b. Surface Transportation

     The cost of international surface transportation by ocean decreased from $5 million in 2002 to $3.8 million in 2003. Ocean surface transportation suppliers are selected on the basis of a best value comparative analysis of proposals.

     Under the acts of the Universal Postal Union (UPU), each postal administration that receives mail from another administration has the right to collect from the sending administration a payment for the costs incurred in processing and delivering mail received from that administration; those charges are called terminal dues. Additionally, the UPU provides for transit charges for mail which is exchanged between administrations through a third country. Transit charges are paid by the sending country to the intermediary country for forwarding mail to the destination.

     Settlements of terminal dues and transit charges are contingent upon both the Postal Service and the foreign postal administration (FPA) accepting statistics in regards to the weights and number of pieces exchanged by the two countries. The actual settlement with an FPA and the payment of terminal dues or transit charges occurs a year or more after the service is performed. In order to record expenses associated with the current year, the Postal Service accrues an estimate of these expenses based on available weight and piece data by country. In 2003, the Postal Service recognized $360.5 million in terminal dues and transit charges expense. The comparable number for 2002 was $410.7 million.

     Mail transport equipment (MTE) consists of sacks, trays, lids, pallets, and wheeled containers used to enclose and transport mail. The Mail Transport Equipment Service Center (MTESC) program is an out-sourced, production-oriented, volume-driven integrated network of 22 MTE processing facilities located throughout the United States. MTESC contractors collect, sort,