstate air transportation (a) Definitions In this section— (1) the terms air carrier , foreign air carrier , foreign air transportation , and interstate air transportation have the meanings given such terms in section 40102(a) of title 49; (2) the term certificated air carrier means an air carrier that holds a certificate of public convenience and necessity issued under section 41102(a) of title 49; (3) the term code-share relationship means a relationship pursuant to which any certificated air carrier or foreign air carrier’s designation code is used to identify a flight operated by another air carrier or foreign air carrier; and (4) the term Secretary means the Secretary of Transportation. (b) International mail (1) In general (A) Use of certificated air carriers; code-share relationships Except as otherwise provided in this subsection, the Postal Service may contract for the transportation of mail by aircraft between any of the points in foreign air transportation only with certificated air carriers. A contract may be awarded to a certificated air carrier to transport mail by air between any of the points in foreign air transportation that the Secretary has authorized the carrier to serve either directly or through a code-share relationship with 1 or more foreign air carriers. (B) Use of foreign air carriers If the Postal Service has sought offers or proposals from certificated air carriers to transport mail in foreign air transportation between points, or pairs of points within a geographic region or regions, and has not received offers or proposals that meet Postal Service requirements at a fair and reasonable price from at least 2 such carriers, the Postal Service may seek offers or proposals from foreign air carriers. Where service in foreign air transportation meeting the Postal Service’s requirements is unavailable at a fair and reasonable price from at least 2 certificated air carriers, either directly or through a code-share relationship with 1 or more foreign air carriers, the Postal Service may contract with foreign air carriers to provide the service sought if, when the Postal Service seeks offers or proposals from foreign air carriers, it also seeks an offer or proposal to provide that service from any certificated air carrier providing service between those points, or pairs of points within a geographic region or regions, on the same terms and conditions that are being sought from foreign air carriers. (C) Methodology for determining fair and reasonable prices For purposes of this subsection, the Postal Service shall use a methodology for determining fair and reasonable prices for the Postal Service designated region or regions developed in consultation with, and with the concurrence of, certificated air carriers representing at least 51 percent of available ton miles in the markets of interest. (D) Ceiling prices For purposes of this subsection, ceiling prices determined pursuant to the methodology used under subparagraph (C) shall be presumed to be fair and reasonable if they do not exceed the ceiling prices derived from— (i) a weighted average based on market rate data furnished by the International Air Transport Association or a subsidiary unit thereof; or (ii) if such data are not available from those sources, such other neutral, regularly updated set of weighted average market rates as the Postal Service, with the concurrence of certificated air carriers representing at least 51 percent of available ton miles in the markets of interest, may designate. (E) Situations in which concurrence cannot be attained If, for purposes of subparagraph (D)(ii), concurrence cannot be attained, the most recently available market rate data described in this paragraph shall continue to apply for the relevant market or markets. (2) Contract process The Postal Service shall contract for foreign air transportation as set forth in paragraph (1) through an open procurement process that will provide— (A) potential offerors with timely notice of business opportunities in sufficient detail to allow them to make a proposal; (B) requirements, proposed terms and conditions, and evaluation criteria to potential offerors; and (C) an opportunity for unsuccessful offerors to receive prompt feedback upon request. (3) Emergency or unanticipated conditions; inadequate lift space The Postal Service may enter into contracts to transport mail by air in foreign air transportation with a certificated air carrier or a foreign air carrier without complying with the requirements of paragraph (1) or (2) if— (A) emergency or unanticipated conditions exist that make it impractical for the Postal Service to comply with such requirements; or (B) the Postal Service’s demand for lift exceeds the space available to the Postal Service under existing contracts and— (i) there is insufficient time available to seek additional lift using procedures that comply with those requirements without compromising the Postal Service’s service commitments to its own customers; and (ii) the Postal Service first offers any certificated air carrier holding a contract to carry mail between the relevant points the opportunity to carry such excess volumes under the terms of its existing contract. (c) Good-Faith effort required The Postal Service and potential offerors shall put a good-faith effort into resolving disputes concerning the award of contracts made under subsection (b). (d) Special circumstances If the Postal Service determines that service by certificated air carriers or combination of air carriers between any pair or pairs of points in foreign air transportation is not adequate for its purposes, the Postal Service may contract, without advertising for bids, in such manner and under such terms and conditions as the Postal Service may deem appropriate, with any air taxi operator or combination thereof for such air transportation service. Contracts made under this subsection may be renewed at the existing rate by mutual agreement between the holder and the Postal Service. The Postal Service, with the consent of the air taxi operator, may