FDA regulations in part 312 (21 CFR part 312) provide procedures that govern the use of investigational new drugs, including new biological drugs, in humans. Under part 312, the sponsor of a clinical study in humans must submit to FDA an IND which provides specific information regarding the investigational new drug and the clinical study. The IND must be authorized by FDA and approved by the local institutional review board (IRB) before the clinical study may begin. The provisions of this rulemaking do not alter the procedures specified in part 312 for submission of an IND. A manufacturer requesting approval to market a biological product in interstate commerce must submit a biologics license application (BLA) to FDA before the product may be introduced into interstate commerce (42 U.S.C. 262). Among other things, the BLA contains information and data resulting from the clinical studies performed under an IND (§ 601.2 (21 CFR 601.2(a))). All information and data concerning the product, including those submitted in applicable IND's and in the BLA, are held by FDA in a biological product file (see definition of “biological product file” in § 601.51(a) (21 CFR 601.51(a)) throughout the lifetime of the product.

The general requirements related to disclosure of information for all types of commodities regulated by FDA and for all types of documents are provided in part 20 (21 CFR part 20). Under these regulations, certain categories of information are exempt from mandatory disclosure. The categories of information relevant to human gene therapy and xenotransplantation clinical trials that have historically been exempt from public disclosure include trade secrets and commercial or financial information which is privileged or confidential (§ 20.61); personnel, medical, and similar files, the disclosure of which constitutes a clearly unwarranted invasion of personal privacy (§ 20.63); and at the discretion of FDA, interagency or intra-agency memoranda or letters, except for factual information which is reasonably segregable (§ 20.62).

Specific requirements for the availability for public disclosure of data and information in an IND, including those IND's relating to biological drug products, are included in § 312.130. FDA's policy for the confidentiality of data and information contained in an IND for a biological product and in a biological product file is provided in §§ 601.50 and 601.51 (21 CFR 601.50 and 601.51). Under §§ 601.50 and 601.51, and consistent with the other referenced disclosure regulations, FDA has not routinely publicly disclosed any data or information contained in an IND or a pending biological product file. FDA has not even acknowledged the existence of the IND or a pending biologics license application, unless its existence has previously been publicly acknowledged. Because the agency has no mechanism for reliably tracking what information concerning an unapproved, investigational product has been publicly acknowledged, the agency generally provides no information to the public concerning an investigational product, including information concerning any IND or pending BLA submissions, and refers the public to the sponsor of the IND or the pending biological license for further information. In some cases, FDA may publicly disclose selected portions of safety and effectiveness data, such as summary information for consideration at an open session of a Federal advisory committee meeting, or other public workshops or meetings (§ 601.51(d)(1)). Once a biological license has been approved, certain information, as specified in § 601.51(e), concerning the approved product and the clinical investigation of the product may be publicly disclosed.

As a result of rapid advances in molecular biology, genomics, immunology, and transplant biology, new classes of biological therapeutics are being developed with the goal of providing future treatment options for genetic disease, cancer, and organ failure. Novel therapeutic approaches currently under consideration include the areas of human gene therapy and xenotransplantation. Human gene therapy and xenotransplantation are being proposed to treat genetic diseases such as cystic fibrosis, cardiovascular insufficiency, metabolic diseases such as diabetes, neurologic diseases such as Parkinson's and Huntington's disease, cancer, acquired immune deficiency syndrome (AIDS), and organ failure.

Human gene therapy is defined as the administration of genetic material to modify or manipulate the expression of a gene product or to alter the biological properties of living cells for therapeutic use. Cells may be modified ex vivo for subsequent administration to the subject or altered in vivo by gene therapy products given directly to the subject. Human gene therapy includes, but is not limited to, autologous or allogeneic bone marrow stem cells modified with a viral vector, intramuscular or intravascular injection of a therapeutic plasmid deoxyribonucleic acid (DNA) or a therapeutic viral vector, ribozyme technology, and use of sequence specific oligonucleotides to correct a genetic mutation. For the purposes of this regulation, gene therapy is not intended to include the administration of viral or cellular products (e.g., blood or unmodified bone marrow), or their derivatives, that do not contain genetic material that has been specifically engineered into the product for therapeutic purposes. While prophylactic vaccines, including plasmid DNA vaccines and genetically modified viral vector vaccines, and some replication competent viruses are excluded under this regulation from the gene therapy definition, they are similar in nature to gene therapy products. Issues relevant to gene therapy products, such as vector integration and biodistribution, also apply to prophylactic vaccines. Therefore, the agency requests comment on whether such products should be included under this rulemaking to allow information related to these products to be available for public disclosure.

The use of antisense oligonucleotides to block gene transcription is not intended to be included under gene therapy; however, as noted above, the use of sequence specific oligonucleotides to correct a genetic mutation would be included. The proposed mechanism of action of sequence specific oligonucleotides is to irreversibly change, insert, or delete a single base in the genome of a cell. This raises questions of whether base changes may result in mutations that may cause cancer, or express an immunogenic protein or have other adverse health affects. In addition, their use in vivo raises issues of activity in tissues other than the target and the risk of gonadal biodistribution leading to germ line changes.

Xenotransplantation refers to any procedure that involves the transplantation, implantation, or infusion into a human recipient of either: (1) Live cells, tissues, or organs from a nonhuman animal source; or (2) human body fluids, cells, tissues, or organs that have had ex vivo contact with live nonhuman animal cells, tissues, or organs. The live cells, tissues, or organs used in xenotransplantation are referred to as xenotransplantation products. Xenotransplantation products include those from transgenic or nontransgenic animals, as well as combination products that contain xenotransplantation products in combination with drugs or devices. These include, but are not limited to, porcine fetal neuronal cells, encapsulated porcine islet cells, encapsulated bovine adrenal chromaffin cells, baboon bone marrow, and external liver assist devices employing porcine liver, or porcine hepatocytes. Nonliving biological products or materials from animals, such as porcine heart valves and porcine insulin, are not classified as xenotransplantation products for the purposes of this rulemaking.

While human gene therapy offers great promise for improving the lives of patients with serious, life-threatening diseases and disorders, there are several risks inherent in its use as a medical intervention. These risks include the inadvertent infection of patients, and potentially their contacts, with replication competent virus present in gene therapy vector preparations. For example, infection with type C murine retroviruses, which could contaminate retroviral vector preparations, is known to cause a range of diseases in animals including spongiform encephalopathy, anemia, and neoplastic disease. In addition, these risks include the risk of infection with novel infectious agents generated by recombination in vivo, the consequences of which are unknown; the risk of insertional mutagenesis through disruption of the normal genetic sequence, resulting in altered gene expression; and the risk of inadvertent modification of the patient's germline and its effect on future offspring.

Although xenotransplantation provides a potential approach to address the shortage of human organs and for treatment of disease, the use of xenotransplantation products raises concerns about possible infection of the recipient and, subsequently, the public at large with both known and as-yet- unrecognized infectious agents. Experience with human allograft transplantation has demonstrated the potential for transmissibility of infections from donor to recipient through transplants (Refs. 1 to 3). The direct contact resulting from implantation of a xenotransplantation product into a recipient, with the associated disruption of anatomical barriers and the immunosuppression of the recipient, may facilitate interspecies transmission of xenogeneic infectious agents. The potential for subsequent transmission of a xenogeneic infectious agent from the recipient to the recipient's close contacts, and propagation through the general human population, is an additional risk and a recognized public health concern.

Insertional mutagenesis is a risk potentially associated with the infection of xenotransplant recipients and their close contacts and the general population with xenogeneic retroviruses. In addition to potential horizontal transmission of infectious agents from the recipient of a xenotransplantation product to the recipient's contacts, there is concern regarding vertical transmission of infectious agents from the recipient to progeny during gestation (e.g., transmission from mother to fetus of infectious agents across the placenta or during parturition). Vertical transmission of xenogeneic infectious agents could result in the development of infectious disease in progeny. In addition, vertical transmission of xenogeneic viruses can result in insertional mutagenesis with disruption of normal human development or integration into the germline resulting in transmission to future generations.

Thus, human gene therapy and xenotransplantation investigative approaches individually pose: (1) Risks that extend beyond the individual (e.g., public health risks, including the potential for the transmission of infectious agents from the recipient to the public at large); and (2) risks of inadvertent modification of the germline (alterations of the genetic material of the progeny). Moreover, these approaches may also be used in combination (e.g., xenotransplantation products genetically modified before implantation), resulting in complex questions and issues for consideration and discussion prior to and during human clinical trials.

Human gene therapy and xenotransplantation investigations call for additional mechanisms to provide the public access to clinical trial information relevant to the assessment of risks and benefits, and to informed consent. Special care is needed to ensure that individual subjects understand the experimental nature of the procedures and their known and unknown risks and burdens. Human gene therapy and xenotransplantation require the evaluation of risks to third parties such as health care workers, close contacts of the recipient, and the community. The informed consent process should address the need for long-term surveillance and post-mortem analysis and potential infectious disease risks to recipients and their contacts.

These investigative approaches raise new challenges for the local review bodies responsible for ensuring the safe and ethical conduct of this research. Local IRB's are responsible for reviewing biomedical and behavioral research involving human subjects, to protect the rights of human subjects (45 CFR part 46, Protection of Human Subjects, and 21 CFR part 56, Institutional Review Boards). Institutional Biosafety Committees (IBC's) are responsible for reviewing and overseeing basic and clinical research conducted at their institutions. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment (section IV-B-2 National Institutes of Health (NIH) Guideline for Research Involving Recombinant DNA Molecules). This proposed rule would provide a mechanism for public access to human gene therapy and xenotransplantation clinical trial information and for public education, informed discussion and participation that can form a foundation for safe and ethical research in these innovative areas.

The proposed rule would enhance the development of related Federal initiatives that provide for public access to clinical trial information through national data bases: There are also a number of Internet sites sponsored by associations, clinical centers or academic institutions, and nonprofit organizations that provide public access to similar types of clinical trial information. Examples include: Center Watch Clinical Trials Listing Service at http://www.centerwatch.com, a resource both for patients interested in participating in clinical trials and for research professionals; http://www.HealthAtoZ.com, a search engine for health and medical Internet resources; the Musella Foundation for brain tumor research and information, at http://www.virtualtrials.com; the National Alliance of Breast Cancer Organizations, at http://www.nabco.org, which, in an effort to increase awareness of clinical trials, lists brief descriptive summaries of clinical trials in the National Cancer Institute Physician Data Query (NCI PDQ) data base; the University of Michigan, at http://www.cancer.med.umich.edu, which lists clinical trials at the University of Michigan Cancer Center (UMCC) and supplies links to external clinical trials and resources; the former Surgeon General C. Everett Koop's Internet site, at http://www.drkoop.com, which allows the public to browse through a listing of therapeutic areas where volunteers are being sought for clinical trials; Biotechnology Industry Organization, a trade association, at http://www.bio.org, which lists press releases and industry news, and provides links to patient groups and professional medical societies; and http://www.investor.biospace.com, which has not only a biotechnology search engine that links to hundreds of companies, but also extensive information on the latest technologies and clinical trials, as a basis for investment. The proposed rule should facilitate the development of similar data bases, either publicly or privately sponsored, with information concerning the study of gene therapy and xenotransplantation. As provided under section 113 of the Food and Drug Modernization Act of 1997 (Public Law 105-115), NIH, through its National Library of Medicine, has created a national clinical trials data base at http://clinicaltrials.gov to provide patients, family members, and other members of the public with current information about clinical research studies.

Historically, public disclosure of information with regard to human gene therapy and xenotransplantation has assisted FDA in performing its duties and has benefitted the public. The categories of information that may be made publicly available by FDA as a result of this disclosure rule include information currently made public by other Federal agencies in connection with advisory committee meetings or other public workshops or meetings, and through general commercial disclosure.

The NIH Office of Biotechnology Activities (OBA; formerly the Office of Recombinant DNA Activities) administers the Recombinant DNA Advisory Committee (RAC). This committee was established in October 1975, in response to concerns about the potential public health risks and environmental hazards posed by recombinant DNA research, as well as the significant ethical, legal, and societal issues associated with this emerging technology. The RAC has met quarterly in open public session to discuss these issues and, since the first human gene transfer clinical trial was proposed in 1988, the committee has publicly reviewed selected human gene transfer clinical trial protocols. The minutes of RAC discussions of human gene transfer clinical trials and related issues are accessible to the public via the OBA website (http://www.nih.gov/od/oba/index.htm). RAC review and public discussions provide an important mechanism for receiving public input into Federal policy development and for making the public aware of potential toxicities and adverse events associated with gene transfer products. As one example, when a participant in a cystic fibrosis gene transfer clinical trial required intensive care treatment for an acute adverse event suffered shortly after administration of an adenoviral gene transfer product, the investigator was invited to discuss the occurrence with other experts in the field at the next public RAC meeting. This public discussion and analysis facilitated both dissemination of important information about this toxicity and enhanced understanding of its pathogenesis, thereby contributing to the safety of patients in other gene therapy trials.

NIH also collects information on gene transfer studies and makes it available to the public. Appendix M of the “NIH Guidelines for Research Involving Recombinant DNA Molecules” (Ref. 4) requires that investigators provide specific information for the purposes of protocol registration, RAC review, and potential public discussion, and that this information should not contain confidential commercial information or trade secrets, enabling all aspects of RAC review to be open to the public. The required information includes scientific and nontechnical abstracts, the informed consent document, statements on privacy and confidentiality, reports of serious adverse events, protocol amendments, and annual followup reports. Public disclosure of this information has facilitated progress and has contributed to improved patient safety in the field of human gene transfer by providing public access to clinical trial information, rapid dissemination of adverse event information, and summary information regarding outcomes of gene therapy clinical trials and adverse events.

All investigators receiving any NIH funds for basic and/or clinical research involving recombinant DNA molecules, and all investigators affiliated with institutions receiving any NIH funds for basic and/or clinical research involving recombinant DNA molecules, must comply with the NIH Guidelines. The NIH Guidelines also apply to collaborations between NIH-funded or affiliated researchers and privately funded investigators. In addition, commercial sponsors not affiliated with a NIH-funded institution have voluntarily submitted materials to OBA for RAC review. Therefore, the general practice in the field of human gene transfer has been to submit to NIH, OBA the information required under NIH Guidelines with the understanding that the information will be available for RAC review and potentially public discussion. This suggests that the information specified in Appendix M is not generally considered to be proprietary and that its disclosure does not impede commercial development.

The categories of information that would be disclosed as a result of this rulemaking include information that generally has been made public for xenotransplantation protocols. Sponsors of xenotransplantation IND's have publicly disclosed information regarding the scope of xenotransplantation clinical trials and the development of public health safeguards through: (1) Open public sessions of the Xenotransplantation Subcommittee of the Biologics Response Modifiers Advisory Committee (BRMAC) for the Center for Biologics Evaluation and Research (CBER), FDA (December 17, 1997, June 3 and 4, 1999, and January 13, 2000), and (2) Public Health Service (PHS) sponsored public workshops, including the workshop entitled “Developing U.S. Public Health Policy in Xenotransplantation,” January 21 and 22, 1998, at which xenotransplantation clinical trials under FDA IND's were summarized by the sponsor or by a sponsor's designee. Transcripts of these meetings can be found on the CBER Internet site at http://www.fda.gov/cber. At these public meetings, FDA scientists and others presented data demonstrating that porcine endogenous retroviruses could be activated and could infect human cells in vitro, and the implications of these data for porcine xenotransplantation product development and regulation were discussed. Based on these discussions, the BRMAC concurred with FDA's decision to place all porcine xenotransplantation clinical trials on clinical hold. During these meetings, FDA publicly discussed testing requirements and results needed by manufacturers in order to address and remove the clinical hold, and allowed sponsors of porcine xenotransplantation IND's the opportunity to present testing strategies, assuring the industry of consistency in regulation. The public as well was assured that Federal oversight was being conducted in a responsible manner.

Information related to the categories of information FDA proposes to disclose is available through publicly accessible filings to the Securities and Exchange Commission (SEC). The Securities Act of 1933 requires that investors receive financial and other significant information concerning securities being offered for public sale. In an annual filing, a company must provide a comprehensive overview of its business. This includes a description of ongoing research programs including discussion of clinical study safety and efficacy results, disclosure of investigational sites and the investigators involved, plans for product development and commercialization, and financial information. This information may be found on the SEC Internet site at http://www.sec.gov/edgarhp.htm.

In addition, voluntary disclosure of information regarding clinical trials of unapproved products and therapies by individual sponsors over the Internet has become widespread. Company Internet sites often provide this information in the form of descriptive summaries of clinical trials, press releases, recruitment opportunities for patients, investment opportunities, and general awareness material.

Thus, information of the kind FDA proposes to disclose concerning clinical trials on human gene therapy and xenotransplantation is already widely disclosed. This disclosure has not impeded commercial development of these products. In addition, the agency considers public disclosure of data and for information from human gene therapy or xenotransplantation clinical trials essential for public education, and for informed discussion and consideration of the public health and safety risks associated with the use of these investigational therapies.

The scope of this proposed rule is limited to disclosure of information related to human gene therapy and xenotransplantation. Confidential commercial information, such as information regarding commercial licensing agreements or the identification of suppliers, trade secret manufacturing information, names and other personal identifiers of patients and, except as specifically provided in the regulations, names and personal identifiers of third parties, such as physicians, hospitals, etc., and, at FDA's discretion, interagency or intra-agency memoranda and letters would not be disclosed. FDA is proposing only to disclose certain information necessary to ensure a continued mechanism for public education and input, which FDA believes is essential to the evaluation of the public health impact of these new technologies. FDA believes that these categories of information have not been considered to be proprietary, since they have been made publicly available through various mechanisms and their disclosure has not impeded commercial development. The public expects the current level of information disclosure and public review to continue in the areas of human gene therapy and xenotransplantation where there is potential risk to the public health.

The categories of information related to an IND that would be disclosed under this regulation include: (1) Product and patient safety data and related information, including results from preclinical and clinical studies and tests that demonstrate the safety and/or feasibility of the proposed procedures; (2) the name and address of the sponsor; (3) the clinical indications to be studied; (4) the protocol for each planned study, to include a scientific abstract and a nontechnical abstract, a statement of the objectives, purpose, and rationale of the study, the name and address of each investigator, the name and address of the official contacts of each local review body as appropriate (IRB, IBC) and dated copies of approval by each group, the criteria for patient selection and exclusion, an estimate of the number of patients to be studied, a description of the treatment that will be administered to patients, and the clinical procedures, laboratory tests, or other measures to be taken to monitor the safety and effects of the drug in human subjects and to minimize risk; (5) written informed consent forms; (6) identification of the biological product(s) and a general description of the method of production, including a description of product features that may affect patient safety; (7) IND safety reports; (8) information submitted to FDA in the annual report; (9) the regulatory status of the investigation, the date of such action, and the reason for such action; and (10) other relevant data and information that the Director, CBER, determines are necessary for the appropriate consideration of the public health and scientific issues, including relevant ethical issues, raised by human gene therapy or xenotransplantation.

To facilitate public disclosure of this information, FDA proposes to require sponsors of human gene therapy and xenotransplantation clinical trials to submit to FDA the information defined above upon submission of: (1) The initial IND, (2) any amendment documenting changes or additions to the IND, at the time the amendment goes into effect, (3) IND safety reports, and (4) annual reports. FDA is not proposing to require the submission of any new information not previously submitted as part of the IND process. For example, FDA is not proposing that all variations and updates of informed consent forms be submitted to FDA for public disclosure; however, under the proposed rule, FDA would disclose any sample informed consent forms generally submitted with an initial IND submission.

The agency requests comment on whether this rulemaking should apply to information as defined above that is submitted in a BLA. Public disclosure of information in a BLA would provide a continuation of the availability of information for public disclosure up until the time of license approval. A disadvantage would be the amount of documentation that would be required to be submitted in order to support this initiative.

The proposed provisions of this rulemaking do not alter the procedures specified in part 312 for submission of an IND. However, with regard to clinical holds of an IND (§ 312.42), FDA would be able to place a human gene therapy or xenotransplantation investigation on clinical hold if the sponsor does not submit to the agency the redacted version of data and information for public disclosure, or if the redacted version submitted is incomplete or not properly redacted.

The proposed regulation would make available for public disclosure specified safety and effectiveness information submitted in support of an IND 1 involving either a human gene therapy or xenotransplantation protocol. This information, discussed thoroughly in section II.C of this preamble, includes protocols, criteria for patient selection and exclusion, summary results of preclinical and clinical studies of the investigational article, a summary of the treatment that will be administered and the measures that will be taken to minimize risk to human subjects, safety reports, informed consent documentation, and information concerning the regulatory status of the product, such as whether it is on clinical hold and the reason for the hold. While such information relating to human gene therapy protocols has routinely been made available to the public through the NIH RAC process for the last 20 years, FDA regulations have consistently provided that similar information submitted to FDA as part of an IND is not publicly available. (See §§ 601.50 and 601.51.) This proposed rule is an attempt to harmonize these approaches for public review of important, new, but potentially hazardous and controversial, therapies. In this way, FDA will be able to more fully participate in existing and future venues for obtaining educated public input and discussion that could inform the agency's deliberations. The agency believes that there is great benefit in having human gene therapy and xenotransplantation products scrutinized, as they are being developed, by individuals with a wide variety of perspectives, including scientists from different disciplines, biomedical ethicists, patient advocacy organizations, and the general public, because of the unique blend of proposed benefit as well as potential risk to society that these products possess. Investigations of these types of products raise serious ethical and scientific issues, and, therefore, the decisionmaking process should be as transparent and fully informed as possible.

The proposed rule would formalize the existing practice of making certain specified types of safety and effectiveness information in IND's for human gene therapy and xenotransplantation publicly available. Such disclosure is necessary in order to protect the public health by informing the research community and the public of the nature and the hazards of the proposed research and by permitting comment on the merits of the proposed research.

The Freedom of Information Act (FOIA), 5 U.S.C. 552, generally provides that Federal agencies must disclose information in their files to the public on request. FOIA is designed to make federal agency records or information available to the public. The Supreme Court has stated that, “The basic purpose of [the] FOIA is to ensure an informed citizenry, vital to the functioning of a democratic society, needed to check against corruption and to hold the governors accountable to the governed.” (See NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 242 (1978).)

The statute provides nine exemptions and three law enforcement exclusions that agencies may use to protect specific categories of information from disclosure (5 U.S.C. 552(b)). These exemptions are the only basis for withholding information requested by the public under the FOIA 2 and are discretionary, not mandatory. (See Chrysler Corp. v. Brown, 441 U.S. 281 (1979).) One of these exemptions is particularly relevant to this proposed rule and the disclosure of information in applications to investigate and market human gene therapy and xenotransplantation products.

Exemption 4 of the FOIA protects trade secrets and confidential commercial information from public disclosure. (See 5 U.S.C. 552(b)(4).) While trade secret information, narrowly defined as secret, commercially valuable information related to manufacturing methods or processes, is present in all IND's and biological product files, including those subject to this proposed rule, this proposal will not affect the confidentiality of such information, and therefore it will not be discussed. Confidential commercial information is defined under exemption 4 as “commercial or financial information obtained from a person and privileged or confidential.” Each element of the definition must be satisfied for information to be confidential commercial information entitled to protection under exemption 4.

Historically, much of the data and information submitted in IND's and unapproved biological product files has been considered confidential commercial information. (See Public Citizen Health Research Group v. FDA, 704 F.2d 1280 (D.C. Cir. 1983); R & D Laboratories, Inc. v. FDA No. 00-CV-0165 (D.D.C. Sept. 7, 2000).) FDA's general information disclosure regulations define confidential commercial information, and provide that information submitted to FDA that falls within this definition is not disclosable. (See 21 CFR 20.61.) Further, the regulations that apply to the submission of IND's and biological product files define the contents of these applications as confidential commercial information generally exempt from disclosure and, indeed, even prohibit the agency from acknowledging the existence of an application (prior to approval) if it has not already been publicly disclosed. (See 21 CFR 312.130, 601.50, and 601.51.) The regulations provide different rules for disclosure after an approval letter has been sent, and when the application has been terminated, abandoned, or otherwise no longer has commercial value.

The agency is exercising its legal authority to promulgate new regulations that will make explicit and will formalize the circumstances and means by which certain safety and effectiveness information in these special types of applications will be made available for public disclosure. Such a change is especially warranted when, as here, the change is being made in large part to reflect the actual environment in which human gene therapy and xenotransplantation applications exist.

As has been discussed elsewhere in this preamble (in section I.B, Issues Related to Human Gene Therapy and Xenotransplantation), sponsors of IND's pertaining to human gene therapy have publicly disclosed the types of information covered by this proposed rule for many years as part of the process overseen by the RAC. Likewise, there has been widespread practice in the field of xenotransplantation to make publicly available a great deal of information concerning details of trials of xenotransplantation products during public advisory committee meetings and workshops sponsored by FDA and by the U.S. PHS. Information that is publicly disclosed by its owner cannot be confidential within the meaning of the FOIA and, as a result, can be made available for public disclosure by FDA. (See CNA Fin. v. Donovan, 830 F.2d 1132, 1154 (D.C. Cir. 1987).) The fact that these types of information cannot be considered confidential is the principal basis for issuing this proposed rule.

This proposed rule contains the public disclosure procedures the agency will apply to the safety and effectiveness information in human gene therapy and xenotransplantation applications that has historically been treated as confidential commercial information by the agency. These procedures will follow the consistent practice in the fields of human gene therapy and xenotransplantation of making such information available to the public. It is important to note that while certain safety and effectiveness data and information will be publicly available under this proposed rule, FDA does not intend to disclose the full reports of safety and effectiveness on the basis of which the product may be approved. FDA believes that, prior to approval of a biological product file, the full reports constitute confidential commercial information, as they traditionally have under the agency's regulations, and should not be released. (See 21 CFR 601.51(d).) However, under § 601.51(e), all safety and effectiveness data and information do become publicly available after a license is issued, and this practice will not be changed by this proposal.

In addition to the full reports, the agency also wishes to make clear that it will continue its current policy of not releasing confidential commercial information that is contained in a human gene therapy or xenotransplantation IND or unapproved biological product file. Examples of confidential commercial information that may exist in these applications would include information concerning licensing agreements and information identifying suppliers. This information ordinarily will remain confidential under exemption 4 unless it has already been publicly disclosed by the sponsor. Such business-related information is also not the type of information that FDA believes should be disclosed to further the public discussion and evaluation of human gene therapy and xenotransplantation trials. In addition, this proposed rule will not affect the rules governing the disclosure of personal medical and other similar information, the disclosure of which would cause an unwarranted invasion of personal privacy. (See 21 CFR 20.63.)

Based on the authorities discussed, the agency proposes to require sponsors of IND's related to human gene therapy and xenotransplantation to disclose certain specified safety and effectiveness data and information. This proposal will formalize and codify the existing practice in these fields under which these data and information have been publicly disclosed by their sponsors. Disclosure is especially necessary regarding these new, important, and also controversial technologies so that the research community and the public can be assured of the safety of conducting clinical trials of these products.

This proposal would require the sponsors of human gene therapy or xenotransplantation IND's to submit to FDA publicly available versions of information FDA requires in such IND's. The purpose of this requirement is to facilitate FDA's efforts to make important information concerning human gene therapy and xenotransplantation IND's available to the public in a timely and efficient manner. Sponsors would have to redact the information from IND submissions specified in proposed § 601.53. Sponsors would redact trade secrets, confidential commercial information, such as licensing agreements and suppliers, and names and other personal identifiers of patients and, except as specifically provided in the regulations, names and personal identifiers of third parties, such as physicians, hospitals, etc. (See §§ 20.61 and 20.63.) It would not be necessary for sponsors to redact the vast majority of the information in human gene therapy and xenotransplantation IND's since, as described in this proposal, such information would be publicly disclosable.

