I think a letter can contain merchandise if no more than 3.5 ounces and not more than 1/4" thick. You just pay the 20-cent nonmachinable surcharge.
Look at section "2.0 Physical Standards for Nonmachinable Letters" here:
http://pe.usps.com/text/dmm300/201.htm#1042571
***Important****
Reading now section 3.10, I wonder if you have to pay the nonmachinable surcharge with CHIPS IN LETTERS!! (It is in "3.0 Physical Standards for Machinable and Automation Letters and Cards" section.)
3.10 Rigid and Odd-Shaped ItemsRigid items (e.g., pens, pencils, keys, bottle caps) are prohibited within mailpieces. Reasonably flexible items (e.g., credit cards) are permitted. Subject to 3.12, Flexibility Standards for Automation Letters, odd-shaped items (e.g., coins and tokens) are permitted if firmly affixed to and wrapped within the contents of the mailpiece and envelope to streamline the shape of the mailpiece for automated processing.
Anyway. it looks like you can include things like coins and tokens in LETTERS.
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