Authorization To Manufacture and Distribute Postage Evidencing Systems, 21774-21777 [2020-07573]

Agencies

• Postal Service

[Federal Register Volume 85, Number 76 (Monday, April 20, 2020)]
[Rules and Regulations]
[Pages 21774-21777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07573]


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POSTAL SERVICE

39 CFR Part 501


Authorization To Manufacture and Distribute Postage Evidencing 
Systems

AGENCY: Postal ServiceTM.

ACTION: Final rule.

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SUMMARY: The Postal Service is amending its Postage Evidencing Systems 
regulations. These changes set forth the current procedure (which may 
be updated based upon changes to postal regulations) to become an 
authorized Postage Evidencing System (PES) provider. The changes also 
update or create new definitions, update all references of the Office 
of Payment Technology to the Office of Commercial Payment, and 
reorganize or reword certain provisions currently in the regulations 
for clarity.

DATES: Effective May 20, 2020.

FOR FURTHER INFORMATION CONTACT: Lisa H Arcari, Director, Commercial 
Payment, [email protected], 202-268-4270.

SUPPLEMENTARY INFORMATION: The Postal Service issued proposed revisions 
to 39 CFR part 501, set forth in the Federal Register on February 6, 
2020 (85 FR 6838). The proposal made several changes: (1) It introduced 
a PES Provider Applicant Guide, (2) it cleaned up some grammatical and 
formatting issues, and (3) it updated the contact information for the 
office of Commercial Payment, the successor organization to Payment 
Technology.
    One set of comments was received in response to the Federal 
Register Notice. The comments raised and the Postal Service's responses 
are summarized below.
    Industry comment: The final rule should clarify that modifications 
to the underlying substantive standards referenced in the Guide will 
continue to be made via publication in the Federal Register, including 
notice and opportunity for comment by affected stakeholders. The 
Intelligent Mail[supreg] Indicia Performance Criteria (IMIPC) will be 
controlled and distributed by the Commercial Payment group. The Guide 
should be updated in accordance with updates to other Postal 
Regulations, but substantive changes in requirements should not be 
communicated in the Guide.
    USPS response: The Postal Service agrees that the Guide, although 
it sets forth the methodology for a PES provider applicant to be 
approved as a PES provider, is not a replacement for regulations 
governing application. The

[[Page 21775]]

Guide will be updated to reflect changes in postal regulations, which 
changes are made by publication in the Federal Register.
    Industry comment: The final rule should clarify that the Guide only 
applies to new applicants; current PES providers do not need to 
reapply.
    USPS response: The Postal Service disagrees with this comment, to 
an extent. The Domestic Mail Manual (DMM) contains a list of authorized 
PES Providers. The final rule states that the new Guide only applies to 
`Any person or entity seeking authorization.' Since the current 
authorized PES Providers already have authorization, it is clear they 
do not need to reapply at this time. However, should their existing 
authorization expire or be terminated, any new or renewal application 
would be subject to the Guide.
    Industry comment: The final rule should clarify that the final 
approval authority to become a PES provider is the Vice President of 
Mail Entry and Payment Technology (MEPT).
    USPS response: The Postal Service believes that the final rule 
already communicates this clearly. No changes were made to the final 
rule in response to this comment.
    Industry comment: The final rule and the Guide should be revised to 
require that access to the IMIPC is conditioned on a Non-disclosure 
agreement with the Postal Service.
    USPS response: The Postal Service agrees that to the extent that a 
PES provider applicant seeks to obtain access to the IMIPC, such access 
should only be granted after the applicant enters into a Non-disclosure 
agreement with the Postal Service permitting such access and the usage 
thereof.
    Industry comment: The definition of Postal terms for Postage meter 
and PC Postage products should be updated.
    USPS response: The Postal Service agrees; both definitions have 
been updated in the final rule.
    Industry comment: Section 501.14(8) has an inadvertent typo with an 
extra semicolon between `postage' and `printing dies'. The reference to 
printing dies can be removed entirely given the current digital form of 
printing technology.
    USPS response: The Postal Service agrees; reference to `printing 
dies' has been removed in the final rule.

