data problems, and resources available to customers to learn about service and interpret information.

     Bundle Tracking Service is being developed to provide tracking information for carrier route pre-sorted bundles which bypass mail processing equipment. This service will be available for Standard Mail, enhanced carrier route flats and Periodicals mail, and carrier route flats. The pilot test started in April 2003. Currently the Postal Service is conducting market research to ascertain market place demand and pricing.

     The second round of cost-based Post Office (P.O.) box fee structures was implemented in conjunction with the R2001-1 rate case. The fee structure for P.O. boxes is now based on one of seven fee levels that best match the cost of the P.O. box space at a given Post Office. Further refinements of this fee structure will continue in future rate filings. This will make it possible for P.O. box fees in a number of locations to cover their costs, which will create more equitable P.O. box fees over time and improve the contribution of P.O. box service to institutional costs. Additionally, in June 2002, the Postal Service migrated to the first Web-based, standalone system capable of tracking Post Office box activity. This represents the initial step toward the integration of the more than 13,000 standalone systems currently used to track P.O. box activities. This new system will help management drive product strategies to grow P.O. box revenue and contribution.

     In 2003, the Postal Service continued to focus on providing customers reliable and affordable package delivery in order to remain a valuable provider in this highly competitive market. The Postal Service has focused on identifying cost-reduction opportunities while maintaining reliable consistent service, developing revenue opportunities by improving existing products and developing new products, and improving access to, and ease-of-use of, products and services. The Postal Service has further defined its strategic direction to coincide with identifyin

international opportunities to grow revenue, volume, contribution and market share while meeting customers' needs.

     Parcel Select service is the Postal Service's economic ground package product designed for medium- to large-size shippers who transport their packages to destinating Postal Service facilities. In 2003, the Postal Service continued to experience volume growth in this product line of nearly 10 percent. Driving this growth has been the Parcel Select product, entered at destinating delivery units (DDU) where volume growth has been nearly 40 percent. Rate stability and the embedding of Delivery Confirmation service in the base rates were critical to this progress. Improving access by standardizing critical entry times and "early bird" hours at delivery units, as well as a continued focus on service improvements, and the development of better service measurement and simplified acceptance procedures helped spur this product growth. Additionally, significant work has been done to develop an Electronic Verification System, which will also improve access and help grow DDU volume.

     Selling merchandise to customers through the mail inevitably results in a portion of the merchandise being returned. By the end of 2003, an estimated 2.8 billion residential parcels will be shipped from online storefronts. Of this volume, 360 million parcels (approximately 13 percent) will be returned.

     This presented an opportunity to develop a destination entry merchandise return service. Currently Parcel Select service is targeted toward business-to-residential shippers with volume of more than 100 parcels per day, allowing them to deposit the parcels closer to their destination. By offering a similar merchandise return service, the Postal Service will be targeting the same shippers, but focusing on merchandise returned from consumers to merchants. Return parcels will most likely be picked up at the same mail facility where the packages