Periodic Reporting Requirements, 33879-33886 [2018-15326]

Agencies

• POSTAL REGULATORY COMMISSION

[Federal Register Volume 83, Number 138 (Wednesday, July 18, 2018)]
[Proposed Rules]
[Pages 33879-33886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15326]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2018-2; Order No. 4706]


Periodic Reporting Requirements

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission is proposing revisions to the periodic 
reporting requirements codified in our regulations. This document 
informs the public of the proposed rules, invites public comment, and 
takes other administrative steps.

DATES: Comments are due: August 17, 2018.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at https://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

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

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Background
III. Comments
IV. Analysis of Proposed Changes
V. Solicitation of Comments
VI. Conclusion

I. Introduction

    On December 27, 2017, the Postal Service filed a request for the 
Commission to consider revisions to the periodic reporting requirements 
codified in 39 CFR part 3050.\1\ On January 5, 2018, the Commission 
established this docket and invited comments regarding the Postal 
Service's proposed revisions.\2\ Based on comments received in response 
to the Commission's advance notice of proposed rulemaking, the 
Commission proposes the following revisions to the periodic reporting 
requirements found in 39 CFR part 3050.
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    \1\ United States Postal Service Petition for Rulemaking on 
Periodic Reporting, December 27, 2017 (Petition).
    \2\ Advance Notice of Proposed Rulemaking to Revise Periodic 
Reporting Requirements, January 5, 2018 (Order No. 4347).
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II. Background

    The Postal Accountability and Enhancement Act (PAEA) granted the 
Commission enhanced information gathering and reporting 
responsibilities. See 39 U.S.C. 3652(e)(1). The PAEA provides that the 
Commission shall prescribe the content and form of the public reports 
the Postal Service files with the Commission under section 3652. In 
Docket No. RM2008-4, the Commission approved its current periodic 
reporting requirements.\3\
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    \3\ Docket No. RM2008-4, Notice of Final Rule Prescribing Form 
and Content of Periodic Reports, April 16, 2009 (Order No. 203).
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    On December 27, 2017, the Postal Service filed a request for the 
Commission to consider revisions to the periodic reporting 
requirements. First, the Postal Service requests that the Commission 
adjust the deadlines for the quarterly Revenue, Pieces, and Weight 
(RPW) report; the Quarterly Statistics Report (QSR); the quarterly 
Billing Determinants report; and the monthly National Consolidated 
Trial Balance and Revenue and Expense Summary (Trial Balance) report to 
align the deadlines with other financial reporting deadlines. Petition 
at 1. The Postal Service states that aligning these deadlines with 
other financial reporting deadlines will avoid potential restatements 
of the earlier filed reports once the data for the later filed reports 
are finalized. Id. at 3.
    Specifically, the Postal Service seeks to move the quarterly and 
year-end deadlines for the RPW and QSR reports so that they are the 
same as the Form 10-Q and Form 10-K due dates. Id. at 2-3. In addition, 
the Postal Service requests that the Commission extend deadlines for 
quarterly Billing Determinants reports to 60 days after the end of 
Quarters 1, 2, and 3, and 90 days after the end of Quarter 4.\4\ The 
Postal Service also requests that the Commission revise the periodic 
reporting rules so that the Trial Balance reports and the Monthly 
Summary Financial reports have the same deadline. Id. at 5-6.
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    \4\ Id. at 4. The Postal Service also requests that the Quarter 
4 Billing Determinants report be incorporated into the annual 
Billing Determinants report rather than submitted as a standalone 
filing. Id. The Postal Service states that eliminating the 
standalone filing would help the Postal Service more effectively 
allocate scarce time and resources. Id.
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    Second, the Postal Service requests that the Commission modify the 
format of the Monthly Summary Financial Report to make the report more 
consistent with the Postal Service's quarterly and annual financial 
reports. Id. at 1. The Postal Service states that the term ``Operating 
Revenue'' as used in Tables 1 and 2 of the Monthly Summary Financial 
Report does not correspond with its usage in its Form 10-K reports. Id. 
at 7. The Postal Service requests revisions to Tables 1 and 2 of the 
Monthly Summary Financial Report so that the items and amounts reported 
for total operating revenue reconcile on both tables and the breakdown 
for revenue more closely aligns with the format in its other financial 
reports.\5\
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    \5\ Id. The Postal Service also requests updating Table 2 to 
reflect the name change of Standard Mail to USPS Marketing Mail. Id. 
at 8.
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    Third, the Postal Service requests that the Commission consider 
eliminating or modifying any reporting requirements that have become 
unnecessary or irrelevant since implementation of the current periodic 
reporting rules in 2009. Id. at 1. The Postal Service requests that the 
Commission consider eliminating or modifying these requirements to 
avoid imposing ``unnecessary or unwarranted administrative effort and 
expense'' on the Postal Service. Id. at 9 (citing 39 U.S.C. 
3652(e)(1)).

III. Comments

    On March 7, 2018, the Public Representative and United Parcel 
Service, Inc. (UPS) filed comments.\6\ On April 6, 2018, the Postal 
Service and the Parcel Shippers Association (PSA) filed reply 
comments.\7\
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    \6\ Public Representative Comments on Advance Notice of Proposed 
Rulemaking to Revise Periodic Reporting Requirements, March 7, 2018 
(PR Comments); Comments of United Parcel Service, Inc. on Advance 
Notice of Proposed Rulemaking to Revise Periodic Reporting 
Requirements, March 7, 2018 (UPS Comments).
    \7\ Reply Comments of the United States Postal Service, April 6, 
2018 (Postal Service Reply Comments); Reply Comments of the Parcel 
Shippers Association (PSA), April 6, 2018 (PSA Reply Comments).
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    Public Representative. The Public Representative divides her 
discussion into two sections. First, she discusses the guiding 
principles the Commission should consider when revising its periodic 
reporting requirements. PR Comments at 2-4. Specifically, she observes 
that the PAEA outlines three guiding principles for the Commission to 
consider when determining the content and form of the Postal Service's 
public reports submitted under 39 U.S.C. 3652. Id. at 2. The three 
guiding principles are whether the requirement ``(A) provid[es] the 
public with timely, adequate information to assess the lawfulness of 
rates charged; (B) avoid[s] unnecessary or unwarranted administrative 
effort and expense on the