The proposed rule would also specify that FDA may place a human gene therapy or xenotransplantation investigation on clinical hold if the sponsor has not submitted to the agency a redacted and thus disclosable version of the required IND information that complies with the requirements of proposed § 601.53. A sponsor must properly purge its redacted version of trade secrets, confidential commercial information, and names and other personal identifiers and, except as specifically provided in the regulations, names and personal identifiers of third parties, such as physicians, hospitals, etc. Section 505(i)(3) of the act authorizes FDA to prohibit a sponsor of an investigation from conducting that investigation if FDA determines that the drug involved represents an unreasonable risk to the safety of persons who are the subjects of the clinical investigation, or if there are other reasons that FDA has established by regulation for which the agency may issue a clinical hold. FDA recognizes that errors in redacting may occur and will provide sponsors with an opportunity to correct such errors. However, FDA will have the enforcement authority to place a human gene therapy and xenotransplantation investigation on clinical hold if resolution is not reached on any discrepancies found by FDA in the redacted versions, or if a redacted version is not submitted at all by the sponsor. As described in this proposal, it is important for proposed and ongoing human gene therapy and xenotransplantation investigations to be the subject of public education, discussion, and consideration in order for all relevant issues, including safety, to be explored.

As stated above, FDA has tentatively concluded that the information that would be disclosed as a result of this rulemaking is, in fact, already being made public through a variety of mechanisms, and therefore cannot be considered confidential. As such, it does not constitute confidential commercial (or trade secret) information within the meaning of FOIA Exemption 4.

However, FDA's issuance of this proposed rule is authorized even if the information to be disclosed could be considered confidential commercial information covered by Exemption 4 and within the scope of protection of the Trade Secrets Act (18 U.S.C. 1905). That statute prohibits the disclosure of confidential commercial or trade secret information, except as “authorized by law.” Because agency regulations that specifically provide for the disclosure of such information can supply the requisite legal authorization for release of the information for purposes of the Trade Secrets Act, that statute would not present a bar to any of the disclosures contemplated by this proposed rule. (See, e.g., CNA Financial Corp., 830 F.2d 1132, 1138-1139 (D.C. Cir. 1987)).

The broad rulemaking authority conferred on FDA by Congress under the act (21 U.S.C. 201 et seq.) permits the agency to amend its regulations as contemplated by this proposed rule.

Section 505(i) of the act (21 U.S.C. 355(i)) gives FDA the authority to issue regulations imposing conditions on the investigation of new drugs. In addition to prescribing certain mandatory conditions, that section further provides that the agency may impose “other conditions” as necessary “relating to the protection of the public health.” (21 U.S.C. 355(i)). This language was added to the act as part of the Drug Amendments of 1962 (Public Law 87-781) to make it “clear that the conditions prescribed in the [bill] are not the sole conditions that may be imposed for the protection of public health.” H.R. Conf Rep. No. 2526, at 20 (1962), reprinted in 1962 U.S.C.C.A.N. 2927, 2929. Legislative history relating to these amendments also indicates that one purpose of the bill was to make “information on drugs * * * more readily available to physicians and the general public.” (S. Rep. No. 1744, at 1 (1962), 1962 U.S.C.C.A.N. 2884). FDA's broad discretion in adopting regulations under this language has been upheld by the courts. (United States v. Garfinkel, 29 F.3d 451 (8th Cir. 1994)).

The proposed amendments to FDA's regulations are within FDA's statutory discretion in imposing conditions on products under development to promote the public health. The public health often is served not only by collection of research data and information, but also by disclosure of such information. (See e.g., Dole v. United Steelworkers of America, 494 U.S. 26, 28 (1990)).

The proposed rule would serve several significant public health goals. It would enhance the ability of patients with serious and life-threatening diseases and others seeking information about emerging therapies to obtain critically important information from FDA about the existence of clinical trials in which they might participate, about possible safety problems associated with the products they are taking, and about the regulatory status of applications pending before the agency.

As an aftermath of recent problems in clinical trials involving gene therapy products, FDA and NIH have launched two new initiatives to further strengthen the safeguards for individuals enrolled in clinical studies for gene therapy. One initiative, the Gene Therapy Clinical Trial Plan, would ensure: That sponsors meet their obligation to adequately monitor the clinical trials for which they are responsible; that there is appropriately independent oversight of such clinical trials; and that there is an increased level of government oversight, through increased inspection frequency and review of sponsors' monitoring plans and other clinical trial practices. Under the other initiative, FDA and NIH will, several times per year, convene Gene Transfer Safety Symposia to provide a critical forum with experts in gene transfer for the sharing and analysis of medical and scientific data from gene transfer research. FDA and NIH support will also be provided for professional organizations and academic centers to hold safety conferences focused on gene therapy. These safety symposia and educational outreach efforts are intended to guide the conduct of current clinical trials and enhance the design of future gene transfer trials to maximize public safety.

The ready availability of information concerning clinical trials involving gene therapy is essential to the success of these efforts. For example, such information would be discussed at the government's safety symposia, may be made available for other scientific discussions and to the general public, and would be used in evaluating current gene therapy practices, including sponsor monitoring and informed consent standards. Likewise, FDA intends to continue to sponsor and support government, professional, and academic conferences related to xenotransplantation. Thus, FDA believes that the disclosure of information contained in INDs related to gene therapy and xenotransplantation trials is essential to patient safety and appropriate informed consent.

In addition to section 505(i), section 701(a) of the act (21 U.S.C. 371(a)) gives FDA general rulemaking authority to issue regulations for the efficient enforcement of the act. A regulation issued under section 701 of the act will be sustained as long as it is reasonably related to the purposes of the act. (United States v. Nova Scotia Food Prod. Corp., 568 F.2d 240, 246 (2d Cir. 1977)). Section 903(b) of the act (21 U.S.C. 393(b)) explicitly states that the mission of FDA includes the promotion and protection of the public health. It has long been recognized by the courts, including the Supreme Court, that the primary purpose of the act is the protection of public health (United States v. An Article of Drug, Bacto-Unidisk, 394 U.S. 784, 798 (1969)). As a result, FDA's rulemaking authority under section 701(a) of the act has been broadly construed to uphold a wide variety of the agency's rulemaking activities intended to protect the public health. (See e.g., National Ass'n of Pharmaceutical Mfrs. v. FDA, 637 F.2d 877 (2d Cir. 1981)) (current good manufacturing practice regulations); Pharmaceutical Mfrs. Ass'n v. FDA, 484 F. Supp. 1179 (D. Del. 1980) (rule requiring disclosure of drug side effects to patients); American Frozen Food Inst. v. Mathews, 413 F. Supp. 548 (D.D.C. 1976) (rule establishing common and usual names for certain nonstandard foods to provide consumers with relevant buying information), aff'd, 555 F.2d 1059 (D.C. Cir. 1977); National Nutritional Foods Ass'n v. Weinberger, 376 F. Supp. 142 (S.D.N.Y.) (rule requiring that certain vitamin preparations be restricted to prescription sale and be labeled accordingly), aff'd, 512 F.2d 688 (2d Cir. 1975)), cert. denied, 423 U.S. 827 (1975). FDA believes that its rulemaking authority under section 701(a) of the act supports the amendments proposed here because they advance public health goals concerning gene therapy and xenotransplantation studies.

FDA is also proposing to issue this new regulation under the authority of section 361 of the Public Health Service Act (PHS Act) (42 U.S.C. 264). Under section 361 of the PHS Act, FDA may make and enforce regulations necessary to prevent the introduction, transmission, or spread of communicable diseases between the States or from foreign countries into the States. (See sec. 1, Reorg. Plan No. 3 of 1966 at 42 U.S.C. 202 for delegation of section 361 of the PHS Act authority from the Surgeon General to the Secretary, Health and Human Services; see 21 CFR 5.10(a)(4) for delegation from the Secretary to FDA.) Intrastate transactions may also be regulated under section 361 of the PHS Act.

This proposed regulation is part of a regulatory program that will further the goal of preventing the introduction, transmission, or spread of communicable disease. For this regulatory system to be effective in preventing the spread of disease, FDA must be able to regularly make publicly available information regarding these experimental procedures. By providing sponsors, clinical investigators, patients and their families, and the general public with access to the types of information proposed in this rule, FDA will be able to more rapidly identify and react appropriately to newly discovered or understood risks in order to prevent the spread of communicable disease.

Studies in the areas of gene therapy and xenotransplantation are conducted to explore the potential for considerable benefits. However, use of these procedures, particularly in the case of xenotransplantation, poses potential risks for the transmission of infectious disease. Infectious disease public health concerns focus not only on the transmission of known zoonoses, but also on the transmission of infectious agents as yet unrecognized. The disruption of natural anatomical barriers and immunosuppression of the recipient increase the likelihood of interspecies transmission of xenogeneic infectious agents. An infectious agent may pose risks if it can infect, cause disease in, and transmit among humans, or if its ability to infect, cause disease in, or transmit among humans remains inadequately defined. The public availability of information this proposed rule envisions will permit public attention to any emerging risks associated with these experimental techniques, early detection and definition of which will permit the agency and sponsors to take steps to prevent or minimize the introduction of communicable disease.

An additional concern is that these infectious agents could subsequently be transmitted from the patient to family members and other close contacts of the patients, to health care personnel, and to other members of the public. Because the potential risk of transmission of infectious disease extends beyond the patient receiving the treatment, it is vital that the public, as well as the patient, be informed and educated about potential infectious disease risks and methods for reducing those risks. Close contacts should understand the uncertainty regarding the risks of xenogeneic infections, behaviors known to transmit infectious agents from human to human (e.g., unprotected sex, breast feeding, intravenous drug use with shared needles, and other activities that involve potential exchange of blood or other body fluids) and methods to minimize the risk of transmission. Close contacts of recipients also need to know about the importance of reporting any significant unexplained illness through their health care provider to the research coordinator at the institutions where the xenotransplantation was performed. This broader concern for the spread of communicable disease is reflected in the proposed requirements providing for public disclosure. While informed consent procedures may try to address these educational needs, the public release and discussion of information that this proposed rule calls for is also necessary to ensure that all those potentially at risk have the information to manage these risks and so avoid or minimize the spread of communicable disease.

For all the above reasons, to promote and protect the public health, FDA is proposing to issue this proposed rule providing for public disclosure of certain information relating to gene therapy and xenotransplantation.

The proposed rule would create a new § 601.52 entitled “Availability for public disclosure of certain data and information related to human gene therapy or xenotransplantation” and § 601.53 entitled “Submission to FDA of certain data and information related to human gene therapy or xenotransplantation for public disclosure.” In addition, conforming amendments are proposed to §§ 20.100, 312.42, 312.130, 601.50, and 601.51. The provisions of this rulemaking do not alter the procedures specified in part 312 for submission of an IND. The proposed regulations are discussed below.

Part 601 (21 CFR part 601) sets forth provisions that govern the licensing of biologic products by the FDA. Existing procedures and requirements regarding confidentiality of data and information contained in IND's for biological products or biologics license applications are described in §§ 601.50 and 601.51. The proposed rule would amend §§ 601.50 and 601.51 to include language that would reference the exceptions proposed in § 601.52 regarding the availability for public disclosure of certain data and information related to human gene therapy or xenotransplantation. Specifically, §§ 601.50(a) and 601.51(a) would be amended to add the words, “Except as provided in § 601.52.”

In addition, FDA is proposing to amend the § 601.50 section heading and § 601.50(a) to replace the word “notice” with “application” to be consistent with other current regulations regarding investigational new drugs, i.e., part 312.

Proposed § 601.52 would set forth the requirements regarding the availability for public disclosure of certain data and information related to human gene therapy or xenotransplantation. These provisions would define the therapies and scope of the proposed regulation, and describe the types of data and information related to human gene therapy and xenotransplantation that may be disclosed by FDA.

a. Definitions. Proposed § 601.52(a) would include definitions of human gene therapy and xenotransplantation that are consistent with existing agency policy and guidance regarding these therapies. Proposed § 601.52(a)(1) would define “human gene therapy” to mean the administration of genetic material in order to modify or manipulate the expression of a gene product or to alter the biological properties of living cells for therapeutic use. FDA interprets this definition to include both the ex vivo and in vivo modification of cells. Proposed § 601.52(a)(2) would define “xenotransplantation” to mean any procedure that involves the transplantation, implantation, or infusion into a human recipient of either: (a) Live cells, tissues, or organs from a nonhuman animal source, or (b) human body fluids, cells, tissues, or organs that have had ex vivo contact with live nonhuman animal cells, tissues, or organs. This definition of xenotransplantation does not include the use of products that are nonliving, acellular products such as porcine heart valves, porcine insulin, or bovine serum albumin. The definition also does not include non-animal cells and tissues, such as bacteria and plant cells.

Because the terms “human gene therapy” and “xenotransplantation” are not currently used elsewhere in the regulations, FDA is proposing that, for the convenience of the user, the definitions be included in proposed § 601.52. If, in the future, additional regulations are issued using these terms, FDA intends to move these definitions to the section of the regulations which currently includes definitions of other terms applicable to biological products (21 CFR 600.3).

b. Scope. Proposed § 601.52(b) would describe the scope of the proposed regulation. Consistent with the use of the terms “human gene therapy” and “xenotransplantation,” FDA intends that the proposed rule apply to the procedures, not specific products used in the therapies, although data and information regarding a product may be disclosed as proposed in § 601.52(c). FDA intends with this broadly-defined scope that the proposed regulation apply to any experimental use of human gene therapy and xenotransplantation, although the immediate impact of the proposed regulation would be on investigational products. For example, the proposed regulations would apply to any use of gene therapy or xenotransplantation in clinical studies in humans, including use of a licensed gene therapy or xenotransplantation product with an experimental drug or device being clinically studied for use in a gene therapy or xenotransplantation procedure.

FDA believes it is not necessary to disclose for purposes of public education and discussion all the information which may be included in an IND. Except as specifically provided in the proposed rule, FDA intends that information regarding human gene therapy or xenotransplantation investigations will continue to be held confidential, consistent with existing regulations in §§ 20.61, 20.62, 20.63, 20.100, 312.130, 601.50, and 601.51. Accordingly, proposed § 601.52(b) would specify that, except as specifically provided in proposed § 601.52, the availability for public disclosure of data and information related to human gene therapy or xenotransplantation shall remain in accordance with § 601.50 for IND's for a biological product.

c. Information for public disclosure. Proposed § 601.52(c) would specify the types of data and information related to human gene therapy or xenotransplantation that the FDA may make available for public disclosure. The types of information listed in proposed § 601.52(c) are already required for submission under existing regulations (parts 312 and 601) as part of an IND or BLA or as a supplement to a BLA.

Under proposed § 601.52(c)(1), FDA would make product and patient safety data and related information related to human gene therapy and xenotransplantation available for public disclosure. This proposed provision is similar to existing requirements in § 601.51(e)(1), which require that all safety and effectiveness data and information contained in a biological product file be made available for public disclosure immediately after a license has been issued. The proposed provisions in § 601.52, however, would extend this throughout the entire product development process for a product related to human gene therapy or xenotransplantation. The proposed rule further specifies in § 601.52(c)(1) that for the purposes of this proposed regulation, product and patient safety data and related information include results of preclinical and clinical studies and tests that demonstrate the safety and/or feasibility of the proposed procedures. In addition, FDA proposes in § 601.52(c)(1) to identify some of the types of product and patient safety data and related information that would be disclosed to the public that are particularly relevant or specific to human gene therapy and xenotransplantation. These types of product and patient safety data and related information are: (1) Analysis in animals, humans, or in vitro systems of gene transfer, expression, and persistence; (2) vector biodistribution; (3) evidence for immune response/anergy; (4) biological activity; (5) results of product safety testing including test results for known xenogeneic and human infectious agents and replication competent virus; (6) qualification of source herd, individual source animal, and source organ/tissue/cells for xenotransplantation in humans; and (7) information on monitoring or prevention of potential health risks to the recipient, close contacts, and health care workers. FDA does not intend this to be an exclusive list. In all cases, names and other personal identifiers of patients and, expect as specifically provided in the regulations, names and other personal identifiers of third parties, such as physicians or hospitals, would be removed. Furthermore, FDA does not intend product and patient safety data and related information under proposed § 601.52(c)(1) to include IND safety reports and annual reports, as provided for in §§ 312.32 and 312.33. Rather, specific requirements for the public disclosure of these types of reports are proposed below in § 601.52(c)(7) and (c)(8), respectively.

Under proposed § 601.52(c)(2) and (c)(3), FDA would make the name and address of the sponsor and the clinical indications to be studied available for public disclosure. The sponsor name and address and the indications to be studied are types of information that are consistent with information already required for submission to FDA in an IND under § 312.23(a)(1)(i) and (a)(3)(iv)(b), respectively.

Under proposed § 601.52(c)(4), FDA would make the protocol for each planned study available for public disclosure. A study protocol is required for submission in an IND under § 312.23(a)(6); proposed § 601.52(c)(4) would specify that certain elements of the protocol be available for public disclosure. Proposed § 601.52(c)(4)(i) through (c)(4)(vi) would describe the following specific elements of the protocol to be available for public disclosure: (1) A scientific abstract and a non-technical abstract; (2) a statement of the objectives, purpose, and rationale of the study (submitted in an IND under § 312.23(a)(6)(iii)(a)); (3) the name and address of each investigator (submitted in an IND under § 312.23(a)(6)(iii)(b)); (4) the name and address of the official contacts of each local review body as appropriate (IRB (submitted in an IND under § 312.23(a)(6)(iii)(b)), and IBC (NIH Guidelines for Research Involving Recombinant DNA Molecules, revised April 1998)) and dated copies of each committee's approval of the study; (5) the criteria for patient selection and exclusion and an estimate of the number of patients to be studied (submitted in an IND under § 312.23(a)(6)(iii)(c)); and (6) a description of the treatment that will be administered to patients and the clinical procedures, laboratory tests, or other measures to be taken to monitor the safety and effects of the drug in human subjects and to minimize risk (similar to that submitted in an IND under § 312.23(a)(6)(iii)(g)). FDA intends that the term “investigator' in proposed § 601.52(c)(4)(iii) include “sponsor-investigators” (individuals who have the responsibility for both the development and clinical investigation of the product) as well as “investigators,” both of which are defined in existing § 312.3(b). In proposed § 601.52(c)(4)(iv), FDA intends to make available for public disclosure the dated copies of the IRB's and IRC's approval of the proposed clinical study to identify when the IRB or IBC assumed responsibility for the continued review and approval of the IND.

Under proposed § 601.52(c)(5), FDA would make sample informed consent forms available for public disclosure. FDA proposes to provide public access to human gene therapy and xenotransplantation clinical trial information relevant to informed consent to promote public education, discussion, and consideration of the unique challenges that these novel therapies present to assuring adequate informed consent, as discussed previously in this proposed rule.

Under proposed § 601.52(c)(6), FDA would make the identification of the biological product(s) and a general description of the method of production, including a description of product features that may affect patient safety, available for public disclosure. This proposed provision contains types of information that are required for submission to FDA in an IND under § 312.23. FDA has modified the language taken from § 312.23 to reflect information needs related to human gene therapy and xenotransplantation and specifies that only a “general” description of the production method would be made available, excluding trade secret information. FDA does, however, propose to further specify in § 601.52(c)(6) that the identification and description would include the following types of information, as applicable: (1) The vector name and type; (2) gene insert; (3) regulatory elements and their source; (4) intended target cells; (5) source of cells, tissues, or organ(s); (6) method used to prepare the vector containing cells; (7) method used to procure and prepare cells, tissues, or organ(s) for xenotransplantation; (8) purity of cells; (9) adventitious agent testing; (10) description of the delivery system; (11) ancillary products used during production; (12) herd colony and individual source animal health maintenance and surveillance records; and (13) biological specimens to be archived from source animals. These types of information are consistent with information that is already submitted to and publicly disclosed by OBA for human gene therapy.

Under proposed § 601.52(c)(7), FDA would make IND safety reports, as provided in § 312.32, and other similar data and information available for public disclosure. Under § 312.32, sponsors of investigational drugs, including biological drugs, are required to submit to FDA certain adverse reaction reports concerning their product. Under § 601.51(e)(3), information concerning these adverse experience reports, excluding names and other identifiers of patients, health care facilities, and physicians, may be publicly disclosed after the licensure of the product. Under proposed § 601.52(c)(7), such adverse experience reports and other safety reports related to an investigational product could be publicly disclosed at any time throughout the lifetime of the product. The same limitations for disclosure included in § 601.51(e)(3) are included in proposed § 601.52(c) to protect the privacy of patients and health care workers.

Under § 601.52(c)(8), FDA would make information submitted in the annual report available for public disclosure. Sponsors must submit to FDA annual reports of the progress of the investigations as required under § 312.33. FDA proposes that the following types of information relevant to human gene therapy and xenotransplantation be included, as applicable, in the annual report submitted by the sponsor to FDA for public disclosure: (1) Evidence of gene transfer, gene expression in target cells, and biological activity; (2) assessment of immune response; (3) analysis of biodistribution; (4) significant preclinical and clinical toxicities; (5) evidence of infection by agents associated with the products; (6) adverse experiences; (7) number of subjects who died during participation in the investigation, with the cause of death for each subject and the status of autopsy requests; and (8) any available post mortem evidence of gene transfer, biodistribution, specifically including gonadal distribution. In all cases, names and other personal identifiers of patients and, except as specifically provided in the regulations, names and other personal identifiers of third parties, such as physicians or hospitals, would be removed.

Under proposed § 601.52(c)(9), FDA would make the regulatory status of the investigation, the date of a regulatory action, and the reason for an action available for public disclosure in order to identify to the public the current regulatory status of a clinical investigation. For example, FDA would disclose that an investigation is on clinical hold, or that an IND is inactive, withdrawn, or terminated. Additional information regarding the procedures and criteria for placing an investigation on clinical hold, withdrawal of an IND, inactive status for an IND, and IND termination may be found in §§ 312.42, 312.38, 312.45, and 312.44, respectively.

Under § 601.52(c)(10), FDA would make available for public disclosure other relevant data and information that the Director, CBER, determines are necessary for the appropriate consideration of the public health and scientific issues, including relevant ethical issues raised by human gene therapy or xenotransplantation. This proposed provision is included because the investigational nature of these therapies and the continuing evolution of the science surrounding these therapies renders FDA unable to anticipate all of the types of information related to human gene therapy and xenotransplantation that may warrant public education, discussion, and consideration. Examples of other relevant data that FDA may disclose could, under certain circumstances, include the details of a test used to determine eligibility for trial entry or autopsy or biopsy information. However, in general, FDA intends to release only the information specifically identified in this proposed rule, except in unique conditions or circumstances. Proposed § 601.52(c)(10) would provide that other relevant data and information may be approved for disclosure only by the Director of CBER.

Proposed § 601.53 would require sponsors of human gene therapy and xenotransplantation clinical trials to submit to FDA for public disclosure a redacted version of certain data and information. These provisions would specify when and what types of submissions to make to FDA in a redacted version for public disclosure, and the requirements for identifying and certifying these submissions.

Furthermore, proposed § 312.42(b)(6) provides that a sponsor's failure to submit to FDA the data and information specified in §§ 601.52 and 601.53 that has been properly redacted under § 601.53(a) is a basis for FDA placing the investigation on clinical hold. FDA recognizes that errors in redacting may occur and will provide sponsors with an opportunity to correct such errors. However, FDA will have the enforcement authority to place a human gene therapy and xenotransplantation investigation on clinical hold if resolution is not reached on any discrepancies found by FDA in the redacted versions, or if a redacted version is not submitted at all by the sponsor. It is important that FDA has the specific authority to place a human gene therapy or xenotransplantation investigation on clinical hold if the sponsor has not submitted required data and information to FDA in a form that FDA can make publicly available in a timely and efficient manner. As previously described in this proposal, due to the unique nature of human gene therapy and xenotransplantation, public participation in the consideration of proposed and ongoing clinical studies of such therapies is crucial. In order for such public education, discussion, and consideration to take place and be meaningful, FDA must be able to make all relevant and publicly disclosable data and information available to the public as soon as practicable. The agency has determined that having sponsors submit redacted versions that comply with proposed §§ 601.52 and 601.53 is the most efficient means to accomplish this.

Under proposed § 601.53(a), FDA would require the sponsor of an IND to submit to FDA for public disclosure a redacted version of the types of submissions identified in § 601.53(b)(1) through (b)(5). The sponsor would be required to include all applicable information identified as disclosable in § 601.52 and redact all information considered confidential as trade secret, names and other personal identifiers of patients and, except as specifically provided in the regulations, names and personal identifiers of third parties, such as physicians, hospitals, etc., and certain confidential commercial information, such as information regarding commercial licensing agreements or the identification of suppliers. Sponsors would be permitted to redact either by removing or obscuring the information exempt from disclosure.

Proposed § 601.53(b)(1) through (b)(5) would list the types of submissions that the sponsor would be required to submit to FDA in duplicate and as a redacted version for public disclosure. FDA believes this information should be available for public disclosure as soon as possible and therefore, would require under this paragraph that the redacted version be submitted to FDA concurrently with the original unabridged submission or at the specific time points noted.

Proposed § 601.53(b)(1) would require submission for public disclosure a redacted version of the information defined under § 601.52 to accompany the original unabridged IND submission.

Proposed § 601.53(b)(2) would require submission for public disclosure a redacted version of any amendment documenting changes or additions to the information defined under § 601.52 that occur either during the IND review process or after the IND goes into effect. FDA recognizes that some amendments may require negotiation with FDA and subsequent revision by the sponsor. As such, FDA would require that the redacted version of any amendment be submitted at the time the amendment goes into effect.

Proposed § 601.53(b)(3) would require submission for public disclosure of a redacted version of any IND safety report at the time of submission of the original report to FDA. Sponsors are required under § 312.32 to notify FDA in a written IND safety report of any serious and unexpected adverse experiences associated with the use of their drug no later than 15 days after the sponsor's initial receipt of the information. FDA believes that the timely availability of adverse experience information is essential for public education and informed discussion and consideration of the health and safety issues presented by the experiences.

Proposed § 601.53(b)(4) would require submission for public disclosure of a redacted version of the annual report, in accordance with § 312.33. Consistent with § 312.33, sponsors would be required to submit, within 60 days of the anniversary date that the IND went into effect, a redacted version of the annual report.

Under proposed § 601.53(b)(5), a sponsor would be required to submit for public disclosure a redacted version of other information upon specific request of the Director, CBER. For example, FDA may request that the sponsor submit information regarding a test used to determine eligibility for trial entry. This proposed provision is included because due to the investigational nature of these therapies and the continuing evolution of the science surrounding these therapies, FDA is not able to anticipate all of the types of information related to human gene therapy and xenotransplantation that may warrant public education, discussion, and consideration. However, in general, FDA does not intend to request information not identified in this proposed rule, except for unique conditions or circumstances.

Proposed § 601.53(c) would require that the sponsor submit the information identified in § 601.53(b) in duplicate, in a form readily separable from the nonredacted or original unabridged version or submission and clearly marked as suitable for public disclosure on each page of the submission. This proposed provision would enable FDA to identify and provide this information more rapidly to the public and would help assure that only appropriate information is disclosed to the public.

Proposed § 601.53(d) would require that any copyrighted material be included in a single appendix to the submission and listed in a bibliography in the redacted version. The proposal would specify that any copyrighted material whose copyright is not owned by the applicant shall not be included in any other section of the redacted version. FDA is including this provision to facilitate timely release of the redacted version on the Internet. In response to an FOIA request, copyrighted materials can be included in the response. However, with regard to posting on the Internet, copyrighted material must be redacted prior to electronic disclosure as this is not considered a “fair use” of copyrighted material. Therefore, FDA would not release the appendix containing copyrighted materials as part of the redacted version on the Internet, but may release the bibliography of materials included in the appendix.

