Notice2024-06611
Public Inquiry on Zone 10 Packages Pursuant to 39 U.S.C. 3642
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
March 28, 2024
Issuing agencies
Postal Regulatory Commission
Abstract
The Commission is initiating a public inquiry proceeding and appoint a presiding officer to serve as an investigator to explore the appropriate classification of Zone 10 packages pursuant to 39 U.S.C. 3642. This notice informs the public of the filing and takes other administrative steps.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 61 (Thursday, March 28, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 61 (Thursday, March 28, 2024)]
[Notices]
[Pages 21545-21547]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-06611]
=======================================================================
-----------------------------------------------------------------------
POSTAL REGULATORY COMMISSION
[Docket No. PI2024-2; Order No. 7017]
Public Inquiry on Zone 10 Packages Pursuant to 39 U.S.C. 3642
AGENCY: Postal Regulatory Commission.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The Commission is initiating a public inquiry proceeding and
appoint a presiding officer to serve as an investigator to explore the
appropriate classification of Zone 10 packages pursuant to 39 U.S.C.
3642. This notice informs the public of the filing and takes other
administrative steps.
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. Background
III. Public Inquiry
IV. Ordering Paragraphs
I. Introduction
In Order No. 7016, the Commission stated that it would initiate a
public inquiry proceeding and appoint a presiding officer to serve as
an investigator to explore the appropriate classification of Zone 10
packages pursuant to 39 U.S.C. 3642 and whether the implementation of
Zone 10 prices raises a material issue of fact concerning whether a
violation of 39 U.S.C. 403(c) has occurred if the Postal Service elects
to implement the Zone 10 prices.\1\ The Commission establishes this
docket to facilitate examination of those issues.
---------------------------------------------------------------------------
\1\ Docket No. CP2024-72, Order Approving Price Adjustments and
Classification Changes for Domestic Competitive Products, March 22,
2024, at 3, 28, 29-31 (Order No. 7016).
---------------------------------------------------------------------------
II. Background
On November 22, 2023, the Postal Service filed notice with the
Commission of its intent to establish a new Zone 10 for Priority Mail
Express, Priority Mail, and USPS Ground Advantage and proposed
associated Zone 10 rates.\2\ The Postal Service states that the changes
will take effect no earlier than July 1, 2024, with a specific date to
be determined by the Postal Service in the future. Docket No. CP2024-72
Notice at 1.
---------------------------------------------------------------------------
\2\ Docket No. CP2024-72, USPS Notice of Changes in Rates and
Classifications of General Applicability for Competitive Products,
November 22, 2023 (Docket No. CP2024-72 Notice).
---------------------------------------------------------------------------
Currently, Priority Mail Express, Priority Mail, and USPS Ground
Advantage packages are charged prices based on weight and zone. For
packages mailed within the United States, a package is assigned Zone 1-
8 based on the distance the package must travel to reach its
destination. The proposed new Zone 10 and associated prices will apply
to (1) packages originating in the Lower 48 States and destined to
Alaska, Hawaii, or the U.S. Territories (which include Puerto Rico, the
U.S. Virgin Islands, and territories in the Pacific, including Guam and
American Samoa); (2) packages originating in Alaska and destined to
Hawaii or the U.S. Territories; (3) packages originating in Hawaii or a
territory in the Pacific Ocean and destined to Alaska, Puerto Rico, or
the U.S. Virgin Islands; and (4) packages originating in Puerto Rico or
the U.S. Virgin Islands and destined to Alaska, Hawaii, or a territory
in the Pacific Ocean. Id. at 2-3. The proposed Zone 10 does not apply
to packages that originate in Alaska, Hawaii, or the U.S. Territories
and are destined to the Lower 48 States. Id. at 4.
