Administrative Practice and Procedure, Postal Service, 63662-63704 [E7-21596]

Agencies

• POSTAL REGULATORY COMMISSION

[Federal Register Volume 72, Number 217 (Friday, November 9, 2007)]
[Rules and Regulations]
[Pages 63662-63704]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21596]



[[Page 63661]]

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Part II





Postal Regulatory Commission





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39 CFR Parts 3001, 3010, 3015 and 3020



 Administrative Practice and Procedure, Postal Service; Final Rule

Federal Register / Vol. 72, No. 217 / Friday, November 9, 2007 / 
Rules and Regulations

[[Page 63662]]


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POSTAL REGULATORY COMMISSION

39 CFR Parts 3001, 3010, 3015 and 3020

[Docket No. RM2007-1; Order No. 43]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: A recently-enacted federal law directs the Commission to 
develop rules to implement a new postal ratemaking system. This 
document responds to that directive by adopting rules addressing market 
dominant and competitive products, including negotiated service 
agreements, the regulatory calendar, and product lists. Adoption of the 
rules allows the Postal Service and mailers to begin to exercise its 
options under the new law.

DATES: Effective date: November 9, 2007.
    November 20, 2007: deadline for the Postal Service to provide 
information necessary for further development of the Mail 
Classification Schedule.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820 and stephen.sharfman@prc.gov.

SUPPLEMENTARY INFORMATION: 

Regulatory History

72 FR 5230, February 5, 2007
72 FR 29284, May 25, 2007
72 FR 33261, June 15, 2007
72 FR 50744, September 4, 2007

I. Introduction

    This order marks the end of the first phase of the Commission's 
efforts to develop the system of modern rate regulation contemplated by 
the Postal Accountability and Enhancement Act (PAEA), Public Law 109-
435, 120 Stat. 3198, December 20, 2006. The Order adopts final rules 
governing market dominant products, competitive products, and product 
lists. It represents the Commission's initial attempt to fashion a 
coherent set of regulations implementing the new rate-setting process, 
an effort that has been guided by the PAEA's bedrock principles, namely 
flexibility, accountability, and transparency.
    Throughout this rulemaking process, which began in January 2007, 
the parties' comments have been helpful, particularly in the latest 
round, sharpening the issues and suggesting alternative resolutions. 
The Commission appreciates the parties' contributions. The final rules 
focus particularly on comments and reply comments received in response 
to Order No. 26, which included proposed rules for regulating rates and 
classes under the PAEA.\1\
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    \1\ In this proceeding, the Commission has received more than 
160 comments. In response to Order No. 26 alone, 58 sets of comments 
were filed. The Commission has carefully reviewed these comments 
and, where appropriate, addresses them in this Order.
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    The final rules differ from the proposed rules in ways designed to 
clarify the rules in response to these comments. Principal highlights 
of the Order and final rules include: (1) Clarifying the intent of the 
proposed rules by specifying the content of notices of proceedings 
applicable to various types of filings, in lieu of uniform reliance on 
existing rule 3001.17; (2) Clarifying the legal implications of 
Commission findings in various proceedings; (3) Reaffirming the 
application of the rate cap to market dominant products; (4) Adopting a 
transition rule concerning the calculation of the annual limitation in 
the event of a transitional rate filing; (5) Clarifying the content of 
exigent rate requests; (6) Reaffirming that each negotiated service 
agreement (NSA) is a separate product, but noting that functionally 
equivalent NSAs may, upon proper showing, be grouped as one product; 
and (7) Adopting initial lists of market dominant and competitive 
products.
    The final rules are issued almost 8 months before the statutory 
deadline. The rules do not purport to address every issue that might 
arise under the PAEA. Nonetheless, the benefits of implementing the 
regulations on an accelerated basis outweigh potential refinements in 
the rules that might be possible if the full 18-month period provided 
by statute were used. See 39 U.S.C. 3622(a) and 3633(a). With 
experience, the rules may be modified if deemed necessary.
    With the first phase of implementing the PAEA at an end, the 
Commission intends to turn as quickly as practicable to issuing 
proposed regulations on related matters under the PAEA, including those 
involving complaints, reporting requirements, and commercially 
sensitive materials. With the basic framework now in place, the Postal 
Service is free to utilize new flexible pricing approaches. Pending 
implementation of regulations on these related matters, the 
Commission's existing rules will continue to apply.

II. Regulation of Market Dominant Products: Part 3010

A. Overview

    The Commission appreciates the commenters' thoughtful review of 
proposed part 3010 and their reasoned observations. It concludes that 
there is a broad consensus that the proposal's overall direction 
comports with the PAEA's philosophy. However, it also acknowledges that 
commenters identify aspects of the initial effort that would benefit 
from clarification or correction.
    A considered assessment of the commenters' suggestions results, in 
some instances, in revisions to the rules.\2\ The Commission, on its 
own accord, also makes editorial and conforming changes to improve the 
clarity and readability of the rules or to conform them more closely to 
official publication requirements.
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    \2\ Discussion focuses primarily on comments suggesting the need 
for changes. In instances where more than one commenter present 
similar suggestions, the discussion sometimes focuses mainly on one 
commenter's submission.
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1. Note on Due Process
    Review of the comments indicates that there are two broad due 
process concerns. One pertains to the Commission's issuance of rules 
implementing only some aspects of the PAEA's new regulatory framework. 
The other focuses on the approach reflected in specific rules in the 
proposals that have been issued.
    The Postal Service and most commenters addressing finalization of 
part 3010 recognize that this is one of the first steps the Commission 
is taking to implement the PAEA, and that it is developing 
complementary regulations on related matters, such as annual reporting 
requirements and complaint proceedings. The Commission appreciates that 
commenters are being asked to assess the advisability of certain 
procedures prior to issuance of a comprehensive set of regulations. 
However, it finds that pragmatic considerations and the interest in 
promptly implementing PAEA policies dictate serial issuance of new 
rulemaking proposals, rather than a complete set. Moreover, the 
Commission believes that issuance of the proposed regulations in parts 
3010, 3015 and 3020 at the same time has provided commenters with an 
adequate basis for assessing many essential initial issues. However, as 
Advo observes with respect to all of the Order No. 26 proposals, * * * 
the true measure of their success will come when they are applied * * * 
to specific issues that arise in the future.'' Advo Comments,

[[Page 63663]]