Proposed § 601.53(e) would require that redacted versions be accompanied by the statement specified to ensure that the sponsor has redacted only the information identified in § 601.53(a) as exempt from disclosure (confidential commercial, trade secret, or personal information). In addition, under proposed § 601.53, the sponsor must include a declaration that the statement is true and correct, under penalty of perjury.

The proposed rule would make conforming amendments to parts 20 and 312. Part 20 describes the procedures and policy regarding the availability and disclosure of information to the public. Section 20.100 lists the cross-references to other sections of title 21 CFR that contain requirements on the availability of specific categories of FDA records and how these records are handled upon a request for public disclosure. The proposed rule would amend § 20.100(c) by adding a paragraph (43) that would contain a cross-reference to the proposed § 601.52 regarding the availability for public disclosure of certain data and information submitted to FDA related to human gene therapy or xenotransplantation.

Part 312 describes the procedures and requirements that govern the use of investigational new drugs, including provisions for submission to and review by FDA of IND's. The provisions of this rulemaking do not alter the procedures specified in part 312 for submission of an IND. Section 312.42, among other things, lists the grounds for which FDA may impose a clinical hold of an investigation. Proposed § 312.42(b)(7) would amend § 312.42 by adding an additional basis for clinical hold for human gene therapy and xenotransplantation investigations. Under this proposal, FDA could place a human gene therapy or xenotransplantation investigation on clinical hold if the sponsor has not submitted to the agency a redacted version for public disclosure that complies with the requirements of § 601.53.

Section § 312.130 contains requirements regarding the availability for public disclosure of data and information in an IND. The proposed rule would amend § 312.130 by revising paragraph (b) to include a reference to proposed § 601.52, in addition to the existing references to §§ 601.50 and 601.51, when listing the provisions of this chapter that govern the availability for public disclosure of all data and information in an IND.

Under the proposed rule, FDA would require that sponsors of human gene therapy and xenotransplantation clinical trials submit for public disclosure a redacted version of the information defined under § 601.52 as contained in the initial IND submission, amendments documenting changes or additions to the information defined under § 601.52 at the time the amendments go into effect, IND safety reports, and annual reports. The redacted version of these documents should be submitted to FDA in a form immediately releasable to the public, and clearly marked accordingly on each page of the submission as suitable for public disclosure. Acceptable approaches range from submitting a “marked up” version of the original that obscures the information which is not to be disclosed, to developing a separate document that abstracts the needed information for public disclosure from the original unabridged version submitted to FDA.

Specifically, FDA is proposing that the redacted version of the information specified in the proposed rule be submitted to FDA concurrently with the original unabridged IND submission or at the specific time points noted in the provisions. Sponsors of human gene therapy and xenotransplantation clinical trials would send an original and two copies of the original unabridged version of the IND submission (as required under existing § 312.23(d)) as well as one copy of the redacted version for public disclosure to FDA's CBER, where they would be received by the Document Control Center (DCC) to be logged, filed, and routed for appropriate documentation, review, and approval. DCC would route the submittals to the appropriate FDA reviewer, where, upon receipt, the redacted version for public disclosure would be reviewed for administrative completeness as well as to ensure that the submitting sponsor has appropriately redacted personal information regarding patients and third parties prior to release to the public. Once this review is complete, the redacted version for public disclosure would be sent to the Dockets Management Branch for public display where a docket number would be assigned. Each redacted version for public disclosure submitted to FDA would be tagged with the same docket number for that IND for reference. FDA is also proposing to make the redacted versions for public disclosure available to the public electronically on the Internet site according to the docket number.

In addition, to facilitate timely release by FDA of the redacted version, FDA is proposing to require that all copyrighted materials submitted in accordance with § 601.53 be placed in a single appendix and listed in a bibliography in the redacted version. Should an FOIA request be received for the data and information specified in § 601.52, FDA would be able to include a copy of any copyrighted materials in its response. However, FDA would not be able to publicly release any copyrighted material on the Internet as electronic posting of such information is not a “fair use” of that copyrighted material and must be redacted prior to electronic release. In this case, FDA instead would disclose the bibliography of copyrighted materials contained in the appendix.

FDA encourages, but would not require at this time, sponsors to submit the redacted version for public disclosure in electronic format. Pilot programs are currently underway regarding submission of electronic IND's and BLA's. (See 63 FR 29740 and 29741.) As such, FDA may, in the near future, implement electronic submission and disclosure of this information.

Sponsors of human gene therapy or xenotransplantation clinical trials who submit an initial IND or an amendment to an existing IND on or after the effective date of the final rule resulting from this rulemaking would be required to submit a redacted version for public disclosure in conformance with the rule.

Sponsors of xenotransplantation clinical trials who have submitted an IND to FDA prior to the effective date of the final rule resulting from this rulemaking would be required to submit for public disclosure a redacted version of the information defined under § 601.52, reflecting all amendments to date, by a date specified in the final rule.

Sponsors of human gene therapy clinical trials who have submitted IND's or amendments prior to the effective date of the final rule, need not submit redacted versions. For these IND's or amendments, FDA will rely on the existing OBA database as a source of the information that FDA will disclose.

For additional information regarding the proposed effective dates for the final rule see the end of this preamble.

The agency has determined under 21 CFR 25.30(h) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

FDA has examined the impacts of the proposed rule under Executive Order 12866, under the Regulatory Flexibility Act (5 U.S.C. 601-612) (as amended by subtitle D of the Small Business Regulatory Fairness Act of 1996 (Public Law 104-121)), and under the Unfunded Mandates Reform Act (UMRA) (Public Law 104-4). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Regulatory Flexibility Act requires agencies to analyze whether a rule may have a significant impact on a substantial number of small entities and, if it does, to analyze regulatory options that would minimize the impact. The UMRA requires that agencies prepare a written statement under section 202(a) of UMRA of anticipated costs and benefits before proposing any rule that may result in an expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million (adjusted annually for inflation) in any one year.

The agency believes that this final rule is consistent with the principles identified in Executive Order 12866. OMB has determined that the final rule is a significant regulatory action as defined by the Executive Order and so is subject to review. Because the rule does not impose mandates on State, local, or tribal governments, or the private sector, that will result in an expenditure in any one year of $100 million or more, FDA is not required to perform a cost-benefit analysis according to the Unfunded Mandates Reform Act. Aggregate impacts of the rule, and aggregate expenditures caused by the rule, will not approach $100 million for either the public or the private sector. As discussed below, because of the limited information that can be used to characterize the entities that may qualify as small businesses, the impact on small business establishments is uncertain. FDA has therefore prepared an Initial Regulatory Flexibility Analysis.

In the discussion that follows, FDA will describe the purpose and requirements of the proposed rule, the estimated number of entities that will be affected, the estimated cost of compliance with the rule per IND, and a summary of estimated annual costs to industry.

The purpose of the proposed rule is to make available for public disclosure and to require submission in redacted version for public disclosure, certain data and information related to human gene therapy and xenotransplantation investigations. These areas of clinical investigation have the potential for unique public health risks and modification of the human genome. The public health and safety risks require that FDA be able to make timely disclosures of adverse outcomes, such as the development of novel infectious agents, unanticipated alterations of a recipient's germline, and severe toxicity resulting from the therapy, in order to prevent or contain further adverse occurrences.

These therapeutic research areas will effectively transform participating recipients into life-long research subjects. The length of commitment, coupled with the magnitude of potential risks to the recipients, their families and community, will present new challenges for risk assessment and the adequacy of informed consent. As noted earlier, these investigative approaches raise new challenges for Institutional Review Boards. The novelty and extent of the risk issues will call for expanded public access to clinical trial information relevant to assessment of risks and benefits, and public education and informed consent. These public information needs can only be addressed through disclosure of relevant information about the proposed and ongoing investigations.

The information to come under this disclosure regulation includes: (1) Product and patient safety data and related information including results of preclinical and clinical studies and tests that demonstrate the safety and/or feasibility of the proposed procedures; (2) the name and address of the sponsor; (3) the clinical indications to be studied; (4) the protocol for each planned study to include a scientific abstract and a nontechnical abstract, a statement of the objectives, purpose, and rationale of the study, the name and address of each investigator and subinvestigator, the name and address of the official contacts of each local review body as appropriate (IRB, IBC) and the dated copies of approval by each group, the criteria for patient selection and exclusion, an estimate of the number of patients to be studied, and a description of the treatment that will be administered to patients, and the clinical procedures, laboratory tests, or other measures to be taken to monitor the safety and effects of the drug in human subjects and to minimize risk; (5) the informed consent documentation; (6) the identification of the biological product(s) and a general description of the method of production, including a description of product features that may affect patient safety; (7) the IND safety reports; (8) the information submitted to FDA in the annual report; (9) the regulatory status of the investigation, the date of an action, and the reason for an action; (10) and other relevant data and information that the Director, CBER, determines are necessary for the appropriate consideration of the public health and scientific issues, including relevant ethical issues, raised by human gene therapy or xenotransplantation. After a license has been issued, all safety and effectiveness data and information in the biological product file are immediately available for public disclosure unless extraordinary circumstances are shown (§ 601.51(e)(1)).

The sponsor of an IND involving human gene therapy or xenotransplantation will be required to submit this information in redacted version for public disclosure, removing all information that would be defined as trade secret, or personal information. The redacted submissions would be as follows:

1. Redacted version of information as defined under § 601.52 at the time of the initial IND submission.

2. Redacted version of any amendment documenting changes or additions to the information defined under § 601.52, at the time the amendment goes into effect.

3. Redacted version of IND safety reports at the time of submission of the initial report.

4. Redacted version of the annual progress report within 60 days of the anniversary date that the IND went into effect.

The redacted version would be submitted in a form that is readily identifiable and separable from the original unabridged submission to FDA.

The proposed rule will affect sponsors of human gene therapy or xenotransplantation clinical trials. The agency estimates that, at any one time, a total of 147 sponsors will be affected by the proposed rule. This includes 134 sponsors that have submitted IND's in the area of human gene therapy, and an additional 13 sponsors that have submitted IND's for clinical trials involving xenotransplantation. The number of new IND's per year in these two research areas has remained relatively constant at the level of approximately 45 IND submissions per year, for the past several years.

Certain types of information have a substantial commercial value. This value may be particularly high for data pertaining to specific business plans, strategies, or lines of scientific research. The required disclosure of such information, however, imposes no economic impact where the relevant data are already available to competitors. As discussed earlier in this preamble, information that would be disclosed under this proposed rule is routinely examined and discussed by the RAC, in the case of gene therapy, and discussed at other public meetings addressing xenotransplantation issues, or through public filings with the SEC. Because the information proposed for disclosure has not been treated as confidential by industry, FDA finds that there is minimal incremental commercial value associated with the information that may be disclosed. The agency has, therefore, not attributed regulatory costs to its disclosure. The agency requests public comment on the validity of this view.

The proposed rule will require additional paperwork activities for affected firms. The primary impact on clinical trial sponsors will be the requirement for additional staff time to redact IND-related submissions, throughout the period in which the IND is active. Table 1 of this document provides a summary of the types of submissions that will be required for public disclosure and the estimated number of such submissions that FDA expects to receive each year across all active IND's in the areas of human gene therapy and xenotransplantation. The estimated time required per redacted submission is also shown in table 1. The numbers of submissions and redaction times are estimated by FDA staff involved in application review, based on their experience in recent years, and their familiarity with the content of the IND packages. The redaction is assumed to be performed by a relatively senior member of the scientific research staff at a sponsoring organization. The cost per hour of staff time is estimated to be approximately $38, based on the Bureau of Labor Statistics estimate of total hourly compensation for professional white-collar workers in the private goods-producing and service producing industries.3 The redacted documents listed in table 1 reflect a series of submissions that would typically occur over several years. Based on FDA's estimate of the total volume of submissions of each type per year, the agency estimates that the total cost to the industry will be approximately $123,880 [$41,040+$5,130+$1,710+$76,000]. This yields an average annual cost of $843 per sponsor [$123,880/147].

Although human gene therapy offers the promise of more effective treatment, for diseases ranging from cystic fibrosis to human immunodeficiency virus (HIV), rapid progress and patient safety in research requires timely communication of new findings about the success or risks of candidate strategies. The key to success for any human gene therapy strategy is attaining a vector that can serve as a safe and efficient gene delivery vehicle (Ref. 5). In general, human gene therapy researchers work to maximize efficacy through the regulation of gene expression over long periods (Ref. 6). Simultaneous with this goal, researchers attempt to develop vectors and treatment strategies that will both minimize the patient's immune response (which counters the therapy) (Ref. 7) and minimize the toxicity of the gene therapy (Refs. 8 and 9). As different vectors are considered, it is critical that newly discovered risks be reported to alert other researchers considering similar vectors or developing therapies to treat similar conditions.

As described earlier, the importance of timely communication of risks is clearly demonstrated by the cystic fibrosis patient who developed an acute adverse event requiring intensive care after receiving an adenoviral vector. In this case, public discussion of the adverse event at the RAC meeting facilitated rapid dissemination of important information about this toxicity, thereby contributing to the safety of patients in other gene therapy trials.

For xenotransplantation, the disclosure of information is necessary for public education and more efficient product and recipient tracking. Communication of risks offers other benefits for recipients of xenotransplantation products, their families, and their communities. According to a recent World Health Organization report on xenotransplantation, “The practice of xenotransplantation carries with it an unquantifiable risk of xenozoonotic infection and disease. Measures are required to minimize risk and maximize safety in the potential use of this technology” (Ref. 10). The level of risk is particularly difficult to quantify since potential viruses may be unknown and “silent” in the donor species; that is, they may not be identified through the currently available battery of screening tests for known pathogens. In addition, the risk of infection in the recipient of a xenotransplantation product may be substantially increased as a result of the immunosuppressive drug therapy administered to prevent rejection of the transplanted xenotransplantation product.

New evidence supporting the possibility of this risk is reported in a recent study (Ref. 11) showing that pig pancreatic islets transplanted into severely immunodeficient mice produce porcine endogenous retroviruses (PERV) that can infect human cells that had been transplanted into the same mice receiving the porcine pancreatic cells. Although pigs are considered a promising alternative source of organs for xenotransplantation, this study found that the PERV were trancriptionally active and infectious cross-species in vivo after xenotransplantation of the pig tissues. These findings bolster earlier concerns about PERV infection from pig islet xenotransplantation in immunosuppressed human patients.

Recent experience with zoonotic viruses has demonstrated the potential lethality of these viruses. An example is the 1998 to 1999 outbreak of a hendra-like virus in Malaysia and Singapore (Ref. 12). Documented cases occurred primarily among adults who had come in close contact with swine, which also showed signs of the illness. In some instances, illness in the pigs had occurred 1 to 2 weeks before illness in the humans. Illness in humans was characterized by 3 to 14 days of fever and headache followed by drowsiness and disorientation that often progressed to coma within 24 to 48 hours. During the period September 1998 to April 1999, 229 human cases were reported, 111 of which (48 percent) resulted in death. Although the first cases of human illness were reported in September 1998, the type and source of infection was initially unknown, so human exposures continued to occur, with the peak number of new cases occurring 6 months later, in March 1999. Once the type of virus was identified, through laboratory testing, and the source of infection (i.e., exposure to pigs) was serologically confirmed, public health measures were taken to prevent further outbreaks.

Ebola hemorrhagic fever is another disease that is transferable from animals to humans (Ref. 13) and consequently illustrates the importance of timely tracking of and public communication about zoonotic viruses. In the period from January to July 1995, a total of 316 persons became ill with hemorrhagic fever in Kikwit, Democratic Republic of the Congo (DRC) (Ref. 14). During the epidemic, a mortality rate of 60 to 80 percent was reported among hospital cases. After an incubation period of approximately 7 days, the early clinical features of the disease included fever, headache, sore throat, diarrhea and myalgias, followed by vomiting, worsening diarrhea, oliguria, shock and death after 7 to 14 days. In May of 1995, the month of peak onset of new cases, the DRC requested international assistance in investigating the cause of the outbreak. Laboratory testing by the Centers for Disease Control and Prevention (CDC) confirmed the presence of the Zaire subtype of Ebola hemorrhagic fever. Continued investigation and testing enabled the international team to identify modes of transmission and to specify the precautions necessary to prevent further spread of the virus. According to the CDC, prompt laboratory diagnosis is an essential component of the surveillance needed to maximize Ebola prevention and control measures (Ref. 15). In this instance, the lack of early detection and proper management of Ebola hemorrhagic fever patients resulted in numerous deaths among both health care personnel and patients (Rollin and Ksiazek, 1998). By hastening the disclosure of important risk information, the proposed rule would assist public health agencies and health care providers in more rapidly identifying and controlling any zoonotic viruses that might emerge following xenotransplantation.

As of April 1999, the United Network for Organ Sharing (UNOS) reported a total of 62,443 patients on the waiting list for an organ transplant. This number far exceeds the total of approximately 20,000 transplants performed each year (Ref. 16). In addition to bolstering the supply of viable organ transplants, patients may also benefit from cellular and tissue therapies involving a xenotransplantation product. Although the potential to fill unmet needs is great, the number of prospective xenotransplant recipients represents a sizeable population at potential risk of zoonotic infection. The proposed data disclosures would help to provide the information needed by the public to understand, manage, and minimize the risks associated with these advancing medical technologies.

The agency has only limited information to estimate the number of small entities conducting clinical investigations of human gene therapy or xenotransplantation. As indicated in the cost analysis, the overall number of business entities sponsoring clinical trials is estimated to be 147. Although a few companies are a part of larger firms, many others may have annual revenues of less than $5 million, which is the revenue level that identifies a small business, according to the Small Business Administration. The estimated cost impact of $843 per sponsor per year reflects the staff time that would need to be allocated to produce redacted versions of the specified documents for the purpose of public disclosure.

The proposed rule offers sponsors considerable flexibility in implementation by allowing for a range of approaches for preparing a redacted version. Under the proposed rule, acceptable approaches range from submitting a “marked up” version of the original that simply obscures the information not to be disclosed, to development of a separate document that abstracts the needed information for the public from the original unabridged version submitted to FDA. This flexibility will help to minimize the cost impact.

The agency does not anticipate that the estimated cost will significantly burden any of the sponsors. However, because of the limited information available for establishments sponsoring clinical trials in human gene therapy and xenotransplantation, and its importance in developing estimates of the small entity impact, the agency requests detailed comment on the number and type of businesses sponsoring clinical trials in human gene therapy or xenotransplantation, and the expected impact of the proposed requirements on these entities.

In developing the proposed rule, the agency considered but rejected two alternatives that might impose less burden on small businesses. The agency found, however, that these alternatives would be less effective in supporting the advancement of this research, because of unanswered concerns regarding patient safety and public health. One of the alternatives considered involved voluntary disclosure by clinical trial sponsors without a regulatory requirement. This alternative would reduce costs to industry only if establishments failed to voluntarily provide the needed information for disclosure. Moreover, while voluntary provision of this information would be no less burdensome for industry, it could prove inadequate in protecting public health, because the agency would have no means of assuring the quality and consistency of the content of the voluntarily disclosed information, or the timeliness of its reporting. The disclosure of timely, accurate, and complete information is critical to an appropriate agency response to adverse outcomes, including the emergence of novel and potentially life-threatening infectious agents, or the alteration of the germline in patients participating in the clinical study. Also, voluntary disclosure provides no means for the agency to ensure a balanced dissemination of information on identified risks and benefits. Such balance is central to an adequate public understanding of the technologies, and to an informed public discussion of the overall risk versus benefit to patients and communities.

A second alternative to the proposed rule would require disclosure, but would have FDA assume the sole responsibility for redaction of documents submitted by the sponsor. Although this alternative would reduce the direct cost impact for sponsors, the limited number of agency staff available to perform this task would introduce the risk of delay in producing the redacted version for public disclosure. This outcome could potentially result in delaying the research, or delaying the timely public availability of critical information.

The following references have been placed on display in the Dockets Management Branch and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday.

This proposed rule contains information collection provisions that are subject to review by OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The title, description, and respondent description of the information collection provisions are shown below with an estimate of the annual reporting burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

FDA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have a practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.

Title: Submission to FDA for Public Disclosure of Certain Data and Information Related to Human Gene Therapy or Xenotransplantation.

Description: FDA is proposing new regulations to require that sponsors of IND's involving human gene therapy or xenotransplantation submit information related to the IND in redacted version for public disclosure, removing all information that would be defined as trade secret or personal information whose disclosure would constitute a clearly unwarranted invasion of privacy, and certain confidential commercial information. Each submission for public disclosure would be accompanied by a statement, signed by a responsible person, that the information has been suitably redacted. FDA would then publicly disclose the redacted version to provide an opportunity for public education, discussion, and consideration of public health and safety issues, as well as consideration of societal and ethical issues.

FDA is also proposing to require that the sponsor submit any copyrighted material in a single appendix to each redacted version and any copyrighted material whose copyright is not owned by the sponsor not be included in any other section of the redacted version. The proposal would further require that the redacted version include a bibliography of the copyrighted material contained in the appendix. This provision would facilitate the timely public disclosure of the redacted version on the Internet, with the copyrighted information excluded. Making available copyrighted material on the Internet is not considered “fair use” of copyrighted material.

Description of Respondents: Sponsors of clinical investigations involving human gene therapy or xenotransplantation.

FDA has estimated the burden for each provision that describes a collection of information. The estimates are based on FDA's experience in reviewing IND submissions and in redacting documents related to an IND.

Under proposed § 601.53(b), approximately 147 sponsors of clinical investigations involving human gene therapy (134 sponsors) and xenotransplantation (13 sponsors) would be required to submit a redacted version of certain documents under the IND. For all 147 sponsors, these documents include the original IND (45 submissions/year), amendments to an IND (270 submissions/year), IND safety reports (90 submissions/year), and annual reports (100 submissions/year) for an estimated total of 505 submissions/year (45 + 270 + 90 + 100). FDA has estimated the time necessary to copy and redact each of the above types of submissions; i.e., IND submission, 24 hours/submission; amendments, .5 hour/per submission; IND safety reports, .5 hour/submission; and annual reports, 20 hours/submission. The total burden equals the sum of the burdens estimated for each type of submission (45x24 + 270x.5 + 90x.5 + 100x20 equals 3,260 hours).

Under § 601.53(c) all submissions under § 601.53(b) must be readily separable from the original submission and clearly marked on each page as suitable for disclosure. Under § 601.53(d) of the proposed rule, sponsors of human gene theraphy and xenotransplantation clinical studies would be required to submit copyrighted material in a single appendix to each redacted submission and include in the redacted version a bibliography of these materials. The hours per response, therefore, are an average estimate of the total time for redaction of the document, separation of copyrighted material and preparation of a bibliography, marking of each page as suitable for public disclosure, and submission to FDA, as provided in § 601.53(b), (c), and (d). The information collection burdens associated with the submission of an IND as provided in part 312 are approved by OMB under OMB control number 0910-0014.

In compliance with section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), FDA has submitted the information collection provisions of this proposed rule to OMB for review. Interested persons may submit comments on the information collection requirements of this proposal by February 20, 2001, to the Office of Information and Regulatory Affairs, OMB, New Executive Office Bldg., 725 17th St. NW., Washington, DC 20503, Attn: Desk Officer for FDA.

FDA proposes that any final rule that may issue based on this proposal become effective 90 days after the date of its publication in the Federal Register. On or after that date, sponsors of human gene therapy or xenotransplantation clinical trials would be required to submit a redacted version of the data and information specified in the final rule as part of a submission into an IND. Sponsors may voluntarily submit a redacted version immediately upon the date of issuance of the final rule. FDA is proposing, for sponsors of xenotransplantation clinical trials who have submitted an IND prior to the effective date of the final rule, that the sponsor submit for public disclosure a redacted version of the information held under the IND, to contain the information specified in proposed § 601.52. FDA invites comment on the length of time after issuance of the final rule that these sponsors should be provided to submit the redacted information.

Interested persons may submit to the Dockets Management Branch (address above) written comments regarding this proposal by April 18, 2001. Two copies of any comments are to be submitted, except that individuals may submit one copy. Comments are to be identified with the docket number found in brackets in the heading of this document. Submit written comments on the information collection provisions by February 20, 2001. Received comments may be seen in the Dockets Management Branch between 9 a.m. and 4 p.m., Monday through Friday.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, it is proposed that 21 CFR parts 20, 312, and 601 be amended as follows:

In the Federal Register of May 29, 1992 (57 FR 22984), FDA published its “Statement of Policy: Foods Derived From New Plant Varieties” (the 1992 policy). The 1992 policy clarified the agency's interpretation of the application of the act with respect to human foods and animal feeds derived from new plant varieties, including varieties that are developed using recombinant deoxyribonucleic acid (rDNA) technology. This proposal refers to foods derived from plant varieties that are developed using in vitro manipulations of DNA (generally referred to as rDNA technology) as “bioengineered foods.”

The 1992 policy provided guidance to industry on scientific and regulatory issues related to plant-derived foods, including bioengineered foods. In developing the 1992 policy as it relates to bioengineered foods, FDA focused on modifications to foods that were likely to result in commercial products and did not attempt to predict future changes in foods that could result from technological advances. Instead, FDA intended to modify its policy as circumstances warranted (57 FR 22984 at 22985).

In announcing the 1992 policy, FDA invited interested persons to submit written comments. Comments received from the scientific community generally have supported the scientific guidance articulated in the 1992 policy, including the scientific guidance as it relates to bioengineered foods. In addition, the views expressed by the members of FDA's Food Advisory Committee (Ref. 1) and the joint meeting of FDA's Food Advisory Committee and Veterinary Medicine Advisory Committee (Ref. 2), generally supported the scientific guidance in the 1992 policy.

However, many consumers, a number of public interest groups, and some State officials have expressed concern about or opposed the regulatory guidance articulated in the 1992 policy, particularly regarding the ability of the regulated industry to make market entry decisions. Frequently, those comments suggested, as an important adjunct to the 1992 policy, that FDA require an administrative process, such as premarket notification, to ensure that the agency remains aware of new bioengineered foods entering commercial distribution.1

FDA is confident that the guidance articulated in the 1992 policy adequately addressed both the scientific and regulatory issues raised by the products that were approaching commercialization in 1992. FDA is aware, however, that rDNA technology continues to evolve and that it is not possible for the agency to anticipate all of the novel scientific and regulatory issues that may arise as the number and types of foods developed using this technology expands. As discussed more fully below, this proposed rule would modify the regulatory guidance laid out in the 1992 policy by requiring the submission to the agency of data and information regarding plant-derived bioengineered foods at least 120 days prior to the commercial distribution of such foods.

In the 1992 policy, FDA explained that, under the act, developers of new foods have a responsibility to ensure that the foods they offer to consumers are safe and in compliance with all requirements of the act (57 FR 22984 at 22985). In light of this responsibility, FDA has long regarded it to be a prudent practice for producers who use new technologies in the manufacture or development of foods and food ingredients to work cooperatively with FDA to ensure that the products of these new technologies are safe and comply with all applicable legal requirements (57 FR 22984 at 22991). Historically, the food industry generally has initiated consultation with FDA during the pioneer stages of a new technology, even if there is no legal obligation to do so. These consultations have served to make FDA aware of foods and food ingredients before these products are distributed commercially, and have provided FDA with the information necessary to address any questions regarding the safety, labeling, or regulatory status of the food or food ingredient. As such, these consultations have provided assistance to both industry and the agency in exercising their mutual responsibilities under the act.

