(a) When there is sufficient quantity of identical pieces for a three-digit ZIP Code area to fill a sack approximately one-third full the mailer must place the pieces in a sack labeled for the area.

(b) If the identical pieces remaining after the three-digit sort for any State are sufficient to fill a sack approximately one-third full they must be placed in a sack labeled for the State.

(c) All identical pieces remaining after the State sacks have been prepared must be placed in sacks labeled "Mixed States."

(iii) Nonidentical pieces.

(a) All nonidentical pieces must be merged and presorted by State. When there is sufficient quantity for a State to fill a sack approximately one-third full, the pieces must be placed in a sack labeled for the State.

(b) All nonidentical pieces remaining after the State sacks have been prepared, must be placed in sacks labeled "Mixed States."

(iv) The total weight of pieces (identical or nonidentical) placed in one sack

must not exceed 80 pounds.

串

NOTE: The corresponding Postal Manual section is 135.216.

(5 U.S.C. 301, 30 U.S.C. 501, 5454 (e))

AUGUST 5, 1968.

TIMOTHY J. MAY,

Mr. KRIEGER. I will let Mr. Burr carry on from there.
Mr. OLSEN. Mr. Burr.

General Counsel.

Mr. BURR. I would like, before I read my report for the record, to explain specifically the difference between a book manufacturer and a publisher. It is our feeling that, when the Post Office first started working on these regulations, they did not consider the difference. We, as a book manufacturer, handle the distribution and mailing for many, many publishers, large and small. We are a complete service operation. Therefore, our job is to mail the books when the labels come in to us from publishers within a very short period of time. We have no figure, no knowledge of how many labels are going to come in, whether they are going to be a thousand more or less, whether they are going to be 20,000.

Our business is comprised of large orders and small orders, and we are equipped to handle both, again without knowledge of how many we are going to have on any particular day. So that to comply with these regulations you must be able to program what you are going to do.

In other words, we do not know whether we are going to have many units over a thousand or not over a thousand. To replace the 50 men we have at times in our post office, from our point of view, would be very costly, even ruinous. In fact, we would find it very difficult to decide how to even charge for this service because it is a nonpredictable cost. Our publisher customers, as a matter of fact, because of the very nature of the mail-order book business, cannot very well predict how many labels they are going to send in to us at any given time. Due to the nature of their business, they must make immediate shipment to the consumer; they cannot hold their labels for any length of time because of the problem of collection, and also the problem that they have a commitment to the recipient to deliver as soon as they can when they receive their money.

I might add that this increased cost is one that is going to be passed on directly to the consumer, especially as it applies to phase 1, because phase 1 covers individual mailing to the individual consumer recipient; whereas, under phase 2, the book shipments might go to bookstores, warehouses, textbook depositories, and so forth. Therefore, this

is a direct cost, and the majority of the books that are mailed as individual copies are not the $5 price that the Post Office people mentioned; they are a dollar or $1.50. So you can see this additional cost, which we feel is easily in the neighborhood of 6 cents or more a book, is a large percentage of the selling price of the books, much more so than for the $5 book that the postal people were talking about. So, therefore, we want to draw your attention to the definite difference between the implementation of phases 1 and 2 and urge you strongly to postpone phase 1 because of manufacturers' complete inability to comply with it. I would like to read my statement. It is not too long, and I think it covers it.

Mr. DANIELS. You are a book manufacturer as differentiated from a book publisher. The manufacturer is actually a service organization. Mr. BURR. That is right; we are a contract manufacturer.

Mr. DANIELS. What do you mean by "manufacturer"? You are not actually engaged in the manufacture.

Mr. BURR. Oh, yes. We do the composition, setting the type, the printing and binding, and the books are warehoused in our facilities and shipped.

Mr. DANIELS. As opposed to a service distribution organization? Mr. BURR. Yes; that is right.

Mr. DANIELS. I wanted to get it straight.

Mr. BURR. The remarks that I make I will make as vice president of the Book Manufacturers' Institute and chairman of the postal committee.

The Book Manufacturers' Institute represents firms doing over 85 percent of the volume of book manufacturing in the competitive market, employing well over 30,000 persons. The institute urgently requests every possible effort on the part of the House Post Office and Civil Service Committee to forestall the imposition of Post Office regulation section 135 (2) (a) (6)-fourth-class mail-as proposed by the Post Office Department in two phases, phase 1 to be effective on October 1, 1968, and phase 2 to be effective on January 15, 1969.