[[Page 33880]]

part of the Postal Service; and (C) protect[s] the confidentiality of 
commercially sensitive information.'' Id. (citing 39 U.S.C. 
3652(e)(1)). The Public Representative concludes that, generally, the 
periodic reporting requirements in 39 CFR part 3050 ``enable the 
Commission to carry out its duties and serve the public interest'' and 
that any revisions should be consistent with the guiding principles in 
section 3652(e)(1). Id. at 4.
    Second, the Public Representative discusses each of the Postal 
Service's specific requests. In response to the Postal Service's 
request to revise the filing deadlines for the Trial Balance, RPW, QSR, 
and Billing Determinants reports, the Public Representative states that 
she supports ``any proposed extensions that would reduce administrative 
expense or effort expended by the Postal Service, so long as the 
proposed extensions do not disrupt the Commission's or the public's 
need for this information on a timely basis.'' Id. at 4-5. The Public 
Representative suggests an additional revision to the filing deadline 
for the Monthly Summary Financial Report for the last month of each 
quarter. Id. at 5. She notes that there is no Form 10-Q report filed 
for the fourth fiscal quarter and suggests that Sec.  3050.28(b)(1) be 
revised so that Monthly Summary Financial Reports for the last month of 
each fiscal quarter be due when the Postal Service files the Form 10-Q 
or the Form 10-K report (whichever is applicable). Id. at 5-6.C
    The Public Representative does not object to the Postal Service's 
proposed revisions to Tables 1 and 2 of the Monthly Summary Financial 
Reports. Id. at 6-7. Specifically, she notes that the proposed revision 
to replace ``Standard Mail'' with ``USPS Marketing Mail'' simply 
reflects the Postal Service's request, and the Commission's approval, 
to change the name of the class. Id. at 6. Additionally, she states 
that the other proposed changes to Tables 1 and 2 ``should better align 
the preliminary financial information'' provided in the Postal 
Service's monthly financial reports with its Form10-Q and Form 10-K 
reports. Id. She notes that adequate transparency remains because 
information that would no longer be included in the revised Tables 1 
and 2 remains publicly available in other periodic reports. Id. at 6-7.
    The Public Representative notes that it is difficult to evaluate 
the Postal Service's request that the Commission eliminate or modify 
the scope of the required reports because the Postal Service did not 
identify any ``unnecessary'' or ``unwarranted'' periodic reporting 
requirements. Id. at 7. She states that such an evaluation requires 
more specific information related to the administrative effort and 
expense on the Postal Service to meets its periodic reporting 
requirements. Id. Specifically, she notes that it would be helpful if 
the Postal Service discussed: ``the data that must be collected to 
comply with the rule; the effort and expense incurred to collect the 
data required by the rule; whether the data would be collected if the 
rule did not require reporting; the accessibility and availability of 
the data to the public, other than through the filing of the periodic 
report required by the rule; the applicable Postal Service data 
retention policy; whether the report would be generated if the rule did 
not require reporting; and the effort and expense incurred to generate 
the report.'' Id. at 7-8.
    The Public Representative observes that the current periodic 
reporting requirements are ``designed to minimize administrative effort 
and expense expended by the Postal Service.'' Id. at 8. For example, 
she notes that few periodic reporting requirements ``impose specific 
detailed form requirements'' and the rules that do impose certain form 
requirements seek to ensure that the Postal Service provides the data 
in a consistent and useful manner. Id. However, the Public 
Representative does note that the Commission could streamline the rules 
that require duplicative submissions. Id.
    UPS. In its comments, UPS discusses the specific revisions 
requested by the Postal Service; \8\ expresses concern that the 
Commission provide notice and an opportunity for comment on any 
proposal to eliminate or modify the Postal Service's periodic reporting 
requirements; \9\ and requests that the Commission require the Postal 
Service to provide segment-level reporting for its competitive 
products.\10\ In regards to the requested revisions to certain 
reporting deadlines, UPS acknowledges the ``merit in aligning the 
release of periodic reports,'' and ``supports modifying the reporting 
deadlines insofar as it relieves the reporting burden on the Postal 
Service and helps provide more accurate data.'' Id. at 4. However, UPS 
does not support the requested revisions to the format of the Monthly 
Summary Financial Report. Id. at 5. UPS expresses concern that the 
requested modification--specifically, the revisions to the definition 
of operating revenue--``could hamper the ability of the Commission and 
other interested parties to look at trends or do any longitudinal 
analysis.'' Id. UPS states that the Postal Service, a government 
agency, should not be able to ``self-define'' the terms it uses in its 
Form 10-Q and Form 10-K reports and seeks to minimize the Postal 
Service's use of self-defined terms. Id. at 5-6.
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    \8\ UPS Comments at 4-6.
    \9\ Id. at 6-7.
    \10\ Id. at 7-10. UPS notes that the ``Postal Service may claim 
that the entire organization is one segment because of the close 
integration of their market[]dominant and competitive products[.]'' 
Id. at 8. UPS states that this ``close integration'' between the 
market dominant and the competitive products is justification for 
requiring the Postal Service to report on market dominant and 
competitive products separately. Id. UPS suggests that the 
requirement that the Postal Service maintain separate accounts for 
market dominant and competitive products indicates that the PAEA 
envisioned that the Postal Service would provide financial reports 
that distinguish between those accounts. Id. at 8-9.
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    PSA Reply Comments. In its reply comments, PSA addresses two issues 
raised in the UPS Comments. PSA Reply Comments at 1. First, PSA agrees 
that if the Commission decides to adopt the proposed additional changes 
to the reporting requirements, that the Commission should ``continue 
its practice of providing notice of the proposed changes and an 
opportunity for interested parties to comment.'' Id. Second, PSA 
disagrees with UPS's request that `` `[t]he Commission ensure that all 
changes requested by the Postal Service increase, rather than decrease, 
the quality and quantity of the information that is available to the 
public' and `hold the Postal Service to higher accounting and reporting 
standards than those imposed on their private sector counterparts.' '' 
Id. at 1-2 (quoting UPS Comments at 2). PSA states that the approach 
proposed by UPS would only increase the Postal Service's reporting 
requirements and administrative burden and is inappropriate given that 
the Postal Service currently provides substantial data on its 
competitive products in its periodic reports. Id. at 2. PSA states such 
data reporting is ``likely much greater than that of its private 
competitors'' and allows the Commission to determine statutory 
compliance. Id. Instead, PSA asserts that the Commission should 
consider whether new reporting requirements are necessary to allow the 
Commission to review compliance and whether the requirements adequately 
protect proprietary information. Id.
    Postal Service Reply Comments. The Postal Service first addresses 
the Public Representative's comments that more information is needed 
about the administrative effort and expense of reporting requirements 
to determine whether the Commission should