In the 1992 policy, FDA noted that the agency expected this practice of consultation to continue with respect to bioengineered foods (57 FR 22984 at 22991). One early example of such a consultation involved FLAVR SAVRTM tomatoes.2 In developing FLAVR SAVTM tomatoes, Calgene used rDNA technology to introduce an antisense polygalacturonase gene, which was derived from tomatoes, and the kanamycin resistance gene (the kan r gene), which encodes the enzyme aminoglycoside-3′-phosphotransferase II (APH(3′)II). The enzyme APH(3′)II confers resistance to the clinically used antibiotics kanamycin and neomycin in the selection of new plant varieties developed using rDNA technology. The use of APH(3′)II raised several issues that had not previously been evaluated by the agency in the context of food safety. The initial consultation between the agency and Calgene about the intended use of APH(3′)II, which in this instance resulted in the filing and approval of a food additive petition (59 FR 26700, May 23, 1994), was an effective mechanism to fully explore and resolve these issues.

The resolution of these and other scientific issues entailed the use of nontraditional approaches to the evaluation of food safety. For example, traditional evaluation of the safety of a food additive frequently includes toxicological tests conducted in accordance with the principles outlined in the agency's “Toxicological Principles for the Safety Assessment of Direct Food Additives and Color Additives Used in Food” (Redbook (Ref. 3)).3 In addition to guidance on when certain tests may be appropriate, the Redbook includes specific recommendations on the protocols for conducting such tests.

In contrast, issues raised during the consultations on APH(3′)II and the FLAVR SAVRTM tomato required evaluation of data generated using procedures that had only rarely been used in the evaluation of food safety. For example, Calgene used “Southern blots” to determine which DNA sequences had been transferred to FLAVR SAVRTM tomatoes, “Northern blots” to demonstrate the intended technical effect in FLAVR SAVRTM tomatoes, and “Western blots” to determine the amount of APH(3′)II present in FLAVR SAVRTM tomatoes. The use of nontraditional strategies in the evaluation of food safety likely will become the norm as the use of rDNA technology expands, and further consultations between industry and the agency would foster the identification and design of reasonable test procedures to evaluate the composition and safety of whole foods.

Consultations are an appropriate forum for industry and the agency to address proactively issues that are relevant to bioengineered foods, and developers have actively consulted with FDA about their products since the issuance of the 1992 policy. In June 1996, FDA provided guidance to industry on procedures for these consultations (the 1996 procedures (Ref. 5)).4 Under that process, a developer who intends to commercialize a bioengineered food meets with the agency to identify and discuss relevant safety, nutritional, or other regulatory issues regarding the bioengineered food prior to marketing it. Depending on the experience the agency and the developer have with the kind of modification being considered, a developer may initiate such a consultation early or late in the development of the food. When the developer believes that it has accumulated adequate data or information to address any issues raised during the consultation, the developer begins the “final consultation” by submitting to FDA a summary of its scientific and regulatory assessment of the food. To date, the agency has completed its evaluation of data or other information from more than 45 such consultations (Ref. 6). FDA believes that, to date, all developers of bioengineered foods commercially marketed in the United States have consulted with the agency prior to marketing the food.

FDA continues to believe that the consultation process is appropriate for bioengineered foods. Accordingly, this proposed rulemaking includes FDA's recommendation that developers consult with the agency to identify and discuss relevant safety, nutritional, or other regulatory issues regarding a bioengineered food (see proposed § 192.10 and section VI of this document).

In 1999, FDA announced that the agency would hold three public meetings, each in a different region of the United States (64 FR 57470, October 25, 1999). The purpose of those meetings was for the agency to share its current approach and experience over the past 5 years regarding bioengineered foods, to solicit views on whether FDA's policies or procedures should be modified, and to gather information to be used to assess the most appropriate means of providing information to the public about bioengineered products in the food supply. In the notice announcing the public meetings (64 FR 57470), FDA requested comments on specific questions regarding bioengineered foods. As a result of those meetings and the request for comments, the agency subsequently received more than 35,000 written comments about its policy regarding bioengineered foods.

At those meetings, and in the comments, FDA heard three messages very clearly. First, there does not appear to be any new scientific information that raises questions about the safety of bioengineered foods currently being marketed. Second, some of the public is concerned about FDA's existing guidance and regulatory approach to overseeing the safety of these products. These concerns include whether FDA's guidance and regulatory approach will be adequate for future developments and whether firms will continue to inform FDA about new bioengineered foods under the present program. In addition, there was a concern that the current regulatory process lacks transparency (e.g., because FDA discloses each consultation about a bioengineered food only at the end of the process). Third, there are very strongly held but divergent views as to whether bioengineered foods should bear special labeling. However, there was general agreement that providing more information to consumers about bioengineered foods would be useful 5 (Ref. 8).

FDA is responsible for ensuring that all foods 6 in the American food supply conform to the applicable provisions of the law. The act provides FDA with broad authority to regulate the safety and wholesomeness of food. In particular, the act prohibits the adulteration of food under section 402 of the act (21 U.S.C. 342) and the misbranding of food under section 403 of the act (21 U.S.C. 343). The act also requires that all food additives (as defined by section 201(s) of the act (21 U.S.C. 321(s))) be approved by FDA before they are marketed (sections 409 and 402 of the act (21 U.S.C. 348(a) and 342(a)(2)(C))). FDA is authorized to seek sanctions against foods that do not adhere to the act's standards, through seizure of foods that violate the act under section 304 of the act (21 U.S.C. 334); the agency is also authorized to seek an injunction against, or criminal prosecution of, those responsible for introducing such foods into commerce under sections 302 and 303 of the act (21 U.S.C. 332 and 333).

All plant breeding techniques have the potential to alter food source crops in ways relevant to the legal status of food derived from such crops. However, rDNA technology greatly facilitates, relative to traditional breeding techniques, both the introduction of specific new substances into foods and the directed modification of the composition of foods. This is in part because the technology expands the range of sources of new substances that can be introduced into plants, relative to those that can be introduced with traditional techniques, due principally to rDNA technology's ability to permit the transfer to a food crop of genetic material from virtually any organism. Similarly, at the present time, information related to the genomes of many organisms is rapidly expanding, with the result that newly identified genes are now available to breeders. In addition, rDNA technology increases the speed by which traits can be introduced into food crops, by allowing the introduction of specific, well-characterized genetic material and by reducing the need for backcrossing to remove undesirable traits. Given the efficiencies of rDNA techniques, the advances in these techniques, and the rapidly expanding information related to genomes, FDA expects that these techniques are likely to be utilized to an increasingly greater extent by plant breeders and that the products of this technology are likely in some cases to present more complex safety and regulatory issues than seen to date.

Alterations in food source plants accomplished using rDNA technology, with resulting changes in the foods derived from such plants, can present a range of regulatory issues (57 FR 22984 to 23005). For example, such alterations may present questions as to the food additive status of the substances introduced into the food as a result of the genetic transformation. As noted, bioengineering permits the introduction into food of substances from any source, and the number and types of genes available for use in rDNA technology are rapidly increasing. Thus, increasingly, substances may be introduced into food using rDNA techniques that cannot be introduced by traditional breeding. FDA noted in the 1992 policy that a nonpesticidal substance introduced into food by way of breeding is a food additive if the substance is not generally recognized as safe (GRAS) within the meaning of 21 U.S.C. 321(s). Because of the greater range of sources of substances that can be introduced into plants via rDNA technology, there is a greater likelihood that some of the new substances will be significantly different from substances that have a history of safe use in food or may otherwise not satisfy the GRAS standard in section 201(s) of the act(s). Thus, there is a greater potential for foods developed using rDNA technology to contain substances that are food additives.

The agency reiterates its view, as stated in the 1992 policy (57 FR 22990), that transferred genetic material can be presumed to be GRAS. Likewise, FDA is not altering its view, as set forth in the 1992 policy, that there is unlikely to be a safety question sufficient to question the presumed GRAS status of the proteins (typically enzymes) produced from the transferred genetic material, or of substances produced by the action of the introduced enzymes (such as carbohydrates, fats, and oils), when these proteins or other substances do not differ significantly from other substances commonly found in food and are already present at generally comparable or greater levels in currently consumed foods. However, FDA recognizes that because breeders utilizing rDNA technology can introduce genetic material from a much wider range of sources than previously possible, there is a greater likelihood that the modified food will contain substances that are significantly different from, or are present in food at a significantly higher level than, counterpart substances historically consumed in food. In such circumstances, the new substances may not be GRAS and may require regulation as food additives (57 FR 22990).

To date, FDA has not seen multiple examples of food additive substances introduced into food using rDNA technology. However, the agency recognizes that the potential for introducing such substances is real. There are, for example, certain plant-derived proteins that have a sweetening effect but whose biochemical function is not known.7 In addition, they are found in plants that have not been used for food. Thus, in contrast to other proteins introduced into foods by genetic engineering, which have been presumed GRAS, there is little or no apparent basis for a GRAS presumption for such substances. Genes encoding the protein sweetener could be introduced into a fruit to enhance sweetness. In such circumstances, FDA should be made aware of the intended marketing of the modified food and have access to relevant information to evaluate whether the protein sweetener is a food additive within the act's definition under section 201(s) of the act. If the protein sweetener is a food additive, premarket approval of the substance would be required under section 409 of the act before the altered food could be lawfully marketed.

Another potential consequence of transferring genetic material from one source into another is the possibility of introducing a food allergen that would not be expected to be in a particular food, a change that would be relevant to the legal status of such food. This is because genes code for proteins, and virtually all allergens are proteins (although only a small subset of proteins are allergens). Thus, by increasing the range of potential proteins that can be introduced into food over that possible by traditional breeding, there is an increased potential for introducing an allergen into a food developed using rDNA technology. Also, rDNA technology can be used to express proteins at higher concentrations than they would otherwise be expressed; these higher concentrations may increase the potential for such proteins to be allergenic.

One implication of being able to transfer genes between unrelated plants using rDNA techniques is that it is possible to transfer genes from one food plant to another quite unrelated food plant, thereby allowing the potential transfer of an allergen from the first plant to the second. In such a case, food from the bioengineered plant could have an allergenic characteristic completely different from that of its conventional counterpart. Such a change would not be evident to the consumer. For example, a gene from a Brazil nut plant was introduced into a soy plant to improve the protein content of soy beans for use in animal feed. The seed was never commercialized, however, because when the company tested the soy beans for allergenicity, they found that people allergic to Brazil nuts were also allergic to the bioengineered soy (Refs. 9 and 10). Given the potential consequences to sensitive consumers of eating soy products containing a Brazil nut allergen, such a food would likely be considered misbranded within the meaning of sections 201(n) and 403(a)(1) of the act, unless the presence of the new allergen were disclosed to consumers.

Further, in certain circumstances, labeling may not be adequate or practical to ensure that consumers are aware of the presence of unexpected allergens. FDA would likely consider such food containing an unexpected allergen to be adulterated within the meaning of section 402(a)(1) of the act because the unexpected allergen rendered the food possibly injurious to health. With alterations of this type, FDA should be made aware of the modification and have an opportunity to assess whether and how the food could legally be marketed. Specifically, FDA should have the opportunity to consider whether any labeling proposed by the developer would ensure that the engineered food is not misbranded within the meaning of sections 201(n) and 403(a)(1) of the act, and whether, even with labeling, the food would be adulterated because it may be injurious to health within the meaning of section 402(a)(1) of the act.

Compositional changes in foods created through breeding may also present regulatory status issues. Although traditional breeding techniques can be used to alter significantly the compositional characteristics of food, rDNA technology enhances that ability because rDNA technology enables breeders to make targeted changes in plant components such as proteins and other constituents. For example, rDNA techniques would facilitate a breeder's ability to modify a soy plant so that the composition of oil derived from the plant would more closely resemble that of a tropical oil than that of conventional soy oil. In these circumstances, the name “soy oil” would likely not be suitable for the oil derived from the altered soy plant because the composition of the new oil is significantly different from what is customarily understood to be “soy oil”. Thus, a new common or usual name would likely be required for this new oil to ensure that the oil is not misbranded under section 403(i)(1) of the act. FDA should be made aware of compositional changes of this type so that the agency may consider whether a new common or usual name is required and, if so, what that new name should be.

Additionally, rDNA technology has recently begun to be used to introduce multiple genes to generate new metabolic pathways (Ref. 11). New metabolic pathways are intended to result in the synthesis of substances not normally present in the host plant. Such modifications may alter the composition of the food in a significant manner that may raise nutritional or safety issues or that would require use of a new common or usual name.

In addition to enabling breeders to introduce desired new characteristics into foods, all breeding methods used to develop new plant varieties have a potential for unintentionally introducing undesired new characteristics into foods (57 FR 22986). Broadly speaking, a breeding method's potential for introducing unintended changes to the characteristics of a food results either from bringing into a food plant extraneous genetic material encoding trait(s) additional to the desired trait(s), or from introducing mutations (such as deletions, amplifications, insertions, rearrangements, or DNA base-pair changes) into the plant's native genetic material that alter some characteristic(s) of the food.

The most commonly used breeding method is a “narrow cross,” which is hybridization between varieties of the same species. Hybridization between related species or genera that cannot be cross-fertilized is a “wide cross.” Wide crosses are useful for expanding the range of genetic source material that can be introduced into food crops, but are performed relatively infrequently because of technical and logistical difficulties. Both wide and narrow crosses will introduce into plants extraneous genetic material along with the genetic material encoding the desired traits. Breeders then attempt to remove any undesired traits through extensive backcrossing.

Plant breeders also use mutagenic techniques to modify plants. These techniques include random mutagenesis using a mutagenic agent and somaclonal variation. (Somaclonal variation refers to the process of growing a plant up from tissue culture and observing for phenotypic changes, which are often due to chromosomal rearrangements or other mutations.) Both techniques can introduce undesirable mutations along with possible desirable mutations. As with hybridization, breeders perform backcrosses to eliminate any undesirable traits. Cell fusion poses similar issues to those posed by wide crosses (because it generally is performed between cells of different species of plants) and posed by somaclonal variation (because it involves growing a plant up from tissue culture).

Recombinant DNA technology greatly reduces the likelihood of introducing extraneous genetic material, as compared with hybridization, because it enables breeders to introduce only the gene or genes of interest, with little or no extraneous deoxyribonucleic acid (DNA). However, it shares with mutagenesis techniques a potential for introducing unintended effects through mutations. In part, this is because rDNA technology involves growing plants from tissue culture, which can exhibit somaclonal variation, and, more significantly, because breeders using this technology generally cannot control the location in the plant genome at which genetic material will insert when introduced into a plant. Thus, with rDNA technology, the introduced genetic segment may insert into a genetically active chromosomal location. Such insertion may disrupt or inactivate an important gene or a regulatory sequence that affects the expression of one or several genes, thereby potentially affecting adversely the safety of the food or raising other regulatory issues. Such an occurrence is referred to as an insertional mutation.

FDA believes that in the future, plant breeders will increasingly use rDNA techniques to achieve more complicated compositional changes to food, sometimes introducing multiple genes residing on multiple vectors to generate new metabolic pathways. FDA expects that with the increased introduction of multiple genes, unintended effects may become more common. For example, rice modified to express pro-vitamin A was shown to exhibit increased concentrations of xanthophylls (Ref. 11), and rice modified to reduce the concentration of a specific protein was found to exhibit an increased concentration of prolamine (Ref. 12).

FDA believes that the use of rDNA techniques in plant breeding may lead to unintended changes in foods that raise adulteration or misbranding questions. These unintended changes may cause a food to be adulterated because the food may be rendered injurious to health within the meaning of section 402(a)(1) of the act, or, in the absence of a new common or usual name, cause the food to be misbranded under section 403(i)(1) of the act. Because of its role in ensuring the safety of the U.S. food supply, FDA needs to be aware of the modifications to food source plants from the application of rDNA technology and any unintended effects in food that result so that the agency can evaluate whether the foods from such plants are adulterated or misbranded.

Because some rDNA-induced unintended changes are specific to a transformational event (e.g., those resulting from insertional mutagenesis), FDA believes that it needs to be provided with information about foods from all separate transformational events, even when the agency has been provided with information about foods from rDNA-modified plants with the same intended new trait and has had no questions about such foods. Similarly, the agency believes that it needs to be provided with information about foods from rDNA-modified plants whose intended change is the introduction of a pesticidal protein subject to oversight by the Environmental Protection Agency (EPA) rather than by FDA, because the transformational event that is used to introduce the pesticidal trait may also cause unintended changes to the food that would raise adulteration or misbranding questions subject to FDA jurisdiction.

In contrast, the agency does not believe that it needs to receive information about foods from plants derived through narrow crosses (including narrow crosses between different rDNA-modified lines). Narrow crosses, because they generally are performed between varieties that are themselves used in food or are very closely related to varieties used in food, are unlikely to introduce extraneous DNA that encodes traits that have not been in food before. In addition, plant lines used for narrow crosses generally have been subject to extensive backcrossing and field testing to ensure genetic stability (including lack of any active transposons that could cause insertional mutagenesis). Finally, because the plant lines are closely related to each other, crosses between them will involve homologous recombination and thus are unlikely to be subject to insertional mutagenesis. Therefore, narrow crosses are unlikely to result in unintended changes to foods that raise safety or other regulatory questions.

The agency recognizes that unintended changes associated with other non-rDNA breeding methods may pose regulatory questions similar to those posed by rDNA methods. For example, wide crosses, especially between a food plant variety and an undomesticated nonfood plant variety, have much greater potential than do narrow crosses for introducing unintended traits that may alter the safety of the food; undomesticated plants frequently produce toxins at levels unsafe for human consumption, and may also produce substances not found in food. The agency has not found it necessary to assess routinely the safety of foods derived from such breeding methods, because over the last 50 to 60 years that some of these techniques have been used in plant breeding, breeders have used well-established practices successfully to identify and eliminate, prior to commercial use, plants that exhibit unexpected adverse traits. The agency is not aware of a basis for additional FDA oversight of foods derived from plants modified by such techniques, given that there has not been such a need in the past and that there do not appear to be any significant changes in breeders' use of such techniques that would warrant new FDA oversight. Rather, because of the technical advantages of rDNA methods over these other techniques, FDA anticipates that, in the future, breeders will likely use non-rDNA methods less frequently to introduce new characteristics into food plants as they increasingly utilize rDNA techniques. Likewise, despite the similar potential for unintended effects, FDA believes that declining to propose a requirement that the agency be notified about the commercialization of food source plants transformed using techniques other than rDNA is consistent with its current conclusion that, unexpected effects aside, rDNA techniques have a greater potential, relative to conventional methods of breeding, to result in the development of foods that present legal status questions. The agency therefore is not proposing to include foods from crops modified by methods other than rDNA techniques within the scope of this proposed notification rule. The agency requests comment as to whether it should include foods from crops developed by wide crosses or other breeding methods in the scope of any final rule based upon this proposal.

FDA recognizes that whether there is a change in the legal status of a food resulting from a particular rDNA modification depends almost entirely on the nature of the modification, and that not every modification accomplished with rDNA techniques will alter the legal status of the food. In other words, many modifications will result in a food that does not contain an unapproved food additive, does not contain an unexpected allergen, and does not differ significantly in its composition compared with its traditional counterpart or otherwise require special labeling. For this reason, FDA is neither proposing to require premarket approval for all foods developed using rDNA technology nor is the agency proposing an across-the-board requirement that all such foods bear special labeling.

There is substantial basis to conclude, however, that there is greater potential for breeders, using rDNA technology, to develop and commercialize foods that are more likely to present legal status issues and thus require greater FDA scrutiny than those developed using traditional or other breeding techniques. It was in part for this reason that, in 1994, the agency initiated a consultation process. Since that time, developers have actively consulted with FDA regarding their new plant varieties; under this process, the agency has completed its evaluation of data and other information from some 45 consultations.

As noted, FDA believes that, to date, the developer of each rDNA variety commercially marketed in the United States has consulted with the agency prior to marketing food from the new variety. But these products represent only a small fraction of the potential products of rDNA technology.8 Additionally, in general, the introduced traits have been agronomic in nature (i.e., directed at the characteristics of the plant and not at the characteristics of the food produced by the plant). However, this picture is rapidly changing. The current list, which is provided by the Animal and Plant Health Inspection Service (APHIS) in the U. S. Department of Agriculture (USDA), of field tests of plants being developed using rDNA technology shows that the plants under development have a broader variety of introduced traits (Ref. 13). Additionally, that list shows that many such traits are not simply agronomic, but are intended to modify the food itself, and thus would be more likely than in the past to raise regulatory issues falling under FDA's purview.9 Finally, as noted previously, FDA believes that, given the efficiencies of rDNA techniques, the advances in these techniques, and the rapidly expanding information related to genomes, these techniques are likely to be utilized by plant breeders to an increasingly greater extent.

The confluence of the increasingly broader use of rDNA techniques to develop foods for human and animal use and the globalization of the world's food supply also suggest that FDA needs to be aware of the various foods developed using rDNA technology. Currently, approximately 45 percent of the United States' plant-derived food is imported, and that percentage continues to increase. The agency expects that rDNA techniques may, over time, be used increasingly by plant breeders and developers in countries that export foods to this country. In such circumstances, the accuracy of FDA's knowledge about the presence in the U.S. food supply of foods developed using rDNA techniques is likely to decrease. In addition, the awareness of particular food allergies is not uniform throughout the world because the diets of some populations do not contain sufficiently large amounts of a food such that the allergic potential has been demonstrated; in these circumstances, it is particularly important that FDA be aware of imported foods modified using rDNA techniques that may unexpectedly contain a substance that is an allergen.

For all these reasons, FDA believes that the food products of rDNA technology are appropriately made subject to greater regulatory scrutiny by FDA in the form of enhanced agency awareness of all such foods intended for commercial distribution. This increased agency awareness will ensure that at this stage of this continuously evolving technology, all market entry decisions about new bioengineered foods, including those intended for import into the United States, are made consistently and in full compliance with the law. Similarly, in order for the agency to evaluate fully and consistently the possible regulatory consequences of the alterations made possible using rDNA technology, FDA must be made aware of the bioengineered foods entering commercial distribution.

Section 701(a) of the act (21 U.S.C. 371(a)) authorizes the Secretary of the Department of Health and Human Services (the Secretary) to issue regulations for the efficient enforcement of the act; under section 903(d)(2) of the act (21 U.S.C. 393(d)(2), the Secretary is responsible for executing the act, including section 701(a), through the Commissioner of Food and Drugs. The authority under section 701(a) of the act to issue regulations under the act extends to both regulations that supplement a specific statutory mandate as well as regulations that are justified by the statutory scheme as a whole. (See National Confectioner's Association v. Califano, 569 F.2d 690, 693 (D.C. Cir. 1978), citing Toilet Goods Association v. Gardner, 387 U.S. 158, 163 (1967).) In assessing a regulation issued under section 701(a), it is important to consider both the statutory purpose as well as the practical aspects of the situation, including the possible enforcement problems that may be encountered by FDA. (See National Confectioner's Association v. Califano, 569 F.2d 690, 693 (D.C. Cir. 1978), citing Toilet Goods Association v. Gardner, 387 U.S. 158, 163 (1967).)

To ensure that FDA has the maximum amount of information about foods from bioengineered plants, the agency has tentatively concluded that, prior to initiation of commercial distribution in the United States of a bioengineered food, FDA must be notified of the intent to market such food, including foods intended for import into the United States. Notification will ensure that the agency is aware of all bioengineered foods entering commercial distribution that are subject to FDA's jurisdiction and will help to ensure that all market entry decisions by the industry are made consistently and in full compliance with the law. This will permit the agency to assess on an ongoing basis whether foods developed using rDNA technology comply with the standards of the act. FDA believes that it is essential that all those developing and marketing bioengineered foods participate fully and completely in the proposed notification program. Therefore, the agency is proposing that the notification program that is described in this document be mandatory.

Accordingly, for the reasons set forth above concerning the special circumstances of bioengineered foods, to enforce the act efficiently, and in particular, to administer efficiently the act's various provisions that relate to food as such provisions apply to bioengineered food, including section 301 of the act (21 U.S.C. 331) and sections 402, 403, and 409 of the act, FDA is proposing regulations to require that the agency be notified at least 120 days prior to the initiation of commercial distribution in the United States of a bioengineered food. The elements of FDA's proposed program are discussed in detail below.

FDA is proposing to require the submission to the agency of data and information regarding plant-derived bioengineered foods that would be consumed by humans or animals. FDA's proposal also includes a recommendation that prospective notifiers participate in a presubmission consultation program. The regulations regarding bioengineered foods that would be consumed by humans would be codified in new part 192. The regulations regarding bioengineered foods that would be consumed by animals would be codified in new part 592. The proposed regulations regarding bioengineered foods that would be consumed by animals parallel the proposed regulations regarding bioengineered foods that would be consumed by humans. For ease of discussion, in this proposed rule, FDA describes each of the regulations that would be codified in part 192, without describing the parallel regulations in part 592. Following this discussion, FDA describes areas of importance in the proposed animal feed regulations (section XI of this document).

FDA is proposing to codify five definitions that are associated with the proposed notification program (proposed § 192.1). These terms are bioengineered food, commercial distribution, notifier, premarket biotechnology notice (PBN or notice), and transformation event. FDA invites comments on these proposed definitions. FDA is particularly interested in comments on the proposed definitions of bioengineered food and transformation event. Specifically, FDA is requesting comment on whether these proposed definitions are consistent with the agency's intent (described in section V of this document) that the proposed notification program apply to a particular subset of plant-derived foods. Such comments may result in a modification to the proposed definitions.

Under the proposed definitions, a required PBN may be submitted by any person who is responsible for the development, distribution, importation, or sale of a bioengineered food. Based on the agency's experience, FDA expects that it ordinarily will be the seed developers and purveyors who notify the agency about a bioengineered food.

FDA is proposing to require a submission to the agency of data and information regarding a plant-derived bioengineered food at least 120 days prior to the commercial distribution of the food (proposed § 192.5). The proposed regulation would include a bioengineered food derived from a new plant variety modified to contain a pesticidal substance, and would exclude a bioengineered food that meets three specified criteria. The rationale for this proposed notification requirement is discussed in section II of this document. FDA specifically requests comment on the scope of the proposed notification requirement and on the proposed conditions for exclusion from the notification requirement. Such comments may result in a modification to the proposed regulation.

FDA is proposing that the notification requirement apply to a bioengineered food derived from a new plant variety modified to contain a pesticidal substance (proposed § 192.2(a)). Under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) (7 U.S.C. 136 et seq.), EPA has authority to regulate all pesticides, regardless of how they are made or their mode of action. Under the act, EPA has authority to regulate pesticide residues in foods and FDA has authority to regulate a nonpesticidal substance that may be introduced into a new variety and that is expected to become a component of food. Given this statutory framework, both FDA and EPA agree that any food safety questions beyond those associated with the pesticide, such as those raised by unexpected or unintended compositional changes, are under FDA's jurisdiction (57 FR 22984 at 23005). FDA's proposal to include in its notification program new plant varieties that contain a pesticidal substance will facilitate consultation between EPA and FDA on the scientific and regulatory issues that are not within the scope of EPA's authority under FIFRA and the act.

FDA is proposing to exclude from the notification requirement a bioengineered food that satisfies three conditions. The first condition is that the food derives from a plant line that represents a transformation event that has been addressed in a notice previously submitted to FDA (proposed § 192.5(a)(1)). Under § 192.5(a)(1), a separate notice would be required for distinct plant lines that are derived from separate transformed cells, even when those cells were transformed during a single transformation procedure. The second condition is that the use or application of the bioengineered food has been addressed in a notice previously submitted to FDA (proposed § 192.5(a)(2)). Under § 192.5(a)(2), a separate notice would be required, for example, if herbicide tolerance introduced into a variety of sweet corn that is used solely for human food is subsequently transferred, using traditional plant-breeding techniques, to a variety of field corn that would also be used in food intended for consumption by animals. The third condition is that a letter from FDA demonstrates that FDA has evaluated the use or application of the bioengineered food and has no questions about it (proposed § 192.5(a)(3)). Under § 192.5(a)(3), a notice would be required if, for example, a prior notice about another use of a bioengineered food is still pending or if the agency's response to a prior notice demonstrates that FDA did not consider the prior notice as providing a basis to conclude that the bioengineered food was in compliance with all applicable requirements of the act.

