[Federal Register Volume 83, Number 22 (Thursday, February 1, 2018)]
[Rules and Regulations]
[Pages 4585-4591]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01810]


=======================================================================
-----------------------------------------------------------------------

POSTAL REGULATORY COMMISSION

39 CFR Part 3010

[Docket No. RM2016-6; Order No. 4393]


Mail Preparation Changes

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Commission adopts a final rule concerning mail preparation 
changes. This Order amends an existing Commission rule.

DATES: Effective March 5, 2018.

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

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Background
III. Review of Proposed Rule and Analysis of Comments
IV. Ordering Paragraphs

I. Introduction

    In this Order, the Commission adopts a final rule concerning mail 
preparation changes. The final rule adopted by this Order amends an 
existing Commission rule located at 39 CFR part 3010.\1\ The rule as 
adopted incorporates suggestions presented by commenters that include 
slight modifications to the rule as proposed, but do not materially 
affect its substance.
---------------------------------------------------------------------------

    \1\ On December 1, 2017, the Commission issued a Notice of 
Proposed Rulemaking in Docket No. RM2017-3 that proposed replacing 
provisions of 39 CFR part 3010 with new rules in new subparts. The 
Commission issues this rule in part 3010 and any changes to the 
rule's location in the CFR will be made in the Docket No. RM2017-3 
rulemaking. See Docket No. RM2017-3, Notice of Proposed Rulemaking 
for the System for Regulating Rates and Classes for Market Dominant 
Products, December 1, 2017 (Order No. 4258). The notice of proposed 
rulemaking was published in the Federal Register on December 11, 
2017. See 82 FR 58280.
---------------------------------------------------------------------------

II. Background

    The Commission is charged with enforcing its price cap rules, which 
require that the Postal Service make reasonable adjustments to its 
billing determinants to account for the effects of classification 
changes such as the introduction, deletion, or redefinition of rate 
cells. See 39 CFR 3010.23(d)(2). Under Sec.  3010.23(d)(2), these 
classification changes can include changes to mail preparation 
requirements made by the Postal Service. In Docket No. R2013-10R, the 
Commission articulated a standard governing when mail preparation 
changes result in the deletion or redefinition of rate cells under 
Sec.  3010.23(d)(2) of the price cap rules.\2\
---------------------------------------------------------------------------

    \2\ Docket No. R2013-10R, Order Resolving Issues on Remand, 
January 22, 2016 (Order No. 3047). For a complete history of the 
underlying proceedings and the facts regarding the change to Full 
Service Intelligent Mail barcoding (IMb) which precipitated the need 
for a standard, see Docket No. R2013-10, Order on Price Adjustments 
for Market Dominant Products and Related Mail Classification 
Changes, November 21, 2013, at 5-35 (Order No. 1890); Order No. 
3047; Docket No. R2013-10R, Order Resolving Motion for 
Reconsideration of Commission Order No. 3047, July 20, 2016 (Order 
No. 3441).
---------------------------------------------------------------------------

    After setting forth the standard applied to mail preparation 
requirements, the Commission instituted the present rulemaking ``to 
create rules for the process and timeframes for the regulation of mail 
preparation requirement changes.'' \3\ As discussed below, the 
Commission issued an initial proposed rule that was

[[Page 4586]]

later withdrawn and replaced with a revised proposed rule.
---------------------------------------------------------------------------

    \3\ Order No. 3047 at 21. See also id. at 59 (``The Commission 
intends to also issue a rulemaking to establish procedural rules 
setting forth the process governing mail preparation changes that 
require price cap compliance.'').
---------------------------------------------------------------------------

A. Initial Notice of Proposed Rulemaking

    On January 22, 2016, the Commission published a notice of proposed 
rulemaking (Initial NPR) that proposed a procedural rule for issues 
concerning compliance with the price cap rules for mail preparation 
changes.\4\ The Commission identified a need to amend its rules to 
``ensure that the Postal Service properly accounts for the rate effects 
of mail preparation changes'' under Sec.  3010.23(d)(2). Order No. 3048 
at 1.
---------------------------------------------------------------------------

    \4\ The Initial NPR was published in the Federal Register on 
February 1, 2016. See 81 FR 5085. Notice of Proposed Rulemaking on 
Motions Concerning Mail Preparation Changes, January 22, 2016, at 1-
2 (Order No. 3048).
---------------------------------------------------------------------------

    The Initial NPR proposed adding a new section under the 
Commission's existing general motion rule that would create a separate 
motion procedure dedicated to compliance issues for mail preparation 
changes. Id. at 3-4. The initial proposed rule defined motions 
concerning mail preparation changes as ``challenges to instances where 
an announced mail preparation change does not contain a Postal Service 
indication that the change has a rate effect requiring compliance with 
Sec.  3010.23(d)(2). . . .'' Id. at 7. The Initial NPR proposed 
parameters for motions specific to mail preparation changes, including 
a filing deadline and grounds required for the motion. Specifically, 
the Initial NPR proposed that any motions concerning mail preparation 
changes were to be filed within 30 days of ``actual or constructive 
notice of the implementation date of the change'' and were to contain a 
description of the change at issue and the ``grounds by which the mail 
preparation change must comply with Sec.  3010.23(d)(2). . . .'' Id. 
The filing deadline would be triggered by written notice of the 
implementation date of the mail preparation change by the Postal 
Service. Id. at 3-4. The Postal Service would be required to 
``affirmatively designate only those changes that require compliance 
with Sec.  3010.23(d)(2)'' when it provided written notice of 
publication of the mail preparation change. Id. at 4.
    Although the Initial NPR reiterated the Commission's previous 
explanation that the ``Postal Service has the affirmative burden to 
determine whether a mail preparation change requires compliance with 
Sec.  3010.23(d)(2) under the Commission's standard in Order No. 
3047,'' the initial rule did not propose including a statement of this 
affirmative burden in the rule.\5\
---------------------------------------------------------------------------

