RECEiYELl POSTAL “*Tr co~1!~!ls5loti BEFORE THE OFFICErJi l;,i S:;,TtT,$i:y POSTAL RATE COMMISSION WASHINGTON, DC 20268-0001 Postal Rate and Fee Changes, 1997 DIRECT TESTIMONY OF JOHN V. CURRIE ON BEHALF OF UNITED STATES POSTAL SERVICE Docket Nlo. R97-1 Table of Contents Autobiographical Sketch.. ........................................................................................ ii ........... 1 .......... 3 .......... Ill. Additional Costs Due to Hazardous Materials.. ....................................... A. Industry Practices and Costs ................................................................... B. Postal Service Practices and Costs.. ....................................................... 6 6 8 I. Purpose of Testimony ................................................................................ II. Current Postal Service Regulations for Mailable Hazardous Materials.. .............................................................................................. IV. Hazardous V. Classification Materials Criteria.. Charges Imposed By Other Carriers. .................................................... .......................... ................................... ................... VI. Proposed Surcharges, Pricing Criteria, and Volumes Affected A. Proposed Surcharges and Pricing Criteria.. ....... ................................... B. Volumes Subject to the Surcharges and Financiial Impaci:. ................. /--‘ VII. C:onclusion Appendix ..................................................................... A. Volume and Revenue Assumptions .................................. .............. ................................ 12 14 15 15 17 18 A-l .~_.. 1 Autobiographical Sketch 2 C.. 3 My name is John V. Currie. 4 Associates, 5 consulting, training, 6 dangerous goods. 7 Mana!ger of Hazardous 6 Corporation, 9 as supervisor Since 1990, I have served as President Inc., the primary business and auditing services Prior to founding Materials of which is the worldwide Currie Associates, Transportation 11 Materials 12 Transloortation 13 observed the handling 14 including Bulk Mail Centers 15 (P&D&), and Associate Council and on the Hazardous Research Trucking materials (BMCs), Processing Offices (AOs). ii Associations, Materials and Enforcement of the Hazardous Materials Board of the National Academy of hazardous of I served as Corporate I have served as a member of the Board of Directors Advisory of for the Digital Equipment for the New York State Police Hazardous Unit. provision related to the transportation as Director of Safety for the American 10 of Currie Committee of the of S’ciences. I have in a variety of postal facilities, and Distribution Centers ,--- 1 I. Purpose of Testimony 2 My testimony 3 4 surcharges 5 types of Hazardous 6 Mail, Priority Mail, or Express 7 (OMHM), generally 9 for the handling mateiials, the Postal Service proposal to establish of two types of hazardous Medical Materials (HMM), generally (1) specifiecl mailed as First-Class Mail; and (2) Other Mailable surcharges improve the alignment 10 the Postal Service price structure 11 of improving recognize Hazardous Materials the special costs of handling these of prices with costs, increase the conformity with industry standards, of and provide a means Postal Service data on these materials. I refer to and briefly summarize 12 materials: mailed as surface parcels.’ The proposed a ,.- describes and handling current Postal Service regulations 13 to the acceptance of hazardous materials, 14 materials subject to each of the proposed 15 overview of the special methods 16 for handling and transporting 17 increasingly stringent 18 concern about the risks these materials 19 describe the current handling 20 by the Postal Service and discuss the various types of additional 21 Postal Service incurs due to the presence surcharges. and procedures these materials. and I specify the I then provide an used by private sector carriers These methods and costly in recent years as knowledge, have become awareness, may pose have incre,ased. environment relaiied and I also in which these items are processed costs that the of these items in the mail. ‘For certain materials, llmited quantities are permitted to be transported by air, in which case these materials may also be mailed as First-Class Mail. Priority Mall. or Express Mail. USPS-T42, Docket R97-1, p. 1 1 Next, I review the hazardous materials surcharges imposed by private- 2 sector carriers susch as United Parcel Service and Federal Express. Though 3 lower than these Icompetitors’ herein help 4 offset both the routine additional 5 costs of clean-up activities 6 Finally, I evaluate the proposed 7 the criteria in sectionss surcharges, the surcharges costs associated with such materials that are required whenever classifications proposed and the a spill or breakage and surcharges with respect to 3623(c) and 3622(b) of the Postal Reorganization USPS-T-42. Docket R97-1, p 2 occurs. Act. 1 II. Current Postal Service Regulations for Mailable Hazardous Materials of numerous hazard 2 The Postal Service authorizes 3 4 classes of hazardous 5 Domestiic Mail Manual (DMM) $X021, 6 be prepared according to specific postal regulations 7 Accepience of Hazardous, a prescrible limitations 9 prescribe 10 class. 