September 24, 2007, at 1. The Commission recognizes this, and intends 
to provide an opportunity to address concerns about conflicts, gaps, or 
the need for other adjustments as the need arises.
    As to the specific proposals, some are concerned that the approach 
the Commission has adopted with respect to notices, public 
participation, and Commission review either is not consistent with due 
process considerations or does not make clear that the Commission 
intends to honor pertinent requirements. See, for example, Valpak 
Comments, September 24, 2007, at 3-16 and 20-27; Medco Comments, 
September 24, 2007, at 4-10; OCA Comments, September 24, 2007, at 12-
15, and APWU Comments, September 25, 2007, at 1-4. In brief, the 
Commission believes that the rules, as proposed, are consistent with 
pertinent due process considerations. However, it appears that there 
are several areas where improvements can be made to make the 
Commission's intentions more clear, without imposing undue burden on 
the Postal Service or the Commission or compromising the PAEA's new 
regulatory approach. Accordingly, the Commission reconsiders its 
approach to several matters and revises or clarifies affected rules to 
reflect this decision. The Commission provides a single discussion of 
the matter here.
2. The Role of the Administrative Procedure Act
    As the Commission has noted in Order No. 26, there is a tension in 
the PAEA between its goals of facilitating rapid and flexible 
adjustments to rates and classifications, and increasing the 
transparency and accountability of those processes.\3\ The regulations 
that the Commission proposed to govern Postal Service notices of rate 
adjustment for market dominant products, as well as changes to the Mail 
Classification Schedule, were intended to afford opportunities for 
public participation that meet the basic guarantees of public 
participation provided for by the PAEA and the Administrative Procedure 
Act (APA) (chapter 5 of title 5 of the United States Code), either 
explicitly or implicitly.
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    \3\ See PRC Order No. 26, ]] 3070, 3074. This tension is readily 
apparent from 39 U.S.C. 3622(b)(6), which simultaneously calls for 
reducing the administrative burden and increasing transparency 
relative to the system that prevailed under the Postal 
Reorganization Act.
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    With respect to Type 1 rate adjustments, the essential features of 
the proposed regulations were requirements that the public receive 
notice of the proposed rate adjustment from both the Postal Service and 
the Commission (proposed rule 3010.10(a)), a 20-day period for public 
comment (proposed rule 3010.13(a)), and a 14-day period for the 
Commission to evaluate the consistency of the rates proposed with the 
relevant requirements of the PAEA and issue its findings (proposed rule 
3010.13(c)).
    Applicability of the APA. Medco concludes that Commission orders 
that determine the status of the Postal Service's rate proposals are 
``rulemakings'' subject to section 553 of the APA. See 5 U.S.C. 553. It 
argues that rate adjustments provided for in the PAEA fall 
unambiguously within the applicable definition of a rule for purposes 
of the APA, citing 5 U.S.C. 551(4):

    `[R]ule' means the whole or part of an agency statement of 
general or particular applicability and future effect designed to 
implement, interpret, or prescribe law or policy * * * and includes 
the approval or prescription for the future of rates. * * *

Medco Comments, September 24, 2007, at 5.

    Consequently, Medco notes, Commission review of rate adjustments, 
such as those provided for in 39 U.S.C. 3622(d)(1)(C)(ii), is informal 
``rulemaking'' that is subject to the notice and comment requirements 
of 5 U.S.C. 553 of the APA. Id.
    Because a ``rule'' can be of either ``general or particular 
applicability,'' the definition covers the adjustments that the Postal 
Service might propose to both Type 1 (general) and Type 2 (NSA) rates. 
Section 503 of title 39 authorizes the Commission to make such rules as 
are ``necessary and proper'' to carry out its duties. That section 
states that Commission rules, are ``subject to chapters 5 and 7 of 
title 5.'' (Section 553 of the APA is placed within chapter 5 of title 
5.) Medco cites National Easter Seal Society v. USPS, 656 F.2d 754, 767 
(D.C. Cir. 1981) as confirming this interpretation of what is now 39 
U.S.C. 503. Because Commission orders that determine the status of 
postal rates are ``rules,'' and are subject to the requirements of 5 
U.S.C. 553, Medco explains, Commission review of the Postal Service's 
rate adjustment proposals must satisfy the notice and public comment 
requirements of section 553. Id., at 3.
    5 U.S.C. 553 requires that an gency:

    (1) Publish notice of the proposed rule in the Federal Register, 
and that it include ``either the terms or substance of the proposed 
rule or a description of the subjects and issues involved'';
    (2) ``[G]ive interested persons an opportunity to participate in 
the rulemaking through submission of written data, views, or 
arguments * * *'';
    (3) Consider ``the relevant matter presented''; and
    (4) ``[I]ncorporate in the rules adopted a concise general 
statement of their basis and purpose.''

Medco emphasizes that complying with these section 553 obligations is 
mandatory unless an exception can be shown to apply. Id. at 7.

    The public notice requirements of section 553. With respect to Type 
1 notices of rate adjustment, Order No. 26 proposed that the Commission 
``publish notice of the [Postal Service rate adjustment filing] in the 
Federal Register'' and ``post the filing on its Website.'' See proposed 
rule 3010.13(a)(1). The Commission intended that consistent with 
existing rule 3001.17(d), APA notice requirements would be 
satisfied.\4\ This pattern was followed in the remainder of the rules 
proposed in Order No. 26 that address various forms of pre-
implementation review by the Commission. Valpak asserts that this set 
of notice requirements would not have satisfied section 553 of the APA 
because the proposed rules did not expressly require that they include 
the terms of the proposal (e.g., proposed rates) or any supporting 
detail. Valpak Reply Comments, October 9, 2007, at 9.
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    \4\ Order No. 26 also proposed that the Postal Service 
``[p]rovide public notice in a manner reasonably designed to inform 
the mailing community and the general public that it intends to 
change rates. * * *'' See proposed rule 3010.10(a)(1). This is 
designed to fulfill the requirement of section 3622(d)(1)(C) of the 
PAEA.
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    Although the Commission fully expected to issue notices that 
complied with the content requirement of section 553, it accepts that 
uncertainty is diminished by specifying this intention in every 
applicable regulation. The Commission revises its proposed regulations 
governing public notices to explicitly include the categories of 
information that section 553 requires. Under the final rules, the 
public can be assured that such notices will contain summaries of the 
Postal Service's proposed rate and classification-related changes in 
sufficient detail to satisfy the notice requirements of the APA. See 
final rules 3010.13(a), 3010.44(a), 3010.65(a), 3020.33, 3020.53, and 
3020.73.\5\
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    \5\ No party contested notice applicable to competitive 
products.
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    The public comment requirements of 5 U.S.C. 553. The regulations 
proposed in Order No. 26 would have allowed the public 20 days from the 
filing of a proposed Type 1 rate adjustment to comment on whether the 
proposed rates