    \5\ The revised notice of proposed rulemaking (Revised NPR) was 
published in the Federal Register on March 31, 2017. See 82 FR 
16015. Revised NPR, March 27, 2017, at 1-2, 7 (Order No. 3827).
---------------------------------------------------------------------------

    In proposing the initial rule, the Commission explained that the 
``primary purpose of the rulemaking is to ensure that the Postal 
Service properly accounts for the rate effects of mail preparation 
changes under Sec.  3010.23(d)(2) of this chapter in accordance with 
the Commission's standard articulated in Order No. 3047.'' Order No. 
3048 at 1-2. The Commission stated that it also intended to 
``standardize the procedure and timeframe by which interested parties 
must file a motion with the Commission when they contend that a mail 
preparation change has a rate effect requiring compliance with the 
price cap rules.'' Id. at 2. The Initial NPR was intended to provide 
``an avenue for interested parties to raise the possibility that the 
Postal Service may have erred by failing to account for the price cap 
impact of a mail preparation change.'' Id. at 5.
    In response to the Initial NPR, the Commission received numerous 
comments that raised questions about the utility of creating a separate 
procedural rule for motions concerning mail preparation changes. 
Commenters submitted concerns over how a separate motion procedure 
would affect the Commission's authority and responsibility to 
independently review mail preparations for compliance with the price 
cap rules.\6\ Commenters also raised questions concerning the potential 
redundancy of the proposed rule in light of the right to challenge the 
Postal Service's compliance with the price cap rules in existing 
proceedings before the Commission. See id. at 3. Commenters also 
suggested modifications to the various procedural components set forth 
in the initial proposed rule, raising concerns with the notice 
provisions and the filing deadline. See id. at 3-5.
---------------------------------------------------------------------------

    \6\ Order No. 3827 at 2-3. The Commission refers to its response 
to the comments in Order No. 3827.
---------------------------------------------------------------------------

    The Postal Service did not share the concerns of the majority of 
the commenters. Instead, it suggested adding additional sections to the 
proposed motion procedure, including discovery, meet and confer 
requirements, and deadlines for resolving motions. Id. at 5-6.

B. Revised Notice of Proposed Rulemaking

    On March 27, 2017, the Commission issued a revised notice of 
proposed rulemaking (Revised NPR) which, in response to comments on the 
Initial NPR, withdrew the initial proposed rule and proposed a revised 
rule.
    The Revised NPR proposed adding a new section to the price cap 
rules, Sec.  3010.23(d)(5). The revised proposed rule creates a 
standardized reporting process for mail preparation changes and 
memorializes the Postal Service's burden to demonstrate compliance with 
the price cap. Specifically, the revised proposed rule requires that 
the Postal Service publish notice of all mail preparation changes in a 
single, publicly available source. Order No. 3827 at 13-14. Under the 
revised rule, the Postal Service must file notice with the Commission 
designating the source it will use to provide public notice. Id. The 
revised proposed rule also requires the Postal Service to affirmatively 
state whether or not the mail preparation change requires compliance 
with Sec.  3010.23(d)(2). Id. If the Postal Service's determination of 
price cap compliance is raised, the Postal Service is required to 
demonstrate, by a preponderance of the evidence, that the mail 
preparation change at issue does not require compliance with Sec.  
3010.23(d)(2).
    The revisions to the rule were made ``to better target the specific 
goal of ensuring that the Postal Service properly accounts for mail 
preparation requirement changes under Sec.  3010.23(d)(2).'' Id. at 11. 
The Revised NPR withdrew the initial proposal to create a separate 
motion procedure for issues concerning mail preparation changes. The 
Commission explained that it chose not to continue creating a separate 
motion procedure specific to compliance issues for mail preparation 
changes based on its review of existing procedures and practices and in 
response to commenter concerns. See id. at 8-11. The Commission 
requested comments in response to the Revised NPR.
    The Postal Service, the Public Representative, the Association for 
Postal Commerce (PostCom), and the National Postal Policy Council, the 
National Association of Presort Mailers, and the Association for Mail 
Electronic Enhancement (collectively NPPC et al.) submitted comments in 
response to the Revised NPR.\7\
---------------------------------------------------------------------------

    \7\ Comments of the National Postal Policy Council, the National 
Association of Presort Mailers, and the Association for Mail 
Electronic Enhancement, May 1, 2017 (NPPC et al. Comments); Public 
Representative Comments on Revised Notice, May 1, 2017 (PR 
Comments); United States Postal Service Comments on Proposed Rules 
for Motions Concerning Mail Preparation Changes, May 1, 2017 (Postal 
Service Comments); Comments of the Association for Postal Commerce, 
May 1, 2017 (PostCom Comments).

