CNF Files Complaint Against USPS

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In continuing efforts to resolve a dispute with the U.S. Postal Service, CNF Inc., Palo Alto, CA, said this week that its Emery Worldwide Airlines subsidiary filed a complaint in U.S. Court of Federal Claims in Washington asking for a declaration of contract rights and for a ruling that the USPS is in breach of contractual payment obligations.

The action relates to a contract the USPS began with Emery in 1998 under which Emery created and has operated a network of 10 Priority Mail processing centers for the USPS. The agency signed on with Emery so it could improve its Priority Mail service.

According to CNF, the relationship soured beginning in the third quarter of 1999, when the USPS began paying CNF a provisional rate for its services that is below its cost of operating under the contract. In accordance with generally accepted accounting principles, the company is recognizing unbilled revenue sufficient only to recover costs. No profit has been recognized since the second quarter of 1999.

"There's been some disagreement about the negotiated rate the Postal Service is paying us for the service we are providing them," said Nancy Colvert, a spokeswoman for CNF. "Technically, based on what the USPS is paying us and what it costs us to provide this service, we have actually lost money with the contract. The purpose of this is not for us to subsidize the Postal Service. We are supposed to be making money on this."

CNF remains hopeful that a business resolution can be obtained and that all efforts continue to reach such a resolution.
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