List of Subjects in 39 CFR Part 501

    Administrative practice and procedure, Postal Service.

    For the reasons stated in the preamble, the Postal Service amends 
39 CFR part 501 as follows:

PART 501--AUTHORIZATION TO MANUFACTURE AND DISTRIBUTE POSTAGE 
EVIDENCING SYSTEMS

0
1. The authority citation for part 501 continues to read as follows:

    Authority:  5 U.S.C. 552(a); 39 U.S.C. 101, 401, 403, 404, 410, 
2601, 2605; Inspector General Act of 1978, as amended (Pub. L. 95-
452, as amended); 5 U.S.C. App. 3.


0
2. Amend Sec.  501.1 by revising paragraphs (a), (b) and (c) and by 
adding paragraph (h) to read as follows:


Sec.  501.1  Definitions.

    (a) Postage Evidencing Systems regulated by part 501 produce 
evidence of prepayment of postage by any method other than postage 
stamps and permit imprints. A Postage Evidencing System is a device or 
system of components that a customer uses to generate and print 
evidence that postage required for mailing has been paid. Postage 
Evidencing Systems print indicia, such as information-based indicia or 
intelligent mail indicia to indicate postage payment. They include but 
are not limited to postage meters and PC Postage systems.
    (b) A postage meter is a USPS-approved Postage Evidencing System 
that uses a postage security device (PSD) to account for postage 
purchased and generates evidence of such purchased postage in the form 
of an indicium, where the PSD is co-located with the printing of the 
indicium. The term meter as used in this part refers to a postage 
meter.
    (c) PC Postage products are USPS-approved Postage Evidencing 
Systems that use a computer, tablet, or similar device as a user 
interface. PC Postage products may use the internet to download postage 
to the computer, tablet or similar device. PC Postage products use a 
mechanism to account for postage that is remote from the printing of 
the indicium.
* * * * *
    (h) Postal Requirements include the Code of Federal Regulations, 
title 39 part 501, the Domestic Mail Manual (DMM), the International 
Mail Manual (IMM), and the Intelligent Mail Indicia Performance 
Criteria (IMIPC).

0
3. Revise Sec.  501.2 to read as follows:


Sec.  501.2  Postage Evidencing System provider authorization.

    (a) The Postal Service considers Postage Evidencing Systems and 
their respective infrastructure to be essential to the exercise of its 
specific powers to prescribe postage and provide evidence of payment of 
postage under 39 U.S.C. 404(a)(2) and (4).
    (b) Due to the potential for adverse impact upon Postal Service 
revenue, the following activities may not be engaged in by any person 
or entity without prior, written approval of the Postal Service. 
Persons or entities that perform these activities are referred to 
collectively as Postage Evidencing System (PES) Providers in this 
section.
    (1) Manufacturing and/or distributing any Postage Evidencing System 
that generates or produces U.S. postage.
    (2) Repairing, refurbishing, remanufacturing, modifying, or 
destroying any component of a Postage Evidencing System that accounts 
for or authorizes the printing of U.S. postage.
    (3) Owning or operating an infrastructure that maintains operating 
data for the production of U.S. postage, or accounts for U.S. postage 
purchased for distribution through a Postage Evidencing System.
    (4) Owning or operating an infrastructure that maintains operating 
data that is used to facilitate registration with the Postal Service of 
customers of a Postage Evidencing System.
    (c) Approval to become a Postage Evidencing System Provider:
    (1) Any person or entity seeking authorization to become a PES 
Provider must submit a request to the Postal Service in writing to the 
Office of Commercial Payment. Once the request is received, the Office 
of Commercial Payment will provide the applicant the PES Provider 
Applicant Guide and the Intelligent Mail Indicia Performance Criteria 
(IMIPC), the IMIPC setting forth PES and indicia specification and 
requirements. The contact information for Commercial Payment can be 
found in Sec.  501.2(f).
    (2) The PES Provider Applicant Guide sets forth the process for 
applicants seeking to become a PES Provider. An applicant is subject to 
the rules in both that Guide and the IMIPC, while they are attempting 
to gain approval to become a PES Provider. Although the Guide sets 
forth the methodology for a PES provider applicant to be approved as a 
PES provider, it is not a replacement for postal regulations; such 
regulations govern the process. As such, the Guide will be updated to 
reflect changes in postal regulations.
    (3) An applicant applying for approval to become a PES Provider 
must undergo three (3) primary phases which are laid out in the PES 
Provider Applicant Guide: Applicant Introduction and Letter of Intent; 
Applicant Qualification and Registration; and PES Evaluation. Each 
phase includes prerequisites to enter the phase, deliverables expected 
during that phase, and a requirement of written