---------------------------------------------------------------------------

[[Page 4587]]

III. Review of Proposed Rule and Analysis of Comments

    In this section, parts of the revised proposed rule that will be 
finalized are identified, briefly outlined, and comments or issues 
relating to the rule are discussed and analyzed.

A. Publication Requirement

    The rule sets forth a requirement that the Postal Service publish 
notice of all mail preparation changes in a single, publicly available 
source. See Order No. 3827 at 13. The Postal Service shall file notice 
with the Commission of the single source it will use to publish notice 
of all mail preparation changes. Id. The publication requirement also 
requires an affirmative designation of whether or not the change will 
be subject to Sec.  3010.23(d)(2). Id. The Commission analyzes and 
responds to comments relevant to the publication requirement.
    In response to both the Initial and Revised NPR, commenters 
generally expressed concern that it is difficult to monitor the 
multiple sources used by the Postal Service to provide notice of mail 
preparation changes. See id. at 6-7. The multiple sources of 
publication make it ``more difficult to know whether the real effects 
of mail preparation changes affect the price cap.'' \8\ Numerous 
commenters requested that the Commission direct the Postal Service to 
identify a single publication where all mail preparation changes will 
be published. Id. Requiring single source publication would allow both 
mailers and the Commission ``to more easily monitor mail preparation 
changes for price cap compliance'' and alleviate the need for a 
separate motion procedure. Id.
---------------------------------------------------------------------------

    \8\ Order No. 3827 at 6 (citing Comments of the National Postal 
Policy Council, the National Association of Presort Mailers, and the 
Association for Mail Electronic Enhancement, September 2, 2016, at 5 
(Initial NPPC et al. Comments)).
---------------------------------------------------------------------------

    In their comments to the Initial NPR, NPPC et al. supported single 
source publication of all mail preparation changes. Initial NPPC et al. 
Comments at 5. In their comments on the Revised NPR, NPPC et al. find 
that the revised proposed rule represents a substantial improvement 
over the initial proposed motion procedure and is an appropriate 
response to its concerns. NPPC et al. Comments at 2. NPPC et al. state 
that the publication requirement ``will promote clarity and efficiency 
by having the Postal Service post all of its mailing regulation changes 
in one place.'' Id. They state that the publication requirement should 
``greatly help the Commission and mailers keep track of mailing 
regulation changes between market-dominant pricing adjustments.'' Id.
    In its comments to the Initial NPR, PostCom proposed directing 
``the Postal Service to identify a publication in which all mail 
preparation changes will be published.'' \9\ In its comments on the 
Revised NPR, PostCom notes that the proposed rule does not define the 
term ``mail preparation change'' and contends that ``[w]hile there is 
nothing inherently problematic with failing to define this term, it 
does create some uncertainty.'' PostCom Comments at 1. PostCom 
specifically notes its concern that the Postal Service would decline to 
publish notice of a mail preparation change because it could determine 
the change does not relate to ``mail preparation.'' Id. at 1-2. In 
light of this concern, PostCom suggests that the Commission clarify in 
the final rule that the Commission ``will still hear challenges to 
changes that were not published in the specified source.'' Id. at 2.
---------------------------------------------------------------------------

    \9\ Comments of the Association for Postal Commerce, September 
2, 2016, at 5 (Initial PostCom Comments).
---------------------------------------------------------------------------

    With respect to PostCom's concern that the Postal Service may 
attempt to avoid price cap compliance by failing to classify a change 
as a mail preparation change and, as a result, fail to provide the 
requisite notice, the Commission submits that its existing procedures 
provide adequate recourse to deal with any issues concerning challenges 
to changes that are not properly designated or published in the 
specified source. Therefore, the Commission declines to adopt PostCom's 
suggested change in the final rule.
    In comments to the Initial NPR, the Public Representative supported 
requiring the Postal Service file notice of mail preparation changes in 
a single source.\10\ He submitted that, because the mail preparation 
changes are not currently published in a single source, ``the 
Commission is not in a position to review the effects of each mail 
preparation change'' and this creates a gap in regulatory coverage. 
Initial PR Comments at 6-7. In comments to the Revised NPR, he states 
that the ``Commission's order should make clear whether one particular 
publication (as selected by the Postal Service) must provide 
notification of all mail preparation changes.'' PR Comments at 7. The 
Public Representative is correct that the Commission's proposed rule 
requires single source publication of all mail preparation changes, 
regardless of whether the changes are also noticed in additional 
sources. Therefore, the Commission modifies the final rule to clarify 
that the rule requires publication of all mail preparation changes in a 
single source as follows: ``The Postal Service shall file notice with 
the Commission of the single source it will use to provide published 
notice of all mail preparation changes.''
---------------------------------------------------------------------------

    \10\ Public Representatives Comments, September 2, 2016, at 6-7 
(Initial PR Comments).
---------------------------------------------------------------------------