As mentioned, FDA believes that all developers of bioengineered foods that already are commercially marketed in the United States have consulted with the agency prior to marketing the food. FDA believes that any legal status questions that pertain to the applicable bioengineered foods have been identified and resolved through that consultation process. Therefore, the notification requirement would not extend to bioengineered food obtained from a plant line (or series of plant lines) that derives from a particular transformation event, as long as both the applicable transformation and the use or application of the bioengineered food has been addressed satisfactorily in a completed consultation under the voluntary program.

It is likely that some final consultations received under the 1996 procedures would still be pending on the date of a final rule based on this proposal. The proposed regulations include no specific provisions regarding a bioengineered food that is the subject of a pending final consultation under the 1996 procedures. FDA specifically requests comment on how FDA should administer such submissions. FDA also specifically requests comment on whether the process for administering a final consultation that is pending on the date of a final rule based on this proposal should be included in these regulations. Such comments may result in a modification to the proposed regulation.

FDA specifically requests comment on the scope of proposed notification requirement and on the proposed conditions for exclusion from the notification requirement. Such comments may result in a modification to the proposed regulation.

FDA is proposing that the data or information that a notifier submits to FDA regarding a bioengineered food must be generated from a plant line whose derivation can be traced to the transformation event that is the subject of the notice and that contains the genetic material introduced via the transformation event (proposed § 192.5(b)). As a practical matter, the proposed regulation will give flexibility to producers while providing the agency with relevant information concerning the nature of the bioengineered foods. FDA specifically requests comment on this proposed provision. Such comments may result in a modification to the proposed regulation.

FDA is proposing to require that a notifier submit a PBN at least 120 days before the bioengineered food is marketed (proposed § 192.5(c)). The proposed timeframe is consistent with contemporary expectations of the Congress for another notification program, the notification program for food contact substances (section 409(h) of the act).

FDA believes that it can, in most circumstances, complete its evaluation of a PBN within 120 days because, as discussed more fully below, FDA is recommending that prospective notifiers participate in a presubmission consultation program. The purpose of the presubmission consultation program is to enable a prospective notifier to identify and address relevant safety, nutritional, or other regulatory issues regarding the bioengineered food before submitting a PBN. Given this presubmission consultation program, FDA expects that a notifier will have sufficient information to prepare a notice that adequately addresses all issues and that scientific experts at the agency will be familiar with the issues raised by a particular bioengineered food when the agency receives the applicable PBN.10

FDA is proposing to include in the regulation a recommendation that a prospective notifier consult with the agency, before submitting a PBN, to identify and discuss relevant safety, nutritional, or other regulatory issues regarding the bioengineered food (proposed § 192.10). The proposed recommendation describes procedures for requesting consultation and the public disclosure provisions that likely would apply to records that FDA maintains about the consultation. Under § 192.10(f), a notifier must state his view as to whether the fact that he is consulting with FDA, or any or all of the data or information that he submits to FDA, is exempt from disclosure under the Freedom of Information Act (FOIA) and must explain the basis for any such exemption claim. The recommendation to consult with FDA derives from the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures. FDA discusses the details of this proposed recommendation immediately below.

Using rDNA technology, bioengineered plants such as corn are now being developed for non-food uses. Examples of such applications include the transfer of genes that encode pharmaceutical proteins, oral vaccines, and enzymes that would be used for non-food industrial applications. In some cases, such as most of the pharmaceutical proteins, the final product would be a highly purified component of the plant commodity. In other cases, such as some oral vaccines, the final product would be a minimally processed plant commodity. In some cases, there may be a potential for a bioengineered plant commodity that is not intended for use in food to enter the food supply inadvertently. FDA encourages developers of bioengineered plants that are not intended for use in food or feed, but that theoretically could enter the food or feed supply, to participate in the consultation program described in this proposed rule. This participation would ensure that developers have given careful consideration to the procedures needed to ensure that their products do not inappropriately get into the food supply, and are aware of the legal implications if their products do.

FDA is proposing to recommend that a prospective notifier participate in a presubmission consultation program (proposed § 192.10(a)). Under the program (proposed § 192.10(b)), a prospective notifier would write to FDA and ask to consult about a bioengineered food. FDA would establish an administrative file for each consultation and would meet with a prospective notifier upon request. Although FDA may provide written feedback during the consultation, that feedback would not release the prospective notifier from the proposed requirement to notify FDA about the bioengineered food at least 120 days before commercialization of the food. The proposed presubmission consultation program derives from the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures.

FDA is proposing to provide information about the availability for public disclosure of: (1) The fact that a developer is consulting with FDA (proposed § 192.10(c)) and (2) the data or information in the file that FDA would establish for a presubmission consultation (proposed § 192.10(d)). The regulations would inform all parties of the fact that FDA must act in response to a request under FOIA for information on presubmission consultations, and must disclose, or protect from disclosure, the applicable record(s) in accordance with § 20.61 (21 CFR 20.61) (proposed § 192.10(c)(2) and (d)(1)).

In light of the significant public interest in bioengineered foods and in FDA's oversight of these foods, FDA believes that it is important for developers to be informed that FOIA may entitle the public to know that the developer has provided data or information to FDA about a bioengineered food and to receive a copy of those data or information. Likewise, FDA believes that it is equally important for the public to know that the fact that a developer is consulting with FDA may be exempt from disclosure under FOIA and that some or all of the data or information that are submitted to FDA during a presubmission consultation could be exempt from public disclosure.

Under FOIA, data or information that are submitted to the Federal Government are available for public disclosure unless those data or information fall within an established exemption of FOIA. The exemption that is most relevant to data or information provided to FDA during a presubmission consultation is “exemption 4,” which applies to “trade secrets and commercial or financial information obtained from a person and privileged or confidential.” (5 U.S.C. 552(b)(4)). FDA has issued regulations implementing exemption 4 of FOIA in § 20.61.

FDA believes that, in most cases, the fact that a developer is consulting with FDA would not constitute confidential commercial information. For example, most plants developed using rDNA technology are considered “regulated articles” under regulations of USDA's APHIS (7 CFR part 340), which regulates the introduction of certain “genetically engineered” plants. At some stage of research and development of a regulated article, a developer requests from APHIS a determination of the article's regulatory status, and, consistent with FOIA requirements, APHIS discloses that request. Thus, by virtue of the APHIS process, the fact that the developer is developing the plant and its food product would usually already be disclosed.

FDA also believes that, in most cases, most of the data or information provided to FDA during a presubmission consultation would not constitute a trade secret or confidential commercial information. For example, only a handful of the submissions that FDA has received under its current consultation program identified specific data or information that the developer claimed to be exempt under § 20.61. Neverthelesss, there could be circumstances where a developer initiates a presubmission consultation about a product that has not previously been disclosed to the public and has grounds to claim that the fact of the consultation should not be available for public disclosure. In such circumstances, disclosing any data or information in the applicable submission would reveal the existence of the submission. Thus, as long as the existence of the consultation is exempt from disclosure, all data or information in the submission would necessarily be exempt from disclosure.

FDA is proposing that a prospective notifier ask FDA in writing for an opportunity to consult about a bioengineered food (proposed § 192.10(e)). A written request would provide clarity about the subject of the consultation.

FDA is proposing to require that a prospective notifier who initiates a consultation inform FDA whether, in his view, the fact of the consultation with FDA is confidential, and whether, in his view, any or all of the provided data or information is confidential (proposed § 192.10(f)(1)). FDA also is proposing to require that a prospective notifier who claims confidentiality for the existence or content of a presubmission consultation explain the basis for that claim (proposed § 192.10(f)(2)). FDA is proposing these requirements because of the significant public interest in bioengineered foods. These requirements would ensure that FDA is aware of the prospective notifier's position regarding the availability for public disclosure of the existence and content of the consultation. In addition, FDA believes that these requirements would alert a prospective notifier to the fact that the data or information contained in a submission to FDA are available for disclosure unless the applicable criteria for exemption are satisfied.

FDA is proposing to recommend that a prospective notifier send FDA a synopsis about the requested consultation (proposed § 192.10(f)(3)). The recommended synopsis would include the prospective notifier's name and address, the name of the bioengineered food and the plant species from which it is derived, a distinctive designation(s) that the notifier uses to identify the applicable transformation events, a list of the identity(ies) and source(s) of introduced genetic material, a description of the purpose or intended technical effect of the transformation event (including expected significant changes in the composition or characteristic properties of food derived from the plant as a result of the transformation event, regardless of whether these changes result from the insertion of new genes or from a modification in the expression of endogenous genes), a description of the applications or uses of the bioengineered food, and a description of any applications or uses of the bioengineered food that are not suitable for the bioengineered food. FDA is proposing to recommend this synopsis because the agency believes that the information in the synopsis is both necessary and sufficient to characterize the bioengineered food in a manner that will enable the agency to engage in a meaningful dialogue with the prospective notifier. For example, information about the identity and intended technical effect of the transformation event would enable the agency to address the potential issue that the food would contain an unapproved food additive. A distinctive designation that the notifier uses to identify the applicable transformation event would enable the agency to efficiently locate other agency records regarding that transformation event. It would also facilitate discussions with APHIS and EPA, if sponsors use those same designations in information supplied to the other agencies. Information about the sources of the genetic material would enable the agency to identify issues associated with a known allergenic source. Information about expected significant changes in the composition of the food would enable the agency to discuss suggestions for an appropriate common or usual name for the bioengineered food. Information about the applications or uses of the food would enable the agency to identify applicable regulatory situations (e.g., whether the bioengineered food would likely be used in human food, animal feed, or both). Information about any applications or uses that the notifier believes would not be suitable for the bioengineered food would enable the agency to identify potential safety questions, if any, about such use of the bioengineered food.

FDA is proposing that a prospective notifier send a request for consultation regarding a bioengineered food to CFSAN (proposed § 192.10(g)). As necessary and appropriate, CFSAN would coordinate the consultation process with CVM. The proposed regulation is consistent with the approach in the 1996 procedures, which has worked well.

FDA is proposing that a prospective notifier should send an original and two paper copies of a written request for consultation and of any additional materials that are sent to FDA during the consultation process (proposed § 192.10(h)(1) and (h)(2)). FDA is proposing an original and two copies of these submissions for efficiency in providing information about the presubmission consultation to the agency's scientific reviewers.

Because it is likely the data or information in a presubmission consultation would be requested under FOIA by an outside party, FDA is proposing that a prospective notifier who claims that certain data or information provided to FDA during the presubmission consultation are exempt from disclosure should clearly identify, in each submission, the data or information at issue (proposed § 192.10(h)(3)(i)). When this is the case, FDA also is proposing that the prospective notifier should provide an additional paper copy of the submission that does not contain such data or information (i.e., a redacted paper copy under proposed § 192.10(h)(3)(ii)). Providing a redacted copy would communicate very clearly which data or information the prospective notifier considers to be exempt. These recommendations are consistent with a practice that is commonly used by firms who send FDA a food additive petition that contains information that the petitioner claims to be confidential, a practice that has worked well. In addition, the practice of providing a redacted copy also has been used in a few cases under the 1996 procedures.

FDA is proposing that the redacted paper copy be prepared in a manner that clearly identifies the location and relative size of deleted information. This proposed regulation is consistent with FDA's proposed regulations (64 FR 60143, November 4, 1999) regarding implementation of the Electronic Freedom of Information Act Amendments of 1996 (EFOIA (Public Law 104-231)). EFOIA includes, among other things, provisions requiring agencies to inform requesters about the amount of information not being released to them.

FDA is proposing to specify the materials that the agency would place in an administrative file that it establishes for a presubmission consultation (proposed § 192.10(i)(1)). These materials include any correspondence between the prospective notifier and FDA, any written materials that the prospective notifier provides during the consultation process, and a memorandum of each meeting or significant phone call between FDA and the prospective notifier during the consultation. This part of the regulation would inform both prospective notifiers and outside parties of the materials that ordinarily would be in the administrative file of the consultation and thus potentially be subject to disclosure under FOIA.

FDA's proposal includes its commitment to discuss issues associated with a bioengineered food with any prospective notifier who asks to do so (proposed § 192.10(i)(2)). FDA is proposing to include this commitment to both remind and encourage prospective notifiers that the purpose of the recommended program is for a prospective notifier to engage FDA in a discussion about the bioengineered food at an early stage of the food's development. However, the agency realizes that there may be circumstances where such a discussion would not be an efficient use of resources for either the prospective notifier or for FDA. For example, a prospective notifier may intend to notify FDA about bioengineered foods that derive from a series of plant lines that are the result of independent transformation events with the same genetic construct. After FDA has completed its evaluation of one of these bioengineered foods, the notifier likely would be aware of most or all of the applicable safety, nutritional, or other regulatory issues that could be associated with the food. Nevertheless, FDA would welcome the opportunity to be informed about the notifier's plans to submit additional notices because this information could help the agency to plan its workload.

The proposed regulation describes a flexible process for any discussion (e.g., by mentioning that the discussion could take place through a meeting or through a telephone conference). FDA is highlighting the opportunity to discuss the bioengineered food by a mechanism other than a face-to-face meeting to minimize the potential that a small business or academic research group would elect not to participate in the program due to the cost of travel. Given the agency's experience under the current consultation process, FDA is confident that a meaningful dialogue can often be accomplished without a face-to-face meeting.

FDA is proposing to codify certain administrative information that would apply to a PBN (proposed § 192.20). The proposed administrative information includes information about where to send a PBN, the number of copies to send, how to include information in a foreign language, how to refer to data or information that are already in FDA's files, how to obtain guidance on scientific issues, and the prerogative of a notifier to withdraw a PBN from FDA's consideration. Many of these administrative aspects of the proposed notification program are consistent with procedures already in place for the food additive petition program (§ 171.1 (21 CFR 171.1)). FDA discusses the details of these administrative aspects of the proposed notification program immediately below.

FDA is proposing that a notifier send a PBN regarding a bioengineered food to CFSAN (proposed § 192.20(a)). As necessary and appropriate, CFSAN would coordinate FDA's evaluation of the PBN with CVM. The proposed regulation is consistent with the approach that FDA recommended in the 1996 procedures, an approach that has worked well.

FDA is proposing that a prospective notifier send to the agency an original paper version and one paper copy of a PBN (including any amendments) (proposed § 192.20(b)(1)). A notifier would have an option to submit one additional paper copy or, under proposed 192.20(c)(1), to submit an electronic copy that is formatted in a manner that makes it suitable for FDA to use while evaluating the PBN. The number of paper copies required by the regulation is consistent with the number of paper copies that FDA currently requires for other premarket submissions, such as a food additive petition. A requirement for multiple paper copies generally serves the purpose of providing a copy of the submission to multiple scientific reviewers. However, as discussed below, FDA also is recommending that a notifier submit an electronic copy of a PBN that is formatted in a manner that makes it suitable for FDA to use in evaluating a PBN. Because scientific reviewers could accomplish their review by accessing the electronic copy, under the proposed rule, a notifier who submits an electronic evaluation copy would submit one less paper copy. FDA would retain the original paper version at CFSAN, while the paper copy would be retained at CVM. Comments may result in a modification to the proposed requirement to submit a single paper copy.

Under the regulation, the paper copy would be the official version at FDA. This provision would clarify the status of an electronic copy that FDA also is proposing to require 11 (see proposed § 192.20(c)(1) and section VII.C of this document).

FDA is proposing that a notifier who claims that specific data or information in the PBN are confidential must prepare and submit one paper copy of the PBN that does not contain any of those data or information (proposed § 192.20(b)(2)). Consistent with the EFOIA proposed rule, the notifier would prepare this redacted paper copy in a manner that clearly identifies the location and relative size of deleted information. As discussed previously regarding a presubmission consultation (see section VI.C of this document), the redacted copy would be very useful as it would communicate very clearly which data or information the notifier considers to be exempt from disclosure.

FDA is proposing to include in the regulation a recommendation that a notifier submit an electronic copy (the evaluation copy) that is formatted in a manner that makes it suitable for FDA to use while evaluating the PBN (proposed § 192.20(c)(1)). Because technology is advancing at a rapid pace, the regulation would inform notifiers how to obtain information about the appropriate format of the electronic copy rather than specify that format. Under the regulation, a notifier would provide such an electronic copy of both the original PBN and of any amendments to the PBN. FDA is recommending the submission of an electronic evaluation copy to take advantage of the fact that contemporary technology makes it possible for notifiers to send, and FDA to evaluate, submissions of data or information in electronic form, and the availability of an electronic evaluation copy has the potential to improve the efficiency of FDA's review. To encourage manufacturers to submit an electronic evaluation copy, a notifier who submits such a copy would submit a total of two, rather than three, paper copies.

FDA also is proposing to require that a notifier submit an electronic copy (the disclosure copy) that is formatted in a manner that makes it suitable for FDA to use to make a PBN available to the public in an electronic reading room (proposed § 192.20(c)(2)). As would be the case with the electronic evaluation copy, the regulation would inform notifiers how to obtain information about the appropriate format of the electronic copy and a notifier would be required to provide such an electronic copy of both the original PBN and of any amendments to the PBN. Consistent with the EFOIA proposed rule, a notifier would delete data or other information claimed to be confidential from the electronic copy in a manner that clearly identifies the location and relative size of deleted information. FDA is proposing to require an electronic disclosure copy to facilitate the agency's compliance with EFOIA, which includes provisions regarding the availability of records in electronic form and the establishment of “electronic reading rooms.” As discussed in the EFOIA proposed rule, section 4 of EFOIA (5 U.S.C. 552(a)(2)(D)) adds a new category of records that agencies must make available in their public reading rooms. This new category consists of copies of records that have been released to any person under FOIA and that, because of their subject matter, the agency determines have become or are likely to become the subject of subsequent requests for substantially the same records. In light of the significant public interest in bioengineered foods and in FDA's oversight of these foods, FDA has tentatively concluded that it is likely that each submitted PBN would be requested under FOIA multiple times.

The preparation of an electronic copy formatted in a manner that makes it suitable for FDA to use to make a PBN available to the public in an electronic reading room will require use of computer technology. Although the use of this technology is widespread, it is possible that a firm that develops a bioengineered food would not have access to the particular technology that will be needed. For this reason, under the proposed regulation a notifier may request a waiver from the requirement to submit an electronic disclosure copy. FDA would grant or deny the notifier's request on its merits.

FDA requests comments on its proposal to require an electronic disclosure copy of a PBN and to provide a notifier with an opportunity to request a waiver from this requirement. Such comments may result in a modification to the proposed requirement to submit such a copy.

FDA is proposing that a notifier who submits any material in a foreign language provide an English translation that is verified to be complete and accurate (proposed § 192.20(d)). This proposed regulation is necessary for the agency's efficient evaluation of a PBN and is consistent with other agency regulations regarding the submission of information in a foreign language (see e.g., § 171.1(a) and the agency's recent proposal for a premarket notification program for food contact substances (65 FR 43269, July 3, 2000)).

FDA is proposing that a notifier may incorporate by reference data or information that are already retained in FDA's files (proposed § 192.20(e)). The proposed regulation specifies that a notifier may simply incorporate by reference a file that the notifier previously submitted. If the notifier wishes to incorporate by reference a file that someone else previously submitted to FDA, the procedure to incorporate that file into the PBN depends on whether the file is publicly available (e.g., the file is in an electronic reading room or is otherwise available under FOIA). If the file is publicly available, a notifier may incorporate that file by referring FDA to it. If the file is not publicly available, a notifier may incorporate that file by referring FDA to it if the person who submitted the file authorizes the notifier to do so in a signed statement and the notifier includes that signed statement in the PBN. This proposed provision is similar to that described for incorporating previously submitted information into a food additive petition (§ 171.1(b)) and to that described in the agency's recent proposal for a premarket notification program for food-contact substances (65 FR 43269, July 13, 2000).

FDA is proposing to inform notifiers that they can obtain current guidance regarding specific technical issues by writing to FDA or by looking on FDA's site on the Internet (proposed § 192.20(f)). FDA is adding this provision to assist notifiers in addressing common technical issues, such as the estimation of dietary exposure to substances that are present in food. FDA expects that this provision will minimize the time spent, by the agency and the notifier, on routine technical issues.

FDA is proposing to codify a provision that a notifier may request, at any time during FDA's evaluation of a PBN, that FDA cease to evaluate that PBN (proposed § 192.30(g)). Under the regulation, the notifier could submit a future PBN about the same bioengineered food. FDA would retain the PBN in its files and would classify it as “withdrawn.” A notifier could choose to withdraw a notice for several reasons. For example, it is possible that discussions between the notifier and FDA would result in a decision by the notifier to substantially revise the notice to provide data or information that address the applicable legal status questions in a more thorough manner than the submitted PBN.

The proposed regulation is consistent with the provisions of the food additive premarket review program (§ 171.7). Although a notifier does not need explicit authorization to withdraw a notice, a notifier may not be aware of this fact. Likewise, a notifier may not be aware that a notice that is “withdrawn” remains an agency record that could be requested under FOIA. Thus, the regulation would both clarify a prerogative accorded to a notifier and inform the notifier of consequences associated with that prerogative.

FDA is proposing that a PBN be separated into seven parts (proposed § 192.25). These would include a letter (proposed § 192.25(a)); a synopsis (proposed § 192.25(b)); administrative statements about the status of review of the bioengineered food by other Federal agencies or by foreign governments (proposed § 192.25(c)); data or information about the method of development (proposed § 192.25(d)); a discussion of any newly inserted genes that encode resistance to an antibiotic (proposed § 192.25(e)); data or information about substances introduced into, or modified in, the food (proposed § 192.25(f)); and data or information about the food (proposed § 192.25(g)). The proposed regulation fosters a case-by-case approach to addressing relevant scientific and regulatory issues rather than a single set of tests that likely would not be applicable in all circumstances. In general, the proposed requirements derive from the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures. In proposing these requirements, FDA also has drawn on its experience in administering a proposed notification program for GRAS substances (62 FR 18938, April 17, 1997).12

The proposed regulation reflects FDA's current judgment based on contemporary scientific methods for development of bioengineered foods and the types of bioengineered foods that are now under development. Accordingly, the proposed regulation focuses on modifications to foods that are likely to result in commercial products and does not attempt to predict future changes in foods that may result from technological advances. In this field of rapid scientific development, if circumstances warrant, FDA would propose to revise any regulation that results from this proposal. FDA requests comment on technological advances in rDNA technology that are likely to result in commercial products and that would not be addressed by the proposed submission requirements. Such comments may result in a modification to the proposed submission requirements.

FDA is proposing to require that a responsible official of the notifier's organization, or the notifier's attorney or agent, date and sign a letter that informs FDA that the notifier is submitting a PBN under proposed § 192.25. In the letter, this official, attorney, or agent would state his position or title and attest to five statements.

FDA is proposing to require that a notifier inform FDA that it is the notifier's view that the bioengineered food is as safe as comparable food and that the intended use of the bioengineered food is in compliance with all applicable requirements of the act (proposed § 192.25(a)(1)). Applicable requirements of the act would include, for example, the requirement under section 409(a) and 402(a)(2)(C) of the act for FDA review and approval of a food additive and the requirement under section 201(n) and 403 of the act that labeling for the food be appropriate. FDA also is proposing that a notifier state that to the best of the notifier's knowledge, the PBN is a representative and balanced submission that includes information, unfavorable as well as favorable, pertinent to the evaluation of the safety, nutritional, or other regulatory issues that may be associated with the bioengineered food (proposed § 192.25(a)(2)). FDA is proposing that the notifier attest to these statements because, under the act, developers of new foods have a responsibility to ensure that the foods they offer to consumers are safe and in compliance with all requirements of the act (57 FR 22984 at 22985).

FDA is proposing the standard “as safe as” because this is the standard that the agency currently uses to evaluate a notice that is submitted under the 1996 procedures. Because the proposed standard is a comparative standard (“as safe as”), it takes into account circumstances such as the existence of naturally occurring toxicants in many plants (e.g., solanine that occurs naturally in potatoes). As discussed below (see section VIII.G.1 and proposed § 192.25(g)(1)), FDA also is proposing that the notifier provide a justification for selecting a particular food or foods as the “comparable food” to which the notifier will compare the bioengineered food.

FDA is proposing to require that a notifier agree to make relevant data or information that are not included in the PBN available to FDA upon request while FDA is evaluating the PBN or for cause (proposed § 192.25(a)(3)). FDA is proposing this requirement to ensure that the agency will have access to relevant data or other information if safety questions arise after the bioengineered food enters commercial distribution. This proposed requirement will also continue a practice that began under the 1996 procedures.

FDA also is proposing that a notifier agree to two procedures for making such data or information available to FDA (proposed § 192.25(a)(4)). The first procedure is to allow FDA to review and copy these data or information at a specified address during customary business hours. The second procedure is to send these data or information to FDA. FDA is proposing that a notifier agree to both of these two procedures to provide flexibility and efficiency to both the notifier and the agency.

FDA is proposing that a notifier inform FDA as to whether the notifier claims that the existence of a PBN, or any or all of the data or information in the PBN, is exempt from disclosure under the FOIA and explain the basis for that claim (proposed § 192.25(a)(5)). FDA is proposing these requirements in light of the significant public interest in bioengineered foods. These requirements would ensure that FDA is aware of the notifier's position regarding the availability for public disclosure of the existence and content of a PBN. In addition, FDA believes that these requirements would alert a notifier that the data or information contained in a PBN are available for disclosure unless the applicable criteria for exemption are satisfied.

As discussed more fully below, this proposed rule assumes that the existence and content of a PBN is available for public disclosure unless the notifier establishes that the existence of the notice constitutes confidential commercial information or that specific data or information in the PBN constitute a trade secret or confidential commercial information. Thus, the proposed rule acknowledges that there could be circumstances in which the existence or content (or a portion of the content) of a PBN would be eligible for an exemption from public disclosure.

FDA is proposing that the first section of a PBN be a synopsis (proposed § 192.25(b)) that includes the same information that FDA is recommending for inclusion in a presubmission consultation (see proposed § 192.10(f)(3) and section VI.C of this document). The synopsis would be a concise document that describes the bioengineered food in a manner that is suitable for preparing a publicly accessible list of PBN's (see proposed § 192.40(c)(1)(i) and section X.A of this document).

FDA is proposing that a notifier inform FDA of the status of any prior or ongoing evaluation of the bioengineered plant, or food derived from such a plant, by USDA/APHIS and EPA (proposed § 192.25(c)(1) and (c)(2)). The proposed regulation is consistent with the recommendations in a report issued in April 2000 by the National Research Council (the 2000 NRC Report) (Ref. 14). That report recommended, among other things, that FDA, EPA, and USDA/APHIS establish a process to ensure appropriate and timely exchange of information between agencies about bioengineered pest-protected plants. Under the regulation, FDA would be aware of any issues still pending at those agencies, that are relevant to FDA's evaluation of the bioengineered food in question. When necessary and appropriate, FDA would contact APHIS, EPA, or both agencies about their evaluation of the bioengineered plant.

In addition, as discussed previously in this notice, the purpose of this notification program is to provide FDA with the information necessary to determine whether there are legal status questions concerning a bioengineered food so as to permit FDA to carry out its enforcement responsibilities. This would include its responsibilities to enforce section 402(a)(2)(B) of the act, which addresses foods containing illegal pesticide residues.13 If the EPA regulatory process regarding the bioengineered food is not yet complete and a tolerance or exemption from tolerance has not been established, the food would not be in full compliance with the law. Accordingly, in these circumstances, FDA would inform a notifier that the agency does not consider the notifier's PBN to satisfy the requirement for premarket notice (see proposed § 192.30(e) and section IX.C.5 of this document).