[[Page 33881]]

eliminate or modify any unnecessary reporting requirements. Postal 
Service Reply Comments at 1. The Postal Service responds that any 
amount of resources dedicated to producing unnecessary reports 
contravenes 39 U.S.C. 3652(e)(1)(B) because such reports may no longer 
aid the Commission. Id. at 1-2. The Postal Service states that the 
Commission's experience since the implementation of the reporting 
requirements renders the Commission able to assess whether each report 
remains useful for its intended purpose. Id. at 2.
    The Postal Service agrees with the Public Representative's proposal 
that the Commission clarify that its September Monthly Summary 
Financial Report is due with the submission of the Form 10-K. Id. at 3.
    The Postal Service addresses UPS's concerns with the Postal 
Service's use of self-defined terms. Id. at 4-5. The Postal Service 
states that UPS does not identify any problems resulting from prior use 
of the requested definitions and does not explain why the new format 
would be any more or any less consistent with U.S. Securities and 
Exchange Commission (SEC) reporting by private companies. Id. at 5. The 
Postal Service also responds to UPS's suggestion that the Commission 
require separate segment-level reporting for market dominant and 
competitive products. Id. at 6. The Postal Service considers such a 
requirement a ``major substantive expansion of the periodic reporting 
obligations.'' Id. The Postal Service further states that application 
of Financial Accounting Standards Board standards ``points inexorably 
toward the conclusion that the Postal Service operates as one 
segment.'' Id.

IV. Analysis of Proposed Rule Changes

A. Legal Authority

    The PAEA requires the Commission to determine the content and form 
of the Postal Service's periodic reporting. 39 U.S.C. 3652(e)(1). The 
Commission may, either on its own motion or on the request of an 
interested party, initiate proceedings to improve the quality, 
accuracy, or completeness of the Postal Service data used in assessing 
statutory compliance. Id. 3652(e)(2).
    The Postal Service petitioned the Commission to: (1) Change the 
deadlines for certain periodic reports; (2) modify the format of the 
Monthly Summary Financial Report, and (3) eliminate or modify any 
existing reporting requirements that are unnecessary. Pursuant to its 
authority under 39 U.S.C. 3652(e)(1), the Commission makes the 
following modifications to periodic reporting requirements.

B. Deadlines for Certain Periodic Reports

    The Postal Service proposes to move the deadlines for several 
periodic reports. These reports include quarterly RPW and QSR reports, 
quarterly Billing Determinants reports, and monthly Trial Balance 
reports. Petition at 2-6.
    No commenter objected to the proposed deadline modifications. The 
Public Representative ``supports any proposed extensions that would 
reduce administrative expense or effort expended by the Postal 
Service,'' provided that the Commission and public receive necessary 
information on a timely basis. PR Comments at 5. Similarly, UPS 
``supports modifying the deadlines insofar as it relieves the reporting 
burden on the Postal Service and helps provide more accurate data.'' 
UPS Comments at 4.
    The Commission agrees with the Postal Service, the Public 
Representative, and UPS that the proposed deadlines appear to align 
with other financial reporting deadlines. Moving the deadlines for 
these reports should create more streamlined reporting and help ensure 
that the Postal Service is able to provide timely and accurate 
financial reports to the Commission. Accordingly, the Commission 
proposes to modify the following reporting requirements.
    1. Section 3050.25 Volume and revenue data.
    Proposed Sec.  3050.25(c) is revised to state that quarterly RPW 
reporting is due within 40 days of the close of Quarters 1, 2, and 3, 
and 60 days of Quarter 4, but no later than the filing of the Form 10-Q 
or Form 10-K reports. This modification aligns the RPW reporting 
deadlines for Quarters 1, 2, and 3 with the deadlines for filing the 
Form 10-Q report,\11\ and the RPW reporting deadline for Quarter 4 with 
the deadline for filing the Form 10-K report.\12\
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    \11\ 39 CFR 3050.40(a)(1).
    \12\ Id. 3050.40(a)(2).
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    Proposed Sec.  3050.25(d) is revised to extend the QSR reporting 
deadline to 40 days from the close of Quarters 1, 2, and 3, and 60 days 
for Quarter 4, but no later than the filing of the Form 10-Q or Form 
10-K reports. This modification aligns the QSR deadlines with the 
deadlines for Form 10-Q report and Form 10-K report filings, 
respectively.
    Proposed Sec.  3050.25(e) is revised to extend the deadline for 
submitting quarterly Billing Determinants reports to 60 days after the 
close of Quarters 1, 2, and 3 and 90 days after the close of Quarter 4. 
This revision allows the Postal Service ample time to produce billing 
determinants using key inputs, such as the quarterly RPW report. The 
extension for filing of the Quarter 4 quarterly Billing Determinants 
report to 90 days aligns it with the deadline for the annual billing 
determinants report as stated in Sec.  3050.25(b).
    2. Section 3050.28 Monthly and pay period reports.
    Proposed Sec.  3050.28(b) is revised to reflect that the Monthly 
Summary Financial Report for the last months of Quarters 1, 2, and 3 is 
due at the time of filing the Form 10-Q report. As the Public 
Representative notes, the Postal Services files the Form 10-K report, 
not the Form 10-Q report, after Quarter 4. Accordingly, the Commission 
proposes to change the deadline for the Monthly Summary Financial 
Report for the final month of Quarter 4 to align with the filing of the 
Form 10-K report. The deadlines for the first two months of each 
quarter is the 24th day of the following month.
    Proposed Sec.  3050.28(c) is revised to align the deadline for 
filing National Consolidated Trial Balance and Revenue and Expense 
Summary for the last months of each quarter with the deadlines for the 
Monthly Summary Financial Report. For the last months of Quarters 1, 2, 
and 3, the National Consolidated Trial Balance and Revenue and Expense 
Summary is due with the Form 10-Q report, and for the last month of 
Quarter 4 it is due with the Form 10-K report. For the first two months 
of each quarter, the National Consolidated Trial Balance and Revenue 
and Expense Summary are due on the 24th day of the following month, 
aligned with the deadline for the Monthly Summary Financial Report.