[[Page 63664]]

comply with the rate cap provisions of the Commission's proposed rules 
and whether they comply ``with the policies of 39 U.S.C. 3622.'' See 
proposed rule 3010.13(b)(2). The regulations proposed in Order No. 26 
did not specifically provide for public comment on proposed Type 2 rate 
adjustments. See proposed rule 3010.41.
    Commenters' positions. Some commenters argue that the regulations 
proposed in Order No. 26 provided opportunities for public comment 
during the pre-implementation period that went beyond what the PAEA 
intended. Advo Reply Comments, October 9, 2007, at 3; DFS Comments, 
September 24, 2007, at 2-4; and PostCom Comments, September 24, 2007, 
at 1-3. Another group of commenters argued that these opportunities 
were inadequate to honor the PAEA's directive to increase transparency 
and accountability in the rate-setting process, and inadequate to 
satisfy even the minimum requirements of the APA. APWU Reply Comments, 
October 9, 2007, at 1-2; Medco Comments, September 24, 2007, at 2-5; 
McGraw-Hill Reply Comments, October 9, 2007, at 4-5; NAA Reply 
Comments, October 9, 2007, at 1-5; OCA Reply Comments, October 9, 2007, 
at 3-4; Valpak Comments, September 24, 2007, at 2-16, 20-23; and Valpak 
Reply Comments, October 9, 2007, at 1-34.
    Advo argues that Congress did not contemplate, and the Commission 
should not allow, any public input prior to implementation of the Type 
1 or Type 2 rates. It points out the PAEA provides for public comment 
during pre-implementation review of proposed Type 3 rates (those 
prompted by ``extraordinary'' circumstances), but makes no mention of 
them in the context of pre-implementation review of Type 1 and Type 2 
rates. From this Advo infers that Congress meant to prohibit public 
participation in pre-implementation review wherever it did not 
expressly require it. Advo Reply Comments, October 9, 2007, at 1-3.
    DFS contends that no issues may be commented upon or considered by 
the Commission at the pre-implementation stage except compliance with 
the rate cap. It takes the view that the objectives and factors 
governing postal rate setting set out in section 3622(b) and (c) are 
relevant only to the process by which the Commission designs a ``modern 
system of ratemaking'' for market dominant products. DFS Reply 
Comments, October 9, 2007, at 5-7.
    PostCom and the Postal Service offer another rationale for reaching 
the conclusion that public comment on any compliance issue other than 
the rate cap at the pre-implementation stage conflicts with the PAEA. 
They argue that the scope of pre-implementation review is necessarily 
limited by the changed role that the Commission plays in rate setting 
under the PAEA. They assert that it is the role of the Postal Service 
rather than the Commission to balance the elaborate list of largely 
qualitative objectives and factors that apply to the modern system of 
ratemaking when proposing changes in rates. They contend that 
Commission review is relevant only where a clear violation of one of 
those objectives or factors can be demonstrated. They argue that the 
rate cap is the only section 3622 requirement that is concrete and 
objective enough to be susceptible to such a finding. Therefore, in 
their view, compliance with the cap is the only issue upon which public 
comment might be relevant to Commission review.
    They emphasize that the rate-setting apparatus described in 39 
U.S.C. 3622(d) focuses on the rate cap and its administrative details. 
In particular, they note that section 3622(d) provides for a feedback 
mechanism to resolve only the issue of non-compliance with the rate 
cap. This supports the conclusion that Congress intended the rate cap 
and its administration to be the only concern of pre-implementation 
review. PostCom Reply Comments, October 9, 2007, at 1-3; and Postal 
Service Reply Comments, October 9, 2007, at 14-17. A number of other 
commenters agree that pre-implementation public comment and Commission 
review should be confined to the issue of rate cap compliance. See ANM/
MPA Comments, September 24, 2007, at 2; NPPC Comments, September 24, 
2007, at 2; Pitney Bowes Comments, September 24, 2007, at 7-8; and Time 
Warner Comments, September 24, 2007, at 4-5.
    Another group of commenters take the opposing position, namely that 
failing to provide an opportunity for public comment before rate or 
classification changes take effect, or restricting the scope of the 
issues that such comments may address, undermines the PAEA's objective 
of increasing the transparency and accountability of the rate-setting 
system (see 3622(b)(6)) and violates section 553 of the APA.\6\ They 
note that section 553(c) requires an agency to allow interested persons 
to ``participate'' in substantive rulemakings by submitting ``written 
data, views, or arguments * * *'' They note that section 553(c) also 
requires an agency order adopting a rule to include `` `a concise 
general statement of the basis and purpose''' after considering the `` 
`relevant matter''' that has been presented in the course of the 
rulemaking. Medco Comments, September 24, 2007, at 3. These commenters 
acknowledge that in addressing pre-implementation procedures in 39 
U.S.C. 3622(d), the PAEA emphasizes compliance with the rate cap. But, 
they point out, there is no language in section 3622(d) or elsewhere in 
chapter 36 that excludes broader pre-implementation review by the 
Commission. Therefore, they argue, there is no legal ground for 
excluding either the objectives and factors listed in section 3622, or 
the general policy provisions of title 39, from pre-implementation 
review. Valpak Reply Comments, October 9, 2007, at 12, 20; Medco 
Comments, September 24, 2007, at 7; and McGraw-Hill Reply Comments, 
October 9, 2007, at 5.
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    \6\ See generally Medco and Valpak comments, and the reply 
comments of McGraw-Hill, NAA, the OCA, and Valpak.
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    These commenters also acknowledge that expedition and flexibility 
in rate setting are among the PAEA's goals, and that the Commission has 
a good deal of discretion to set priorities with respect to which 
compliance issues it will focus on in the limited time it has set aside 
for pre-implementation review. They contend, however, that prohibiting 
public comment outright on statutory policies, objectives, and 
standards that would be affected by the rates under Commission review 
would not allow some compliance issues to be evaluated by APA mandated 
procedures. This, they suggest, would have the effect of selectively 
reading section 503 of title 39 (which subjects substantive Commission 
orders to the requirements of the APA) out of the statute. See Medco 
Comments, September 24, 2007, at 4-5, 7.
    It is certain, Medco and others argue, that barring public comment 
altogether before adopting a substantive rule violates the notice and 
comment guarantee of section 553 of the APA. They note that regulations 
proposed in Order No. 26 do not explicitly assure an opportunity for 
public comment with respect to amended notices of Type 1 rate 
adjustments, all Type 2 rate adjustments, and significant 
classification changes that do not require amendments to the market 
dominant and competitive product lists. They argue that deferring 
consideration of the public's views to various post hoc forms such as 
the Commission's annual compliance report required by 39 U.S.C. 3653 or 
a complaint filed under 3662 does not preserve the interests protected 
by 5 U.S.C. 553. Those interests include

[[Page 63665]]

the chance for the public to be heard before a rule has been finalized 
when its comments are more likely to influence the agency's rule. See 
Valpak Reply Comments, October 9, 2007, at 6, 7, and 16.
    Commission analysis. The tension between the groups interpreting 
the PAEA as mandating little, if any, pre-implementation review of 
proposed changes in postal rates and classes, and those interpreting it 
as requiring that all issues be reviewable prior to implementation, is 
clear. It is equally clear that the Commission can interpret its 
responsibilities in a way that reconciles the flexibility and 
expedition that the PAEA requires with the public participation 
guarantees of the APA.
    A statute should be construed ``so that effect is given to all its 
provisions, so that no part will be inoperative or superfluous, void or 
insignificant.'' Pennsylvania Medical Society v. Snider, 29 F.3d 886, 
895 (3d Cir. 1994). The court observed in Citizens to Save Spencer 
County v. EPA:

    [i]f inconsistent provisions point generally in a common 
direction, it is the task of an agency with requisite authority to 
pursue a middle course that vitiates neither provision but 
implements to the fullest extent possible directives of each, * * *

600 F.2d 844, 870 (D.C. Cir. 1979). This is particularly true if a 
construction can be found that will give force to and preserve all the 
provisions of the statute. FDA v. Brown and Williamson Tobacco Corp., 
529 U.S. 120, 133 (2000). Accordingly, the Commission reconciles those 
provisions of the PAEA that promote flexible and expedited rate setting 
with those that foster transparent and accountable rate setting.

