commend again the committee's position to look at all of ratemaking, including revenue forgone.

Mr. McCLOSKEY. Thank you very much, Ms. Emigh. Mr. Silbergeld, thank you so much.

Mr. SILBERGELD. Thank you, Mr. Chairman.

Mr. McCLOSKEY. Mr. Ralph Seiffe, vice president and treasurer of the National Association of Presort Mailers, is our cleanup hitter and concluding panelist.

Mr. Seiffe I have been told that is the proper pronunciation.
Mr. SEIFFE. “Syfee.”
Mr. McCLOSKEY. "Syfee"?
Mr. SEIFFE. Yes.
Mr. McCLOSKEY. Excuse me. I was misinformed.

I want to welcome you and accept your statement for the record, and please proceed as you would like.

STATEMENT OF RALF SEIFFE, VICE PRESIDENT AND TREASURER, NATIONAL ASSOCIATION OF PRESORT MAILERS Mr. SEIFFE. Thank you.

I will try to make my summary remarks as brief as possible, and maybe we can get out of here by noon.

My name is Ralf Seiffe. I am here to represent the National Association of Presort Mailers. I am vice president and treasurer of that organization. I am also the chairman of Mailsort Chicago, a large-sized, automated presort bureau serving mailers in the Chicago area and presumably some of Mr. Hayes' constituents as well.

I am here today to talk about our industry a little bit because we are a creature of the rates. No one is more interested in how rates are made and applied than we are, so it is probably appropriate for a little background to make our point.

Today we are happy to report that members of our association have become the largest categorical providers of prebarcoded mail to the Postal Service. Of the 7 billion or so prebarcoded letters that received a postal rate incentive last year, half of that, or about 3.5 billion were provided by members of our association. This confirms the predictions we gave this committee in March 1991 and is a result of substantial and continuing investment made by our members in technology the Postal Service's automation plans demand.

The National Association of Presort Mailers obviously concurs with the Postal Service's automation plan. We think it is the most promising avenue to keep postage rates under control and to keep mail a relevant communications medium. A corollary strategy of the automation plan–from an earlier task force—was to divide mailing tasks between mailers and the Postal Service so that the lowest combined cost to both parties results. This is a noble objective; one that the members of our association have dedicated their businesses to achieve and to provide to the Nation's business mailers.

Our association is a 96-member trade association which consists of presort service bureaus, mailers, mailing equipment vendors, and other interested parties. It was formed in 1984 to represent the presort mailers' interests before the Postal Service, the Rate Commission, and Congress, as well as to provide communications between members and mailers. Our primary purpose has been to actively participate in every postal rate case since our founding in 1984.

Since our association was chartered, our members have concentrated on providing services to large and small mailers throughout the United States, regardless of what category they mail in and, today, we process approximately 12 billion pieces of mail annually for our customers; our industry overall provides one of every three letters the Postal Service receives in first class.

We provide benefits to our customers in several ways. Primarily, we reduce the cost of using the U.S. Postal Service. Presort bureaus aggregate many mailers' output in one place and at one time to meet the Postal Service's density requirements. We improve qualification, and we create economies of scale. Other benefits customers value include pickup from their location and delivery to the Postal Service and insulation from day-to-day dealings with the Postal Service in many cases.

Since the advent of automation, we have added prebarcoding as one of the benefits mailers receive, and presorters provide these services for a portion of the incentives that the Postal Rate Commission and the Postal Service have established. Generally the customers receive the lion's share of that discount and, since our industry has automated, we have actually been able to lower our prices to our customers, something I'm sure that the rest of the panelists would like to be able to say of their service bureau.

Presort service's aggressive investment in automation has resulted in its becoming the largest mailer of prebarcoded mail, and while our members mostly began as manually operated three to five-digit presorters, we have become among the earliest and largest participants in the Postal Service's automation plans. We have aggressively automated for the same reasons the Postal Service has, in one case to save labor costs, and second to realize those incentives that the Rate Commission and the Postal Service and intervenors litigate.

As an industry solely devoted to realizing these postal incentives, we are keenly interested in the postal rates in general and the incentives in particular. Our participation in the several rate cases since 1984 has taught us much about the statutory ratemaking process, and in general we are happy with that process. We did testify last year that the process could be shortened to perhaps 6 months to save litigation costs but that we believed that mailers are well served by a strong Postal Rate Commission. That is still our opinion.