C. Format of Monthly Summary Financial Report

    The Postal Service seeks modification of the format of the Monthly 
Summary Financial Report, as illustrated at Sec.  3050.28(b)(1). 
Petition at 6-8. The Postal Service proposes to modify Table 1, USPS 
Monthly Financial Statement, renaming ``Total Operating Revenue'' as 
``Operating Revenue'' while removing subcomponents ``Mail and Services 
Revenue'' and ``Government Appropriations.'' Id. at 7. The Postal 
Service proposes one line item for ``Operating Revenue,'' one for 
``Other Revenue,'' and a third line for ``Total Revenue.'' Id. The 
Postal Service states that this modification is consistent with the 
reporting requirements and definitions for Form 10-Q and Form 10-K 
reporting. Id. The Postal Service states

[[Page 33882]]

that while ``Government Appropriations'' will no longer be its own line 
item on the Monthly Summary Financial Report, it will still be a 
component of ``Operating Revenue,'' consistent with how it is reported 
for U.S. Generally Accepted Accounting Principles purposes. Id.
    The Postal Service also proposes to modify the format of Table 2, 
Mail Volume and Mail Revenue. Id. at 7-8. It seeks to replace the 
``Total All Mail'' input with ``Total Operating Revenue,'' which would 
match the ``Operating Revenue'' input from Table 1. Id. at 8. Finally, 
the Postal Service seeks to change the input for ``Standard Mail'' to 
``USPS Marketing Mail,'' accurately reflecting the new name of the mail 
class. Id.
    UPS requests that the Commission consider parallel SEC reporting 
definitions for publicly traded delivery companies. UPS Comments at 6. 
UPS also suggests requiring the Postal Service to reproduce past 
monthly reports using the proposed new format, or require the Postal 
Service to produce two reports--one using the new format and one using 
the old format--for the first 12 months after adoption of the new 
format. Id.
    The Postal Service's proposal to modify the format of the Monthly 
Summary Financial Report is consistent with the definition of 
``operating revenue'' for purposes of Form 10-K reporting.\13\ The 
Commission does not identify any of the changes as diminishing the 
amount of adequacy of the information provided. While line inputs for 
``Mail and Service Revenue'' and ``Government Appropriations'' will 
collapse into the new ``Operating Revenue'' input, the information 
specific to those categories will remain available. For example, the 
amount reported for ``Government Appropriations'' in Table 1 is located 
in the monthly filed Postal Service ``National Trial Balance'' in 
account number 41431.000 ``Free and Reduced Rate Mail.'' \14\ Given 
that the proposal does not appear to disrupt the ability of the 
Commission or the public to access timely and adequate information, the 
Commission proposes the following rule modifications.
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    \13\ United States Postal Service, 2017 Report on Form 10-K, 
November 14, 2017, at 19.
    \14\ See, e.g., United States Postal Service, National Trial 
Balance and Statement of Revenue and Expenses, March 2018, May 10, 
2018, Excel file ``National Trial Balance--Redacted March 2018 (FY 
2018).xls,'' row 907.
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    1. Section 3050.28(b)(1), Table 1--USPS Monthly Financial 
Statement.
    Proposed Sec.  3050.28(b)(1) changes the input ``Total Operating 
Revenue'' to ``Total Revenue'' in Table 1. The existing input for 
``Operating Revenue'' will remain, but the component inputs ``Mail and 
Services Revenue'' and ``Government Appropriations'' are removed. A new 
heading, ``Revenue,'' holds the inputs for ``Operating Revenue,'' a new 
input for ``Other Revenue,'' and their combined sum in the new ``Total 
Revenue'' input.
    2. Section 3050.28(b)(1), Table 2--Mail Volume and Mail Revenue.
    Proposed Sec.  3050.28(b)(1) changes the current input of 
``Standard Mail'' to ``USPS Marketing Mail'' in Table 2. This change is 
consistent with the change to the name of the class, approved in Order 
No. 3670.\15\
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    \15\ Docket No. R2017-1, Order on Price Adjustments for Special 
Services Products and Related Mail Classification Changes, December 
15, 2016, at 18 (Order No. 3670).
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    The Commission considers the Postal Service's proposal to rename 
``Total All Mail'' with ``Total Operating Revenue'' to be potentially 
confusing. The components within the input are ``Volume'' and 
``Revenue.'' To avoid having an input for the ``Volume'' of ``Total 
Operating Revenue,'' the Commission proposes to remove the ``Total All 
Mail'' input and its components. Instead, the Commission proposes to 
add distinct inputs for ``Total Volume'' and ``Total Operating 
Revenue.'' The ``Total Operating Revenue'' input will match the 
``Operating Revenue'' input from Table 1.