    With respect to the publication requirement, the Postal Service 
contends that the ``Commission should decline to adopt the proposed 
`single source' publication requirement.'' Postal Service Comments at 
27. It states that it is ``unclear what procedural purpose would be 
served by these new requirements'' and that it ``already has strong 
business incentives to provide advance notice of upcoming changes, to 
help ensure that mailers can and will comply with any new requirements 
in a timely manner.'' Id. at 25, 26. The Postal Service outlines the 
many ways in which it communicates proposed changes to mail preparation 
requirements, including at conferences attended by various mailers, and 
sources such as the Postal Bulletin and the Federal Register. Id. at 
26. The Postal Service does not claim that it would be burdensome or 
difficult to provide notice of all mail preparation changes in one 
source; rather, it contends, ``[n]otice was not the source of the 
disagreement between the Postal Service, the Commission, and the 
mailers challenging the IMb requirements.'' Id. at 27. Further, it 
submits that no party has complained ``that its ability to dispute the 
price-cap effects of mail preparation requirement changes has been 
hampered by where and how the Postal Service gave notice of the 
relevant changes.'' Id. The Postal Service also contends that the rule 
requiring that the ``Postal Service publish all such changes in a 
`single source' serves no relevant purpose'' in the absence of a filing 
deadline for motions concerning mail preparation changes. Id. at 3.
    In response to the Postal Service's question regarding the purpose 
of the single source publication requirement, the rule will provide 
standardized, transparent reporting of mail preparation changes to 
ensure compliance with the price cap rules. This information will 
enable the Commission and the mailing community to properly monitor the 
changes to mail preparation

[[Page 4588]]

requirements for price cap compliance. This rulemaking was initiated to 
add a procedural component to the existing Commission rules in order to 
ensure that the Postal Service ``properly accounts for the rate effects 
of mail preparation changes under Sec.  3010.23(d)(2).'' Order No. 3048 
at 1. Although the Postal Service states that it has a business 
incentive to provide notice of mail preparation changes, price cap 
compliance is an obligation that exists independent of any business 
incentive the Postal Service may have for its actions. Without a 
standardized process for reporting changes to mail preparation 
requirements, it is difficult to monitor the multitude of mail 
preparation changes made by the Postal Service for purposes of ensuring 
price cap compliance.
    As previously stated, the Postal Service provides notice of changes 
to mail preparation requirements in many different sources including 
the ``Federal Register, Postal Bulletin, and on the RIBBS website.'' 
\11\ As the Postal Service admits that it already provides notice of 
changes to mail preparation requirements in a variety of formats and 
sources, it should not be burdensome for it to comply with the single 
source publication requirements. Further, this rule does not interfere 
with parties' current rights to challenge the Postal Service's 
compliance with the price cap rules in existing Commission proceedings 
and does not conflict with the Commission's responsibility to enforce 
the price cap rules.
---------------------------------------------------------------------------

    \11\ Order No. 3048 at 3. Since the publication of the Initial 
NPR, the RIBBS website has transitioned to PostalPro. See https://ribbs.usps.gov; https://postalpro.usps.com.
---------------------------------------------------------------------------

    Accordingly, the Commission finds it appropriate to maintain the 
publication requirement in the final rule, with the slight modification 
described above, because it will provide important notice to both the 
mailers and the Commission of mail preparation changes that could 
potentially implicate the price cap.
    In addition to publication in a single source, the rule requires 
the Postal Service to affirmatively designate whether or not the 
individual mail preparation change requires compliance with Sec.  
3010.23(d)(2). Although the Commission did not receive comments 
specific to this revised affirmative designation requirement in 
response to the Revised NPR, a similar requirement was proposed in the 
Initial NPR. The initial rule proposed requiring an affirmative 
designation for only those instances where the mail preparation change 
required compliance with the price cap rules. Comments received on that 
provision requested that the Commission modify the requirement to 
include an affirmative statement of whether or not the change required 
compliance with the price cap rules. Specifically, PostCom submitted 
that ``the Postal Service should provide an affirmative statement of no 
price impact, providing clarity for mailers and no additional burden on 
the Postal Service in light of their affirmative duty to make the 
initial determination.'' \12\ The Postal Service did not oppose the 
affirmative designation requirement in the Initial NPR and does not 
comment specifically on the modified designation requirement in the 
Revised NPR, except to state that it opposes all changes in the Revised 
NPR. Postal Service Comments at 5.
---------------------------------------------------------------------------

    \12\ Order No. 3827 at 7(citing Initial PostCom Comments at 7); 
see also e.g., Initial PR Comments at 6-8; Initial NPPC et al. 
Comments at 8-11.
---------------------------------------------------------------------------

    As it remains the Postal Service's obligation to review all of its 
mail preparation changes for compliance with Sec.  3010.23(d)(2), the 
rule maintains the requirement that the Postal Service provide an 
affirmative statement of its determination for each mail preparation 
change that it does or does not require compliance with Sec.  
3010.23(d)(2).

