The Postal Service continues to pursue the deregulation of air transportation rates for the transportation of international and military mail and a transfer to the Postal Service of the authority to contract competitively for such transportation in the open market. Such a transfer of authority may require legislation.

B. INTERNATIONAL SURFACE TRANSPORTATION

The cost of international surface transportation by ocean decreased from $4.8 million in 2004 to $4.0 million in 2005. Ocean surface transportation suppliers are selected on the basis of a best value comparative analysis of proposals.

C. TERMINAL DUES, TRANSIT CHARGES, AND OTHER INTERNATIONAL EXPENSES

Under the acts of the Universal Postal Union (UPU), each postal administration that receives mail from another administration has the right to collect payment from the originating administration for the costs incurred to process and deliver that mail. These charges are called terminal dues for letter post. International Parcel Post and International Express Mail, as well as private courier services, also incur processing and delivery costs from foreign postal administrations (FPAs). Additionally, the UPU provides for transit charges for mail exchanged between administrations through a third country. Transit charges are paid by the originating country to the intermediary country for its forwarding of mail to the destination.

For the most part, settlements of terminal dues and transit charges are contingent upon both the Postal Service and a FPA accepting statistics with regard to the weights and number of mailpieces exchanged by the two countries. The actual settlement and payment of terminal dues or transit charges can occur 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 2005 the Postal Service recognized $551 million in terminal dues, Express Mail, transit charges, and other international expense unrelated to the transportation of mail. The comparable expense for 2004 was $415 million.

4. Postal Service-Owned Transportation

The Postal Service-owned fleet is predominantly used to provide transportation for the "first and last miles" of its delivery network. The fleet is used primarily in urban and suburban locations and is augmented by highway contract routes and rural delivery where necessary and appropriate. In addition to providing delivery and mail processing support, the fleet also includes vehicles used for law enforcement, plant and vehicle maintenance support, mobile Post Offices, and other administrative support functions.