D. Modifications Deemed Necessitated by the Public Interest

    Though the Postal Service requests that the Commission eliminate or 
modify any unnecessary reporting requirements, it does not offer any 
specific suggestions. Petition at 9-10.
    UPS urges the Commission to require segment-level reporting for 
competitive products. UPS Comments at 7. Because the PAEA requires a 
level of structural separation of market dominant and competitive 
products for accounting purposes, UPS states the Commission should 
require separate segment-level reporting for competitive products. Id. 
at 8, 10.
    In prescribing the content and form of annual reports, the 
Commission must consider the adequacy of the information to assess the 
lawfulness of rates charged. 39 U.S.C. 3652(e)(1)(A). The Commission 
finds that the current approach of reporting as a single segment is 
adequate for the purposes of determining compliance. Furthermore, in 
consideration of 39 U.S.C. 3652(e)(2)(A), the Commission does not find 
that the practice of reporting as a single segment is inaccurate or in 
need of substantial improvement. Accordingly, the Commission does not 
adopt the UPS proposal to require segment-level reporting for 
competitive products.
    The Commission has considered all comments and reply comments and 
has evaluated the necessity of modifications to the financial reporting 
requirements. The Commission proposes the following changes.
    1. Section 3050.21 Content of the Postal Service's section 3652 
report.
    The Commission has identified several areas where, in the course of 
preparing the Annual Compliance Determination (ACD), more detailed 
annual financial reporting would better enable the Commission to assess 
PAEA compliance. For the required information, the Commission has, to 
date, been able to request the information from the Postal Service 
during the compressed timeline of the proceeding, which results in the 
submission of the necessary information but creates a burden on the 
Commission and the Postal Service to identify where information gaps 
exist and produce the information required to fill them in a compressed 
timeframe. In order to streamline the ACD process and eliminate the 
administrative effort of both the Postal Service and Commission during 
Annual Compliance Review dockets, the Commission proposes to add 
certain information to the required content of the Postal Service's 
section 3652 report.
    Section 3050.21(f)(6). In the FY 2016 ACD, the Commission directed 
the Postal Service to provide information demonstrating that 
noncompensatory bilateral agreements improve the net financial position 
of the Postal Service over Universal Postal Union (UPU) default 
terminal dues rates.\16\ The Commission finds such information 
necessary to determine whether market dominant negotiated service 
agreements (NSAs) are compliant with 39 U.S.C. 3622(c)(10)(A). 
Accordingly, the Commission proposes to add Sec.  3050.21(f)(6). The 
proposed section requires the Postal Service to file with its Annual 
Compliance Report, documentation demonstrating that noncompensatory 
market dominant NSAs improve the Postal Service's net financial 
position or enhance the performance of mail preparation,

[[Page 33883]]

processing, transportation, or other functions.
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    \16\ Docket No. ACR2016, Annual Compliance Determination, March 
28, 2017, at 69 (FY 2016 ACD).
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    Section 3050.21(j). In Docket No. ACR2017, Chairman's Information 
Request No. 7 requested that the Postal Service provide a distribution 
of market dominant and competitive fees found in the RPW report.\17\ 
The Postal Service responded to CHIR No. 7, providing the mail fee 
distributions for both market dominant \18\ and competitive mail.\19\ 
The Commission used this information to prepare the FY 2017 ACD and 
considers the information necessary for future determinations of 
compliance. To this end, the Commission proposes revising Sec.  
3050.21(j). As currently constructed, the section requires the Postal 
Service to provide any information it believes will help the Commission 
evaluate compliance with title 39. The Commission proposes to move that 
requirement to Sec.  3050.21(n), placing it at the end of the list of 
annual reporting requirements. The Commission's proposal replaces the 
current Sec.  3050.21(j) with a requirement that the Postal Service 
provide a distribution breakdown of mail fees for market dominant and 
competitive products. The purpose of the proposed change is to provide 
the Commission each year with the same information that the Postal 
Service provided in response to Docket No. ACR2017, CHIR No. 7, 
question 3.
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    \17\ Docket No. ACR2017, Chairman's Information Request No. 7 
and Notice of Filing Under Seal, January 23, 2018, question 3 (CHIR 
No. 7).
    \18\ Docket No. ACR2017, Responses of the United States Postal 
Service to Questions 1-3 of Chairman's Information Request No. 7, 
January 30, 2018, question 3, Excel file ``Resp.Q.3.Attach A_MD Fee 
Distrbtn.xlsx.''
    \19\ Docket No. ACR2017, Library Reference USP-FY17-NP36, 
January 30, 2018.
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    Section 3050.21(k). In Docket No. ACR2017, Chairman's Information 
Request No. 1 requested data related to several international mail 
products.\20\ The questions relating to these products included 
requests for information on quarterly and annual data on third-party 
service performance measurements.\21\ Also requested was the amount of 
forfeited revenue for failing to meet the applicable service 
performance requirements. Id. questions 4, 10, and 16.a. The Postal 
Service provided all of the requested information.\22\ The Postal 
Service's Library Reference USPS-FY17-NP31 provided the Commission with 
more complete and accurate financial information regarding certain 
products.\23\ The Commission finds that having such information 
included as part of the Postal Service's annual filing, rather than in 
response to an information request, will better assist the Commission 
in its task of evaluating compliance with title 39. Including the 
information would reduce the burden on the Commission and Postal 
Service of identifying and providing the necessary information during 
the compressed timeline of the annual review. The Commission 
accordingly proposes to add Sec.  3050.21(k). The new section requires 
that the Postal Service provide any third-party service performance 
results where a financial penalty or bonus is applied, and to provide 
the amount of any forfeited revenue. This requirement will apply to all 
market dominant and competitive products, including NSAs. The 
information will provide more accurate revenue analysis for the 
products subject to third-party service performance measurements.
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    \20\ Docket No. ACR2017, Chairman's Information Request No. 1, 
January 5, 2018 (CHIR No. 1).
    \21\ See Docket No. ACR2017, CHIR No. 1, questions 2, 3, 4, 7, 
8, 10, 15, and 16.
    \22\ Docket No. ACR2017, Responses of the United States Postal 
Service to Questions 1-16 of Chairman's Information Request No. 1, 
January 12, 2018 (Docket No. ACR2017, Responses to CHIR No. 1); 
Library Reference USPS-FY17-NP31, January 12, 2018.
    \23\ In its Docket No. ACR2017, Responses to CHIR No. 1, 
question 15, the Postal Service indicated that service performance 
measurements for Inbound Parcel Post are only available for the 
periods January through June and July through August. The Postal 
Service provided this data in Library Reference USPS-FY17-NP31.
---------------------------------------------------------------------------

