Price Cap Rules for Market Dominant Price Adjustments, 33819-33835 [2014-13649]

Agencies

• POSTAL REGULATORY COMMISSION

[Federal Register Volume 79, Number 113 (Thursday, June 12, 2014)]
[Rules and Regulations]
[Pages 33819-33835]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13649]



[[Page 33819]]

Vol. 79

Thursday,

No. 113

June 12, 2014

Part II





 Postal Regulatory Commission





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39 CFR Part 3010





 Price Cap Rules for Market Dominant Price Adjustments; Final Rule

Federal Register / Vol. 79 , No. 113 / Thursday, June 12, 2014 / 
Rules and Regulations

[[Page 33820]]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3010

[Docket No. RM2014-3; Order No. 2086]


Price Cap Rules for Market Dominant Price Adjustments

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is issuing a set of final rules addressing the 
price cap for market dominant price adjustments. This action follows a 
review of comments on proposed rules. The changes, which concern rate 
decreases, rate incentives, and de minimis rate increases, update and 
clarify the rules.

DATES: Effective July 14, 2014.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION: 

Regulatory History

72 FR 5230, February 5, 2007
72 FR 29284, May 25, 2007
72 FR 33261, June 15, 2007
72 FR 63622, November 9, 2007
73 FR 22490, April 16, 2013
78 FR 52694, August 26, 2013
78 FR 67951, November 8, 2013
79 FR 5355, January 31, 2014

Table of Contents

I. Introduction
II. Procedural Issues
III. Type 1-C Rate Adjustments
IV. Rates of General Applicability
V. Adjustments for the Deletion of Rate Cells When No Alternate Rate 
Cell is Available
VI. De Minimis Rate Increases
VII. Miscellaneous Issues
VIII. Explanation of Final Rules
IX. Ordering Paragraphs

I. Introduction

    On November 18, 2013, the Commission issued a notice of proposed 
rulemaking to continue its review of the rules in 39 CFR part 3010.\1\ 
The notice requested comments regarding the treatment of rate 
decreases, rate incentives, and de minimis rate increases under part 
3010. See Order No. 1879 at 1.
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    \1\ Notice of Proposed Rulemaking on the Treatment of Rate 
Incentives and De Minimis Rate Increases for Price Cap Purposes, 
November 18, 2013 (Order No. 1879); see also 79 FR 5355 (January 31, 
2014).
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    The Commission received comments and reply comments from the Postal 
Service, the Association for Postal Commerce (PostCom), and Pitney 
Bowes Inc. (Pitney Bowes).\2\ The National Association of Presort 
Mailers, the Major Mailers Association, and the Association for Mail 
Electronic Enhancement (collectively, Joint Commenters) and the 
National Postal Policy Council (NPPC) submitted initial comments 
only.\3\ The Public Representative, Valpak Direct Marketing Systems, 
Inc. and Valpak Dealers' Association, Inc. (collectively, Valpak), and 
the Association of Magazine Media (MPA) submitted reply comments 
only.\4\
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    \2\ Initial Comments of the United States Postal Service, March 
18, 2014 (Postal Service Comments); Reply Comments of the United 
States Postal Service, April 17, 2014 (Postal Service Reply 
Comments); Comments of the Association for Postal Commerce, March 
18, 2014 (PostCom Comments); Reply Comments of the Association for 
Postal Commerce, April 16, 2014 (PostCom Reply Comments); Comments 
of Pitney Bowes Inc., March 18, 2014 (Pitney Bowes Comments); and 
Reply Comments of Pitney Bowes Inc., April 17, 2014 (Pitney Bowes 
Reply Comments). On April 18, 2014, the Postal Service filed a 
supplement to its reply comments. Supplement to Reply Comments of 
the United States Postal Service, April 18, 2014. The filing does 
not supplement the substance of the Postal Service's reply comments. 
Rather, it asserts that ``the Postal Service is delaying some rate 
and classification proposals, pending the completion of this 
proceeding'' and requests that the Commission expedite the issuance 
of a final order in this docket. Id. at 1. Neither the Notice nor 
the Commission's rules provide for the supplementation of comments 
after the date those comments are due.
    \3\ Joint Comments of the National Association of Presort 
Mailers, the Major Mailers Association and the Association for Mail 
Electronic Enhancement, March 18, 2014 (Joint Commenters Comments); 
Comments of the National Postal Policy Council, March 18, 2014 (NPPC 
Comments).
    \4\ Public Representative Reply Comments, April 17, 2014 (PR 
Reply Comments); Valpak Direct Marketing Systems, Inc. and Valpak 
Dealers' Association, Inc. Reply Comments on Notice of Proposed 
Rulemaking, April 16, 2014 (Valpak Reply Comments); and Reply 
Comments of MPA--The Association of Magazine Media, April 17, 2014 
(MPA Reply Comments).
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    This Order begins with a discussion of procedural issues raised by 
the comments. Then, it addresses the substantive comments on each of 
the following aspects of the proposed rules: Type 1-C rate adjustments; 
rates of general applicability; adjustments for the deletion of rate 
cells when no alternate rate cell is available; and de minimis rate 
increases. Next, this Order discusses miscellaneous issues raised by 
the commenters. Finally, the Commission adopts the proposed rules, 
modified as described below.

II. Procedural Issues

    The comments filed in this docket raise two procedural issues: (1) 
The time for filing comments; and (2) the effect of an appeal pending 
before the United States Court of Appeals for the District of Columbia 
District (D.C. Circuit) on the implementation of proposed Sec.  
3010.23(d)(4).

A. Time for Filing Comments

    Initial comments in this docket were due March 17, 2014. 79 FR 
5355. Reply comments were due April 16, 2014. Id. Because the federal 
government was closed due to severe weather on March 17, 2014, comments 
filed on March 18, 2014, are deemed timely filed. See 39 CFR 3001.15 
(providing that in computing a period of time under a Commission 
notice, the last day of the period is to be included unless it is a 
Saturday, Sunday, or federal holiday). The Postal Service Reply 
Comments were accompanied by a motion for late acceptance, citing the 
press of business and the unavailability of a critical employee.\5\ 
Three other commenters filed reply comments on April 17, 2014, without 
motions for late acceptance. PR Reply Comments at 1; Pitney Bowes Reply 
Comments at 1; MPA Reply Comments at 1. Because the period between the 
date initial comments were filed and the date reply comments were due 
was shortened by one day, the Commission grants the Postal Service's 
motion and will consider the comments filed on April 17, 2014, timely 
filed.
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    \5\ Motion for Late Acceptance of the Reply Comments of the 
United States Postal Service, April 17, 2014.
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B. Delaying Implementation of Proposed Sec.  3010.23(d)(4)

    The Postal Service requests that the Commission delay the 
implementation of proposed Sec.  3010.23(d)(4) until the D.C. Circuit 
issues a decision on the pending appeal of the Commission's decision in 
Docket No. R2013-10.\6\ The Postal Service contends that it is not 
clear whether the proposed rule would have applied to the Full Service 
Intelligent Mail Barcode (Full Service IMb) change discussed in Order 
No. 1890 because ``even the Commission itself could not conclusively 
determine whether a rate cell has been deleted, or simply been 
redefined, by implementing the Full-Service IMb requirement.'' Postal 
Service Comments at 7 (footnote omitted).
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    \6\ Postal Service Comments at 8. See also Docket No. R2013-10, 
Order on Price Adjustments for Market Dominant Products and Related 
Mail Classification Changes, November 21, 2013 (Order No. 1890); 
U.S. Postal Serv. v. Postal Regulatory Comm'n, No. 13-1308 (D.C. 
Cir. filed Dec. 20, 2013).
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    The Public Representative, PostCom, Pitney Bowes, and MPA oppose 
delaying the implementation of the proposed rule. The Public 
Representative maintains that the application of the proposed rule to a 
certain rate cell depends on the particular case before the Commission, 
rendering the outcome of the appeal

[[Page 33821]]

irrelevant to the application of the proposed rule to future cases. PR 
Reply Comments at 7. He adds that delaying implementation would not 
help ``in finalizing several instances where products have been 
transferred recently to the competitive product list.'' Id. PostCom 
argues that the court's decision in the appeal will have no bearing on 
the implementation of proposed Sec.  3010.23(d)(4) because the proposed 
rule would not have applied to the rate cells at issue in Docket No. 
R2013-10 given that alternate rate cells were available. PostCom Reply 
Comments at 4-5. As discussed further below, Pitney Bowes urges the 
Commission to modify proposed Sec.  3010.23(d)(4) to specify that it 
applies only to transfers of products to the competitive product list 
and contends that there would be no need for delay if its approach is 
adopted. Pitney Bowes Reply Comments at 2. MPA supports Pitney Bowes' 
contention. MPA Reply Comments at 2.
    The Commission will not delay the implementation of proposed Sec.  
3010.23(d)(4) pending the outcome of the appeal. As discussed in 
section V, below, the court's decision is unlikely to affect how 
proposed Sec.  3010.23(d)(4) is implemented.

III. Type 1-C Rate Adjustments

    As set out in the Commission's notice of proposed rulemaking, a 
Type 1-C rate adjustment is an adjustment to a rate of general 
applicability that contains only a rate decrease.\7\ The Postal Service 
is not required to calculate an annual limitation for purposes of a 
Type 1-C rate adjustment. Proposed Sec.  3010.20(e). The Postal Service 
may choose whether or not to generate unused rate adjustment authority 
as a result of a Type 1-C rate adjustment. Proposed Sec.  3010.6(b). If 
it chooses to generate unused rate adjustment authority, it is required 
to do so in accordance with proposed Sec. Sec.  3010.23(b)(2) and 
3010.27.
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    \7\ Proposed Sec.  3010.6(a). The use of the singular 
``decrease'' in this rule does not prevent the Postal Service from 
including multiple rate decreases in a single Type 1-C rate 
adjustment.
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    Commenters raised two issues relating to Type 1-C rate adjustments. 
First, commenters expressed views on whether the Postal Service should 
be required to elect whether it will generate unused rate adjustment 
authority at the time it files a notice of Type 1-C rate adjustment. 
Second, two commenters suggested that the proposed rules be modified to 
specify how unused rate adjustment authority is generated when a Type 
1-C rate adjustment follows a Type 3 rate adjustment.

A. The Postal Service Is Required To Elect Whether To Generate Unused 
Rate Adjustment Authority at the Time of Filing a Notice of Type 1-C 
Rate Adjustment

    Several commenters requested that the Commission clarify whether 
the Postal Service is required to choose whether a Type 1-C rate 
adjustment will generate unused rate adjustment authority at the time 
it files a notice of Type 1-C rate adjustment. Joint Commenters 
Comments at 3; NPPC Comments at 5. The Joint Commenters and NPPC are 
concerned that a deferred election would reduce rate predictability and 
stability. Id. In the alternative, the Joint Commenters propose that a 
rule allowing for deferred election be applied prospectively. Joint 
Commenters Comments at 3.
    The Public Representative does not believe allowing a deferred 
election would be overly complicated. PR Reply Comments at 7. He opines 
that a deferred election would provide the Postal Service ``flexibility 
consistent with administrative convenience.'' Id. at 8. The Postal 
Service asserts that requiring it to choose whether or not to generate 
unused rate adjustment authority at the time it files a notice of Type 
1-C rate adjustment ``would unreasonably restrict the Postal Service's 
pricing flexibility and needlessly encumber its business planning 
activities.'' Postal Service Reply Comments at 2. It states that it has 
not observed any link between the behavior of mailers and its decision 
to seek additional unused rate adjustment authority as a result of rate 
incentives. Id. at 3. It states that because it is required to use 
historical billing determinants to calculate the percentage change in 
rates, it may not have the necessary information to make an election at 
the time it files its notice of a Type 1-C rate adjustment. Id. It 
cautions that requiring an election at the time of filing would 
``provide a perverse incentive for the Postal Service to always request 
price cap authority for newly introduced rate incentives, since it 
would not be able to do so later.'' Id.
    The Commission finds that no change to the proposed rules is 
necessary. Although the commenters cite proposed Sec. Sec.  
3010.23(a)(1)(iii), 3010.23(e), and 3010.6(b), they do not discuss 
proposed Sec.  3010.12(b)(10). That proposed section requires that the 
notice for a Type 1-C rate adjustment specify whether the Postal 
Service elects to generate unused rate adjustment authority. Requiring 
the Postal Service to choose whether it will generate unused rate 
adjustment authority at the time it files its notice of a Type 1-C rate 
adjustment is an important part of the proposed rules for Type 1-C rate 
adjustments. It provides predictability for mailers by alerting them to 
circumstances when unused rate adjustment authority will be generated 
and allows them the opportunity to comment on the effects of the 
proposed rate adjustments. It also provides information the Commission 
requires to accurately calculate the percentage change in rates, 
reducing the need for information requests to ascertain the Postal 
Service's intent (which is particularly important in a time-limited 
rate case).
    It is important to note that electing not to generate unused rate 
adjustment authority in a Type 1-C rate adjustment does not prevent the 
Postal Service from electing to include the effects of a rate decrease 
in a future Type 1-A or Type 1-B rate adjustment.\8\ Proposed Sec.  
3010.23(a)(1)(iii) allows the Postal Service to include in the 
calculation of the percentage change in rates for a Type 1-A or Type 1-
B rate adjustment a rate incentive that was excluded from the 
calculation of the percentage change in rates for a previous rate 
adjustment. In that situation, the effects of the rate decrease are 
included in the percentage change in rates calculation for the current 
Type 1-A or Type 1-B rate adjustment. As a result, the Postal Service 
would have the option to increase other rates within the class during 
that Type 1-A or Type 1-B rate adjustment or to generate unused rate 
adjustment authority in that Type 1-A or Type 1-B rate adjustment.
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    \8\ See Docket No. C2009-1R, Order on Reconsideration and 
Clarification, August 13, 2013, at 10 (Order No. 1807) (``If the 
Postal Service chooses to extend a price decrease into a future 
year, it may opt to incorporate the reduced price into the 
calculation of the percentage change in rates at that time.''); 
Docket No. R2013-6, Order Approving Technology Credit Promotion, 
June 10, 2013, at 16-17 (Order No. 1743); Docket No. R2013-1, Order 
on Price Adjustments for Market Dominant Products and Related Mail 
Classification Changes, November 16, 2012, at 17 (Order No. 1541).
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    In Order No. 1879, the Commission provided the following example of 
how unused rate adjustment authority would be calculated in a Type 1-C 
rate adjustment where the Postal Service elects to generate unused rate 
adjustment authority:

    Example A: 
Docket No. R201X-1: Type 1-A Rate Adjustment
    Date of Notice of Rate Adjustment: January 1, 201X
    Annual Limitation: 3.000 percent
    Percentage Change in Rates for the Class: 2.500 percent
    Generated Unused Rate Adjustment Authority: 0.500 percent

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Docket No. R201X-2: Type 1-C Rate Adjustment
    Date of Notice of Rate Adjustment: July 1, 201X
    Annual Limitation: N/A
    Amended Percentage Change in Rates for the Class: 2.250 percent
    Additional Generated Unused Rate Adjustment Authority: 0.250 
percent
    Amended Unused Rate Adjustment Authority Generated in Docket No. 
R201X-1: 0.750 percent

Order No. 1879 at 5. If the Postal Service elected not to generate 
unused rate adjustment authority in Docket No. R201X-2 but then 
determined to include the effects of the rate decrease in a Type 1-A 
rate adjustment filed the following fiscal year (Docket No. R201Y-1), 
the example would change as follows:

    Example B: 
Docket No. R201X-1: Type 1-A Rate Adjustment
    Date of Notice of Rate Adjustment: January 1, 201X
    Annual Limitation: 3.000 percent
    Percentage Change in Rates for the Class: 2.500 percent
    Generated Unused Rate Adjustment Authority: 0.500 percent
Docket No. R201X-2: Type 1-C Rate Adjustment
    Date of Notice of Rate Adjustment: July 1, 201X
    Annual Limitation: N/A
    Percentage Change in Rates for the Class: N/A
    Additional Generated Unused Rate Adjustment Authority: N/A
    Unused Rate Adjustment Authority Generated in Docket No. R201X-
1: 0.500 percent
    Unused Rate Adjustment Authority Generated in Docket No. R201X-
2: N/A
Docket No. R201Y-1: Type 1-A Rate Adjustment
    Date of Notice of Rate Adjustment: January 30, 201Y
    Annual Limitation: 2.400 percent
    Percentage Change in Rates for the Class: 2.250 percent
    Unused Rate Adjustment Authority Generated in Docket No. R201X-
1: 0.500 percent
    Unused Rate Adjustment Authority Generated in Docket No. R201X-
2: N/A
    Unused Rate Adjustment Authority Generated in Docket No. R201Y-
1: 0.150 percent

    In Example B, the amount of unused rate adjustment authority 
generated in Docket No. R201X-1 does not change. Instead, the Postal 
Service generates unused rate adjustment authority in Docket No. R201Y-
1 by including the undiscounted rate as the current rate and the 
discounted rate as the proposed rate in the calculation of the 
percentage change in rates. Historical billing determinants, adjusted 
in accordance with proposed Sec.  3010.23(d)(2), are used. Proposed 
Sec.  3010.23(d)(3). In other words, if the Postal Service elects to 
generate unused rate adjustment authority in Docket No. R201X-2, the 
discounted rate is included in the calculation of the percentage change 
in rates for Docket No. R201X-1 as if it had been proposed in Docket 
No. R201X-1. This results in additional unused rate adjustment 
authority being ascribed to Docket No. R201X-1. In subsequent notices 
of rate adjustment, the current rate will be the discounted rate 
approved in Docket No. R201X-2.
    In contrast, if the Postal Service elects not to generate unused 
rate adjustment authority in Docket No. R201X-2, there is no effect on 
the percentage change in rates for, or amount of unused rate adjustment 
authority generated in, Docket No. R201X-1. If the Postal Service 
chooses to begin including the discount in the calculation of the 
percentage change in rates in Docket No. R201Y-1, the discount is 
treated as if it had first been proposed in Docket No. R201Y-1 (rather 
than in Docket No. R201X-2).

A. The Postal Service May Not Choose To Generate Unused Rate Adjustment 
Authority in a Notice of Type 1-C Rate Adjustment Filed Immediately 
After a Type 3 Rate Adjustment

    The Postal Service requests that the Commission modify proposed 
Sec.  3010.27(a) to allow the Postal Service to add unused rate 
adjustment authority generated by a Type 1-C rate adjustment to ``the 
most recent calculation of its total unused rate authority, regardless 
of whether that calculation resulted from a Type 1-A, Type 1-B, or 
Exigent rate case.'' Postal Service Comments at 2-3. It points out that 
if the Postal Service filed a notice of Type 1-C rate adjustment after 
a Type 3 rate adjustment (but before another Type 1-A or 1-B rate 
adjustment), ``the new Type 1-C rate authority would not be applied to 
the most recent calculation of the unused rate authority.'' Id. at 2. 
The Public Representative supports the Postal Service's request. PR 
Reply Comments at 10.
    The Commission declines to modify its proposed rules for Type 1-C 
rate adjustments as requested by the Postal Service. Generating unused 
rate adjustment authority in a Type 1-C rate adjustment by referring to 
the most recent Type 1-A or Type 1-B rate adjustment is consistent with 
the Postal Service's authority to change rates within a given class in 
that Type 1-A or Type 1-B rate adjustment, so long as the adjustments 
do not exceed the maximum rate adjustment calculated under 39 CFR 
3010.20.\9\ If the Postal Service makes rate adjustments for a class 
that add up to less than the annual limitation on the percentage change 
in rates, 39 U.S.C. 3622(d)(2)(C) allows it generate unused rate 
adjustment authority equal to the difference between the annual 
limitation and the actual rate adjustments.
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    \9\ As the Commission explained in its notice of proposed 
rulemaking, a Type 1-C rate adjustment is designed to take into 
consideration a proposed rate reduction that would be in effect 
during the same period as the rates proposed in the most recent Type 
1-A or Type 1-B rate adjustment. Order No. 1879 at 4-5.
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    In a Type 3 rate adjustment, by contrast, the Postal Service does 
not change rates within the confines of the maximum rate adjustment. 
Rather, it increases rates to a level that exceeds the maximum rate 
adjustment. Because there is no maximum rate adjustment in a Type 3 
rate adjustment, it is not possible to generate unused rate adjustment 
authority. In fact, the Commission requires that the Postal Service 
exhaust all available unused rate adjustment authority before imposing 
a rate increase in a Type 3 rate adjustment. 39 CFR 3010.63(c).
    Because it is not consistent with 39 U.S.C. 3622(d)(2)(C) to 
generate unused rate adjustment authority as a result of a Type 3 rate 
adjustment, the Commission will not modify its proposed Type 1-C rules 
to allow the Postal Service to do so. The Postal Service is free to 
file a Type 1-C rate adjustment immediately after a Type 3 rate 
adjustment. However, that Type 1-C rate adjustment may not generate 
unused rate adjustment authority. If the Postal Service wishes to 
generate unused rate adjustment authority in a rate adjustment filed 
immediately after a Type 3 rate adjustment, it must file a notice of 
Type 1-A rate adjustment and calculate the annual limitation on the 
percentage change in rates.\10\
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    \10\ A Type 1-B rate adjustment uses unused rate adjustment 
authority. See proposed Sec.  3010.5. Because a Type 3 rate 
adjustment exhausts all unused rate adjustment authority, it would 
be impossible for the Postal Service to file a successful notice of 
Type 1-B rate adjustment immediately after a Type 3 rate adjustment.
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    Although proposed Sec.  3010.27, as contained in the notice of 
proposed rulemaking, does not allow the Postal Service to calculate 
unused rate adjustment authority in a Type 1-C rate adjustment filed 
immediately after a Type 3 rate adjustment (that is, with no 
intervening Type 1-A or Type 1-B rate adjustment), the Commission finds 
it prudent to include additional clarification in proposed Sec.  
3010.6. Therefore, it modifies proposed Sec.  3010.6 to specify that a 
Type 1-C rate

[[Page 33823]]

adjustment filed immediately after a Type 3 rate adjustment does not 
generate unused rate adjustment authority.

IV. Rates of General Applicability

    Several commenters request clarification of the definition of the 
term ``rate of general applicability'' set out in proposed Sec.  
3010.1(g). See PostCom Comments at 3-6; Joint Commenters Comments at 4; 
Valpak Reply Comments at 1; NPPC Comments at 3-4; PR Reply Comments at 
4-5; Postal Service Comments at 3-6. Two commenters assert that the 
definition is not clear and needs improvement, without pointing to 
specific areas in need of clarification or improvement. Joint 
Commenters Comments at 4; Valpak Reply Comments at 1. Other commenters 
request clarification in the final order about how the definition would 
be applied to particular promotions or rates. NPPC Comments at 3-4; PR 
Reply Comments at 4-5; PostCom Comments at 3-6; Postal Service Comments 
at 3-6. No commenter proposed language to modify the definition.
    Below, the Commission provides a more detailed discussion of the 
application of the proposed definition to the promotions and types of 
mail identified by the commenters, including international mail, 
volume-based incentives, niche classifications, rates that require 
``ministerial approval'' by the Postal Service, and particular rates 
identified by the parties. However, except as noted in section A below, 
it concludes that no changes to the proposed definition are necessary 
at this time. Although the Commission understands and appreciates the 
concerns of the commenters, it finds that the proposed rule accurately 
summarizes the Commission's treatment of the thousands of rates 
previously proposed by the Postal Service without limiting its 
flexibility to give individualized consideration to the wide variety of 
rates that could be proposed in the future.

B. Modification of the Definition of Rate of General Applicability To 
Include International Mail Rates

    The Postal Service requests that the Commission clarify how 
international rates will be treated under the definition of the term 
``rate of general applicability.'' Postal Service Comments at 3. It 
notes that the proposed section omits ``rates published in the 
International Mail Manual (IMM), as well as inbound international 
rates,'' raising questions about how international rates will be 
treated in the calculation of the annual limitation on the percentage 
change in rates. Id.
    In previous rate cases, the Commission has treated rates applicable 
to all mail meeting standards established by the IMM as rates of 
general applicability. See, e.g., Order No. 1890 at 61-62. It has 
treated rates that are only available upon the written agreement of the 
Postal Service and a foreign postal operator as rates that are not 
rates of general applicability.\11\ Rates for inbound international 
mailpieces that are subject to the provisions of the Universal Postal 
Convention of the Universal Postal Union (UPU) are rates of general 
applicability that are included in the calculation of the annual 
limitation on the percentage change in rates. For instance, the 
terminal dues rates for inbound Letterpost described in section 1130.6 
of the Mail Classification Schedule (MCS) are set by the UPU. They are 
considered rates of general applicability within the meaning of Sec.  
3010.1(g) because they are available to all mail meeting the standards 
established by section 1130 of the MCS. Similarly, rates for outbound 
international mail and special services that apply to all mailpieces 
and service transactions meeting standards established by the IMM are 
rates of general applicability.\12\ Currently, rates for inbound 
special services are not included in the calculation of the percentage 
change in rates, so the Commission need not determine whether 
individual rates for inbound special services are rates of general 
applicability. Id.
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    \11\ See, e.g., Docket No. R2014-3, Order Approving an 
Additional Inbound Market Dominant Multi-Service Agreement with 
Foreign Postal Operators 1 Negotiated Service Agreement (with Canada 
Post Corporation), December 31, 2013 (Order No. 1940).
    \12\ See, e.g., Docket No. R2013-10, Library Reference PRC-LR-
2013-10/5, November 21, 2013.
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    In contrast, the Commission treats rates established by written 
agreements with foreign postal operators in the same manner as 
negotiated service agreements (that is, not as rates of general 
applicability). For example, rates established pursuant to the Inbound 
Market Dominant Multi-Service Agreements with Foreign Postal Operators 
1 agreement with the Australian Postal Corporation are not considered 
rates of general applicability.\13\ Although the agreement is listed at 
section 1602.3.5 of the MCS, the rates are only available upon the 
written agreement of the Postal Service and a foreign postal operator 
(in this case, the Australian Postal Corporation). Similarly, rates 
established under the Inbound Market Dominant Expr[egrave]s Service 
Agreement approved in Docket No. R2011-6 are not rates of general 
applicability because they are only available upon the written 
agreement of the Postal Service and approximately two dozen signatories 
of the Expr[egrave]s Service Agreement.\14\ Although the Universal 
Postal Convention is itself a multilateral agreement, the Commission 
has consistently treated rates established pursuant to that convention 
as rates of general applicability.\15\ However, multilateral agreements 
that do not include all members of the UPU (such as the Expr[egrave]s 
Service Agreement) have consistently been treated like negotiated 
service agreements.\16\
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    \13\ Docket No. R2014-2, Order Approving an Additional Inbound 
Market Dominant Multi-Service Agreement with Foreign Postal 
Operators 1 Negotiated Service Agreement (with Australian Postal 
Corporation), December 30, 2013 (Order No. 1931).
    \14\ See Docket No. R2011-6, Order Adding Inbound Market 
Dominant Expr[egrave]s Service Agreement 1 to the Market Dominant 
Product List, September 26, 2011 (Order No. 876).
    \15\ See, e.g., Order No. 1890 at 64 (using UPU terminal dues 
rates in the calculation of the percentage change in rates for 
Inbound Letter Post).
    \16\ See Docket No. R2011-6, Notice of United States Postal 
Service of Type 2 Rate Adjustment, and Notice of Filing Functionally 
Equivalent Agreement, August 12, 2011 (filing Expr[egrave]s Service 
Agreement as a Type 2 rate adjustment).
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    In order to clarify the application of the definition of the term 
``rate of general applicability'' to international mail, the Commission 
will modify proposed Sec.  3010.1(g) to include references to the IMM 
and foreign postal operators.