[[Page 21776]]

approval by the Office of Commercial Payment to allow the process to 
continue to the next phase. Please note that, to the extent that a PES 
provider applicant seeks to obtain access to the IMIPC, such access 
should only be granted after the applicant enters into a Non-disclosure 
agreement with the Postal Service permitting such access and the usage 
thereof.
    (4) To the extent that an applicant reaches the PES Evaluation 
phase, then the applicant is governed by Postal Requirements, the 
IMIPC, and the PES Provider Applicant Guide even though not yet an 
authorized PES Provider.
    (5) The Postal Service, in its sole discretion, may approve an 
applicant. In reaching its approval determination, the Postal Service 
may review factors and make determinations including, but not limited 
to, satisfactory evidence of the applicant's integrity and financial 
responsibility, commitment to comply with the Postal Requirements, and 
a determination that disclosure to the applicant of Postal Service 
customer, financial, or other data of a commercial nature necessary to 
perform the function for which approval is sought would be appropriate 
and consistent with good business practices within the meaning of 39 
U.S.C. 410(c)(2).
    (6) No applicant is considered a PES Provider until the Postal 
Service issues a final written decision. This is accomplished by the 
provision of a final approval of the applicant's status as an 
authorized PES Provider in writing from the Vice President of Mail 
Entry & Payment Technology (or successor). The applicant is approved in 
writing to engage in the function(s) for which authorization was sought 
and approved.
    (d) To the extent that any person or entity is approved to be a PES 
Provider, such PES Provider must adhere to the Postal Requirements.
    (e) As a condition of obtaining authorization under this section, 
the PES Provider's facilities used for the manufacture, distribution, 
storage, resetting, repair, refurbishment, remanufacturing, modifying, 
or destruction of a Postage Evidencing System and all facilities 
housing infrastructure supporting Postage Evidencing Systems will be 
subject to unannounced inspection by representatives of the Postal 
Service. If such facilities are outside the continental United States, 
the PES Provider will be responsible for all reasonable and necessary 
travel-related costs incurred by the Postal Service to conduct the 
inspections. Travel-related costs are determined in accordance with 
Postal Service Handbook F-15, Travel and Relocation. At its discretion, 
the Postal Service may continue to fund routine inspections outside the 
continental United States as it has in the past, provided the costs are 
not associated with particular security issues related to a PES 
Provider's Postage Evidencing System or supporting infrastructure, or 
with the start-up or implementation of a new plant or of a new or 
substantially changed manufacturing process.
    (1) When conducting an inspection outside the continental United 
States, the Postal Service will make every effort to combine the 
inspection with other inspections in the same general geographic area 
in order to enable affected PES Providers to share the costs. The 
Postal Service team conducting such inspections will be limited to the 
minimum number necessary to conduct the inspection. All air travel will 
be contracted for at the rates for official government business, when 
available, under such rules respecting class of travel as apply to 
those Postal Service representatives inspecting the facility at the 
time the travel occurs.
    (2) If political or other impediments prevent the Postal Service 
from conducting security evaluations of Postage Evidencing System 
facilities in foreign countries, Postal Service approval of the 
activities conducted in such facilities may be suspended until such 
time as satisfactory inspections may be conducted.
    (f) The Postal Service office responsible for administration of 
this part is the Office of Commercial Payment or successor 
organization. All submissions to the Postal Service required or invited 
by this part are to be made to this office in person or via mail to 475 
L'Enfant Plaza SW, Room 3500, Washington, DC 20260-0004.