To explain the rationale for its proposal, the Postal Service
states that the new Zone 10 and associated prices ``will better align
with the zoning practices of [its] competitors, who currently have
separate zones for offshore destinations.'' Id. at 3. The Postal
Service states that its ``competitors charge significantly more for
shipments from the Lower 48 states to offshore locations than for
shipments in the reverse direction.'' \3\ The Postal Service also
states that its decision to establish Zone 10 is ``cost-based in
[[Page 21546]]
nature'' because ``[t]he cost of transport to offshore locations is
higher on average than it is to transport to non-offshore
destinations.'' Docket No. CP2024-72 Notice at 3. Specifically, the
Postal Service explains that there are more limited transportation
options to offshore destinations, and the use of air transportation,
the mix of air transportation providers, and the need to use higher
cost providers all contribute to higher costs.\4\ The Postal Service
does not, however, provide specific data and sources demonstrating
these cost factors or otherwise demonstrating support for the ``cost-
based'' nature of the new Zone 10 prices and has yet to undertake the
effort to disaggregate Zone 10 costs and confirm that its cost-based
assumption is supported by its available transportation data. See
Docket No. CP2024-72 Response to CHIR No. 2, question 1.
---------------------------------------------------------------------------
\3\ Docket No. CP2024-72, USPS Response to Chairman's
Information Request No. 1, With Portions Filed Under Seal, December
20, 2023, question 2.c.
\4\ Docket No. CP2024-72, USPS Response to Chairman's
Information Request No. 2, With Portions Filed Under Seal, January
12, 2024, question 1.a. (Docket No. CP2024-72 Response to CHIR No.
2).
---------------------------------------------------------------------------
In Order No. 7016, the Commission acknowledged that its role in
reviewing proposed Competitive product rate and classification changes
was limited by law. Order No. 7016 at 1-2, 32-33. Because the proposed
rate and classification changes complied with 39 U.S.C. 3633(a), 39 CFR
part 3035, and Order Nos. 1062 and 6249,\5\ the Commission approved the
proposed price and classification changes as consistent with applicable
law and found that it had no legal basis to reject the proposed
changes. Order No. 7016 at 15-22. However, the Commission also
identified numerous concerns with the Postal Service's proposal and
approach and urged the Postal Service to reconsider whether it is
prudent or necessary to implement its proposal. Id. at 2, 22-32. The
Commission also identified two areas that were particularly suited to
further exploration in a separate public inquiry proceeding: (1) the
question of whether Zone 10 packages are appropriately classified as
Competitive products pursuant to 39 U.S.C. 3642 and (2) the question of
whether the implementation of Zone 10 prices raises a material issue of
fact concerning whether a violation of 39 U.S.C. 403(c) has occurred if
the Postal Service elects to implement the Zone 10 prices. Id. at 28,
30-32.
---------------------------------------------------------------------------
\5\ See 39 U.S.C. 3633(a); 39 CFR part 3035; Docket No. CP2012-
2, Order Approving Changes in Rates of General Applicability for
Competitive Products, December 21, 2011 (Order No. 1062); Docket
Nos. CP2022-22 and CP2022-62, Order Granting in Part the United
States Postal Service's Motions for Clarification of Order Nos. 6071
and 6195, August 15, 2022 (Order No. 6249).
---------------------------------------------------------------------------
Classification of Zone 10 packages. Postal products are separated
into two distinct classifications: Market Dominant and Competitive. 39
U.S.C. 3621, 3631, 3642. Section 3642 of Title 39 governs the addition
of products to, removal of products from, or transfer of products (or
components of a product) between the Market Dominant and Competitive
product lists.\6\ The Commission may consider a change to a product's
classification upon request of the Postal Service, upon request of
users of the mail, or upon its own initiative. 39 U.S.C. 3642(a). There
is nothing to prevent transfer of only part of a product between
product lists. 39 U.S.C. 3642(c).
---------------------------------------------------------------------------
\6\ 39 U.S.C. 3642. The implementing regulations for this
section appear in 39 CFR part 3040.
---------------------------------------------------------------------------
The criteria for assigning a product to either the Market Dominant
or Competitive product list are described in 39 U.S.C. 3642(b). Section
3642(b)(1) defines a Market Dominant product as a product over which
``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). Competitive products
are defined as ``all other products.'' Id. Products covered by the
postal monopoly are not subject to transfer from the Market Dominant
category. 39 U.S.C. 3642(b)(2). Additional considerations in
determining the correct classification of a postal product include the
availability and nature of private sector competitors, the views of
users of the product, and the likely impact on small businesses. 39
U.S.C. 3642(b)(3).