FDA also is proposing that a notifier inform FDA as to whether the bioengineered food is or has been the subject of review by any foreign government and, if so, describe the status of that review (proposed § 192.25(c)(3)). Foreign countries have instituted various regulatory requirements for bioengineered foods. Information about the status of a notifier's submission(s) to foreign countries could be pertinent to FDA's review. For example, some issues raised by a foreign country could be relevant to the legal status of the bioengineered food under the act.

FDA is proposing that a PBN include data or information about the method of development (proposed § 192.25(d)). Specifically, FDA is proposing that the data or information that a notifier provides regarding the method of development include: (1) Characterization of the parent plant including scientific name, taxonomic classification, mode of reproduction, and pertinent history of development (proposed § 192.25(d)(1)); (2) construction of the vector used in the transformation of the parent plant, with a thorough characterization of the genetic material intended for introduction into the parent plant and a discussion of the transformation method, open reading frames, and regulatory sequences (proposed § 192.25(d)(2)); (3) characterization of the introduced genetic material, including the number of insertion sites, the number of gene copies inserted at each site, and information on DNA organization within the inserts; and information on potential reading frames that could express unintended proteins in the transformed plant (proposed § 192.25(d)(3)); and (4) data or information related to the inheritance and genetic stability of the introduced genetic material (proposed § 192.25(d)(4)). The proposed requirement derives from the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures. FDA requests comment on technological advances in rDNA technology that are likely to result in commercial products and that would not be addressed by the proposed submission requirements. Such comments may result in a modification to the proposed submission requirements.

FDA also is proposing to require that a notifier include a discussion, as necessary, of other relevant data or information about the method of development (proposed § 192.25(d)(5)). This requirement would cover any issues about the method of development that are not explicitly addressed in proposed § 192.25(d)(1), (d)(2), (d)(3), and (d)(4). FDA expects that such issues would be identified during presubmission consultations on specific products.

In September 1998, FDA issued for public comment a draft guidance document regarding the use of antibiotic resistance markers in bioengineered plants (the 1998 draft antibiotic resistance guidance (Ref. 15)).14 ,15 Consistent with the thinking presented in that document, FDA is proposing to require that a PBN include a discussion about any newly inserted genes that encode resistance to an antibiotic (proposed § 192.25(e)). Because scientific methods to assess this issue are evolving, in the proposed regulation FDA is recommending that a notifier contact FDA about the agency's current thinking on this topic.

FDA is proposing that a PBN include data or information about substances introduced into, or modified in, the food (proposed § 192.25(f)). These data or information would include data or information about the identity and function of these substances (proposed § 192.25(f)(1)), the level of these substances in the bioengineered food (proposed § 192.25(f)(2)), dietary exposure to these substances (proposed § 192.25(f)(3)), the potential that a protein introduced into the food will be an allergen (proposed § 192.25(f)(4)), and a discussion of other safety issues that may be associated with these substances (proposed § 192.25(f)(5)). In general, the proposed requirements derive from the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures. FDA requests comment on these proposed submission requirements. Such comments may result in a modification to the proposed submission requirements.

FDA is proposing that a notifier provide data or information about substances introduced into, or modified in, the food (proposed § 192.25(f)). Under the regulation, a “modified substance” would include a substance that is present in the bioengineered food at an increased level relative to comparable food. Because pesticidal substances are regulated by EPA, the proposed regulation regarding data and information about substances introduced into the plant excludes data and information about pesticidal substances.

As discussed previously (section II of this document), a nonpesticidal substance introduced into food by way of breeding is a food additive if the substance is not GRAS within the meaning of 21 U.S.C. 321(s). Thus, the legal status issues raised by bioengineered foods include the potential that the food would contain an unapproved food additive. In the 1992 policy, FDA expressed its view that there is unlikely to be a safety question sufficient to question the presumed GRAS status of the expression products of the transferred genetic material when the expression products do not differ significantly from other substances commonly found in food and are already present at generally comparable or greater levels in currently consumed foods (57 FR 22984 at 22990). In the 1992 policy, FDA identified proteins, carbohydrates, and fats and oils as substances commonly found in food because those were the substances that were being considered in products under development in 1992.16 As discussed, rDNA technology has recently begun to be used to introduce multiple genes to generate new metabolic pathways (Ref. 11). As with proteins, carbohydrates, and fats and oils, it is FDA's view that the substances produced by the new pathways would be presumed to be GRAS if they do not differ significantly from other substances that are currently present at generally comparable or greater levels in food and, as such, are safely consumed.

FDA is proposing that a PBN include data or information about the identity and function of substances introduced into, or modified in, the food (proposed § 192.25(f)(1)) and the level in the bioengineered food of these substances (proposed § 192.25(f)(2)). The proposed regulation derives from the fact that the quantity and quality of scientific evidence required to establish that the use of a substance is safe vary considerably depending upon the chemical, physical, and physiological properties of the substance and its estimated dietary exposure.

FDA is proposing that a notifier include either: (1) An estimate of dietary exposure to substances introduced into, or modified in, the food (proposed § 192.25(f)(3)(i)); or (2) a statement that explains the basis for the notifier's conclusion that an estimate of dietary exposure to these substances is not needed to support safety (proposed § 192.25(f)(3)(ii)). As discussed in the 1992 policy (57 FR 22984 at 22998), many substances that would be introduced into, or modified in, a bioengineered food would be present in the bioengineered food at a relatively low level. For example, since 1994, developers have completed more than 45 consultations about bioengineered foods, most of which contain newly introduced or modified enzymes (Ref. 6). In most cases, an estimate of dietary exposure to these enzymes was not critical to the safety assessment. However, this is not always the case, even for enzymes that would be present in food at a low level. For example, in the case of the enzyme APH(3′)II, FDA relied, in part, on the estimated dietary exposure to APH(′)II in concluding that active APH(3′)II in food would not interfere with the clinical efficacy of the orally administered antibiotic, kanamycin (59 FR 26700 at 26703). Thus, the particular circumstances will determine whether an actual estimate of dietary exposure to a substance that is introduced into a food plant is needed to support the notifier's view that the bioengineered food is as safe as comparable food.

FDA is proposing that a notifier include a discussion of the available data or information that address the potential that a protein introduced into the food will be an allergen (proposed § 192.25(f)(4)). The proposed regulation is consistent with the 1996 procedures, which recommend that a notifier provide FDA with information regarding any known or suspected allergenicity and a discussion of the available information about the potential for the bioengineered food to induce an allergic response. Because scientific methods to assess this issue are evolving, in the proposed regulation FDA is recommending that a notifier contact FDA about the agency's current thinking on this topic.

FDA is developing guidance for evaluating the potential allergenicity of proteins introduced into bioengineered foods and intends to make that draft guidance available for public comment in the near future. The draft guidance will be based in part on recommendations made by scientific experts who attended a public scientific conference on food allergy and bioengineered foods that FDA, EPA, and USDA jointly hosted on April 18 and 19, 1994 (the 1994 allergenicity conference (Ref. 17)).17

It is impracticable for FDA to either anticipate all classes of substances that could be introduced into food or provide specific guidance about each of those classes of substances. Therefore, FDA is proposing that a notifier provide a discussion of data or information relevant to other safety issues that may be associated with the substances introduced into, or modified in, the food (proposed § 192.25(f)(5)). This requirement would cover any issues that are not explicitly addressed in proposed § 192.25(f)(1), (f)(2), (f)(3), and (f)(4) regarding substances introduced into, or modified in, the food. Such issues could include, for example, the digestibility or toxicity of an introduced protein. FDA expects that such issues would be identified during presubmission consultations on specific foods.

FDA is proposing that a notifier provide data or information about the bioengineered food (proposed § 192.25(g)). These data or information would include a justification for selecting a particular food(s) as “comparable food” (proposed § 192.25(g)(1)); a discussion of historic uses of the comparable food(s) (proposed § 192.25(g)(2)); data or information comparing the composition and characteristics of the bioengineered food to those of comparable food(s), with emphasis on significant nutrients, naturally occurring toxicants and antinutrients, and any intended changes to the composition of the food (proposed § 192.25(g)(3)); any other information relevant to the safety, nutritional, or other regulatory assessment of the bioengineered food (proposed § 192.25(g)(4)); and a narrative that explains the basis for the notifier's view that the bioengineered food is as safe as comparable food(s) and that the bioengineered food is otherwise in compliance with all applicable requirements of the act (proposed § 192.25(g)(5)). In general, the proposed requirements derive from the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures. FDA discusses the details of this proposed regulation immediately below. FDA requests comment on the proposed submission requirements regarding the food. Such comments may result in a modification to the proposed submission requirements.

FDA is proposing that the notifier provide a justification for selecting a particular food or foods as the “comparable food” to which the notifier will compare the bioengineered food (proposed § 192.25(g)(1)). The proposed requirement is based on the 1992 policy and FDA's experience under the 1996 procedures.

Ordinarily, the comparable food would be the parental variety or commonly consumed varieties of the parent plant (57 FR 22984 at 22996 and Ref. 5)). However, when the intended effect of the transformation is to change the composition of the food, it may be appropriate to also compare the composition and characteristics of the bioengineered food to that of another commonly consumed food. For example, if an oilseed crop is modified to produce an oil that has a higher content of a particular fatty acid than commonly consumed varieties, it may be appropriate to also compare the composition and characteristics of the bioengineered food to that of a food that contains that fatty acid. FDA expects that any issues associated with the appropriate selection of comparable food(s) would be identified during presubmission consultations on specific products.

FDA is proposing that the notifier provide a discussion of historic uses of the comparable food(s) to which the notifier will compare the bioengineered food (proposed § 192.25(g)(2)). Several notifiers who have consulted with FDA under the 1996 procedures have included such a discussion (e.g., as part of their description of the applications or uses of the bioengineered food). FDA has found that such a discussion is particularly helpful in identifying the potential uses of the bioengineered food, regardless of whether those uses are specifically targeted by the notifier.

Consistent with the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures, FDA is proposing that a notifier provide data or information comparing the composition and characteristics of the bioengineered food to those of comparable food(s), with emphasis on changes in the levels of significant nutrients and naturally occurring toxicants and antinutrients (proposed § 192.25(g)(3)(i) and (g)(3)(ii)). Such changes could raise legal status questions such as whether the name of the food adequately describes the food or whether the food is adulterated within the meaning of section 402(a)(1) of the act.

Consistent with the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures, FDA is proposing that a notifier provide data or information about any intended changes to the composition or characteristics of the food (proposed § 192.25(g)(3)). Such changes could raise legal status questions such as the appropriate common or usual name for the food. For example, FDA has been notified about a modification to a canola variety of rapeseed to produce an oil with a modified fatty acid composition. Because the name that is most often used to describe oil derived from the parent plant (i.e., canola oil) did not accurately reflect the characteristic properties of the bioengineered oil, the notifier suggested a new name for the oil.

Intended changes to the composition or characteristics of the food also could raise safety questions about the food. For example, it is possible that a developer could modify corn so that the corn becomes a significant dietary source of the nutrient folic acid. Folic acid is used to fortify many foods, including breakfast cereals, because of the relationship between consumption of folic acid and a reduced risk of neural tube defects (21 CFR 101.79). However, excess folic acid in the diet can mask the signs of vitamin B12 deficiency. Thus, an increased level of folic acid in a food such as corn, which is commonly used in breakfast cereals, could raise safety or other regulatory issues.

Under proposed § 192.25(g)(3), intended changes to the composition of food include modifications that are intended to reduce the level of a substance in food. For example, it is possible that a modification would be intended to decrease the level of a substance that is considered undesirable, such as the phytate that naturally occurs in soybeans. It also is possible that a modification would be intended to reduce the fat content of a food. As with intended increases in the level of substances already in food, changes that decrease the level of substances already in food could raise legal status questions such as the appropriate common or usual name for the food.

Consistent with the 1992 policy, the 1996 procedures, and FDA's experience under the 1996 procedures, FDA is proposing that a notifier provide a discussion of any other information relevant to the safety, nutritional, or other regulatory assessment of the bioengineered food (proposed § 192.25(g)(4)). This requirement would cover any legal status issues about the food that are not explicitly addressed in proposed § 192.25(g)(1), (g)(2), and (g)(3). For example, under proposed § 192.25(g)(4), a notifier could discuss the basis for proposing a specific common or usual name for a bioengineered food, or any other proposed labeling that would accompany the bioengineered food. FDA expects that such issues would be identified during presubmission consultations on specific foods.

FDA requests comment on whether this rule should also include a requirement that a premarket notice for a bioengineered food include methods by which the food could be detected. In particular, the agency is interested in comments on the circumstances under which such methods should or should not be required, and the rationale for any such requirement (e.g., the modification to the crop makes the food acceptable for animal feed but unacceptable for human food). The agency is also interested in comments on whether any such required methods should be for raw agricultural commodities, representative finished foods likely to contain the modified food, or both; and whether any such required methods should contain sufficient information, such as primer sequences, to enable technically-proficient non-government laboratories to use them; and what other criteria, if any, there should be for required methods (e.g., cost). Such comments may result in a modification to the proposed submission requirements.

FDA is proposing to require that a notifier provide a narrative that explains the basis for the notifier's view that the bioengineered food is as safe as comparable food and that the bioengineered food is otherwise in compliance with all applicable requirements of the act (proposed § 192.25(g)(5)). The narrative would provide an integrated discussion of the data and information submitted in a PBN. FDA is proposing this requirement because the notifier has the responsibility for determining that the intended use of the bioengineered food is as safe as comparable food and is otherwise lawful. Absent an integrated discussion of the underlying data and information, the basis for the notifier's conclusion about the legal status of the bioengineered food may not be apparent.

FDA is proposing to do an initial evaluation of the notice within 15 working days to see whether the notice appears to include all elements required under §§ 192.20 and 192.25 (proposed § 192.30(a)). FDA also is proposing to file a PBN that appears to include all required elements, and to contact a notifier to explain what is missing if the PBN does not appear to include all required elements. FDA is proposing this “filing decision” because the timeframe for the agency's response to the notifier (i.e., 120 days (see proposed § 192.5(c) and section V.C of this document) is relatively short. To enable the agency to complete its evaluation in this period, it is essential that the agency have a complete notice when the 120-day period begins.

The proposed timeframe for the filing decision (i.e., within 15 working days) is consistent with the timeframe for the filing decision for a food additive petition (§ 171.1(i)(1)). The proposed process that “FDA will inform the notifier” provides flexibility for the mechanism whereby FDA contacts a notifier. FDA expects to contact the notifier by telephone or possibly by electronic mail and expects that a notifier would provide the missing material promptly. However, should circumstances warrant (e.g., FDA is unable to reach a notifier by telephone, or the notifier does not provide the materials promptly), under the regulation, FDA could send a letter or telefax to the notifier explaining that the agency had received, but not filed, the PBN and the reasons therefor.

Under proposed § 192.30(a)(1), CFSAN will inform CVM about any PBN that it files. Regardless of whether the bioengineered food would be used in human food, food for animals, or both, this inter-Center communication will ensure that both Centers are aware of all bioengineered foods that are nearing commercialization.

FDA is proposing to send, within 15 working days of filing a notice, a letter to the notifier (or, when applicable, the notifier's agent) informing the notifier of the date on which FDA filed the PBN (proposed § 192.30(b)). As a practical matter, such a letter would acknowledge receipt as well as inform the notifier of the date of filing.

FDA is proposing to respond to a notifier within 120 days of filing a notice (proposed § 192.30(c)). Because all submissions will be sent to CFSAN, CFSAN would issue the response to the notifier, regardless of whether the intended use of the bioengineered food is in human food, food for animals, or both. A response from CFSAN would make clear that CFSAN was aware of, and thus had been notified about, all bioengineered foods, regardless of their intended use.

As with any correspondence, the particular circumstances will determine the full text of the agency's letter. However, the agency believes that a letter would likely fall into one of four general categories (proposed § 192.30(d)(1), (d)(2), (d)(3), and (d)(4)). FDA discusses each of these four categories immediately below.

a. Letter that extends FDA's evaluation. FDA is proposing that the agency could inform a notifier that the agency is extending its evaluation of the premarket notice by 120 days (proposed § 192.30(d)(1)). Under the regulation, in this letter FDA would also inform the notifier that the agency expects that the bioengineered food will not be marketed during the extended evaluation period.

Ordinarily, FDA expects to send a final response to a notifier within 120 days, particularly if a prospective notifier discusses relevant scientific and regulatory issues with FDA, prior to submitting a PBN about a bioengineered food (see proposed § 192.10 and section VI of this document). However, there are several circumstances that could prevent the agency from completing its evaluation within that time period. For example, FDA may need to extend the review time if a notifier did not participate in the presubmission consultation program; the issues raised by a particular bioengineered food could be particularly novel and complex; parts of a submission could require clarification, amplification, or correction; or the submission could be poorly written or be of such poor scientific quality that it precludes timely evaluation by the agency.

As discussed previously, FDA is issuing this proposed rule to ensure that it has the appropriate amount of information about bioengineered foods and to help to ensure that all market entry decisions by the industry are made consistently and in full compliance with the law. The goal of this rulemaking would not be achieved if a bioengineered food entered commercial distribution before FDA had completed its evaluation of the applicable notice.

b. Letter that the notice does not provide a basis. FDA is proposing that the agency have an option to inform a notifier that the premarket notice does not provide a basis for the notifier's view that the bioengineered food is as safe as comparable food or is otherwise lawful (proposed § 192.30(d)(2)). In so doing, FDA would inform the notifier of the reasons for this conclusion. Under the regulation, in this letter FDA would also inform the notifier that the agency expects that the bioengineered food will not be marketed.

FDA has had experience with another food program, the proposed notification program for GRAS substances, in which some submitted notices do not provide a basis for the notifier's view that the intended use of a substance is lawful (Ref. 18). The underlying reasons why the applicable notices have not provided a basis for a GRAS determination have been quite varied. Likewise, there could be various reasons why a premarket notice does not provide a basis for the notifier's view that the bioengineered food is as safe as comparable food or is otherwise lawful. For example, the notice may not provide a basis for the notifier's view that a substance introduced into the bioengineered food is not an unapproved food additive or that the bioengineered food would not be misbranded. As another example, the notice may not provide a basis to conclude that a bioengineered food that contains an unusually high level of a naturally occurring toxicant would not be adulterated. As a third example, if the poor quality of a notice makes it difficult for the agency to fully evaluate the notice, regardless of the time period available, FDA may inform the notifier of the inadequacies of the notice rather than extend its evaluation of the notice for another 120 days.

If a notice about a bioengineered food does not provide a basis to conclude that a bioengineered food is as safe as comparable food or is otherwise lawful, that food could be adulterated or misbranded and should not be marketed. If a notifier initiates commercial distribution of a bioengineered food after being informed that the applicable notice is not adequate, FDA will carefully and completely review the legal status of the applicable food and will use all available options to ensure that the food is fully in compliance with all provisions of the act. In particular, in such circumstances, the agency fully intends to bring to bear the complete range of its authorities and resources, including its authority under section 704 of the act (21 U.S.C. 374) to conduct inspections and investigations, collect samples, and perform analyses, as well as its authority under sections 705 and 903 of the act (21 U.S.C. 375 and 393) to engage in publicity and public education. When the agency concludes through the application of these resources that a food is adulterated, misbranded, or otherwise not in full compliance with the act, FDA will utilize the act's legal sanctions, as appropriate, including in rem seizure of violative foods and injunction proceedings against, or criminal prosecution of, those responsible for distributing such foods.

c. Letter that FDA has no questions. If, based on its evaluation of a notice, FDA has no questions regarding the notifier's view that the bioengineered food is as safe as comparable food and is otherwise lawful, FDA would inform a notifier of that fact (proposed § 192.30(d)(3)). Because the evaluation of food safety is a time-dependent judgment that is based on general scientific knowledge as well as specific data and information about the food, FDA would qualify its statement to clarify that the agency has no questions “at this time.” This proposed response is similar to the letters that FDA has issued in response to submissions received under the 1996 procedures.

d. Letter that a notifier has withdrawn the notice. Under proposed § 192.20(g), if a notifier requests that FDA cease to evaluate a PBN, FDA would retain the PBN in its files and classify the PBN as “withdrawn.” In such a circumstance, FDA would bring the notification process to closure by sending the notifier a letter acknowledging that the agency had received a withdrawal letter and had ceased to evaluate the PBN, effective on the date that FDA received the letter (proposed § 192.30(d)(4)). This proposed response is similar to responses issued by FDA under the proposed notification program for GRAS substances when the notifier requests that FDA cease to evaluate a GRAS notice (Ref. 18).

If the bioengineered food contains a pesticidal substance, FDA is proposing that FDA's response letter will describe the status of the bioengineered food at EPA (proposed § 192.30(e)). If all applicable regulatory processes at EPA have come to closure (proposed § 192.30(e)(1)), FDA would say so and would respond as described above. As discussed above, if regulatory processes at EPA regarding the bioengineered food are still pending, FDA would inform the notifier that FDA does not consider the PBN to satisfy the requirement for premarket notice (proposed § 192.30(e)(2)).

FDA is proposing to inform notifiers about: (1) The public disclosure provisions that apply to the existence and content of a PBN; (2) procedures that a notifier should use to inform FDA of the notifier's view about whether the existence or content of a PBN is exempt from public disclosure; and (3) the criteria that FDA uses to evaluate the notifier's view (proposed § 192.40(a) through (d)). FDA also is proposing the procedures that FDA will use to disclose the agency's evaluation of, and response to, each PBN (proposed § 192.40(e)). This part of the regulation would ensure that both notifiers and the interested public have information about provisions that derive from the FOIA. FDA requests comment on these proposed provisions. Such comments may result in a modification to the proposed requirements.

FDA is proposing that the existence of a filed PBN ordinarily is available for public disclosure on the date that FDA files it (proposed § 192.40(a)(1)). Under the regulation, a notifier who believes that the existence of a PBN is exempt from disclosure would be responsible for asserting that claim (proposed § 192.40(a)(2)). If a notifier claims that the existence of a PBN is confidential, FDA would evaluate that claim and would disclose the existence of the PBN, unless FDA determines that the criteria for exemption from disclosure in § 20.61 are satisfied (proposed § 192.40(a)(3)). If FDA determines that the existence of a PBN is confidential at the time that the agency files it, the existence of the PBN would become available for public disclosure, in accordance with § 20.61, when the criteria for exemption from disclosure are no longer satisfied (proposed § 192.40(a)(4)).

FDA has previously discussed the FOIA, and the exemption from public disclosure that the FOIA provides for trade secrets and confidential commercial information, with respect to data or information that a developer submits to FDA during a presubmission consultation (section VI.B of this document). Consistent with that discussion, FDA believes that, in most cases, the fact that a notifier had submitted a PBN would not constitute confidential commercial information. Nevertheless, there could be circumstances in which a notifier submits a PBN and has grounds to claim that the existence of the PBN should not be available for public disclosure.

FDA is proposing to make a list of filed PBN's easily accessible to the public (e.g., by placing the information on the Internet or in a paper or electronic file that is available at FDA for public review and copying) (proposed § 192.40(b)). FDA expects that the list of PBN's would include most or all of the information in the synopsis of the PBN. Consistent with current procedures for updating an easily accessible inventory of notices received for another foods program (i.e., the GRAS notification program; see Ref. 18), FDA expects to update the list of filed PBN's on an approximately monthly basis. The proposed regulation to make this information easily accessible to the public is responsive to the input that FDA received at the public meetings that it convened in 1999, and to the comments that FDA received as a result of those meetings.

FDA is proposing that the data or information in a PBN ordinarily are available for public disclosure on the date that FDA files the PBN (proposed § 192.40(c)(1)). Under the regulation, a notifier who believes that some or all of the content of a PBN is exempt from disclosure would be responsible for asserting that claim (proposed § 192.40(c)(2)). If a notifier claims that some or all of the content of a PBN is confidential, FDA would evaluate that claim. FDA would disclose the content of the PBN, unless FDA determines that the criteria for exemption from disclosure in § 20.61 are satisfied (proposed § 192.40(c)(3)). If FDA determines that some or all of the content of a PBN is confidential at the time that the agency files it, the data or information in question would become available for public disclosure, in accordance with § 20.61, when the criteria for exemption from disclosure are no longer satisfied (proposed § 192.40(c)(4)).18

Consistent with the agency's discussion of its view regarding the disclosability of the data or information provided to FDA during a presubmission consultation (section VI.B of this document), FDA believes that, in most cases, most of the data or information in a PBN would not constitute a trade secret. For example, very few of the submissions that FDA has received under its current consultation program identify specific data or information that the developer claims to be exempt under § 20.61. However, when the existence of the PBN is exempt from disclosure, all data and information in the submission would necessarily be exempt from disclosure.

FDA anticipates that the PBN will be easily accessible to the public. Under EFOIA and FDA's proposed rule to implement EFOIA, frequently requested records, or records that are likely to be requested frequently, are placed in an “electronic reading room.” As discussed above (see section VII.C of this document), FDA has tentatively concluded that it is likely that each submitted PBN would be requested under FOIA multiple times. Therefore, these records will be easily accessible to the public because they will be available electronically (proposed § 192.40(d)).

FDA is proposing to make two agency records associated with a PBN easily accessible to the public (e.g., by placing the information on the Internet or in a paper or electronic file that is available at FDA for public review and copying) (proposed § 192.40(e)(1)). The applicable records include the text of the letter issued by the agency in response to each PBN, and the text of the agency's completed evaluation of each PBN.

The proposed regulation commits to make available the “text” of the agency's letter and the agency's memorandum, rather than a “copy” of these records, to enable FDA to satisfy the regulations by a mechanism other than providing a physical copy of these records (e.g., by providing an electronic copy on the Internet). Consistent with current procedures for updating an easily accessible inventory of notices received for another foods program (i.e., the GRAS notification program; see Ref. 18), FDA expects to add the text of applicable agency letters and memoranda to the easily accessible file on an approximately monthly basis. The proposed regulation to make this information easily accessible to the public is responsive to the input that FDA received at the public meetings that it convened in 1999, and to the comments that FDA received as a result of those meetings.

As discussed previously (proposed § 192.30(c)(1) and section IX.C.1 of this document), a notifier could receive a letter that informs the notifier that FDA is extending its evaluation of the premarket notice by 120 days. Under the proposed regulation to make the agency's response to a PBN easily accessible to the public, such an extension letter would be easily accessible to the public. When FDA issues a final letter regarding the applicable notice, it is likely that the agency would replace the extension letter with the final letter rather than making both letters easily accessible. The fact that the notifier had received an extension letter would still be readily apparent (e.g., because the date of the final response letter would be more than 120 days from the date of the extension letter). In addition, it is likely that FDA's final response letter would acknowledge the fact that the agency had sent a letter extending its evaluation.

FDA is proposing to require the submission to the agency of data and information regarding bioengineered plant-derived foods that would be used in animal feed. FDA's proposal also includes a recommendation that prospective notifiers participate in a presubmission consultation program. In general, these proposed regulations regarding bioengineered foods intended to be fed to animals (proposed part 592) parallel the agency's proposed regulations for human food (proposed part 192). The following discussion addresses areas of importance in the proposed animal feed regulations (proposed part 592).

The number of different species encompassed by the term “animal,” as used in the act, is extraordinarily broad. CVM has regulatory authority over the food consumed by all nonhuman species, ranging from those raised in aquaculture, such as lobster and fish, to pets, birds, and the traditional classes of farm animals like cattle, swine, and horses. These animals may consume parts of a bioengineered plant that are not eaten by people. For example, cattle and other herbivores eat the forage portion of the corn plant (stalk and leaves), which has no human food applications. In addition, animals may eat the byproducts or residues left over from the production of human foods. For example, soybean meal, which is a source of dietary protein widely used in animal diets, is a byproduct from the production of soybean oil, which is primarily used in human foods. As another example, broken rice, which is not desirable for human food, is a major pet food ingredient.