    To do this, it helps to clearly identify the statutory purposes 
that need to be reconciled. The Commission concludes that one of 
Congress's main motives in enacting the PAEA was to simplify and 
expedite the setting of postal rates. It further concludes that 
Congress intended to give the Postal Service wide latitude in designing 
specific rates and rate relationships, expecting that the Commission 
would alter those decisions only where disregard of particular 
statutory standards is clear. Consequently, the Commission now plays a 
different role in reviewing proposed rates prior to their 
implementation than it has in the past.
    The Commission also concludes that Congress expected that a modern 
system for regulating rates and classes would afford the public and the 
Commission only a limited period of pre-implementation comment and 
review. This finding is supported primarily by the 45-day period of 
advance notice of proposed changes in rates that is referenced in 
section 3622(d)(1)(C). This provision indicates that Congress viewed 45 
days as an adequate review period for the compliance issues that would 
be raised prior to implementing new rates. This implies that the pre-
implementation issues with which Congress expected the Commission to 
deal would be few enough, or the level of scrutiny would be light 
enough, to allow the Commission to evaluate them adequately within 45 
days. The inference is strong that Congress contemplated that 
complicated or subjective compliance issues would be addressed during 
the annual compliance review, or through the complaint procedures of 
section 3662.
    Even though Congress intended limited pre-implementation review of 
postal rate changes, it must be presumed that Congress was aware of 5 
U.S.C. 553 and the limits it sets on the extent to which public 
participation can be deferred until after a rule is finalized. That APA 
provision is designed to ensure that the opinion of those whose 
interests will be affected by an agency's rules will be heard before a 
rule is finalized, not after. Courts have emphasized the distinction:

    The EPA overlooks, however, the crucial difference between 
comments before and after rule promulgation. Section 553 is designed 
to insure that [parties affected by an agency decision] have an 
opportunity to participate in and influence agency decision-making 
at an early stage, when the agency is more likely to give real 
consideration to alternative ideas.

United States Steel Corp. v. EPA, 595 F.2d 207, 214 (5th Cir. 1979), 
rehearing granted 598 F.2d 915.\7\

    \7\ See also, City of New York v. Diamond, 379 F. Supp. 503, 517 
(S.D.N.Y. 1974) (``Permitting the submission of views after the 
effective date is no substitute for the right of interested persons 
to make their views known to the agency in time to influence the 
rule making process in a meaningful way * * *''). Accord, Maryland 
v. EPA, 215, 222 (4th Cir. 1975); vacated on other grounds sub nom. 
EPA v. Brown, 431 U.S. 99 (1977).
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    The Commission notes that neither the PAEA nor its legislative 
history explicitly define the scope of public input or Commission 
review of proposed rates prior to their implementation. It concludes 
that the weight of the inferences that may be drawn from the provisions 
of the PAEA itself indicate that Congress intended to leave room for 
Commission discretion in determining the degree of public input that 
would be afforded in the pre-implementation period, the form that it 
should take, and what priority the Commission would give to evaluating 
the public input that it decided to elicit. Given this, the most likely 
and most reasonable assumption is that Congress expected the Commission 
to give as much consideration as it could to the issues most capable of 
resolution in the brief period that the PAEA provides, without 
violating the minimum guarantees that 5 U.S.C. 553 provides.
    The Commission can give close scrutiny to only a limited number of 
compliance issues in the time available before rate changes are 
implemented, but it can not always predict in advance precisely which 
issues will be of highest priority. In recognition of that fact, the 
final rules adopted by the Commission require the Postal Service to 
address a broad range of relevant issues in any notice of rate 
adjustment, but clarify that the Commission focus must be primarily on 
the requirements of 39 U.S.C. chapter 36, subchapter 1. See final rules 
3010.13 and 3010.14.\8\
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    \8\ Within the 45-day period contemplated for pre-implementation 
review, the Commission is likely to be able to scrutinize and reach 
definitive conclusions on compliance issues that are factually clear 
and straightforward-such as rate cap compliance, or compliance with 
formulas for calculating preferred rates. Commission review of more 
complex or nuanced issues within that timeframe is likely to be 
somewhat less thorough, and any conclusions that it reaches are 
likely to be of a preliminary nature. For that reason, final rule 
3010.13(j) distinguishes between the effect of the Commission's pre-
implementation findings concerning formula-determined caps and 
rates, and other issues. The Commission will treat its findings 
concerning the former as decided on the merits for purposes of 
subsequent proceedings, but will not attach comparable presumptions 
to findings concerning the consistency of a proposed change with 
complex or subjective policy factors. Final rule 3010.13(j) responds 
to a suggestion by GCA that this dichotomy be reflected in the 
Commission's rules. See GCA Comments, September 24, 2007, at 5-6.
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    PRC Order No. 26, ] 2029 commented that the Commission would not 
entertain comments on costing methodology during the pre-implementation 
period. Valpak and NNA infer from this that the Commission proposed to 
prohibit public comments from discussing any issue that involves 
attributable costs. Valpak Comments, September 24, 2007, at 5; Valpak 
Reply Comments, October 9, 2007, at 29-34; and NNA Comments, September 
24, 2007, at 8. Valpak argues that the requirement that classes and 
services cover their attributable costs remains a requirement of the 
PAEA (see 39 U.S.C. 3622(c)(2)), just as it was under the Postal 
Reorganization Act. Valpak goes on to identify more than a dozen basic 
policies, objectives, and factors in title 39 that have no force unless 
attributable cost levels for the various classes and services are 
known. Valpak argues that it is inconsistent for the rules proposed in 
Order No. 26 to