11 Publication 12 materials the acceptance Restricted, or Perishable Hazardous materials Matter. These regulations 52, that apply to each hazarcl to transportation by air also appear in in the mail are a cause of concern 14 equipment. 15 solvent cleaners, 16 and diagnostic 17 hazardous 18 commodity” 19 packaged These risky yet mailable specimens materials materials testing. This term applies to many hazardous and intended by postal facilities materials for personal of a “consumer when they are care or household use indicate that while spills or leaks an? they significantly increase the operational “Copies of the postal materials cited in this section are included connection with Docket No. MC97-2 USPS-T-42, agents! In some cases the may meet the 49 CFR 5171.8 definition and rarely injurious, of risks include paints, inks, perfumes, medical wastes, etiologic bound for laboratory in a limited quantity because who handle mail, and to mail processing small aerosol dispensers, Reports tendered infrequent in Publication 52 at Chapter 6. they present to other mail, to individuals 21 must detailed requirements applicable 13 20 in the of certain hazard classes and further and packaging requirements as described C023, and CO24.’ Thesie materials on the mailability documentation Additional in mailable quantities, Docket R97-I, p3 in Library Reference costs PCR-26 filed in 1 associated 2 Instructions (Mlls) are distributed 3 instructions on proper response 4 96-l 5 policies of the Postal Service on preventing 6 Action Plans and Emergency 7 exposures a Materials lncid’ent Reports (Forms 1770). 9 incidental spills and leaks involving 10 provided 11 to use it. All ernployees 12 action plans and specialized 13 response 14 EL-810-96-1 15 some state environmental 16 releases 17 Management 18 Acceptance 19 associated 20 21 witlh the collection, and EL-810-96-2 handling, to hazardous in Library Reference Response with certain personal of hazardous to determine PCR-26. These instructions incidents, developing materials, ‘HAZWOPER CFR 1910.120) Emergency up spills, responding materials must be equipment to be provided (PPE) and training training First Responder Headquarters the mailability is required levels of See by federal and responses to Safety and Risk coordinates of hazardous on how requirements. to provide appropriate to the environment. of on emergency must be trained to different the Postal Service to and filing Hazardous mailed hazardous with Business materials Mail and arly requirements. Over the past ten years, the Occupational Administration include in the cleanup regulations special packaging See EL-810- engaged in the HAZWOPER3 at Postal Service and in&de Employees employees materials Management releases. Plans, cleaning protective In addition, materials hazardous are required at 15-16. of mail. to all Postal Service facilities and/or injuries involving as specified and distribution (OSHA), the Environmental stands for Hazardous Protection Waste Operations USPS-T-42. Safety and Health Agency and Emergency Docket R97-1, p.4 (EPA), and the Response (OSHA standard 29 8.1 1 International Air Transport Association 2 trainilng requirements 3 incre:ased costs for training, 4 there have been no significant 5 accepts for mailing. (IATA) have institutecl related to hazardous equipment, materials. and strengthened This has resulted in and medical surveillance changes in the materials even though the Postal Service 6 7 Proposed The Postal Service is proposing a 9 ,- hazardous materials. The proposed 10 applies to the six categories 11 §C023.10.2a-f; 12 (c) clinical (or diagnostic) 13 other medical devices. 14 medical items that a customer 15 them for shipment 16 Publication described in DMM agents, (b) etiological (d) biological labeling, surc:harge agent preparations, products, (e) sharps, and (If) and quantity requirements for must meet before the Postal Service will accept 52. Other Mailable 19 a wide range of materials 20 labeling items described 2’1 additional and packaging Hazardous requirements, restrictions surcharge quantities, modes of transportation. 52. for the domesttc shipment of these hazardous are in DMM §5CO21, C023, C024, and in Publication USPS-T-42, applies tlo - 6.0 ancl 9.0. These include on acceptable and allowable in Publication regulations Materials in DMM §§CO23.1.0 with varying detail is provided Acceptance materials Medical Materials of material currently specimens, for these mailable are found in DMM ~~CO21, CO23.10.3 - 10.7, and in those mailable 23 Hazardous The packaging, 18 22 two surcharges these are (a) etiologic The proposed 17 r- Surcharges Docket R97-1. p.5 52. 1 III. Additional Costs Due to Hazardous Materials 2 3 4 A. Industry Practices and Costs Carriers by all modes of transportation 5 operational 6 common systerns 7 consignor a Service to collect, transport, 9 may be different, 10 11 costs associated have experienced with the transportation an increase of hazardous in materials. The utilized by private sector carriers to move freight from a to a consignee may be compared to the system used by the Postal and deliver mail; although the special handling the quantity required for hazardous per package materials in either system is quite similar. For motor carriers, packages are picked up from the consignor 12 up and delivery driver and taken to a pick-up and delivery terminal. 13 packages 14 where they are unloaded 15 bulk facility in the region nearest the consignee. 16 loaded and reloaded 17 the consignee. 16 materials 19 the packages 20 movement 21 are loaded on the vehicle, 22 communicate 23 hazardous are then consolidated and transported and reloaded on another on a trailer destined alre properly and segregated blocked, for another secured quantity and placards are separated of hazardous against of these materials must be displayed thle hazards carried. At each facility, packages materials which contain from the main stream of other cargo and USPS-T-42. to for loading must ensure that If a sufficient specific markings break- route truck for delivery braced, and otherwise as required. facility are then off- of loading the packages the person responsible These break-bulk The packages pick-up and delivery In each of these instances into the vehicle, to a regional by a pick- Docket R97-1. p.6 to ,,---. /--. I stored in a designated 2 transporltation. 3 and to use only approved Employees materials storage area pending are trained to exercise The regulations 5 carriers Imust provide training 6 hazardous materials 7 presented by each material, 6 from exposure, 9 associatmed with their jobs, and knowledgeable for employees further in this storage area hazardous of several federal and state authorities who prepare, materials. mandate that handle, or transport in order to ensure that they are aware of the hazards familiar with the methods for protecting able to perform specific regulatory 10 cargoes safely. 11 employees 12 hours expended 13 every three years the recurrent The typical cost of providing is approximately this training In spite of this intensive occur during transportation 16 environmental 17 these costs, Department 16 who transport 19 the case of self-insured 20 to their operational restoration compliance training, accidental releases and may result in expensive of four or for meeting do occasionally clean-up and In order to ensure that carriers, are able ,to pay of Transportation these materials these to motor carrier with an average to new employees requirement. costs. for handling this type of training training themselves functions about methods $15 per hour per employee, for delivering 15 21 caution tools or devices when handling 4 14 /.-- hazardous (DOT) regulations must provide additional carriers, that they guarantee require that carriers insurance financial coverage, security; or in this adds costs. To prevent dangerous reactions 22 accidental release, the regulations 23 hazard classes must be segregated from occurring in the evsnt of an require that certain materials USPS-T-42, from one another Docket R97-I P7 of incompatible during transportation. 1 Regulations 2 hazardous 3 including 4, CFR s177.848 5 for each transportation materials mode provide specific segregation and may also specify special handling restrictions on the use of mechanized Based upon my experience, tools. I am aware that hazardous constitute app,roximately 7 However, I also know that these materials a percentage 9 costs, carriers have imposed a surcharge hazardous requirements, See, eg., 49 and IATA 9.3. 6 IO handling charts for five percent of all materials of a carrier’s operational offered for transportation. constitute costs. materials a significantly higher In order to recoup a part of these on commodities that are regulated as materials. 11 12 B. Postal Service 13 In-Office Handlinq 14 Hazardous Practices and Costs Procedures Medical Material generally 15 processed 16 its packaging 17 mailstream 10 Moreover, 19 HMM pieces appear to have higher processing 20 understandabl,y 21 22 on ;automated be designed safety considerations so that it is diverted by the facer-canceler generally more cautious (if not previously thrpugh in handling Hazardous Materials the regular mailstream. require that to the manually-processed culled out manually). even relative to other items in the manually-processed Other Nlailable delivered equipment; cannot and should not be costs because mailstream, employees are them. are processed, However, distributed, and postal employees are -. USPS-T-42, DocketR97-1. p.8 1 instructed to handle as “outside”4 2 contain such materials. 3 than regular mail. pieces all items that are labeled or known to Outside pieces necessarily This does not apply to all medical mailings. 4 5 specimens not required 6 “Etiologic 7 transport. 8 are alctually processed 9 employees 10 speciimens. Agent Preparation” However, are apprehensive “Etiologic Agent,” labels should be placed in sacks for dispatch and dispatched costs Any clinical/diagnostic Substance,” it appears that many medical Due to employee 11 to bear the “Infectious incur greater handling or alld mailings that could be sacked as outside pieces because postal about coming into contact with clinical or diagnostic concerns about these potentially 12 handling time is increased. 5 Thanks to comprehensive 13 adherence 14 these pieces of mail are handled without 15 points. by postal employees to safe handling incident dangerous training procedures, substances, and diligent the vast majoriiy of and safely reach the delivery 16 17 18 Clean-LID costs Of course, hazardous 19 and transportation. 20 for automated materials packages When they do, high cleanup mail handling equipment ‘See Handbook EL-812 at 13, in LR-PCR-26. being combined with other parcels in a sack. result. “Outside” occasionally costs and extended downtime The most selrious incidents pieces 5Recenily. due to employee concerns. the Memphis BMC had to biological materials moved through the facility. USPS-T-42, fail during handling are handled mdividually are rather than m.titute special handling procedures for ail Docket R97-1. p.9 1 systematically reported 2 that occurred 3 Library Reference between using Form 1770. October Reports received 1991 and November regarding incidents 1994 are summarized in PCR-26. 4 5 Costs Related to Air Transportation There has been an increase 6 hazardous materials. Restrictions in pilot/airline 7 contains 8 is that the articles fail to comply with acceptance, 9 documentation, The prime reason hazardous and other transportation of hazardous transport substances. Governing 11 the guidelines 12 International 13 Federal 14 articles are outlined 15 denied boarding 16 aircraft or are not approved 17 airline’s FAA Certificate. 16 a given aircraft is subject to the discretion 19 are refused by the airlines 20 contact the sender, advise the customer 21 what action should be taken regarding 22 must either be returned 23. Whether set forth by the International Re!gulations returned Organization (49 CFR). regulations are identified Association as a substance the final approval of these articles are from transport to be transported via passenger on a particular for boarding an item onto of the Pilot in Command., Articles that must be returned to the AMClAMF, of the airline’s the item. to sender or forwarded whic:h must then refusal, ancl determine If 11is safe to do so, the item via Domestic the item must be dispatched USPS-T-42, within (IATA), for air transport In many instances, they are totally prohibited or forwarded, for the safe (ICAO) and Title 49 of the Code of Specific procedures In addition, labeling, mandated Air Transport in 49 CFR 5§171-177. because articles are refused packaging, regulations 10 Civil Aviation refusals to carry mail that Docket R97-1, p.10 Surface Mail. to the respective ,--. 1 P&DC or BMC network for transportation 2 is recluired to notify the receiving 3 handling of such articles. 4 Required Traininq materials in the mailstream. training 6 hazardous 7 expanded 6 the mail and respond to spill and leak incidents. 9 OSHA and the EPA. training curriculum 11 1. The most significant, 12 are the “Awareness” 13 training for employees courses mandated Level” training and o’ther employees who frequently 16 hazardous This training 17 Training materials. is required are summarized level HAZWOPER materials in by in MI EL-810~‘36overall cclsts, First Responder by OSHA. 15 16 who handle hazardous This training of a revised and in terms of number of people and probable and “Operations” The “Awareness 14 costs due to the presence It has recently instituted The various types and levels of training IO The AMC/AMF facility of the arrival and need for special The Postal Service incurs substantial 5 ./- to its final destinatil3n. is required for mail halndlers, supervisc’rs handle packages is provided through that relay contain the Postal Service Network system, and lasts two hours. The “Operations 19 personnel, 20 incidental supervisors, spills. Level” training is required for maintenance and other persons designated This training requires to manage eight hours per employee and custodial and (clean up for initial ‘1 understand that Postal Service training costs are generally not “attributeti” to individual mail subclasses and special sew~ces. but rather are accounted for as institutional costs. Nevertheless, in the private sector the costs of special Waning related to hazardous materials have become substantial over the past 10 years. and I believe that these costs are one important reason that private sector cxriers impose surcharges on such matenals, or otherwise charge higher rates for txrylng them. USPS-T-42, Docket R97-1, p 11 _1 training, with a required 2 of people must receive a three-day 3 Technical 4 training 5 rnailability Training annual refresher training hazardous A smaller number course, usually conducted C,enter in Norman, Oklahoma. for window clerks includes of various course of two hours. In addition, at the the standard a module on postal regulations related to the materials. 6 7 8 YV. Hazardous Materials Charges By Other Carriers In order to recoup a part of the increased 9 associated 10 surcharge 11 amounts 12 carrier industry, 13 making it difficult to determine 'I4 transporting 'I 5 conducted '16 American 17 which would be reciommended ia additional 19 Imposed with handling hazardous on those commodities of these surcharges discounting materials Since the deregulation transporitation regulations shipments. to establish for hazardous Research is currently Conference a unique classification materials to being of the and rate and would reflect these expenses. Of the majorr carriers that transport hazardous materials in small palrcels, 20 the Postal Service is the only one that does not currently charge extra for 21 processing the mailstream 22 whatever postage is required for the indicated 23 distance. United Parcel Service imposes surcharges these items. The of the motor an average charge which might be attributed materials Associations a based on trade volume is common, by the Nlational Motor Freight Classification Trucking expenses carriers have imposed subject to hazardous may vary. competitive hazardous materials, operational Hazardous items travel through class of mail, weight, at and ..- USPS-T-42, Docket R97-I. p.12 of $10.00 (ground) and ,e.,.. 1 $14.00 (air) for transportation 2 Federal Express imposes surcharges 3 hazard class. 4 and labeling 5 6 7 .-- are also widely available According fee of $10.00 per shipment, Airborne Express infectious substances RPS charges placed in a Lab Pack, an outer packaging 11 Express. DHL will not accept hazardous 14 when offered by an approved 15 Additional, by DHL headquarters. materials available materials surcharge Air Express 17 hazardous materials, Hazardous 18 specimens are only accepted materials 19 substances, properly, then has packaging. required of $0.10 per pound for of $30 per shipment. Diagnostic as hazard class 6.2 infectious even if they do not contain any such substance. Emery Worldwide regardless imposes a $50.00-per-shipment 21 surcharge, 22 prepared for air transportation. of the size of the package. 23 surcharge as other hazards. Infectious Diagnostic USPS-T-$2. or are only accepted handling imposes a surcharge if they are shipped specimens for $0.75 from Airborne account and in pre-approved with a minimum surcharge of $12.00 per unless prior authorization charges are based upon any additional Burlington an additional is packed in dry ice. Diagnostic 10 been granted packaging of the hazard class. in Class 6.2 are required to be packaged 13 on the for customer schedule, imposes a hazardous 9 its system. on the Internet and in other publications. regardless -- $17.00 if the shipment 20 through of $10.00 or more depending to a current accessorial shipment 12 materials These carriers’ rates and requirements 8 16 ,I--. of hazardous All packages substances specimens hazardous materials must be are subject to the same not known to contain any Docket R97-1, ~~13 1 infectious substances must be packaged 2 Emery Worlldwide to avoid the surcharge. 3 diagnostic 4 approved specimens in special packaging approved Emery Worldwide only accepts under the terms of contractual agreements by with pre- accounts. 