0
4. Amend Sec.  501.3 by
0
a. Removing paragraph (c);
0
b. Redesignating paragraphs (d) and (e) as paragraphs (c) and (d), 
respectively; and
0
c. Revising newly redesignated paragraph (c).
    The revision reads as follows:


Sec.  501.3  Postage Evidencing System provider qualification.

* * * * *
    (c) Protect customer information by not causing or permitting the 
data to be released other than for the operation of a third-party 
location. The provider bears the ultimate responsibility to ensure 
customer information will not be compromised at any domestic or off 
shore locations (including third-party locations), and bears the 
responsibility to ensure its agents or contractors operating domestic 
or off shore locations do not compromise this information. The provider 
shall notify its customer that data relating to its systems is being 
housed at a third-party location, and shall provide a copy thereof to 
the Postal Service of such notice to its customers. To the extent that 
any unauthorized release takes place, the provider shall notify the 
Postal Service immediately upon discovery of any unauthorized use or 
disclosure of data or any other breach or improper disclosure of data 
of this agreement by the provider (as well as its agent operating the 
third-party location) and will cooperate with the Postal Service in 
every reasonable way to help the Postal Service regain possession of 
the data and prevent its further unauthorized use or disclosure. In the 
event that the Postal Service cannot regain possession of the data or 
prevent its further unauthorized use or disclosure, the provider shall 
indemnify the Postal Service from damages resulting from its (or such 
third-party) actions.
* * * * *

0
5. Amend Sec.  501.6 by revising paragraphs (c)(1), (2), and (3) and 
(e) to read as follows:


Sec.  501.6  Suspension and revocation of authorization.

* * * * *
    (c) * * *
    (1) Upon determination by the Postal Service that a provider is in 
violation of provisions of this part, or that its Postage Evidencing 
System poses an unreasonable risk to postal revenue, Commercial 
Payment, acting on behalf of the Postal Service, shall issue a written 
notice of proposed suspension citing the specific conditions or 
deficiencies for which suspension of authorization to manufacture and/
or distribute a specific Postage Evidencing System or class of Postage 
Evidencing Systems may be imposed. Except in cases of willful 
violation, the provider shall be given an opportunity to correct 
deficiencies and achieve compliance with all requirements within a time 
limit corresponding to the potential risk to postal revenue.
    (2) In cases of willful violation, or if the Postal Service 
determines that the provider has failed to correct cited deficiencies 
within the specified time limit, Commercial Payment shall issue a 
written notice of suspension setting forth the facts and reasons for 
the decision to suspend, and the effective date if a written defense is 
not presented as provided in paragraph (d) of this section.

[[Page 21777]]

    (3) The notice shall also advise the provider of its right to file 
a response under paragraph (d) of this section. If a written response 
is not presented in a timely manner the suspension may go into effect. 
The suspension shall remain in effect for ninety (90) calendar days 
unless revoked or modified by Commercial Payment.
* * * * *
    (e) After receipt and consideration of the defense, Commercial 
Payment shall advise the provider of its decision, and the facts and 
reasons for it. The decision shall be effective upon receipt unless it 
provides otherwise. The decision shall also advise the provider that it 
may be appealed within thirty (30) calendar days of receipt (unless a 
shorter time frame is deemed necessary). If an appeal is not filed in a 
timely manner, the decision of Commercial Payment shall become a final 
decision of the Postal Service. The appeal may be filed with the Chief 
Information Officer of the Postal Service and must include all 
supporting evidence and state with specificity the reasons the provider 
believes that the decision is erroneous. The decision of the Chief 
Information Officer shall constitute a final decision of the Postal 
Service.
* * * * *

0
6. Amend Sec.  501.7 by revising paragraph (a) to read as follows:


Sec.  501.7  Postage Evidencing System requirements.