[[Page 63666]]

allow comments of section 3622 requirements generally in the pre-
implementation review period, but single out costs for exclusion from 
consideration.
    The comment in Order No. 26 of which Valpak and NNA complain may 
not have been adequately explained. The merits of one attribution 
methodology relative to another is an example of an issue that is too 
complex to be re-evaluated in a pre-implementation context. Cost 
attribution methods should be reviewed in other rulemaking proceedings. 
Whether rates properly reflect costs will be judged using the most 
recently approved attribution methodologies.
    Final rule 3010.13 retains the 20-day period for public comment 
proposed in Order No. 26. Some commenters complain that Order No. 26 
did not analyze the adequacy of this amount of time to afford a 
meaningful opportunity to respond to the issues that proposed rates 
might raise, as 5 U.S.C. 553 requires. Medco Comments, September 24, 
2007, at 8; and Valpak Reply Comments, October 9, 2007, at 12. The 
adequacy of the 20-day comment period must be viewed in the context of 
the PAEA's goals. Major goals are to simplify and expedite the process 
by which rates are adjusted. Routinely enlarging the public comment 
period would reduce the time available to the Commission to evaluate 
the comments received, if it is to provide the expedition that Congress 
contemplated. Twenty days should be adequate to allow interested 
persons to identify and explain perceived failures to conform to the 
statutory requirements.
    Type 1 and Type 2 rate adjustments compared. The notice and comment 
guarantees of section 553 of the APA apply to both Type 1 and Type 2 
rate adjustments. The Commission's final rules, however, still 
distinguish between Type 1 and Type 2 review. Where the scope of public 
comments and Commission orders addressing Type 1 rate adjustments 
primarily focus on the requirements of 39 U.S.C. 3622(d), the scope of 
comments and orders addressing Type 2 rate adjustments focus on 
compliance with the requirements of 39 U.S.C. 3622(c)(10).
    Similarly, where the period for public comments addressing Type 1 
rate adjustments is 20 days from the Postal Service's filing, the 
period for public comments addressing Type 2 adjustments is 10 days 
from the Postal Service's filing. This reflects the narrower potential 
compliance issues that Type 2 rate adjustments raise, and a lesser need 
for review for such adjustments. Compare final rule 3010.13(c) with 
final rule 3010.44.
    Implementation dates under the APA. Section 553(d) of the APA 
states that:

    The required publication or service of a substantive rule shall 
be made not less than 30 days before its effective date, except--
    [A] substantive rule which grants or recognizes an exemption or 
relieves a restriction;
    [I]nterpretative rules and statements of policy; or
    [A]s otherwise provided by the agency for good cause found and 
published with the rule.

    If one were to add the 20-day comment period to the 14-day period 
that the Commission will allow itself for issuing an order regarding a 
proposed rate adjustment, and add a 30-day waiting period before the 
order could take effect, the total number of days required before a 
proposed rate adjustment could take effect would exceed the 45 day pre-
implementation period provided for in section 3622(d)(1)(C). 
Recognizing this possibility, DFS urges the Commission to routinely 
accompany its rate adjustment orders with findings that there is good 
cause to waive the 30-day waiting period. It argues that the Commission 
could base its finding of good cause on the generalized notion that the 
PAEA puts a high priority on allowing the Postal Service to change 
rates quickly. DFS Reply Comments, October 9, 2007, at 4.
    Finding good cause, however, requires a showing that a 30-day 
waiting period is either ``impractical, unnecessary, or contrary to the 
public interest.'' It is essentially an emergency procedure. See 
Buschmann v. Schweiker, 676 F.2d 352, 357 (9th Cir. 1982).\9\ Since the 
purpose of the section 553(d) waiting period is ``to give affected 
parties a reasonable time to adjust their behavior before the final 
rule takes effect'' (Omnipoint v. FCC, 78 F.3d 620, 630 (D.C. Cir. 
1981)), it usually requires an analysis of specific interests that will 
be hurt and those that will be helped by waiver of the waiting period. 
See, for example,  American Bankers Association v. National Credit 
Union Administration, 38 F. Supp. 2d 114, 139,140 (D.D.C. 1999); 
Buschmann v. Schweiker. Id. Accordingly, it would seem problematic for 
the Commission to require itself, by rule, to routinely determine that 
the factual circumstances surrounding a rate adjustment support a 
finding of ``good cause'' for waiver. The Commission properly will 
consider such a finding on a case-by-case basis.
---------------------------------------------------------------------------

    \9\ The need to meet tight statutory deadlines has been rejected 
as a justification for waiving the waiting period requirement. U.S. 
Steel Corp. v. EPA, 595 F.2d 207, 214 (5th Cir. 1979).
---------------------------------------------------------------------------

    Classification issues and the APA. Several commenters criticize the 
rules proposed in Order No. 26 for failing to explicitly provide notice 
and public comment opportunities before changes in the Mail 
Classification Schedule are put into effect. They note the Commission's 
proposed rules allow for public comment before the Mail Classification 
Schedule is adopted, but make no provision for notice or public comment 
for major classification changes unless they involve amendments to the 
lists of market dominant or competitive products that the Commission is 
required to maintain under 39 U.S.C. 3642. See proposed rules 3020.33, 
3020.53, and 3020.73. This, they contend, violates the notice and 
comment guarantees of section 553 of the APA. They also note that Order 
No. 26 proposed rules that would require 15 days' notice from the 
Postal Service prior to ``updating'' product descriptions in the Mail 
Classification Schedule, but would not have provided an opportunity for 
public comment on these changes. See proposed rules 3020.90 et seq. 
They contend that major classification changes can potentially be 
imposed through such updates. Medco Comments, September 24, 2007, at 9-
10; OCA Comments, September 24, 2007, at 15-17; McGraw-Hill Reply 
Comments, October 9, 2007, at 2-3; and Valpak Comments, September 24, 
2007, at 4, 15-16.
    The Commission does not contemplate engaging in pre-implementation 
review of the merits of any classification change. However, to preserve 
Postal Service flexibility yet provide assurance that the Postal 
Service will not misuse the system for correcting the Mail 
Classification Schedule, additional opportunity for mailer comment is 
provided in the final rules. The Postal Service notices of planned 
classification changes will be posted on the Commission Web site and 
interested persons will be afforded the opportunity to comment. See 
chapter IV-B and rules 3020.91 through 3020.93.
3. Transparency Concerns
    Several commenters assert that the rules proposed in Order No. 26 
are inadequate to preserve, let alone increase, the transparency and 
accountability of postal rate setting under the PAEA relative to the 
regulatory regime under the Postal Reorganization Act. They make this 
assertion, in large part, because the Commission has not published 
proposed rules specifying the

[[Page 63667]]

information that the Postal Service will be required to provide to the 
Commission as part of its periodic reporting under 39 U.S.C. 3652, and 
the information and issues that will be covered by the Commission's 
annual compliance report under 39 U.S.C. 3653. See, for example, Valpak 
Comments, September 24, 2007, at 6; and Valpak Reply Comments, October 
9, 2007, at 4. NAA observes that:

    [I]t is difficult to comment on * * * the proposed ratesetting 
rules without an understanding of how the Commission envisions the 
interplay between annual reporting requirements, the data 
submissions required to support notices of rate adjustments, and the 
respective roles of the reporting requirements and the complaint 
process.

NAA Comments, September 24, 2007, at 13.

