In recent years, the Office of Inspector General of the U.S. Postal Service (USPS) has concluded that it lacks adequate controls against short-payment or nonpayment of postage on metered mailings. The Postal Service responded by stepping up enforcement, and business mailings of parcels—the type of mailings sent by most direct response marketers—is an area of special concern.
This is because such mailings typically include a mix of pieces of varying weights, shapes, and contents, and are sent at varying rates of postage. In addition, commercial mailers of parcels typically use postage meter strips or labels—not preprinted, bulk-mailing permit markings—to indicate postal payment. USPS normally verifies only a tiny fraction of these pieces before accepting them for processing.
When the Postal Service believes that a business mailer may be underpaying on postage, its in-house law enforcement force, the Postal Inspection Service, goes to work. The resulting investigation can lead to a letter from the Postal Service claiming that you owe a six- or seven-figure sum because sufficient postage was not paid on parcels mailed to consumers one, two, or three years ago. These letters provide only 30 days to appeal or pay up, and conclude with “We appreciate your business.”
If your company receives such a letter, notify your company’s in-house legal department or outside counsel immediately, unless the amount of the underpayment claim is trivial. Do not assume that the dispute can be resolved informally because your company is a valued customer of the Postal Service. Regardless of your standing, you will need to understand how the Postal Service’s underpayment claims are investigated to build the strongest defense possible.
The Investigative Process
Based on a tip or hunch, postal inspectors visit the mail processing site or sites from which the mailer sends outbound parcels, and pull one or more samples of those parcels for inspection. The inspectors weigh, measure, photograph, and test each sampled parcel to verify how much postage should have been paid. Then, the inspectors compare the total postage owed on the sample pieces with the total paid. If the former is larger than the latter, inspectors multiply this ratio by the total amount of postage actually paid by the mailer on all of its mail for the previous year or so. Inspectors then submit an investigative report to the district office covering the area in which the parcels entered the system, and the district office sends the mailer a decision demanding additional payment.
Or at least that’s how the process is supposed to work. In practice, investigations and reports can be sloppy, and unjustified underpayment claims can result. Here are a few examples Venable has encountered in recent cases:
- The Postal Service fails to produce the investigative report and work papers of the Postal Inspection Service. Without this supporting information, verifying the validity of an underpayment claim can be impossible.
- The Postal Inspection Service’s work papers are incomplete or nonexistent.
- Files lack photographs, videos, or other evidence needed to document test results. This is especially important when the Postal Service claims that required information or markings were missing from the face of the mailpiece, or the piece’s physical properties made it ineligible for the rates claimed.
- The Postal Service fails to credit the mailer for all of the postage paid for mailings. The Postal Service fails to demonstrate how the pieces were sampled, or that the sample is representative of the entire universe of mailings. This is especially important when a mailer uses multiple mailpiece shapes or multiple mail classes or products.
- The Postal Service uses a sample of pieces mailed during a brief period to claim underpayment throughout a much longer period.
Building a Response
The response to a Postal Service underpayment decision will always depend on the facts and circumstances of each case. However, here are some useful starting points:
First, make a written request for a copy of the complete investigative report, as well as all of the underlying work papers and documentary evidence. Request that any spreadsheets be produced in electronic form, and that the deadline for filing an administrative appeal be extended until 30 days after the requested materials have been delivered to you.
If you receive documentation, study the steps in the Postal Service’s analysis—including the bullet points listed above—carefully. Work with knowledgeable legal counsel to build the most effective case possible. Unlike trials and appeals in court, the initial written appeal is the best opportunity to make your case with the Postal Service.
Finally, file a protective appeal if the Postal Service declines your requests or fails to respond before your appeal is due. Apart from any defenses against the substance of the claim, you should argue that assessing a monetary claim against a mailer without disclosing all of the underlying evidence and analysis is a denial of due process.
If you have worked with the Postal Service for any length of time, you know that rules governing postal rates can be arcane and complicated. You may have a warm and friendly relationship with your local Postmaster, or have been singled out for praise or recognition by your sales, marketing, or customer relations contacts at the Postal Service. You may have even received a plaque for being an outstanding “postal partner.” But if you receive a demand letter, none of those accolades will count with the Postal Service’s revenue protection branch. Alert your in-house legal department or experienced outside counsel immediately, and focus on building the strongest possible case to appeal the Postal Service’s charges.
Photo by Gualberto107/FreeDigitalPhotos.net
The above post was adapted from a “Law & Orders” column originally published in the March-April 2015 issue of ER magazine.