5 6 7 V. Classific:ation Criteria In consultation with postal officials, 8 surcharge classifications 9 criteria in Section 2623(c). imposes I have evaluated the proposed for HMM and OMHM with respect to the classification Since the mail covered 10 surcharges additional handling 11 and equity (criterion 12 establishment 13 costs, as compared 14 mailers of hazardous 15 such material through 16 recipient, 17 costly (criterion 18 because 19 and they provide a means of determining 20 (criterion 21 despite the fact that new surcharges 22 alternative costs on the Postal Service, fairness 1) for the entire spectrum of a classification by these propos’ed of mailers are served by the with an associated to the present situation and nonhazardous surcharge to oiifset these in which these costs are born by material the mail is of considerable alike. The ability to transport value to the sender and since for many people other options are less convenient 2). These classifications are desirable they permit it to recover the additional 5). The proposed of prohibiting classifications will be imposed, Docket R97-1. wrth such mail, of such mail more easily may also be desirable the mailing of such material USPS-T-42, to the Postal Service costs associated the volume and/or more if contrasted (criterion p 14 to mailers, to the 5). Criteria 3 and _<-- , 4 (desirability 2 not relevant to these proposals. of classifications with different degrees of speed and reliability) are 3 4 VI. Pioposed Surcharges, A. Proposed Surcharges Pricing Criteria, and Volumes Affected 5 6 7 The Postal Service is proposing 8 and $1.00 per piece for OMHM. 9 evaluated 10 11 ,,--- and Pricing these proposed Criteria surcharges In consultation surcharges of $0.50 per piece with postal officials, for HMM I have with respect to the pricing criteria in Section 2622(b). As described in section Ill(B), the handling 12 imposezs additional 13 Service has not been able to quantify 14 of the same order of magnitude 15 per workhour 16 translate 17 extra costs for routine handling 18 spills or leaks occur. 19 for similar materials of these materials costs on the Postal Service (criterion of $3O,‘the 3). Although these costs, it is my judgment as the proposed proposed surcharges surcharges. of these materials, that they are Indeed, at a cost In addition to the there are clean-up I would also note that the posted surcharges costs when of competitors higher. ‘I understand that postal costs per workhour for typical manual operati#xs, factors for indwct labor and non-labor costs, would be this high or higher. USPS-T-42, the Postal of $0.50 and $,l 00 would into one minute and two minutes of time respectively. are significantly clearly Docket R97-1, p.15 including “piggyback” 1 It promotes 2 offsetting 3 hazardous 4 fairness and equity (criterion these costs instead of spreading a surcharge them over the entire volume of non-. miaterials in the mail. The vallue of service (criterion 5 high; HMM pieces generally 6 Moreover, 7 provide considerable 8 diagnostic 9 medical materials 2) for mailing these materials travel as First-Class, the ability to send medical materials tests. convenience The value of service provided they generally 10 high given the convenience and relatively 11 material. Priority, or Express. Mail. through travel as surface parcels, but it is still low cost of using the mails for such 13 materials and on private sector providers 14 acceptable. 15 materials 16 less than a pound and paying $2.00 - $3.00 in postage. 17 surcharge 18 will occasionallly 19 surcharges 20 materials 21 of similar services surcharge the mail would appear to to OMHM is less than that of I believe that the effect of these new surcharges The overwhelming on mailers of such of similar services (criterion 4) is majority of pieces subject to the $0.50 medical are expected to be clinical/diagnostic specimens be paid for heavier Priority Mail pieces). materials effectively weighing The level of the HMM has been set with these typical pieces in mind (although for hazardous is relatively while lowering the total cost for many because 12 1) to establish the surcharge Since these proposed raise the cost of shipping such via the Postal Service, their impact, if any, on private sector providers will presumably be beneficial. USPS-T42, Docket R97-1, p 16 /-- As noted above, alternate 1 2 subject to the proposed 3 reasonable surcharges costs (criterion Criterion 4 means of sending are available and receiving the materials from private sector providers 5). 6 (degree of preparation by the mailer and its effect on reducing 5 costs to the Postal Service) does not apply to the material subject to the 6 proposed 8 schedule, 9 cultural, 10 surcharges.’ The proposed 7 at surcharges, are relatively scientific though adding a bit of complexity simple in structure and informational material subject to the proposed (criterion 7). Criterion value to the recipient) to the 8 (educational, domesnot apply to the surcharges. 11 /- 12 B. Volumes to the Surcharges I am informed that, because 13 and Financial no surcharges materials, the Postal Service has no precise estimate 15 materials it currently 16 mailable 17 appears to have increased 18 have evolved handles. have not changed specilnens 21 another exist for hazardous of the volume of such While the types of hazardous significantly, the volume materials that are of such Imaterials in the mail in recent years as the needs of postal customers and as other carriers have imposed surcharges It appears that the current volume of First-Class 20 Impact currently 14 19 ,- Subject clinical diagnostic may be on the order of 10 million pieces annually, 500 thousand pieces of Priority medical materials, with perhaps primarily used ‘Indeed, the material by its nature increases Postal Service costs Any “preparation” that the mailer by using required special packaging only serves to mitigate these cost increases performs USPS-T-42, Docket R97-1, p.17 1 needles. See Appendix 2 been judgmentally 3 volume, 4 modest percentage 5 proposed 6 revenue A. For OMHM, the volume subject to the zsurcharge has assumed to be about one-half or 1 .l million pieces. Because of the total volumes surcharges of one percent of Parcel Post the hazardous materials volumes are a in the affected mail classe:s, the will not have an appreciable effect on volume or postage in ithose classes. 7 a 9 VII. Conclusion The proposed Hazardous surcharges 10 Mailable Materials 11 that are required 12 this material will facilitate 13 The proposed 14 tha,t has emerged 15 shippers’ for Hazardous appropriately Medical Materials reflect the additional to carry such material safely in the mailstream. surcharges incentives the routine collection care and costs Slurcharges private-sector closer to the one carriers, thereby to burden the Postal Service with such high-cost USPS-T-42, for of data on its volume and costs. also move the postal price structure among competitive and Other DocketR97-1, p.16 reducing mail. 1 Appeindix A. Volume and Revenue Assumptions 2 3 - From limited information 4 Business 5 “round-number” 6 surcharge. 7 First-Class 6 the $0.50 HMM surcharge 9 revenue would be $5.25 million. about individual Reply Mail) of hazardous estimates materials, Mail and another expected. 11 assumed a price elasticity 12 elasticity, and calculated (as the Postal Service has developed of the volume that might be subject to the HMM It appears that about 10,000,000 10 mailers and/or recipients pieces are currently 500,000 pieces as Priority Mail. had no effect on volume, However, carried as If the imposition the asso’ciated surcharge some volume reduction is to be To obtain a rough estimate this effect, the Postal Service has of -0.8, roughly equal to the Priority Mail price the volume response as follows: First-Class 13 before surcharge (000s) Priority 14 Volume 15 Postage @ 8 oz & 5 Ibs 1.93 6.00 16 Postage 2.43 6.50 plus HMM surcharge 10,000 500 17 Price ratio 1.259 1.083 18 Volume 0.832 0.938 19 Volume ratio (1) after surcharge (000s) 8,317 469 20 21 Total HMM surcharge revenue (000s) 22 23 24 25 26 (1) Volume ratio = price ratio n elasticity 4.393 of 1 For materials subject to the OMHM surcharge, 2 individual mailers and recipients 3 volume estimlates, and for the purpose 4 has judgmentally 5 pieces, would be subject to the surcharge.’ 6 surcharge 7 with HMM. some volume reduction 0 Service has assumed 9 Post, and cakulated assumed was insufficient information to construct of revenue estimates, even approximate the Postal Service that about 0.5% of Parcel Post volume, had no effect on volume, If the imposition a price elasticity However, as For OMHM, the Postal of -1.0. roughly equal to that for Parcel the volume response as follows: Two-pound 10 or 1.1 million of the $1.00 OMHM revenue would be $1 .I million. is to be expected. ablsut piecesTen-pound 800 (000s) pieces 300 11 Volum’e before surcharge 12 Postage (2) 4.54 5.87 13 Postage plus OMHM surcharge 5.54 6.87 14 Price ratio 1.220 1.170 15 Volume 0.820 0.854. 16 ratio (3) Volumle after surcharge (000s) Total OMHM surcharge revenue 656 256 17 18 (000s): 912 19 20 (2) Postage 21 surcharge 22 (3) Volume is calculated as Zone 3 Inter-BMC plus non-machinable ratio = price ratio A elasticity 23 ‘Because mucl? Parcel Post volume is originated by households rather than businesses, the Postal Service’s estlmai!e of 0.5% does not seem unreasonable, even though It IS significantly lower than the 5% figure for private-.sector carriers noted in section III(A). A-2
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