Mail that can't be delivered goes to one of two Mail Recovery Centers* located in St. Paul and Atlanta. Each item is looked over for some identifying information on the outside that can connect the package with either the sender and recipient. If nothing is found, the item is scanned for valuable material. Correspondence is destroyed to protect privacy, but if a package contains a valuable item it's opened to search for any marks on the inside indicating who owns the package. If something is found, it is placed in special packaging and sent on its way.
Of the remaining items, firearms, pornography, and food are destroyed, while the remainder is auctioned off in bulk lots. The office receives 90 million or so letters and packages each year, with only 8-9% reaching their destination.
Most of this mail is undeliverable because the sending address is obscured or the addressee is deceased, and the return address is missing. Letters to fictional people like Santa are also handled by the office, although these are sometimes redirected to organizations that specialize in answering these letters.
*Despite the name change in 1994, most people still refer to this as the "dead letter office," a title the department held since its inception in 1825. This office is best known to the public under this name thanks to mentions in Hermann Melville's classic short story "Bartleby, The Scrivener" as well as "Miracle on 54th Street."
Posted 4467 day ago