C. Volume-Based Incentives Can Be Rates of General Applicability

    PostCom requests that the Commission clarify whether the volume 
sent by a mailer would be considered a characteristic of the mail to 
which a rate applies. PostCom Comments at 4. It suggests that excluding 
rates that are ``dependent on factors other than the characteristics of 
the mail to which the rate applies'' might mean that volume incentive 
rates can never be considered rates of general applicability. Id. The 
Public Representative argues that because volume discounts vary in 
purpose and effect, a rule to cover all volume discounts would not be 
practical. PR Reply Comments at 5.
    It is not the Commission's intent to suggest that volume incentives 
can never be considered rates of general applicability. The volume of 
mail sent by a mailer under an incentive program is a characteristic of 
the mail to which the rates under the incentive program apply. Thus, a 
promotional rate that provides a 5 percent rebate on a mailing that 
includes 1,000 or more pieces could

[[Page 33824]]

be a rate of general applicability (assuming all other factors are 
met). The promotional rate applies to pieces included within the 
mailing meeting the volume threshold. Similarly, a promotion that 
provided a 1-cent per piece discount for Standard Mail once a mailer 
sends 100,000 pieces could be a rate of general applicability, if the 
promotional rate applies to Standard Mail pieces sent during the 
promotional period.
    In contrast, volume sent by a mailer in a previous year is not a 
characteristic of the mail to which rates under the incentive program 
apply. For instance, a promotional rate that provided a 2-cent discount 
for First-Class letters weighing more than 2 ounces to any mailer that 
in the previous year sent more than 100,000 First-Class letters 
weighing more than 2 ounces would not be a rate of general 
applicability. In that case, eligibility for the discount hinges on the 
volume of mail sent by the mailer before the incentive program begins. 
Because historic volumes are not characteristics of the mail to which 
the discount applies, the discount would not be considered a rate of 
general applicability.
    The Technology Credit Promotion proposed in Docket No. R2013-6 was 
not a rate of general applicability because eligibility for the 
discount hinged on the past behavior of mailers rather than the 
characteristics of mail sent under the promotion. Order No. 1743 at 15. 
The fact that the Technology Credit Promotion was a volume-based 
promotion was not what prevented the Commission from treating it as a 
rate of general applicability. Rather, it was the fact that certain 
mailers would not be able to qualify for the promotion, no matter how 
much or what kind of mail they sent going forward. Id. The universe of 
mailers that could qualify for the promotion was determined in advance. 
No matter what they did, no matter how they altered their business 
model or mailings to respond to the Postal Service's incentives, some 
mailers would not be able to participate in the Technology Credit 
Promotion.

D. Niche Classifications Can Be Rates of General Applicability

    NPPC requests that the Commission clarify whether a niche 
classification designed to be available in practice to ``only a very 
small number of mailers'' and for which no contract is available would 
be considered a rate of general applicability. NPPC Comments at 4. A 
niche classification with rates that are only available to a small 
number of mailers can be a rate of general applicability.
    For instance, the Commission recently provided clarification on the 
price cap treatment of the rates for the round-trip DVD mailer product. 
Order No. 1807 at 7-10. Only a few mailers qualify for the round-trip 
DVD mailer rates.\17\ Nevertheless, the Commission explained that if 
the Postal Service had chosen to increase rates for letter-shaped 
round-trip DVD mail within that product, the increase ``would have 
required the filing of a notice of price adjustment that triggered a 
recalculation of available CPI pricing authority. . . .'' Order No. 
1807 at 9. There would have been little sense in requiring a 
recalculation of the annual limitation on the percentage change in 
rates if the Commission intended to exclude the hypothetical rate 
increase for letter-shaped round-trip DVD mail from the calculation of 
the percentage change in rates.
---------------------------------------------------------------------------

    \17\ See Docket Nos. MC2013-57 and CP2013-75, Response of the 
United States Postal Service to Chairman's Information Request No. 
1, January 17, 2014, question 1 (asserting that two mailers 
represent the overwhelming majority of round-trip DVD mail).
---------------------------------------------------------------------------

    There is some evidence that mailers also view niche classifications 
as being more generally applicable than negotiated service 
agreements.\18\ In Docket No. RM2013-2, Valpak requested that the 
Commission include an explanation in each notice of Type 2 rate 
adjustment of why the Postal Service was entering into a negotiated 
service agreement rather than establishing a niche classification.\19\ 
It based this request on former 39 CFR 3001.195(a)(1), which required 
the Postal Service to provide a written justification for entering into 
a negotiated service agreement ``as opposed to a more generally 
applicable form of classification.'' Id.
---------------------------------------------------------------------------

    \18\ See Docket No. RM2013-2, Order Adopting Final Rules for 
Determining and Applying the Maximum Amount of Rate Adjustments, 
July 23, 2013, at 27-28 (Order No. 1786).
    \19\ Docket No. RM2013-2, Valpak Direct Marketing Systems, Inc. 
and Valpak Dealers' Association, Inc. Comments on Notice of Proposed 
Rulemaking, May 16, 2013, at 13.
---------------------------------------------------------------------------

E. Rates That Require Mailers To Obtain ``Ministerial Approval'' From 
the Postal Service Can Be Rates of General Applicability

    NPPC also requests that the Commission clarify whether a rate that 
depends on ``at least a ministerial approval by that Postal Service'' 
that is ``discretionary to some degree'' could be considered a rate of 
general applicability. NPPC Comments at 4. It cites non-profit and 
Periodicals mail rates as examples of rates that require the Postal 
Service to exercise this kind of discretion.
    The opportunity for the Postal Service to exercise discretion in 
determining which mail is eligible for a rate does not, without more, 
prevent the rate from being considered a rate of general applicability. 
Postal Service employees routinely make determinations about 
mailability, machinability, and eligibility for rates of general 
applicability. In each of these circumstances, the Postal Service 
exercises its discretion within statutory and regulatory boundaries 
described in the MCS, the Domestic Mail Manual (DMM), or the IMM. For 
instance, letters and cards must meet the dimensional, weight, and 
automation compatible standards in DMM section 201 in order to be 
eligible for the machinable rate. Some of these standards are objective 
(such as weight). Others require the exercise of discretion. See, e.g., 
DMM section 201.3.10 (permitting ``reasonably flexible items'' to be 
deemed automation compatible). If mailpieces are deemed nonmachinable, 
a nonmachinable surcharge is imposed. That discretion does not prevent 
changes in the amount of the nonmachinable surcharge from being 
included in the calculation of the percentage change in rates.\20\ 
Similarly, the Postal Service has the discretion to determine whether a 
mailpiece is a periodical publication as described in 39 U.S.C. 
3626(b). That discretion does not prevent rates for periodicals from 
being included in the calculation of the percentage change in 
rates.\21\
---------------------------------------------------------------------------

    \20\ See Docket No. R2008-1, Library Reference PRC-R2008-1-LR1, 
March 17, 2008, FCM--cap--calculations, lines 13-15.
    \21\ See, e.g., Docket No. R2013-10, Library Reference USPS-LR-
R2013-10/3, September 26, 2013.
---------------------------------------------------------------------------

    Rates for which mailers are eligible only when Postal Service 
employees exercise discretion outside the boundaries of the MCS, the 
DMM, or the IMM are less likely to be considered rates of general 
applicability. For example, in Docket No. R2013-10, the Postal Service 
proposed a coupon program that would give $50 or $100 coupons to new 
Every Door Direct Mail (EDDM) customers. Order No. 1890 at 75-76. 
Postal Service sales representatives would determine the amount of the 
coupon ``based on an understanding of customer needs.'' Id. at 75. The 
sales representatives would determine which customers received a 
coupon, but not every customer eligible for a coupon would receive one. 
Id. The Postal Service elected not to include the EDDM coupon program 
in its calculation of the percentage change in rates, so the Commission 
did not reach

[[Page 33825]]

the question of whether the program constituted a rate of general 
applicability. However, as proposed by the Postal Service,\22\ the 
program would appear not to be a rate of general applicability because 
it was not available to all mail meeting standards established in the 
MCS, the DMM, or the IMM. It was available only to mail meeting 
standards established in the MCS, the DMM, or the IMM that was sent by 
a select number of mailers chosen by Postal Service representatives.
---------------------------------------------------------------------------

    \22\ This paragraph discusses the EDDM coupon as proposed by the 
Postal Service. Section E below, discusses the application of 
proposed Sec.  3010.1(g) to the rate as approved by the Commission.
---------------------------------------------------------------------------

F. Applying the Proposed Definition to Previously-Approved Rates

    Several commenters requested that the Commission discuss whether 
certain previously-approved rates would be considered rates of general 
applicability. PostCom Comments at 3-6; Postal Service Comments at 3-5; 
Valpak Reply Comments at 2.
    At the outset, it is important to emphasize that not every rate 
incentive that meets the definition of ``rate of general 
applicability'' will be included in the calculation of the percentage 
change in rates. As discussed in proposed Sec.  3010.23(e)(2), in order 
to be included in the calculation of the percentage change in rates, a 
rate incentive must meet three tests. First, it must be in the form of 
a discount or easily translated into a discount. Proposed Sec.  
3010.23(e)(2)(i). Second, there must be sufficient billing determinants 
available. Proposed Sec.  3010.23(e)(2)(ii). Finally, the rate 
incentive must be a rate of general applicability. Proposed Sec.  
3010.23(e)(2)(iii). If a rate incentive is not in the form of a 
discount (or easily translated to a discount), it will not be included 
in the percentage change in rates. Likewise, if sufficient billing 
determinants are not available, the rate incentive will not be included 
in the percentage change in rates.
    Additionally, not every promotion listed below was included in the 
calculation of the percentage change in rates. In some instances, the 
Postal Service chose not to include a rate incentive that is a rate of 
general applicability in the calculation of the percentage change in 
rates. This choice is consistent with proposed Sec.  3010.23(e)(1).
    A discussion of each rate identified by the commenters is provided 
below. For each rate, the Commission provides a brief description of 
the rate and a short discussion of whether the rate would be considered 
a rate of general applicability, as that term is defined in proposed 
Sec.  3010.1(g). For each rate, the Commission also explains any 
adjustments to billing determinants and indicates whether the Postal 
Service chose to include the effects of the rate in the calculation of 
the percentage change in rates.
    Summer sales. Mailers who participated in the summer sales approved 
in Docket Nos. R2009-3 and R2010-3 received a 30-percent rebate based 
on mail volume that exceeded predetermined thresholds.\23\ Eligibility 
for these incentives was based on the volume of mail sent by a mailer 
in the previous year. Id. As discussed in section B above, the volume 
sent by a mailer in a previous year is not a characteristic of the mail 
to which the rate applies. Therefore, the summer sales would not be 
considered rates of general applicability and would be subject to 
proposed Sec.  3010.24. The Postal Service chose not to include the 
summer sales in the calculation of the percentage change in rates. 
Order No. 219 at 9; Order No. 439 at 12.
---------------------------------------------------------------------------

    \23\ Docket No. R2009-3, Order Approving Standard Mail Volume 
Incentive Pricing Program, June 4, 2009, at 2-3 (Order No. 219); 
Docket No. R2010-3, Order Approving Standard Mail Volume Incentive 
Pricing Program, April 7, 2010, at 7 (Order No. 439).
---------------------------------------------------------------------------