In Docket No. CP2024-72, several commenters raised concerns
relevant to an inquiry pursuant to 39 U.S.C. 3642, and the Commission
recognized that the concerns raised by commenters may call into
question whether the proposed Zone 10 volumes are correctly classified
as Competitive. Order No. 7016 at 28-29. As a result, the Commission
determined that this issue would be appropriate to consider in a public
inquiry proceeding. Id. The Commission stated that it intended to
appoint a presiding officer to serve as an investigator in the public
inquiry proceeding to further explore the appropriate classification of
these packages and to provide analysis and recommendations to the
Commission on that issue. Id.
Violation of 39 U.S.C. 403(c). 39 U.S.C. 403(c) prohibits the
Postal Service from making ``any undue or unreasonable discrimination
among users of the mails'' ``in establishing classifications, rates,
and fees.'' 39 U.S.C. 403(c). In order to find that undue or
unreasonable price discrimination exists in violation of 39 U.S.C.
403(c), the Commission must find that: (1) a mailer has been offered
less favorable rates or terms and conditions than one or more other
mailers; (2) the mailer is ``similarly situated'' to the mailer or
mailers who have been offered the more favorable rates or terms and
conditions; and (3) there is no rational or legitimate basis for the
Postal Service to deny the more favorable rates or terms and conditions
offered to others.\7\ The Commission has the authority to take action
to bring the Postal Service into compliance with 39 U.S.C. 403(c) if it
finds the Postal Service is not operating in conformance with that
provision based on a complaint raising such non-conformance. 39 U.S.C.
3662(a), (c). The Commission has the authority to appoint an officer of
the Commission representing the interests of the general public to
bring a complaint for violation of 39 U.S.C. 403(c) or any other
provision enumerated in 39 U.S.C. 3662(a). 39 U.S.C. 3662(a).
---------------------------------------------------------------------------
\7\ Docket No. C2020-2, Order Granting the Postal Service's
Motion to Dismiss Complaint with Prejudice, April 28, 2020, at 8
(Order No. 5491) (citing Docket No. C2009-1, Order on Complaint,
April 20, 2011, at 28 (Order No. 718)).
---------------------------------------------------------------------------
In Order No. 7016, the Commission noted that the Postal Service was
not required to justify its Zone 10 rates on a cost basis beyond
showing compliance with 39 U.S.C. 3633(a). Order No. 7016 at 30-32.
However, the Commission also noted that it previously found costs are a
relevant consideration under the 39 U.S.C. 403(c) analysis and that
costs may be particularly relevant in the case of Zone 10 because one
of the Postal Service's rationales for its Zone 10 proposal is that it
is ``cost-based in nature.'' See id. at 30; Order No. 5491 at 8; Docket
No. CP2024-72 Notice at 3.
The Commission stated that the Postal Service's cost-based
rationale for its proposal appeared reasonable on its face given the
Postal Service's representations regarding transportation costs to
offshore areas; however, it also raised concern that the Postal Service
failed to undertake the effort to disaggregate Zone 10 costs and
confirm that its assumption regarding higher transportation costs for
Zone 10 packages was supported by its available transportation data.
Order No. 7016 at 31-32. The Commission directed the
[[Page 21547]]
Postal Service to file a rulemaking proceeding proposing and supporting
the methodological changes necessary to derive separate Zone 10
transportation costs for Priority Mail and USPS Ground Advantage within
90 days of the date of Order No. 7016. Id. at 27.
