Proposed Rule2024-03270
Periodic Reporting
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
February 16, 2024
Issuing agencies
Postal Regulatory Commission
Abstract
The Commission is acknowledging a recent filing requesting the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports (Proposal One). This document informs the public of the filing, invites public comment, and takes other administrative steps.
Full Text
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<title>Federal Register, Volume 89 Issue 33 (Friday, February 16, 2024)</title>
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[Federal Register Volume 89, Number 33 (Friday, February 16, 2024)]
[Proposed Rules]
[Pages 12289-12291]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-03270]
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POSTAL REGULATORY COMMISSION
39 CFR Part 3050
[Docket No. RM2024-3; Order No. 6965]
Periodic Reporting
AGENCY: Postal Regulatory Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commission is acknowledging a recent filing requesting the
Commission initiate a rulemaking proceeding to consider changes to
analytical principles relating to periodic reports (Proposal One). This
document informs the public of the filing, invites public comment, and
takes other administrative steps.
DATES: Comments are due: February 26, 2024.
ADDRESSES: Submit comments electronically via the Commission's Filing
Online system at <a href="http://www.prc.gov">http://www.prc.gov</a>. Those who cannot submit comments
electronically should contact the person identified in the FOR FURTHER
INFORMATION CONTACT section by telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at
202-789-6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Proposal One
III. Notice and Comment
IV. Ordering Paragraphs
I. Introduction
On February 8, 2024, the Postal Service filed a petition pursuant
to 39 CFR 3050.11 requesting that the Commission initiate a rulemaking
proceeding to consider changes to analytical principles relating to
periodic reports.\1\ The Petition identifies the proposed analytical
changes filed in this docket as Proposal One.
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\1\ Petition of the United States Postal Service for the
Initiation of a Proceeding to Consider Proposed Changes in
Analytical Principles (Proposal One), February 8, 2024 (Petition).
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II. Proposal One
Background. The Postal Service has in recent years made several
proposals to improve the methodology used to calculate dropship
workshare discounts for various flat-shaped USPS Marketing Mail
mailpieces. Petition, Proposal One at 1. For some flat-shaped USPS
Marketing Mail pieces, two rates are available: (1) a per-piece rate
for pieces up to a 4-ounce breakpoint weight; (2) and a combined rate,
per piece and per pound, for pieces heavier than the 4-ounce breakpoint
weight. Id. In 2017, the Postal Service's passthrough calculation
divided the discount for the heavier pieces by the avoided cost per
pound for all pieces, both above and below the 4-ounce breakpoint. Id.
at 2. The Postal Services states that this method was ``incomplete,''
because ``[i]t did not include in its numerator pieces below the
pricing breakpoint, but it did include the weight of those pieces in
the denominator.'' Id. Therefore, the Postal Service proposed, and the
Commission approved, the following methodology to calculate dropship
workshare discounts for USPS Marketing Mail that included the discount
for pieces at or below the breakpoint weight in the numerator:
((Pound discount * Pounds above breakpoint) +
(Piece discount * Pieces below breakpoint)).
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(Avoided cost per pound * Pounds above and below
breakpoint) \2\.
The Postal Service states that the usual approach of taking ``the
unit discount from the published benchmark price'' divided by the
avoided cost ``did not work because the benchmark price varies with the
different weights of the pieces mailed.'' Id. at 3. The Postal Service
states that it could only calculate the workshare discounts for these
flat-shaped USPS Marketing Mail mailpieces on a weighted basis after
mailing, ``when the weights and numbers of pieces sent were known.''
Id. The Postal Service contends that, as a practical matter, the
passthrough percentages for these mailpieces could sometime vary widely
with changes in mail volumes and weights which, in turn, made it more
difficult for the passthrough percentages to meet the requirements of
39 CFR 3030.284 and 3030.284. Id.
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\2\ Id. (citing Docket No. RM2017-11, Order on Analytical
Principles Used in Periodic Reporting (Proposal Seven), November 20,
2017, at 4, 8 (Order No. 4227)).