Today, however, I would like to focus the committee's attention on the dark side of postal ratemaking, and that is regulation. While mailers and the Postal Service openly litigate the price of mailing before the Postal Rate Commission, the regulations that control mailers' ability to realize these incentives are the province of postal managers. It is the combination of price and regulation that forms the real cost of mail, and it is our opinion that the growth of regulation, especially regarding automated mail, is de signed to shift costs away from the Postal Service and toward mailers outside the intentions of the Postal Reorganization Act.

We categorize regulations into two forms that might be called explicit regulation and implicit regulation. Explicit regulations are those propagated by the U.S. Postal Service headquarters staff with the objective of inclusion in the Domestic Mail Manual. Last year, we testified that the Service issued a huge number of new rules just after the close of the R90 rate case's final testimony period and that the timing of their release precluded mailers from assessing their impact in the rate case testimony.

Many mailers believed the timing was no coincidence and that the Service did not want these regulations and the additional costs mailers would bear to be factored into the Rate Commission's Opinion and Recommended Decision. Other mailers view this timing more charitably, but most would agree that the regulations' costs should be recognized in the ratemaking process.

This year's best example of explicit regulation may be the announcement of the 11-digit bar code. The Postal Service, after years promoting the nine-digit bar code, has unilaterally decided to redefine what constitutes a bar code via new regulations. These initiatives will create new costs for mailers and, at the same time, create new cost avoidances for the Postal Service. Mailers, quite naturally, would like the Postal Service to offer new rates that compensate for at least part of these new shifted costs and to recognize the costs the Postal Service itself will avoid. While such a path seems to define the very concept of work sharing, the Postal Service has yet to show any signs of agreeing, although they may in the future.

Another cost mailers face is the implicit regulations of mailing practices often found at the divisional levels. These implicit costs are imposed upon mailers by local managers either by unfair interpretation of the Domestic Mail Manual or by its complete disregard. A clear and recent example of the acceptance policy of the San Francisco Division has been announced, and it is our understanding that prebarcoding mail, while it saves money and time for the Postal Service, will be held to a higher standard than normal mail in the San Francisco Division.

The San Francisco Division has determined that its policy will be to hold prebarcoding mailers to a more restrictive time than mailers who are depositing full-rate mail even though it costs the Postal Service more to handle that full-rate mail. Moreover, where once the Division provided ancillary services to all mailers, it will now discontinue those services, directly increasing the real cost of mailing.

The combination of creeping explicit regulations and unfathomable implicit regulations are real costs for mailers. The very uncertainty of the nature and direction of the regulatory process creates risk for the businessmen who are our members and for mailers in general. One perverse result of all this may be that mailers are more inclined to use our presort bureau's services as a method to shift regulatory risks from themselves to our members.

In fairness, however, we must also recognize that the Postal Service has improved its regulatory process at both the headquarters level and many postal regions and divisions. Several ad hoc groups are working to rationalize regulations and the mailers' needs at the headquarters level. Many members are also reporting success at divisional levels.

Nevertheless, it is our testimony that the Post Office and Civil Service Committee investigate regulations' effects on the ratemaking process. Moreover, we believe that a complete understanding of ratemaking will only result when regulations are recognized explicitly as costs mailers suffer. Finally, we suggest that the committee have the Postal Service explain their analysis of regulatory costs and effects on the ratemaking process.

Specifically with regard to the Joint Task Force on Postal Rate making, we would support the 4-year rate cycle but worry that endless litigation would be a problem with this midcourse adjustment. We would, of course, support service agreements and we would

support indexation if we could get realistic data from the Postal Service regarding our costs which they have not. We now suffer from several different sources of numbers, and we never know which ones are right.

Thank you.
[The prepared statement of Ralf Seiffe follows:

Statement of Ralf Seiffe, Vice President and Treasurer
On Behalf of The National Association of Presort Mailers
Before The United States House of Representatives'
Committee On Post Office and Civil Service

June 9, 1992

In a letter dated May 29, 1992, the Honorable William L. Clay, Chairman and the Honorable Benjamin A. Gilman, Ranking Minority Member invited The National Association of Presort Mailers To participate in these hearings.

We are honored to be here today

to respond to that invitation as we have several times in the past. Our written testimony has been prepared on behalf of the members of our association and is presented today by Ralf Seiffe, the association's vice president and treasurer. Our observations are based on the collective experience of our members, especially those who have made substantial investments to participate in the Postal Service's Automation programs.

Today, we are happy to report that members of our association provided one-half of all prebarcoded letters for which the Postal Service granted a postage incentive this past year. This association is now responsible for three and one half billion prebarcoded letters annually; this achievement is unparalleled by any other industry and represents demonstrable automation success for the participating businesses and for the Postal Service.

It