B. Evidentiary Burden

    In addition to the publication requirement, the rule provides that, 
``[i]f raised by the Commission or challenged by a mailer, the Postal 
Service must demonstrate, by a preponderance of the evidence, that a 
mail preparation change does not require compliance with paragraph 
(d)(2) of this section in any proceeding where compliance is at 
issue.'' Order No. 3827 at 13-14.
    In response to the Revised NPR, NPPC et al. submit that ``the 
revised proposal correctly makes clear that, if a question arises 
(which has seldom occurred over the past decade) the Postal Service 
bears the burden of proof that a mail preparation requirement change 
does not require compliance with section 3010.23(d)(2) of the 
Commission's rules.'' NPPC et al. Comments at 2. NPPC et al. contend 
that the ``revised proposal properly emphasizes that the Postal Service 
bears the obligation to comply with the price cap regulations and the 
Commission has primary enforcement authority.'' Id.
    The Postal Service objects to the evidentiary burden provision and 
submits that the burden of proof should be placed on the ``proponent 
that asserts that a particular mail preparation change constitutes a 
change in rates because it redefines a price cell.'' Postal Service 
Comments at 2, 15-16. It states that ``[i]f the Commission nonetheless 
decides to place the burden of proof on the Postal Service, the Postal 
Service will need to develop a process for obtaining cost information 
from potentially impacted mailers in order to determine the amount of 
compliance costs that a given change might impose on the mailing 
community.'' Id. at 2-3. The Postal Service further claims that the 
rule is unfairly ``assigning the burden of proof.'' Id. at 14.
    The Postal Service also claims that the evidentiary burden 
provision is unfair based on its pending appeal of the underlying 
substantive standard applying Sec.  3010.23(d)(2) to mail preparation 
changes. Id. at 19. The Postal Service maintains that the substantive 
standard set forth in Order No. 3047 and reiterated in Order No. 3441 
fails to provide clarity and that the Commission ``should suspend 
further work on the rulemaking until the DC Circuit has completed its 
review of the substantive standard.'' Id.
    The Postal Service claims that its complaints regarding confusion 
over application of the standard are relevant to the evidentiary 
standard set forth in the current rulemaking because it is confused 
over ``what, exactly, it is asking the Postal Service to prove.'' Id. 
at 22. The Postal Service repeats its substantive argument regarding 
its objections to the redefinition prong of the Commission's standard 
and states that it ``does not have comprehensive, verifiable 
information concerning the costs that any given mail preparation change 
will collectively impose on the impacted mailer.'' Id. at 22-23. It 
contends that as a result, the Commission is ``[p]assing the fact-
gathering burden onto the Postal Service'' and undermining the purpose 
of the rulemaking which it characterizes as establishing a `` 
`streamlined' process that would allow the Postal Service to implement 
mail preparation changes `with minimal disruption,' and that would not 
stay implementation of a mail preparation change that is the subject of 
a motion.'' Id. at 23.
    In response to the Postal Service's concerns over the evidentiary 
standard, the Commission submits that the evidentiary burden in the 
final rule is the same burden that has existed throughout the PAEA era. 
It is the Postal Service's responsibility to ``apply a good faith 
analysis to make the preliminary determination of whether a mail 
preparation requirement change will result in either the deletion or 
redefinition of a rate cell.'' Order No. 3047 at 20. If it determines 
that a mail preparation ``change has deleted or redefined a rate cell 
then it must comply

[[Page 4589]]

with the price cap rule under [Sec.  3010.23(d)(2)] and account for the 
rate effects of the change.'' Id. Accordingly, as explained in Order 
No. 3047, the Postal Service has the ``affirmative burden to determine 
whether changes to mail preparation have a rate effect with price cap 
implications in accordance with the Commission's standard and [Sec.  
3010.23(d)(2)].'' Id.
    In response to the Postal Service's contention that the 
Commission's failure to explain its standard and how it is to be 
applied to future cases should prevent the rulemaking from moving 
forward, the Commission points to its responses to the Postal Service's 
arguments concerning the substantive standard in Order Nos. 3047 and 
3441. In Order No. 3441, the Commission explained:

    Although the Postal Service claims that the Commission 
``fail[ed] to respond'' to the Court's holding that the Commission 
must explain its standard, the Commission provided a detailed 
explanation of the standard, parameters of the standard, and 
application of the standard. Order No. 3047 at 13-31. The Commission 
cannot provide explanation of abstract hypothetical changes the 
Postal Service may make in the future, as those issues and facts are 
not currently before the Commission. However, despite the fact that 
this standard is to be applied on a case-by-case basis, the 
Commission provided an explanation of how the standard would be 
applied, and set forth the parameters of such application so that 
the Postal Service and interested parties would have sufficient 
guidance in the future. See id. at 15-31.

Order No. 3441 at 11.
    The Commission has previously declined the Postal Service's motion 
to suspend this rulemaking proceeding pending resolution of the Postal 
Service's Petition for Review before the DC Circuit Court of 
Appeals.\13\ The Commission again declines to suspend this proceeding. 
As previously stated, the Postal Service's comments simply repeat ``the 
Postal Service's arguments in disagreement with the Commission's 
substantive standard articulated in Order Nos. 3047 and 3441 and [do] 
not provide any justification to warrant a stay.'' \14\ Moreover, the 
final rule will not be affected should the Court disagree with the 
Commission's standard articulated in Order No. 3047 because, should the 
standard be modified, the Court affirmed the Commission's authority to 
regulate mail preparation changes under the price cap rules and this 
rule sets a procedure for reporting and monitoring mail preparation 
changes. Order No. 3047 at 2, 9-10. The final rule sets up a procedure 
for reporting mail preparation changes, requires a designation of 
whether or not the change implicates the price cap, and formalizes the 
Postal Service's burden to comply with the price cap; the rule does not 
incorporate the substantive standard. In the event the standard is 
later modified, the rule would remain as a procedural mechanism to 
identify mail preparation changes that may have rate implications, and 
provide an avenue for parties to raise the issue of whether a change 
has such implications, and would apply regardless of the appellate 
outcome.
---------------------------------------------------------------------------

    \13\ Order Denying Motion, April 28, 2017 (Order No. 3879).
    \14\ Order No. 3879 at 2; see Postal Service Comments at 19-25.
---------------------------------------------------------------------------

    The Postal Service also points to Order No. 3827, the Revised NPR, 
and contends that statements made in that order contradict the 
Commission's standard set forth in Order No. 3047. The Postal Service 
submits that the Commission, in Order No. 3827, ``maintains that a mail 
preparation change is subject to the price cap when it functionally 
`eliminates' a rate.'' Postal Service Comments at 20. It claims that 
this statement contradicts the Commission's position on appeal and 
contends that ``the Commission's brief in the DC Circuit acknowledged 
that the elimination of a rate does not address whether mailers will be 
forced to pay higher prices.'' Id. Although this comment addresses the 
substance of the standard as opposed to the rule, the Commission 
responds in order to correct the Postal Service's mischaracterization. 
The functional elimination of a rate is a deletion under Sec.  
3010.23(d)(2) and once it is clear that a rate has been deleted; the 
effect of that deletion is calculated pursuant to the price cap rules. 
Section 3010.23(d)(2) represents the first step in a two-part process 
for price cap compliance; it determines whether the price cap applies. 
Once that determination has been made under Sec.  3010.23(d)(2), the 
remaining subparts of Sec.  3010.23(d) are utilized to determine the 
rate effect of the change. In this second step, depending on the 
calculation, the rate effect could represent a rate increase, decrease, 
or have zero effect.\15\ These facts are acknowledged by both Order No. 
3827 and the Commission's brief in the DC Circuit Court of Appeals and 
do not represent the contradiction claimed by the Postal Service.
---------------------------------------------------------------------------

    \15\ Order No. 3047 only concerned the first step in this two-
part process; whether a mail preparation change was subject to the 
price cap applying Sec.  3010.23(d)(2).
---------------------------------------------------------------------------

    Moreover, if the Postal Service is unsure how to apply Sec.  
3010.23(d)(2) to a mail preparation change in order to determine 
whether the price cap applies, it may file a motion with the 
Commission. As discussed in more detail below, see infra section 
III.C., the Commission's general motion practice rules provide an 
avenue for the Postal Service to request a determination from the 
Commission on whether a specific mail preparation change will trigger 
compliance with the price cap under Sec.  3010.23(d)(2).
    With respect to the Postal Service's concern that the lack of 
discovery will prevent it from satisfying its burden of proof, the 
Commission responds that discovery is always available in Commission 
proceedings where it is ``reasonably calculated to lead to admissible 
evidence during a proceeding.'' See, e.g., 39 CFR 3001.86. The 
Commission has traditionally declined to make discovery a right in 
proceedings, as it ``could take away the Commission's ability to adapt 
review procedures to fit the underlying issues presented.'' \16\ As the 
Commission explained in the Revised NPR, in the situation where 
compliance with the price cap is at issue ``the specific evidence 
presented will be largely fact dependent subject to the individual 
circumstances of the matter and the Postal Service's showing will be 
evaluated based on the evidence available at the time.'' Order No. 3827 
at 9. If issues arise that cannot be resolved within the existing 
procedures or require discovery, in line with past practice, the 
Commission retains the flexibility to tailor the proceedings 
accordingly to fit the issue and any party may file a request for 
discovery. Therefore, the Commission declines to modify the rule to 
institute discovery as a matter-of-right.
---------------------------------------------------------------------------

    \16\ Docket No. RM2008-4, Notice of Final Rule Prescribing Form 
and Content of Periodic Reports, April 16, 2009, at 12 (Order No. 
203).
---------------------------------------------------------------------------

    However, the Commission agrees with the Postal Service's suggestion 
that the rule also codify the requirement that a ``challenging party 
should provide relevant evidence to rebut the Postal Service's initial 
determination that the price cap does not apply.'' Postal Service 
Comments at 18. Parties requesting relief before the Commission based 
on the Postal Service's action or inaction must always provide the 
requisite support for their position. In addition to the rules 
prescribed for specific proceedings, Sec.  3001.11 of this chapter 
provides that the necessary contents of documents that do not pertain 
to a specific rule, regulation, or Commission Order. See 39 CFR 
3001.11(c). Accordingly, the

[[Page 4590]]

Commission modifies the final rule to include the contents necessary to 
challenge a Postal Service determination concerning a mail preparation 
change.
    The Public Representative also suggests a slight modification to 
the last sentence of the proposed rule to clarify that ``raised by the 
Commission'' is intended to cover situations where the Commission 
independently questions the Postal Service's compliance with Sec.  
3010.23(d)(2). PR Comments at 7. The Commission avers that the word 
``raised'' appropriately covers all situations where compliance issues 
for mail preparation changes may be questioned by the Commission. 
However, the Commission makes a slight modification to apply the term 
``raised'' to challenges by the Commission or any other party in order 
to simplify the language in the rule. Accordingly, final rule Sec.  
3010.23(d)(5) incorporates the slight modifications described.

