Contracts and contracting have often been the topics of previous installments of PARCEL Counsel. In this issue, we will look at a category of contracts not previously considered: USPS’s Negotiated Service Agreements (NSAs). On its website, the USPS defines an NSA as follows:
“A Negotiated Service Agreement (NSA) is a customized and mutually beneficial contractual agreement between the USPS and a specific mailer (customer or organization). An NSA provides for customized pricing, prices, and classifications under the terms and conditions established in the NSA and may include modifications to current mailing standards and other postal requirements.”
The underlying concept is essentially the same as contracts between parcel shippers and a multitude of other private entities providing transportation services. The gist is that a negotiation takes place based on the volume of pieces or parcels that a parcel shipper would be tendering in exchange for rates or other terms that are more favorable than the private provider’s or USPS’s standard rates or terms. Generally speaking, the higher the volume, the deeper the discount.
There is one essential difference between private contracts and the USPS’s NSAs. The private providers are indeed private. They are free to negotiate whatever deal they choose subject only to their own internally established criteria.
Conversely, USPS’s NSAs are subject to certain federal statutes and certain federal regulations. One regulation in particular, 39 CFR 3030.540, sets forth some very basic requirements for an NSA to be approved. First, the NSA must either “improve the net financial position of the Postal Service” or “enhance the performance of operational functions”.
Furthermore, NSAs “may not cause unreasonable harm to the market place” and “must be available on public and reasonable terms to similarly situated mailers”. This latter requirement is perhaps the most critical distinction between private contracts and USPS NSAs. Private providers may freely discriminate between customers with respect to rates. However, USPS NSAs are not allowed to do this. It is my understanding that this means that parcel shippers tendering similar volumes with similar mailing and handling characteristics would be entitled to a substantially similar Negotiated Service Agreement.
Another critical difference is that while a private provider would have in place a mechanism for “upper management” to approve any contract entered into by the sales force, proposed NSAs negotiated by the USPS must be submitted to and approved by the Postal Regulatory Commission (PRC). A NSA must be approved by the PRC before it can be implemented.
One step of this process is that redacted versions of a proposed NSA are published in what is known as the Federal Register. As an example, in the Federal Register for Wednesday, November 24, 2021, there were four such notices posted: two were for Priority Mail Negotiated Service Agreements, one was for a Parcel Select and Parcel Return Negotiated Service Agreement, and one was for a Priority Mail and First-Class Package Service Negotiated Service Agreement.
All for now!
Brent Wm. Primus, J.D., is the CEO of Primus Law Office, P.A. and the Senior Editor of transportlawtexts, inc. Previous columns, including those of William J. Augello, may be found on PARCELindustry.com. Your questions are welcome at firstname.lastname@example.org.
This article originally ran in the January/February, 2022 issue of PARCEL.