    Standard Mail High Density Flats. In Docket No. R2009-4, the Postal 
Service requested a rate decrease for all Standard Mail High Density 
Flats in order to address mailer concerns about detrimental impacts on 
businesses.\24\ Because the rate decrease applied to all mailpieces, 
the rate would be considered a rate of general applicability.\25\ The 
Postal Service chose not to include the rate decrease in the 
calculation of the percentage change in rates. Id. at 6.
---------------------------------------------------------------------------

    \24\ Docket No. R2009-4, Order Approving Price Adjustment for 
Standard Mail High Density Flats, July 1, 2009, at 2-3 (Order No. 
236).
    \25\ PostCom points out that footnote 14 of Order No. 1879 
(incorrectly) implies that the Standard Mail High Density Flats 
rates and the Mobile Barcode promotions were not rates of general 
applicability. PostCom Comments at 4. This was an error on the 
Commission's part. The dockets listed in footnote 14 involved rates 
that were not included in the calculation of the percentage change 
in rates. The footnote should have distinguished between rates that 
were excluded because they were not rates of general applicability 
and rates that the Postal Service chose not to include in the 
calculation of the percentage change in rates.
---------------------------------------------------------------------------

    First-Class Mail Incentive Program. Under the First-Class Mail 
Incentive Program, mailers received a 20-percent rebate for mailpieces 
sent over a predetermined threshold.\26\ Eligibility for the incentive 
was based on the volume of mail sent by a mailer in the previous year. 
Id. As discussed in section B above, the volume sent by a mailer in a 
previous year is not a characteristic of the mail to which the rate 
applies. The First-Class Mail Incentive Program would not be considered 
a rate of general applicability. Thus, it would have been subject to 
proposed Sec.  3010.24. The Postal Service chose not to include the 
First-Class Mail Incentive Program in the calculation of the percentage 
change in rates. Id. at 9.
---------------------------------------------------------------------------

    \26\ Docket No. R2009-5, Order Approving First-Class Mail 
Incentive Pricing Program, September 16, 2009, at 5 (Order No. 299).
---------------------------------------------------------------------------

    Reply Rides Free Promotion and Saturation and High Density 
Incentive. The Reply Rides Free Promotion allowed eligible mailers to 
send a mailpiece that included a reply card or envelope at the 1-ounce 
rate as long as the mailpiece's weight did not exceed 1.2 ounces.\27\ 
Only customers who mailed First-Class Mail Presort and Automation 
Letters in the previous two fiscal years qualified for the promotion. 
Id. The Saturation and High Density Incentive provided a rebate to 
mailers who increased current mail volumes over a predetermined 
threshold. Id. at 24. Only customers with at least six mailings in the 
previous fiscal year were eligible for the incentive. Id. Eligibility 
for both promotions was based on the volume of mail sent by a mailer in 
the previous year. Id. at 22, 24. As discussed in section B above, the 
volume sent by a mailer in a previous year is not a characteristic of 
the mail to which the rate applies. Therefore, neither rate would be 
considered a rate of general applicability and both rates would have 
been subject to proposed Sec.  3010.24.
---------------------------------------------------------------------------

    \27\ Docket No. R2011-1, Order Approving Market Dominant 
Classification and Price Changes, and Applying Price Cap Rules, 
December 10, 2010, at 22 (Order No. 606).
---------------------------------------------------------------------------

    This outcome is consistent with the Commission's actual treatment 
of these two promotions. The Postal Service requested that the Reply 
Rides Free Promotion and Saturation and High Density Incentive Program 
be included in the calculation of the percentage change in rates. Id. 
at 17-18. The Commission rejected the Postal Service's proposal to 
include the Promotion and Incentive in the price cap calculation, 
finding that ``[m]ailers that are not eligible to participate should 
not have negative consequences resulting from the incentive.'' Id. at 
19.
    2011 Mobile Barcode Promotion. The 2011 Mobile Barcode Promotions 
offered a 3-percent discount for mailpieces that included a mobile

[[Page 33826]]

barcode.\28\ The presence of a mobile barcode is a characteristic of 
the mail to which the discounted rate applied. Thus, the rate would be 
considered a rate of general applicability. The Postal Service did not 
include the 2011 Mobile Barcode Promotion in the calculation of the 
percentage change in rates and the Commission found such treatment 
reasonable given the uncertainty over the number of mailers that would 
use the discount. Id. at 9. However, the Commission noted in that 
docket that the 2011 Mobile Barcode Promotion was generally applicable. 
Id.
---------------------------------------------------------------------------

    \28\ Docket No. R2011-5, Order Approving Market Dominant Price 
Adjustment, May 17, 2011, at 3 (Order No. 731).
---------------------------------------------------------------------------

    2012 Mobile Barcode Promotion and Mobile Shopping Promotion. The 
2012 Mobile Barcode Promotion in Docket No. R2012-6 and the Mobile 
Shopping Promotion in Docket No. R2012-9 offered a 2-percent discount 
to any mailpieces that included a mobile barcode.\29\ The mobile 
barcode was required to direct the recipient to a Web site that would 
allow the recipient to purchase a product. Id. The presence of a mobile 
barcode is a characteristic of the mail to which the rate applies. 
Thus, these rates would be considered rates of general applicability. 
The Postal Service did not include either of these promotions in the 
calculation of the percentage change in rates and the Commission found 
such treatment reasonable given the uncertainty over the number of 
mailers that would use the discount. Order No. 1296 at 6-7; Order No. 
1424 at 7. However, the Commission noted that both rates were generally 
applicable. Id.
---------------------------------------------------------------------------

    \29\ Docket No. R2012-6, Order Approving Market Dominant Price 
Adjustment, March 26, 2012, at 3 (Order No. 1296); Docket No. R2012-
9, Order Approving Market Dominant Price Adjustment, August 7, 2012, 
at 3 (Order No. 1424).
---------------------------------------------------------------------------

    Mail to Mobile Promotions. In Docket No. R2013-1, the Postal 
Service combined the Mobile-Coupon/Click-to-Call Promotion, Emerging 
Technology Promotion, and Mobile Buy-It-Now Promotion into a category 
called Mail to Mobile Promotions.\30\ The Mail to Mobile Promotions 
sought to enhance the long term value of mail through barcodes and 
other innovative technologies that foster Web site interactions. Id. 
Mailpieces that included a specified type of barcode or technology 
received a 2-percent discount. Id. The presence of mobile barcodes and 
other technologies are characteristics of the mail to which the rate 
applies. Thus, these promotions would be considered rates of general 
applicability. In Order No. 1541, the Commission approved the Postal 
Service's request to include these promotions in the calculation of the 
percentage change in rates. Id. at 17. Billing determinants from the 
2011 Barcode Promotion were used as a proxy for the Mail to Mobile 
category when calculating price cap adjustments. Id.
---------------------------------------------------------------------------

    \30\ Docket No. R2013-1, Order on Price Adjustments for Market 
Dominant Products and Related Mail Classification Changes, November 
16, 2012, at 14 (Order No 1541).
---------------------------------------------------------------------------

    Picture Permit Promotion and Product Samples Promotion. The Picture 
Permit Promotion temporarily eliminated the Picture Permit charge for 
registered mailers that included a logo, trademark, or brand in the 
indicia of a mailpiece.\31\ Any mailer could register for the promotion 
and participants were encouraged to register in advance. Id. The 
Product Samples Promotion provided a 5-percent discount for any package 
that included product samples. Id. at 12. Both promotions offered a 
discount to any mailer that mailed pieces with the appropriate 
characteristics. Thus, the rates would be considered rates of general 
applicability. The requirement to register in advance would not prevent 
these promotions from being considered rates of general applicability. 
Registration was not limited to particular mailers; it was merely an 
administrative requirement. The Postal Service chose not to include 
these promotions in the calculation of the percentage change in rates.
---------------------------------------------------------------------------

    \31\ Docket No. R2013-1, United States Postal Service Notice of 
Market-Dominant Price Adjustment, October 11, 2012, Attachment D at 
10 (Docket No. R2013-1 Notice).
---------------------------------------------------------------------------

    Branded Color Mobile Technology Promotion and Mail and Digital 
Personalization Promotion. The Branded Color Mobile Technology 
Promotion and Mail and Digital Personalization Promotion were 
categorized as continuations of previous technology promotions 
(Continuing Promotions). Order No. 1890 at 58. The Branded Color Mobile 
Technology Promotion provides a 2-percent discount for any mailpiece 
that includes a multi-color mobile barcode inside or on the mailpiece. 
Id. at 53. The Mail and Digital Personalization Promotion provides a 2-
percent discount for any mailpiece that includes a personalized or 
customized Web page link and uses a mailpiece customized to the 
recipient. Id. at 54. Both promotions offer a discount for any mail 
with the appropriate mailpiece characteristics. Thus, the promotional 
rates would be considered rates of general applicability. The 
Commission stated that these promotions are not limited-availability 
promotions. Id. at 59. The combined billing determinants from the 
Direct Mail Mobile Coupon and Click-to-Call Promotion, the Emerging 
Technology Promotion, and the Mobile Buy-It-Now Promotion in Docket No. 
R2013-1 are used as a proxy for these Continuing Promotions. Id. at 60. 
The Commission further explained that the promotions were included in 
the calculation of the percentage change in rates in order to ensure 
``that the Postal Service will be accountable for the price cap effects 
of terminating these promotions in the future.'' Id. at 59.
    Earned Value Reply Mail Promotion. The Earned Value Reply Promotion 
provides any mailer sending First-Class Mail Business Reply and 
Courtesy Reply Mail enclosures a 2-cent credit for each mailpiece 
returned during the promotion period. Id. at 55. The promotions are 
available uniformly to any mailer sending a First-Class Mail Business 
Reply or Courtesy Reply Mail enclosure. Thus, this aspect of the 
promotion would be considered a rate of general applicability.
    However, the Postal Service also offered a 3-cent discount to 
mailers that participated in the 2013 Earned Value Reply Mail Promotion 
and had higher total return counts in 2014 compared to 2013. Id. The 3-
cent discount depends on volume in a previous year, which is not a 
characteristic of the mail to which the rate applies. Thus, the 3-cent 
discount portion of the promotion would not qualify as a rate of 
general applicability. Billing determinants from the 2013 Earned Value 
Reply Mail promotion were used as a proxy for this promotion. Id. at 
55-56. The Postal Service calculated an average of the 2-cent and 3-
cent discounts for the promotional rate, but was directed by the 
Commission to use only the 2-cent rate in order to avoid speculation 
about participation in the program. Id. at 61.
    Emerging Technology Featuring Near Field Communication (NFC) 
Promotion and Mail Drives Mobile Commerce Promotion. The Emerging 
Technology Featuring NFC Promotion and Mail Drives Mobile Commerce 
Promotion (Continuing Promotions) are continuations of similar 
promotions that encourage the use of technology and barcodes to enhance 
the value of mail. Id. at 76. The Emerging Technology Featuring NFC 
Promotion provides a 2-percent discount on mailpieces that incorporate 
a near field communication or similar technology.\32\ The Mail Drives 
Mobile Commerce Promotion provides a

[[Page 33827]]

2-percent discount to any mailpiece that includes a mobile barcode that 
directs a recipient to a shopping Web site accompanied by instructions. 
Id. at 8. Both promotions offered a discount to any mail meeting the 
appropriate mailpiece characteristics. Thus, the rates would be 
considered rates of general applicability. The Postal Service used the 
Holiday Mobile Shopping Promotion, the 2013 Emerging Technology 
Promotion, and the Mobile Coupon Click to Call Promotion as proxies for 
these Continuing Promotions. Order No. 1890 at 76. The Commission 
allowed the Continuing Promotions to be included in the calculation of 
the percentage change in rates after correcting for the termination of 
the Emerging Technology Promotion for First-Class Mail. Id. at 61.
---------------------------------------------------------------------------

    \32\ Docket No. R2013-10, United States Postal Service Notice of 
Market-Dominant Price Adjustment, September 26, 2013, Attachment D 
at 7.
---------------------------------------------------------------------------

    EDDM Coupon Program. The EDDM Coupon Program provides new EDDM 
customers with a coupon. Id. at 75. The program is limited by a 
redemption cap set at $3 million. Id. at 75-76. Eligibility for the 
program is restricted to new customers who receive the coupon on a 
first-come, first-served basis. Existing customers would not be 
eligible for the coupon. Like the Technology Credit Promotion, 
eligibility for the coupon is based on the mailer's behavior during the 
period before the promotion begins, which is not a characteristic of 
the mail to which the rate applies. Thus, the rate would not be 
considered a rate of general applicability. The Postal Service did not 
include the program in the price cap calculation. Id. at 76.
    Premium Advertising Promotion and High Density and Saturation 
Incentive. The Premium Advertising Promotion provided a 15-percent 
discount to eligible mailers for mailing pure marketing and advertising 
content. Id. at 55. Eligibility was restricted to mailers who generated 
a certain amount of revenue in the previous year. Id. The High Density 
and Saturation Incentive provided mailers with a rebate if they 
increased mail volume over a customer-specific threshold. Id. at 75. 
Both promotions are based on previous mailings and volumes and thus 
would not be considered rates of general applicability.
    Color Print in First-Class Mail Transactions Promotion. The Color 
Print in First-Class Mail Transactions Promotion provides a 2-percent 
discount to any mailpiece that includes dynamic variable color 
messaging on financial bills and statements and complies with the Full 
Service IMb requirements. Id. at 54. The color messaging and Full 
Service IMb compliance are characteristics of the mail to which the 
rate applies. Thus, the rates would be considered rates of general 
applicability. The Postal Service chose not to include the promotion in 
the calculation of the percentage change in rates. Id.

F. Incentives and Discounts That Are Not Rates of General Applicability 
Will Be Treated Like Negotiated Service Agreements

    The Postal Service objects to proposed Sec.  3010.24, which would 
require that discounts and incentives that are not rates of general 
applicability be treated like negotiated service agreements for 
purposes of calculating the percentage change in rates. Postal Service 
Comments at 5-6. It argues that the proposed section would limit ``how 
the Postal Service could use price cap authority generated by reducing 
rates for the many mailers who would be eligible to participate in rate 
incentives not of general applicability.'' Id. at 6. It asserts that 
the proposed section would prevent the Postal Service from using all of 
its pricing authority and discourage it from ``developing targeted rate 
incentives that could more effectively drive beneficial mailer 
behaviors.'' Id.
    PostCom, Pitney Bowes, the Joint Commenters, NPPC, the Public 
Representative, and Valpak support proposed Sec.  3010.24. PostCom 
believes that the proposed section appropriately prevents price cap 
authority from being created when an incentive rate is available only 
to a subset of mailers. PostCom Comments at 3. Pitney Bowes asserts 
that the proposed section addresses its concern that it would be 
inequitable or unjust to allow non-participating mailers to pay higher 
rates as a result of a temporary promotion. Pitney Bowes Comments at 4. 
The Joint Commenters characterize the proposed rule as reasonable and 
equitable. Joint Commenters Comments at 2. NPPC finds the proposed 
section proper because a rate that is not a rate of general 
applicability allows the Postal Service ``to discriminate in favor of a 
limited number of mailers by offering to them a reduced rate, and to 
control the access to that rate.'' NPPC Comments at 2. The Public 
Representative also posits a ``discriminatory impact of increasing 
price cap authority for mailers ineligible for incentive or promotional 
rates.'' PR Reply Comments at 2. Valpak argues that the Postal 
Service's opposition to the proposed section disregards 39 U.S.C. 
101(d), which requires that postal rates apportion costs of postal 
operations to all users of the mail on a fair and equitable basis. 
Valpak Reply Comments at 3.
    Pitney Bowes and the Joint Commenters point out the similarities 
between negotiated service agreements and incentives and discounts that 
are not rates of general applicability, including the limited number of 
participants and the shared purpose of increasing revenue and 
contribution. Pitney Bowes Comments at 3; Joint Commenters Comments at 
2.
    The Commission declines to modify proposed Sec.  3010.24. 
Subjecting mailers to the risk that the Postal Service may increase 
rates as a result of additional cap room created by a promotion or 
incentive that is not generally applicable is inappropriate. In its 
annual price adjustment filings, the Postal Service is free, within the 
confines of the price cap, to change rates of general applicability as 
it sees fit. To that end, the Postal Service routinely offers discounts 
and incentives that are targeted at a certain type of mail but 
available to all mailers.\33\ While it may be true that, in practice, 
some mailers will not choose to take advantage of such targeted 
discounts or incentives, the decision lies solely with the mailer.
---------------------------------------------------------------------------

    \33\ See, e.g., Order No. 1424 at 3-4 (Mobile Shopping 
Promotion); Docket No. R2013-1 Notice, Attachment D at 12 (Product 
Samples Promotion); Order No. 1890 at 54 (Color Print in First-Class 
Mail Transactions Promotion).
---------------------------------------------------------------------------

    In contrast, a discount or incentive that is not a rate of general 
applicability precludes certain mailers from participating, whether 
they want to or not. The Commission does not wish to prevent discounts 
or incentives that target certain types of mail from being included in 
the calculation of the percentage change in rates. It does, however, 
wish to prevent discounts or incentives that are limited to certain 
mailers from being included in the calculation of the percentage change 
in rates. For instance, the Postal Service chose to target First-Class 
Mail Business Reply and Courtesy Reply Mail in its Earned Value Reply 
Mail Promotion. Order No. 1890 at 55. Those promotional rates were 
included in the calculation of the percentage change in rates. Id. at 
61. The Technology Credit Promotion, on the other hand, was limited to 
mailers who had sent a certain volume from the previous fiscal year. 
Order No. 1743 at 15. The Commission excluded the Technology Credit 
Promotion from the calculation of the percentage change in rates. Id. 
at 17.

V. Adjustment for the Deletion of Rate Cells When No Alternate Rate 
Cell Is Available

    Under the Commission's existing rules, when the Postal Service 
proposes a classification change that introduces, deletes, or redefines 
a rate cell, it must make reasonable adjustments to its

[[Page 33828]]

billing determinants. 39 CFR 3010.23(d). Proposed Sec.  3010.23(d)(4) 
specifies that, in the case of a classification change that deletes a 
rate cell for which no alternate rate cell is available, the billing 
determinants should be adjusted to zero. If the Postal Service does not 
adjust the billing determinants to zero in this circumstance, it must 
explain how it proposes to treat the rate cell.
    Pitney Bowes asserts that proposed Sec.  3010.23(d)(4) is 
``intended to address adjustments for deleted rate cells that result 
from the transfer of a product to the competitive products category.'' 
Pitney Bowes Comments at 2. It suggests that the Commission modify the 
proposed rule to explicitly refer to product transfers, ``to ensure it 
is applied only in the intended circumstance. . . .'' Id. It proposes 
language to accomplish this goal. Id. at 3. The Joint Commenters also 
request that the Commission modify the proposed section to ``make clear 
that this rule only applies to situations in which a rate cell is 
deleted because of a product transfer, but for no other reason.'' Joint 
Commenters Comments at 2-3 (emphasis in original). MPA supports the 
approach proposed by Pitney Bowes and the Joint Commenters. MPA Reply 
Comments at 2.
    The Public Representative argues that proposed Sec.  3010.23(d)(4) 
should not be limited to product transfers. PR Reply Comments at 6. He 
points out that a rate cell can be deleted ``for any one of several 
reasons apart from product transfers.'' Id.
    NPPC and PostCom do not express an opinion on whether the 
Commission should limit the application of proposed Sec.  3010.23(d)(4) 
to product transfers. NPPC Comments at 6; PostCom Reply Comments at 4-
5. Rather, they ask the Commission to state that proposed Sec.  
3010.23(d)(4) would not apply to the Full Service IMb change described 
in Order No. 1890. Id. In that docket, the Postal Service proposed a 
classification change that resulted in the modification or deletion of 
a rate cell. Order No. 1890 at 15. However, NPPC and PostCom point out 
that the Commission did not require the Postal Service to adjust the 
billing determinants to zero because alternate rate cells were 
available. NPPC Comments at 6; PostCom Reply Comments at 4-5.
    Pitney Bowes and MPA also seek reassurance that proposed Sec.  
3010.23(d)(4) would not have applied in Docket No. R2013-10, although 
they do so on the basis of their understanding that proposed Sec.  
3010.23(d)(4) applies only to product transfers. See Pitney Bowes Reply 
Comments at 2; MPA Reply Comments at 2. The Public Representative 
believes that Docket No. R2013-10 presented an unusual situation and 
that the question of how to adjust billing determinants is best handled 
on a case-by-case basis. PR Reply Comments at 6-7.
    Although it supports proposed Sec.  3010.23(d)(4) in the context of 
the Parcel Post example given in Order No. 1786, the Postal Service 
``is concerned about what the Commission means by 'deletion of a rate 
cell.' '' Postal Service Comments at 7. It believes that in 
circumstances like those in Docket No. R2013-10, it would not be clear 
when the proposed section would apply because it was not clear whether 
a rate cell was redefined or deleted. Id. at 7-8. It asserts that a 
case on appeal to the D.C. Circuit ``includes the issue of whether a 
mail preparation requirement can result in the deletion of a rate 
cell'' and requests that the Commission delay the implementation of 
proposed Sec.  3010.23(d)(4) until the D.C. Circuit issues a decision 
in that case. Id. at 8. PostCom, Pitney Bowes, the Public 
Representative, and MPA do not support delaying the implementation of 
the proposed rules. PostCom Reply Comments at 5; Pitney Bowes Reply 
Comments at 2; PR Reply Comments at 7; MPA Reply Comments at 2.
    The Commission declines to limit the application of proposed Sec.  
3010.23(d)(4) to deletions resulting from transfers of products to the 
competitive product list. The Parcel Post case cited in the notice of 
proposed rulemaking was an example of the Commission requiring the 
Postal Service to adjust billing determinants to zero as a result of a 
classification change that led to the deletion of a rate cell. However, 
transfers of products from the market dominant product list to the 
competitive product list are not the only classification changes that 
could result in the deletion of a rate cell. For example, the Postal 
Service could remove a product from the market dominant product list 
without moving it to the competitive product list. See 39 CFR 3020.30. 
The Postal Service could also update size or weight limitations in a 
manner that resulted in the deletion of a rate cell (for example, by 
reducing the maximum weight of Bound Printed Matter Parcels from 15 
pounds to 10 pounds). See 39 CFR 3020.111.
    In addition, the Commission does not intend to require the Postal 
Service to adjust billing determinants to zero whenever it transfers a 
product from the market dominant product list to the competitive 
product list, as described in the language proposed by Pitney Bowes. If 
alternate rate cells are available for a rate cell deleted due to the 
transfer of a product to the competitive product list, the Commission 
expects the Postal Service to use those alternate rate cells to make 
reasonable adjustments to its billing determinants instead of adjusting 
the billing determinants to zero. See proposed Sec.  3010.23(d)(2).
    In order for proposed Sec.  3010.23(d)(4) to apply to a 
classification change, the classification change must meet two 
criteria. First, it must result in the deletion of a rate cell. Second, 
there must be no alternate rate cells available. In the case of the 
Full Service IMb change described in Order No. 1890, alternate rate 
cells were available and the Postal Service could make reasonable 
adjustments to the billing determinants to take into account the 
effects of the classification change. Because alternate rate cells were 
available, proposed Sec.  3010.23(d)(4) would not have applied. This is 
true regardless of whether the Full Service IMb change is characterized 
as resulting in the redefinition of rate cells or the deletion of rate 
cells. Consequently, the Commission declines to delay the 
implementation of proposed Sec.  3010.23(d)(4) pending the appeal of 
Order No. 1890.
    Given the issues raised by commenters, the Commission finds it 
would be useful to modify the heading of proposed Sec.  3010.23(d)(4) 
to specify that it describes how adjustments to billing determinants 
are to be made in the case of the deletion of a rate cell when an 
alternate rate cell is not available. It makes no other modifications 
to proposed Sec.  3010.23(d)(4).

VI. De Minimis Rate Increases

    The Postal Service requests that the Commission raise the proposed 
threshold for de minimis rate increases under proposed Sec.  3010.30 
from 0.001 percent to ``at least 0.05 percent.'' Postal Service 
Comments at 8-9, n.18. It argues that the 0.001 percent threshold is 
too low to afford it meaningful pricing flexibility. Id. at 9. It 
asserts that a threshold of 0.001 percent would not be sufficient to 
correct the nonprofit passthrough for Standard Mail 5-Digit Automation 
Flats, as directed by the Commission in Order No. 1890, or to correct 
errors discovered after the close of a rate case. Id. The Public 
Representative and Pitney Bowes support raising the de minimis 
threshold. PR Reply Comments at 10; Pitney Bowes Reply Comments at 3. 
The Public Representative supports raising the threshold to an amount 
``as large as practical.'' PR Reply Comments at 10. He supports a limit 
of 0.05 percent ``if the rate adjustment is for the correction

[[Page 33829]]

of calculation errors or pursuant to Commission directive.'' Id. Pitney 
Bowes supports a ``modest increase'' in the threshold. Pitney Bowes 
Reply Comments at 3. PostCom opposes the Postal Service's proposal, 
asserting that the 0.001 percent limitation is necessary to ensure that 
the Postal Service does not circumvent the annual limitation. PostCom 
Reply Comments at 5.
    Congress directed the Commission to establish a system for 
regulating rates and classes for market dominant products that includes 
an annual limitation on the percentage change in rates equal to the 
change in the Consumer Price Index for All Urban Consumers [CPI-U] 
unadjusted for seasonal variation over the most recent available 12-
month period. . . . 39 U.S.C. 3622(d)(1)(A). The Bureau of Labor 
Statistics (BLS) reports the CPI-U index to three digits.\34\ Because 
Congress linked the calculation of the annual limitation to the change 
in the CPI-U, and the CPI-U is calculated to three digits, it is 
reasonable to conclude that Congress did not intend to limit the Postal 
Service's ability to make rate increases of less than 0.001 percent.
---------------------------------------------------------------------------

    \34\ Order No. 1879 at 13; Docket No. RM2009-8, Notice of 
Proposed Rulemaking to Amend the Cap Calculation in the System of 
Ratemaking, July 10, 2009, at 2 (Order No. 246); Docket No. RM2009-
8, Order Amending the Cap Calculation in the System of Ratemaking, 
September 22, 2009, at 1 (Order No. 303).
---------------------------------------------------------------------------

    Although the Postal Service and the Public Representative describe 
circumstances when a higher de minimis threshold may have some appeal, 
they have not articulated a compelling basis for establishing the 
threshold at a level that is greater than the smallest change in CPI-U 
that can be calculated using BLS data. Consequently, the Commission 
makes no change to the de minimis threshold under proposed Sec.  
3010.30.

VII. Miscellaneous Issues

A. Seasonal and Temporary Rates Will Continue To Be Identified and 
Treated as Rate Cells Separate and Distinct From Permanent Rates When 
Calculating the Percentage Change in Rates

    NPPC requests that the Commission confirm its understanding that 
seasonal and temporary rates will continue to be identified and treated 
as rate cells separate and distinct from permanent rates when 
calculating the percentage change in rates. NPPC Comments at 7. NPPC's 
understanding is correct. Proposed Sec.  3010.23(a)(2) continues the 
Commission's practice of assigning seasonal and temporary rates to 
separate rate cells. Under the proposed rules, the ``current rate'' for 
a seasonal or temporary rate would be the most recent rate in effect 
for the rate cell, regardless of whether the seasonal or temporary rate 
is available at the time the Postal Service files the notice of rate 
adjustment. Proposed Sec.  3010.23(a)(1)(ii). For a seasonal or 
temporary promotion, the most recent rate in effect for the rate cell 
is the rate under the seasonal or temporary promotion. For example, if 
the Postal Service offers a 2-cent Mother's Day discount for 1-ounce 
stamped mail sent during the month of May 2014, there will be two 
separate rate cells for 1-ounce stamped mail: One rate cell for volume 
sent at the normal, undiscounted rate and a separate rate cell for 
volume sent at the Mother's Day rate. If the Postal Service files a 
notice of Type 1-A rate adjustment in October 2014, the rate for the 
undiscounted rate cell will be 49 cents (the undiscounted rate in 
effect in October 2014) and the rate for the Mother's Day rate cell 
will be 47 cents (the most recent rate in effect for the Mother's Day 
rate cell).

B. Unused Rate Adjustment Authority Generated By a Mid-Year Promotion 
or Incentive Program May Be Applied to Any Rate in the Same Class

    PostCom argues that any additional unused rate adjustment authority 
generated by a mid-year promotion or rate incentive program should be 
applied only to the products that were eligible for the promotion or 
incentive, to ensure that promotional and incentive pricing is non-
discriminatory. PostCom Comments at 7; PostCom Reply Comments at 4. It 
asserts that the Commission recognized the principle that rate 
adjustment authority should be tied to individual products in Order No. 
1541, which it contends allowed the Postal Service ``to account for 
revenue forgone from promotions only `so long as volumes are properly 
ascribed to the appropriate products.''' PostCom Comments at 7; PostCom 
Reply Comments at 4 (both citing Order No. 1541 at 18).
    The Postal Service opposes this proposal. Postal Service Reply 
Comments at 4. It argues that 39 U.S.C. 3622(d)(2)(A) makes clear that 
the annual limitation on the percentage change in rates is calculated 
at the class level, not the product level. Id. It cites two dockets 
where the Commission allowed unused rate adjustment authority to be 
generated for the whole Special Services class as a result of rate 
reductions applicable only to specific products. Id. at 5 (citing Order 
No. 1756 at 3, 8; Order No. 987 at 44-47). It asserts that the language 
from Order No. 1541 cited by PostCom relates to how volumes should be 
treated for purposes of calculating the percentage change in rates, not 
how the Postal Service can apply unused rate adjustment authority.
    The Postal Service is correct. Section 3622(d)(2)(A) of title 39, 
United States Code, expressly applies the annual limitation on the 
percentage change in rates at the class level. Section 3622(d)(2)(C) 
limits the maximum amount of unused rate adjustment authority the 
Postal Service can exercise in any one year ``for any class or 
service.'' Furthermore, 39 CFR 3010.28 limits the maximum amount of 
unused rate adjustment authority that may be used to make a Type 1-B 
rate adjustment ``for any class.'' In Order No. 1786, the Commission 
declined to apply the annual limitation ``at anything other than the 
class level, consistent with the clear language of 39 U.S.C. 
3622(d)(2)(A).'' Order No. 1786 at 8. In that same order, the 
Commission specified that unused rate adjustment authority is also 
calculated ``for each class.'' Id. at 20.
    The language from Order No. 1541 cited by PostCom relates to how 
the Postal Service accounted for volumes relating to First-Class Mail 
promotions. There, the Commission determined that the Postal Service 
could account for the promotions by applying a separate adjustment when 
calculating the percentage change in rates. It did not speak to the 
appropriate use of unused rate adjustment authority in subsequent rate 
cases. The Commission declines to make the change proposed by PostCom.

C. The Postal Service Will Not Be Required To Reconcile Volume Sent at 
Promotional Rates With Unused Rate Adjustment Authority Claimed in Its 
Next Scheduled Rate Adjustment

    PostCom requests that the Commission require the Postal Service to 
reconcile volume sent at promotional rates with pricing authority 
claimed on its next scheduled rate adjustment. PostCom Comments at 7-9. 
It refers to its proposal as a ``true-up'' requirement. Id. PostCom 
reasons that the Postal Service ``should only be permitted to account 
for revenue foregone from promotional prices if it in fact foregoes 
that revenue.'' Id. at 8. It again cites Order No. 1541, this time for 
the proposition that if volumes for promotional rates are overstated, 
the rate authority created by the promotion would be overstated as 
well. Id. (citing Order No. 1541 at 17). It asserts that its proposal 
would ensure the accuracy of the amount of any unused rate adjustment 
authority created by promotions. Id. at 8-9. The Public Representative 
supports this proposal,

[[Page 33830]]

opining that it would be ``useful and not an onerous requirement for 
the Postal Service.'' PR Reply Comments at 8. He notes that the 
proposal could require revisions to proposed Sec.  3010.23(d) but does 
not specify what those revisions would be. Id.
    The Postal Service objects to the proposal. Postal Service Reply 
Comments at 6-8. It views the proposal as an attempt to treat unused 
rate adjustment authority generated as a result of a rate incentive 
``differently from any other pricing authority available to the Postal 
Service.'' Id. at 7. It argues that if it is required to reconcile 
volumes sent at promotional rates, it should also be permitted to 
reconcile volumes sent at non-promotional rates, for which it was 
required to use historical billing determinants that may have 
underestimated volumes actually sent in subsequent years. Id.
    The Commission will not require the Postal Service to reconcile 
volumes sent at promotional rates as proposed by PostCom. As the 
Commission explained at length in Order No. 1786, the percentage change 
in rates is calculated by using a fixed set of historical billing 
determinants to weight current rates and proposed rates. Order No. 1786 
at 14-20. The true-up requirement proposed by PostCom is inconsistent 
with the current backward-weighted index used to calculate price 
changes. In Docket No. RM2013-2, the Commission rejected requests to 
allow the Postal Service to use anticipated changes in mailer behavior 
to weight proposed rates, on the basis that they were inconsistent with 
the use of a fixed rate index of prices, where the prior year's billing 
determinants serve as the weight for each rate cell.
    The Commission finds no rational basis for requiring the Postal 
Service to reconcile volumes sent at promotional rates without also 
allowing it to reconcile volumes sent at non-promotional rates. If the 
Postal Service would be at risk of a reduction in unused rate 
adjustment authority if volumes sent at promotional rates in a 
particular year are lower than those sent at promotional rates during 
the previous year, it should also be eligible for an increase in unused 
rate adjustment authority if volumes sent at non-promotional rates 
during a particular year exceed the volumes sent at non-promotional 
rates during the previous year.
    However, such an approach runs the risk of creating substantial 
uncertainty about the amount of unused rate adjustment authority 
available to the Postal Service. This level of uncertainty is 
inconsistent with 39 U.S.C. 3622(b)(2), which requires that the system 
for regulating rates for market dominant classes of mail be designed 
to, among other things, ``create predictability and stability in 
rates.'' Additionally, the Commission does not have sufficient data at 
this time to determine that a true-up requirement would result in a 
more accurate calculation of the percentage change in rates. Each year 
in its Annual Compliance Determination (ACD), the Commission undertakes 
an empirical analysis of the price cap. This review is designed to 
monitor the effectiveness of the price cap rules, particularly with 
respect to whether a backward-weighted index accurately reflects the 
actual change in rates. In carrying out its review, the Commission 
compares the percentage change in rates for each class of mail when 
calculated using a backward-weighted (Laspeyres) index with the 
percentage change in rates calculated using a forward-weighted 
(Paasche) index. In the two most recent ACDs, for FY 2012 and FY 2013, 
the Commission noted the difficulty of using a forward-weighted index 
to take into account major classification changes, rates that are in 
effect for only part of a year, and rate increases that are more than 
12 months apart.\35\
---------------------------------------------------------------------------

    \35\ Docket No. ACR2012, Fiscal Year 2012 Annual Compliance 
Determination Report, March 28, 2013 (revised May 7, 2013), at 181; 
Docket No. ACR2013, Fiscal Year 2013 Annual Compliance Determination 
Report, March 27, 2014, at 133-34.
---------------------------------------------------------------------------

    The Commission declines to adopt PostCom's proposal.

D. The Commission Will Not Require the Postal Service To Show Good 
Cause for Including Temporary and Promotional Rates in the Calculation 
of the Percentage Change in Rates

    PostCom requests that the Commission ``establish a default rule 
requiring the Postal Service to exclude temporary promotional rates and 
incentive programs from its percentage change in rates calculations 
unless it demonstrates good cause to account for promotional and 
incentive programs in another manner.'' PostCom Comments at 9. It 
argues that such a rule is necessary because additional rate adjustment 
authority resulting from a promotion or incentive becomes a permanent 
part of the Commission's future calculations of the percentage change 
in rates. Id. at 8-9.
    The Public Representative opposes this proposal, arguing that it 
would create controversy about the adequacy of the Postal Service's 
showing of good cause and inappropriately place the burden of 
justification on the Postal Service. PR Reply Comments at 9.
    PostCom's proposal is inconsistent with past Commission treatment 
of promotional rates and incentive programs. The Commission has 
repeatedly allowed the Postal Service to include temporary promotional 
rates and incentive programs in its calculation of the percentage 
change in rates, so long as the rates were in the form of a discount 
(or could easily be translated into a discount), had sufficient billing 
determinants available, and were rates of general applicability. As the 
Commission explained in the notice of proposed rulemaking, this 
approach ensures that non-participating mailers are not harmed by 
promotions and incentives that are not rates of general applicability 
while preserving the Postal Service's pricing flexibility. Order No. 
1879 at 10-12. For instance, in Docket No. R2013-10, the Commission 
included rates for the Branded Color Mobile Technology Promotion, the 
Mail and Digital Personalization Promotion, and the Earned Value Reply 
Mail Promotion in its calculation of the percentage change in rates. 
Order No. 1890 at 41. In Docket No. R2013-1, the Commission also 
allowed promotional rates for First-Class Mail to be included in the 
calculation of the percentage change in rates, provided that volumes 
associated with the promotion were ascribed to the correct rate cells 
(i.e., the separate rate cells for the promotional rates). Order No. 
1541 at 17-18.

E. Technical Amendment to Proposed Sec.  3010.30

    The Public Representative suggests that proposed Sec.  3010.30 be 
modified to include a provision for de minimis rate adjustments that 
follow Type 3 rate adjustments. PR Reply Comments at 10. The Commission 
agrees that it would be reasonable to modify paragraphs (a)(2) and (e) 
of proposed Sec.  3010.30 to ensure that, for an affected class, the 
sum of all rate increases included in de minimis rate adjustments since 
the most recent Type 1-A, Type 1-B, or Type 3 rate adjustment that was 
not a de minimis rate increase does not exceed 0.001 percent. This 
modification will ensure that the Postal Service accurately accounts 
for de minimis rate adjustments that occur in between omnibus rate 
cases. Because the Commission's rules do not require that the annual 
limitation on the percentage change in rates or the percentage change 
in rates be calculated in connection with a Type 3 rate adjustment, 
there is no need to modify proposed Sec.  3010.30(d).