C. Motion Procedure

    As explained above, the final rule creates a process where the 
Postal Service will be required to provide published notice of all mail 
preparation changes in a single source with a designation of whether or 
not each change requires compliance with Sec.  3010.23(d)(2). The rule 
also memorializes the Postal Service's burden to demonstrate compliance 
with the price cap rules for any issues arising from its designation of 
a mail preparation change. The rule does not create a separate motion 
procedure for issues concerning mail preparation changes as originally 
contemplated. The Commission analyzes and responds to comments relevant 
to the withdrawal of the motion procedure.
    NPPC et al. agree with the Commission that ``existing procedures 
should be sufficient to allow interested parties to raise issues of 
price cap compliance for mail preparation changes.'' NPPC et al. 
Comments at 3. However, NPPC et al. contend that the ``new procedures 
in the revised proposal will make recourse to the existing procedures 
rarely necessary.'' Id. PostCom submits that the ``revised procedures 
are superior to those previously proposed'' and ``commends the 
Commission for its thoughtful consideration of the comments submitted 
on its previous proposal.'' PostCom Comments at 1.
    As noted by the Public Representative, by withdrawing the motion 
procedure and associated filing deadline, the revised rule ``permits 
interested persons to challenge at any time a Postal Service's decision 
that a mail preparation change is not a rate change.'' PR Comments at 
6. He concludes that the rule will ``close a potentially significant 
regulatory gap in the original proposal'' by ``providing for a method 
to sufficiently alert the Commission and other interested parties about 
mail preparation changes.'' Id. at 4, 5. He notes that the revised 
location of the rule in part 3010 ``will be more readily appreciated 
and that interested parties will be more likely to recognize that they 
may challenge the Postal Service's conclusions regarding compliance 
with paragraph (d)(2) of that section.'' Id. at 6.
    The Postal Service seeks to have the Commission reinstate the 
initial proposed motion rule with modifications. Postal Service 
Comments at 2. Specifically, the Postal Service requests that the 
Commission reinstate:

    [T]he 30-day filing deadline for motions challenging the Postal 
Service's initial determination that a mail preparation change does 
not implicate the price cap, adopt the additional procedural 
provisions requested by the Postal Service in its initial Comments, 
and place the burden of proving `significant' mailer costs on the 
proponent that asserts that a particular mail preparation change 
constitutes a change in rates because it redefines a price cell.

Id. (internal citations omitted).
    The Postal Service contends that, without a separate procedure 
specific to mail preparation changes, it ``must rely on impacted 
mailers to come forward with evidence concerning the extent of 
compliance costs that a mail preparation change will impose, and 
without any defined process to insure that they do so accurately and 
completely.'' Id. at 23. It claims that ``[t]he Commission's proposal 
does not meaningfully address that problem.'' Id.
    The Postal Service claims that the Commission revised the proposed 
rule ``without meaningful explanation,'' yet it also acknowledges that 
the Commission explained that ``its existing procedures `should be 
sufficient to raise issues of price cap compliance for mail preparation 
changes,' that creating additional procedures would be `redundant,' and 
that the revised proposed rule is meant `to better target the specific 
goal of ensuring that the Postal Service properly accounts for mail 
preparation requirement changes under Sec.  3010.23(d)(2).' '' \17\ The 
Postal Service's specific complaints with respect to the Commission's 
explanation of the rule are that it fails to explain how ``the revised 
proposed rule comports with the statutory criteria and addresses the 
Postal Service's concerns about predictability, or acknowledges the 
Commission's prior statements explaining that the goal of this 
proceeding would be to allay those concerns.'' Postal Service Comments 
at 10.
---------------------------------------------------------------------------

    \17\ Id. at 9, 10 (citing Order No. 3827 at 10-11).
---------------------------------------------------------------------------

    The Postal Service also claims that the revised rule ``strips the 
rule of its critical procedural protection: the 30-day filing 
deadline.'' Id. at 9. The Postal Service explains that it is concerned 
that ``[i]f mailers are permitted to raise objections to mail 
preparation changes under the substantive standard at any time, 
regardless of how much time has passed since the Postal Service 
provided notice of the change or the stage of implementation that the 
change is in, then the present rulemaking completely fails to protect 
against unpredictable impacts on the Postal Service's pricing 
authority.'' Id. at 9-10.
    In response to the Postal Service's comments, the Commission 
declines to create a separate motion procedure for mail preparation 
changes because ``existing procedures available to interested parties 
should be sufficient to raise issues of price cap compliance for mail 
preparation changes.'' Order No. 3827 at 10. As the Commission 
previously explained:

    Mailers may notify the Commission using the general motion 
procedures set forth in Sec.  3001.21 of this chapter if they 
disagree with the Postal Service's determination of compliance with 
Sec.  3010.23(d)(2). The rules under Sec.  3001.21 of this chapter 
require motions to ``set forth with particularity the ruling or 
relief sought, the grounds and basis therefore, and the statutory or 
other authority relied upon . . .'' Accordingly, any motions filed 
under Sec.  3001.21 of this chapter concerning mail preparation 
changes shall provide all information the mailers have to rebut the 
Postal Service's determination, consistent with the Commission's 
standard set forth in Order No. 3047.