    Section 3050.21(l). The Commission further proposes to reduce the 
necessity of information requests by adding a requirement that the 
Postal Service provide all total workhour data and data sources, 
showing workhour measurements by Labor Distribution Code. In Docket No. 
ACR2017, Chairman's Information Request No. 2 requested that the Postal 
Service provide this data to supplement total workhour information 
listed in the annual report on Form 10-K.\24\ The Postal Service 
provided the workhour data and data sources in an Excel file.\25\ The 
Commission uses this information in its ACD and seeks this information 
in future years in substantially the same format. Accordingly, the 
Commission proposes to add Sec.  3050.21(l). The proposed requirement 
directs the Postal Service to provide all total workhour data and data 
sources showing workhour measurements by Labor Distribution Code. The 
Commission finds that this requirement will reduce the need for future 
information requests for workhour data.
---------------------------------------------------------------------------

    \24\ Docket No. ACR2017, Chairman's Information Request No. 2, 
January 10, 2018, question 3 (CHIR No. 2).
    \25\ Docket No. ACR2017, Responses of the United States Postal 
Service to Questions 1-19 of Chairman's Information Request No. 2, 
January 17, 2018, question 3, Excel file 
``ChIR.2.Q.3.LDC.Workhours--FY17.xlsx.''
---------------------------------------------------------------------------

    Section 3050.21(m). In recent ACD reports, the Commission has 
continually expressed concerns about the Inbound Letter Post product. 
For example, in the FY 2017 ACD report, the Commission ``reiterate[d] 
its concern that the UPU pricing regime for the Inbound Letter Post 
product continues to result in noncompensatory terminal dues.'' \26\ 
After a brief period of improvement, the contribution for the Inbound 
Letter Post product has decreased from negative $33 million in FY 2011 
to negative $170 million in FY 2017.\27\ In fact, the trend of negative 
contribution existed well before the PAEA. The Commission's precursor, 
the Postal Rate Commission, also identified a trend of net loss in 
contribution for Inbound Letter Post in its annual reports to Congress 
on international mail for FY 1998 to FY 2006.\28\ The Postal Service 
has provided a myriad of explanations for the increasingly poor 
financial performance of the Inbound Letter Post product, including 
increasing costs,\29\ increasing volume,\30\ increasing weight,\31\ and 
failing to meet UPU quality-of-service targets.\32\
---------------------------------------------------------------------------

    \26\ Docket No. ACR2017, Annual Compliance Determination, March 
29, 2018, at 68 (FY 2017 ACD). See FY 2016 ACD at 66; Docket No. 
ACR2015, Annual Compliance Determination, March 28, 2016, at 70 (FY 
2015 ACD); Docket No. ACR2014, Annual Compliance Determination, 
March 27, 2015, at 53 (FY 2014 ACD); Docket No. ACR2013, Annual 
Compliance Determination, March 27, 2014, at 59 (FY 2013 ACD); 
Docket No. ACR2012, Annual Compliance Determination, March 28, 2013, 
at 143 (FY 2012 ACD); Docket No. ACR2011, Annual Compliance 
Determination, March 28, 2012, at 143-144 (FY 2011 ACD); Docket No. 
ACR2010, Annual Compliance Determination, March 29, 2011, at 130-131 
(FY 2010 ACD); Docket No. ACR2009, Annual Compliance Determination, 
March 29, 2010, at 108-109 (FY 2009 ACD); Docket No. ACR2008, Annual 
Compliance Determination, March 30, 2009, at 81 (FY 2008 ACD); 
Docket No. ACR2007, Annual Compliance Determination, March 27, 2008, 
at 115, 118 (FY 2007 ACD).
    \27\ FY 2017 ACD at 65; FY 2011 ACD at 144.
    \28\ FY 2008 ACD at 82; FY 2007 ACD at 116. Pursuant to section 
3663 of the Postal Reorganization Act, the Commission issued eight 
annual reports, apart from IM99-1, to Congress covering Fiscal Years 
1998 through 2005. See Docket Nos. IM99-1, IM2000-1, IM2001-1, 
IM2002-2, IM2003-1, IM2004-1, IM2005-1, and IM2006-1.
    \29\ FY 2017 ACD at 66; FY 2015 ACD at 69; FY 2012 ACD at 145.
    \30\ FY 2017 ACD at 66.
    \31\ FY 2013 ACD at 60; FY 2012 ACD at 145.
    \32\ FY 2009 ACD at 109; FY 2008 ACD at 82.
---------------------------------------------------------------------------

    In recent ACD reports, the Commission has conducted trend analysis 
for products for which the Commission has identified ongoing issues. 
For example, for each fiscal year since the passage of the PAEA, the 
Commission has found that the Periodicals class failed to generate

[[Page 33884]]

revenue sufficient to cover attributable costs.\33\ In the FY 2017 ACD 
report, the Commission analyzed the volume, revenue, attributable cost, 
and contribution for the Periodicals class for FY 2007 to FY 2017. FY 
2017 ACD at 45. The Commission also analyzed the unit revenue, unit 
attributable cost, and unit contribution for Periodicals for the same 
time period. Id. at 46. The Commission also provided analysis of the 
volume, revenue, attributable cost, and contribution for the Outside 
County Periodicals and Within County Periodicals products 
specifically.\34\
---------------------------------------------------------------------------

    \33\ FY 2017 ACD at 45-46; FY 2016 ACD at 42-43; FY 2015 ACD at 
42-43; FY 2014 ACD at 33-34; FY 2013 ACD at 42-43; FY 2012 ACD at 
25; FY 2011 ACD at 16; FY 2010 ACD at 90-91; FY 2009 ACD at 74; FY 
2008 ACD at 54, 56; FY 2007 ACD at 68.
    \34\ See Docket No. ACR2017, Library Reference PRC-LR-ACR2017-5, 
March 29, 2018, Excel file ``FY 2017 Periodicals Cost 
Coverage.xlsx,'' tab ``Cost Coverage.''
---------------------------------------------------------------------------