Although the general effect of the subject regulation is the same for publishers and manufacturers, there are several important differences which make phase 1, with its direct impact upon manufacturers, more disastrous to them. Except for a very few large book-club publishers, who have their own warehouses, mailings for publishers of books that are mailed directly to consumers is done by book manufacturers. And since manufacturers mail for many publishers, they cannot control the presorting of labels for either identical or unidentical pieces, as can publishers who warehouse and mail generally in bulk shipments in their own operations.

Secondly, a manufacturer mailing both large bulk shipments and individual pieces for several publishers cannot fairly price such services since the manufacturer cannot predict the total quantity on any given day in the future and guess whether a specific order will fall on a day when there will be either over or under the subject 1,000 pieces mailed. In its effect, the proposed regulation imposes arbitrary discrimination as to the cost of books as between publishers and even on the same book for the same publisher.

It is apparent, therefore, that, although the impact on the large manufacturer is severe, the effect on the medium-size and small plants may be disastrous. These inequities are enhanced for the small manufacturer by the fact that he does not consistently have volume under,

or in excess of, the 1,000 pieces subject to the regulation, and therefore cannot automate or have a specific group of employees trained for this task. Obviously this means that publishers and the public must all bear the weight of the costs, or the manufacturer must suffer a loss, or both. In an industry that deals with a custom-made product on which prices are set through bids prior to manufacture, this regulation imposes for both manufacturer and publisher a significant additional cost that is unpredictable. We cannot conceive appropriate alternatives at this point.

A survey shows that most, if not all, of the book manufacturing firms cannot physically comply with the regulation's requirement by October 1. The full extent of the new responsibilities being placed on the mailer are unclear and this adds to the confusion and precludes realistic planning,

For example, the effect of the regulation is to require the mailer to acquire and develop adequate space-which means up to 30,000 square feet-to do the prescribed sorting and other postal functions now transferred to the mailer. In fact, these transferred postal functions are more complex and exceed the present responsibility of the detached postal units. Nor can the space now occupied by existing detached postal units be utilized by the manufacturer, since these postal units serve a function and must continue in operation.

Secondly, the demands for hiring and training from five to 50 people is impossible to accomplish in the time allotted. In many cases, manufacturers cannot hire all the labor they now need and have no idea where additional people, who must be of relatively high caliber, can be obtained.

The integration of such a group into the labor force of the manufacturer, at the level of wages and benefits of the postal employees formerly performing similar functions, undoubtedly will cause many complex problems with the present workers and the unions representing them. Moreover, even assuming the manpower requirement can be met, there are serious questions as to the implications of handling the mail in a quasi-official capacity.

Specifically the many unions involved will very likely raise questions as to whether or not their members, when assigned to the required postal functions, will agree to accept the Federal regulatory responsibilities necessarily attached to performing these duties.

Finally, the administrative and operational procedures necessary to determine the costs to be recovered by manufacturers for their services cannot be developed and implemented without exhaustive study and testing.

The foregoing are but a few of the problems attendant to the imposition of the regulation, which incidentally, appears to have been promulgated by the postal authorities without meeting with the book manufacturing firms who are primarily affected thereby or visiting the existing installations in manufacturng plants to determine functional feasibility.

Our plant in Saddle Brook is one of the largest distributors or manufacturers of books and was not visited to discuss this matter with

us.

While it is true postal officials did visit certain publishing houses, as we have heretofore indicated publishers and manufacturers are not similarly affected by phase I of the regulation. The manufacturers, who feel the primary impact of phase I, were not given an oppor

tunity to pragmatically show the devastating effect of the regulation in question.

Lastly, we respectfully submit that serious and substantial questions as to the authority of the postmaster, under the guise of regulatory power, to increase postal rates are presented. Clearly, the impact upon the book industry of the complete transfer of said postal functions and their attendant costs, constitutes a de facto increase in rates. Yet, this is an area exclusively within the domain of Congress, not to be preempted by the actions of the postmaster. In fact, the action of the postal authority appears in direct conflict with the constituional powers of Congress to regulate postal rates.