    The Commission anticipates issuing proposed rules soon after the 
close of this docket that specify the information that the Postal 
Service will provide in its periodic reporting under section 3652 to 
facilitate preparation of the annual compliance report that the 
Commission will provide pursuant to section 3653. Interested persons 
will have ample opportunity to identify the types of information that 
will best inform the Commission and the public, and assure the level of 
accountability and transparency contemplated by the PAEA. Data from the 
Postal Service's periodic reports under section 3652 will be available 
and provide the basis for pre-implementation analysis of the Postal 
Service's proposed rate adjustments, and will inform any complaints 
that might be filed by the public. The Commission is optimistic that 
the combination of pre-implementation review of rate changes, periodic 
reporting by the Postal Service, annual compliance reports by the 
Commission, and the complaint mechanism, all supported by the 
Commission's subpoena power, will serve to increase the level of 
transparency and accountability of postal rate setting under the PAEA 
relative to that which prevailed under the prior regulatory regime.
    Ex parte communications. In PRC Order No. 26, ] 2026, the 
Commission remarked that:

[t]he Commission does not propose formal discovery, Notices of 
Inquiry, Presiding Officer's Information Requests, testimony, and 
hearings. It anticipates handling resolution of discrepancies or 
other matters through direct communication with the Postal Service.
    Valpak criticizes these remarks, observing that:
    PAEA-mandated transparency cannot be achieved by private 
communications, such as meetings or briefings held behind closed 
doors. Rather than achieving increased transparency, the result 
would be much-reduced transparency.

Valpak Comments, September 24, 2007, at 11-12.

    Valpak misinterprets the Commission intentions for fact gathering 
during the pre-implementation review period. While the Commission does 
envision direct communications as an important method of promptly 
clarifying factual issues raised by the Postal Service's rate 
adjustment filings, it intends that the substance of those 
communications be made public in written memoranda placed in a public 
file. The Commission is aware that in formulating informal rules, which 
would include its orders determining compliance of proposed rate 
adjustments with the requirements of the PAEA, it must inform the 
public of the nature and substance of any exchanges with the Postal 
Service or other interested persons that address the merits of the 
proposed rate adjustment. The Commission anticipates issuing proposed 
rules regularizing ex parte procedures in the context of informal 
rulemakings soon after the conclusion of this docket. In the interim, 
if the Commission initiates ex parte communications concerning the 
merits of rate adjustment filings, including the accuracy of the data 
that support the filing, it will summarize the ex parte contact and 
place the summary in a public file shortly afterward.
4. Complaints
    In the context of this rulemaking, several commenters have 
expressed their views on certain aspects of the complaint process. 
PostCom argues that the Commission should not hear complaints against 
proposed rates during the 45-day notice period before a CPI increase 
takes effect. PostCom also advocates limiting the hearing of complaints 
under section 205 of the PAEA to the time of the annual compliance 
review. PostCom acknowledges that the Commission will promulgate rules 
governing the complaint process in the near future, yet it believes 
that the Commission should ``nevertheless take the opportunity in this 
proceeding to clarify this matter.'' PostCom Comments, September 24, 
2007, at 2; see also MOAA Reply Comments, October 5, 2007, at 2, n.1. 
Other commenters oppose PostCom's proposed limitations on the filing of 
complaints on the grounds that they would unduly prejudice mail users 
or that the proposed limitations are contrary to the PAEA. GCA Reply 
Comments, October 9, 2007, at 2-5; NAA Reply Comments, October 9, 2007, 
at 10-13.
    NAA argues that the Commission should provide for expedited 
consideration of post-implementation complaints that allege a failure 
to meet the statutory conditions of 39 U.S.C. 3622(c)(10). Several 
commenters contend that (1) the standard for setting a complaint for 
proceedings should be construed generously, and (2) an expeditious 
complaint procedure should be adopted.\10\ Other commenters believe 
that the complaint procedures are outside the scope of this rulemaking 
and these issues should be deferred to another rulemaking.\11\
---------------------------------------------------------------------------

    \10\ GCA Comments, September 24, 2007, at 2-5 (incorporating by 
reference: GCA Comments, April 6, 2007; Joint Comments of ABM, GCA, 
and NAA, April 6, 2007; GCA Reply Comments, May 7, 2007; ABM, GCA, 
NAA, and NNA Joint Reply Comments, May 7, 2007); see also NAA 
Comments, September 24, 2007, at 11-12.
    \11\ ANM and MPA Reply Comments, October 9, 2007, at 11; Advo 
Reply Comments, October 9, 2007, at 10.
---------------------------------------------------------------------------

    These comments on the complaint process raise important policy 
considerations. They are, nonetheless, beyond the scope of this current 
rulemaking proceeding. The Commission does not find it appropriate in 
this proceeding to make any pronouncements on certain isolated aspects 
of the complaint process. The Commission will shortly initiate a 
separate rulemaking to consider modifications to the existing rules 
governing complaints, see 39 CFR 3001.81 et seq., during which all 
interested persons can address all such issues. The Commission believes 
that the best way to make important policy decisions regarding the 
complaint process is by dealing with all complaint related issues 
together on a comprehensive basis.
    In its comments, GCA asks the Commission to make it the ``next item 
of business to propose and enact appropriate rules governing the 
complaint process * * *'' GCA Comments, September 24, 2007, at 5. 
Another commenter echoes this plea. See Valpak Comments, September 24, 
2007, at 6-7. The Commission acknowledges that the complaint process is 
of great importance to the PAEA's statutory scheme and will shortly 
issue proposed rules for public comment.
5. Other Considerations
    Free Press and The Nation, in joint comments, raise concerns about 
the impact of the Commission's proposed implementation of a new 
ratemaking system on Periodicals. They say they

[[Page 63668]]

strongly reject the notion that the Commission should take a ``light-
handed'' approach in pursuit of values ``held by the American people 
that are embodied in a free press that cultivates new ideas and fosters 
a robust political debate.'' Free Press and The Nation Comments, 
September 25, 2007, at 1-2. They urge that Periodicals be considered 
very carefully and that rate setting reflect the unique character of 
publications in this subclass and their contribution to the nation. 
They propose that the Commission reincorporate these values into its 
proceeding. Id. at 2.\12\ They also provide a summary of views on 
Docket No. R2006-1 to demonstrate why the Commission should ``inject 
historical, democratic values back into its current work.'' Id. at 2-3. 
This summary makes clear that they consider the outcome, for 
Periodicals, a reversal of public policy.
---------------------------------------------------------------------------

    \12\ Dow Jones opposes any revision of the rules based on the 
comments of Free Press and The Nation. It notes: ``There is no place 
in postal ratemaking to ignore proper cost-attribution, for 
otherwise, inefficiencies will be encouraged, not discouraged.'' Dow 
Jones Reply Comments, October 4, 2007, at 3.
---------------------------------------------------------------------------

    Free Press and The Nation do not propose specific revision to the 
proposed rules. The Commission does not revise the rules to effect any 
additional preferences for Periodicals. The Commission notes that the 
regulatory calendar should provide publishers and other mailers with an 
increased degree of certainty about when changes will occur. Similarly, 
the annual limitation on rate increases should provide insulation from 
rate shock.