    In analyzing the continuing issues with the Periodical class, the 
Commission also evaluated how increasing unit cost and decreasing unit 
revenue for Periodicals resulted in a decrease in contribution. FY 2017 
ACD at 46. The Commission discussed factors that related to unit 
revenue and attributable costs for Outside County Periodicals, such as 
the change of mail mix and the unit costs for various presort levels 
within the product (e.g., Carrier Route, 5-Digit, and 3-Digit). Id. at 
49.
    As the result of the ongoing concerns expressed by the Commission 
(and echoed by participants) regarding the financial performance of the 
Inbound Letter Post product,\35\ the Commission plans to use the 
aggregated Inbound Letter Post revenue, volume, attributable cost, and 
contribution data that would be submitted under the proposed rule to 
analyze trends that may result in lower contribution from certain UPU 
country groups. Such analysis could help the Commission more accurately 
identify issues within the Inbound Letter Post product and identify 
appropriate remedial actions.
---------------------------------------------------------------------------

    \35\ See Docket No. IM2016-1, Congressional Letter to Secretary 
of State Rex Tillerson and Postmaster General Megan Brennan, 
November 8, 2017; Docket No. ACR2017, Comments of James Smaldone, 
Founder & CEO, Mighty Mug, Inc., January 25, 2018, at 1-2; Docket 
No. ACR2017, Comments of National Association of Manufacturers on 
Order No. 4377, January 24, 2018, at 2; Docket No. ACR2017, Comments 
of United Parcel Service, Inc. in Response to Notice of Preliminary 
Determination to Unseal the Material Filed in Response to Chairman's 
Information Request No. 1, Question 1, January 24, 2018, at 2-3; 
Docket No. ACR2017, Comments of the Honorable Kenny Marchant on 
Determination to Unseal the Material Filed in Response to Chairman's 
Information Request No. 1, Question 1, January 25, 2018, at 1-2; 
Docket No. ACR2017, Comments of US Chamber of Commerce, January 25, 
2018, at 1-2; Docket No. ACR2017, Comments of SBE Council Related to 
Inbound Letter Post, February 20, 2018, at 1-2; Docket No. ACR2017, 
Comments of United Parcel Service, Inc. in Response to Notice of 
Preliminary Determination to Unseal the Postal Service's Response to 
Chairman's Information Request No. 15, February 23, 2018, at 3-4; 
Docket No. ACR2017, Reply Comments of United Parcel Service, Inc. on 
United States Postal Service Motion for Reconsideration of Order No. 
4551, April 13, 2018, at 4; Docket No. ACR2017, Comments of U.S. 
Chamber of Commerce, April 13, 2018, at 1; Docket No. IM2018-1, 
Comments Received from U.S. Representatives Kenny Marchant and Ralph 
Abraham, July 3, 2018, at 1; Docket No. IM2018-1, Comment Received 
from U.S. Senator Bill Cassidy, M.D., July 3, 2018, at 1.
---------------------------------------------------------------------------

    Accordingly, the Commission proposes to add Sec.  3050.21(m). The 
new section requires that the Postal Service provide Inbound Letter 
Post revenue, volume, attributable cost, and contribution data 
aggregated by UPU country group and by shape for the preceding five 
fiscal years when it files its Annual Compliance Report. The Commission 
finds that this requirement will reduce the need for future information 
requests for aggregated Inbound Letter Post data.
    Section 3050.21(n). The Commission proposes to move the requirement 
that the Postal Service provide any other information that it 
anticipates will help the Commission evaluate compliance. The 
Commission finds it appropriate to place this general requirement at 
the end of the list of items included in the Annual Compliance Report. 
The substance of former Sec.  3050.21(j) will be unchanged. The 
requirement will only be renumbered as Sec.  3050.21(n).\36\
---------------------------------------------------------------------------

    \36\ Current Sec.  3050.21(a) requires the annual report to 
provide the items listed in paragraphs (b) through (j) of Sec.  
3050.21. Proposed paragraphs (k) through (n) necessitate that the 
Commission revise Sec.  3050.21(a) to require the report to include 
the items listed in paragraphs (b) through (n).
---------------------------------------------------------------------------

    2. Section 3050.60 Miscellaneous Reports and Documents.
    The Commission, having considered whether any current reporting 
requirements are unnecessary, proposes to modify Sec.  3050.60(c). The 
Postal Service provides a master list of publications and handbooks 
whenever changed, in accordance with Sec.  3050.60(b). The Commission 
welcomes those publications and handbooks in electronic form, as it 
would reduce the administrative effort of both the Postal Service and 
the Commission without degrading the utility of the publication or 
handbook. Accordingly, the Commission proposes to revise Sec.  
3050.60(c) to require only an electronic copy of all changed 
publications and handbooks.

V. Solicitation of Comments

    The Commission invites interested persons to comment on the changes 
proposed in this rulemaking. Comments are due no later than 30 days 
after publication of this Notice in the Federal Register.

VI. Conclusion

    It is ordered:
    1. The Commission proposes to amend existing periodic reporting 
rules located at 39 CFR part 3050.
    2. Lauren A. D'Agostino will continue to serve as an officer of the 
Commission (Public Representative) to represent the interests of the 
general public in this rulemaking proceeding.
    3. Interested persons may submit comments no later than 30 days 
from the date of publication of this Notice in the Federal Register.
    4. The Secretary shall arrange for publication of this notice in 
the Federal Register.

    By the Commission.
Stacy L. Ruble,
Secretary. Vice Chairman Hammond dissenting.

List of Subjects in 39 CFR Part 3050

    Administrative practice and procedure, Reporting and recordkeeping 
requirements.

    For the reasons discussed in the preamble, the Commission proposes 
to amend Chapter III of title 39 of the Code of Federal Regulations as 
follows:

PART 3050--PERIODIC REPORTING

0
1. The authority citation for part 3050 continues to read as follows:

    Authority: 39 U.S.C. 503, 3651, 3652, 3653.s.

0
2. Amend Sec.  3050.21 by:
0
a. Revising paragraph (a),
0
b. Adding paragraph (f)(6),
0
c. Revising paragraph (j), and
0
d. Adding paragraphs (k), (l), (m), and (n).
    The additions and revisions read as follows:


Sec.  3050.21   Content of the Postal Service's section 3652 report.

    (a) No later than 90 days after the close of each fiscal year, the 
Postal Service shall submit a report to the Commission analyzing its 
costs, volume, revenue, rate, and service information in sufficient 
detail to demonstrate that all products during such year comply with 
all applicable provisions of title 39 of the United States Code. The 
report shall provide the items in paragraphs (b) through (n) of this 
section.
* * * * *
    (f) * * *
    (6) Provide financial or other supporting documentation that

[[Page 33885]]

demonstrates that noncompensatory market dominant negotiated service 
agreements improve the net financial position of the Postal Service 
over default rates or enhance the performance of mail preparation, 
processing, transportation, or other functions.
* * * * *
    (j) For market dominant and competitive products, provide a 
distribution breakdown of mail fees, including all underlying 
calculations and source workpapers;
    (k) For market dominant and competitive products, including 
negotiated service agreements, provide any third-party service 
performance results upon which any financial penalty or bonus is 
determined, and the amount of any forfeited revenue;
    (l) Provide all total workhour data and data sources showing 
workhour measurements by Labor Distribution Code;
    (m) For the Inbound Letter Post product, provide revenue, volume, 
attributable cost, and contribution data by Universal Postal Union 
country group and by shape for the preceding five fiscal years; and
    (n) Provide any other information that the Postal Service believes 
will help the Commission evaluate the Postal Service's compliance with 
the applicable provisions of title 39 of the United States Code.
0
3. Amend Sec.  3050.25 by revising paragraphs (c), (d), and (e) to read 
as follows:


Sec.  3050.25  Volume and revenue data.

* * * * *
    (c) Revenue, pieces, and weight by rate category and special 
service by quarter, within 40 days of the close of Quarters 1, 2, and 3 
of the fiscal year and 60 days after Quarter 4, but no later than the 
filing of reports filed pursuant to section 3050.40(a) or 3050.40(b);
    (d) Quarterly Statistics Report, including estimates by shape, 
weight, and indicia, within 40 days of the close of Quarters 1, 2, and 
3 of the fiscal year and 60 days after Quarter 4 but no later than the 
filing of reports filed pursuant to section 3050.40(a) or 3050.40(b); 
and
    (e) Billing determinants within 60 days of the close of Quarters 1, 
2, and 3 of the fiscal year and 90 days after Quarter 4.
0
4. Amend Sec.  3050.28 by revising paragraph (b), tables 1 and 2 in 
paragraph (b)(1), and paragraph (c) to read as follows:


Sec.  3050.28  Monthly and pay period reports.

* * * * *
    (b) Monthly Summary Financial Report on the 24th day of the 
following month, except that the reports for the last months of 
Quarters 1, 2, and 3 of the fiscal year shall be provided at the time 
that the Form 10-Q report is provided and the report for the last month 
of Quarter 4 of the fiscal year shall be provided at the time that the 
Form 10-K report is provided;
    (1) * * *

                          Table 1--USPS Monthly Financial Statement--Month, Fiscal Year
                                                  [$ millions]
----------------------------------------------------------------------------------------------------------------
                                       Current period                                Year-to-date
                       -----------------------------------------------------------------------------------------
                                                    % Plan   % SPLY                              % Plan   % SPLY
                         Actual    Plan     SPLY     Var      Var     Actual    Plan     SPLY     Var      Var
----------------------------------------------------------------------------------------------------------------
Revenue:
    Operating Revenue
    Other Revenue
Operating Expenses
    Personnel
     Compensation and
     Benefits
    Transportation
    Supplies and
     Services
    Other Services
Total Operating
 Expenses
New Operating Income
Interest Income
Interest Expense
Total Net Income
Other Operating
 Statistics
    Mail Volume
     (Millions)
        Total Market
         Dominant
         Volumes
        Total
         Competitive
         Product
         Volumes
Total Mail Volumes
Total Workhours
 (Millions)
Total Career Employees
Total Non-Career
 Employees
----------------------------------------------------------------------------------------------------------------


                            Table 2--Mail Volume and Mail Revenue--Month, Fiscal Year
                                                   [Thousands]
----------------------------------------------------------------------------------------------------------------
                                  Current period                                   Year-to-date
                 -----------------------------------------------------------------------------------------------
                      Actual           SPLY         % SPLY var.       Actual           SPLY         % SPLY var.
----------------------------------------------------------------------------------------------------------------
Market Dominant
 Products:
    First Class:
        Volume
        Revenue
    Periodicals:
        Volume

[[Page 33886]]

 
        Revenue
USPS Marketing
 Mail:
        Volume
        Revenue
    Package
     Services:
        Volume
        Revenue
    All Other
     Market
     Dominant
     Mail:
        Volume
        Revenue
Total Market
 Dominant
 Products:
        Volume
        Revenue
Total
 Competitive
 Products
        Volume
        Revenue
            Tota
             l
             Ope
             rat
             ing
             Rev
             enu
             e:
            Tota
             l
             Vol
             ume
----------------------------------------------------------------------------------------------------------------

* * * * *
    (c) National Consolidated Trial Balances and the Revenue and 
Expense Summary on the 24th day of the following month, except that the 
reports for the last month of Quarters 1, 2, and 3 of the fiscal year 
shall be provided at the time that the Form 10-Q report is provided and 
the report for the last month of Quarter 4 of the fiscal year shall be 
provided at the time that the Form 10-K report is provided;
* * * * *
0
5. Amend Sec.  3050.60 by revising paragraph (c) to read as follows:


Sec.  3050.60  Miscellaneous reports and documents.

* * * * *
    (c) The items listed in paragraph (b) of this section in electronic 
form;
* * * * *
[FR Doc. 2018-15326 Filed 7-17-18; 8:45 am]
 BILLING CODE 7710-FW-P