Id. Moreover, as the rule relates to ensuring that the Postal Service 
is complying with the price cap rules, it is in line with the 
objectives and factors of the PAEA.
    In response to the Postal Service's concern that it would be 
subject to late objections to its determination that a change does not 
impact the price cap, the Postal Service may file a motion with the 
Commission and ``seek a determination from the Commission [on the price 
cap impact of the change] using the procedures set forth under Sec.  
3001.21 of this chapter prior to implementation of the change.'' Id. at 
9. Therefore, both mailers and the Postal Service may use existing 
procedures to resolve issues concerning the price cap impact of a mail 
preparation change.
    In response to the Postal Service's contention that the revised 
rule ignores

[[Page 4591]]

the primary reason for instituting the rulemaking, the main purpose of 
the rule was to ``ensure that the Postal Service properly accounts for 
the rate effects of mail preparation changes under Sec.  3010.23(d)(2) 
of this chapter in accordance with the Commission's standard 
articulated in Order No. 3047.'' Order No. 3048 at 1-2. In 
accomplishing that goal, the Commission initially sought to create a 
more efficient process that improved upon existing procedures by 
proposing a new motion procedure specific to compliance issues for mail 
preparation changes. However, based on its review of comments and 
further analysis, the Commission determined that any additional motion 
rule would add potential inefficient redundancies. A separate motion 
practice would be an unnecessary addition to existing actions that 
could include a comment filed in a rate adjustment proceeding alerting 
the Commission to the potential rate impact of a mail preparation 
change, a Postal Service request for an advance determination on the 
rate impact of a mail preparation change, an interested party's motion 
to designate a mail preparation change as having a rate impact, or 
other relevant motions. In those actions, the Postal Service or any 
interested party is free to request discovery.\18\ Therefore, the 
Commission disagrees with the Postal Service's comments that it needs 
to create a separate procedure specific to compliance issues for mail 
preparation changes and submits that the final rule provides a more 
effective way of ensuring the Postal Service complies with the price 
cap rules for mail preparation changes.
---------------------------------------------------------------------------

    \18\ As previously discussed, under the PAEA, the Commission 
retains discretion to order or permit discovery, in part due to the 
``extremely compressed time schedules under which compliance review 
must be conducted.'' Order No. 203 at 55. In most cases, the 
Commission functions as a gatekeeper for limited discovery--where 
parties request the Commission to propound specific questions or 
requests on participants. This gatekeeper role filters discovery 
requests that may be untimely, irrelevant, intended as a leveraging 
tactic, or simply abusive.
---------------------------------------------------------------------------

    In addition to potential redundancies, the Commission also found 
that a separate motion rule would conflict with existing procedures. 
See Order No. 3827 at 10. For example, in a rate adjustment proceeding, 
the Commission's rules request participants focus their comments on 
whether the Postal Service's planned rate adjustment complies with the 
price cap rules. 39 CFR 3010.11(b)(1)-(2). The Commission must then 
determine whether the planned rate adjustments are consistent with the 
annual limitation and applicable law. 39 CFR 3010.11(d). This process 
has accommodated nearly all changes to mail preparation requirements 
that require compliance with the price cap rules over the past decade 
without issue.\19\ The Commission's standard, articulated in Order No. 
3047, does not disrupt this process and the Commission finds that a 
separate motion procedure with deadlines outside of the rate adjustment 
proceedings would conflict with the existing rules governing compliance 
with the price cap rules.
---------------------------------------------------------------------------

    \19\ In Docket No. R2013-10R, although the Postal Service 
contended that the Full Service IMb requirement was not a rate 
change, the Postal Service did not argue that it was unaware of the 
significance of the change compared to its more routine mail 
preparation changes. See Order No. 3047 at 21, 26-27.
---------------------------------------------------------------------------

IV. Ordering Paragraphs

    It is ordered:
    1. Part 3010 of title 39, Code of Federal Regulations, is revised 
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.

    By the Commission.
Ruth Ann Abrams,
Acting Secretary.

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 of part 3010 continues to read as follows:

    Authority: 39 U.S.C. 503; 3662.


0
2. Amend Sec.  3010.23 by adding paragraph (d)(5) to read as follows:


Sec.  3010.23  Calculation of percentage change in rates.

* * * * *
    (d) * * *
    (5) Procedures for mail preparation changes. The Postal Service 
shall provide published notice of all mail preparation changes in a 
single, publicly available source. The Postal Service shall file notice 
with the Commission of the single source it will use to provide 
published notice of all mail preparation changes. When providing notice 
of a mail preparation change, the Postal Service shall affirmatively 
state whether or not the change requires compliance with paragraph 
(d)(2) of this section. If the Postal Service's determination regarding 
compliance with paragraph (d)(2) of this section is raised by the 
Commission or any other party, the Postal Service must demonstrate, by 
a preponderance of the evidence, that a mail preparation change does 
not require compliance with paragraph (d)(2) of this section in any 
proceeding where compliance is at issue. In any challenge to the Postal 
Service's determination concerning a mail preparation change, the 
challenging party shall provide all information to rebut the Postal 
Service's determination that the change is not subject to the price 
cap.
* * * * *
[FR Doc. 2018-01810 Filed 1-31-18; 8:45 am]
BILLING CODE 7710-FW-P