B. Basic Framework for Rules on Market Dominant Products

    No commenter takes issue with the organizational structure the 
Commission has proposed for rules on market dominant products. The 
Commission has reviewed that structure, and finds it appropriate to 
adopt this framework without change; however, it makes two minor 
editorial revisions. One is a change in the caption of part 3010 from 
``Rules Applicable to Rate Adjustments for Market Dominant Products'' 
to ``Regulation of Rates for Market Dominant Products.'' The other is a 
change in the caption of subpart B.\13\ This entails revising the 
reference to ``Type 1'' to the more inclusive and descriptive reference 
to ``Type 1-A and 1-B.'' The intention is to make it readily apparent 
from a reading of the caption that the text addresses both types of 
filings.
---------------------------------------------------------------------------

    \13\ Two commenters address other potential changes in 
terminology. NPMHU takes issue with the Commission's use of the term 
``exigent.'' NPMHU Comments, September 24, 2007, at 8-10. MOAA notes 
that the Service's use of ``customized agreement'' may be more 
accurate than ``negotiated service agreement.'' MOAA Reply Comments, 
October 5, 2007, at 2. The Commission generally finds these points 
well taken, but retains the terms used in the proposed rules. They 
lack precision, but have met with wide acceptance in the postal 
community.
---------------------------------------------------------------------------

    Accordingly, part 3010, organized into five subparts, houses the 
text of the final rules regulating rates for market dominant products. 
The Commission emphasizes that although the overall organization 
remains the same at the part and subpart level, the number, 
designation, and text within the five subparts differ in some respects 
from the proposal, based on revisions associated with comments, 
Commission decisions, or on publication requirements. For example, in 
subpart C as adopted, a new rule 3010.29 is added to address 
transitional filings. This change, and others, are identified and 
discussed within.
    Based on the foregoing considerations, the Commission adopts the 
following organization and captions for the final set of regulations on 
market dominant products in its final rules:
Part 3010--Regulation of Rates for Market Dominant Products
Subpart A--General Provisions
Subpart B--Rules for Rate Adjustments for Rates of General 
Applicability (Type 1-A and 1-B Rate Adjustments)
Subpart C--Rules for Applying the Price Cap
Subpart D--Rules for Rate Adjustments for Negotiated Service Agreements 
(Type 2 Rate Adjustments)
Subpart E--Rules for Rate Adjustments in Exigent Circumstances (Type 3 
Rate Adjustments)

C. Subpart A--General Provisions

1. Overview
    Subpart A, as originally proposed, consists of a set of seven 
general provisions. These provisions include a standard statement (in 
rule 3010.1) noting that the rules in this subpart implement provisions 
in the PAEA related to market dominant products. They also provide that 
advance notice-and-review period for planned rate adjustments consists 
of a minimum of 45 days for adjustments other than those based on an 
exigency. They establish that exigency-based rate adjustments require 
the Postal Service to file a formal request with the Commission and 
state that they entail special procedures.
    There is more detailed development of these general points in 
subsequent rules.
2. Issues
    Rule 3010.1. In Order No. 26, the Commission said that the crux of 
the debate that had emerged over the length of time for Commission 
review was whether 45 days constitutes the statutory maximum or 
minimum. It noted that the Postal Service interpreted the language in 
the statute as establishing a maximum, but also had acknowledged that 
some changes, as a matter of good business practice, will entail 
considerable implementation, and that it intended to provide additional 
notice in these instances. PRC Order No. 26, ]] 2019-21. Some 
commenters viewed the wording in the statute as establishing an 
absolute minimum, and therefore clearly authorizing the Commission to 
explicitly require the Postal Service to provide more notice.
    The Commission concluded that the appropriate way to implement the 
PAEA was to require that the Postal Service provide notice of rate 
adjustments no later than 45 days before the intended implementation 
date. Rule 3010.1, as proposed, reflects this assessment.
    Commenters' positions. Most commenters addressing this point agree 
with or accept the Commission's disposition.\14\ Some, however, 
continue to express concerns about the impact of a short notice period 
on adjustments on mailers. The NPPC, for example, emphasizes ``that the 
minimum notice period needed for mailers and third-party vendors to 
implement rate changes will often be considerably longer, particularly 
when classification changes require substantial rewriting of 
software.'' NPPC Comments, September 24, 2007, at 5. (Emphasis in 
original.) Similarly, MMA considers the Postal Service's promised 90 
days' notice insufficient, given implementation requirements. MMA 
Comments, September 24, 2007, at 5. It suggests addressing this problem 
by limiting index and exigent rate adjustments to rate changes, and not 
permitting other changes, such as new mail preparation requirements and 
transportation requirements, to be part of the proceedings. Id. at 6.
---------------------------------------------------------------------------

    \14\ NNA suggests consideration be given to requiring notice in 
public media. NNA Comments, September 24, 2007, at 5-6.
---------------------------------------------------------------------------

    Commission analysis; final rule. The Commission agrees that both 
the 45 days provided in the rule and the 90 days' notice the Postal 
Service intends to issue allows only a brief period for

[[Page 63669]]

assessing the Postal Service's notice and implementing the changes, but 
continues to believe that the proposed approach comports with the 
statutory language and strikes an appropriate initial balance between 
Postal Service flexibility and Commission review responsibilities. The 
Commission appreciates mailers' concerns in this regard, but considers 
revisions that would explicitly extend the period inappropriate at this 
time as they would reduce the flexibility the PAEA intends the Postal 
Service to have. Thus, MMA's suggestion is not accepted, although minor 
changes to improve clarity are made.
    Rules 3010.2 through 3010.6. This series of rules codify ``type'' 
and address general aspects of the PAEA-authorized scenarios for 
addressing rate changes for market dominant products. As explained in 
Order No. 26, the rationale for assigning types to the various 
scenarios is to facilitate future reporting and general discussion, and 
the proposal generally tracks an approach that has been successfully 
employed for filing library references since Docket No. RM98-2. PRC 
Order No. 26, ] 2017.
    Suggested revisions. No commenter takes issue with the overall 
approach in this series. However, OCA suggests, in the nature of a 
clarification, that the Commission revise rule 3010.2(b) by adding 
references to ``service'' and ``by class of service.'' It suggests the 
inclusion of similar references in other rules for consistency.\15\ OCA 
Comments, September 24, 2007, at 23-24. The Commission does not find 
that this clarification will assist administration of the new 
ratemaking process.
---------------------------------------------------------------------------

    \15\ OCA identifies the following rules as candidates for 
similar treatment: rules 3010.3(a); 3010.4(a) and (b); 3010.11(b); 
3010.14(b)(4); 3010.26(b); 3010.27; 3010.28; and 3010.63(a) and (b). 
Id.
---------------------------------------------------------------------------

