Competitive Postal Products

POSTAL REGULATORY COMMISSION <CFR>39 CFR Parts 3000, 3010, 3040, 3041</CFR> <DEPDOC>[Docket No. RM2023-5; Order No. 6953]</DEPDOC> <RIN>RIN 3211-AA34</RIN> <SUBJECT>Competitive Postal Products</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Postal Regulatory Commission. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Notice of Proposed Rulemaking seeks comment on a proposal for reviewing contracts negotiated between the Postal Service and customers for competitive services. These contracts are known as competitive negotiated service agreements (NSAs). The proposal includes a default method for reviewing competitive NSAs and three optional streamlined methods. Different requirements apply to each method for reviewing proposed competitive NSAs. In addition, the proposal includes requirements for administering approved competitive NSAs. The proposal is designed to streamline competitive NSA review, ensure transparency and accountability, preserve existing flexibility, and enable a smooth transition with minimum disruption for stakeholders. This document informs the public of the filing, invites public comment, and takes other administrative steps. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> <E T="03">Comments are due:</E> April 8, 2024; <E T="03">Reply comments are due:</E> May 7, 2024. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Submit comments electronically via the Commission's Filing Online system at <E T="03">https://www.prc.gov.</E> Those who cannot submit comments electronically should contact the person identified in the <E T="02">FOR FURTHER INFORMATION CONTACT</E> section by telephone for advice on filing alternatives. The Rule Summary can be found on the Commission's Rule Summary Page at <E T="03">https://www.prc.gov/rule-summary-page.</E> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> David A. Trissell, General Counsel, at 202-789-6820. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <EXTRACT> <FP SOURCE="FP-2">I. Background</FP> <FP SOURCE="FP-2">II. Basis of Proposed Rules</FP> <FP SOURCE="FP-2">III. Proposed Rules</FP> </EXTRACT> <HD SOURCE="HD1">I. Background</HD> A Negotiated Service Agreement (NSA) is “a written contract, to be in effect for a defined period of time, between the Postal Service and a mailer, which provides for customer-specific rates or fees and/or terms of service in accordance with the terms and conditions of the contract.” 39 CFR 3010.101(f). These NSAs require prior Commission approval before they are added to the applicable product lists; however, different statutory and regulatory criteria apply to the approval of Market Dominant NSAs and Competitive NSAs. <SU>1</SU> <FTREF/> <FTNT> <SU>1</SU>   <E T="03">See, e.g.,</E> 39 U.S.C. 3642; Postal Regulatory Commission, <E T="03">Annual Report to the President and Congress</E> Fiscal Year 2021, January 25, 2022, at 26 ( <E T="03">FY 2021 Annual Report</E> ) (stating that the Commission reviews Market Dominant NSAs to ensure they comply with 39 U.S.C. 3622(c)(10) and the Commission's regulations in 39 CFR part 3040, subpart G); <E T="03">id.</E> at 28 (stating that Competitive NSAs require prior Commission review for compliance with 39 U.S.C. 3633(a) and 39 CFR part 3035). The focus of this docket is Competitive NSAs. </FTNT> Before adding a product (such as a Competitive NSA) to the Competitive product list, the Commission undertakes two types of review: (1) review under 39 U.S.C. 3642; and (2) review under 39 U.S.C. 3633. Upon consideration of required information submitted by the Postal Service, including projections of the proposed product's revenues and costs and responses to any information requests, <SU>2</SU> <FTREF/> the Commission determines whether the product complies with the requirements for Competitive products in 39 U.S.C. 3642. The Commission also makes a preliminary determination of whether the proposed product will comply with the criteria outlined in 39 U.S.C. 3633(a). Final determination of compliance with 39 U.S.C. 3633(a) is made retrospectively, in the Commission's <E T="03">Annual Compliance Determination(s)</E> (ACD), as set forth in 39 U.S.C. 3653. <FTNT> <SU>2</SU>   <E T="03">See</E> 39 CFR 3035.105. This information includes “[s]ufficient revenue and cost data for the 12-month period following the effective date of the rate or class to demonstrate that each affected competitive product will be in compliance with 39 U.S.C. 3633(a)(2)[.]” 