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The Postal Services states that it identified the problem complying
with 39 CFR 3030.284 and 3030.284 in Docket No. R2021-2, ``where it was
mathematically impossible for the Postal Service to make all six
passthrough percentages for Basic Carrier Route Flats (those on 5-Digit
pallets and those on all other pallets)'' comply with the Commission's
workshare discount regulations.\3\ The Postal Service therefore filed a
petition to address the non-compliance by modifying how it calculated
and
[[Page 12290]]
reported passthroughs for USPS Marketing Mail flats.\4\ Specifically,
the Postal Service proposed to calculate and report passthroughs for
USPS Marketing Mail Carrier Route Flats on 5-digit pallets and
passthroughs for all other USPS Marketing Mail Carrier Route Flats
together rather than separately. Petition, Proposal One at 4. The
Commission approved this proposal and Postal Service notes that the
Commission observed that the prior methodology ``leads to anomalous
results and could precipitate inefficient pricing.'' \5\
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\3\ Id.; see Docket No. R2021-2, Order on Price Adjustments for
First-Class Mail, USPS Marketing Mail, Periodicals, Package
Services, and Special Services Products and Related Mail
Classification Changes, July 19, 2021 (Order No. 5937).
\4\ Petition, Proposal One at 3; see Docket No. RM2021-6,
Petition of the United States Postal Service for the Initiation of a
Proceeding to Consider Proposed Changes in Analytical Principles
(Proposal Three), April 8, 2021.
\5\ Petition, Proposal One at 4-5 (citing Docket No. RM2021-6,
Order on Analytical Principles Used in Periodic Reporting (Proposal
Three), November 4, 2021, at 11 (Order No. 6032)). Additionally, the
Postal Service states that, in approving the price adjustments in
Docket No. R2021-2, the Commission also granted a one-time exemption
from 39 CFR part 3030, subpart J for Basic Carrier Route Flats
entered at the [Destination Delivery Unit] DDU workshare discount
that noted the ``mathematical impossibility'' of compliance.
Petition, Proposal One at 4.
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The Postal Service states that while the adjustments in 2021
prevented the compliance problem for USPS Marketing Mail Carrier Route
Flats on 5-digit pallets from reoccurring, ``the adjustments did not
otherwise change the methodology for calculating passthrough
percentages for other flat-shaped [USPS] Marketing Mail pieces with
piece and pound price components.'' Id. at 5. Instead, the Postal
Services states that changes in volumes and weight cause compliance
issues with 39 CFR 3030.284 and 3030.284. Id. The Postal Service states
that it ``found a great disparity in the volumes and weights of [USPS]
Marketing Mail Carrier Route Flats dropshipped at the [destination
sectional center facility] DSCF and [destination delivery unit
(DDU)].'' Id. at 5. The Postal Service states that it requested, and
the Commission granted, a waiver permitting the passthrough percentage
for USPS Marketing Mail Carrier Route Flats dropshipped at the DDU to
be 105 percent.\6\ Thereafter, the Postal Service again revised the way
it prices flat-shaped USPS Marketing Mail pieces with piece and pound
price components and offering dropship discounts on per-piece prices
only, which the Commission approved.\7\
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\6\ Id. at 5-6 (citing Docket No. RM2022-12, Order Approving
Postal Service Application for Waiver under 39 CFR 3030.286, August
30, 2022, at 9, 11 (Order No. 6261)).
\7\ Petition, Proposal One at 6, 7-8 (citing Docket No. RM2023-
4, Petition of the United States Postal Service for the Initiation
of a Proceeding to Consider Proposed Changes in Analytical
Principles (Proposal One), February 10, 2023; Docket No. RM2023-4,
Order on Analytical Principles Used in Periodic Reporting (Proposal
One), April 6, 2023, at 14 (Order No. 6474).
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The Postal Service's current methodology for calculating workshare
discount passthrough percentages is ``the same . . . as it uses for
most other products, dividing the per-piece discount by the per-piece
cost avoidance.'' Petition, Proposal One at 7. The Postal Service
states that the passthrough percentages no longer vary with the
different weights of pieces mailed because the passthroughs are
calculated independently of the volumes and weights of pieces mailed.
Id.
The Postal Service states that its current methodology for
calculating workshare discount passthrough percentages ``has some
limitations.'' Id. The Postal Service argues that because pound prices
do not vary by dropship entry point, it reduces incentives for mailers
to dropship flat-shaped pieces weighing more than 4 ounces closer to
their delivery destinations. Id. at 8. The Postal Service also states
that its current methodology does not ``reflect the avoided costs of
delivering flat-shaped [USPS] Marketing Mail pieces as closely as they
could.'' Id. at 9. Instead, the Postal Service states that workshare
discounts for pieces weighing more than 4 ounces are too small relative
to their avoided costs, while those for pieces weighing 4 ounces or
less are too large. Id.