    (a) A Postage Evidencing System submitted to the Postal Service for 
approval must meet the requirements of the Intelligent Mail Indicia 
Performance Criteria (IMIPC) published by Commercial Payment. Copies of 
the current IMIPC may be requested via mail to the address in Sec.  
501.2(f).
* * * * *

0
7. Amend Sec.  501.8 by revising paragraph (a) to read as follows:


Sec.  501.8  Postage Evidencing System test and approval.

    (a) To receive Postal Service approval, each Postage Evidencing 
System must be submitted by the provider and evaluated by the Postal 
Service in accordance with the Intelligent Mail Indicia Performance 
Criteria (IMIPC) published by Commercial Payment. Copies of the current 
IMIPC may be requested via mail to the address in Sec.  501.2(f). These 
procedures apply to all proposed Postage Evidencing Systems regardless 
of whether the provider is currently authorized by the Postal Service 
to distribute Postage Evidencing Systems. All testing required by the 
Postal Service will be an expense of the provider.
* * * * *

0
8. Amend Sec.  501.10.by revising paragraphs (a) introductory text and 
(b) to read as follows:


Sec.  501.10  Postage Evidencing System modifications.

    (a) An authorized provider must receive prior written approval from 
the director, Commercial Payment, of any and all changes made to a 
previously approved Postage Evidencing System. The notification must 
include a summary of all changes made and the provider's assessment as 
to the impact of those changes on the security of the Postage 
Evidencing System and postage funds. Upon receipt of the notification, 
Commercial Payment will review the summary of changes and make a 
decision regarding the need for the following:
* * * * *
    (b) Upon receipt and review of additional documentation and/or test 
results, Commercial Payment will issue a written acknowledgement and/or 
approval of the change to the provider.

0
9. Amend Sec.  501.14 by revising paragraphs (c) introductory text, 
(c)(8), and (d) introductory text to read as follows:


Sec.  501.14  Postage Evidencing System inventory control processes.

* * * * *
    (c) To ensure adequate control over Postage Evidencing Systems, 
plans for the following subjects must be submitted for prior approval, 
in writing, to the Office of Commercial Payment.
* * * * *
    (8) Postage meter destruction--when required, the postage meter 
must be rendered completely inoperable by the destruction process, and 
associated components must be destroyed. Manufacturers or distributors 
of meters must submit the proposed destruction method; a schedule 
listing the postage meters to be destroyed, by serial number and model; 
and the proposed time and place of destruction to Commercial Payment 
for approval prior to any meter destruction. Providers must record and 
retain the serial numbers of the meters to be destroyed and provide a 
list of such serial numbers in electronic form in accordance with 
Postal Service requirements for meter accounting and tracking systems. 
Providers must give sufficient advance notice of the destruction to 
allow Commercial Payment to schedule observation by its designated 
representative who shall verify that the destruction is performed in 
accordance with a Postal Service-approved method or process. To the 
extent that the Postal Service elects not to observe a particular 
destruction, the provider must submit a certification of destruction, 
including the serial number(s), to the Postal Service within 5 calendar 
days of destruction. These requirements for meter destruction apply to 
all postage meters, Postage Evidencing Systems, and postal security 
devices included as a component of a Postage Evidencing System.
    (d) If the provider uses a third party to perform functions that 
may have an impact upon a Postage Evidencing System (especially its 
security), including, but not limited to, business relationships, 
repair, maintenance, and disposal of Postage Evidencing Systems, 
Commercial Payment must be advised in advance of all aspects of the 
relationship, as they relate to the custody and control of Postage 
Evidencing Systems and must specifically authorize in writing the 
proposed arrangement between the parties.
* * * * *

Joshua J. Hofer,
Attorney, Federal Compliance.
[FR Doc. 2020-07573 Filed 4-17-20; 8:45 am]
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