39 CFR 3035.105(c)(1). </FTNT> Over the years, various efforts have sought to streamline review of NSAs in certain respects by applying the concept of functional equivalence to groups of NSAs. <SU>3</SU> <FTREF/> An “umbrella” product is a grouping of NSAs that are functionally equivalent to a baseline agreement. The Commission has used a functional equivalence analysis to approve “umbrella” product agreements. <SU>4</SU> <FTREF/> Non-published rates NSA products are a refinement of “umbrella” products that receive further streamlined review because the products “conform to a template agreement and offer prices within specified, pre-approved ranges.” Order No. 5753 at 3. These products must comply with Commission classification and regulatory requirements, including pre-approved pricing formulas, minimum cost coverage, and documentation, allow for a streamlined review process because the contract template and financial model are approved in advance. <SU>5</SU> <FTREF/> <FTNT> <SU>3</SU>   <E T="03">See, e.g.,</E> Docket No. CP2008-5, Order Concerning Global Expedited Package Services Contracts, June 27, 2008 (Order No. 86). </FTNT> <FTNT> <SU>4</SU>   <E T="03">See, e.g.,</E> Order No. 5753 at 2-3 (summarizing the Commission's approach to “umbrella” products); Docket No. R2013-9, Order Granting, in Part, Motion for Partial Reconsideration of Order No. 1864 and Modifying, in Part, Order No. 1864, August 11, 2014, at 7 (Order No. 2148) (allowing then-existing “umbrella” products to designate multiple baseline agreements but “plan[ning] to discontinue the practice of designating more than one baseline reference.”). The Commission also has considered similar arrangements termed “shell classifications,” which may use a “shell” or template in lieu of an actual agreement as a baseline. <E T="03">See</E> Docket No. CP2008-8 <E T="03">et al.,</E> Order Concerning Global Plus Negotiated Service Agreements, June 27, 2008, at 7-8 (Order No. 85); <E T="03">cf.</E> Docket No. MC2008-6 <E T="03">et al.,</E> Order Concerning Prices Under Inbound Direct Entry Contracts with Certain Foreign Postal Administrations, September 4, 2008, at 3, 7 (Order No. 105). </FTNT> <FTNT> <SU>5</SU>   <E T="03">See</E> Order No. 5753 at 3; Docket Nos. MC2010-29 and CP2010-72, Order Approving Postal Service Request to Add Global Expedited Package Services-Non-Published Rates 1 to the Competitive Product List, November 22, 2010, at 15 (Order No. 593) (“[T]he model contract is based on business rules which ensure that each contract covers its attributable costs and makes a contribution to institutional costs.”). </FTNT> In Order No. 6446, the Commission outlined concepts for potential enhancements to its regime for adding NSAs to the Competitive product list in the Framework. <E T="03">See</E> Order No. 6446 at 12. The core feature of the Framework was establishing a three-track system for categorizing and reviewing NSAs proposed to be added to the Competitive product list. <E T="03">Id.</E> Under this Framework, a proposed NSA would have been filed in one of three tracks, and each track would have had distinct filing and review procedures providing different levels of scrutiny and review. <E T="03">Id.</E> These tracks would have consisted of a Custom NSA track, a Standard NSA track, and an NPR NSA track. <E T="03">Id.</E> The Commission received comments in response to Order No. 6446. Previously, the Commission developed a conceptual framework that contemplated separate tracks for filing and reviewing certain types of NSAs, and requested comments thereon. Having considered the comments received, the Commission revises its proposed regulations. <HD SOURCE="HD1">II. Basis of the Proposed Rules</HD> Despite improvements over time, the Commission maintains that streamlining and codifying the rules pertaining to Competitive NSAs will provide increased clarity concerning filing requirements and review processes. Codifying such procedures and standards also provides an opportunity to make improvements to the practices and precedents that have developed, while maintaining the opportunities for pricing flexibility that NSAs afford the Postal Service. Specifically, the Commission proposes to codify, with modifications, its existing NSA filing and review procedures as default rules for proposals to add NSAs to the Competitive product list. The Commission proposes to codify, with modifications, existing, optional, streamlined methods for adding qualifying Umbrella products and Non-Published Rate products to the Competitive product list. The Commission also proposes to create a new streamlined filing option for qualifying NSAs called Standardized Distinct Products. Each streamlined option would have distinct filing and review procedures providing different levels of scrutiny and streamlined review. The intent is to preserve the Postal Service's existing contracting flexibility with default review procedures, while providing the option for streamlined pre-implementation review of NSAs that satisfy the eligibility requirements of one of the optional streamlined methods. The Commission's proposal provides new filing and review procedures for Standardized Distinct Product NSAs. These procedures would include advance review of financial mode ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 64k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━