    Commenters propose two revisions in proposed rule 3010.4. The 
Postal Service points out that the reference to ``a rate'' in the 
second sentence of paragragh (a) of this section is not consistent with 
the language in the relevant provision in the PAEA. It suggests that 
substituting the phrase ``an increase for the class'' for the original 
wording would achieve this consistency. In addition, DMA expresses 
concern that the Commission has not adequately addressed the limit on 
application of unused rate authority for Type 1-B adjustments filed 
within 12 months of each other, and suggests adding language that 
clarifies this point. DMA Comments, September 24, 2007, at 3. The 
Postal Service considers this concern adequately addressed by operation 
of rule 3010.7. Postal Service Reply Comments, October 9, 2007, at 40.
    Commission analysis; final rule. The Commission finds proposed 
rules 3010.2 and 3010.3 achieve their intended objective and adopts 
them without change. The Commission finds that several revisions to 
rule 3010.4 are warranted, based on commenters' observations. One 
simply reflects redesignation of proposed paragraph (b) as final 
paragraph (c) to accommodate a new provision. The other revisions are 
substantive. The first adopts the Postal Service's suggested revision 
to the second sentence of rule 3010.4(a). In final form, this now reads 
as follows: ``A rate adjustment using unused rate adjustment authority 
may not result in an increase for the class that exceeds the applicable 
annual limitation plus 2 percentage points.'' The second change, based 
on DMA's suggestion, entails the addition of a new paragraph (b), which 
reads as follows: ``Type 1-B rate adjustments filed within 12 months of 
each other may not apply more than 2 percentage points of unused rate 
authority to any class.'' The Commission adopts rule 3010.4 as revised 
and explained above.
    The Commission adopts rule 3010.5 as proposed, without change, as 
no commenter took issue with it and it achieves the intended objective 
of providing a basic statement defining Type 2 rate adjustments.
    Rule 3010.6: general information about Type 3 proceedings. This 
provision consists of three paragraphs. The text provides in general 
terms for public participation in Type 3 cases and Commission review in 
90 days. Subpart E addresses Type 3 requests in considerably more 
detail.
    Suggested revisions. OCA proposes revision of proposed rule 
3010.6(c) to address its due process concerns and consistency with the 
PAEA. It suggests adding an explicit reference to notice and an 
opportunity for a public hearing and comment. OCA Comments, September 
24, 2007, at 24-25.
    Commission analysis; final rule. The Commission is revising other 
rules in subpart E of part 3010 to make clear its intentions with 
respect to due process. As this rule is only a general statement, the 
Commission does not find that OCA's proposed revision, even if modified 
to reflect the Commission's approach, appropriate. Accordingly, it 
adopts proposed rule 3010.6 without change.
    Rule 3010.7. This proposed rule consists of six paragraphs 
addressing the regulatory calendar, which the Commission refers to as a 
schedule in the rules. The text provides, among other things, for 
development, maintenance and posting of the calendar.
    Suggested revisions. The Commission's proposed treatment of issues 
related to the regulatory calendar did not generate proposals for 
revisions, but Valpak expresses a concern about how exigent requests 
will mesh with the regulatory calendar and poses several potential 
scenarios. Valpak Comments, September 24, 2007, at 26-27.
    Commission analysis; final rule. The Commission agrees that in the 
event of an exigent request, it is likely the points NNA usefully 
raises will need to be addressed. At the same time, the Commission 
notes that in the interest of getting a basic framework in place for 
the new system, it is not practical to attempt to address every 
eventuality. This is especially the case with respect to exigent 
requests, which the Commission (and presumably most others) hope does 
not materialize in the near future. Accordingly, it adopts proposed 
rule 3010.7 without change.

D. Subpart B--Rules for Rate Adjustments for Rates of General 
Applicability (Type 1-A and 1-B Rate Adjustments)

1. Overview
    Subpart B, as proposed, consists of five sections covering basic 
matters related to Type 1-A and Type 1-B rate adjustments. There was no 
objection to the proposed organization of this set of rules; therefore, 
the Commission carries it over into the final rules.
2. Summary
    The rules in this subpart, as proposed, reflect a broad range of 
considerations related to rate adjustments for Type 1-A and Type 1-B 
filings. These include, among others, the procedures to be followed by 
the Postal Service and the Commission (including each agency's notice 
requirements), the public's role, technical matters related to limits 
on adjustments, and the scope of Commission review. Several rules are 
affected by the Commission's decision on due process considerations. 
The impact mainly affects the text of rule 3010.13.
3. Issues
    Rule 3010.10: procedures. This rule, as proposed, consists of two 
paragraphs that set out the basic procedures associated with Type 1-A 
and Type 1-B rate adjustments. Paragraph (a) establishes the minimum 
requirements regarding the timing and nature of notices of these two 
types of adjustments, as well as the filing thereof

[[Page 63670]]

with the Commission. The notice is to be provided in a manner 
reasonably designed to inform the mailing community and the general 
public that the Postal Service intends to change rates not later than 
45 days prior to the intended implementation date. Transmission of a 
notice of rate adjustment to the Commission is also to occur no later 
than 45 days prior to the intended rate implementation date.
    Paragraph (b) encourages the Postal Service to provide public 
notice and to submit its notice of rate adjustment as far in advance of 
the 45-day minimum as practicable, especially in instances where the 
intended price changes include classification changes or operations 
changes likely to have material impact on mailers.
    Suggested revisions. McGraw-Hill suggests that the Commission 
should allow for an extension of the 45-day review period, of its own 
accord, or at the request of any interested party for good cause shown 
to the extent reasonably necessary under the circumstances. McGraw-Hill 
Comments, September 24, 2007, at 5.
    Commission analysis; final rule. The Commission has considered the 
suggestion that it should impose more explicit or extensive notice 
requirements on the Postal Service. At this point, it continues to 
believe that leaving the Postal Service with the flexibility to 
determine the most effective way to distribute information about 
planned rate adjustments is the more appropriate course. This approach 
can be revisited if there are serious shortcomings in the Postal 
Service's practice.
    The Commission makes one minor editorial revision to rule 
3010.10(a)(2). This consists of deleting the word ``rate'' in the 
phrase ``intended rate implementation date.'' This deletion makes this 
reference consistent with rule 3010.10(a)(1). Accordingly, the 
Commission adopts rule 3010.10 as proposed, with the referenced 
editorial revision.
    Rule 3010.11: limit on size of rate increases. This rule, as 
proposed, consists of an introductory phrase and three paragraphs. The 
introductory statement provides that rate increases for each class of 
market dominant products in any 12-month period are limited. Paragraph 
(a) notes that rates of general applicability are subject to an 
inflation-based limitation computed using the CPI-U values as detailed 
in section 3010.12. Paragraph (b) recognizes that the PAEA authorizes 
an exception to the inflation-based limitati