The Commission was concerned that if the Postal Service's actual
cost data differed from the Postal Service's assumptions, the Postal
Service's cost-based justification for the Zone 10 rates could be
invalid and concerns of violation of 39 U.S.C. 403(c) could arise. Id.
at 30-32. As a result, the Commission stated that it intended to
appoint a presiding officer to serve as an investigator to gather
information and explore whether the Postal Service would be in
violation of 39 U.S.C. 403(c) if the Postal Service elects to implement
the new Zone 10 and related prices. Id. The Commission also stated that
the investigator may also consider whether violation of any other
provision enumerated in 39 U.S.C. 3662(a) has occurred. Id. at 32. The
Commission further stated that after gathering applicable information,
the investigator shall issue a public, written report to the Commission
as to whether the implementation of Zone 10 raises a material issue of
fact concerning whether a violation of 39 U.S.C. 403(c) or any other
provision enumerated in 39 U.S.C. 3662(a) has occurred. Id.
III. Public Inquiry
The Commission establishes this proceeding to appoint and direct a
presiding officer to serve as an investigator to explore the
appropriate classification of Zone 10 packages pursuant to 39 U.S.C.
3642 and whether the implementation of Zone 10 prices raises a material
issue of fact concerning whether a violation of 39 U.S.C. 403(c) has
occurred if the Postal Service elects to implement the Zone 10 prices.
Pursuant to 39 CFR 3010.106, the Commission appoints John Avila to
serve as presiding officer in this docket. In that role, the Commission
expects the presiding officer to serve an investigatory role similar to
the one envisioned by 39 CFR 3022.21 to procure applicable information,
examine issues, and report back to the Commission with his analysis and
recommendations.\8\
---------------------------------------------------------------------------
\8\ See 39 CFR 3022.21. 39 CFR 3022.21 contemplates the
appointment of an investigator in the context of procuring
information and examining issues before reporting back to the
Commission during a complaint proceeding.
---------------------------------------------------------------------------
In addition to consideration of 39 U.S.C. 403(c) and 3642, the
underlying regulations, Commission precedent, the record of Docket No.
CP2024-72, and the disaggregated costs the Postal Service has been
directed to file within 90 days, the Commission anticipates that the
presiding officer may need additional information from the Postal
Service prior to conducting analysis and reaching any conclusions and
expects him to issue presiding officer information requests as he deems
appropriate to gather such information. 39 CFR 3010.106(c).
Once the presiding officer serving as investigator has sufficient
information to analyze and assess whether Zone 10 packages should
remain classified as Competitive pursuant to 39 U.S.C. 3642, the
underlying regulations, and Commission precedent, the presiding officer
shall file a public, written report to the Commission in this
proceeding detailing his analysis and recommendations to the Commission
on that issue. Once the presiding officer serving as investigator has
sufficient information to assess whether the implementation of Zone 10
raises a material issue of fact concerning whether a violation of 39
U.S.C. 403(c) has occurred, the presiding officer shall issue a public,
written report to the Commission as to whether the implementation of
Zone 10 raises a material issue of fact concerning whether a violation
of 39 U.S.C. 403(c) has occurred. The investigator may also consider
whether violation of any other provision enumerated in 39 U.S.C.
3662(a) has occurred. Upon receipt of these reports, the Commission
will consider if further action in this docket or separate proceedings
is appropriate.
Materials filed in this proceeding will be available for review on
the Commission's website unless the information contained therein is
subject to an application for non-public treatment. The Commission's
rules on non-public materials (including access to documents filed
under seal) appear in 39 CFR part 3011. Additional information may be
accessed via the Commission's website at <a href="http://www.prc.gov">http://www.prc.gov</a>.
IV. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket No. PI2024-2 to review issues
related to the appropriate classification of Zone 10 packages pursuant
to 39 U.S.C. 3642 and whether the implementation of Zone 10 prices
raises a material issue of fact concerning whether a violation of 39
U.S.C. 403(c) has occurred if the Postal Service elects to implement
the Zone 10 prices.
2. Pursuant to 39 CFR 3010.106, the Commission appoints John Avila
to serve as presiding officer in this docket. The presiding officer
shall serve in an investigatory role and make filings in this docket as
described in the body of this Order.
3. The Secretary shall arrange for publication of this notice in
the Federal Register.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2024-06611 Filed 3-27-24; 8:45 am]
BILLING CODE 7710-FW-P
</pre></body>
</html>Indexed from Federal Register on March 28, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.