[[Page 33831]]

VIII. Explanation of Final Rules

    Following is a section-by-section analysis of the final rules.
    Section 3010.1 adds a definition of the term ``rate of general 
applicability.'' It also includes definitions and amendments to 
existing definitions relating to Type 1-C rate adjustments and de 
minimis rate adjustments. Finally, it specifies that the definitions 
apply to the entire part, not just subpart A.
    Section 3010.2 is revised to correct a typographical error.
    Section 3010.3(a) specifies that Type 1-C rate adjustments are 
consistent with 39 U.S.C. 3622.
    Section 3010.3(b)(2) specifies that a Type 1-C rate adjustment may 
not be combined with any other type of rate adjustment.
    Section 3010.4(a) eliminates a superfluous word.
    Section 3010.5 specifies that a Type 1-B rate adjustment is based 
on both the annual limitation and unused rate adjustment authority.
    Previous Sec. Sec.  3010.6, 3010.7, and 3010.8 are redesignated as 
Sec. Sec.  3010.7, 3010.8, and 3010.9, respectively.
    Section 3010.6, as so redesignated, contains a general description 
of a Type 1-C rate adjustment.
    Section 3010.10(a) includes a conforming change.
    Section 3010.11 contains conforming changes in the heading and in 
paragraphs (a), (b)(2), (d), and (k).
    Section 3010.12(a) contains a conforming change.
    Section 3010.12(b) specifies the contents of notices that include 
rate incentives and of Type 1-C notices of rate adjustments.
    Section 3010.12(e) contains a conforming change.
    Section 3010.20 contains conforming changes in paragraphs (b) and 
(d).
    Section 3010.20(e) specifies that there is no limit on the amount 
of a rate decrease under a Type 1-C rate adjustment.
    Section 3010.21 contains conforming changes in the heading and in 
paragraph (b).
    Section 3010.22 contains conforming changes in the heading and in 
paragraphs (a) and (b).
    Section 3010.23(a) includes definitions of the terms ``current 
rate,'' ``rate cell,'' and ``rate incentive.''
    Section 3010.23(b)(1) contains a conforming change.
    Section 3010.23(b)(2) provides for the calculation of the 
percentage changes in rates for Type 1-C rate adjustments.
    Section 3010.23(c) contains conforming changes.
    Section 3010.23(d) changes the format, but not the content, of 
existing Sec.  3010.23(d) and adds a provision specifying the treatment 
of deleted rate cells when no alternate rate cells are available.
    Section 3010.23(e) provides for the treatment of rate incentives.
    Section 3010.24 specifies that rate incentives that are not rates 
of general applicability will be treated in the same manner as 
negotiated service agreements.
    Section 3010.26 contains conforming changes.
    Sections 3010.27 and 3010.28 are redesignated as Sec. Sec.  3010.28 
and 3010.29, respectively.
    New Sec.  3010.27 describes how unused rate adjustment authority is 
calculated for Type 1-C rate adjustments.
    Section 3010.30 contains the requirements for de minimis rate 
increases.

VII. Ordering Paragraphs

    It is ordered:
    1. Part 3010 of title 39, Code of Federal Regulations, is amended 
as set forth below the signature of this Order, effective 30 days after 
publication in the Federal Register.
    2. The Secretary shall arrange for publication of this order in the 
Federal Register.

List of Subjects in 39 CFR Part 3010

    Administrative practice and procedure; Postal Service.

    For the reasons discussed in the preamble, the Commission amends 
chapter III of title 39 of the Code of Federal Regulations as follows:

PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS

0
1. The authority citation for part 3010 continues to read as follows:

    Authority:  39 U.S.C. 503; 3622.


0
2. Revise Sec.  3010.1 to read as follows:


Sec.  3010.1  Definitions.

    (a) The definitions in paragraphs (b) through (m) of this section 
apply in this part.
    (b) Annual limitation means:
    (1) In the case of a notice of a Type 1-A or Type 1-B rate 
adjustment filed 12 or more months after the last Type 1-A or Type 1-B 
notice of rate adjustment, the full year limitation on the size of rate 
adjustments calculated pursuant to Sec.  3010.21;
    (2) In the case of a notice of a Type 1-A or Type 1-B rate 
adjustment filed less than 12 months after the last Type 1-A or Type 1-
B notice of rate adjustment, the partial year limitation on the size of 
rate adjustments calculated pursuant to Sec.  3010.22; and
    (3) In the case of a notice of a Type 1-C rate adjustment, the 
annual limitation calculated pursuant to Sec.  3010.21 or Sec.  
3010.22, as applicable, for the most recent notice of a Type 1-A or 
Type 1-B rate adjustment.
    (c) Class means a class of market dominant postal products.
    (d) De minimis rate increase means a rate adjustment described in 
Sec.  3010.30.
    (e) Maximum rate adjustment means the maximum rate adjustment that 
the Postal Service may make for a class pursuant to a notice of Type1-A 
or Type 1-B rate adjustment. The maximum rate adjustment is calculated 
in accordance with Sec.  3010.20.
    (f) Most recent Type 1-A or Type 1-B notice of rate adjustment, 
when used in reference to a notice of rate adjustment for a class, 
means the most recent Type 1-A or Type 1-B notice of rate adjustment 
for that class.
    (g) Rate of general applicability means a rate applicable to all 
mail meeting standards established by the Mail Classification Schedule, 
the Domestic Mail Manual, and the International Mail Manual. A rate is 
not a rate of general applicability if eligibility for the rate is 
dependent on factors other than the characteristics of the mail to 
which the rate applies. A rate is not a rate of general applicability 
if it benefits a single mailer. A rate that is only available upon the 
written agreement of both the Postal Service and a mailer, a group of 
mailers, or a foreign postal operator is not a rate of general 
applicability.
    (h) Type 1-A rate adjustment means a rate adjustment described in 
Sec.  3010.4.
    (i) Type 1-B rate adjustment means a rate adjustment described in 
Sec.  3010.5.
    (j) Type 1-C rate adjustment means a rate adjustment described in 
Sec.  3010.6.
    (k) Type 2 rate adjustment means a rate adjustment described in 
Sec.  3010.7.
    (l) Type 3 rate adjustment means a rate adjustment described in 
Sec.  3010.8.
    (m) Unused rate adjustment authority means:
    (1) In the case of a Type 1-A or Type 1-B rate adjustment, the 
percentage calculated pursuant to Sec.  3010.26; and
    (2) In the case of a Type 1-C rate adjustment, the percentage 
calculated pursuant to Sec.  3010.27.

0
3. In Sec.  3010.2, revise the first sentence to read as follows:


Sec.  3010.2  Applicability.

    The rules in this part implement provisions in 39 U.S.C. chapter 
36, subchapter I, establishing rate setting policies and procedures for 
market dominant products. * * *

[[Page 33832]]


0
4. Revise Sec.  3010.3 to read as follows:


Sec.  3010.3  Types of rate adjustments for market dominant products.

    (a) There are five types of rate adjustments for market dominant 
products. A Type 1-A rate adjustment is authorized under 39 U.S.C. 
3622(d)(1)(D). A Type 1-B rate adjustment is authorized under 39 U.S.C. 
3622(d)(2)(C). A Type 1-C rate adjustment is authorized under 39 U.S.C. 
3622. A Type 2 rate adjustment is authorized under 39 U.S.C. 
3622(c)(10). A Type 3 rate adjustment is authorized under 39 U.S.C. 
3622(d)(1)(E).
    (b)(1) The Postal Service may combine Type 1-A, Type 1-B, and Type 
2 rate adjustments for purposes of filing with the Commission.
    (2) The Postal Service may not combine a Type 1-C rate adjustment 
with any other type of rate adjustment. The Postal Service may file a 
Type 1-C rate adjustment and a de minimis rate increase 
contemporaneously, but the Type 1-C rate adjustment and the de minimis 
rate increase must be contained in separate notices of rate adjustment.

0
5. In Sec.  3010.4, revise paragraph (a) to read as follows:


Sec.  3010.4  Type 1-A rate adjustment--in general.

    (a) A Type 1-A rate adjustment is an adjustment based on the annual 
limitation.
* * * * *

0
6. Revise Sec.  3010.5 to reads as follows:


Sec.  3010.5  Type 1-B rate adjustment--in general.

    A Type 1-B rate adjustment is an adjustment that is based on the 
annual limitation and that uses unused rate adjustment authority in 
whole or in part.


Sec. Sec.  3010.6, 3010.7, and 3010.8  [Redesignated as Sec. Sec.  
3010.7, 3010.8, and 3010.9]

0
7. Redesignate Sec. Sec.  3010.6, 3010.7 and 3010.8 as Sec. Sec.  
3010.7, 3010.8 and 3010.9, respectively.

0
8. Add new Sec.  3010.6 to read as follows:


Sec.  3010.6  Type 1-C rate adjustment--in general.

    (a) A Type 1-C rate adjustment is an adjustment to a rate of 
general applicability that contains only a decrease. A rate adjustment 
that includes both an increase and a decrease in rates of general 
applicability is a Type 1-A or Type 1-B rate adjustment; it is not a 
Type 1-C rate adjustment.
    (b)(1) Except as provided in paragraph (b)(2) of this section, a 
Type 1-C rate adjustment may generate unused rate adjustment authority, 
as described in Sec.  3010.27.
    (2) A Type 1-C rate adjustment filed immediately after a Type 3 
rate adjustment (that is, with no intervening Type 1-A or Type 1-B rate 
adjustment) may not generate unused rate adjustment authority.
    (3) The Postal Service may elect not to generate unused rate 
adjustment authority in a Type 1-C rate adjustment.

0
9. In Sec.  3010.10, revise paragraph (a) to read as follows:


Sec.  3010.10  Notice.

    (a) The Postal Service, in every instance in which it determines to 
exercise its statutory authority to make a Type 1-A, Type 1-B, or Type 
1-C rate adjustment for a class shall:
    (1) Provide public notice in a manner reasonably designed to inform 
the mailing community and the general public that it intends to adjust 
rates no later than 45 days prior to the intended implementation date 
of the rate adjustment; and
    (2) Transmit a notice of rate adjustment to the Commission no later 
than 45 days prior to the intended implementation date of the rate 
adjustment.
* * * * *

0
10. In Sec.  3010.11, revise the section heading and paragraphs (a) 
introductory text, (b)(2), (d), and (k) to read as follows:


Sec.  3010.11  Proceedings for Type 1-A, Type 1-B, and Type 1-C rate 
adjustment filings.

    (a) The Commission will establish a docket for each notice of Type 
1-A, Type 1-B, or Type 1-C rate adjustment filing, promptly publish 
notice of the filing in the Federal Register, and post the filing on 
its Web site. The notice shall include:
* * * * *
    (b) * * *
    (2) Whether the planned rate adjustments measured using the formula 
established in Sec.  3010.23(c) are at or below the limitation 
established in Sec.  3010.29.
* * * * *
    (d) Within 14 days of the conclusion of the public comment period 
the Commission will determine, at a minimum, whether the planned rate 
adjustments are consistent with the annual limitation calculated under 
Sec.  3010.21 or Sec.  3010.22, as applicable, the limitation set forth 
in Sec.  3010.29, and 39 U.S.C. 3626, 3627, and 3629 and issue an order 
announcing its findings.
* * * * *
    (k) A Commission finding that a planned Type 1-A, Type 1-B, or Type 
1-C rate adjustment is in compliance with the annual limitation 
calculated under Sec.  3010.21 or Sec.  3010.22, as applicable; the 
limitation set forth in Sec.  3010.29; and 39 U.S.C. 3626, 3627, and 
3629 is decided on the merits. A Commission finding that a planned Type 
1-A, Type 1-B, or Type 1-C rate adjustment does not contravene other 
policies of 39 U.S.C. chapter 36, subchapter I is provisional and 
subject to subsequent review.

0
11. In Sec.  3010.12, revise paragraphs (a) introductory text, (b)(4), 
and (e), redesignate paragraphs (b)(9) and (10) as (b)(11) and (12), 
respectively, and add new paragraphs (b)(9) and (10) to read as 
follows:


Sec.  3010.12  Contents of notice of rate adjustment.

    (a) A Type 1-A, Type 1-B, or Type 1-C notice of rate adjustment 
must include the following information:
* * * * *
    (b) * * *
    (4) The amount of new unused rate adjustment authority, if any, 
that will be generated by the rate adjustment calculated as required by 
Sec.  3010.26 or Sec.  3010.27, as applicable. All calculations are to 
be shown with citations to the original sources. If new unused rate 
adjustment authority will be generated for a class of mail that is not 
expected to cover its attributable costs, the Postal Service must 
provide the rationale underlying this rate adjustment.
* * * * *
    (9) For a notice that includes a rate incentive:
    (i) If the rate incentive is a rate of general applicability, 
sufficient information to demonstrate that the rate incentive is a rate 
of general applicability; and
    (ii) Whether the Postal Service has excluded the rate incentive 
from the calculation of the percentage change in rates under Sec.  
3010.23(e) or Sec.  3010.24.
    (10) For a Type 1-C rate adjustment, whether the Postal Service 
elects to generate unused rate adjustment authority.
* * * * *
    (e) The notice of rate adjustment shall identify for each affected 
class how much existing unused rate adjustment authority is used in the 
planned rates calculated as required by Sec.  3010.28. All

[[Page 33833]]

calculations are to be shown, including citations to the original 
sources.
* * * * *

0
12. In Sec.  3010.20, revise paragraphs (b) and (d) and add paragraph 
(e) to read as follows:


Sec.  3010.20  Calculation of maximum rate adjustment.

* * * * *
    (b) Type 1-A and Type 1-B rate adjustments are subject to an 
inflation-based annual limitation computed using CPI-U values as 
detailed in Sec. Sec.  3010.21(a) and 3010.22(a).
* * * * *
    (d) In any 12-month period the maximum rate adjustment applicable 
to a class is:
    (1) For a Type1-A notice of rate adjustment, the annual limitation 
for the class; and
    (2) For a Type 1-B notice of rate adjustment, the annual limitation 
for the class plus the unused rate adjustment authority for the class 
that the Postal Service elects to use, subject to the limitation under 
Sec.  3010.29.
    (e) There is no limitation on the amount of a rate decrease 
contained in a notice of Type 1-C rate adjustment.

