Service Standards for Market-Dominant Mail Products

<RULE> POSTAL SERVICE <CFR>39 CFR Part 121</CFR> <SUBJECT>Service Standards for Market-Dominant Mail Products</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Postal Service <E T="51">TM</E> . <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The United States Postal Service is revising the service standards for certain market-dominant services, specifically First-Class Mail®, Periodicals, USPS Marketing Mail, and Package Services. The new service standards, which will be implemented in two phases, align with operational initiatives that the Postal Service plans to implement on a nationwide basis to fundamentally transform its processing and transportation networks to achieve greater operational precision and efficiency, significantly reduce costs, and enhance service pursuant to the <E T="03">Delivering for America</E> strategic plan. The changes will maintain service at existing levels for most volume, will upgrade standards for more market-dominant volume than is downgraded, and will improve service reliability. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Effective April 1, 2025, except for instruction 4 (revising part 121), which is effective July 1, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Martha Johnson, Senior Public Relations Representative, at <E T="03">martha.s.johnson@usps.gov</E> or (202) 268-2000. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Table of Contents</HD> <EXTRACT> <FP SOURCE="FP-2">I. Introduction</FP> <FP SOURCE="FP-2">II. Comments</FP> <FP SOURCE="FP-2">III. Response to Comments</FP> <FP SOURCE="FP1-2">A. Service Impacts</FP> <FP SOURCE="FP1-2">B. Disparate Impact on Rural Communities and Network Consolidations</FP> <FP SOURCE="FP1-2">C. Financial Considerations</FP> <FP SOURCE="FP1-2">D. Election Mail</FP> <FP SOURCE="FP-2">IV. Explanation of Final Rules</FP> <FP SOURCE="FP1-2">A. Service Standards Generally</FP> <FP SOURCE="FP1-2">B. First-Class Mail</FP> <FP SOURCE="FP1-2">C. Periodicals, USPS Marketing Mail, and Package Services</FP> </EXTRACT> <HD SOURCE="HD1">I. Introduction</HD> By adopting this final rule, the Postal Service is amending 39 CFR part 121 to revise the current service standards for certain market-dominant products. The Postal Service is restructuring the service standards for domestic First-Class Mail, such that the service standards will retain the current day range of 1-5 days (as well as the current 0-1 days for USPS Connect® Local), while being calculated, with certain exceptions, as the sum of delivery days accruing across three successive operational legs reflecting end-to-end service from an originating 5-digit ZIP Code to a destinating 5-digit ZIP Code. The rule also partially adjusts the service standards for end-to-end Periodicals, USPS Marketing Mail, and Package Services so that they will be primarily based on the standards for First-Class Mail, consistent with the Postal Service's implementation of a more integrated network, thus continuing efforts to eliminate the Postal Service's legacy network that, due to its poor design, has multiple, redundant network flows. These revisions achieve the objectives set forth in 39 U.S.C. 3691(b), taking into account the factors of 39 U.S.C. 3691(c). Overall, they further the Postal Service's obligations under 39 U.S.C. 101 and other provisions of Title 39 of the U.S. Code to provide universal postal services in a prompt, reliable, and efficient manner. The Postal Service is required by law to provide universal postal services in a financially self-sufficient manner, through an integrated network for the delivery of mail and packages at least six days a week. Currently, the Postal Service is not financially self-sufficient and lacks a network that is conducive to the logical, efficient, cost-effective, and reliable movement of mail and packages in an integrated manner from origin to destination in the modern postal environment, taking into account the current and projected volume, revenue, costs, and product mix. The Postal Service network has not been appropriately adjusted to account for volume, revenue, costs, and mail mix changes, including the substantial decline in Single-Piece First-Class Mail volume and increase in package volume, leading to significant inefficiencies. The new service standards align with operational initiatives that the Postal Service plans to implement on a nationwide basis to fundamentally transform its processing and transportation networks to achieve greater operational precision and efficiency, significantly reduce costs, and enhance service pursuant to the Postal Service's <E T="03">Delivering for America</E> strategic plan (DFA Plan). These initiatives will comprehensively transform the Postal Service's operations to address problems that exist today and create a network that enables the integrated movement of mail and packages in a precise and cost-effective manner consistent with best