All in all, it appears that the Post Office Department, in order to show an effort to decrease costs has proposed this regulation in an area not subject to public knowledge or concern without adequate meetings with, or personal study of the operations of, firms in the most affected industry. The effect of the regulation can only be: wild confusion and errors in mailing for a long period of time; union and legal problems involved with untangling responsibility and demanding correct performance of an essentially postal function; and inequitable and discriminatory burdens placed upon the book manufacturing industry, its customers, and the public. These are certainly not results contemplated by Congress in the enabling legislation, or the constitutional guidelines involved in setting postal rates.

The foregoing suggests that if the postal authorities are truly faced with a problem of not recovering costs on fourth-class educational matter that direct action in the form of an increase in postal rates is the appropriate, equitable means to accomplish this end, a means that does not transgress the constitutional and legislative domain reserved to Congress.

We urge legislative action to prevent implementation of the proposed regulation pending complete study of all facts.

Mr. OLSEN. Thank you very much, Mr. Krieger and Mr. Burr. We appreciate your coming here today.

Mr. KRIEGER. Thank you.

Mr. OLSEN. It is always good to have our old friend, Mr. Nilan, from the United Federation of Postal Clerks to advise us on legislation. Mr. Nilan, will you please introduce your compatriots.

STATEMENT OF PATRICK J. NILAN, LEGISLATIVE DIRECTOR, UNITED FEDERATION OF POSTAL CLERKS, ACCOMPANIED BY FRANCIS S. FILBEY, ADMINISTRATIVE AIDE, WASHINGTON OFFICE; AND CHARLES S. SARBAUGH, PRESIDENT OF LOCAL 3285, HANOVER, PA.

Mr. NILAN. Thank you very much, Mr. Chairman.

If I may say so, it is always a pleasure to appear before you as chairman and the distinguished members of your committee also. I would like to, if I may, Mr. Chairman, first ask that our complete statement as well as the supplementary statement by Mr. Sarbaugh and a copy of our union's letter to the Postmaster General be included in the record as presented, and then, in an effort to cooperate with the committee, I will try briefly to paraphrase our testimony for your information.

Mr. OLSEN. Without objection, it is so ordered.

Mr. NILAN. I would like to introduce, to my left, Mr. Charles Sarbaugh, president of our local 3285 of Hanover, Pa.; and also our executive vice president, administrative aide Mr. Francis Filbey, to my right, who is the administrative aide of our organization from Washington.

I would like to express my appreciation to those who cooperated with us in giving us the opportunity to appear here this morning. I would like to say this also: We cannot help but be impressed, although in a very negative sort of a way that unfortunately the Post Office Department apparently gives to the publishers and the book industry, the record companies, the same type of lip service but no real prior consultation and meaningful consultation when they change regulations, particularly where our people are concerned. This frequently happens with us.

We sympathize with them. I might say we wholeheartedly endorse the presentations made by the previous witnesses, particularly Mr. Cassidy when he stated in his opinion the Post Office Department appears to be working backward in these changes because when you review our testimony you will find that we suggest this also.

I would like to also say, Mr. Chairman, for the record, my good friend and yours, as well as the other members of the committee, James H. Rademacher, president of the National Association of Letter Carriers, advised me this morning that he would be very happy if I would include for the record that the National Association of Letter Carriers wholeheartedly endorses our position in regard to this legislation and that the committee and yourself as chairman will receive a letter to that effect.

Mr. OLSEN. The letter will be made a part of the file, when received. Mr. NILAN. I might say between our two postal unions, we and the NALC represent 600,000 of the total 800,000 postal employees. We do speak for the postal employees in this great country of ours.

I would like to say first, as you know, we went through a very difficult period in the reassignment of hundreds of thousands of mobile clerks into post offices and we must now go through a similar period of relocation and adjustment of our postal clerks in the so-called detached mail units. The Department suggests this would be approximately 250 to 400 or 500 people, depending on their classification. We suggest to you, Mr. Chairman, as of this morning we have been unable to get from the Post Office Department even the identities of the detached mail units in the post offices concerned. Certainly as of this date, only 3 weeks before the implementation of the first phase, trying to represent our clerks in the affected areas, we are at a decided disadvantage because of this lack of information.

We also would like to reiterate that the Post Office Department, as I mentioned on page 4 of my statement, has again chosen to ignore our organization, namely, the United Federation of Postal Clerks, the union which exclusively represents approximately 306,000 postal clerks throughout the country, concerning these latest controversial Department regulations.

Mr. OLSEN. The committee will ask the Post Office Department to identify these areas and the number of people.