adjust the compensation under such contracts for increased or decreased costs occasioned by changed conditions occurring during the contract term. The Postal Service shall cancel such a contract when the Secretary authorizes an additional certificated carrier or carriers to provide service between any pair or pairs of points covered by the contract, and such carrier or carriers inaugurate schedules adequate for its purposes. (e) Transportation of mail by aircraft in interstate air transportation (1) Determination of rates and contract terms The Postal Service may determine rates and contract with any air carrier for the transportation of mail by aircraft in interstate air transportation either through negotiations or competitive bidding. (2) Mail shipments of live animals (A) In general In the exercise of its authority under paragraph (1), the Postal Service may require any air carrier to accept mail shipments of day-old poultry, honeybees, and such other live animals as postal regulations allow to be transmitted as mail matter. The authority of the Postal Service under this subparagraph shall not apply in the case of any air carrier who commonly and regularly refuses to accept any live animals as cargo. (B) Surcharges Notwithstanding any other provision of law, the Postal Service is authorized to assess, as postage to be paid by the mailers of any shipments covered by subparagraph (A), a reasonable surcharge that the Postal Service determines in its discretion to be adequate to compensate air carriers for any necessary additional expense incurred in handling such shipments. (f) Applicability to points within Alaska The authority of the Secretary and the Postal Service under subsections (b), (c), and (d), as in effect on September 30, 2008, shall also apply, and the authority of the Postal Service under subsection (e) shall not apply, to the transportation of mail by aircraft between any 2 points both of which are within the State of Alaska and between which the air carrier is authorized by the Secretary to engage in the transportation of mail. . (b) Clerical amendment The table of sections for chapter 54 of such title is amended by adding at the end the following: 5404. Contracts for foreign and interstate air transportation. . 4. Reduction of Alaska bypass mail subsidy (a) In general Chapter 54 of title 39, United States Code (as amended by this Act), is further amended by adding at the end the following: 5405. Reduction of Alaska bypass mail subsidy (a) Competitive product classification (1) In general Except as provided in this section, Alaska bypass mail service under section 5402 shall be treated as a separate competitive product for all purposes. (2) Transfer prohibited No part of Alaska bypass mail service may be transferred to the market-dominant category of mail under section 3642. (3) Limitations Alaska bypass mail service shall not be treated as a competitive product for purposes of the implementation of sections 3633(a) and 3634. (b) Minimum cost coverage (1) In general The Postal Service shall establish and maintain rates and fees for matter sent by Alaska bypass mail service— (A) for fiscal year 2015, that cover at least 30 percent of the costs attributable to Alaska bypass mail service in that fiscal year; (B) for fiscal year 2016, that cover at least 34 percent of the costs attributable to Alaska bypass mail service in that fiscal year; (C) for fiscal year 2017, that cover at least 38 percent of the costs attributable to Alaska bypass mail service in that fiscal year; (D) for fiscal year 2018, that cover at least 42 percent of the costs attributable to Alaska bypass mail service in that fiscal year; (E) for fiscal year 2019, that cover at least 46 percent of the costs attributable to Alaska bypass mail service in that fiscal year; and (F) for fiscal year 2020, and for each fiscal year thereafter, that cover at least 50 percent of the costs attributable to Alaska bypass mail service in that fiscal year. (2) Costs attributable The costs attributable to Alaska bypass mail service for a fiscal year shall include all the direct and indirect costs of Alaska bypass mail service during that fiscal year that are attributable to that service through reliably identified causal relationships. (3) Institutional costs Costs that can be attributed to Alaska bypass mail service may not be classified as institutional costs of the Postal Service. (4) Rate increase limitation For fiscal years 2014 through 2020, no rate for any type of Alaska bypass mail service may be increased in a fiscal year by more than the maximum permitted rate increase for market dominant products plus an additional 1 percent. (c) Compliance (1) Annual review At least once each fiscal year, the Postal Regulatory Commission shall determine whether the Postal Service is in compliance with the requirements under subsection (b). (2) Remedial actions If, under paragraph (1), the Postal Regulatory Commission determines that the Postal Service has not complied with the requirements under subsection (b) with respect to a fiscal year, the Commission shall prescribe, not later than 60 days after making such determination, actions to ensure— (A) the establishment and maintenance of rates and fees for Alaska bypass mail service that recover any costs required to have been covered for such fiscal year under subsection (b), but that were not covered, by the date that is not later than the last day of the fiscal year that follows such fiscal year; and (B) compliance with the requirements under subsection (b) in subsequent fiscal years. (3) Limitation The Postal Regulatory Commission may not order the Postal Service to discontinue Alaska bypass mail service. (4) Regulations Not later than 90 days after the date of enactment of this subsection, the Postal Regulatory Commission shall issue regulations to implement this subsection. . (b) Clerical amendment The table of sections for chapter 54 of such title (as amended by this Act) is further amended by adding at the end the following: 5405. Reduction of Alaska bypass mail subsidy. .