Undesirable substances can concentrate in the byproducts or residues left over from the production of human foods. For example, gossypol, a naturally occurring toxicant in cotton, concentrates in cottonseed meal, which is a byproduct obtained during the manufacture of cottonseed oil. The presence of gossypol limits the use of cottonseed meal in animal feed. As another example, some substances that can cause enlargement of the thyroid naturally occur in rapeseed plants and are concentrated in the meal (commonly called canola meal) that is a byproduct obtained during the manufacture of low erucic acid rapeseed oil (comonly called canola oil). These compounds must remain at a low level for the canola meal to be useful in animal feed.

In some cases, bioengineered foods could make up most of an animal's diet, which the animal could consume for its entire lifespan. For example, in a single year a high-producing dairy cow could eat as much as 6,000 pounds of a nutritional supplement containing added energy and protein. This supplement could contain up to 80 percent corn grain and 20 percent soybean meal. The same dairy cow could also consume as much as 4,380 pounds of fermented corn forage and ears (i.e., whole plant corn silage in that same year). Fattening beef cattle could eat a diet based on 10 percent whole plant corn silage, 80 percent corn grain, and 9 percent soybean meal. A typical swine diet contains 74 percent corn grain and 23 percent soybean meal, while broiler chicks might eat a ration that is 58 percent corn grain and 35 percent soybean meal. Because these foods may comprise such a large percentage of an animal's diet, an undesirable substance that is introduced into a bioengineered food, even at a low level, has the potential to adversely affect an animal that eats the food.

Because of these factors, notifiers in assembling a PBN to address bioengineered foods to be consumed by animals should pay particular attention to the intended use of the bioengineered food, including the species expected to consume it; the function and level of all introduced or modified substances; and any changes in the composition and characteristics of the food. FDA has concluded that the notices should contain adequate information about any potential safety issues for all substances introduced into, or modified in, the food. Concerns associated with any changes in the composition or characteristics of the bioengineered food should also be addressed. Notifiers should be aware that in some cases, animal diets are formulated using different nutritional parameters than those used by human nutritionists. For example, when a diet is formulated for cattle, nutritionists utilize parameters such as neutral detergent fiber and acid detergent fiber in evaluating the suitability of a potential ingredient. Notices for bioengineered plants intended to be fed to animals should incorporate these differences in how ingredients are evaluated for their nutritional content.

This proposed rule contains information collection provisions that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (the PRA) (44 U.S.C. 3501-3520). A description of these provisions is given below with an estimate of the annual reporting and recordkeeping burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

FDA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.

Title: Premarket Notice Concerning Bioengineered Food

Description: Section 701 of the act sets forth authority to issue regulations for the efficient enforcement of the act. Section 201 of the act defines terms utilized within the act. Food is defined by section 201 of the act to mean: “(1) articles used for food or drink for man or other animals, (2) chewing gum, and (3) articles used for components of any such article.” Thus, the act clearly incorporates animal feed and drink into its definition of food.

Section 403 of the act prohibits the misbranding of food. Section 402 of the act prohibits the adulteration of food. Section 409 of the act establishes a premarket approval requirement for “food additives.” Section 201(s) of the act provides a two-step definition of “food additive.” The first step broadly includes any substance the intended use of which results or may reasonably be expected to result, directly or indirectly, in its becoming a component or otherwise affecting the characteristics of food, which under section 201(f) of the act includes animal food. The second step, however, excludes from the definition of food additive substances that are GRAS by qualified experts.

In this proposed rule, FDA is proposing to require the submission to the agency of data and information regarding plant-derived bioengineered foods. The proposed rule refers to foods derived from plant varieties that are developed using rDNA technology as “bioengineered foods.” FDA is proposing that this submission be made at least 120 days prior to the commercial distribution of such foods. The notice would include data and information about the bioengineered food and a narrative that provides an integrated discussion of those data and information. The notifier would maintain a record of relevant data and information that are not included in the notice. FDA would make the existence of the notice, and the agency's evaluation of and response to the notice, easily accessible to the public. The content of the notice would be publicly available consistent with the FOIA and other federal disclosure statutes. FDA is also proposing to include in the regulation a recommendation that prospective notifiers consult with the agency to identify and discuss relevant safety, nutritional, or other regulatory issues regarding a bioengineered food.

Description of Respondents: Developers, manufacturers, distributors, or importers of food.

FDA estimates the burden of this collection of information as follows:

Under the proposed rule, a notifier sends a notice regarding a bioengineered food to CFSAN regardless of whether the intended use is in human food, food for animals, or both. Because FDA routinely issues separate regulations regarding human food and animal feed, the regulations associated with the notice are codified in two parts of title 21: part 192 and part 592. Both CFSAN and CVM have been consulting with developers of bioengineered foods, and have received submissions of data and information about such foods. Since 1994, FDA has received, on average, eight submissions about bioengineered foods that are ready for commercialization per year. However, given the efficiencies of rDNA techniques, the advances in these techniques, and the rapidly expanding information related to genomes, FDA expects that these techniques are likely to be utilized to an increasingly greater extent. Thus, for the purpose of this analysis FDA is estimating that the agency would receive 20 PBN's per year.

In this analysis, FDA is assuming that all notices about bioengineered foods will encompass both human food and food for animals. FDA is making this assumption because this was the case in approximately 70 percent of submissions that FDA has received since 1994. Because some 30 percent of notices may not encompass both human food and food for animals, FDA's assumption results in a conservative estimate of the reporting and recordkeeping burden.

Because FDA's analysis assumes that all notices will encompass both human food and food for animals, and because all notices are submitted to CFSAN, regardless of the intended use, FDA is estimating the recordkeeping and reporting burden only for the regulations issued in Part 192. FDA is making no separate estimate of the recordkeeping and reporting burden for the regulations issued in Part 592 because this burden is subsumed within the burden estimated for part 192.

FDA contacted five firms that had made one or more submissions under FDA's existing procedures, which are summarized in a guidance first issued in 1996 (the 1996 procedures (Ref. 5)). FDA asked each of these firms for an estimate of the hourly burden to prepare a submission under the current process. Three of these firms subsequently provided the requested information. Based on this information, FDA is estimating that the average time to prepare a submission under the 1996 procedures is 150 hours.

The proposed rule would include some reporting requirements that are not described in the 1996 procedures. After considering the amount of time that firms need, on average, to prepare a submission under the 1996 procedures, and after considering the relative contribution of the additional parts, FDA is estimating that a firm would need 32 to 48 additional hours to prepare the additional sections. For the purpose of this analysis, FDA selected the average of these estimates (i.e., 40 additional hours).

FDA is estimating that the hourly burden to prepare a PBN is the sum of the hours that a firm currently spends, on average, to prepare a submission under the 1996 procedures and the additional hours that a firm would spend, on average, to prepare a submission that addresses requirements that are not described under the 1996 procedures. This sum is 150 hours plus 40 hours, or 190 hours.

FDA expects that most of the data or information in a PBN will be available for public disclosure. However, a few firms that made submissions under the 1996 procedures included information that they considered to be confidential. To ensure that FDA is aware of confidential information, under the proposed rule a notifier must identify any confidential information in the PBN. FDA is estimating that two PBN's per year would contain confidential information and that it would take a notifier 2 hours to identify this information. Under the proposed rule, a notifier who includes confidential information must prepare and submit an additional paper copy that has been edited to delete confidential information (i.e., a redacted copy). FDA is estimating that it would take a notifier 5 hours to prepare the redacted copy. FDA's estimates of the hourly reporting burden associated with confidential information are based on its familiarity with submissions received under the 1996 procedures, including the content and organization of those submissions. In most cases, the confidential information is present in limited locations within a given submission.

Under the proposed rule, a notifier ordinarily would submit an electronic copy that would be in a format that is suitable for FDA to use to make the PBN available in an electronic reading room (e.g., html format). FDA is estimating that it would take 8 hours to format the electronic disclosure copy. Because a notifier who includes confidential information must redact this copy, FDA is estimating that it would take an additional 4 hours to do the redacting and that this would occur in 2 of the 20 notices submitted per year. Thus, FDA is estimating that it would take a total of 8.4 hours, on average, to prepare the electronic disclosure copy. FDA's estimate of the hourly reporting burden associated with an electronic copy is based on its understanding of the attributes of commonly used software programs that likely would be used to prepare the electronic copy.

Under the proposed rule, a notifier may request a waiver from the proposed requirement to submit an electronic disclosure copy, e.g., because the notifier does not have access to the technology that is needed to prepare such a copy. Because a notifier who requests a waiver need only write an explanation of why he is requesting the waiver, FDA estimates that it would take 0.5 hours to request a waiver. Because most firms who have already consulted with FDA regarding bioengineered foods are large firms who likely would have access to the appropriate technology, FDA is assuming that a request for a waiver will be a rare event, and may not happen at all. Therefore, in this estimate of the hourly burden to prepare a notice, FDA is making the conservative assumption that all firms will submit an electronic disclosure copy, with an hourly burden of 8 hours, and that no firms will request a waiver, which would have a reduced burden of only 0.5 hours.

In addition, in the proposed rule FDA is recommending that a notifier submit an electronic copy that would be formatted in a manner that is suitable for FDA to use to evaluate the PBN (e.g., portable document format (PDF)). A notifier who submits an electronic evaluation copy would submit one less paper copy. FDA is estimating that it would take 8 hours to format the electronic evaluation copy.

Under the proposed rule, a notifier who includes information in a foreign language must include an English translation that is verified to be accurate and complete. Based on its experience, FDA is estimating that it would take 20 hours to prepare such a translation and that this would happen very rarely (i.e., once every 2 years). However, FDA has limited experience with the hourly burden associated with English language translations and specifically requests comment on this estimate.

Under the proposed rule, a notifier who wishes to incorporate by reference a submission made by another party must include a signed statement from that party, authorizing the notifier to incorporate the information by reference, unless the referenced submission is publicly available (e.g., under the FOIA). FDA is estimating that it would take 2 hours to obtain the signed statement and that this would happen very rarely (i.e., once every 2 years). FDA's estimate is based on its experience with incorporation by reference in another food program (i.e., the food additives program).

Under the proposed rule, a notifier who wishes to withdraw a PBN from FDA's consideration must do so in writing. Because this can be done by a simple letter, FDA is estimating that it would take 1 hour. FDA also is estimating that this would happen very rarely (i.e., once every 2 years).

In the proposed rule, FDA is recommending that prospective notifiers participate in a presubmission consultation program. Accordingly, FDA has estimated the hourly burden to notifiers who choose to participate.

Under the proposed rule, a prospective notifier who requests consultation prepares a single submission to address potential uses of the bioengineered food in both human food and food intended for animals. The prospective notifier would send multiple paper copies of the submission to CFSAN, who would contact CVM when the bioengineered food would be consumed by animals. Based on its experience under the 1996 procedures, FDA is estimating that it would take 0.5 hours to prepare the multiple copies that would be submitted for each request for consultation.

Since 1994, FDA has received on average approximately seven requests per year for consultation about bioengineered foods that are under development (i.e., before the foods are ready for commercialization). However, given the efficiencies of rDNA techniques, the advances in these techniques, and the rapidly expanding information related to genomes, FDA expects that these techniques are likely to be utilized to an increasingly greater extent. For the purpose of this analysis FDA is estimating that the agency would receive 20 requests for consultation per year about bioengineered foods. Based on its experience under the 1996 procedures, FDA is estimating that it would take 4 hours to prepare written materials that accompany the original request for consultation and 8 hours to prepare one or several additional written submissions as the consultation proceeds.

To ensure that FDA is aware of confidential information, a notifier who submits confidential information must both identify the confidential information and prepare and submit an additional paper copy that does not contain such information. FDA is estimating that it would take 2 hours to identify such information in both the original and additional submissions and that it would take 5 hours to prepare redacted copies of these submissions. FDA also is estimating that approximately 2 of 20 requests for consultation would include confidential information. FDA's estimates are based on its familiarity with requests for consultation under the 1996 procedures, including the content and organization of written materials that accompanied those requests.

Under the proposal, notifiers must retain the data and other information that provides the basis for their conclusions about the bioengineered food. FDA is assuming that notifiers would establish and maintain an administrative file that contains these data and information. Based on its experience with the content of submissions received under the 1996 procedures, FDA is estimating that the one-time process of establishing such a file would equal 10 percent of the hourly burden already estimated for preparing a PBN (i.e., 10 percent of 190 hours, or 19 hours).

In compliance with the PRA, the agency has submitted the information collection provisions of this proposed rule to OMB for review. Interested persons must submit written comments regarding information collection by February 20, 2001, to the Office of Information and Regulatory Affairs, OMB, New Executive Office Bldg., 725 17th St. NW., rm. 10235, Washington, DC 20503, Attn: Desk Officer for FDA.

FDA has examined the economic implications of this proposed rule as required by Executive Order 12866. Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). Executive Order 12866 classifies a rule as significant if it meets any one of a number of specified conditions, including: having an annual effect on the economy of $100 million, adversely affecting a sector of the economy in a material way, adversely affecting competition, or adversely affecting jobs. A regulation is also considered a significant regulatory action if it raises novel legal or policy issues. The Office of Management and Budget has determined that this proposed rule is a significant regulatory action as defined by Executive Order 12866.

Bioengineered foods have the potential to offer multiple benefits such as: Improved yield, drought resistance, disease resistance, improved flavor, longer shelf life, increased nutrition, and reduced need for pesticides, among others. Consumers have expressed concern, however, about possible risks that can accompany bioengineered foods. From a public health perspective, the main concerns are allergenicity and toxicity. To ensure that bioengineered foods are as safe as their conventional counterparts, FDA instituted a consultation process with industry to review the development of new bioengineered foods (57 FR 22984 at 22991 and (Ref. 5)). Since then, food producers have completed some 45 consultations about bioengineered foods. To the best of our knowledge all bioengineered foods on the market have gone through FDA's process before they have been marketed.

Under the current process, a developer who intends to commercialize a bioengineered food meets with the agency prior to marketing to identify and resolve relevant safety, nutritional, or other regulatory issues regarding the bioengineered food. When the developer believes that it has accumulated adequate data or information to address and resolve any potential safety or other regulatory issues, the developer submits to FDA a summary of its assessment of these issues. Agency scientists evaluate that summary to determine whether any safety or other regulatory issues are resolved. This process ensures that developers of bioengineered foods are aware of and address safety and other issues prior to marketing.

However, because the consultation process is voluntary, food producers could choose not to notify FDA. Additionally, as food producers in countries that export foods to the United States begin to adopt bioengineered varieties, they may choose not to participate in the voluntary consultation process. Requiring premarket notification for bioengineered foods ensures that FDA will continue to have the opportunity to discuss safety and other regulatory issues with developers before new bioengineered foods go on the market, thereby putting an additional check in place for bioengineered foods.

Although the current consultation process has been successful in that the agency believes that it has reviewed all of the bioengineered foods that have reached the market, a firm could bypass the current review process. In so doing, the firm may market a product that presents safety or other regulatory issues that would otherwise have been identified and resolved through consultation with the agency. For example, the food may contain an unexpected allergen or an unapproved food additive, or may be so significantly different from its conventional counterpart that special labeling would be required to enable consumers to identify the difference.

Bioengineering enables developers to expand greatly the range of sources of genes to introduce into foods. Genes code for proteins, and virtually all known food allergens are proteins. Therefore, by transferring a gene from one foodplant to another (and thereby essentially transferring a protein from one food to another) one may transfer the allergenic properties of the first food to the second. Because food allergies can result in serious harm, including anaphylactic shock and death, it is important to know the allergenic profile of food from a plant that is to be used as the source of a gene to be transferred to another foodplant.

It is also possible for a protein that has never been in food before to become an allergen once people become exposed to it in the diet. Therefore, it is also important to know whether a protein from a traditionally nonfood source has characteristics associated with allergenic proteins.

Similarly, because bioengineering enables developers to introduce genetic material from a wider range of sources than has traditionally been possible, there is a greater likelihood that a developer using bioengineering to modify a foodplant may introduce genetic material whose expression results in a substance that is significantly different from substances historically consumed in food. Such a substance may require premarket approval as a food additive because it may not be GRAS.

It is also possible with bioengineering that the newly introduced genetic material may be inserted into the chromosome of a foodplant in a location that causes the food derived from the plant to have higher levels of toxins than normal, or lower levels of a significant nutrient. In the former case, the food may not be safe to eat, or may require special preparation to reduce or eliminate the toxic substance. In the latter case, the food may require special labeling, so that consumers would know that they were not receiving the level of nutrients they would ordinarily expect from consuming a comparable food. It is important therefore for developers to evaluate bioengineered foods from new plant varieties to determine whether the composition of the food has been altered.

The additional provisions of the proposed rule, beyond what was requested by the 1996 procedures, aid in ensuring that relevant safety questions are addressed by the developer. The submission of a narrative of the developer's reasons for concluding that the bioengineered food is as safe as comparable food and its justification of the choice of comparable foods by the notifier will aid in ensuring that all potential safety issues have been considered. Discussion of unsuitable uses will provide FDA the opportunity to ensure that foods that would not be suitable for particular applications are not marketed for those applications. Submission of a redacted copy will aid the agency in protecting confidential information in the notice and in responding to FOIA requests. Submission of an electronic disclosure copy would facilitate the agency's making the PBN available in an electronic reading room.

For developers who would have gone through FDA's consultation process, the costs associated with the proposed required process would include only costs of the additional provisions of the proposed rule. The required process will be modeled on the experience and knowledge gained from the current consultation process, but there will be a number of new provisions that will have costs for notifiers. First, the rule would require a narrative explaining how the notifier concluded the bioengineered food is as safe as comparable food and that the food is in compliance with the act. Second, notifiers who inform FDA about a bioengineered food that contains a gene that encodes resistance to an antibiotic must specifically discuss the issues associated with the use of that gene. Although this provision was not in the 1992 policy or the 1996 procedures, in 1998 FDA released draft guidance for public comment. Since 1998, most notifiers who are in this situation have included this discussion in their submissions; in addition, many plant varieties are being developed without genes that encode resistance to an antibiotic. Therefore, FDA is considering that the requirement to discuss genes that encode resistance to an antibiotic be a cost of the proposed rule for only one submission per year (that is, FDA is estimating that only one relevant submission would have omitted this discussion without the rule). Third, notifiers must submit a written justification of their choice of foods that are comparable to the bioengineered food and the historic uses of these comparable foods. Fourth, if the bioengineered food is unsuitable for any applications or uses, notifiers must submit a description of these applications or uses. Because inappropriate uses are seldom an issue, FDA is considering that this issue would arise approximately once every 3 years. Fifth, if the submission includes confidential information, notifiers must submit redacted copies. Because very few submissions under the current process have included confidential information, FDA is considering that approximately one or two copies per year will contain confidential materials. Sixth, notifiers must ordinarily would submit an electronic copy suitable for making the PBN available in an electronic reading room, but could request a waiver if they have access to the technology that would be needed to prepare the copy.

FDA contacted five firms that had made one or more submissions under the 1996 procedures. FDA asked each of these firms for an estimate of the hourly cost associated with preparing a submission under the current process. Three of these firms subsequently provided the requested information. One firm estimated an average cost of $125 per hour; another firm estimated an average cost of $48 per hour; a third firm estimated an average cost of $60 per hour. Based on this information, FDA is estimating that the average cost to prepare a submission under the 1996 procedures is approximately $78 per hour.

The agency estimated the cost of a notice as the time needed multiplied by $78, the average cost associated with the person responsible for preparing a notice. Since 1994, FDA has received approximately eight submissions per year, but the agency expects this number of submissions to increase because of the increasing use of the technology. Because most firms who have consulted with FDA under the current process are large firms who likely would have access to the technology that would be needed to prepare an electronic disclosure copy, in this analysis FDA is estimating that no firms would request a waiver from the proposed requirement to submit such a copy. Therefore, total costs for these additional provisions are expected to be between $16,604 and $67,444 per year.

For developers who would not have chosen to notify FDA, the cost of the proposed rule would be higher. Regardless of whether they choose to consult with FDA, food producers are statutorily prohibited from marketing misbranded or adulterated foods. To ensure that the new food is not adulterated or misbranded, the developer must generate similar information to what would be required under the proposed notification requirement. Therefore, for these developers, the cost of the proposed notification requirement would be the submission of paperwork documenting the generation of the needed information, not the information itself. FDA's estimate of the time required to prepare a notice is discussed previously (section XII of this document). According to that analysis, the average submission would require 255.5 hours of preparation. Additionally, maintaining records of the notice would require 19 hours by the firm. At an average hourly cost of $78, the total cost of preparation and recordkeeping for a submission would be $21,411 (hourly cost x 274.5 hours).

As discussed above, FDA has requested comment on whether this rule should also include a requirement that a premarket notice for a bioengineered food include methods by which the food could be detected. As part of its analysis of impacts, FDA requests comments on the technical feasibility and if feasible, the costs of requiring such methods in a PBN. In particular, FDA requests comments on the feasibility and costs of requiring methods of detection in all circumstances and in a limited set of circumstances, such as foods whose use is restricted in some way. FDA also requests comments on the costs of supplying methods for detection of the bioengineered food in crops and in finished food products.

FDA has examined the economic implications of this proposed rule as required by the Regulatory Flexibility Act (5 U.S.C. 601-612). If a rule has a significant economic impact on a substantial number of small entities, the Regulatory Flexibility Act requires agencies to analyze regulatory options that would lessen the economic effect of the rule on small entities.

Businesses in Agricultural Services are considered small if they have fewer than 500 employees, and in Commercial Physical and Biological Research (SIC 8731) if they have less than $5 million in annual receipts. Companies engaged in the development of bioengineered food may fit into either of these categories. Since 1994, more than 45 biotechnology submissions have been completely evaluated by FDA; these submissions were made by 11 distinct companies and 3 universities. Most of these companies are multinationals with hundreds of millions of dollars in annual sales and do not meet the criteria for a small entity. However, at least one of the companies that has notified FDA would meet the small entity definitions.

For firms that would not have notified FDA, the cost may be $21,411. FDA finds that this proposed rule would have a significant economic impact on a substantial number of small entities.

FDA considered a number of options to ease the burden on small businesses. Extra flexibility for small businesses meeting with FDA was considered. However, the proposed rule as written already includes flexibility for meeting with FDA, allowing phone meetings in lieu of meeting in person. Additional guidance was another option considered. However, the recommended presubmission consultation provides an opportunity for small businesses to get guidance from FDA about regulatory and safety concerns and how they can be dealt with by a small business. Thus, FDA has tentatively determined there is adequate flexibility written into the rule to accommodate the special needs of small businesses.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 (Public Law 104-4) requires that agencies prepare a written statement of anticipated costs and benefits before proposing any rule that may result in an expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million in any one year (adjusted annually for inflation). FDA has tentatively determined that this proposed rule is not a significant action as defined in the Unfunded Mandates Reform Act and will not have an effect on the economy that exceeds $100 million adjusted for inflation in any one year. The correct inflation-adjusted statutory threshold is $107 million.

FDA proposes that any final rule that may issue based on this proposal become effective 60 days after the date of publication of the final rule in the Federal Register.

The agency has determined under 21 CFR 25.30(h) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environment assessment nor an environmental impact statement is required.

Interested persons may submit to the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, written comments regarding this proposal by April 3, 2001. Submit written comments on the information collection provisions by February 20, 2001. Two copies of any comments are to be submitted, except that individuals may submit one copy. Comments are to be identified with the docket number found in brackets in the heading of this document. Received comments may be seen in the Dockets Management Branch between 9 a.m. and 4 p.m., Monday through Friday.

The following references have been placed on display in the Dockets Management Branch (address above) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, it is proposed that Title 21 CFR, Chapter I be amended as follows:

1. Add part 192 to read as follows:

The collection of information contained in this notice of proposed rulemaking has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control numbers 1545-1403 and 1545-1480.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid control number assigned by the Office of Management and Budget.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

This document contains proposed amendments to 26 CFR part 1 under section 1221 of the Internal Revenue Code (Code). Prior to amendment in 1999, section 1221 generally defined a capital asset as property held by the taxpayer other than: (1) Stock in trade or other types of assets includible in inventory; (2) property used in a trade or business that is real property or property subject to depreciation; (3) certain copyrights (or similar property); (4) accounts or notes receivable acquired in the ordinary course of a trade or business; and (5) U.S. government publications.

In 1994, the IRS published in the Federal Register (59 FR 36360) final Treasury regulations under section 1221 providing for ordinary character treatment for most business hedges. The regulations generally apply to hedges that reduce risk with respect to ordinary property, ordinary obligations, and borrowings of the taxpayer and that meet certain identification requirements. (§ 1.1221-2). In 1996, the IRS published in the Federal Register (61 FR 517) final regulations on the character and timing of gain or loss from hedging transactions entered into by members of a consolidated group. The final regulations published in 1994 and 1996 are collectively referred to as the Treasury regulations in this preamble.

On December 17, 1999, section 1221 was amended by section 532 of the Ticket to Work and Work Incentives Improvement Act of 1999 (113 Stat. 1860) to provide ordinary gain or loss treatment for hedging transactions and consumable supplies. Section 1221(a)(7) provides ordinary treatment for hedging transactions that are clearly identified as such before the close of the day on which they were acquired, originated, or entered into.

The statute defines a hedging transaction generally to include a transaction entered into by the taxpayer in the normal course of business primarily to manage risk of interest rate, price changes, or currency fluctuations with respect to ordinary property, ordinary obligations, or borrowings of the taxpayer. § 1221(b)(2)(A)(i) and (ii). The statutory definition of hedging transaction also includes transactions to manage such other risks as the Secretary may prescribe in regulations. Section 1221(b)(2)(A)(iii). Further, the statute grants the Secretary the authority to provide regulations to address the treatment of nonidentified or improperly identified hedging transactions, and hedging transactions involving related parties (sections 1221(b)(2)(B) and (b)(3), respectively). The statutory hedging provisions are effective for transactions entered into on or after December 17, 1999.

Section 1221(a)(8) provides that supplies of a type regularly consumed by the taxpayer in the ordinary course of a taxpayer's trade or business are not capital assets. That provision is effective for supplies held or acquired on or after December 17, 1999.

The legislative history to the hedging provisions states that Congress intended that the approach taken in the Treasury regulations with respect to the character of hedging transactions generally should be codified as an appropriate interpretation of present law. S. Rep. No. 201, 106th Cong., 1st Sess. 24 (1999). These proposed regulations conform the Treasury regulations to these statutory provisions.

Paragraph (a) of the proposed regulations provides basic rules for the treatment of hedging transactions. The substance of these rules is the same as the rules under § 1.1221-2(a).

Accordingly, paragraph (a)(1) of the proposed regulations generally provides that property that is part of a hedging transaction, as defined in section 1221(b)(2)(A) and paragraph (b) of the proposed regulations, is not a capital asset. Paragraph (a)(2) of the proposed regulations provides a similar rule for short sales and options. Where a short sale or option is part of a hedging transaction, as defined, any gain or loss on the short sale or option is ordinary. Under paragraph (a)(3), if a transaction falls outside the regulations, gain or loss from the transaction is not made ordinary by the fact that property is a surrogate for a non-capital asset, that the transaction serves as insurance against a business risk, that the transaction serves a hedging function, or that the transaction serves a similar function or purpose. As under the Treasury regulations, Congress intended that the hedging rules be the exclusive means through which the gains and losses on hedging transactions are treated as ordinary. S. Rep. No. 201, 106th Cong., 1st Sess. 25 (1999).

The provisions of the proposed regulations generally apply to determine the character of gain or loss from transactions that also are subject to various international provisions of the Code. Paragraph (a)(4) of the proposed regulations, however, provides that section 988 transactions are excluded from these regulations because gain or loss on those transactions is ordinary under section 988(a)(1). Paragraph (a)(4) of the proposed regulations also provides that the definition of a hedging transaction under § 1.1221-2(b) of the proposed regulations does not apply for purposes of the hedging exceptions to the subpart F rules of section 954(c) and certain hedging rules in the interest allocation regulations under section 864(e).