Proposal. The Postal Service proposes to address the limitations in
its current methodology for calculating workshare discount passthrough
percentages by separately deriving prices for flat-shaped USPS
Marketing Mail pieces at or below the 4-ounce breakpoint from those
pieces above the 4-ounce breakpoint. Id. For mailpieces at or below the
4-ounce breakpoint, the Postal Service states that:
<bullet<ls-thn-eq> mailers would continue to pay only a per-piece
price;
<bullet<ls-thn-eq> dropship discounts would be given on these per-
piece prices, so that per-piece prices would still vary based upon
entry (i.e., origin, (destination network distribution center) DNDC,
DSCF, or DDU); and
<bullet<ls-thn-eq> the methodology for calculating passthroughs
would remain substantially unchanged from the current formula.
Id. at 10. The Postal Service states that the only difference in
its proposed methodology and the current methodology is the per-piece
cost avoidance from Folder 13, as submitted in its annual compliance
filing. Id. The Postal Service's proposed methodology for calculating
workshare discount passthrough percentages for these pieces is as
follows:
Per-piece dropship discount/per-piece dropship cost avoidance of
lightweight pieces (Folder 13)
Id. The Postal Service contends that the change to the cost
avoidance component of the passthrough calculation is much closer to
actual avoided costs than if the weights of pieces over 4-ounces were
included. Id.
For mailpieces weighting 4-ounces or more, the Postal Services
states:
<bullet<ls-thn-eq> prices would continue to have per-piece and per-
pound components;
<bullet<ls-thn-eq> pound prices would, once again, apply to the
entire weight of a piece, not just the pounds above the breakpoint as
they do in the current price structure; and
<bullet<ls-thn-eq> the Postal Service would reintroduce per-pound
dropship discounts, and so the per-pound prices would again vary by
dropship entry point, as they did prior to adopting the current
methodology.
Id. at 10-11. The Postal Service states that, instead of basing
dropship discounts on the per-piece rates and cost avoidances, it
proposes to base dropship workshare discounts for pieces weighing 4
ounces or more on the per-pound component of the rates. Id. at 12. As
such, the Postal Service's proposed methodology for calculating
passthroughs for pieces weighing 4 ounces or more is:
Per-pound dropship discount/Per-pound dropship cost avoidance (Folder
13)
Id.
The Postal Service contends that ``the virtue'' of the proposed
methodology is that the discounts are tied directly to the per-pound
cost avoidance and are ``better aligned with actual cost avoidances''
because they are ``based on actual weight.'' Id. at 12. Finally, the
Postal Service argues that an ``immediate effect'' of its proposal
would be to double the number of workshare discounts, from eight
discounts to 16, for dropshipped flat-shaped USPS Marketing Mail
mailpieces. Id. at 12-13.
III. Notice and Comment
The Commission establishes Docket No. RM2024-3 for consideration of
matters raised by the Petition. More information on the Petition may be
accessed via the Commission's website at <a href="http://www.prc.gov">http://www.prc.gov</a>. Interested
persons may submit comments on the Petition and Proposal One no later
than February 26, 2024. Pursuant to 39 U.S.C.
[[Page 12291]]
505, JP Klingenberg is designated as an officer of the Commission
(Public Representative) to represent the interests of the general
public in this proceeding.
IV. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket No. RM2024-3 for consideration
of the matters raised by the Petition of the United States Postal
Service for the Initiation of a Proceeding to Consider Proposed Changes
in Analytical Principles (Proposal One), filed February 8, 2024.
2. Comments by interested persons in this proceeding are due no
later than February 26, 2024.
3. Pursuant to 39 U.S.C. 505, the Commission appoints JP
Klingenberg to serve as an officer of the Commission (Public
Representative) to represent the interests of the general public in
this docket.
4. The Secretary shall arrange for publication of this order in the
Federal Register.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2024-03270 Filed 2-15-24; 8:45 am]
BILLING CODE 7710-FW-P
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</html>Indexed from Federal Register on February 16, 2024.
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