business practice far into the future. They should also lead to substantial cost savings (conservatively estimated at between $3.6 to $3.7 billion annually), which is critical given the Postal Service's current poor financial condition, which can be addressed only through comprehensive changes to reduce costs and increase efficiency (in conjunction with the other elements of the DFA Plan). To illustrate, the current service standards require the Postal Service to conduct separate trips to drop off destinating volume from the processing network to collection/delivery facilities in the morning for delivery that day, and then pick-up originating volume from the collection/delivery facilities to the processing network in the afternoon, or alternatively pay Highway Contract Route contractors to layover for multiple hours between the outbound and return legs of their routes. Many of these trips transport low amounts of volume to and from collection/delivery facilities that are far from the Postal Service's processing facilities. The Postal Service's Regional Transportation Optimization (RTO) initiative will eliminate some of the costs and inefficiencies associated with these excess trips by allowing certain mail and packages to be picked up the next day from the Post Office on the same trip that also dropped off mail at that Post Office for delivery that day. The Postal Service will designate 5-digit ZIP Codes for RTO when a retail/collection facility servicing that 5-digit ZIP Code is more than 50 miles from the originating Regional Processing and Distribution Center or Campus (RPDC), though exceptions may apply based on operational or business considerations. Under the new service standards, which are needed to implement RTO, most mail and packages would either receive the same service standard or an accelerated standard so that it is delivered faster than today, while some mail and packages would have a service expectation that is one day longer than the current expectation but still within the current day-ranges. Further details of the changes appear below. By implementing the new standards and the operational initiatives to which they are aligned, the Postal Service will be better able to achieve the goals of the DFA Plan to create a high-performing, financially sustainable organization, which is necessary for the Postal Service to achieve the statutory policies and objectives adopted by Congress. The Postal Service will implement the final rule in two phases, with phase 1 going into effect on April 1, 2025, and phase 2 going into effect on July 1, 2025. As described further below, during phase 1, the Postal Service will enable the implementation of RTO by adding one service expectation day to certain volume in Leg 1 ( <E T="03">i.e.,</E> from collection to originating processing facility) for items originating in ZIP Codes covered by RTO. On July 1, during phase 2, the Postal Service will implement the proposed rule in its entirety and will therefore among other changes accelerate the movement of mail in Leg 2 ( <E T="03">i.e.,</E> from originating processing facility to destinating processing facility) by expanding the drive times for each of the travel bands that establish the delivery expectation days for First-Class Mail by four hours. Phase 2 is dependent upon certain efficiencies gained as a result of RTO and requires significant changes across the Postal Service's processing, logistics, and delivery networks. By delaying the service standard changes related to Leg 2 for a brief period of 90 days, the Postal Service will be able to facilitate effective operational execution and change management by gradually implementing these changes, reducing the immediate impact on front-line employees and decreasing the level of change that is implemented at one time. In addition, during the 90-day period between phase 1 and phase 2, the Postal Service will gather data on real-world operational conditions and constraints arising from RTO and use this data to adjust operational planning regarding Leg 2 operations to the extent warranted, and therefore help ensure that the Postal Service is well positioned to implement the Leg 2 service standard changes. To be clear, the phased approach is to facilitate more effective implementation of the changes. The rule, as originally proposed and as repeated below, will be implemented in full on July 1. On October 4, 2024, the Postal Service requested from the Postal Regulatory Commission (PRC or Commission) an advisory opinion on the service standard changes, including those described herein, for market-dominant and competitive products, together with a comprehensive strategy of network modernization, in accordance with 39 U.S.C. 3661(b). The PRC then initiated Docket No. N2024-1, in which the PRC's Presiding Officer, its appointed Public Representative, and a numbe ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 110k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━