Monday, June 30, 2014

Subtle Violations of Postal Regulations Can Cost Mailers Millions

Sept. 30, 2015 update: So much for turning fines into a new source of postal revenue. A federal judge marked the Southern California Edison fine "Return to Sender" yesterday, ruling that the Postal Service did not use "reasoned decisionmaking." 

"USPS's position appears to be that even if a mailer complies with 99 percent of the requirements and incurs substantial workshare expenses to bring its mail pieces into compliance, a single form of noncompliance - even accidental, even inconsequential - is sufficient to render a revenue-deficiency assessment for 100 percent of a mailer's discounted rates," wrote U.S. District Court Judge James Boasberg, according to Courthouse News, which has details of the ruling.

Violating postal regulations, even in subtle and unintentional ways, can cost business mailers millions of dollars, two recent lawsuits reveal.

The U.S. Postal Service assessed Southern California Edison $7.6 million in penalties for not keeping its address lists up to date and Sears $1.1 million for allegedly violating the rules governing how folded self-mailers should be sealed, according to the lawsuits.

The two companies filed appeals of the USPS decisions on June 18 with the U.S. District Court in Washington. Both are represented by Venable LLP, a major Washington, DC law firm.

SCE was dinged because of a “suspiciously high increase” in the amount of undeliverable and return-to-sender First Class Mail it sent between 2006 and 2008. The big utility acknowledges two minor errors in its address-correction procedures – regarding missing suite or apartment numbers and the handling of fractional-number street addresses (such as 29 ½ Elm Street) – but contends those did not cause an appreciable increase in bad addresses.

“A more plausible explanation is the upsurge of unemployment, bankruptcies, foreclosures and mortgage defaults that occurred in SCE's service area during that period,” the appeal states. USPS also objected to SCE manually overriding the Postal Service’s address-correction database – even though those overrides were based on customer communications indicating that the USPS data were out of date, the company contends.

“The Postal Service ordered SCE to refund to the Postal Service the entire $7.6 million in discounts that SCE earned for its mail preparation work on the 82 million pieces of presorted First-Class Mail that SCE mailed between May 14, 2007 and November 26, 2008.”

Loss of all discounts
Sears, like SCE, notes that its postal penalties exceed by many times the Postal Service’s estimated costs resulting from the alleged violations. (Generally speaking, the penalty for violating mailing standards is indeed the loss of discounts on the entire mailing and not based on USPS’s actual costs or on the portion of the mailing that was problematic.)

Sears ran into trouble with the USPS over the placement and type of seals on 6.3 million folded Standard Class self-mailers it sent for two 2009 promotions. Such mailers are sometimes called “fletters” because they have the dimensions of flat (e.g. catalog) mail but are folded and sealed so they can go through USPS’s letter-sorting equipment and mail at the lower letter rates.

Sears contends the mailings met postal regulations or were specifically approved by postal officials because they were designed not to jam letter-sorting machinery. But USPS ended up determining that the pieces needed an additional adhesive tab and that some were improperly sealed with glue instead of tabs.

“The Postal Service, after extensive empirical testing and analysis of alternative seal designs, soon afterwards adopted rule changes that explicitly authorized the same design features soon after the mailings occurred,” the Sears lawsuit contends.

Discussions and arguments over fletter mail were frequent a few years ago, partly because mailers and postal employees struggled to understand the regulations. That was complicated by frequent tweaks to the rules when USPS discovered that some mail pieces that met the standards were still gumming up the works.

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Anonymous said...

Regarding the alleged incorrect tabbing/gluing of the fletter, I would presume the pieces were cleared for acceptance by a DMU clerk or some other type of BMEU inspection personnel. If there wasn't a ruling on a "special tabbing option" then why was the mail even accepted in the first place? It seems to me that specific instance is the fault of the USPS for even allowing the mail into the system.

Since there isn't a required certification for mailing agents submitting mailings through the USPS the finality and authority of what is acceptable to the post office lies with the acceptance personnel of the USPS.

If one of my employees creates a mistake due to negligence or ignorance it certainly isn't my customer that ends up paying the price. Now I have to be responsible for the performance and accuracy of the USPS's employees? This lawsuit is truly frightening and it lends to an extremely toxic level of liability to an already weakening industry.

Grant said...

In a rational world you would be right, but if you read DMM 607.1.1 you find this:

Mailer Responsibility
A mailer must comply with all applicable postal standards. Despite any statement in this document or by any USPS employee, the burden rests with the mailer to comply with the laws and standards governing domestic mail. For mailings that require a postage statement, the mailer certifies compliance with all applicable postal standards when signing the corresponding postage statement.

Basically, it doesn't matter what the USPS does or says, they'll hold you (the mailer) accountable.

I wish I could do that to my customers, but I don't have my own law enforcement division at my disposal, so they would probably tell me to pound sand.