Regulations under § 1.482-8 will address risk management activities in the context of a global dealing operation. Thus, except to the extent provided in §§ 1.475(g)-2, 1.482-8, and 1.863-3(h), these regulations do not apply in determining the allocation and source of income for a participant in a global dealing operation or whether a risk management function related to the activities of a regular dealer in securities has been conducted.

Proposed regulations under §§ 1.882-5 and 1.884-1 also refer to hedging under § 1.1221-2 for purposes of determining assets and liabilities of a foreign corporation for interest allocation and branch tax purposes. The IRS and Treasury are evaluating the appropriate requirements necessary to implement cross-border and worldwide hedging rules for these purposes and seek comments in this regard. Therefore, paragraph (a)(4) of the proposed regulations provides that the definition of hedging transaction in paragraph (b) of the proposed regulations is inapplicable in determining the hedging requirements under sections 882(c) and 884, except to the extent provided in regulations under those sections.

Paragraph (b) of the proposed regulations restates the definition of hedging transaction in section 1221(b)(2)(A). Under this rule, a hedging transaction is generally a transaction that a taxpayer enters into in the normal course of its business primarily to manage the risk of interest rate or price changes or currency fluctuations with respect to ordinary property, ordinary obligations, or borrowings of the taxpayer.

Paragraph (c) of the proposed regulations provides rules of application designed to ensure that the definition of hedging transaction is applied reasonably to include most common types of business hedges. Congress intended that the approach taken in the Treasury regulations with respect to the character of hedging transactions generally should be codified as an appropriate interpretation of present law. S. Rep. No. 201, 106th Cong., 1st Sess. 24 (1999). The Senate Finance Committee believed that the Treasury regulations interpret risk reduction flexibly to provide hedging transaction treatment for fixed to floating hedges, certain written call options, dynamic hedges, partial hedges, recycled hedges, and hedges of aggregate risk (see § 1.1221-2(c)). Id. at n.12. The Committee believed that (depending on the facts) the treatment of those transactions as hedging transactions is appropriate and that it is also appropriate to modernize the definition of hedging transaction by providing risk management as the standard. Id. These proposed regulations revise the Treasury regulations to reflect the risk management standard.

Paragraph (c)(1) of the proposed regulations deals with the meaning of risk management. It provides that, except as otherwise provided in paragraph (c), a transaction satisfies the risk management standard if it reduces risk. To enter into a hedging transaction, the taxpayer must have risk when all of its operations are considered—that is, there must be risk on a “macro” basis. Nonetheless, a hedge of a single asset or liability, or pool of assets or liabilities, will be respected as managing risk if the hedge reduces the risk attributable to the item or items being hedged and if the hedge is reasonably calculated to reduce the overall risk of the taxpayer's operations. In addition, if a taxpayer hedges a particular asset or liability, or a pool of assets or liabilities, and the hedge is undertaken as part of a program to reduce the overall risk of the taxpayer's operations, the taxpayer need not show that the hedge reduces its overall risk.

Paragraph (c)(1) of the proposed regulations also recognizes that fixed to floating hedges and certain types of written options may manage risk and may be hedging transactions in appropriate situations. For example, a covered call with respect to assets held or a written put option with respect to assets to be acquired may be a hedging transaction.

In addition, paragraph (c)(1) of the proposed regulations provides that a hedging transaction includes a transaction that reverses or counteracts a hedging transaction. This rule recognizes that some transactions are used to eliminate some or all of the risk reduction accomplished through another hedging transaction. Although the transactions are not risk reducing if viewed independently, they are considered to be part of the larger hedging transaction.

Paragraph (c)(1) of the proposed regulations further provides that a taxpayer may hedge any part or all of its risk for any part of the period during which it has risk. The proposed regulations also provide that the fact that a taxpayer frequently enters into and terminates hedging positions is not relevant to whether transactions are hedging transactions.

Except as otherwise provided in paragraph (c) of the proposed regulations, a transaction that is not entered into primarily to reduce risk is not a hedging transaction. For example, the so-called “store-on-the-board” transaction, in which a taxpayer disposes of its production output and enters into a long futures contract with respect to the same product, is not a hedging transaction. In this example, the long futures contact could be viewed as a surrogate for the storage of the commodity. The net proceeds from the sale of the production output and the gain or loss on the long futures contract simulates the price at which the production output would have sold if it had been physically stored and sold at a later time. However, because the production output to which the futures contract relates has been sold, there is no underlying position (with respect to ordinary property held or to be held) that exposes the taxpayer to price risk. Thus, the long position does not reduce risk. Moreover, gain or loss on the contract is not treated as ordinary on the grounds that it is a surrogate for inventory.

Paragraph (c)(2) of the proposed regulations provides that a hedging transaction may be entered into by using a position that was a hedge of one asset or liability to hedge another asset or liability.

Paragraph (c)(3) of the proposed regulations provides that the acquisition of certain assets, such as investments, may not be a hedging transaction. Even though acquisition of these assets may involve some risk reduction, they typically are not acquired primarily to manage risk. For example, a taxpayer's interest rate risk from a floating rate borrowing may be reduced by the purchase of debt instruments that bear a comparable floating rate. The proposed regulations provide that the acquisition of the debt instruments, however, is not made primarily to reduce risk and, therefore, is not a hedging transaction. Similarly, borrowings generally are not made primarily to manage risk. The IRS and Treasury request comments on the circumstances in which the acquisition of debt instruments or borrowings are made primarily to manage risk.

Paragraph (c)(4) defines the normal course requirement of paragraph (b) to include any transaction entered into in furtherance of a taxpayer's trade or business. Thus, for example, a liability hedge meets this requirement regardless of whether the liability is undertaken to fund current operations, an acquisition, or an expansion of a taxpayer's business. This definition does not apply to other uses of the term “normal course” in the Code or regulations.

Paragraph (c)(5) of the proposed regulations provides that a hedge of property or of an obligation is a hedging transaction only if a sale or exchange of the property, or performance or termination of the obligation, could not produce capital gain or loss. The special rule in the Treasury regulations for noninventory supplies (§ 1.1221-2(c)(5)(ii)), however, is not contained in these proposed regulations. Under the noninventory supply rule, if a taxpayer sells only a negligible amount of a noninventory supply, then, only for purposes of determining whether a hedge of the purchase of that noninventory supply is a hedging transaction, that noninventory supply is treated as ordinary property. This rule is not being proposed because section 1221(a)(8) generally provides ordinary gain or loss treatment for consumable supplies held or acquired on or after December 17, 1999.

Paragraph (c)(6) of the proposed regulations provides that the status of liability hedges as hedging transactions is determined without regard to the use that is made of the proceeds of a borrowing so long as the transaction is entered into in furtherance of the taxpayer's trade or business. The Service and Treasury believe that a liability hedge should not fail to qualify as a hedging transaction because the proceeds of the borrowing being hedged are used to purchase a capital asset.

Paragraph (c)(7) of the proposed regulations provides that, in the case of hedges of aggregate risk, all but a de minimis amount of the risk being hedged must be attributable to ordinary property, ordinary obligations, or borrowings.

Although the purpose of the rules in paragraph (c) is to ensure that the definition of hedging transaction will be interpreted reasonably to cover most common business hedges, not all hedges are intended to be covered. For example, the regulations do not apply where a taxpayer hedges a dividend stream, the overall profitability of a business unit, or other business risks that do not relate directly to interest rate or price changes or currency fluctuations with respect to ordinary property, ordinary obligations, or borrowings. Moreover, the regulations do not provide ordinary treatment for gain or loss from the disposition of stock where, for example, the stock is acquired to protect the goodwill or business reputation of the acquirer or to ensure the availability of goods.

Paragraph (c)(8) of the proposed regulations provides that a hedging transaction does not include a transaction entered into to manage risks other than interest rate or price changes, or currency fluctuations, unless a regulation, revenue ruling, or revenue procedure provides otherwise. Thus, until such guidance is published, a hedge of volume or revenue fluctuations is not a hedging transaction. One example of this type of hedge is a weather derivative used by an energy producer to hedge against the decrease in volume of sales from variations in weather patterns.

The IRS is considering whether to expand the definition of hedging transaction to include transactions that manage risks other than interest rate or price changes, or currency fluctuations with respect to ordinary property, ordinary obligations or borrowings of the taxpayer. The Service solicits comments on the types of risks that should be covered, including specific examples of derivative transactions that may be incorporated into future guidance.

The status of so-called “gap” hedges is not separately addressed in paragraph (c) of the proposed regulations. Insurance companies, for example, sometimes hedge the “gap” between their liabilities and the assets that fund them. Under the proposed regulations, a hedge of those assets does not qualify as a hedging transaction if the assets are capital assets. Whether a gap hedge qualifies as a liability hedge is a question of fact and depends on whether it is more closely associated with the liabilities than with the assets. For example, a contract to purchase assets is generally not a liability hedge even if the assets are being purchased to fund the liability. Other gap hedges may be appropriately treated as liability hedges and, therefore, may qualify as hedging transactions.

The rules in paragraphs (d), (e) and (f) of the proposed regulations, covering consolidated group hedging, identification and recordkeeping rules, and the effect of identification and non-identification, respectively, are generally unchanged from the corresponding rules in the Treasury regulations. This is because Congress generally intended to codify the approach to hedging transactions that was taken in the Treasury regulations. S. Rep. No. 201, 106th Cong., 1st Sess. 24 (1999).

Paragraph (d) of the proposed regulations provides rules applicable to hedging by members of a consolidated group. The proposed regulations retain the single-entity approach of the Treasury regulations. That is, they treat the risk of one member of the group as the risk of the other members, as if all the members were divisions of a single corporation. Thus, a member of a consolidated group that hedges the risk of another member by entering into a transaction with a third party may receive ordinary gain or loss treatment on that transaction if the transaction otherwise qualifies as a hedging transaction.

Under this single-entity approach, intercompany transactions are neither hedging transactions nor hedged items. Because they are treated as transactions between divisions of a single corporation, intercompany transactions do not manage the risk of that single corporation and, therefore, fail to qualify as hedging transactions.

The proposed regulations also retain the separate-entity election of the Treasury regulations, permitting a consolidated group to treat its members as separate entities when applying the hedging rules. The election is made by attaching a statement to the group's federal income tax return.

For a group that elects separate-entity treatment, an intercompany transaction is treated as a hedging transaction if and only if: (1) It would qualify as a hedging transaction if entered into with an unrelated party; and (2) it is entered into with a member that, under its method of accounting, marks its position in the intercompany transaction to market. If these requirements are satisfied, the member with respect to which it is an intercompany hedging transaction must account for its position in the transaction under § 1.446-4, and, if that member properly identifies the transaction as a hedging transaction, each member treats the gain or loss from its position in the transaction as ordinary.

The proposed regulations provide that, even when these two requirements are met, these regulations supplant only the character and timing rules of § 1.1502-13. Other aspects of the transaction, such as the source of the gain or loss, are unaffected by these regulations and thus may be governed by other portions of § 1.1502-13.

Pursuant to section 1221(a)(7), paragraph (e)(1) of the proposed regulations provides that hedging transactions must be identified before the close of the day on which they are entered into. Paragraph (e)(2) of the proposed regulations requires that the item, items, or aggregate risk being hedged be identified substantially contemporaneously with entering into the hedging transaction. The identification must be made no more than 35 days after entering into the hedging transaction.

Paragraph (e)(3) of the proposed regulations contains a series of special rules for identifying certain types of hedging transactions. In the case of inventory, the identification must specify the type or class of inventory to which the hedge relates. If particular inventory purchases or sales transactions are being hedged, the taxpayer must also identify the expected date and the amount to be acquired or sold. In the case of hedges of aggregate risk, the identification requirement is satisfied if a taxpayer's records contain a description of the hedging program and if there is a system for identifying transactions as entered into as part of that program. The intent underlying this rule is to provide verifiable information with respect to the item being hedged without requiring the taxpayer to identify individually the many items that give rise to the aggregate risk being hedged.

Paragraph (e)(4) of the proposed regulations provides rules with respect to how an identification is made. It must be clear that the identification is being made for tax purposes. In lieu of separately identifying each transaction, however, a taxpayer may establish a system in which identification is indicated by the type of transaction or the manner in which the transaction is consummated or recorded.

Paragraph (e)(5) of the proposed regulations deals with the required identification where the taxpayer is a member of a consolidated group, and paragraph (e)(6) of the proposed regulations provides that an identification for purposes of section 1256(e)(2) is also an identification for purposes of § 1.1221-2(e)(1).

Pursuant to section 1221(b)(2)(B), paragraph (f) of the proposed regulations deals with the effect of identification and non-identification. The rules in this paragraph are the same as the rules in paragraph (f) of the Treasury regulations.

The proposed regulations under section 1256 generally restate the rules of § 1.1256(e)-1 that coordinate the identification of hedges for purposes of section 1256(e). The citations to section 1256(e)(2)(C) in the Treasury regulations have been replaced with citations to section 1256(e)(2) in the proposed regulations.

The proposed regulations are proposed to be effective for transactions entered into on or after January 18, 2001. However, the IRS will not challenge any transaction entered into on or after December 17, 1999, and before January 18, 2001 that satisfies the provisions of these proposed regulations.

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It is hereby certified that the collection of information in these regulations will not have a significant economic impact on a substantial number of small entities. This certification is based upon the fact that very few small businesses enter into hedging transactions due to their cost and complexity. Further, those small businesses that hedge enter into very few hedging transactions because hedging transactions are costly, complex, and require constant monitoring and a sophisticated understanding of the capital markets. Therefore, a Regulatory Flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any electronic or written comments (a signed original and eight (8) copies of written comments) that are submitted timely (in the manner described in ADDRESSES) to the IRS. The IRS and Treasury request comments on the clarity of the proposed rules and how they may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for May 16, 2001, beginning at 10 a.m., in the IRS auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC. Due to building security procedures, visitors must enter at the 10th Street entrance, located between Constitution and Pennsylvania Avenues, NW. In addition, all visitors must present photo identification to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 15 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see FOR FURTHER INFORMATION CONTACT.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit written comments and an outline of topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by April 25, 2001. A period of 10 minutes will be allotted to each person making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is Jo Lynn Ricks, Office of the Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

Sections 501 and 502 of the Economic Recovery Tax Act of 1981 (Pub. L. 97-34, 95 Stat. 172) added sections 1092 and 263(g), respectively, to the Internal Revenue Code to address certain deferral and conversion strategies involving economically offsetting positions in actively traded personal property. These economically offsetting positions are called straddles. Section 1092(c)(1).

In general, under section 1092, a taxpayer that realizes a loss on a position in actively traded personal property must defer the recognition of the loss to the extent the taxpayer has unrecognized gain on an economically offsetting position in the property. This deferral rule matches the recognition of loss with the recognition of the economically offsetting income. Section 263(g) addresses interest and carrying charges properly allocable to personal property that is part of a straddle. Under this section, these otherwise deductible expenses are not currently deductible. Instead, they must be capitalized into the basis of the property. By requiring capitalization, section 263(g) prevents: (1) A taxpayer from gaining a timing advantage by accruing deductions associated with carrying the straddle transaction before recognizing income from a position in personal property that is part of the straddle; and (2) the deductions from having a character different from that of the income.

These proposed regulations provide certain rules with respect to the application of section 263(g) and section 1092.

The proposed regulations consist of § 1.263(g)-1, which provides a general introduction, and §§ 1.263(g)-2, 1.263(g)-3, 1.263(g)-4, and 1.263(g)-5, described below. The proposed regulations also include a new paragraph 1.1092(d)-1(d).

The proposed regulations generally address four issues: (1) The definition of personal property as such term is used in section 263(g) (in § 1.263(g)-2); (2) the type of payments that are subject to the capitalization rules of section 263(g) (in § 1.263(g)-3); (3) the operation of the capitalization rules of section 263(g) (in § 1.263(g)-4); and (4) the circumstances under which an issuer's obligation under a debt instrument can be a position in actively traded personal property and, therefore, part of a straddle (in § 1.1092(d)-1(d)). These issues are discussed in more detail below.

Section 263(g)(1) requires capitalization of interest and carrying charges properly allocable to personal property that is part of a straddle (as defined in section 1092(c)). Section 1092(d)(1) defines personal property for purposes of section 1092, as personal property of a type that is actively traded. Commentators have suggested that because sections 263(g) and 1092 were enacted at the same time, the term personal property as used in section 263(g) should be given the same definition under section 1092(d)(1). This would limit the definition of personal property in section 263(g) to personal property of a type that is actively traded.

Despite this suggestion, the proposed regulations provide that personal property has its common law meaning in section 263(g) for two reasons. First, the definition in section 1092(d)(1) by its terms applies only for purposes of section 1092. Second, the broader, common law interpretation of personal property more closely accords with the purposes of section 263(g). Application of the limited definition in section 1092(d)(1) for purposes of section 263(g) could result in dissimilar tax treatment of economically similar transactions. For example, adoption of the narrower definition would cause section 263(g) to apply to a transaction in which a taxpayer borrows to purchase actively traded personal property that is a part of a straddle but not to a similar transaction in which the taxpayer borrows to purchase a derivative instrument that is not itself actively traded but is a position in actively traded property.

Consequently, proposed § 1.263(g)-2 defines personal property as a property right, whether or not actively traded, other than a right in real property. This definition includes both financial positions that provide substantial rights but do not impose substantial obligations on the holder (e.g., common stock or a purchased option) and executory contracts that impose both rights and obligations on the holder (e.g., notional principal contracts (NPC's) and forward transactions). However, the definition excludes straddles comprised only of financial positions that impose only obligations on the holder (e.g., the obligor's position in a debt instrument or a writer's position in an option).

Section 263(g)(1) provides for the capitalization of interest and carrying charges. For this purpose, interest and carrying charges are collectively defined in section 263(g)(2) as “interest incurred or continued to purchase or carry the personal property” and “all other amounts (including charges to insure, store, or transport) paid or incurred to carry the personal property,” less certain types of income from the personal property.

The phrase “incurred or continued to purchase or carry” also appears in section 265(a)(2), which disallows interest expense on indebtedness incurred or continued to purchase or carry tax-exempt debt. Rev. Proc. 72-18 (1972-1 C.B. 740) sets out rules for determining when this standard is met for purposes of section 265(a)(2). Under that revenue procedure, indebtedness issued by a taxpayer that is not a dealer in tax-exempt obligations meets this standard if: (1) The proceeds of the indebtedness are directly traceable to the purchase of the tax-exempt obligations, (2) the tax-exempt obligations are used as collateral for the borrowing, or (3) the totality of the facts and circumstances supports a reasonable inference that the purpose of the borrowing was to purchase or carry tax-exempt obligations. In general, the facts-and-circumstances test is met if there is a “sufficiently direct relationship” between the borrowing and the investment in the tax-exempt obligations. Similarly, the proposed regulations provide that a sufficiently direct relationship between indebtedness or other financing and personal property that is part of a straddle exists if payments on the indebtedness or other financing are determined by reference to the value or change in value of the personal property. See § 1.263(g)-3(c).

Section 263(g) also applies to “all other amounts (including charges to insure, store or transport the personal property)” paid or incurred to carry personal property that is part of a straddle. As noted by one commentator, “taxpayers should not be permitted to deduct items incurred in connection with protecting or preserving the value of assets” that are part of a straddle. Therefore, the term, to carry in the context of section 263(g) includes the reduction of the risk of holding an asset. Because straddles necessarily involve positions that offset each other, the positions “carry” each other.

Accordingly, under § 1.263(g)-3(b) of the proposed regulations, interest and carrying charges subject to capitalization under section 263(g) include: (1) Otherwise deductible payments or accruals (including interest and original issue discount) on indebtedness or other financing issued or continued to purchase or carry personal property that is part of a straddle; (2) otherwise deductible fees or expenses paid or incurred in connection with the taxpayer's acquiring or holding personal property that is part of a straddle, including, but not limited to, fees or expenses incurred to purchase, insure, store, maintain, or transport the personal property; and (3) other otherwise deductible payments or accruals on financial instruments that are part of a straddle or that carry part of a straddle.

Section 263(g) requires capitalization of interest and carrying charges that exceed certain specified income inclusions (allowable offsets) listed in section 263(g)(2)(B). Section 1.263(g)-3(e) sets forth the allowable offsets, including amounts that are receipts or accruals on financial instruments that are part of a straddle or carry part of a straddle. The Treasury Department and the IRS solicit comments regarding whether other amounts should be treated as allowable offsets for purposes of section 263(g).

Generally, section 263(g) coordinates the character and timing of items of income and loss attributable to a taxpayer's position in a straddle by allocating interest and carrying charges to the capital account of a position in personal property that is part of the straddle. Proposed regulation § 1.263(g)-4 provides a set of allocation rules governing the “capitalization” of interest and carrying charges.

In many cases, certain allocation rules readily suggest themselves.

Congress was aware of “cash and carry” transactions in adopting section 263(g). See H.R. Rep. No. 201, 97th Cong. 1st Sess. 203-04 (1981). In a typical transaction, a taxpayer borrows to purchase personal property and sells the property forward. The debt instrument generates ordinary deductions (interest expense) that precede predictable (and approximately equal) capital gains on the sale of the personal property. Coordination of the amount and timing of income and loss in a cash and carry transaction is achieved under the proposed regulation by allocating the interest expense to the capital account of the personal property. This rule applies to all transactions in which a taxpayer has borrowed to purchase personal property that is part of a straddle.

If the proceeds of a borrowing are not used to purchase personal property, a second allocation rule allocates interest expense to personal property when the personal property collateralizes the borrowing. See Rev. Proc. 72-18, § 3.03 (disallowing interest deduction for debt secured by tax-exempt obligations); Rev. Rul. 78-348 (1978-2 C.B. 95) (applying yield restrictions to investments pledged by person benefitting from tax-exempt bond financing).

A third allocation rule of the proposed regulations allocates interest on indebtedness to personal property when payments on the indebtedness are determined by reference to the value, or change in value, of the personal property that is part of a straddle.

Fees and charges related to the maintenance of the personal property, such as charges to insure, store, or transport the personal property, are allocated to the capital account of that personal property. See S. Rep. No. 144, 97th Cong. 1st Sess. 154 (1981).

In other cases, the appropriate method for allocating capitalized interest and carrying charges is less obvious. This may be true of payments or accruals on a financial instrument, such as a NPC, described in proposed § 1.263(g)-3(d). For example, the proposed rules would apply to a taxpayer that holds stock and enters into an equity swap that is a short position with respect to the stock. In such a case, both the stock and the equity swap may be personal property that is part of a straddle, and payments on the equity swap could be capitalized with respect to the capital account of either the stock or the equity swap. However, it may not be clear how a capitalization rule would apply in conjunction with the rules under § 1.446-3 with respect to payments on NPCs. Accordingly, the proposed rules provide that, in cases to which a specific allocation rule is not applicable, interest and carrying charges will be allocated to personal property that is part of a straddle in the manner that is most appropriate under all the facts and circumstances. Proposed regulations § 1.263(g)-4(c) Example 7 (relating to a straddle consisting of stock and an equity swap) illustrate one application of this facts and circumstances rule. The Treasury Department and the IRS invite comments and suggestions regarding both the proposed specific allocation rules and the general facts and circumstances allocation rule.

The regulations under section 263(g) are proposed to be effective for expenses paid, incurred, or accrued after the date the regulations are adopted as final for straddles established on or after January 17, 2001. See § 1.263(g)-5.

If a taxpayer is the obligor under a debt instrument that provides for one or more payments linked to the value of actively traded personal property, the value of the taxpayer's obligation under the debt instrument changes as the value of the referenced property changes. For this reason, the taxpayer's position as obligor under the debt instrument functions as a position in the referenced property.

Some commentators have suggested that a debt instrument (other than one denominated in an actively traded foreign currency) cannot be a position of the obligor in personal property that is part of a straddle. Section 1092(d)(7) provides that an obligor's interest in a nonfunctional-currency-denominated debt instrument is treated under section 1092(d)(2) as a position in the nonfunctional currency. From this, the commentators infer that an obligor's interest in a debt instrument may never be treated as an interest in personal property other than a nonfunctional currency.

However, neither the legislative history nor the express language of section 1092(d)(7) indicates that Congress intended to exclude interests in personal property from the definition of position in section 1092(d)(2). A rule that a debt instrument can be a position in currency does not establish that a debt instrument is a position only in currency. This interpretation of section 1092(d)(7) has already been rejected by the IRS and Treasury in § 1.1275-4(b)(9)(vi), which provides that increased interest expense on a contingent payment debt instrument issued by a taxpayer may be a straddle loss subject to section 1092 deferral.

To clarify the definition of position under section 1092(d)(2), § 1.1092(d)-1(d) of the proposed regulations explicitly provides that an obligation under a debt instrument may be a position in personal property that is part of a straddle. This provision is proposed to be effective for straddles established on or after January 17, 2001. However, no inference is intended with respect to straddles established prior to Janaury 17, 2001. Thus, in appropriate cases, the IRS may take the position under section 1092(d)(2) that, even in the absence of a regulation, an obligation under a debt instrument was part of a straddle prior to the effective date of § 1.1092(d)-1(d) if the debt instrument functioned economically as an interest in actively traded personal property.

In 1995, the IRS published proposed regulation § 1.1092(d)-(2). See 60 F.R. 21482; FI-21-95, 1995-1 C.B. 935. The proposed regulations clarify the circumstances in which common stock may be personal property for the purposes of section 1092. Because proposed regulation §§ 1.1092(d)-2 and 1.1092(d)-1(d) address similar issues, the IRS proposes to finalize both regulations simultaneously. The Treasury Department and the IRS, therefore, invite additional comment on proposed § 1.1092(d)-(2).

In addition, in 1985, the Treasury Department and the IRS adopted Temporary Regulation § 1.1092(d)-5T(d), which defines the term loss for purposes of §§ 1.1092(b)-1T through 1.1092(b)-4T as a loss otherwise allowable under section 165(a). The Treasury Department and the IRS request comments on whether that definition should be expanded to include expenses such as interest and carrying charges or payments on notional principal contracts. If so, how should such a change be coordinated with the proposed regulations in this document?

It has been determined that this notice of proposed rulemaking is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulation does not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Internal Revenue Code, this notice of proposed rulemaking will be submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business.

Before these proposed regulations are adopted as final regulations, consideration will be given to any written or electronic comments (a signed original and eight (8) copies, if written) that are submitted timely (in the manner described in the ADDRESSES portion of this preamble) to the IRS. The IRS and Treasury request comments on the clarity of the proposed regulations and how they may be made easier to understand. All comments will be available for public inspection and copying.

A public hearing has been scheduled for May 22, 2001, at 10 a.m. in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue NW., Washington DC. Due to building security procedures, visitors must enter at the 10th Street entrance located between Constitution and Pennsylvania Avenues, NW. In addition, all visitors must present photo identifications to enter the building. Because of access restrictions, visitors will not be admitted beyond the immediate entrance area more than 15 minutes before the hearing starts. For information about having your name placed on the building access list to attend the hearing, see the FOR FURTHER INFORMATION CONTACT section of this preamble.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who wish to present oral comments at the hearing must submit and an outline of the topics to be discussed and the time to be devoted to each topic (signed original and eight (8) copies) by May 1, 2001. A period of 10 minutes will be allotted to each person for making comments. An agenda showing the scheduling of the speakers will be prepared after the deadline for receiving outlines has passed. Copies of the agenda will be available free of charge at the hearing.

The principal author of these regulations is Kenneth Christman, Office of Associate Chief Counsel (Financial Institutions and Products). However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is proposed to be amended as follows: