Pursuant to the authority of sections 10(b), 13, 14, 19, et al., of the Federal Reserve Act, the Board has amended its Regulation A (12 CFR part 201) to incorporate changes in discount rates on Federal Reserve Bank extensions of credit. The discount rates are the interest rates charged to depository institutions when they borrow from their district Reserve Banks.

The “basic discount rate” is a fixed rate charged by Reserve Banks for adjustment credit and, at the Reserve Banks' discretion, for extended credit for up to 30 days. In decreasing the basic discount rate from 4.0 percent to 3.5 percent, the Board acted on requests submitted by the Boards of Directors of the twelve Federal Reserve Banks. The new rates were effective on the dates specified below. The 50-basis-point decrease in the discount rate was associated with a similar decrease in the federal funds rate approved by the Federal Open Market Committee (FOMC) and announced at the same time.

In a joint press release announcing these actions, the FOMC and the Board of Governors noted that a significant reduction in excess inventories seems well advanced. Consumption and housing expenditures have held up reasonably well, though activity in these areas has flattened recently.

Investment in capital equipment, however, has continued to decline. The erosion in current and prospective profitability, in combination with considerable uncertainty about the business outlook, seems likely to hold down capital spending going forward. This potential restraint, together with the possible effects of earlier reductions in equity wealth on consumption and the risk of slower growth abroad, continues to weigh on the economy.

With pressures on labor and product markets easing, inflation is expected to remain contained. Although measured productivity growth stalled in the first quarter, the impressive underlying rate of increase that developed in recent years appears to be largely intact, supporting longer-term prospects.

The FOMC continues to believe that against the background of its long-run goals of price stability and sustainable economic growth and of the information currently available, the risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future.

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 605(b)), the Board certifies that the change in the basic discount rate will not have a significant adverse economic impact on a substantial number of small entities. The rule does not impose any additional requirements on entities affected by the regulation.

The provisions of 5 U.S.C. 553(b) relating to notice and public participation were not followed in connection with the adoption of the amendment because the Board for good cause finds that delaying the change in the basic discount rate in order to allow notice and public comment on the change is impracticable, unnecessary, and contrary to the public interest in fostering price stability and sustainable economic growth.

The provisions of 5 U.S.C. 553(d) that prescribe 30 days prior notice of the effective date of a rule have not been followed because section 553(d) provides that such prior notice is not necessary whenever there is good cause for finding that such notice is contrary to the public interest. As previously stated, the Board determined that delaying the changes in the basic discount rate is contrary to the public interest.

Congress recognized that many disadvantaged microentrepreneurs lack sufficient training and education to gain access to capital and to conduct other activities necessary to establish, maintain, and expand their businesses. It enacted the Program for Investment in Microentrepreneurs Act (“PRIME” or “the Act”) to augment training and technical assistance under the Small Business Act and other legislation. PRIME grants to qualified Microenterprise Development Organizations (“MDOs”) will help meet training and technical assistance needs for disadvantaged microentrepreneurs, thereby encouraging entrepreneurship and capital formation at the community level.

The congressional mandate to provide cognitive support to the target market through the Act is recognition that many low income and very low-income entrepreneurs need training and technical assistance to start, operate, strengthen, or expand their businesses. In order to achieve measurable success, technical assistance providers must be accessible, consistent and committed to the entrepreneur's progress over extended periods of time. The competency and capacity of these providers must also be measured. Research into the outcomes of support, its long-term effect, and how best to continue assistance is essential in determining the value of support over the long run.

The U.S. Department of Commerce's Characteristics of Business Ownership shows that in 1987, approximately 17 percent (2.3 million) of businesses in the United States were operated by low-income and very low-income microentrepreneurs. Since then a variety of economic developments, including corporate downsizing, declining availability of lower skilled manufacturing jobs and expanded opportunities in the technology field, have combined to make microenterprise an increasingly more viable option in the U.S. economy.

The Aspen Institute estimated that during 1997 microlenders nationwide provided business assistance to 172,000 microentrepreneurs, a mere fraction of low- and very-low income individuals involved in microenterprise. The Institute further estimated that of that number, about 57,000 actively pursued and benefited from sustained business-based training and technical assistance. Of those, approximately 6,000 received loans.

One of the major constraints is the cost of providing this training and technical assistance. Current private sector sources simply are not meeting the need. The Act, therefore, focuses on expanding the cultivation, support and motivation of these low- and very-low income microentrepreneurs. It will also help build the capacity of the microenterprise industry in order to deliver vital services to a much greater segment of the 2.3 million or more low income and very low income microentrepreneurs. One of the goals of the PRIME program is to be a resource for MDOs as they grow and develop and ultimately become self-sustaining.

The Act authorizes the U.S. Small Business Administration (“SBA”) to make grants to “qualified organizations” to fund training and technical assistance for disadvantaged microentrepreneurs. It also authorizes SBA to make grants to increase the training and technical assistance capacities of MDOs. Further, it authorizes funding for grants for research and development, and other undertakings deemed by the Administrator or designee to be consistent with the purposes of the Act. The PRIME program requires that grants made by SBA be matched by grantees from non-Federal sources. These regulations set up four categories of Technical Assistance Grants targeted to these purposes.

Grants made either for the purpose of providing technical assistance to disadvantaged microentrepreneurs or for capacity building purposes initially will be awarded, on a competitive basis, in amounts not less than $50,000. Such grants may be renewable, annually, for up to four additional years. Renewal of an existing grant will take place at the discretion of the SBA and will be based on the availability of funds and the individual grantee's performance in terms of goals met, milestones achieved, and demonstrated results.

Grants for research and development will also be awarded on a competitive basis, though not subject to a minimum award. These grants may also be renewed based on the appropriateness of extended funding periods, availability of funds, and appropriation and performance.

PRIME will be implemented with a clear focus on the applicants' abilities to meet the purposes of the Act. Accountability and outcomes will be an ongoing consideration during the grant period. Applicants for funding for technical assistance to disadvantaged microentrepreneurs will be evaluated based on such items as technical capabilities; market penetration potential; ability to meet stated goals; historical performance; key personnel; resource management; community partnering and collaboration with state and local entities; accountability for outcomes; program sustainability; and replicability of program design. Applicants for funding as capacity builders will be similarly evaluated. Continued performance of these two groups will be measured in terms of such items as number of clients served; range and quality of service; number of businesses started, stabilized, expanded, and/or funded; number of jobs created; business survival rates; capital formation; and non-business outcomes such as wage employment.

On October 10, 2000, SBA published the proposed rule for the PRIME program in the Federal Register (65 FR 60256). SBA received 13 timely comments in response to the proposed rule. What follows is a summary of the comments received and the actions taken in response to those comments.

SBA received 3 comments on § 119.2, which sets forth definitions found in the Act and further defines terms not included in the Act. Two of the commenters expressed an interest in having the definition of “training and technical assistance” clarified to convey that the examples of training and technical assistance which SBA included in the proposed rule are not conclusive. SBA adopted this comment by adding the language, “such as, but not limited to,” before the specific examples. One of the above mentioned commenters also requested that the definition of training and technical assistance include, “services which may address additional barriers to success that low and very low income entrepreneurs may face.” Although SBA can appreciate what this commenter is trying to accomplish with the recommended language, SBA has decided not to include such language until we can more clearly identify existing barriers. The PRIME program is a new initiative and the legislation enacting the program specifically defines “training and technical assistance.” As the program develops, and as we are able to more clearly identify barriers, SBA will consider expanding the definition of training and technical assistance in line with the statutory purpose of the PRIME program.

The third commenter on § 119.2 asked that the definition of “capacity building” be expanded to include purposes beyond an MDO's ability to provide training and technical assistance to disadvantaged microentrepreneurs. As with the definition of training and technical assistance, the definition of capacity building is clearly set forth in the Act enacting the PRIME program. SBA believes that the definition of capacity building, as it appears in the Act, accurately portrays the intent of Congress and the purposes of the PRIME program. Therefore, SBA does not feel that it would be appropriate to expand the purposes beyond those articulated by Congress. In addition, SBA deleted the definition of the term “emerging microenterprise development organization or program” based upon comments received on § 119.12, which are discussed in that part of this Supplementary Information.

SBA received 3 comments in response to proposed § 119.3, which lists organizations eligible to apply for PRIME grants. One commenter asked us to specify that Internal Revenue Service (IRS) classified organizations such as 501(c)(3)s are eligible to apply for PRIME grants. SBA does not feel this change is necessary. When addressing eligible organization within the rule for the PRIME program, SBA has not specified any IRS paragraph citations (e.g., 501, 509); rather, SBA simply articulates the statutory requirement that the eligible organizations be non-profits. Organizations such as 501(c)(3)s would satisfy the non-profit language used in the rule.

A second commenter on § 119.3 asked SBA to include specific language listing the local governments or agencies of local governments eligible for PRIME grants. SBA did not adopt this change because the Act authorizing PRIME specifically states that only non-profit entities are eligible organizations. The Act does allow for non-profit agencies to work, “in conjunction with” local governments or agencies of local governments however, eligible organizations themselves consist only of non-profits.

The final comment on § 119.3 asked for clarification that faith based organizations are eligible to apply for grant programs. SBA did not include any explicit language to that effect because there is no explicit statutory language disqualifying faith based organizations from participating in the program. SBA will need to review each faith based organization application to determine, on a case-by-case basis, whether there are any constitutional First Amendment issues presented.

SBA received four comments on § 119.4, which lists the uses for PRIME grants permitted by the Act. One commenter suggested that we revise the rule text to allow capacity building grants to go directly to MDOs for building their own capacity. SBA did not adopt this change because it is unnecessary. The PRIME program already allows for grants for the purposes recommended by the commenter under the heading of “Technical Assistance Grants.” “Capacity Building Grants,” on the other hand, by statute, are awarded to MDOs for the benefit of building the capacity of other MDOs.

The remaining commenters on this section also asked SBA to make the definition of “training and technical assistance” more flexible. SBA fulfilled this request by amending the definition of training and technical assistance in § 119.2 to include the language, “such as, but not limited to” before the list of examples.

SBA received nine comments on § 119.5, which lays out the Act's parameters for allocating and apportioning PRIME grant awards. All of the commenters expressed concern that this section appears to require that at least 50 percent of each grantee's total award amount must serve “very low income” persons. SBA has amended the language of this section to clarify that because the PRIME program seeks to reach as many disadvantaged entrepreneurs as possible, the focus of § 119.5 is on the number and the quality of the grants reaching the disadvantaged entrepreneurs, not the amount of the grants. The section conveys that at least 50 percent of the total number of grants awarded under the PRIME program, as a whole, must serve “very low income” persons.

SBA did not receive any comments in response to proposed § 119.6, which stated that awards for training and technical assistance will not be less than $50,000. However, SBA amended this section to conform with the change made to § 119.7 (How long and in what amounts will grant funding be available to a single grantee?)(See below). In this final rule, the minimum award for training and technical assistance and capacity building grants will be not less than $50,000 during the initial year of the grant.

SBA received a total of 9 comments on § 119.7, which explains for how long and in what amounts grant funding will be available to a single grantee. All of the commenters were opposed to declining award amounts in the option years. SBA understands the commenters concerns however, we have maintained a “step down” approach to the award amounts for the option years. SBA believes that this step down approach will allow SBA to accommodate new grantees every year while providing existing grantees with enough funding to pursue their plans. Therefore, the section provides that for Technical Assistance and Capacity Building Grants, after the initial grant, grant awards for following option years will be in amounts not to exceed 67 percent of the initial grant amount. SBA did not treat Research and Development Grants and Discretionary Grants similarly. SBA believes that these grants, by their very nature, require more flexibility. Often projects, such as research projects, are more unpredictable in terms of when milestones will be achieved and what direction the research will take upon attainment of each milestone. Therefore, for these types of grants, after making the initial grant, option year grant awards will be approved at SBA's discretion.

In addition, to address the concerns raised by these comments, SBA made two other changes to § 119.7. First, SBA modified the language of subsection (a) to clarify the discussion of option year funding. Secondly, SBA added a new subsection (d) to clarify that grantees in the final year of a project may request a one-time extension for up to 12 months under OMB Circular A-110, paragraph .25(e)(2). The purpose of this revision is to place grantees on notice that extensions may be requested under the PRIME Program.

SBA also made one other amendment to § 119.7 in an effort to clarify the language of the section. We have amended the heading to read, “How long and in what amounts will grant funding be available to a single grantee?” (Emphasis added). This heading more accurately describes the content of the text, which follows the heading.

SBA received only one comment on § 119.8, which sets forth the matching requirements for grantees. The commenter was concerned that a request for a waiver from the matching requirements would count against them. In an effort to confirm that this is not the case, SBA amended some of the language within paragraph (c) and (d) and added new paragraphs (e) and (f). SBA's intent within this section is to convey that a request for a waiver should be made sincerely and only when absolutely necessary. Obviously, SBA wants to avoid issuing unnecessary waivers in order to ensure that program funds will be utilized in the most far-reaching manner possible. SBA will first evaluate applications based on merit alone and will rank order these applications accordingly. Once SBA completes this ranking, we will review the applications for waiver requests and will grant waiver requests in the same rank order until waiver request authority has been expended. If, when following the rank order, SBA comes to an application that requests a waiver but all waiver authority has already been granted, SBA has no option but to deny the waiver request and will therefore be forced to similarly deny the otherwise meritorious grant proposal. If such a situation occurs, such an applicant will not be able to suddenly turn around, come back to SBA stating that they have the required match amount and hope to receive a grant award. Accordingly, as we have stated, waiver requests should be made only when necessary.

SBA received two comments in response to § 119.10, which restates the Act's requirement that SBA not prefer SBA Microloan Program participants under § 7(m) of the Small Business Act over non-participants or former participants in that program. Both comments supported this position therefore, the section remains as it was proposed.

SBA received three comments in response to § 119.11, which sets forth the information that will be requested in an application for funding under PRIME. All three comments suggested that the application is too long. These comments do not affect the regulation text of this section however, SBA wants to remind potential applicants that the application contains both instructions and requests for information. Not every page of the application contains a request for information. Of course, as the PRIME program progresses, SBA will look for opportunities to streamline the application itself.

SBA received six comments on § 119.12, which sets forth the criteria that SBA will use to evaluate grant applications. All six commenters indicated that SBA did not give enough weight to the past experience of the qualified organizations delivering technical assistance to disadvantaged entrepreneurs. After receiving these comments (which came from almost 50 percent of the total number of commenters), SBA decided to increase the weight given to past experience. Since issuing the proposed rule, and upon review of comments, SBA more firmly believes that an organization's ability to accomplish the objectives of the PRIME program may best be demonstrated by its prior experience and success in serving disadvantaged entrepreneurs. Also, based on these comments, SBA decided to eliminate the provision in proposed § 119.12(a)(1). The proposed provision would require two separate competitions for Technical Assistance Grants. One competition for microenterprise development organizations that had been in operation for four years or less and one competition for microenterprise development organizations that had been in operation for more than four years. SBA believes that the adjustments to the past experience weighting makes two competitions unnecessary.

SBA received a total of 5 comments on §§ 119.16, 119.17, both of which address the reporting, record keeping, and related requirements of the PRIME program. All of the commenters were opposed to the quarterly reporting requirement and two of the commenters felt that the information being requested was unrealistic or excessive. In drafting these sections, SBA had to take into account the requirements found within § 115 of the Riegle Community Development and Regulatory Improvement Act of 1994 (Riegle Act) (12 U.S.C. 4714) as required by the Act authorizing PRIME and the applicable circulars issued by the Office and Management and Budget (OMB). These directives, along with SBA's experience and the commenters' concerns, lead us to amend this section to allow for, in the case of Technical Assistance and Capacity Building Grants, quarterly reporting during the first two years. Thereafter, the grantees may request that SBA reduce the frequency of reports. For recipients of Research and Development Grants, reports will be required in accordance with agreed upon milestones. For Discretionary Grants, reports will be required as appropriate for the project, or on a schedule similar to that provided for Technical Assistance and Capacity Building Grant recipients.

The Office of Management and Budget (“OMB”) reviewed this rule as a “significant” regulatory action under Executive Order 12866.

SBA has determined that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. Congress has limited the funding level for this program therefore, it can only affect a limited number of small businesses through making grants to specifically defined organizations.

The Office of Management and Budget (OMB) has approved the information collection requirements contained in part 119 under the provisions of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, and has assigned OMB control number 3245-0329. Information collected includes application information submitted by applicants in response to the Program Announcements, as provided in §§ 119.9 and 119.11, and reporting, recordkeeping and related requirements related to a grant award, as provided in § 119.16. The required information will be used to evaluate applicants for PRIME grant awards and to monitor the financial and performance aspects of the awards once they are made. SBA estimates that it will take 80 hours to respond to the program announcements and to perform quarterly reporting and recordkeeping requirements. SBA estimates 500 applicants, resulting in an annual hour burden of 40,000 hours for the PRIME Program. SBA received only two comments on the proposed application packages suggesting that the applications were too long. SBA responded to these comments earlier in the preamble to this rule when addressing the comments made on § 119.11. An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number. The OMB control number associated with this collection information is 3245-0329.

For purposes of Executive Order 13132, SBA has determined that this final rule has no federalism implications because the legislation authorizing it provides grants to private, non-profit organizations working directly with disadvantaged entrepreneurs.

For purposes of Executive Order 12988, SBA certifies that this final rule is drafted, to the extent practicable, in accordance with the standards set forth in section 3 of that Order.

The FAA published this direct final rule with a request for comments in the Federal Register on March 23, 2001, (66 FR 16118). The FAA uses the direct final rulemaking procedure for a noncontroversial rule where the FAA believes that there will be no adverse public comment. This direct final rule advised the public that no adverse comments were anticipated, and that unless a written adverse comment, or a written notice of intent to submit such an adverse comment, were received within the comment period, the regulation would become effective on July 12, 2001. No adverse comments were received, and, thus, this action confirms that this direct final rule will be effective on that date.

On February 28, 2001, a document proposing to amend Part 71 of the Federal Aviation Regulations (14 CFR part 71) by establishing Class E airspace extending upward from the surface to and including 3200 feet MSL within a 4.1 mile radius of Washington County Regional Airport was published in the Federal Register (66 FR 12741-12742). This Class E2 airspace area is effective during the specific dates and times when the Class D airspace is not in effect.

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA on or before March 30, 2001. No comments to the proposal were received. The rule is adopted as proposed.

The coordinates for this airspace docket are based on North American Datum 83.

Class E airspace areas designations for airspace extending upward from the surface of the earth are published in paragraph 6002 of FAA Order 7400.9H, dated September 1, 2000 and effective September 16, 2000, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation based in this document will be amended in the order.

This amendment to Part 71 of the Federal Aviation Regulations (14 CFR part 71) provides controlled Class E airspace extending upward from the surface for aircraft conducting IFR operations at the Washington County Regional Airport, Hagerstown, MD at times when the ATCT is closed.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

On February 20, 2001 a document proposing to amend Part 71 of the Federal Aviation Regulations (14 CFR part 71) by establishing Class E airspace extending upward from 700 feet Above Ground Level (AGL) for an RNAV aproach to the South Albany Airport, South Bethlehem, NY was published in the Federal Register (66 FR 1860-10861).

Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA on or before March 22, 2001. No comments to the proposal were received. The rule is adopted as proposed. The coordinates for this airspace docket are based on North American Datum 83.

Class E airspace areas designations for airspace extending upward from 700 feet or more above the surface of the earth are published in paragraph 6005 of FAA Order 7400.9H, dated September 1, 2000 and effective September 16, 2000, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be amended in the order.

This amendment to Part 71 of the Federal Aviation Regulations (14 CFR part 71) provides controlled Class E airspace extending upward from 700 feet above the surface for aircraft conducting IFR operations at the South Albany Airport, South Bethelem, NY.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation it is certified that this rule will not have significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

Federal Register document 01-7419, Airspace Docket No. 00-AEA-03FR, published on April 13, 2001 (66 FR 19083), established Class E airspace at Salisbury, MD. An error was discovered in the geographic coordinates for the Salisbury, MD airport and two other geographic points were omitted. This action corrects those errors.

Pfizer, Inc., 235 East 42d St., New York, NY 10017-5755, filed a supplement to NADA 8-622 that provides for use of TERRAMYCIN® (oxytetracycline hydrochloride) Soluble Powder for making medicated drinking water for the treatment of various bacterial diseases of livestock. The supplemental NADA provides for a zero-day slaughter withdrawal time after the use of the product in drinking water of swine. The application is approved as of April 25, 2001, and the regulations are amended in 21 CFR 520.1660d to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

The agency has determined under 21 CFR 25.33(a)(1) 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.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

2. Section 520.1660d Oxytetracycline hydrochloride soluble powder is amended in paragraph (d)(1)(iii)(C) by removing “Nos. 000069 and 059130” and by adding in its place “No. 059130 and zero days those products sponsored by No. 000069”.

Alpharma Inc., One Executive Dr., P.O. Box 1399, Fort Lee, NJ 07024, filed NADA 141-083 that provides for use of Avatec® (90.7 grams per pound (g/lb) lasalocid as lasalocid sodium) and Baciferm® (50 g/lb bacitracin zinc) Type A medicated articles to make two-way combination drug Type C medicated chicken feeds. The combination Type C medicated feeds are used for prevention of coccidiosis caused by Eimeria tenella , E. necatrix , E. acervulina , E. brunetti , E. mivati , and E. maxima , and for increased rate of weight gain and improved feed efficiency in broiler chickens. The NADA is approved as of April 18, 2001, and the regulations are amended in 21 CFR 558.311 to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

FDA has determined under 21 CFR 25.33(a)(2) 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.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Pursuant to Treasury Order 120-01 (formerly 221), dated June 6, 1972, and 120-03, dated November 5, 1990, the Secretary of the Treasury delegated to the Director of the Bureau of Alcohol, Tobacco and Firearms (ATF), the authority to enforce, among other laws, the provisions of section 4181 of chapter 32 and chapters 51, 52 and 53 of the Internal Revenue Code of 1986 (IRC) and the Federal Alcohol Administration (FAA) Act. The Director has subsequently redelegated certain of these authorities to appropriate subordinate officers by way of various means, including by regulation, ATF delegation orders, regional directives, or similar delegation documents. As a result, to ascertain what particular officer is authorized to perform a particular function under such provisions, each of these various delegation instruments must be consulted. Similarly, each time a delegation of authority is revoked or redelegated, each of the delegation documents must be reviewed and amended as necessary.

ATF has determined that this multiplicity of delegation instruments complicates and hinders the task of determining which ATF officer is authorized to perform a particular function. ATF also believes these multiple delegation instruments exacerbate the administrative burden associated with maintaining up-to-date delegations, resulting in an undue delay in reflecting current authorities.

Accordingly, this final rule rescinds all authorities of the Director in part 70 that were previously delegated and places those authorities with the “appropriate ATF officer.” Most of the authorities of the Director that were not previously delegated are also placed with the “appropriate ATF officer.” Along with this final rule, ATF is publishing ATF Order 1130.19, Delegation Order—Delegation of the Director's Authorities in 27 CFR Part 70, Procedure and administration, which delegates certain of these authorities to the appropriate organizational level. The effect of these changes is to consolidate all delegations of authority in part 70 into one delegation instrument. This action both simplifies the process for determining what ATF officer is authorized to perform a particular function and facilitates the updating of delegations in the future. As a result, delegations of authority will be reflected in a more timely and user-friendly manner.

In addition, this final rule also eliminates all references in the regulations that identify the ATF officer with whom an ATF form is filed. This is because ATF forms will indicate the officer with whom they must be filed. Similarly, this final rule also amends part 70 to provide that the submission of documents other than ATF forms (such as letterhead applications, notices and reports) must be filed with the “appropriate ATF officer” identified in ATF Order 1130.19. These changes will facilitate the identification of the officer with whom forms and other required submissions are filed.

This final rule eliminates all references to an ATF region, which were comprised of certain States for ATF administrative purposes but no longer exist. Also, this final rule eliminates the definition of “delegate” in § 70.11 and the references to “delegate” in § 70.803. The definition of delegate in § 70.11 is any officer, employee, or agency of the Department of the Treasury authorized by the Secretary of the Treasury directly, or indirectly by one or more redelegations of authority, to perform the function mentioned or described in the delegation order. To prevent any misunderstanding or confusion with the ATF delegation order, ATF Order 1130.19, we are removing this term from the aforementioned sections of 27 CFR part 70.

This final rule also makes various technical amendments to Subpart D—Administrative and Miscellaneous Provisions of 27 CFR part 70. Specifically, a new § 70.3 is added to recognize the authority of the Director to delegate regulatory authorities in part 70 and to identify ATF Order 1130.19 as the instrument reflecting such delegations. Also, § 70.2 is amended to provide that the instructions for an ATF form identify the ATF officer with whom it must be filed.

ATF has made or will make similar changes in delegations to all other parts of Title 27 of the Code of Federal Regulations through separate rulemakings.

This final rule removes a sentence from § 70.438 that refers to an obsolete ATF publication, corrects references to other sections of regulations in § 70.253(b)(1) and (2) and in § 70.438, corrects § 70.224 that refers to the general statute of limitations on collecting an assessment in accordance with 26 U.S.C. 6502, and corrects § 70.482(e) by raising the amount for which a Chief Counsel's opinion need not be filed for offers-in-compromise in accordance with 26 U.S.C. 7122(b).

In § 70.802 we have eliminated the card index record of permits, which is no longer maintained, and made appropriate changes to the information available or provided by ATF because of the disclosure restrictions of 26 U.S.C. 6103.

The provisions of the Paperwork Reduction Act of 1995, Pub. L. 104-13, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR part 1320, do not apply to this final rule because there are no new or revised recordkeeping or reporting requirements.

Because no notice of proposed rulemaking is required for this rule, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) do not apply. A copy of this final rule was submitted to the Chief Counsel for Advocacy of the Small Business Administration in accordance with 26 U.S.C. 7805(f). No comments were received.

It has been determined that this rule is not a significant regulatory action because it will not: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in Executive Order 12866.

Because this final rule merely makes technical amendments and conforming changes to improve the clarity of the regulations, it is unnecessary to issue this final rule with notice and public procedure under 5 U.S.C. 553(b). Similarly it is unnecessary to subject this final rule to the effective date limitation of 5 U.S.C. 553(d).

The principal author of this document is Robert Ruhf, Regulations Division, Bureau of Alcohol, Tobacco and Firearms.

On February 20, 2001, the Postal Service published for public comment in the Federal Register (66 FR 10868-10872) a proposal to require that for Periodicals and Standard Mail prepared in sacks: [1] packages must not weigh more than 20 pounds as provided in new DMM M020.1.8a; [2] packages of pieces with covers of coated stock that are not individually enclosed in an envelope or protective wrapper (e.g., polywrap or uncoated paper wrapper) must not exceed 3 inches in height if secured with string or twine, rubber bands, or only shrinkwrap, and must not exceed 6 inches in height if secured with two plastic straps or shrinkwrap plus one or two bands as provided in new DMM M020.1.8d; and [3] packages of pieces with outer surfaces of uncoated stock must not exceed 8 inches in height, although it is recommended that such packages not exceed 6 inches in height, as provided in new DMM M020.1.8e. It was also proposed that the general packaging standards in DMM M020 be revised by: [1] Eliminating the required banding sequence in DMM M020.2.3b that the first strap be placed around the length and the second around the girth when double-banding packages over 1 inch (redesignated DMM M020.1.4); [2] requiring, for packages of pieces of nonuniform thickness, counter-stacking for sacked and palletized mail to create packages of more uniform thickness as provided in revised DMM M020.1.2; [3] reinforcing and clarifying the requirement that packages over 1 inch in height, whether placed in sacks or on pallets, must be secured with at least two bands, with shrinkwrap, or with shrinkwrap plus one or two bands as provided in DMM M020.1.4d. The deadline for submitting comments on the proposal was March 22, 2001.

Part A below summarizes the revisions to the proposal made in this final rule. Part B sets forth the evaluation of the comments received. It should be noted that although the DMM refers to individual pieces secured together as a unit to a single presort destination as a “package,” many in the mailing industry refer to these units of mail as “bundles,” and the terms are used interchangeably in the discussion of comments below.

Based on comments received in response to the proposed rule, the Postal Service is adopting the standards set forth in the proposed rule with the following changes:

(1) DMM M020.1.2 in the proposed rule has been revised to allow, rather than require, mailers to counter-stack pieces of nonuniform thickness to create packages of more uniform thickness, which are more likely to maintain their integrity during transportation and processing.

(2) DMM M020.1.5b has been revised in the final rule to eliminate a required sequence for applying shrinkwrap plus a strap to packages on pallets. The revised language is consistent with DMM M020.1.4b, M020.1.8d, and M020.1.8e(2) in this final rule.

(3) DMM M020.1.8f has been revised in the final rule to clarify that “uncoated stock” also refers to pieces with coated covers that are individually enclosed in a cover or mailing wrapper of uncoated stock such as an envelope, sleeve, protective cover, partial wrapper, or polybag, and pieces with outer surfaces composed of material other than paper (e.g., plastic, cloth, fiberboard, or metal). As such, packages of such pieces prepared in sacks may be up to 8 inches high (thick). This section is also revised in the final rule to clarify that although packages of pieces of uncoated stock may be up to 8 inches high, it is recommended that such packages not exceed 6 inches in height.

DMM M020.1.8b in the proposed rule, which repeated general language already included in M020.1.4, has been deleted from the final rule. DMM M020.1.8d(3) and M020.8d(4) in the proposed rule contained standards for measuring packages of pieces with coated cover stock. These standards were repeated in DMM M020.1.8e(3) and M020.8e(4) for pieces with uncoated cover stock. Therefore, these items are deleted and their content, applying to all packages of Periodicals and Standard Mail prepared in sacks, is redesignated in the final rule as M020.8c and M020.8d.

Twelve comments were received. All commenters were generally supportive of the efforts undertaken by the Postal Service and mailing industry to improve the processing, transporting, and handling of the mail, and two commenters indicated support for all of the changes in the proposed rule.

One commenter stated that the problem of broken bundles is not new. The commenter noted that over the past 15 years, the Postal Service and outside consultants identified “root causes” for bundle breakage but took no serious actions to resolve the problem prior to the efforts of the Mailers Technical Advisory Committee (MTAC) Package Integrity Work Group to collect breakage data for live mail and to conduct a controlled test for sacked mail. The proposed rule is intended to address these concerns by updating and clarifying DMM M020 standards.

One commenter representing Periodicals mailers has worked with the Postal Service to reduce the incidence and costs of bundle breakage. As part of the Periodicals Operations Review Team and through MTAC, the commenter and members observed an alarming rate of bundle breakage for Periodicals and Standard Mail flats and worked with the Postal Service to understand root causes and identify changes to improve integrity.

One commenter expressed support for the targeted approach to a cost-effective solution to the bundle breakage problem that will not overburden publishers and printers and stated that the proposal will help in the short term. The commenter also believes that a long-term solution is needed.

One commenter favors cost-effective solutions to the bundle breakage problem and wants the Postal Service to capture savings identified in conjunction with the Periodicals Operations Review Team in the recent rate case, but believes the proposed changes could potentially impose a huge financial burden on customers.

One commenter representing smaller-volume Periodicals publications, with circulation generally under 100,000 and mailings prepared primarily in sacks rather than on pallets, recognizes bundle breakage is a problem. This commenter is concerned that the proposed rule “is a costly (to mailers) stopgap measure that may not be effective in accomplishing its stated purpose of reducing USPS handling costs” but expects the proposal to be implemented and members to adapt. This commenter also believes that additional steps the Postal Service is taking, such as educating mailers, improving induction methods, and enabling customers to prepare flats in a manner that supports processing on flat sorting machines (FSMs), are more likely than the proposed changes to cause a meaningful change in processing costs.

The Postal Service and mailing industry have been working together on several fronts to address the serious issue of bundle breakage and its associated costs, which are ultimately reflected in postal rates. As noted, this problem is not new and this final rule is but one of several ongoing efforts to make long-needed changes that will have an overall positive effect on bundle breakage and flats processing costs and efficiencies in general. The MTAC Package Integrity Work Group was created to address the bundle breakage problem identified by the Periodicals Operations Review Team. This final rule represents one step toward achieving incremental improvements while long-term solutions are explored. Various concerns raised by commenters about specific provisions of DMM M020 that are contained in the proposed rule are described and responded to below.

Two commenters questioned whether the proposed requirement to counter-stack pieces of nonuniform thickness to create packages of more uniform thickness will increase carrier and clerk costs to re-orient the pieces before sorting them by a greater amount than the savings that might result from reduced bundle breakage costs.

One commenter requested further clarification of the situations that would require counter-stacking to avoid different interpretations by acceptance personnel and mailers. It was suggested that a clearer definition of “non-uniform thickness” be provided, possibly including a measurement, such as “if there is more than .25″ difference in thickness from top to bottom (thinnest to thickest).”

Based on the comments and upon further review of this issue, the Postal Service has determined that re-orienting counter-stacked pieces to prep flats for delivery or to run on a flat sorting machine (e.g., an AFSM 100) is time consuming and, in many situations, may add to processing costs. Because it is difficult to describe objectively each situation when it would be appropriate to counter-stack pieces to maintain package integrity, M020.1.2 in this final rule has been revised to recommend, rather than require, counter-stacking to create more uniform packages. In addition, language has been added to clarify that mailers should limit the use of counter-stacking to those situations when it is expected to actually improve the uniformity and stability of a package. For example, some postal processing facilities have reported that they receive packages from mailers as small as 1 inch high that contain three or four counter-stacked groups. These small counter-stacked groups have little, if any, impact on the integrity of the package and make it difficult for postal personnel to re-orient the mail to run on a flat sorting machine or for delivery.

Two commenters expressed their approval of the proposal to limit the weight of Periodicals and Standard Mail packages prepared in sacks to 20 pounds and noted that packages that exceed this weight contribute to bundle breakage and cannot be processed on the SPBS. Furthermore, one commenter stated that the 20-pound maximum for packages in sacks is neither unreasonable nor burdensome and is consistent with the standard for packages on pallets.

The 20-pound maximum package weight is retained in this final rule.

Two commenters indicated that mailers could move more Standard Mail out of sacks and onto pallets, and thereby reduce package breakage rates for this mail, if they were permitted to use banding instead of shrinkwrap to secure packages on BMC pallets. One commenter noted that the processing of bundles on BMC parcel sorting machines (PSMs) is abusive and normal packaging may not withstand this processing and recommended that the Postal Service identify the BMCs that do not process bundles on their PSMs. Mailers should then be permitted to use banding instead of shrinkwrap for bundles on BMC pallets sorted to those facilities.

One commenter secures packages of Standard Mail with bands around the length and girth and reported receiving few if any complaints about breakage. This mailer must sack mail that remains after 5-digit and SCF pallets are prepared because of the requirement to shrinkwrap packages on BMC pallets. These sacks are often placed on BMC pallets. This commenter indicated that most letter shops do not have the ability to shrinkwrap packages and could move approximately 80 percent of packages currently prepared in sacks onto pallets if the Postal Service would allow banded packages on BMC pallets.

In conjunction with other efforts focused on moving mail out of sacks to reduce the potential for package breakage and the costs associated with such breakage, the Postal Service will explore potential opportunities to place packages secured with material other than shrinkwrap onto BMC pallets. However, before any final decision is made, the impact that such a change could have on processing costs and service must be fully evaluated. For example, candidate packages may currently be in carrier route-through ADC-level sacks and some analysis would be required to determine the potential difference in container and package handling costs if these packages were to move out of more finely sorted sacks and onto BMC pallets. The Postal Service must also assess the potential impact on package breakage rates resulting from more package handlings but fewer sack handlings, particularly for carrier route, 5-digit, and 3-digit packages, and how this could affect service considering that the recovered pieces must generally be transported to the parent plant for appropriate piece distribution (e.g., on a flat sorting machine). Finally, the methods used by BMCs to process packages on BMC pallets must be reviewed to determine if service would be negatively impacted when compared to the service the mail would receive if prepared in sacks. Sacked mail is processed by BMCs to plants or delivery units where the contents of the sacks are distributed (e.g., are packages at BMCs processed on parcel sorting machines or SPBSs; what sort schemes are used). If a decision is made to expand the type(s) of package securing methods that are acceptable for mail on BMC pallets, it is possible that the standards could be somewhat more restrictive than the current standards for mail prepared on pallets. For example, because data collected by the MTAC Package Integrity Work Group during live mail tests showed that mail secured with rubber bands had the highest breakage rates for palletized packages (2.1 percent), restrictions could be placed on this type of mail. In summary, no changes to the standards for packages on BMC pallets are included in this final rule.

Two commenters requested that proposed DMM M020.1.8d be reworded to clarify that “uncoated” pieces that may be prepared in packages up to 8 inches high includes pieces with coated covers that have been enclosed in a protective cover or mailing wrapper as described in DMM C200.1.7. One commenter asked that the Postal Service clarify that individually polywrapped pieces fall into the category of “uncoated” pieces, whether or not the pieces inside the wrapper have coated covers.

This final rule clarifies in DMM M020.1.8e that the term “uncoated stock” includes pieces with coated covers that are individually enclosed in a cover or mailing wrapper of uncoated stock such as an envelope, sleeve, protective cover, partial wrapper, or polywrap, and also includes pieces with outer surfaces composed of material other than paper (e.g., plastic, cloth, fiberboard, or metal). The final rule also specifies that packages of such pieces must not exceed 8 inches in height.

One commenter prepares Periodicals that have a low height-to-weight ratio in firm bundles that are shrinkwrapped and strapped. These bundles may occasionally exceed the proposed uncoated pieces maximum package height of 8 inches, possibly reaching 10 inches in height. The mailer has not received any feedback about broken bundles and requests that the maximum height for uncoated packages in sacks be raised from 8 inches to 10 inches. If the maximum height will not be raised, clarification was requested as to whether current DMM M020.1.6a (redesignated as M020.1.7a in this final rule) allows payment of one piece rate if two firm bundles are created to avoid exceeding the maximum height limit. In addition, this commenter asked that the final rule include a clarification of the difference between the recommended maximum height of 6 inches and the required maximum height of 8 inches for packages of uncoated pieces prepared in sacks.

The Postal Service believes that concerns about bundle integrity and successful SPBS processing are compelling reasons to limit the maximum height of packages of uncoated pieces in sacks to 8 inches. The 20-pound maximum weight ensures packages are compatible with SPBS processing and it is likely that most packages that exceed 8 inches, when measured at the lowest point as permitted by the new standards, would also exceed 20 pounds. Exceptions are likely to be pieces similar to the DVDs in plastic containers that were included in the controlled test that are less dense than printed material, including circulars, magazines, newspapers, catalogs, and so forth. When such lightweight but thick items are prepared in tall packages (e.g., packages taller than 8 inches), the packages are more likely to break during transportation or processing or to lean and tumble into the wrong container as they are sorted on the SPBS.

The maximum package height of 8 inches for packages of uncoated pieces prepared in sacks is retained in this final rule. DMM M020.1.8.f(1) has been revised to consolidate the maximum permitted height of 8 inches and the recommended maximum height of 6 inches for packages of uncoated pieces prepared in sacks. We believe that this will clarify that such packages may be up to 8 inches in height but the Postal Service wants to encourage mailers to limit these packages to a maximum height of 6 inches. This recommendation is intended to help ensure that bundle integrity will be maintained while recognizing that some mailpieces can be prepared in taller packages (e.g., up to 8 inches high and weighing up to 20 pounds) that can be successfully processed by the Postal Service.

If a firm bundle must be split in two to meet the new height restrictions, each firm bundle is subject to a separate per piece charge to reflect the handling of two pieces by the Postal Service. For purposes of rate eligibility, pieces prepared as one firm bundle under current standards that must be prepared as two firm bundles due to the height restrictions in this final rule would pay two per piece charges, reflecting the fact the Postal Service is processing and delivering two pieces. Under DMM M020.1.6a (redesignated M020.1.7a) these would also count as two addressed pieces in determining whether there are six or more pieces to a presort destination when determining Periodicals rate eligibility.

Two commenters agreed that coated stock does contribute to package breakage. One stated that there is no question that pieces with coated cover stock contribute to bundle breakage and that it makes sense to reduce the maximum height to 6 inches for banded or strapped bundles.

One commenter confirmed that the highest breakage rate occurred for sacked flats with glossy covers of coated stock, and bundles 4 to 6 inches high broke 42 to 100 percent of the time in the MTAC Package Integrity Work Group controlled test, before the bundles were even handled individually. This commenter stated that these high breakage rates “cause significant costs (in the form of additional piece handlings and machine slowdowns and stoppages) borne by all mailers of flats.” In the controlled test, adding a plastic strap to shrinkwrapped packages reduced the breakage rate by 25 percent; packages with two plastic straps had a breakage rate 15 percent lower than the rate for shrinkwrapped packages; and reducing the size of packages by 1 inch reduced breakage by approximately 14 percent.

The key focus of this final rule is to reduce breakage rates for packages of pieces with coated cover stock.

Seven commenters stated that the proposal to limit, for Periodicals and Standard Mail in sacks, the size of packages of pieces with coated stock secured with rubber bands, string or twine, or shrinkwrap without a band to 3 inches in height will increase the number of packages that some mailers will prepare.

One commenter stated that the creation of more packages will add to Postal Service mail processing costs, which is not in the best interests of the mailing industry or the Postal Service, and another stated that the proposed rule could increase by nearly 5 percent the number of bundles that one of its members produces.

One commenter suggested that the proposal will cause mailers to prepare a greater number of packages that are more difficult to open, which will change processing costs. The commenter also stated they would be more positive about the changes if the Postal Service had attempted to quantify added costs associated with the additional packages, such as those related to Postal Service-allied labor costs for opening packages and prepping mail for automated flat sorting machines.

One commenter noted that a Postal Service representative had stated that “over 30 percent of the USPS handling and processing costs for flats were depackaging” and that the proposal would be contrary to the objective of creating fewer packages as well as fewer sacks. This commenter also stated that preparing smaller packages secured only with shrinkwrap for sacked mail will slow production and add to mailer costs. The mailer will need to have list processors provide bundle separation marks for production lines that do not have an “auto slow down” control to maximize bundle size and machine speed. For one customer, some packages for sacked mailings may contain as few as two pieces to meet the 3-inch height limit.

One commenter questions whether the Postal Service documented or measured the cost of handling the additional packages that will be produced if the proposed changes are adopted and asks if the Postal Service has a metric to ensure that the cost reductions for breakage materialize as a result of the proposed rule.

Analysis of the MTAC Package Integrity Work Group test data shows that reducing the size of “high-risk” packages, specifically packages of pieces with coated cover stock prepared in sacks, will result in significant savings. In the controlled package integrity test, the workgroup found that 75 percent of 4-inch and 6-inch packages of coated pieces entered at an origin facility broke even before the packages were handled individually out of the mailer-prepared sacks. Based upon additional analysis of test data for both the live mail and controlled tests, the Postal Service believes that cutting the size of a large package of coated flats in half would reduce bundle breakage for the affected mail by approximately 50 percent.

Using the same methodology that the Postal Rate Commission (PRC) used in Docket No. R2000-1 to analyze this cost trade-off, we found that cutting the average package size for Periodicals and Standard Mail high-risk flats in half (e.g., from an average of 20 down to 10 pieces per package and from 15 down to 7.5 pieces per package) may reduce average mail processing costs for these flats by as much as 0.4 to 0.7 cents per piece. Furthermore, the PRC's methodology does not take into account reductions in allied labor costs that may result from reduced package breakage. The focus of this final rule is to significantly reduce package breakage using current packaging methods. It is not expected that packages prepared by mailers will be any more difficult to open as a result of these changes. It is expected, as noted previously, that the Postal Service will have to process some additional packages that are more likely to maintain their integrity and that packaging in general for mail prepared both in sacks and on pallets will improve as mailers use current methods more effectively.

The Postal Service does not have a metric to ensure that the projected cost reductions materialize as a result of this final rule. After this final rule has been in effect for several months, in order to quantify whether package breakage rates have decreased, the Postal Service plans to collect additional data for live mail in the same manner as originally collected by the MTAC Package Integrity Work Group in 1999.

One commenter stated that because of the 3-inch package height maximum for some mail, packages of large Periodicals publications could sometimes contain fewer than six pieces. This commenter requested that the final rule clarify that rate eligibility standards for such packages will be satisfied as long as there are a minimum of six addressed pieces for the presort level, even if they are prepared in more than one physical package due to the maximum height limit.

Under the provisions of current DMM M020.1.6a, an individual package may be prepared with fewer than the minimum number of pieces required by the standards for the rate claimed without loss of rate eligibility if a greater number of pieces would exceed the maximum physical size for a package and the total number of pieces for that presort destination meets the minimum volume standard (e.g., 30 pieces are available to meet a 10-piece minimum, but a package of eight pieces is 6 inches thick). In the proposed rule, this section was redesignated as M020.1.7, but was not printed. The complete contents of redesignated M020.1.7 are published in this final rule to clarify that rate eligibility for smaller packages prepared under the new height limits is based on the total number of pieces for the presort destination.

Seven commenters indicated that many printers use only shrinkwrap to secure packages and have removed strapping from most of their production lines. Three commenters stated that this allows lines to run faster, more efficiently, and is less costly and that adding strappers to their lines would be expensive.

One commenter stated that most of its mail is sacked due to volume and densities of publications and most mail is also of coated stock. This mailer would choose the option of reducing package size to a 3-inch maximum height instead of adding strapping equipment but is concerned that it will add costs by slowing bindery mailing equipment production speeds, adding material, and increasing labor. Because of the competitive market, the mailer would have to absorb additional costs and would like instead to test heavier shrinkwrap that could be used without an additional strap on packages over 3 inches that are prepared in sacks. This would add some material costs but less than those resulting from the proposed changes. This commenter indicated that the alternative of adding additional strapping equipment that would permit larger packages would require a capital investment of over $500,000 for the strappers and building expansions to accommodate the additional equipment. Currently, this mailer uses only banding to secure packages of individually polywrapped pieces. This commenter also suggested that the Postal Service allow a variety of packaging methods as long as mailers first submit packages for testing and approval.

One commenter stated that instead of adding strappers, the maximum package height would be reduced and the added cost for changing the size of some packages would be approximately $250,000. The commenter prepares sacks and pallets and could set the parameters for only their sacked mail to a maximum package height of 3 inches. For some mail, this could double the number of packages and impact their costs and productivity. This commenter suggests that the Postal Service, in conjunction with the printing industry, test and determine formulations and mil strength of polyfilm that could be used instead of an additional strap to secure packages of coated pieces that are taller then 3 inches.

One commenter stated it would have to spend millions of dollars to purchase and install new strappers and would lose millions of dollars in maintenance, downtime, and lower productivity. It requested that mailers be given the option of selecting the securing method they prefer that makes the most sense for their operation and their customers.

One commenter stated that additional strapping requirements will add to printers' and publishers' mail preparation costs and the Postal Service must capture savings from the proposed standards or the change will have a net negative impact on publishers and printers.

One commenter suggested that, as a next step, they would like to test heavier shrinkwrap (e.g., 2 to 3 mils) or high-performance formulations that may be substituted for the addition of a strap to shrinkwrapped packages or bundles of glossy mail in sacks that exceed 3 inches. This commenter stated that most of the mailing industry uses film that is 1.25 to 1.5 mils thick.

One commenter stated that prohibiting packages of pieces with coated stock that exceed 3 inches unless they are double-strapped or strapped with shrinkwrap is burdensome and may be unreasonable because printers have moved away from strapping to shrinkwrap. The best solution may be to require heavier shrinkwrap.

The Postal Service developed the proposed rule in conjunction with a joint Postal Service/industry effort to reduce package breakage and lower Postal Service operational costs by improving mailer packaging and Postal Service processing of such mail. Data describing the current condition of packages of Periodicals non-letters and Standard Mail flats was collected and analyzed by the workgroup to identify changes that could be made to achieve these results. MTAC workgroup members generally agreed that an analysis of test data clearly pointed to a need to either improve the methods for securing tall packages of pieces of coated stock or reduce the size of such packages if securing methods are not improved. Workgroup members included major mailers that have eliminated banding from most of their production lines and whose operations will be impacted by these changes. These participants indicated that they did not expect their companies to purchase new strapping equipment that would allow them to create 6-inch packages of coated pieces. Instead, they were likely to use current packaging materials, such as shrinkwrap, and to limit the height of packages of coated pieces to be placed in sacks. Several of these participants indicated that many major mailers use shrinkwrap material that is from 0.75 to 1.25 mils thick to secure palletized and sacked packages and that, based on test data, this polywrap is not effective without the addition of a strap in maintaining the integrity of tall packages of coated pieces when they are prepared in sacks. There was also general, although reluctant, agreement that the test data suggested that the proposed packaging changes probably offered the best near-term potential to achieve cost savings from reduced package breakage for mail in sacks. However, other efforts currently under way to move more mail out of sacks and onto pallets, to improve Postal Service processing of packages, and to find alternatives to current preparation methods were seen as offering the greatest long-term potential to reduce the costs associated with package breakage. While the Postal Service will continue pursuing these other efforts, we do not believe that we can afford to delay steps that eliminate from the sacked mail environment those packages that have been clearly identified as the most likely to break.

Some perspective on what might be involved in establishing a certification program for packaging materials and methods can be gained by looking at the development of the process that led to the current standards for certifying polywrap films for automation rate flats. The Postal Service believes that a program to certify packaging materials and methods could be even more complex and costly to implement because of the many variables related to package contents (mailpiece characteristics) and size that would have to be tested at many mailer locations using a broad range of packaging materials and securing methods. At this time, the Postal Service does not have resources to apply to such an effort and believes that the combination of efforts to reduce package breakage currently under way, including better feedback to customers when package integrity problems are identified during postal processing, offer the most promise for improvements.

The Postal Service is open to future discussions regarding industry testing and recommendations for some specific polyfilm formulations that may be used successfully for taller, heavier packages of pieces of coated stock. In assessing alternatives to the materials used today by large printers who probably prepare the majority of their mail on pallets, the overall cost of applying this material to packages on pallets as well as in sacks must also be considered. If mailers were to use a heavy polyfilm that maintains the integrity of the worst mail they produce (i.e., tall packages of coated pieces in sacks) on all of their mail, including mail on pallets, mailer application costs and Postal Service removal and disposal costs could also increase.

To mitigate the impact of this final rule on overall costs, mailers who prepare both palletized and sacked mail need to set different package height maximums for each type of mail when presorting their mailing lists. Several major presort software vendors have stated that their software provides users with the ability to do this.

One commenter has strappers in some processes that apply a single strap around the girth of a package due to package size or an off-balance bind on the mailpiece. The strap is applied after the shrinkwrap, and the commenter therefore suggests that DMM M020.1.5b read “Packages may be secured with heavy gauge shrinkwrap AND plastic banding, only shrink wrap, or only banding material if they can stay together during normal processing.” The proposal in DMM M020.1.5b stated that “Packages may be secured with heavy-gauge shrinkwrap OVER plastic * * *rdquo;.

To be consistent with DMM M020.1.4b, M020.1.8d, and M020.1.8e(2), the language in M020.1.5b has been changed in this final rule to eliminate a required sequence for applying shrinkwrap plus a strap to packages on pallets.

Three commenters stated that the Postal Service must identify a container that can be used instead of sacks for mail that cannot be placed on pallets.

One commenter noted that the Postal Service must urgently pursue alternatives to sacking for those short-run publications that have insufficient density or volume to be palletized. These publications must be placed in sacks, which creates added costs at printers and results in damage from handling by the Postal Service. This commenter stated that some Periodicals have moved from sacks to cartons on pallets under local arrangements.

One commenter encourages the Postal Service to develop a cost-effective alternative to sacking that is compatible with the flats automation strategy for small volume mailers who may not be able to palletize.

One commenter stated that mail secured with straps and placed in sacks often becomes damaged when entered into the SPBS system by being crushed by other mail. Crushing can create broken bundles and also make the pieces incompatible with Postal Service automated flat-sorting machines. This commenter also stated that removing banding from bundles can be dangerous to USPS employees and that for these reasons mailers should be permitted to place Periodicals and Standard Mail flats in flat trays instead of sacks, preferably unbundled in a tray-based preparation like that currently offered for First-Class Mail. This commenter also suggested that placing flats in trays that can be palletized and are compatible with Postal Service tray management systems (TMS) will save costs by eliminating processing of bundles on the SPBS and making flats more compatible with processing on the AFSM 100 or FSM 1000. The Postal Service could limit transportation and handling of these trays by permitting them only for palletized mail drop shipped by mailers to specified entry levels.

The Postal Service must evaluate the broad impact of a move from sacks to flat trays or another type of alternate container for Periodicals non-letters and Standard Mail flats. The potential for improved package integrity must be weighed against many other factors. In moving from sacks to flat trays, we would expect to see a decline in cube utilization. Compared to packages of flats prepared on pallets or in sacks, flat trays often contain a significant amount of unused space within and between trays for both mailers/consolidators and the Postal Service. For example, a thin Periodical with 24 pieces to a destination placed in a flat tray might result in a tray that is only one-quarter full. For mail that must be transported beyond the origin plant service area, this reduced cube utilization is likely to result in less volume per vehicle and increased costs.

Another consideration is the processing of containers sorted to destinations outside of the service area of the origin plant. Currently, sacked mail is processed efficiently through the BMCs on the sack sorter machines (SSMs), and sufficient SSM capacity exists. Flat trays, however, are sorted manually in the BMCs, and if sacks converted to trays this processing operation could quickly become a bottleneck due to lower productivity, less depth of sort, and greater space requirements, again increasing costs.

For some Periodicals and Standard Mail there would not be a one-to-one trade-off of sacks for trays. For example, mail for one presort destination that today fills a sack may have to be placed in two trays. This change would increase the number of container handlings and associated costs.

There is also the issue of lack of flat tray availability given the increased demand for flat trays to accommodate incoming secondary processing on the AFSM 100s. The Postal Service does not have money in its budget to purchase additional large quantities of flat trays for mailers to use instead of sacks.

Finally, offering a tray-based preparation option for Periodicals and Standard Mail with an optional 5-digit sort (mirroring the current option for First-Class flats) would significantly increase the volume requiring incoming primary piece processing to sort mail to the 5-digit level on the AFSM 100s and FSM 1000s. This volume was not anticipated in the equipment deployment and additional flat sorting machines would need to be purchased and deployed to handle the additional incoming primary volume.

The Postal Service recognizes that there may be some future opportunities to explore alternatives to sacks in some situations; however, this final rule does not contain any changes to current sacking requirements.

Six commenters indicated that they are aware that the Postal Service is exploring alternate mail preparation for flats to reduce or eliminate packaging of palletized mail to reduce Postal Service costs.

One commenter suggests that alternate preparation could reduce the bundle breakage problem in addition to reducing allied labor costs associated with opening packages.

One commenter who is participating in the test stated that mailers do not want to make capital investments to improve packaging now when investments may be required in the near future for different preparation methods. Another test participant does not think it would be prudent to make major capital investments in bindery packaging and material handling equipment until the Postal Service flats automation strategy is finalized.

One commenter stated that the Postal Service should examine whether a “bundle-less” preparation, such as that being tested for pallets, could be extended to sacked mailings.

The Postal Service is partnering with the mailing industry to test methods for preparing flat-sized mail in a manner that best supports current and future flats processing and is examining the potential cost savings opportunities of eliminating or reducing packages on pallets. The test parameters were announced in the February 22, 2001, issue of the Postal Bulletin. It is because of the many other efforts, such as the alternate flats preparation test, currently under way to improve flats processing that the Postal Service is implementing this final rule. Because new or modified manufacturing processes may prove to be justified in the future, the revised standards were designed to reduce overall costs now without requiring mailers to change their manufacturing methods, and all current methods of securing packages will continue to be acceptable.

One mailer indicated that presort software currently controls package size by weight, not height, and the Postal Service should develop a standard weight-height conversion table that allows mailers to comply with the proposed rule by using weight as a proxy for height. This flexibility would facilitate compliance in the shortest time frame with less disruption to the industry.

The data collected relating to bundle breakage in the live mail test and the resulting proposed standards do not include information to correlate height to weight. Although some data is available from the controlled test to develop a height-to-weight relationship, it would apply only to the test pieces. It is difficult to develop a standard conversion chart that would consistently result in packages meeting the proposed height standards due to the variations in size, composition, method of binding, paper stock, inserts, and so forth for flat-size mail. For example, packages of a dense perfect-bound publication printed on heavyweight coated paper are likely to have a very different weight-to-height relationship than packages of an enveloped piece containing a lightweight bulky insert. It would be more feasible and useful for mailers to use actual sample mailpieces representing their regular mix of mail to create their own weight-to-height conversion tables. Presort software does have the ability to control package height using the thickness of an average piece. This final rule contains only maximum height standards for packages of Periodicals and Standard Mail prepared in sacks.

One commenter questioned whether the 9 inch by 12 inch envelopes in the controlled test were considered to represent the norm for enveloped flats. This mail experienced an approximate 58 percent breakage rate due to an insert in the center that caused the larger packages to become shaped like a football.

No conclusions were drawn regarding how representative the test piece might be of the general flats mailstream. The only conclusion that was drawn was that counter-stacking is unlikely to create stable tall packages of pieces that are thicker in the center than they are on the edges and mailers may instead need to limit the package size of such pieces or add additional banding to the packages.

Three commenters discussed potential opportunities for moving more mail from sacks to pallets.

One commenter indicated that preparing lighter-weight pallets, (e.g., 150 pounds) would help move mail out of sacks, while another had mixed feelings about preparing lighter-weight pallets as a solution for eliminating sacks. Although 250-pound pallets may result in deeper penetration and better delivery for some mail, they may cause staging problems in plants and extra material handling.

One commenter suggested a 5-digit pallet discount to encourage mail on direct 5-digit pallets that are low cost for the Postal Service. These direct pallets would also substantially reduce the likelihood of bundle breakage. The commenter noted that Postal Service rate case witnesses considered the proposal premature but “did indicate a general interest . . . in encouraging palletization and a specific interest in having additional direct pallets.” Because the MTAC Package Integrity Work Group, during its live mail test, found packages in sacks broke more than 10 times as frequently as packages on pallets, the commenter suggested that the Postal Service investigate ways to modify postage rates and mail preparation standards to encourage mailers to increase palletization. Furthermore, standards should be considered to allow residual mail, currently in sacks, to be merged onto pallets. Bundle breakage is strongly related to the number of handlings a bundle receives. Bundles on more finely presorted pallets will receive fewer handlings and mailers should be encouraged to palletize and drop ship pallets.

As noted above, there is a difference of opinion within the mailing industry as to whether the pallet minimum should be lowered. The DMM currently contains provisions that allow mailers to prepare pallets that weigh less than 250 pounds when those pallets are drop shipped to the destination sectional center facility (DSCF) or destination delivery unit (DDU). Mailers need to obtain written authorization from the processing and distribution manager of the entry facility for DSCF entry of lightweight pallets. There are no data showing that lowering the minimum pallet weight for mail that is not drop shipped to these destinations would provide the Postal Service with savings that offset the additional costs resulting from increased pallet handlings and decreased cube utilization on postal transportation. There are no plans at this time to lower minimum pallet weights.

The pursuit of a discount for mail on 5-digit pallets is beyond the scope of this rule. Any request for domestic rate changes must be submitted by the Postal Service to the Postal Rate Commission.

Mailers should note that several options currently available have been shown to increase palletization levels. For example, mailers may choose not to prepare optional 3-digit pallets or, if they do prepare such pallets, they may use package reallocation to protect the SCF pallet level if their software is PAVE-certified to support this option. In addition, mailers might consider lowering the minimum pallet weight, possibly to as low as 250 pounds, for only their last pallet level (e.g., ADC for Periodicals or ASF/BMC for Standard Mail) to keep mail from falling to sacks. The Postal Service is aware that many mailers do not take advantage of these opportunities.

Two commenters commended the Postal Service for its efforts to reduce stress on bundles through equipment modifications. One commenter encouraged a continued search for gentler handling processes, such as those associated with the SPBS feed systems, while the other supported Postal Service efforts to improve package sorting related to SPBS feed systems as a means to avoid rehandling costs.

In addition to changes to the SPBS feed systems to mitigate bundle breakage, the Postal Service has modified broken bundle recovery methods to reduce costs. A new Automatic Package Processing System (APPS), the next generation SPBS, is also being developed. This new machine is designed to take bulk-loaded parcels or bundles and separate them into an evenly spaced singulated stream for scanning and sorting. This process should be more gentle to flats bundles. However, regardless of changes to Postal Service processing, mailers must take necessary steps to ensure that bundles retain their integrity to the point where they are unloaded on postal processing equipment and opened for distribution of the contents.

One commenter stated that the Postal Service has not done a good job of notifying mailers when packages were improperly prepared and fell apart during processing. If mailers had been informed regularly of problems, they could have incorporated packaging alternatives or fine-tuned methods over time that would not be as costly as the proposed changes.

The MTAC Mail Irregularity Feedback Work Group was formed in response to comments that the MTAC Package Integrity Work Group received from customers indicating that they were not receiving feedback about broken bundles and therefore were unaware of problems or any need to change their packaging methods. In order to improve the quality of business mailings, the Postal Service is revising the irregularity reporting and correction process. More information about these changes, including the revised PS Form 3749, Mail Irregularity Report, can be found in Postal Bulletin 22043 (2-8-01) and in the February 2001 Memo to Mailers. This process will be used to report serious quality issues such as broken bundles, unreadable barcodes, mislabeled trays, and so on, to mailers and mail preparers and also includes a mechanism to address disposition of reported problems.

One commenter indicated that some changes in the proposed rule require software programming changes. This mailer requires 45 to 60 days to program and test new enhancements that allow different package sizes for sacked and palletized mail and proposed an effective date some time between July 15 and September 1, 2001.

Based on the comments received and discussions with other mailers and presort software vendors regarding implementation of software and manufacturing changes to accommodate the final rule, the Postal Service has determined to place all provisions of this final rule into effect on July 1, 2001.

This is a synopsis of the “ Order ”, FCC 01-137, adopted April 19, 2001, and released April 27, 2001. The text of this Order is available for inspection and copying during normal business hours in the FCC Reference Center, Room CY-A257, 445 12th Street, SW., Washington, DC and may also be purchased from the Commission's copy contractor, International Transcription Service (202) 857-3800, 445 12th Street, SW., Room CY-B402, Washington, DC. The Order is also available on the Internet at the Commission's website: http://www.fcc.gov.

1. With this Order , we implement the provisions of the LPTV Pilot Project Digital Data Services Act (“DDSA”). The DDSA mandates that the Commission issue regulations establishing a pilot project pursuant to which specified Low Power Television (“LPTV”) licensees or permittees can provide digital data services to demonstrate the feasibility of using low-power television stations to provide high-speed wireless digital data service, including Internet access, to unserved areas. 1 As defined by the new law, digital data service includes: (1) Digitally-based interactive broadcast service; and (2) wireless Internet access. 2 The DDSA identifies twelve specific LPTV stations that are eligible to participate in this pilot project, and directs the Commission to select a station and repeaters to be determined by the FCC to provide service to specified areas in Alaska.

2. The DDSA requires that the Commission promulgate regulations with respect to this pilot project by April 20, 2001, 3 and specifies interference and other criteria that the designated LPTV stations must meet. 4 The Commission is not required to use notice and comment rule making under 5 U.S.C. 553 to promulgate these regulations and the other provisions of that section are also inapplicable. 5 Further, the DDSA specifies that the Commission require quarterly reports from the specified LPTV stations participating in the project, including information with respect to interference and market success in providing digital data service. 6 In addition, the Commission is required to collect fees with respect to the new service. 7 Finally, on June 30, 2001 and on June 30, 2002, the Commission is required to submit a report to Congress, under section 143(b) of the new law, “evaluating the utility of using low-power television stations to provide high-speed digital data service,” based on the pilot projects.

3. Eligibility. The DDSA specifies twelve LPTV stations eligible to participate in the pilot project. These are: KHLM-LP, Houston, Texas; WTAM-LP, Tampa, Florida; WWRJ-LP, Jacksonville, Florida; WVBG-LP, Albany, New York; KHHI-LP, Honolulu, Hawaii; KPHE-LP (K19DD), Phoenix, Arizona; K34FI, Bozeman, Montana; K65GZ, Bozeman, Montana; WXOB-LP, Richmond, Virginia; WIIW-LP, Nashville, Tennessee; WSPY-LP, Plano, Illinois; and W24AJ, Aurora, Illinois. The DDSA also includes in the LPTV stations eligible to participate in the pilot project a station and repeaters to be determined by the Federal Communications Commission for the sole purpose of providing service to communities in the Kenai Peninsula Borough and Matanuska Susitna Borough in Alaska. 8 We invite LPTV stations in these locations to come forward and present their proposals to commence such a pilot project. The proposal should be submitted in an informal application complying with the requirements set out in this Order.

4. Services to be provided. The DDSA defines permissible digital data services to include: digitally based interactive broadcast service and wireless Internet access. 9 Wireless Internet can be provided on a one-way or two-way basis on the LPTV channel and may be portable or fixed. The DDSA also provides that the service may be connected to the Internet “via a band allocated to Interactive Video and Data Service.” Use of frequencies for this service, now called 218-219 MHz service under part 95, subpart F, must be in accordance with the licensing and other rules established for that service. Specifically, an entity will be permitted to use 218-219 MHz Service frequencies for provision of digital data services pursuant to the DDSA by obtaining a 218-219 MHz Service license via competitive bidding or by entering into an agreement with a 218-219 MHz Service licensee regarding use of its spectrum ( e.g., through partitioning and/or disaggregation agreements under 47 CFR. 95.823). 10 The DDSA specifically indicates that LPTV digital data services may be delivered via multiple transmitters at multiple locations. Therefore, we will fashion the requirements for this service to allow the authorized LPTV facility to be converted to a main base station and to allow additional base stations to be authorized as on-channel boosters.

5. General Requirements. As participants in this pilot program are LPTV stations, we believe that the LPTV rules, contained in subpart G of part 74 of the Commission's rules, should continue to apply to these stations in all respects, except as specified in the statute and in this Order . First and foremost, the LPTV stations participating in the pilot project will continue to have the secondary regulatory status accorded to all other LPTV stations. Thus, for example, the stations participating in the pilot project must provide protection from interference to all primary uses of the spectrum, including authorized full-service TV stations, authorized full-service DTV stations, and land mobile service provided on a “shared-channel” basis. Furthermore, such stations must provide protection to other secondary uses that were previously authorized or proposed in pending applications relative to the pilot project stations' underlying LPTV authorizations. Such other secondary uses include other LPTV stations, TV translator stations, and TV booster stations. In addition, protection must be afforded pursuant to the existing LPTV rules to Class A TV stations. Additionally, except as specified herein, all non-technical requirements applied to LPTV stations, such as, for example, the rules and procedures relating to transfer of LPTV stations, shall apply to the stations participating in the pilot project. Any other of the Commission's rules that apply to LPTV stations also will apply to the participants in the pilot program, except as specified herein. 11 In sum, all rules that apply to LPTV stations will apply to the LPTV pilot project stations except as otherwise specified herein.

6. Service Area. Since these stations will be participating in a pilot project to demonstrate the feasibility of a new mode of operation for LPTV stations, we conclude that it is appropriate that the protected service area of the pilot project station be within the protected service signal contour of the existing LPTV station under its authorized analog facilities. For eligible LPTV stations that have both a license and a construction permit to modify the licensed facilities, the pilot project station may be operated consistent with either the licensed facilities or the facilities authorized in the construction permit (channel and service area). Participants will not be allowed to operate both the licensed and construction permit facilities at the same time, that is, one for digital data transmissions and the other for analog LPTV broadcast service. If a pilot project station requests use of construction permit facilities, operation of the licensed LPTV facilities must cease when operation of the construction permit facilities commences. This provision is intended to address situations where a station's license and construction permit serve mostly different areas, where they are authorized on different channels or where both conditions exist. We will afford protection to pilot project operations based only on the protection afforded the underlying analog LPTV authorization. If an interfering source would not be required to protect the underlying LPTV station's service (for example interference from a full service analog TV or DTV station), then it will not be required to eliminate or reduce interference to the pilot project operation. Further, if an interfering source would not cause unacceptable interference to the underlying LPTV station (based on the LPTV station operating as authorized to provide analog TV service), then it also will not be required to eliminate or reduce interference to the pilot project operation.

7. Term of pilot project. The DDSA does not specify how long the pilot project should last. Nonetheless, it indicates that our last report to Congress on the pilot project is due on June 30, 2002. Accordingly, we hereby clarify that we will issue experimental letter authorizations for the pilot project that will expire on June 30, 2002, unless the term is extended prior to that date. We delegate authority to the Mass Media Bureau to extend the term of the authorizations for individual participants or for participants as a group, and to do so by Public Notice, in the event that it is determined that the term of the pilot project should be extended.

8. Application requirements. The DDSA requires that we establish “requirements as to the form, manner, and information required for submitting requests to the Commission to provide digital data service as a pilot project.”  12 The legislation specifies that digital data services may not be provided unless interference and other criteria are met. 13 In general, we have determined that it is most appropriate to require submission of an informal application for experimental authority in a manner consistent with § 73.1510(b) of our rules. 14 All other aspects of § 73.1510 will not be applicable because they are inconsistent with the DDSA. 15 We will accept applications only from the eligible station specified in the DDSA. 16 Exhibits to the informal applications must fully describe the proposed experimental program and the technical facilities that are proposed. Specifically, for a main base station and any base station boosters, we will require information that is also sought in Form 346, which is used to request authority to construct or make changes to an LPTV, TV translator or TV booster station. The application should contain the general information requested in questions 1-3 of section I, the legal certification requested in question 10 of section II, and, for each requested facility, all of the engineering information requested in section III of Form 346. With respect to the engineering information: The modulation type and bandwidth should be specified; the digital average power should be provided in lieu of the peak analog power; base or fixed station transmitting antenna beam tilt, if any, and polarization should be specified; for response stations, the maximum number of units, the area of anticipated operation, the receive and transmit antenna characteristics including polarization, gain and directional patterns, the largest average digital transmitter output power and effective radiated power contemplated for the pilot project, and the expected worst-case antenna height above ground should be specified. In addition, the application must contain a certification that the facilities in the pilot project will conform to the Commission's environmental impact rules, including explicitly that the proposed operation will not result in RF exposure in excess of the pertinent limits and the provisions set forth. The application should also contain certifications of the applicant and of the preparer of the engineering information, attesting to the accuracy and completeness of the information furnished. Consistent with the Commission's treatment of applications for other experimental authorizations, this application for digital data services will be fee exempt.

9. RF Safety. We will require pilot project licensees and permittees employing two-way technology to attach labels to every response station transceiver (fixed or portable) in a conspicuous fashion visible in all directions and readable at distances beyond the minimum separation distances. These labels shall give notice of the potential radiofrequency safety hazards, and specify minimum separation distances. Such labels should include reference to the Commission guidelines that apply. 17 The general populations/uncontrolled limits apply to consumer response stations. In addition, pilot project licensees and permittees employing two-way technology must include a full explanation of the labels that appear on their transceivers, as well as reference to the applicable Commission guidelines in the instruction manuals and other information accompanying the transceivers. This information should include advice as to the minimum separation distances required between users and radiating antennas to meet the Commission's exposure guidelines. We will not mandate the specific language that must be used, however we will require the use of the ANSI-specified warning symbol for RF exposure. We also recommend that fixed response antennas be installed by pilot project licensees/permittees or by professional personnel under their direction. Professional installation will minimize the possibility that an antenna will be placed in a location that could expose participants in the pilot project or other persons to the radiated signal at close proximity and for an extended period of time.

10. Description of experiment. Section 73.1510(b) requires the application to include a description of the nature and purpose of the experimentation and of the nature of the experimental signal to be transmitted. We will require these applications to specify a program of experimentation that fulfills the requirements of the DDSA. Specifically, the experiments must address a determination of the threshold of perceptible interference to DTV receivers from all types of transmission that the pilot project stations operate with. 18 In so doing, the LPTV participants should assess the potential for causing interference to the reception of nearby DTV stations, including DTV stations that begin operating during the pilot project. For instance, LPTV participants should carefully assess the potential for interference in those situations where pilot project base and/or response stations would operate in the service area of a DTV station operating on a first adjacent channel. Testing should be designed to facilitate the establishment of appropriate operating parameters for all types of proposed transmitting facilities, including desired-to-undesired signal strength ratios for interference situations and the field strength values that represent the range of service. For 2-way service, establishing the service range involves reception both to and from subscriber or consumer transmission/reception facilities (response stations). To the extent possible based on the DTV station environment, testing should determine the distances from DTV receivers at which pilot project stations, including fixed and/or portable response stations, can operate without causing any perceptible interference. We believe meaningful interference testing would include a combination of observations and signal measurements considering such factors as the strengths of desired and undesired signals, the nature of the DTV reception equipment (indoor or outdoor antennas) and the local signal to noise environment. If relevant to the nature of the LPTV data transmissions, interference testing should also consider the effects of the simultaneous transmissions of multiple response stations, compared with the effects of those of single response stations. Testing also must include an evaluation of consumer or marketplace acceptance of the LPTV digital data technology.

11. Resolution of interference. The DDSA requires that the Commission establish procedures “for the receipt and review of interference complaints on an expedited basis. * * * ”  19 In addition, the legislation provides that the Commission may limit the provision of such service if irremediable interference is caused. 20 Section 74.703 of the Commission's rules specifies the applicable requirement for LPTV stations correcting a situation of actual interference. 21 Stations participating in this pilot project must comply strictly with the requirements of this rule. In addition, pursuant to the DDSA, we will require stations in the pilot project to take steps to resolve any reported interference promptly. 22 Specifically, upon receipt of a valid interference complaint, the licensee or permittee should make every effort to modify or suspend operation within 3 hours to eliminate the interference. An interference complaint is considered valid if the interference is to reception of a station or service that must be protected and it is reasonably determined that the interference is from the operation of the pilot project station (for example, if the interference is to a service on a channel where predicted interference is a concern and the interference commenced when a new mode of pilot project station operation began). If the complaint is received from any source other than the affected broadcaster or station, the pilot project participant should fax a copy of the complaint to the affected station within 48 hours of its receipt. If the pilot project station claims that it is not causing the interference or that the interference is not to protected service, it must fax the interference complaint and its opposition to the Commission's Mass Media Bureau, Video Services Division within 48 hours. 23 If the complaint is received from any source other than the affected broadcaster or station, the pilot project participant should at the same time fax a copy of the complaint to the affected station. In addition, the pilot project participant should fax a copy of its opposition to the affected broadcaster or station even if the complaint is received from that broadcaster or station. Thereafter, the Commission's staff will review the situation and issue a decision as quickly as possible, but in any case within the 60 days provided in the DDSA. 24

12. Technical operation. We believe that we should permit as much flexibility as possible with respect to technical operation. We want to allow each station to choose a type of digital modulation that it determines appropriate. Where the type of modulation differs from the standard DTV system 8-VSB, we will require a full description of the modulation the station is proposing to use and an exhibit demonstrating that its use would not be expected to cause interference to DTV and analog TV service. Such an exhibit is also required if a proposed 8-VSB transmission would not comply with the out-of-band emission requirements specified in the DTV rules. 25

13. We anticipate the possibility that several types of transmission facilities may be involved in each pilot project station. First, we expect that most, if not all, of these projects will involve digital transmissions from a main base station at the authorized site of the underlying LPTV station. Unless the evaluation of its digital modulation method requires otherwise, we will assume that operation of such a facility will not represent a significantly increased interference threat compared to the authorized LPTV station if the antenna height is not increased and the digital average power does not exceed 10 percent of the authorized analog LPTV power (10 dB less power). In DTV service, this level of digital power is adequate to provide coverage of the same area. Accordingly, the Commission's staff will not evaluate at the application stage the interference potential of a main digital base station conforming to this restriction.

14. The second type of transmission facility might consist of one or more additional base stations (boosters) located at sites away from the authorized LPTV transmitter site. We propose to treat such stations as we have analog TV booster stations except that each booster may originate its own data messages. As such, we expect such facilities to be limited to a site location, power and antenna height combination that does not extend the coverage area of the main base station in any direction. We will require an exhibit demonstrating that booster coverage is contained within main base station coverage, based on the digital field strength predicted from the main base station at the protected contour of the underlying analog LPTV authorization. Further, we will assume that such an operation will not cause additional interference unless an interference situation is demonstrated in an informal objection to the application. Absent such an objection, the Commission's staff will not evaluate at the application stage the interference potential of an additional digital base station conforming to this restriction.

15. A third possible type of transmission facility is a fixed response station communicating with a base station. 26 We are concerned about the interference potential of such facilities, but want to allow sufficient flexibility for such stations to allow productive testing of desirable power levels and permitted range in terms of distance from base station. On balance, we conclude that such response stations in this pilot project should use as low an effective radiated power (ERP) as is consistent with satisfactory communication with a base station, and in no case should the ERP (digital average power) exceed 10 watts. We will not specifically limit the range of operation from the main or additional base stations, but caution participants in this pilot project that they must protect other stations from interference in accordance with the discussion above.

16. A fourth possible type of transmission facility is a portable response station. Again, while we are concerned about the interference potential of such a station, we want to allow productive testing of desirable power levels and permitted range in terms of distance from a base station. Accordingly, we conclude that such response stations should use as low an effective radiated power (ERP) as is consistent with satisfactory communication with the base station, and in no case should the digital average ERP exceed 3 watts. In addition, the transmitting antenna should be built into the portable transceiver. We will not specifically limit the range of operation from the main or additional base stations, but caution participants in this pilot project that they must protect other stations from interference in accordance with the discussion above and will not be protected at locations beyond the underlying LPTV station's protected signal contour.

17. Additional types of transmission facilities may be proposed, as may facilities that conform to one of the listed types, but do not meet the specified restrictions. For such requests, the applicant must provide sufficiently detailed analysis to allow the Commission staff to conclude that interference is unlikely.

18. Processing. We intend to accept these applications in the same manner used in processing other experimental applications. The normal “broadcast applications” public notice will be issued, and a copy of the application will be available in the public reference room. Where an application is found to be acceptable, the Mass Media Bureau is delegated authority to authorize the proposed operation by an informal letter grant within 60 days, subject to any appropriate conditions that we may impose in the authorization. As this is an informal application, we will not entertain petitions to deny. Informal objections can be filed any time before the application is granted.

19. Facilities changes. The DDSA establishes criteria by which to evaluate requests by participants for facilities changes. 27 We interpret this provision as applying to any requested changes to the underlying analog LPTV authority. Thus, an application to change channel or location must be filed on Form 346 seeking a construction permit to make changes in a licensed LPTV station or a modification of an existing LPTV station construction permit. Following grant of the change in the authorized facilities of the underlying LPTV station, an informal application to modify the pilot project authorization may be filed in accordance with the above procedures.

20. Notification Requirements. The DDSA requires that we establish “procedures by which a low power television licensee participating in a pilot project shall notify television broadcast stations in the same market upon commencement of digital data services and for ongoing coordination with local broadcasters during the test period. * * *”  28 Accordingly, at least twenty days before an LPTV licensee or permittee commences operations pursuant to the pilot program, it must notify all permittees and licensees of television stations in the same market concerning the particulars of its proposed operation. For this purpose, we will consider the market to include all stations assigned to the Designated Market Area (DMA) in which the LPTV pilot project station is located. Similarly, the pilot project stations must notify any authorized full service TV station whose Grade B contour, authorized DTV station whose predicted service contour  29 and any Class A station whose protected service contour overlaps the protected service contour of the pilot project station's underlying LPTV authorization. The LPTV station that is commencing such operations must notify such other television stations in writing or electronically and must provide a complete description of its technical facilities, including power, modulation format, antenna height, and coordinates of any fixed base or booster facilities; the power, modulation format, anticipated antenna height, and the expected area of operation of any fixed and portable response units; as well as the name and telephone number of a person who may be contacted in the event of interference. We will require the LPTV station to coordinate with such other television stations in its market, as defined in this paragraph, before it makes any change to its facilities or services that might cause interference to those stations, including proposals to expand the range of operation of response units beyond the range initially notified. We will also require the LPTV stations participating in the pilot project to permit local broadcasters to observe the interference testing aspects of the pilot project.

21. Reporting requirements. The DDSA requires that the Commission establish quarterly reporting requirements for LPTV stations participating in the pilot project. 30 These quarterly reports should be filed by the tenth day of the month following the end of the quarter, 31 and must include information: on the station's experience with interference complaints and the resolution thereof; and information on the station's market success in providing digital data service. 32 In addition, the DDSA provides that the reports must include “such other information as the Commission may require in order to administer this paragraph.”  33 We will require each pilot project station to include a complete description of any interference complaints it receives, any interference it determines it may be causing and any interference it determines it has received, in its required quarterly report to the Commission. We also will require the quarterly reports to include data concerning transmission format, power and antenna height and determinations of the range within which its desired service could be provided, and any other matters of technical or operational significance. The reporting requirement will commence once experimental authority is granted.

22. Under new section 336(h)(6), the Commission must assess and collect from LPTV stations authorized to participate in the pilot project “an annual fee or other schedule or method of payment comparable to any fee imposed under the authority of this Act on providers of similar services.”  34 The statute allows the Commission to retain receipts of the fee “as an offsetting collection to the extent necessary to cover the costs of developing and implementing the pilot program authorized by this paragraph, and regulating and supervising the provision of digital data service by low-power television stations under this paragraph.” 35 The legislation also provides that excess amounts “shall be deposited in the Treasury in accordance with chapter 33 of title 31, United States Code.”  36

23. Based on the statute, we believe that the services that will be offered by LPTV licensees in the pilot project (digitally-based interactive broadcast services and wireless Internet access) are similar to certain of the services, including ancillary or supplementary services, that may be offered by Digital Television (DTV) licensees. Accordingly, we will impose on the LPTV licensees a comparable fee to that imposed on DTV licensees that offer feeable ancillary or supplementary services. Thus, we will impose a fee of five percent of gross revenues derived from the digital data services provided pursuant to the pilot project to the extent to which these services would be feeable if offered by DTV licensees. 37

24. Not only are the digital data services that may be provided by LPTV stations similar to those that may be provided by DTV licensees, but, in addition, we believe that a fee of five percent will not discourage the provision of these services just as we noted that it would not dissuade DTV broadcasters from offering such DTV ancillary or supplementary services. 38 The amount of the fee will vary with the gross revenues from these services, i.e., with the willingness of consumers to pay for such services. Under this fee structure, if a given provider of the new service does not find a market and is not profitable, its fee will be low. Finally, we believe that this fee is a relatively simple fee for LPTV stations to calculate and for the Commission to apply. Thus, we believe that it is an appropriate fee. 39

25. The fee of five percent of gross revenues will apply to the extent to which the services provided would be feeable if offered by a DTV licensee. 40 Thus, to the extent that the services are provided for a subscriber fee, they will be feeable. Free over-the-air video program services will not be feeable. If questions arise as to whether certain services are feeable or not, 41 we can address them in the context of an appropriately filed request for declaratory ruling.

26. Collection procedures with respect to the five percent of gross revenues fee will be identical to those that apply to DTV licensees, as outlined in the Fees Report and Order, 63 FR 69208 (December 14, 1998). Since the DDSA requires participating licensees to submit quarterly reports, the annual report, on FCC Form 317, applicable to DTV licensees will not apply. However, LPTV stations in the pilot project that have provided feeable services at any point during the twelve-month period ending on September 30, will file the FCC's standard remittance form (Form 159) on the subsequent December 1. Such annual fee filings will apply until the end of the pilot project unless continued thereafter by the FCC. For revenues reported December 1, 2001 only, licensees are to certify revenues received from the feeable services provided from the inception date of the services through September 30, 2001 and remit payment of the required fee for that period.

27. LPTV licensees should use Form 159 (the standard fee remittance form) for the purpose of paying this fee, filing it by December 1. They should follow the instructions for DTV licensees, except instead of paying with respect to feeable ancillary or supplementary services, they will pay with respect to feeable services provided pursuant to the pilot project. They should specify on line 23A the station's call sign; on 24A the payment type code “MDDA”; on line 29A the amount of gross revenues received from feeable services; on line 27A the fee which they remit with Form 159, in the amount of five percent of the amount specified on line 29A; and on line 28 the facility identification number assigned to their station by the Commission. The licensee's signature on line 30 certifies under penalty of perjury the accuracy of the information reported on Form 159. 42

28. The Commission delegates authority to the Office of Managing Director to specify by Public Notice any additional procedures for filing and processing the fees required by this Order that are necessary or warranted. The Commission reserves the right to audit each participating licensee's records which support the calculation of the amount specified on line 27A of Form 159. Each such licensee, therefore, is required to retain such records for the duration of the pilot program, or for three years from the date of remittance of fees pursuant to this Order, whichever is longer.

29. While we do not here include automatic confidentiality for information submitted pursuant to this Order, submission of the required reporting form, and/or remittance of fee payment may be accompanied by a request for confidentiality pursuant to 47 CFR 0.459.

30. Application of experimental rules. In addition to the foregoing, we believe that requirements similar to those contained in sections 5.93(a) and (b) of the rules should apply to the pilot program. 43 Thus, we will require that all transmitting and/or receiving equipment used in the pilot program be owned by, leased to, or otherwise under the control of the LPTV licensee. 44 Response station equipment may not be owned by subscribers to the experimental data service. This will insure that the LPTV licensee has control of the equipment if and when the pilot program terminates. In addition, we will require the LPTV licensee to inform anyone participating in the experiment, including but not limited to subscribers or consumers, that the service or device is provided pursuant to a pilot program and is temporary. 45

31. Final Regulatory Flexibility Analysis. No regulatory flexibility analysis is required because the rules adopted in this Order are being adopted without notice and comment rule making.

32. Congressional Review Act. These rules, promulgated without notice and comment rule making, are not subject to the provisions of the Congressional Review Act.

33. Accordingly, pursuant to the authority contained in sections 1, 2(a), 4(i), 7, and 336 of the Communications Act of 1934 as amended, 47 U.S.C. 1, 2(a), 4(i), 7 and 336, part 74 of the Commission's rules, 47 CFR part 74, is amended as set forth in this Order.

34. The rule amendments set forth shall be effective immediately.

NMFS designated the white abalone, which is a marine invertebrate mollusc, as a candidate species under the ESA on July 14, 1997 (62 FR 37560), based on information indicating that the species had suffered a major decline in abundance. Because of the depleted status of white abalone, NMFS contracted with Scripps Institution of Oceanography (SIO) in August 1998 to conduct a comprehensive status review of the species. The status review of white abalone was completed in March 2000.

NMFS received a petition on April 29, 1999, from the Center for Biological Diversity and the Southwest Center for Biological Diversity to list white abalone as an endangered species on an emergency basis and designate critical habitat under the ESA. On May 17, 1999, NMFS received a second petition to list white abalone as an endangered species throughout its range and designate critical habitat under the ESA from several environmental organizations. NMFS considered this second request as supplemental information to the first petition.

NMFS published its 90-day finding on September 24, 1999 (64 FR 51725), which concluded that the first petition presented sufficient scientific and commercial information indicating that a listing of white abalone as an endangered species may be warranted. However, NMFS did not find that the petition presented substantial evidence warranting listing on an emergency basis. This finding was based on a review of the petition and other available information which indicated that the State of California had closed commercial and recreational fishing for white abalone and that white abalone habitat was not currently at risk from destruction or adverse modification.

Based on the findings of the white abalone status review and an evaluation of the factors affecting the species, NMFS published a proposed rule to list the white abalone as an endangered species on May 5, 2000 (65 FR 26167).

Abalone are marine gastropods belonging to the family Haliotidae and genus Haliotis and are characterized by a flattened spiral shell (Haaker, 1986; Hobday and Tegner, 2000a). Abalone have separate sexes and are broadcast spawners, releasing millions of eggs or sperm during a spawning event. Fertilized eggs hatch and develop into free-swimming larvae, spending from 5 to 14 days as non-feeding zooplankton before development (i.e., metamorphosis) into the adult form. After metamorphosis, they settle onto hard substrates in intertidal and subtidal areas. Abalone grow slowly and have relatively long lifespans of 30 years or more. Young abalone (referred to as “cryptic abalone”) seek cover in rocky crevices, under rocks, and deep crevices, feeding on benthic diatoms, bacterial films, and single-celled algae found on coralline algal substrate (Cox, 1962). As abalone grow and become less vulnerable to predation at about 75-100 mm (2.9-3.9 inches) in length, they emerge from secluded habitat to more open, visible locations where their principal food source, attached or drifting algae, is more available (Cox 1962). In dive surveys, these animals are classified as “emergent” abalone. Abalone lead a relatively sedentary lifestyle. Although juveniles may move tens of meters per day, adult abalone have extremely limited movements as they increase in size (Cox, 1962; Tutschulte, 1976; Shephard, 1973).

Successful abalone recruitment has been related to the interaction between spawning density, spawning period and length, and fecundity (Hobday and Tegner, 2000a). At low adult densities, fertilization success is much reduced. When males and females are greatly separated, fertilization success may be negligible and recruitment failure will likely occur (Hobday and Tegner, 2000a).

Eight species of Haliotis occur along the west coast of North America. Historically, white abalone ranged from Point Conception, California, U.S.A., to Punta Abreojos, Baja California, Mexico. Although studies have recognized possible population structure in other Haliotis species, no studies have identified distinct populations of white abalone (Hobday and Tegner, 2000a). Tutschulte (1976) reported that white abalone are not as cryptic as other California abalone species.

White abalone is the deepest-living of the west coast Haliotis species (Hobday and Tegner, 2000). According to Cox (1960) and Tutschulte (1976), white abalone were found at subtidal depths of 20-60 m (66-197 ft) and were historically most “abundant” at depths of 25-30 m (80-100 ft). At these depths, white abalone are found in open low relief rock or boulder habitat surrounded by sand (Tutschulte, 1976; Davis et al. , 1996).

White abalone may be limited to depths where algae grow, a function of light levels and substrate availability, because they are reported to feed less on drift algae and more on attached brown algae (Tutschulte, 1976; Hobday and Tegner, 2000a). The upper and lower limits of white abalone depth distribution could also be influenced by temperature effects on larvae and juvenile survival. Leighton (1972) found that white abalone larval survival is reduced at lower temperatures. Tutschulte (1976) speculated that white abalone may have been restricted to depths below 25 m (82 ft) by predation from sea otters when sea otter and white abalone latitudinal ranges overlapped or from competition with pink abalone and predation by octopuses.

According to Hobday and Tegner (2000a), the maximum shell length recorded for white abalone in California and Mexico is 20-25 cm (7.8-9.8 inches) and 17 cm (6.6 inches), respectively. Cox (1960) indicated the maximum size was slightly larger at 25.4 cm (10 inches), but that the “average” observed size is about 13-20 cm (5-8 inches) and animals less than 10 cm (4 inches) are rare. White abalone reach sexual maturity at a size between 88 and 134 mm (3.4-5.2 inches) in approximately 4 to 6 years and spawn in the winter, between February and April (Tutschutle, 1976; Tutschutle and Connell, 1981). Compared to two other California abalone species, white abalone have a high degree of spawning synchronicity wherein most males and females spawn in a relatively short time period. Based on a peak in 5-year old animals prior to the peak of the white abalone fishery, Tutschulte (1976) suggested that white abalone have irregular recruitment. Tutschulte (1976) estimated that the maximum lifespan of white abalone is 35 to 40 years.

In the laboratory, settlement of white abalone larvae occurred after 9 to 10 days at 15 °C (59 °F) (Leighton, 1972). This larval period is longer than periods reported for other California abalone species (Hobday and Tegner, 2000a). Drift tube studies have found that larval periods of most abalone species would not usually be long enough for regular dispersal of abalone between islands and mainland areas (Tegner and Butler, 1985b). Since they have a relatively long larval period, potential dispersal distances may be greater for white abalone than those other of abalone species (Hobday and Tegner, 2000a).

No public hearings were held for NMFS’ proposal to list the white abalone as an endangered species, as no hearings were requested during the 60-day public comment period. During the public comment period, however, NMFS received nine written comments on the proposed rule: five from private citizens; two from non-governmental organizations, and one each from a local government agency and an academic/research organization. Of the nine commenters, seven supported the listing of white abalone as an endangered species, one questioned the need for listing given the closure of the commercial and recreational fisheries for white abalone, and one provided some limited technical information only. A summary of the comments and the responses thereto are presented here.

Comment : One commenter questioned the 25 cm (9.8 inches) maximum size of white abalone cited in NMFS’ proposed rule and indicated that Cox (1960) had reported a maximum size of 10 inches (or 25.4 cm). The commenter also provided museum specimen record citations for California and Mexico that provide additional documentation regarding the historic range of white abalone.

Response : NMFS’ proposed listing notice does indicate that the maximum shell length recorded for white abalone in California ranges from 20-25 cm. This information was taken from the NMFS Status Review (Hobday and Tegner 2000a). The discussion of white abalone life history in this final rule has been modified to reflect the maximum size reported by Cox (1960).

Comment : One commenter speculated that white abalone have been extinct for at least 10 years based on his personal diving observations in the northern Channel Islands.

Response : As discussed in NMFS’ status review, the proposed listing notice, and elsewhere in this final rule, the white abalone has declined precipitously in abundance over the past 30 years; however, NMFS disagrees that white abalone are already extinct. As discussed elsewhere in this final rule, the most recent submarine surveys that were conducted in 1996-7 and 1999 (Davis et al. , 1998; Haaker, et al. , 2000) directly observed small numbers of white abalone, and population estimates developed by Hobday and Tegner (2000a) based on these survey observations suggest that the current white abalone population ranges from approximately 1,600 to 2,500 individuals.

Comment : One commenter indicated that NMFS should accelerate its efforts to protect white abalone by listing the species on an emergency basis under the ESA.

Response : As discussed in the proposed listing notice, NMFS has determined that an emergency listing of white abalone is not warranted. That determination was based on the fact that no emergency existed that posed a significant risk to the well-being of the species. Specifically, the State of California has closed the commercial and recreational fisheries for white abalone and the best available information indicated that white abalone habitat was not currently at risk of being destroyed or adversely modified. NMFS continues to believe that the timeframe of the normal rule making process is sufficient for the white abalone listing determination.

Comment : Three commenters were very concerned that NMFS did not propose critical habitat for white abalone. These commenters believe that a critical habitat designation is necessary for the eventual recovery of white abalone and strongly urged NMFS to designate critical habitat encompassing the species’ historic range, including the northern Channel Islands. One commenter provided information that it believed NMFS should consider if it proceeded with a critical habitat designation that included the Palos Verdes shelf.

Response : Section 4(a)(3)(A) of the ESA requires that, to the maximum extent prudent and determinable, NMFS designate critical habitat concurrently with a determination that a species is endangered or threatened. According to § 424.12(a)(1)(i) of NMFS’ and the U.S. Fish and Wildlife Service’s joint implementing regulations for listing endangered and threatened species and designating critical habitat (50 CFR part 424), a designation of critical habitat is not prudent when one or both of the following situations exist: (1) The species is threatened by taking or other human activity, and the identification of critical habitat can be expected to increase the degree of such threat to the species, or (2) such designation of critical habitat would not be beneficial to the species.

Over-harvesting of white abalone for human consumption is the primary factor responsible for the dramatic decline (99 percent) in white abalone abundance, and it has led to a situation where the density of surviving adults is so low that successful reproduction and recruitment are unlikely to occur. There are very limited opportunities for people to harvest abalone in California any longer, and, therefore, NMFS believes there is a significant threat to white abalone from poaching because abalone as a group continue to be highly prized and in demand as food by humans.

Between July 1999 and April 2001, 135 citations were issued for violations of Title 14, 29.15, which addresses abalone taken out of season, sizes, and overlimits (Gaskins, pers. comm., 2001). Because of the extremely low population size and low density of the surviving adult white abalone in California, any successful poaching efforts will reduce adult densities even further, thereby increasing the likelihood of recruitment failure and risk of extinction. The identification of critical habitat for white abalone would disclose to the public those limited areas where the species may currently exist, and, therefore, NMFS believes such an action will increase the threat of poaching to white abalone.

In addition, the available information indicates that habitat degradation or loss was not responsible for the dramatic reduction in abundance of white abalone. It is probable that the isolated location of the northern and southern Channel Islands, where most white abalone were historically harvested, and the relatively deep depth of white abalone habitat throughout its range have limited the impacts of anthropogenic habitat alterations. NMFS believes that the continued isolation of white abalone habitat from human activities serves to protect that habitat. Given the distribution of the white abalone habitat between Point Conception and the Mexican border and the fact that much of it is isolated in the Channel Islands, there are few Federal activities (e.g., oil and gas development, mining, dredge disposal) that have the potential to impact white abalone habitat between Point Conception and the Mexican border. In the case of oil and gas development, for example, future oil and gas leasing which could potentially lead to more exploration and development in this area is not expected to occur in the foreseeable future because of a Presidential moratorium that prohibits leasing through the year 2012. Although there are a small number of existing leases where very limited exploration may occur in the future, this activity would be focused in only a few locations well offshore from areas that might contain white abalone habitat. Hard minerals exploration and mining in coastal areas south of Point Conception are not constrained by the Presidential moratorium, but there are no such activities occurring at present and none are expected in the foreseeable future. Because few, if any, Federal activities are likely to affect white abalone habitat, NMFS believes that there are minimal additional regulatory benefits through ESA section 7 that are likely to accrue to the species from the designation of critical habitat.

After considering the increased risks to white abalone from poaching that would be more likely to occur as a result of a critical habitat designation, and noting the benefits that may accrue to the species from such a designation, NMFS does not believe that a designation would provide significant benefits that outweigh the increased risks (see 50 CFR 424.12(a)(1)(i)). Based on all of the above NMFS has determined that it is not prudent to designate critical habitat for white abalone at this time.

Comment : Several commenters strongly urged NMFS to initiate a recovery effort for white abalone as soon as possible because they believe that the population only consists of a very few, older individuals and successful reproduction is unlikely to occur at present densities. These commenters also urged NMFS to establish breeding programs, including outplanting and monitoring of laboratory reared animals, in an effort to provide for the continued existence of white abalone.

Response : NMFS recognizes that the continued existence of white abalone is precarious and that the species is at a high risk of extinction in the near future. For this reason, NMFS agrees there is an urgent need to embark on a recovery effort for this species as soon as possible. NMFS is committed to this effort and intends to take a lead role in white abalone recovery, including the establishment of a white abalone recovery team and the development of a recovery plan. NMFS also continues to be supportive of the restoration efforts promoted by the White Abalone Restoration Consortium, which includes the collection of white abalone broodstock followed by spawning and rearing of progeny in the laboratory for subsequent re-establishment in the wild. NMFS believes that efforts such as these will be crucial to ensuring the continued survival and long-term recovery of white abalone.

Section 3 of the ESA defines the term “endangered species” as any species that is in danger of extinction throughout all or a significant portion of its range. The term “threatened species” is defined as “any species which is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range.” NMFS considered the following factors in evaluating the risks facing white abalone and in making a determination as to its current status: (1) Current abundance in relation to historical abundance; (2) trends in abundance; (3) spatial and temporal distribution and effective population size, and (4) natural and human influences. A discussion of these factors with respect to white abalone is presented in detail below.

a. Historical Abundance . Estimates of pre-exploitation abundance of white abalone can be made from both fishery-independent and fishery-dependent data and by using an estimate of the total area of white abalone habitat within the species range. Based on a historical range between Point Conception and Punta Eugenia and on the assumption that 3 percent of the area within depth contours of 25 to 65 m (82-213 ft) is rocky reef habitat, Davis et al. (1998) estimated the total area of white abalone habitat throughout the species' range to be 966 hectares (ha). Using Tutschulte's (1976) density estimate of 0.23 white abalone/m2, Hobday and Tegner (2000a) estimated a pre-exploitation abundance of 2,221,800 animals. Hobday and Tegner (2000a) calculated a second pre-exploitation population abundance estimate for white abalone in Mexico of 2.12 million individuals using fishery-independent data from surveys conducted by Guzman and Proo et al. (1976) between 1968 and 1970 along the west coast of Baja California within the depth range of 0 to 27 m (0-89 ft). Hobday and Tegner (2000a) then doubled this estimate to account for white abalone in California and calculated a pre-exploitation estimate of white abalone abundance of 4.24 million animals throughout the range of the species. This second larger estimate incorrectly assumes that white abalone were found throughout the area surveyed (i.e., in southern Baja, California), and therefore, may overestimate white abalone abundance.

Hobday and Tegner (2000a) also calculated a pre-exploitation abundance of white abalone using fishery-dependent data. Between the peak years of white abalone exploitation in California, approximately 605,807 lbs (274,792 kg) of white abalone were landed. Assuming each abalone weighs 1.67 lbs (.76 kg), then a total of 362,759 animals were harvested. Since it would have taken 10 years for white abalone to reach California's legal size limit, and the fishery collapsed after only 10 years of exploitation, Hobday and Tegner (2000a) assume that all legal-sized adults were harvested every year. If total catch in the 10-year period represents the total accumulated virgin stock and there was no recruitment, they estimated the pre-exploitation California population size equals the total catch between 1969 and 1978 which was crudely estimated to be 362,759 animals. If this figure is doubled to include Mexico, the historical abundance is estimated to be 725,518 white abalone throughout its historical range. However, the actual pre-exploitation abundance must have been greater because some white abalone were harvested in subsequent years, some animals were lost to natural mortality, and white abalone from the recreational catch were not included in the estimate. Not all of the pre-exploitation estimates account for cryptic white abalone.

b. Current Abundance . Using a research submersible vessel, the first deep-reef surveys for white abalone were conducted near Santa Barbara, Anacapa, and Santa Cruz Islands, and on Osborn Bank in 1996 and 1997 (Davis et al. , 1998). After searching 77,070 m 2 (829,601 ft 2 ) of rocky reef between 27 and 67 m (89 and 220 ft) depth, only nine live white abalone were found. Assuming that population densities of white abalone estimated from these surveys (i.e., 0.000167 white abalone/m 2 , ±0.0001) were representative of white abalone densities throughout their entire range and that the total available habitat within the species range is 966 ha (2,386 acres), Hobday and Tegner (2000a) estimated that the population size throughout the entire range of the species was 1,613 white abalone. They concluded from these results that white abalone are absent or at extremely low densities at all depths and areas surveyed. Using these same data, Davis et al. (1998) estimated that fewer than 1,000 white abalone existed in 1996-1997 throughout the species range and concluded that these submersible surveys both confirmed the “critically low ” population density and demonstrated the lack of a de facto refugia beyond normal SCUBA depths.

In October 1999, scientists conducted another deep-reef survey for white abalone near Santa Cruz, Anacapa, Santa Barbara, San Clemente and Santa Catalina Islands and on Osborn, Farnsworth, Tanner and Cortez Banks using a submersible vessel (Haaker et al. , 2000; Hobday and Tegner, 2000b). In contrast to the 1996-1997 submersible surveys, the areas selected for the October 1999 study were the areas where the greatest amount of white abalone had been removed by the commercial and recreational fisheries in the 1970s. This survey covered approximately 57.5 ha (142 acres) (Haaker et al. , 2000) of suitable white abalone habitat, at a depth between 19 and 65 m (62 and 213 ft), and found 157 live white abalone with an average density of 0.00027 white abalone/m 2 or 2.7 white abalone per ha.

The 1996-1997 and 1999 surveys for white abalone in California covered approximately 6 percent of the estimated 966 ha (2,386 acres) of suitable habitat throughout the species’ range, so Hobday and Tegner (2000b) combined data from these surveys and calculated another estimate of current population abundance. Based on the estimated potential habitat (966 ha or 2,386 acres) and the area-specific white abalone densities, Hobday and Tegner (2000b) calculated a revised current population abundance of 2,540 individuals throughout the range of the species.

In October and November of 2000, NMFS and the California Department of Fish and Game (CDFG) conducted a remotely operated vehicle survey for white abalone in the vicinity of Catalina Island, San Clemente Island, Cortes Bank, and Tanner Bank. These survey localities constituted areas which historically accounted for more than 90 percent of all white abalone landings. The number of white abalone observed by both the pilot and an observer were counted for each dive and video tapes of each dive were re-analyzed after the survey to confirm identifications and to count cryptic animals. Transects were only conducted on rocky substrates and at depths ranging from 35-65 m where white abalone are normally found. Based on the results of this survey, the white abalone population in U.S. waters was estimated as 1,658 individuals with a 95-percent confidence interval of 174-15,579 individuals. The high variance associated with this estimate is due to the variability in the numbers of white abalone observed in the transects.

All of these historical and current white abalone abundance estimates are likely to be biased for several reasons. First, the total amount of white abalone habitat may be more or less than the 3-percent assumed area within the depth range between 25 and 65 m (82-213 ft), and the amount of habitat may vary among different geographic areas (Hobday and Tegner, 2000b). Second, since the exact width of the submarine transects are not known, the area actually surveyed may be larger or smaller than that which was assumed. In addition, since white abalone prefer low relief rocks covered with foliose algae near sand at depths between 40-60 m, observers collecting data during surveys may preferentially search these areas. Finally, in 1996 alone, 12,307 kg (27,132 lb) of white abalone were reported in Mexican commercial abalone landings. Based on an average weight of 1.67 lb (0.75 kg) per white abalone, landings of this magnitude would lead to an approximation of 32,000 white abalone (Hobday and Tegner, 2000a). If the Mexican landings data are correct, the current white abalone density estimates based on fishery-independent data may be too low.

a. Commercial Fishery Data— California . Commercial white abalone harvest began in 1967, at a time when the total abalone landings in California began to decline (Hobday and Tegner, 2000a). Over 95 percent of the commercial white abalone landings occurred within the 9-year period between 1969 and 1977. White abalone landings peaked at 144,000 lbs (86,000 individuals) in 1972, only 3 years after intense harvest began. The decline in white abalone landings was so dramatic by 1978 (less than 5,000 lbs (2270 kg) landed), that the CDFG no longer required white abalone to be reported separately on commercial landings receipts. Between 1987 and 1992, only 11 white abalone were voluntarily reported in commercial landings, and, since 1992, none have been reported.

b. Recreational Fishery Data—California . Data on the recreational catch of abalone in California comes from commercial passenger dive boats (Hobday and Tegner, 2000a). Between 1971 and 1993, white abalone comprised 1.29 percent of the total, and 2.89 percent of the “identified,” recreational abalone catch in California. Most of the catch was harvested from Santa Catalina and San Clemente Islands. Recreational harvest of white abalone peaked at about 35,000 animals in 1975, then declined sharply. By 1986, white abalone were rarely reported as landed by divers using commercial dive boats. Abalone catch from recreational divers not using commercial dive boats has not been quantified.

c. Commercial Fishery Data—Mexico . Data on abalone landings in Mexico are limited because species-specific catch data are sparse. Before 1984, Mexico did not require commercial abalone fishermen to land abalone in the shell, the only visual identifying characteristic. Prior to about 1990, Hobday and Tegner (2000a) found no data on the number or weight of white abalone landed in Mexico. Often, available data were temporally and spatially inconsistent and contradictory.

Although white abalone are deep-living and often difficult to find, they were harvested in Mexico prior to 1931 because the tender meat attracted a high price (Croker, 1931). Historically, white abalone comprised only a few percent of the total abalone in Baja California. However, in certain cooperatives, white abalone was sometimes a significant portion of the abalone catch (Hobday and Tegner, 2000a). For instance, between 1992 and 1994, white abalone represented about 65 percent of the catch of one Mexican fishing cooperative. Since the total abalone catch for that cooperative was 57,983 lbs (26,301 kg) of meat, 65 percent of the catch represents a large amount of white abalone meat (i.e., 37,689 lbs or 17,096 kg). Hobday and Tegner (2000a) suggest that this harvest may represent overharvesting of newly located reefs, because that harvest rate was not sustained in subsequent years.

Data from Zone 1 (the northernmost portion of the species range in Mexico) from 1990 to 1997 indicate that white abalone represented only 0.73 percent of the total abalone catch (Hobday and Tegner, 2000a). In this same zone, no catch trends are evident for any abalone species. White abalone were not harvested south of Zone 1 from 1993 to 1998. Although the data are limited, it appears that in those areas, catch-per-unit-effort of abalone declined from 205 to 18 kg/boat/day (452 to 40 lbs) between 1958 and 1984, respectively (Guzman del Proo, 1992, as cited in Hobday and Tegner, 2000a).

Since 1981, total abalone catch has remained near 800-1000 tons (726 - 907 metric tons), with most abalone harvested from Cedros Island. From 1993 to 1998, the price of abalone in Mexico remained constant and is an important source of income for the region (Ponce-Diaz et al. , 1998, cited in Hobday and Tegner, 2000a). Based on trends in landings, Mexico's white abalone populations may be depleted (Guzman del Proo, 1992), though perhaps not as severely as in the United States (Hobday and Tegner, 2000a).

d. Recreational Fishery-dependent Data—Mexico . Although there is no recreational abalone fishery in Mexico, the collection of intertidal abalone is thought to occur at some unknown level (Hobday and Tegner, 2000a).

e. Summary of Trends . Survey assessments for white abalone have been limited in number and are spatially separate (Hobday and Tegner, 2000a). For this reason and because relatively few white abalone were observed, estimates of white abalone density based on fishery-independent data collected during surveys in the 1980's and 1990's are imprecise. The current white abalone abundance estimates based on these survey data may also be biased due to assumptions about the total amount of white abalone habitat currently available (e.g., 3 percent) and the amount of area actually surveyed. Nevertheless, data collected from the white abalone surveys represent the best available scientific information on the species.