0
13. In Sec.  3010.21, revise the section heading and paragraph (b) to 
read as follows:


Sec.  3010.21  Calculation of annual limitation when Type 1-A or Type 
1-B notices of rate adjustment are 12 or more months apart.

* * * * *
    (b) If a notice of a Type 1-A or Type 1-B rate adjustment is filed 
12 or more months after the most recent Type 1-A or Type 1-B notice of 
rate adjustment, then the calculation of an annual limitation for the 
class (referred to as the full year limitation) involves three steps. 
First, a simple average CPI-U index is calculated by summing the most 
recently available 12 monthly CPI-U values from the date the Postal 
Service files its notice of rate adjustment and dividing the sum by 12 
(Recent Average). Then, a second simple average CPI-U index is 
similarly calculated by summing the 12 monthly CPI-U values immediately 
preceding the Recent Average and dividing the sum by 12 (Base Average). 
Finally, the full year limitation is calculated by dividing the Recent 
Average by the Base Average and subtracting 1 from the quotient. The 
result is expressed as a percentage, rounded to three decimal places.
* * * * *
0
14. In Sec.  3010.22, revise the section heading and paragraphs (a) and 
(b) to read as follows:


Sec.  3010.22  Calculation of annual limitation when Type 1-A or Type 
1-B notices of rate adjustment are less than 12 months apart.

    (a) The monthly CPI-U values needed for the calculation of the 
partial year limitation under this section shall be obtained from the 
Bureau of Labor Statistics (BLS) Consumer Price Index--All Urban 
Consumers, U.S. All Items, Not Seasonally Adjusted, Base Period 1982 - 
84 = 100. The current Series ID for the index is ``CUUR0000SA0.''
    (b) If a notice of a Type 1-A or Type 1-B rate adjustment is filed 
less than 12 months after the most recent Type 1-A or Type 1-B notice 
of rate adjustment, then the annual limitation for the class (referred 
to as the partial year limitation) will recognize the rate increases 
that have occurred during the preceding 12 months. When the effects of 
those increases are removed, the remaining partial year limitation is 
the applicable restriction on rate increases.
* * * * *

0
15. Revise Sec.  3010.23 to read as follows:


Sec.  3010.23  Calculation of percentage change in rates.

    (a) Definitions. In this section:
    (1) Current rate--(i) In general. Except as provided in paragraphs 
(a)(1)(ii) and (iii) of this section, the term current rate means the 
rate in effect when the Postal Service files the notice of rate 
adjustment.
    (ii) Seasonal and temporary rates. When used with respect to a 
seasonal or temporary rate, as described in paragraph (a)(2) of this 
section, the term current rate means the most recent rate in effect for 
the rate cell, regardless of whether the seasonal or temporary rate is 
available at the time the Postal Service files the notice of rate 
adjustment.
    (iii) Exception. When used with respect to a rate cell that 
corresponds to a rate incentive that was previously excluded from the 
calculation of the percentage change in rates under paragraph (e)(1) of 
this section, the term current rate means the full undiscounted rate in 
effect for the rate cell at the time of the filing of the notice of 
rate adjustment, not the discounted rate in effect for the rate cell at 
such time. For example, if a rate incentive provides a 5-cent discount 
on a 25-cent rate and the Postal Service previously elected to exclude 
the rate incentive from the calculation of the percentage change in 
rates, the Postal Service may choose to begin including the discounted 
rate in its calculation of the percentage change in rates. If the 
Postal Service makes that choice, the current rate for the discounted 
rate cell will be 25 cents (the full undiscounted rate).
    (2) Rate cell. The term rate cell means each and every separate 
rate identified in any applicable notice of rate adjustment for rates 
of general applicability. A seasonal or temporary rate shall be 
identified and treated as a rate cell separate and distinct from the 
corresponding non-seasonal or permanent rate.
    (3) Rate incentive means a discount that is not a workshare 
discount and that is designed to increase or retain volume, improve the 
value of mail for mailers, or improve the operations of the Postal 
Service.
    (b) Calculation--(1) Type 1-A and Type 1-B rate adjustments. For a 
Type 1-A or Type 1-B rate adjustment, for each class of mail and 
product within the class, the percentage change in rates is calculated 
in three steps. First, the volume of each rate cell in the class is 
multiplied by the planned rate for the respective cell and the 
resulting products are summed. Then, the same set of rate cell volumes 
are multiplied by the corresponding current rate for each cell and the 
resulting products are summed. Finally, the percentage change in rates 
is calculated by dividing the results of the first step by the results 
of the second step and subtracting 1 from the quotient. The result is 
expressed as a percentage.
    (2) Type 1-C rate adjustments. For a Type 1-C rate adjustment, for 
each class of mail and product within the class, the percentage change 
in rates is calculated by amending the workpapers attached to the 
Commission's order relating to the most recent Type 1-A or Type 1-B 
notice of rate adjustment to replace the planned rates under the most 
recent Type 1-A or Type 1-B notice of rate adjustment with the 
corresponding planned rates applicable to the class from the Type 1-C 
notice of rate adjustment.
    (c) Formula. The formula for calculating the percentage change in 
rates for a class described in paragraph (b) of this section is as 
follows:
    Percentage change in rates =
    [GRAPHIC] [TIFF OMITTED] TR12JN14.000
    
Where,

N = number of rate cells in the class
i = denotes a rate cell (i = 1, 2, . . . , N)
Ri,n = planned rate of rate cell i
Ri,c = current rate of rate cell i (for a Type 1-A or Type 1-B rate 
adjustment) or rate from most recent Type 1-A rate

[[Page 33834]]

adjustment for rate cell i (for a Type 1-C rate adjustment)
Vi = volume of rate cell i

    (d) Volumes--(1) Obtaining Volumes from billing determinants. The 
volumes for each rate cell shall be obtained from the most recent 
available 12 months of Postal Service billing determinants.
    (2) Permissible adjustments. The Postal Service shall make 
reasonable adjustments to the billing determinants to account for the 
effects of classification changes such as the introduction, deletion, 
or redefinition of rate cells. The Postal Service shall identify and 
explain all adjustments. All information and calculations relied upon 
to develop the adjustments shall be provided together with an 
explanation of why the adjustments are appropriate.
    (3) Basis for adjustments. Whenever possible, adjustments shall be 
based on known mail characteristics or historical volume data, as 
opposed to forecasts of mailer behavior.
    (4) Adjustment for deletion of rate cell when alternate rate cell 
is not available. For an adjustment accounting for the effects of the 
deletion of a rate cell when an alternate rate cell is not available, 
the Postal Service should adjust the billing determinants associated 
with the rate cell to zero. If the Postal Service does not adjust the 
billing determinants for the rate cell to zero, the Postal Service 
shall include a rationale for its treatment of the rate cell with the 
information required under paragraph (d)(2) of this section.
    (e) Treatment of rate incentives. (1) Rate incentives may be 
excluded from a percentage change in rates calculation. If the Postal 
Service elects to exclude a rate incentive from a percentage change in 
rates calculation, the rate incentive shall be treated in the same 
manner as a rate under a negotiated service agreement (as described in 
Sec.  3010.24).
    (2) A rate incentive may be included in a percentage change in 
rates calculation if it meets the following criteria:
    (i) The rate incentive is in the form of a discount or can be 
easily translated into a discount;
    (ii) Sufficient billing determinants are available for the rate 
incentive to be included in the percentage change in rate calculation 
for the class, which may be adjusted based on known mail 
characteristics or historical volume data (as opposed to forecasts of 
mailer behavior); and
    (iii) The rate incentive is a rate of general applicability.

0
16. Revise Sec.  3010.24 to read as follows:


Sec.  3010.24  Treatment of volume associated with negotiated service 
agreements and rate incentives that are not rates of general 
applicability.

    (a) Mail volumes sent at rates under a negotiated service agreement 
or a rate incentive that is not a rate of general applicability are to 
be included in the calculation of percentage change in rates under 
Sec.  3010.23 as though they paid the appropriate rates of general 
applicability. Where it is impractical to identify the rates of general 
applicability (e.g., because unique rate categories are created for a 
mailer), the volumes associated with the mail sent under the terms of 
the negotiated service agreement or the rate incentive that is not a 
rate of general applicability shall be excluded from the calculation of 
percentage change in rates.
    (b) The Postal Service shall identify and explain all assumptions 
it makes with respect to the treatment of negotiated service agreements 
and rate incentives that are not rates of general applicability in the 
calculation of the percentage change in rates and provide the rationale 
for its assumptions.

0
17. In Sec.  3010.26, revise the section heading and paragraphs (b) and 
(e) to read as follows:


Sec.  3010.26  Calculation of unused rate adjustment authority for Type 
1-A and Type 1-B rate adjustments.

* * * * *
    (b) When notices of Type 1-A or Type 1-B rate adjustments are filed 
12 months apart or less, annual unused rate adjustment authority will 
be calculated. Annual unused rate adjustment authority for a class is 
equal to the difference between the annual limitation calculated 
pursuant to Sec.  3010.21 or Sec.  3010.22 and the percentage change in 
rates for the class calculated pursuant to Sec.  3010.23(b)(1).
* * * * *
    (e) Unused rate adjustment authority generated under this section 
lapses 5 years after the date of filing of the notice of rate 
adjustment leading to its calculation.
* * * * *


Sec. Sec.  3010.27 and 3010.28  [Redesignated as Sec. Sec.  3010.28 and 
3010.29]

0
18. Redesignate Sec. Sec.  3010.27 and 3010.28 as Sec. Sec.  3010.28 
and 3010.29.

0
19. Add new Sec.  3010.27 to read as follows:


Sec.  3010.27  Calculation of unused rate adjustment authority for Type 
1-C rate adjustments.

    (a) For a notice of Type 1-C rate adjustment, unused rate 
adjustment authority for a class is calculated in two steps. First, the 
difference between the annual limitation calculated pursuant to Sec.  
3010.21 or Sec.  3010.22 for the most recent notice of Type 1-A or Type 
1-B rate adjustment and the percentage change in rates for the class 
calculated pursuant to Sec.  3010.23(b)(2) is calculated. Second, the 
unused rate adjustment authority generated in the most recent Type 1-A 
or Type 1-B rate adjustment is subtracted from that result.
    (b) Unused rate adjustment authority generated under paragraph (a) 
of this section lapses 5 years after the date of filing of the most 
recent notice of Type 1-A or Type 1-B rate adjustment.
    (c) Unused rate adjustment authority generated under paragraph (a) 
of this section for a class shall be added to the unused rate 
adjustment authority generated in the most recent notice of Type 1-A 
rate adjustment on the schedule maintained under Sec.  3010.26(f). For 
purposes of Sec.  3010.28, the unused rate adjustment authority 
generated under paragraph (a) of this section for a class shall be 
deemed to have been added to the schedule maintained under Sec.  
3010.26(f) on the same date as the most recent notice of Type 1-A or 
Type 1-B rate adjustment.
    (d) Unused rate adjustment authority generated under paragraph (a) 
of this section shall be subject to the limitation under Sec.  3010.29, 
regardless of whether it is used alone or in combination with other 
existing unused rate adjustment authority.

0
20. Add Sec.  3010.30 to read as follows:


Sec.  3010.30  De minimis rate increases.

    (a) The Postal Service may elect to file a Type 1-A notice of rate 
adjustment as a de minimis rate increase if:
    (1) For each affected class, the rate increases contained within 
the notice of a Type 1-A rate adjustment do not result in the 
percentage change in rates for the class equaling or exceeding 0.001 
percent; and
    (2) For each affected class, the sum of all rate increases included 
in de minimis rate increases since the most recent Type 1-A, Type 1-B, 
or Type 3 rate adjustment that was not a de minimis rate increase does 
not result in the percentage change in rates for the class equaling or 
exceeding 0.001 percent.
    (b) No unused rate adjustment authority will be added to the 
schedule of unused rate adjustment authority maintained under Sec.  
3010.26(f) as a result of a de minimis rate increase.
    (c) No rate decreases may be taken into account when determining 
whether rate increases comply with paragraphs (a)(1) and (2) of this 
section.

[[Page 33835]]

    (d) In the next notice of a Type 1-A or Type 1-B rate adjustment 
for a class that is not a de minimis rate increase:
    (1) The annual limitation shall be calculated as if the de minimis 
rate increase had not been filed; and
    (2) For purposes of calculating the percentage change in rates, the 
current rate shall be the current rate from the de minimis rate 
increase.
    (e) The Postal Service shall file supporting workpapers with each 
notice of de minimis rate increase that demonstrate that the sum of all 
rate increases included in de minimis rate increases since the most 
recent Type 1-A, Type 1-B, or Type 3 notice of rate adjustment that was 
not de minimis does not result in a percentage change in rates for the 
class equaling or exceeding 0.001 percent.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2014-13649 Filed 6-11-14; 8:45 am]
BILLING CODE 7710-FW-P