Show the backside please. Is there anything wrote on it? From my view the article 127.40 you show states it is subject to customs inspection. It is all properly done according to that.
So, if it was suspected that something inside was merchandise, it could always be opened. The post office would always seize bundled Irish Sweepstakes ticket forms (didn't they come in booklets?) if it was evident that they were in a letter. In that case, I don't think even the envelope got forwarded unless there was an actual letter enclosed.
The phrasing of the marking makes me wonder if it was intended for a wrapper over a group of mailpieces, for internal handling by a different unit within a Post Office to which the group would be moved. The "to be affixed and canceled" language sounds like a direction to PO personnel and the overall size is very large compared to most other auxiliary markings. I suppose it could be to alert the carrier.
Something about the return address, or the addressee, must have tipped off the PO that it contained commercial merchandise.
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